<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1998
REGISTRATION NO. 333-50201
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TELEWEST COMMUNICATIONS PLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
---------------
ENGLAND AND WALES 4813, 4841 NOT APPLICABLE
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INDUSTRIAL IDENTIFICATION NUMBER)
INCORPORATION OR CLASSIFICATION CODE
ORGANIZATION) NUMBER)
---------------
GENESIS BUSINESS PARK
ALBERT DRIVE, WOKING
SURREY GU21 5RW
UNITED KINGDOM
011-44-1483-750-900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
STEPHEN E. BRILZ
MEDIAONE GROUP, INC.
188 INVERNESS DRIVE WEST
ENGLEWOOD, CO 80112
(303) 858-3000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JEFFREY J. WEINBERG, ESQ. MORTON A. PIERCE, ESQ.
DAVID S. LEFKOWITZ, ESQ. DEWEY BALLANTINE LLP
WEIL, GOTSHAL & MANGES 1301 AVENUE OF THE AMERICAS
ONE SOUTH PLACE NEW YORK, NEW YORK 10019
LONDON EC2M 2WG (212) 259-8000
011-44-171-903-1000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable following the effective date of this Registration Statement and
the initial closing date of the exchange offer described herein.
---------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED PROPOSED
TITLE OF EACH CLASS OF AMOUNT MAXIMUM MAXIMUM AMOUNT OF
SECURITIES TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED(B) PER UNIT OFFERING PRICE(C) FEE(D)
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ordinary Shares of 10p
each (a).............. 460,858,806 -- $862,458,510 $254,426
</TABLE>
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(a) American Depositary Shares ("Telewest ADSs") evidenced by American
Depositary Receipts issuable on deposit of ordinary shares of 10p each
("Telewest shares") of Telewest Communications plc ("Telewest") have
previously been registered on a separate registration statement on Form F-
6. Each Telewest ADS represents 10 Telewest shares.
(b) This Registration Statement relates to an exchange offer (the "Offer") by
Telewest of 1.243 Telewest shares and 65 pence in cash for the outstanding
ordinary shares of 1 pound sterling each ("General Cable shares") of
General Cable PLC ("General Cable"). The number of Telewest shares to be
registered hereby was determined by multiplying (i) 370,763,319 General
Cable shares (consisting of 365,470,362 General Cable shares issued and
outstanding and 5,292,957 General Cable shares potentially issuable upon
the exercise of outstanding stock options) by (ii) the exchange ratio for
the Offer (i.e., 1.243).
<PAGE>
(c) Calculated pursuant to Rule 457(f) based on the value of the estimated
maximum number of General Cable shares to be acquired by Telewest in the
Offer, less the cash portion of the consideration to be paid by Telewest
in the Offer. The General Cable shares are traded on the London Stock
Exchange. The proposed maximum aggregate offering price was determined as
follows: (i) 207.5 pence (i.e., 2.075 pounds sterling, the average of the
high and low trading prices for the General Cable shares on the London
Stock Exchange on June 10, 1998) minus 65 pence (i.e., 0.65 pounds
sterling, the cash consideration per General Cable share payable by
Telewest in the Offer) multiplied by (ii) 370,763,319 General Cable
shares, consisting of 365,092,338 General Cable shares issued and
outstanding and 5,670,981 General Cable shares potentially issuable upon
the exercise of outstanding stock options, multiplied by (iii) 1.6324, the
noon buying rate in New York City for cable transfers in pounds sterling
as certified for customs purposes by the Federal Reserve Bank of New York
on June 10, 1998.
(d) Previously paid. .000295 multiplied by the proposed maximum aggregate
offering price; $100 of such fee was paid in connection with the original
filing of this Registration Statement.
----------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
THIS REGISTRATION STATEMENT CONSISTS OF THE OFFER TO PURCHASE/PROSPECTUS,
DATED JUNE 29, 1998 AND THE DISCLOSURE DOCUMENT, DATED JUNE 29, 1998, EACH AS
SET FORTH HEREIN.
<PAGE>
OFFER TO PURCHASE/PROSPECTUS (FOR US LAW PURPOSES ONLY)
OFFER DOCUMENT
TELEWEST COMMUNICATIONS PLC
Proposed Merger of
Telewest Communications plc
and General Cable PLC
29 June 1998
- -------------------------------------------------------------------------------
THIS OFFER DOCUMENT RELATES TO THE OFFER BY J. HENRY SCHRODER & CO. LIMITED ON
BEHALF OF TELEWEST TO PURCHASE THE ISSUED GENERAL CABLE SHARES FOR 1.243 NEW
TELEWEST SHARES AND 65 PENCE IN CASH FOR EACH GENERAL CABLE SHARE AND THE
ISSUED GENERAL CABLE ADSS FOR 6.215 NEW TELEWEST SHARES AND 325 PENCE IN CASH
FOR EACH GENERAL CABLE ADS.
Accompanying this Offer Document is the Disclosure Document containing
significant additional financial and other information about Telewest and
General Cable required to be provided to holders of General Cable securities
under UK and/or US law in connection with the matters referred to in this
document.
This Offer Document, together with Parts I and II of the Disclosure Document,
contain the information required to be furnished to holders of General Cable
securities under UK law in connection with the Offer described herein. Parts I
and II of the Disclosure Document comprise a prospectus and listing
particulars relating to Telewest prepared in accordance with the listing rules
made under Section 142 of the Financial Services Act 1986. A copy of the
prospectus and listing particulars has been delivered to the Registrar of
Companies for England and Wales for registration in accordance with Section
149 of that Act.
This Offer Document, together with the Disclosure Document, constitutes an
Offer to Purchase/Prospectus of Telewest under the US Securities Act and
contains the information required under US law to be furnished to holders of
General Cable securities in connection with the Offer.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE OFFER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE US SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS DOCUMENT OR THE
ACCOMPANYING DISCLOSURE DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENCE.
HOLDERS OF GENERAL CABLE SECURITIES ARE STRONGLY URGED TO READ AND CONSIDER
CAREFULLY THIS OFFER DOCUMENT AND THE ACCOMPANYING ACCEPTANCE FORM AND
DISCLOSURE DOCUMENT IN THEIR ENTIRETIES, PARTICULARLY THE MATTERS REFERRED TO
IN "PART I--SECTION SIX--RISK FACTORS" OF THE DISCLOSURE DOCUMENT.
<PAGE>
AVAILABLE INFORMATION
Telewest has filed a Registration Statement on Form S-4 with the SEC in
relation to the offering of the new Telewest shares pursuant to the Offer.
This Offer Document and the accompanying Disclosure Document constitute a part
of the Registration Statement. The Depositary has previously filed with the
SEC a Registration Statement on Form F-6 in relation to Telewest ADSs (the
"Form F-6"). This Offer Document and the accompanying Disclosure Document do
not contain all the information set out in the Registration Statement and the
Form F-6, certain parts of which have been omitted in accordance with the
rules and regulations of the SEC. For such information, reference should be
made to the Registration Statement, the Form F-6 and the respective exhibits
thereto. Telewest also has filed with the SEC a tender offer statement on
Schedule 14D-1 in relation to the Offer pursuant to Rule 14d-3 under the US
Exchange Act. General Cable has filed or will file with the SEC a
Solicitation/Recommendation Statement on Schedule 14D-9 in relation to the
Offer pursuant to Rule 14d-9 under the US Exchange Act. The Registration
Statement, the Form F-6, the Schedule 14D-1 and the Schedule 14D-9 are
available for inspection and copying at the public reference facilities
maintained by the SEC as set out below (except that certain of such documents
and any amendments thereto will not be available at the regional offices of
the SEC until 30 days after the filing thereof).
Telewest and General Cable are each subject to the information requirements of
the US Exchange Act and, in accordance therewith, file reports, proxy
statements (in the case of Telewest) and other information with the SEC. Such
reports, proxy statements and other information concerning Telewest and
General Cable can be inspected and copied at the public reference facilities
maintained by the SEC at 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549, and at the SEC's Regional Offices at Seven World Trade Center, 13th
Floor, New York, New York 10048, and Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. Copies of such material can also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The SEC
also maintains a Website at http://www.sec.gov which contains reports, proxy
statements and other information regarding registrants, such as Telewest, that
file electronically with the SEC. The Telewest ADSs and General Cable ADSs are
quoted through the Nasdaq National Market and such reports, proxy materials
and other information concerning Telewest or General Cable may also be
inspected at the offices of the National Association of Securities Dealers,
Inc., Market Listing Section, at 1735 K Street, N.W., Washington, D.C. 20006.
(ii)
<PAGE>
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE
IN ANY DOUBT ABOUT THE ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK
YOUR OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR,
ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER AUTHORISED UNDER THE
FINANCIAL SERVICES ACT 1986 IMMEDIATELY.
If you have sold or otherwise transferred all of your General Cable
securities, please send this document, together with the accompanying
documents as soon as possible to the purchaser or transferee or to the
stockbroker, bank or other agent through whom the sale or transfer was
effected, for delivery to the purchaser or transferee. HOWEVER, SUCH DOCUMENTS
SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO CANADA, AUSTRALIA OR JAPAN.
Schroders, which is regulated in the UK by The Securities and Futures
Authority Limited, is acting for Telewest and no-one else in connection with
the Offer and will not be responsible to anyone other than Telewest for
providing the protections afforded to customers of Schroders, nor for giving
advice in relation to the Offer. Schroders is acting through Schroder & Co.,
Inc. for the purposes of making the Offer in and into the United States.
BT Wolfensohn, which is regulated in the UK by The Securities and Futures
Authority Limited, is acting for General Cable and no-one else in connection
with the Offer and will not be responsible to anyone other than General Cable
for providing the protections afforded to customers of BT Wolfensohn, nor for
giving advice in relation to the Offer.
- -------------------------------------------------------------------------------
RECOMMENDED OFFER
BY
SCHRODERS
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
FOR
GENERAL CABLE PLC
- -------------------------------------------------------------------------------
A letter of recommendation from the Chairman of General Cable appears on pages
1 to 4 of this document.
TO ACCEPT THE OFFER, THE ACCEPTANCE FORM MUST BE COMPLETED AND RETURNED AS
SOON AS POSSIBLE AND, IN ANY EVENT, SO AS TO BE RECEIVED BY NO LATER THAN 3.00
PM (LONDON TIME), 10.00 AM (NEW YORK CITY TIME), ON 13 AUGUST 1998. THE
PROCEDURE FOR ACCEPTANCE OF THE OFFER IS SET OUT ON PAGES 20 TO 28 OF THIS
DOCUMENT AND IN THE ACCOMPANYING ACCEPTANCE FORM.
The Offer is not being made, directly or indirectly, in or into Canada,
Australia or Japan. Accordingly, neither this document nor the Acceptance Form
are to be mailed or otherwise distributed or sent in or into Canada, Australia
or Japan.
The Initial Offer Period will expire at 3.00 pm (London time), 10.00 am (New
York City time), on 13 August 1998, unless extended. Upon expiration of the
Initial Offer Period, if all the Conditions to the Offer have been satisfied,
fulfilled or, where permitted, waived, the Offer will be extended for a
Subsequent Offer Period of at least 14 calendar days.
During the Initial Offer Period holders of General Cable securities who accept
the Offer will have the right to withdraw such acceptances in accordance with
paragraph 3 of Part B of Appendix I below. Such
(iii)
<PAGE>
withdrawal rights will expire at the commencement of the Subsequent Offer
Period (being the period from the time that the Offer becomes or is declared
unconditional in all respects until the Offer closes) and all acceptances of
the Offer will thereupon become irrevocable.
RULE 8 DISCLOSURES
Any person who, alone or acting together with any other person(s) pursuant to
an agreement or understanding (whether formal or informal) to acquire or
control securities of Telewest or of General Cable, owns or controls, or
becomes the owner or controller, directly or indirectly, of 1% or more of any
class of securities of Telewest or General Cable is generally required under
the provisions of Rule 8 of the City Code to notify the London Stock Exchange
and the Panel of every dealing in such securities during the Initial Offer
Period. Dealings by Telewest or by General Cable or by their respective
"associates" (within the definition set out in the City Code) in any class of
securities of Telewest or General Cable during the Initial Offer Period must
also be so disclosed. Please consult your financial adviser immediately if you
believe this rule may be applicable to you.
TENDERS AND ACCEPTANCES
As used in this Offer Document, the term "acceptance" when used in relation to
the Offer shall be synonymous with "tender" and the term "purchase" shall
include an acquisition effected by an exchange of shares.
RESTRICTED JURISDICTION
No person is authorised to give any information or to make any representation
in relation to the matters described in this document or the accompanying
Disclosure Document other than those contained herein. Any information or
representation in relation to such matters not contained herein or therein
must not be relied upon as having been authorised by either Telewest or
General Cable. This document and the accompanying Disclosure Document do not
constitute an offer to sell or a solicitation of an offer to buy securities in
any jurisdiction to any person to whom it is unlawful to make such offer or
solicitation in such jurisdiction. The issue of this document or the
accompanying Disclosure Document should not be interpreted as implying that
there has been no change in the affairs of Telewest, General Cable or any of
their respective subsidiaries or affiliates since the date hereof or that the
information in this document or the accompanying Disclosure Document is
correct at any time subsequent to the dates hereof or thereof.
REDUCTION OF THE ACCEPTANCE CONDITION
The Offer is conditional, amongst other things, on valid acceptances being
received (and not, where permitted, withdrawn) in respect of not less than 90%
of General Cable shares (including General Cable shares represented by General
Cable ADSs) to which the Offer relates, or such lesser percentage as Telewest
may decide, provided that such Condition (the "Acceptance Condition") shall
not be satisfied unless Telewest shall have acquired or agreed to acquire,
whether pursuant to the Offer or otherwise, General Cable shares (including
General Cable shares represented by General Cable ADSs) carrying in the
aggregate more than 50% of the voting rights then exercisable at general
meetings of General Cable and provided further that the Acceptance Condition
shall be capable of being satisfied only at a time when all other Conditions
have been satisfied, fulfilled or, where permitted, waived. Telewest may
reduce the percentage of General Cable shares (including General Cable shares
represented by General Cable ADSs) required to satisfy the Acceptance
Condition. At least five US Business Days prior to any such reduction,
Telewest will announce that it has reserved the right so to reduce the
Acceptance Condition. Telewest will not make such an announcement unless it
believes that there is a significant possibility that sufficient General Cable
shares (including General Cable shares represented by General Cable ADSs) will
be tendered to permit the Acceptance Condition to be satisfied at such reduced
level. Holders of General Cable securities who are not willing to accept the
Offer if the Acceptance Condition is reduced from the 90% level should either
not accept the Offer until the Subsequent Offer Period or be prepared to
withdraw their acceptances promptly following an announcement by Telewest of
its reservation of the right to reduce the Acceptance Condition.
(iv)
<PAGE>
RULE 10B-13 EXEMPTION
In accordance with normal UK practice, BT Alex. Brown, who acts as a market
maker in General Cable securities, either directly or through a nominee or
broker, may, in accordance with applicable law, make certain purchases of
General Cable securities, outside the United States during the period in which
the Offer remains open for acceptance pursuant to relief granted by the staff
of the SEC from Rule 10b-13 under the US Exchange Act. In addition, Telewest
has applied for such relief to allow it to acquire compulsorily any
outstanding General Cable securities pursuant to sections 428-430F of the
Companies Act.
OFFER IN THE US
The Offer is being made in the US by Schroder & Co., Inc. References in this
document (or any document related to the Offer) to the Offer being made by
Schroders should be read accordingly.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
For the purposes of disclosure under the securities laws of the US, all
documents filed with the SEC by Telewest or General Cable pursuant to Sections
13(a), 13(c), 14 or 15(d) of the US Exchange Act, and, to the extent
designated therein, reports on Form 6-K furnished by General Cable subsequent
to the date hereof and during the period in which the Offer remains open for
acceptance shall be deemed to be incorporated by reference herein and to be a
part hereof from the date any such document is filed.
Any statements contained in a document incorporated by reference herein or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for the purposes hereof to the extent that a statement contained
herein (or in any other subsequently filed document which is also incorporated
by reference herein) modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed to constitute a part hereof except
as so modified or superseded. All information appearing in this document is
qualified in its entirety by the information and financial statements
(including notes thereto) appearing in the documents incorporated herein by
reference, except to the extent set out in the immediately preceding
statement.
THIS OFFER TO PURCHASE/PROSPECTUS (FOR US LAW PURPOSES ONLY) INCORPORATES
DOCUMENTS BY REFERENCE THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
THESE DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS
ARE SPECIFICALLY INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT
CHARGE, UPON WRITTEN OR ORAL REQUEST BY ANY PERSON TO WHOM THIS OFFER TO
PURCHASE/PROSPECTUS HAS BEEN DELIVERED, FROM THE RECEIVING AGENT AT THE
ADDRESSES AND TELEPHONE NUMBER SHOWN ON PAGE 21 OR THE US DEPOSITARY AT THE
ADDRESSES SET OUT ON PAGE 25 AND TELEPHONE NUMBER SET OUT ON PAGE 27. IN ORDER
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH REQUEST SHOULD BE MADE BY
8 AUGUST 1998.
(v)
<PAGE>
CONTENTS
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<TABLE>
<CAPTION>
Page
<S> <C>
DEFINITIONS............................................................... (vii)
LETTER FROM THE CHAIRMAN OF GENERAL CABLE................................. 1
LETTER FROM SCHRODERS..................................................... 5
1. Introduction.......................................................... 5
2. Irrevocable undertakings.............................................. 5
3. The Offer............................................................. 5
4. The Mix and Match Election............................................ 6
5. The Pre-emptive Issue................................................. 7
6. The Conversion........................................................ 8
7. Birmingham Cable and Cable London..................................... 8
8. Further details of the Offer.......................................... 8
9. The new Telewest securities........................................... 9
10. Information on Telewest............................................... 10
11. Information on General Cable.......................................... 10
12. Background to the Offer............................................... 10
13. Reasons for the Offer................................................. 15
14. Recommendation of General Cable's Board of Directors.................. 16
15. Advice of General Cable's financial adviser........................... 16
16. Management and employees.............................................. 16
17. Regulation............................................................ 16
18. General Cable Share Schemes........................................... 16
19. Taxation.............................................................. 17
20. Accounting treatment.................................................. 20
21. Comparison of shareholder rights...................................... 20
22. Procedure for acceptance of the Offer................................. 20
23. Rights of withdrawal.................................................. 28
24. Settlement............................................................ 28
25. Further information................................................... 30
26. Action to be taken.................................................... 30
APPENDICES
I Conditions and Further Terms of the Offer
Part A: Conditions of the Offer....................................... I-1
Part B: Further terms of the Offer.................................... I-7
Part C: Form of Acceptance............................................ I-17
II Financial Effects of Acceptance....................................... II-1
II IAdditional Information............................................... III-1
IV Advice of General Cable's Financial Adviser........................... IV-1
V Certain Provisions of the Companies Act............................... V-1
</TABLE>
(vi)
<PAGE>
DEFINITIONS
- -------------------------------------------------------------------------------
The following definitions apply throughout this document, unless the context
otherwise requires:
"Acceptance Condition" the Condition as to acceptances set out in
paragraph 1 of Part A of Appendix I
"Acceptance Form" the Form of Acceptance with respect to holders of
General Cable shares and the Letter of
Transmittal with respect to holders of General
Cable ADSs, in each case, accompanying this
document
"Admission" the admission of the new Telewest shares issued
pursuant to the Offer and the Pre-emptive Issue
to the Official List becoming effective in
accordance with the Listing Rules and the
quotation of the new Telewest ADSs issued
pursuant to the Offer and the Pre-emptive Issue
on Nasdaq becoming effective
"Australia" the Commonwealth of Australia and its dependent
territories
"Basic Terms" the consideration offered to holders of General
Cable securities under the Offer, excluding the
Mix and Match Election
"Birmingham Cable" Birmingham Cable Corporation Limited
"BT Alex. Brown" BT Alex. Brown International, a division of
Bankers Trust International PLC
"BT Wolfensohn" BT Wolfensohn, a division of Bankers Trust
International PLC
"Business Day" a day on which banks in the City of London are
open for trading other than a Saturday or Sunday
"Cable London" Cable London plc
"Canada" Canada, its possessions and territories and all
areas subject to its jurisdiction or any
political subdivision thereof
"certificated" or "in a General Cable share which is not in
certificated form" uncertificated form (that is, not in CREST)
"City Code" The City Code on Takeovers and Mergers
"closing share price" the middle-market quotation as derived from the
Daily Official List of the London Stock Exchange
"Combined Group" the Telewest Group as enlarged by the Merger
"Comcast" Comcast UK Cable Partners Limited
"Companies Act" the Companies Act 1985 (as amended)
"Compulsory Acquisition" compulsory acquisition of all General Cable
shares (including General Cable shares
represented by General Cable ADSs) to which the
Offer relates by Telewest pursuant to sections
428 to 430F of the Companies Act
(vii)
<PAGE>
"Conditions" the conditions of the Offer described in Part A
of Appendix I and "Condition" means any one of
them
"Conversion" the proposed conversion by the TINTA Affiliate,
the MediaOne Affiliates, the Cox Affiliate and
the SBC Affiliate of their holdings of Telewest
Convertible Preference shares into new Telewest
shares after the Offer has become or been
declared unconditional in all respects
"Cox" Cox Communications, Inc.
"Cox Affiliate" Cox U.K. Communications L.P., a limited
partnership the partners of which are indirectly
wholly owned subsidiaries of Cox
"CREST" the relevant system (as defined in the
Regulations) in respect of which CRESTCo is the
Operator (as defined in the Regulations)
"CRESTCo" CRESTCo Limited
"CREST member" a person who has been admitted by CRESTCo as a
system-member (as defined in the Regulations)
"CREST participant" a person who is, in relation to CREST, a system-
participant (as defined in the Regulations)
"CREST sponsor" a CREST participant admitted to CREST as a CREST
sponsor
"CREST sponsored member" a CREST member admitted to CREST as a sponsored
member
"Depositary" The Bank of New York, in its capacity as
depositary pursuant to the Amended and Restated
Deposit Agreement, dated as of 30 November 1994,
as amended as of 2 October 1995, between
Telewest, the Bank of New York and owners and
beneficial owners of Telewest ADRs issued
thereunder
"Disclosure Document" the document dated 29 June 1998 which accompanies
this document
"dollars" or "$" US dollars
"Eligible Institution" a financial institution that is a member of the
Securities Transfer Agents Medallion Program
(STAMP), the Stock Exchange Medallion Program
(SEMP) or the New York Stock Exchange, Inc.
Medallion Signature Program (MSP).
"Escrow Agent" Lloyds Bank Registrars (in its capacity as a
CREST participant under ID 2RA69)
"Extraordinary General the extraordinary general meeting of Telewest to
Meeting" or "EGM" be held on 28 July 1998 at which resolutions will
be proposed, among other things, to approve the
Offer and the Pre-emptive Issue
"First Closing Date" 3.00 pm (London time), 10.00 am (New York City
time), on 13 August 1998, unless and until
Telewest, in its discretion, shall have extended
the Offer in accordance with the provisions of
the City Code, in which case the term "First
Closing Date" shall mean
(viii)
<PAGE>
the latest time and date at which the Offer, as
so extended by Telewest, will expire or, if
earlier, the time at which the Offer becomes or
is declared unconditional in all respects
"Form of Acceptance" the form of acceptance, election and authority
relating to the Offer for use by all holders of
General Cable shares (but not holders of General
Cable ADSs) accompanying this document
"General Cable" General Cable PLC
"General Cable ADRs" American Depositary Receipts evidencing General
Cable ADSs
"General Cable ADSs" General Cable American Depositary Shares, each
representing five General Cable shares
"General Cable ADS
holders" holders of General Cable ADSs
"General Cable Group" General Cable and its subsidiaries and subsidiary
undertakings and, where the context so permits,
each of them
"General Cable
securities" General Cable shares and General Cable ADSs
"General Cable Share
Schemes" the General Cable Limited Approved Executive
Share Option Scheme, the General Cable Limited
Unapproved Executive Share Option Scheme, the
General Cable PLC 1996 Unapproved Executive Share
Option Scheme and the General Cable Sharesave
Scheme
"General Cable
shareholders" holders of General Cable shares
"General Cable shares" the existing issued and fully paid ordinary
shares of (Pounds)1 each in the capital of
General Cable and any further such shares which
are unconditionally allotted or issued on or
before the date on which the Offer closes (or
such earlier date as Telewest may, subject to the
City Code, decide)
"GUHL" General Utilities Holdings Limited
"Initial Offer Period" the period from the date of this document up to
and including the time and date the Offer becomes
or is declared unconditional in all respects or
lapses
"Japan" Japan, its cities, prefectures, territories and
possessions
"Letter of Transmittal" the letter of transmittal relating to the Offer
for use by holders of General Cable ADSs
"Listing Rules" the rules and regulations made by the London
Stock Exchange under the Financial Services Act
1986, and contained in the London Stock
Exchange's publication of the same name
"London Stock Exchange" London Stock Exchange Limited
"MediaOne" MediaOne Group, Inc., known as U S WEST, Inc.
prior to its name change on 12 June 1998
(ix)
<PAGE>
"MediaOne Affiliates" MediaOne UK Cable, Inc. and MediaOne Cable
Partnership Holdings, Inc.
"member account ID" the identification code or number attached to any
member account in CREST
"Merger" the proposed merger of Telewest and General Cable
to be effected pursuant to the Offer
"Merger Agreement" the agreement relating to the merger of General
Cable and Telewest, dated 29 March 1998, between
Telewest, General Cable, Vivendi and GUHL
"Mix and Match Election" the election available to holders of General
Cable securities who accept the Offer to vary the
proportion of new Telewest securities and cash
receivable under the Offer by electing to receive
additional new Telewest shares (including for
General Cable ADS holders in the form of new
Telewest ADSs) or additional cash in respect of
all or a designated portion of their holdings of
General Cable securities, subject to other
holders of General Cable securities making off-
setting elections and subject to scaling down on
a pro rata basis in the event that elections
cannot be satisfied in full
"Nasdaq" the Nasdaq National Market
"new Telewest ADSs" American Depositary Shares of Telewest to be
issued pursuant to the Offer and the Pre-emptive
Issue, each representing ten new Telewest shares
"new Telewest
securities" new Telewest shares and new Telewest ADSs
"new Telewest shares" new ordinary shares of 10 pence each in the
capital of Telewest to be issued pursuant to the
Offer, the Pre-emptive Issue and the Conversion
"Noon Buying Rate" the noon buying rate in New York City for cable
transfers in pounds sterling as certified for
customs purposes by the Federal Reserve Bank of
New York
"Notice of Guaranteed the notice of guaranteed delivery relating to the
Delivery" Offer for use by holders of General Cable ADSs
"NTL" NTL Incorporated
"Offer" the recommended offer made by Schroders on behalf
of Telewest to acquire all of the General Cable
shares (including General Cable shares evidenced
by General Cable ADSs) on the terms and subject
to the conditions set out in this document and
the Acceptance Forms (including, where the
context so requires or permits, any subsequent
revision, variation, extension or renewal
thereof)
"Offer Document" this document including the Appendices
"Official List" The Official List of the London Stock Exchange
(x)
<PAGE>
"Panel" The Panel on Takeovers and Mergers
"participant ID" the identification code or membership number used
in CREST to identify a particular CREST member or
other CREST participant
"Pre-emptive Issue" the issue, by way of open offer, of 260,665,436
new Telewest shares to Qualifying Telewest
securityholders
"Proposed Directors" MJC Villaneau and WA Rice
"Qualifying Telewest holders of Telewest securities whose names appear
securityholders" on the register of members of Telewest or the
Telewest ADS register, as appropriate, on the
Record Date (except for certain non-US overseas
holders)
"Receiving Agent" Lloyds Bank Registrars
"Record Date" the record date for the Pre-emptive Issue, being,
in the case of Telewest shares and Telewest
Convertible Preference shares 5.00 pm (London
time) on 23 June 1998 and, in the case of
Telewest ADSs, 5.00 pm (New York City time) on 2
July 1998
"Regulations" the Uncertificated Securities Regulations 1995
"Relationship Agreement" an amended and restated agreement, dated as of 15
April 1998, between MediaOne International
Holdings Inc., the MediaOne Affiliates, TINTA,
the TINTA Affiliate, Cox, the Cox Affiliate, SBC,
the SBC Affiliate and Telewest
"Registration Statement" the Registration Statement on Form S-4 relating
to the Offer, filed by Telewest with the SEC
under the US Securities Act, of which this
document and the Disclosure Document each form a
part
"SBC" SBC Communications, Inc.
"SBC Affiliate" Southwestern Bell International Holdings (UK-1)
Corporation
"Schroders" J. Henry Schroder & Co. Limited
"SEC" the US Securities and Exchange Commission
"Subscription Agreement" an agreement, dated as of 15 April 1998, between
Telewest, TINTA, MediaOne and Cox pursuant to
which TINTA, MediaOne and Cox have undertaken to
subscribe for their full entitlement for new
Telewest shares under the Pre-emptive Issue and
to subscribe in accordance with the specific
provisions thereof, for any new Telewest shares
offered to but not subscribed for by other
Qualifying Telewest securityholders under the
Pre-emptive Issue
"Subsequent Offer
Period" the period following the expiry of the Initial
Offer Period during which the Offer remains open
for acceptance
"TW Holdings" TW Holdings LLC which currently directly owns the
Telewest shares and the Telewest Convertible
Preference shares beneficially owned by the
MediaOne Affiliates and the TINTA Affiliate
(xi)
<PAGE>
"TINTA" Tele-Communications International, Inc.
"TINTA Affiliate" United Artists Programming--Europe, Inc.
"Telewest" Telewest Communications plc
"Telewest ADRs" American Depositary Receipts evidencing Telewest
ADSs
"Telewest ADSs" American Depositary Shares of Telewest, each
representing ten Telewest shares
"Telewest Convertible convertible preference shares of 10 pence each in
Preference shares" the capital of Telewest which are convertible
into Telewest shares on the basis of one Telewest
share for every Telewest Convertible Preference
share
"Telewest Group" Telewest and its subsidiaries and subsidiary
undertakings and, where the context so permits,
each of them
"Telewest securities" Telewest shares, Telewest Convertible Preference
shares and Telewest ADSs
"Telewest shareholders" holders of Telewest shares
"Telewest shares" ordinary shares of 10 pence each in the capital
of Telewest
"Telewest Share Schemes" the Telewest 1995 Restricted Share Scheme, the
Telewest 1995 Share Participation Scheme, the
Telewest 1995 (No.1) Executive Share Option
Scheme, the Telewest 1995 (No.2) Executive Share
Option Scheme, the Telewest 1995 Sharesave
Scheme, the Telewest Long Term Incentive Plan and
the Telewest Equity Participation Plan
"TFE instruction" a transfer from escrow instruction (as defined by
the CREST Manual issued by CRESTCo)
"TTE instruction" a transfer to escrow instruction (as defined by
the CREST Manual issued by CRESTCo)
"UK" the United Kingdom of Great Britain and Northern
Ireland
"UK GAAP" UK generally accepted accounting principles
"uncertificated" or "in recorded on the register of members of General
uncertificated form" Cable as being held in uncertificated form in
CREST and title to which, by virtue of the
Regulations, may be transferred by means of CREST
"US" the United States of America, its territories and
possessions, any state of the United States and
the District of Columbia
"US Business Days" any day other than Saturday, Sunday or a Federal
holiday in the US, and consists of the time
period from 12.01 am to 12.00 midnight, New York
City time
"US Depositary" The Bank of New York, in its capacity as US
Depositary
(xii)
<PAGE>
"US Exchange Act" the United States Securities Exchange Act of
1934, as amended, and the rules thereunder
"US Securities Act" the United States Securities Act of 1933, as
amended, and the rules thereunder
"US GAAP" US generally accepted accounting principles
"Vivendi" Vivendi S.A., formerly known as Compagnie
Generale des Eaux S.A. prior to its name change
in May 1998
For the purposes of this document, "subsidiary", "subsidiary undertaking",
"holding company" and "associated undertaking" have the respective meanings
given by the Companies Act.
This document and the accompanying Disclosure Document present certain
translations of certain sterling amounts in dollars at specified rates. These
translations should not be construed as representations that the sterling
amounts actually represent such dollar amounts or could be converted into
dollars at the rate indicated or at any other rate.
(xiii)
<PAGE>
[LOGO OF GENERAL CABLE APPEARS HERE]
29 June 1998
To holders of General Cable securities and, for information only, to
participants in the
General Cable Share Schemes
Dear Sir or Madam
RECOMMENDED MERGER WITH TELEWEST
INTRODUCTION
It was announced on 15 April 1998 that your Board and the Board of Telewest
had agreed the terms of a proposed merger to be effected by a recommended
offer to be made by Schroders on behalf of Telewest for General Cable.
This letter sets out the background to the Offer and the reasons why your
Board, which has been advised by BT Wolfensohn (who have taken into account
the commercial assessments of the Directors of General Cable), is recommending
that all holders of General Cable securities accept it.
The formal Offer, and the action you should take in order to accept it, is set
out in the letter from Schroders on pages 5 to 30 of this document. The Offer
is conditional on, among other things, the approval of Telewest shareholders
at an Extraordinary General Meeting to be held on 28 July 1998 and on the
listing of the new Telewest shares (issued pursuant to the Offer and the Pre-
emptive Issue) on the London Stock Exchange and the quotation of the new
Telewest ADSs (issued pursuant to the Offer and the Pre-emptive Issue) on
Nasdaq.
General Cable has also undertaken to sell its shares in Birmingham Cable to
Telewest for (Pounds)100 million in cash, if so requested by Telewest, subject
first to complying with the pre-emption provisions contained in the Articles
of Association of Birmingham Cable. Further details of this arrangement are
set out in "Part I--Section One--The Merger and Related Matters--Birmingham
Cable and Cable London" of the Disclosure Document.
THE OFFER
The Offer is being made on the following basis:
FOR EACH GENERAL CABLE SHARE 1.243 NEW TELEWEST SHARES AND 65 PENCE IN CASH
FOR EACH GENERAL CABLE ADS 6.215 NEW TELEWEST SHARES AND 325 PENCE IN CASH
Based on Telewest's closing share price of 159 pence on 24 June 1998 (the
latest practicable date prior to the publication of this document), the Offer
values each General Cable share at approximately 262.6 pence, each General
Cable ADS at approximately $21.91 (based on an exchange rate of (Pounds)1 =
$1.6683, the Noon Buying Rate on that date) and the whole of General Cable's
issued share capital, fully diluted for the exercise of all outstanding
options, at approximately (Pounds)974 million. This represents a premium of
141% to General Cable's share price at the close of business on 20 February
1998, the last business day in London prior to the announcement by General
Cable that it was in discussions which might lead to an offer, and a premium
of 147% to General Cable's ADS price at the close of business on 19 February
1998, the last day on which there was dealing in General Cable ADSs in New
York prior to the announcement by General Cable that it was in discussions
which might lead to an offer.
GENERAL CABLE PLC
37 OLD QUEEN STREET LONDON SW1H 9JA TELEPHONE 0171 393 2828 FAX 0171 393 2800
REGISTERED IN ENGLAND NO 2369824 REGISTERED OFFICE 37 OLD QUEEN STREET LONDON
SW1H 9JA
1
<PAGE>
Holders of General Cable ADSs will receive their cash in the form of US
dollars and their entitlement to new Telewest shares in the form of new
Telewest ADSs (each new Telewest ADS representing ten new Telewest shares)
unless they elect to receive cash in pounds sterling and new Telewest shares
as set out above.
THE MIX AND MATCH ELECTION
Holders of General Cable securities who validly accept the Offer within the
relevant time period may utilise a Mix and Match Election whereby they may
elect to vary the proportion of new Telewest securities and cash receivable
under the Offer by electing to receive either all new Telewest shares
(including for General Cable ADS holders in the form of new Telewest ADSs) or
all cash in respect of all or a designated portion of their holdings of
General Cable securities, subject to other holders of General Cable securities
making off-setting elections. To the extent that elections cannot be satisfied
as a result of such off-setting elections, entitlements to cash and new
Telewest securities in excess of the Basic Terms will be scaled down on a pro
rata basis.
Further information on the Mix and Match Election can be found in paragraph 4
of the letter from Schroders and in paragraph 4 of Part B of Appendix I to
this document.
UNDERTAKINGS TO ACCEPT THE OFFER
GUHL, a subsidiary of Vivendi, has irrevocably undertaken to accept the Offer
in respect of its registered holding of 146,785,916 General Cable shares,
representing approximately 40.2% of General Cable's issued share capital.
MANAGEMENT AND EMPLOYEES
Mr WA Rice and Mr MJC Villaneau, who are members of your Board, will be
appointed to the Board of Telewest upon completion of the Merger. Telewest
also intends to appoint an executive member of the General Cable Board as a
Director of Telewest if terms are agreed with the appropriate individual.
Telewest has given assurances that existing employment rights, including
pension rights, of employees of General Cable and its subsidiaries will be
fully safeguarded.
TAXATION
Your attention is drawn to paragraph 19 of the letter from Schroders, headed
"Taxation" set out below. If you are in any doubt as to your own tax position
you should consult your independent professional adviser immediately.
GENERAL CABLE SHARE SCHEMES
The Offer will extend to any General Cable shares issued or unconditionally
allotted before the date on which the Offer closes (or such earlier date as
Telewest may, subject to the City Code, decide). As part of the Offer, holders
of options under the General Cable Share Schemes will, in due course be
offered appropriate proposals, as an alternative to exercising their options,
which will include both cash cancellation and roll-over alternatives. These
proposals will be made subsequent to, or conditional upon, the Offer becoming
or being declared unconditional in all respects.
GENERAL CABLE UNAUDITED RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 1998
On 17 June 1998 General Cable announced its unaudited results for the three
months ended 31 March 1998. General Cable had a consolidated loss on ordinary
activities before taxation of (Pounds)12.2 million (three months ended 31
March 1997: (Pounds)11.9 million) on revenue of (Pounds)32.0 million (three
months ended 31 March 1997: (Pounds)22.5 million). Consolidated net assets at
31 March 1998 were (Pounds)190.8 million (at 31 March 1997: (Pounds)274.7
million). The full text of the announcement is included in the Disclosure
Document.
2
<PAGE>
RECOMMENDATION OF THE BOARD OF DIRECTORS
THE DIRECTORS OF GENERAL CABLE, WHO HAVE BEEN SO ADVISED BY BT WOLFENSOHN,
THEIR FINANCIAL ADVISER, CONSIDER THE TERMS OF THE OFFER TO BE FAIR AND
REASONABLE. IN PROVIDING ADVICE TO THE DIRECTORS OF GENERAL CABLE, BT
WOLFENSOHN HAS TAKEN INTO ACCOUNT THE GENERAL CABLE DIRECTORS' COMMERCIAL
ASSESSMENTS.
THE DIRECTORS OF GENERAL CABLE UNANIMOUSLY RECOMMEND HOLDERS OF GENERAL CABLE
SECURITIES TO ACCEPT THE OFFER AS THEY INTEND TO DO IN RESPECT OF THEIR OWN
BENEFICIAL HOLDINGS.
In reaching their conclusions, the Directors of General Cable considered a
number of factors including, but not limited to, the following:
(i) their knowledge of the business of General Cable, including its
financial condition, results of operations and prospects, and the
current and anticipated developments in General Cable's industry;
(ii) the significant structural changes and the trend towards consolidation
in the UK cable industry, and the potential commercial benefits
available to General Cable and Telewest from consolidation, principally
economies of scale, increased purchasing power and operational
efficiency;
(iii) the strategic fit between Telewest and General Cable, which would
strengthen the Combined Group's position as a leading provider of voice,
video and data services, and the view that the Combined Group would be
better placed to benefit from the greater scale of its operations and
would have a stronger competitive position than either of its
constituent companies;
(iv) the detailed terms and conditions of the Offer and the Merger Agreement,
including, among other things, the fact that the Offer was subject to
certain pre-conditions and is subject to a minimum acceptance condition,
as well as the approval of Telewest shareholders in respect of the Offer
and the Pre-emptive Issue;
(v) the premium represented by the consideration under the Offer over the
historical market prices of the General Cable shares and General Cable
ADSs prior to 23 February 1998, the day General Cable announced that it
was in discussions which might lead to an offer, as further discussed
under "Advice of General Cable's Financial Adviser" in Appendix IV;
(vi) the fact that GUHL beneficially owns 40.2% of the outstanding General
Cable shares and has irrevocably undertaken to accept the Offer pursuant
to the terms of the Merger Agreement;
(vii) the receipt by General Cable of an irrevocable undertaking from four
major shareholders, who control approximately 73% of Telewest's voting
share capital, to vote (to the extent permitted under applicable law or
under the City Code or the Listing Rules) in favour of all resolutions
to be proposed at the Extraordinary General Meeting of Telewest in
connection with the Offer;
(viii) the proposed composition of Telewest's management and the Board of
Directors;
(ix) the fact that, as a consequence of NTL's proposed merger with Comcast,
Telewest will have the right following completion of such merger,
pursuant to a co-ownership agreement with Comcast, to acquire Comcast's
holding of shares in Birmingham Cable (including, unless otherwise
agreed between Comcast and Telewest, any shares in Birmingham Cable to
be sold by General Cable to Comcast) and, pursuant to Cable London's
Articles of Association, to acquire Comcast's holding of shares in Cable
London;
(x) the fact that the Board received an indicative proposal from another
bidder, and that such other proposal (a) required similar exclusivity
agreements and irrevocable undertakings on the part of Vivendi to those
required by Telewest, (b) would determine the overall exchange ratio of
the other bidder's shares and cash offered in respect of each General
Cable share by reference to the average market price of the other
bidder's securities immediately prior to posting of an offer document,
whereas the Offer had already fixed the overall exchange ratio of
Telewest shares and cash offered in respect of each General Cable share
(allowing for off-setting elections made under
3
<PAGE>
the Mix and Match Election), and accordingly, holders of General Cable
securities would have the opportunity to benefit from any increase in the
value of Telewest shares since 15 April 1998, the date of the
announcement of the Offer, as opposed to the time immediately prior to
posting and (c) did not contemplate a listing of such bidder's shares on
the London Stock Exchange, thereby restricting liquidity in such bidder's
shares which were to be issued as part of the consideration under the
other proposal;
(xi) presentations by BT Wolfensohn examining the consideration to be received
by holders of General Cable securities in respect of the Offer and the
indicative proposal referred to in paragraph (x) above, including a
comparison of the historic and potential performance of each bidder's
securities;
(xii) presentations made by BT Wolfensohn in connection with the Offer, and
its advice that the terms of the Offer are fair and reasonable (which
advice was provided by BT Wolfensohn after taking into account the
General Cable Directors' commercial assessments), as described in
"Advice of General Cable's Financial Adviser" in Appendix IV;
(xiii) the opportunity for the shareholders of General Cable to maintain an
investment in the telecommunications industry by receiving Telewest
shares or Telewest ADSs in addition to the cash element of the
consideration under the Offer;
(xiv) the fact that there can be no assurance as to the level of growth or
profits to be attained by Telewest in the future, or as to the ability
of Telewest to integrate General Cable or to respond to future
regulatory, competitive and technological developments; and
(xv) the possible impact of the merger on General Cable's employees, customers
and creditors.
The Board of Directors considered each of the factors listed above during the
course of their deliberations prior to resolving to recommend the Offer. In
view of the wide variety of factors considered, the Board of Directors did not
find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in making their
determination.
ADVICE OF GENERAL CABLE'S FINANCIAL ADVISER
Please refer to Appendix IV for a summary of the advice received by General
Cable from BT Wolfensohn, its financial adviser.
ACTION TO BE TAKEN TO ACCEPT THE OFFER
THE PROCEDURE FOR ACCEPTANCE OF THE OFFER IS SET OUT ON PAGES 20 TO 28 OF THIS
DOCUMENT. COMPLETED ACCEPTANCE FORMS SHOULD BE RETURNED IN ACCORDANCE WITH THE
INSTRUCTIONS THEREIN AS SOON AS POSSIBLE AND, IN ANY EVENT, BY 3.00 PM (LONDON
TIME), 10.00 AM (NEW YORK CITY TIME) ON 13 AUGUST 1998.
Yours faithfully
Sir Anthony Cleaver
Chairman
4
<PAGE>
[LOGO OF SCHRODERS APPEARS HERE]
29 June 1998
To holders of General Cable securities and, for information only, to
participants in the General Cable Share Schemes
Dear Sir or Madam
MERGER OF TELEWEST AND GENERAL CABLE
1. INTRODUCTION
On 15 April 1998 the Boards of Telewest and General Cable announced that they
had agreed the terms of a proposed merger to be effected by a recommended offer
for General Cable to be made by Schroders on behalf of Telewest. This letter
sets out the formal offer for your General Cable securities.
The Offer is conditional on, among other things, the approval of Telewest
shareholders at an Extraordinary General Meeting to be held on 28 July 1998 and
on the listing of the new Telewest shares issued pursuant to the Offer and the
Pre-emptive Issue on the London Stock Exchange and the quotation of the new
Telewest ADSs issued pursuant to the Offer and the Pre-emptive Issue on Nasdaq.
YOUR ATTENTION IS DRAWN TO THE LETTER FROM THE CHAIRMAN OF GENERAL CABLE, SET
OUT ON PAGES 1 TO 4, WHICH STATES THAT THE DIRECTORS OF GENERAL CABLE CONSIDER
THE TERMS OF THE OFFER TO BE FAIR AND REASONABLE AND UNANIMOUSLY RECOMMEND YOU
TO ACCEPT IT.
THE PROCEDURE FOR ACCEPTANCE IS SET OUT IN PARAGRAPH 22 OF THIS LETTER.
ACCEPTANCES SHOULD BE RECEIVED AS SOON AS POSSIBLE BUT IN ANY EVENT BY NOT
LATER THAN 3.00 PM (LONDON TIME), 10.00 AM (NEW YORK CITY TIME), ON 13 AUGUST
1998.
2. IRREVOCABLE UNDERTAKINGS
GUHL, a subsidiary of Vivendi, has irrevocably undertaken to accept the Offer
in respect of its registered holding of 146,785,916 General Cable shares,
representing approximately 40.2% of General Cable's issued share capital.
3. THE OFFER
On behalf of Telewest, Schroders hereby offers to acquire, on the terms and
subject to the Conditions set out or referred to in this document and in the
relevant Acceptance Form, all of the General Cable securities on the following
basis:
FOR EACH GENERAL CABLE SHARE 1.243 NEW TELEWEST SHARES AND 65 PENCE IN CASH
FOR EACH GENERAL CABLE ADS 6.215 NEW TELEWEST SHARES AND 325 PENCE IN CASH
Holders of General Cable securities are also offered the opportunity, by way of
the Mix and Match Election, to vary the proportions in which they receive new
Telewest securities and cash by electing to receive either all new Telewest
shares (including for General Cable ADS holders, in the form of new Telewest
ADSs) or all cash in respect of all or a designated portion of their holdings
of General Cable securities, subject to other holders of General Cable
securities making offsetting elections and subject to scaling down on a pro
rata basis in the event that elections cannot be satisfied in full. Further
details are
- --------------------------------------------------------------------------------
Regulated by SFA J. HENRY SCHRODER & CO. LIMITED
120 Cheapside, London EC2V 6DS
Registered office at above address
Registered number 532081 England
5
<PAGE>
set out in paragraph 4 below. Holders of General Cable ADSs will receive their
cash in the form of US dollars and their entitlement to new Telewest shares in
the form of new Telewest ADSs (each new Telewest ADS representing ten new
Telewest shares) unless they elect to receive cash in pounds sterling and new
Telewest shares as set out above.
Based on Telewest's closing share price of 94.5 pence on 27 March 1998 (the
last dealing day in London prior to the announcement by General Cable that it
was in advanced discussions which might lead to an offer by Telewest and the
possible terms of such an offer) the Offer values the entire issued share
capital of General Cable, fully diluted for the exercise of all outstanding
options, at approximately (Pounds)677 million and values each General Cable
share at approximately 182 pence and each General Cable ADS at approximately
$15.35 (based on an exchange rate of (Pounds)1 = $1.6825 being the Noon Buying
Rate on 27 March 1998).
Based on Telewest's closing share price of 159 pence on 24 June 1998 (the
latest practicable date prior to the publication of this document), the Offer
values each General Cable share at approximately 262.6 pence, each General
Cable ADS at approximately $21.91 (based on an exchange rate of
(Pounds)1 = $1.6683, the Noon Buying Rate on that date) and the whole of
General Cable's issued share capital, fully diluted for the exercise of all
outstanding options, at approximately (Pounds)974 million. This represents a
premium of 141% to General Cable's share price at the close of business on 20
February 1998, the last business day in London prior to the announcement by
General Cable that it was in discussions which might lead to an offer, and a
premium of 147% to General Cable's ADS price at the close of business on 19
February 1998, the last day on which there was dealing in General Cable ADSs
in New York prior to the announcement by General Cable that it was in
discussions which might lead to an offer.
Further details of the financial effects of acceptance of the Offer are set
out in Appendix II.
4. THE MIX AND MATCH ELECTION
Holders of General Cable securities who validly accept the Offer within the
relevant time period may utilise a Mix and Match Election whereby they may
elect to vary the proportion of new Telewest securities and cash receivable
under the Offer by electing to receive either all new Telewest shares
(including for General Cable ADS holders in the form of new Telewest ADSs) or
all cash in respect of all or a designated portion of their holdings of
General Cable securities, subject to other holders of General Cable securities
making off-setting elections. To the extent that elections cannot be satisfied
as a result of such off-setting elections, entitlements to cash and new
Telewest securities in excess of the Basic Terms will be scaled down on a pro
rata basis.
THE MIX AND MATCH ELECTION WILL REMAIN OPEN UNTIL 3.00 PM (LONDON TIME), 10.00
AM (NEW YORK CITY TIME) ON THE DATE FALLING FIVE CALENDAR DAYS AFTER THE DATE
ON WHICH THE OFFER BECOMES OR IS DECLARED UNCONDITIONAL IN ALL RESPECTS. ONLY
HOLDERS OF GENERAL CABLE SECURITIES WHO VALIDLY ACCEPT THE OFFER BY THAT DATE
MAY MAKE MIX AND MATCH ELECTIONS. HOLDERS OF GENERAL CABLE SECURITIES WHO
ACCEPT AFTER THAT DATE AND HOLDERS OF GENERAL CABLE SECURITIES WHOSE SHARES
(INCLUDING THOSE REPRESENTED BY GENERAL CABLE ADSS) ARE ACQUIRED IN THE
COMPULSORY ACQUISITION (SHOULD TELEWEST RECEIVE SUFFICIENT ACCEPTANCES TO
ENABLE IT TO ENACT THE COMPULSORY ACQUISITION PROCEDURES) WILL RECEIVE THE
BASIC TERMS OF THE OFFER.
Holders of General Cable securities who make Mix and Match Elections will not
know the exact number of new Telewest securities or the amount of cash which
they will receive until they receive settlement of the consideration under the
Offer. However, an announcement will be made, shortly after the Mix and Match
Election closes, of the approximate extent to which Mix and Match Elections
will be satisfied.
To the extent that elections can be satisfied, General Cable shareholders will
receive cash instead of new Telewest shares and vice versa at a rate of 149
pence per new Telewest share, being the closing share price of a Telewest
share on 24 June 1998 (the latest practicable day prior to publication of this
document) as adjusted for the value attributable to the right of Qualifying
Telewest securityholders to subscribe for new Telewest shares under the Pre-
emptive Issue. Similarly, holders of General Cable ADSs
6
<PAGE>
will receive cash instead of new Telewest ADSs and vice versa at a rate of
(Pounds)14.90 per new Telewest ADS, being such closing share price multiplied
by ten. In respect of such ADS holders, the US Depositary will arrange for
such amount to be translated to US dollars at the exchange rate obtained by
the US Depositary on or about the date the cash consideration is made
available to the US Depositary for delivery to holders of the General Cable
ADS.
Holders of General Cable securities who wish to make a Mix and Match Election
should specify, in the case of General Cable shareholders, the number of
General Cable shares for which they wish to receive all cash or all new
Telewest shares and, in the case of General Cable ADS holders, the number of
General Cable ADSs for which they wish to receive all cash or all new Telewest
ADSs, in each case by completing the relevant boxes on the Acceptance Form.
Holders of General Cable securities who do not make a Mix and Match Election
will be entitled to the Basic Terms of the Offer. In no event will any
exercise of Mix and Match Elections affect the entitlements of holders of
General Cable securities to the extent that they do not make a Mix and Match
Election.
Further information on the Mix and Match Election is set out in paragraph 4 of
Part B of Appendix I to this document.
5. THE PRE-EMPTIVE ISSUE
To fund the cash element of the Offer, Telewest proposes to make a pre-emptive
issue, by way of an open offer, to Qualifying Telewest securityholders
inviting them to subscribe for new Telewest securities. MediaOne, TINTA and
Cox (the "Subscribers" and each a "Subscriber") have, pursuant to the
Subscription Agreement, each undertaken to subscribe for their full
entitlement to new Telewest shares under the Pre-emptive Issue and have also
undertaken to subscribe for any remaining new Telewest shares not subscribed
for by other Qualifying Telewest securityholders.
Telewest cannot revise the financial terms of the Offer without the prior
written consent of each Subscriber, and must obtain the written consent of two
of the three Subscribers to (i) extend the first closing date of the Offer
beyond 13 August 1998, (ii) extend the Offer (unless it has by then been
declared or become unconditional in all respects), (iii) reduce the percentage
of acceptances required under the Acceptance Condition or (iv) waive or vary
any other Condition if the Panel has consented to Telewest invoking that
Condition. Telewest has also agreed to approach the Panel for consent to
invoke a Condition if a Subscriber so requests, and to indemnify each
Subscriber against any loss, liability or cost which it suffers as a result of
entering into or performing its obligations under the Subscription Agreement
save where such loss, liability or cost arises from a breach of the
Subscription Agreement by such Subscriber, or the loss in value of the shares
allotted pursuant to the Subscription Agreement to that Subscriber.
The Pre-emptive Issue will be made on the basis of 13 new Telewest shares for
every 71 Telewest shares or Telewest Convertible Preference shares and 130 new
Telewest shares for every 71 Telewest ADSs held on the Record Date.
Approximately 261 million new Telewest shares are to be issued under the Pre-
emptive Issue at a price of 92.5 pence per share (being the Telewest share
price shortly before the announcement on 29 March 1998 that Telewest and
General Cable were in detailed discussions which might lead to an offer). The
Pre-emptive Issue is expected to raise approximately (Pounds)240 million (net
of expenses solely attributable to the Pre-emptive Issue). Completion of the
Pre-emptive Issue is conditional upon, among other things, the approval of
Telewest shareholders and the Offer having become or been declared
unconditional in all respects.
The new Telewest shares and new Telewest ADSs issued pursuant to the Pre-
emptive Issue will rank pari passu in all respects with the existing Telewest
shares and existing Telewest ADSs respectively, including the right to receive
all dividends and other distributions declared with a record date after the
date of issue of such securities.
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6. THE CONVERSION
TINTA, MediaOne, Cox and SBC have stated their intention to convert all or as
many as possible of the Telewest Convertible Preference shares currently
beneficially held by them into new Telewest shares following the issue of new
Telewest shares pursuant to the Offer and the Pre-emptive Issue to minimise
the dilution of their voting interests in Telewest following completion of the
Merger. Except in certain limited circumstances, under the terms of issue of
the Telewest Convertible Preference shares, such shares may only be converted
into Telewest shares if, following conversion, at least 25% of the Telewest
shares then in issue will be held by "the public" for the purposes of the
Listing Rules. Under the Relationship Agreement, however, Telewest has agreed
to allow conversion of Telewest Convertible Preference shares held by the
MediaOne Affiliates, the TINTA Affiliate and/or the Cox Affiliate to the
extent necessary to ensure that TW Holdings maintains an interest of not less
than 50.1% of the Telewest shares in issue following the Offer and the Pre-
emptive Issue overriding the requirement that 25% of Telewest shares are held
by "the public". See "Part II--Summary of Revised Shareholder Arrangements"
below.
The holding of the "public" (in accordance with the Listing Rules) in
Telewest following the Merger, the Pre-emptive Issue and Conversion will
depend, among other things, on the number of new Telewest shares subscribed
for by Qualifying Telewest securityholders (other than the Subscribers) in the
Pre-emptive Issue, the level of acceptances of the Offer, the nature of
elections made under the Mix and Match Election and the extent to which
Telewest Convertible Preference shares are converted. Telewest believes that
immediately following completion of the Merger, and assuming full acceptance
of the Offer, and no purchase of either Telewest securities or General Cable
securities by TINTA, MediaOne, Cox, SBC or Vivendi save as pursuant to the
Pre-emptive Issue, the aggregate holding of Telewest shares of persons other
than TINTA, MediaOne, Cox, SBC and Vivendi will not fall below 25%. Depending
upon the factors listed above, a number of Telewest Convertible Preference
shares may remain in issue following completion of the Merger.
7. BIRMINGHAM CABLE
General Cable has undertaken to sell its shares in Birmingham Cable to
Telewest for (Pounds)100 million in cash, if so required by Telewest, subject
to first complying with the pre-emption provisions contained in the Articles
of Association of Birmingham Cable. Further details of this arrangement are
set out in "Part I--Section One--The Merger and Related Matters--Birmingham
Cable and Cable London" of the Disclosure Document.
8. FURTHER DETAILS OF THE OFFER
Your attention is drawn to the Conditions and further terms of the Offer set
out in Appendix I below. The following summary of certain of the terms of and
Conditions to the Offer is subject to and qualified in its entirety by
reference to Appendix I below.
The Offer is conditional, among other things, on its approval by Telewest
shareholders. An Extraordinary General Meeting of Telewest has been convened
for 28 July 1998 for the purpose of seeking the necessary approvals from
Telewest shareholders. The Directors of Telewest have recommended that
Telewest shareholders vote in favour of the resolutions to be proposed at the
Extraordinary General Meeting, as they intend to do in respect of their own
beneficial shareholdings. MediaOne, TINTA, Cox and SBC have also undertaken to
General Cable to procure that members of their groups holding Telewest shares
vote (to the extent permitted by applicable law) in favour of all resolutions
to be proposed at the Extraordinary General Meeting.
The Offer is also conditional on valid acceptances being received (and not,
where permitted, withdrawn) by 3.00 pm (London time), 10.00 am (New York City
time) on 13 August 1998 (or such later date as Telewest may, in accordance
with the provisions of the City Code, decide) in respect of not less than 90%
of the General Cable shares (including General Cable shares represented by
General Cable ADSs) to which the Offer relates (the "90% threshold"), or such
lesser percentage as Telewest may decide, provided that such Condition (the
"Acceptance Condition") shall not be satisfied unless Telewest shall
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have acquired or agreed to acquire, whether pursuant to the Offer or
otherwise, General Cable shares (including General Cable shares represented by
General Cable ADSs) carrying in the aggregate more than 50% of the voting
rights then exercisable at general meetings of General Cable and provided
further that the Acceptance Condition shall be capable of being satisfied only
at a time when all other Conditions have been satisfied, fulfilled or, where
practicable, waived. If the 90% threshold is satisfied before the Offer
becomes or is declared unconditional in all respects, this Condition (subject
to any permitted reduction in the acceptance threshold) must continue to be
satisfied on the actual date the Offer becomes or is declared unconditional in
all respects, by reference to the facts then subsisting.
Telewest may reduce the percentage of General Cable shares (including General
Cable shares represented by General Cable ADSs) required to satisfy the
Acceptance Condition. At least five US Business Days prior to any such
reduction, Telewest will announce that it has reserved the right so to reduce
the acceptance level under the Acceptance Condition. Telewest will not make
such an announcement unless it believes there is a significant possibility
that sufficient acceptances of the Offer will be received to permit the
Acceptance Condition to be satisfied at such reduced level. Holders of General
Cable securities who are not willing to accept the Offer if the Acceptance
Condition is reduced below the 90% level should either not accept the Offer
until the Offer becomes or is declared unconditional in all respects or be
prepared to withdraw their acceptances promptly following an announcement by
Telewest of its reservation of the right to reduce the acceptance level under
the Acceptance Condition.
At the conclusion of the Initial Offer Period, the Offer will be extended for
a Subsequent Offer Period of at least 14 calendar days. Holders of General
Cable securities will have the right to withdraw their acceptances of the
Offer during the Initial Offer Period, but not during the Subsequent Offer
Period, except in certain limited circumstances. Telewest reserves the right
(but will not be obliged) at any time to extend the time and date for
fulfilment of the Acceptance Condition, provided that Telewest may not extend
the Initial Offer Period beyond 28 August 1998 without the consent of the
Panel. Telewest reserves the right, if appropriate, to seek the Panel's
approval to extend the final date for expiry of the Acceptance Condition to 18
September 1998, or such later date as the Panel may agree.
If all of the Conditions are satisfied, fulfilled or, where permitted, waived
within the time permitted, payment for General Cable securities which have
been assented to the Offer will be made as provided in paragraph 24
("Settlement") below.
If the Offer becomes or is declared unconditional in all respects and Telewest
acquires or contracts to acquire, pursuant to the Offer or otherwise, at least
90% of General Cable shares (including General Cable shares represented by the
General Cable ADSs) to which the Offer relates, it will be entitled to and
intends to acquire the remaining General Cable shares (including General Cable
shares represented by General Cable ADSs) on the same terms as the Offer
pursuant to and subject to sections 428 to 430F (inclusive) of the Companies
Act. See paragraph 8 of Appendix III to this document ("The Compulsory
Acquisition").
The General Cable securities which are the subject of the Offer will be
acquired fully paid and free from all liens, charges, equitable interests,
encumbrances, rights of pre-emption and other third party rights or interests
of any nature whatsoever and together with all rights now or hereafter
attached thereto, including the right to receive and retain all dividends and
other distributions declared, made or paid after 15 April 1998.
Whether or not Telewest is in a position to effect the Compulsory Acquisition
and irrespective of the size of any outstanding minority in General Cable,
Telewest intends to seek to procure, after the Offer becomes or is declared
unconditional in all respects, an application by General Cable to the London
Stock Exchange for General Cable to be delisted and an application by General
Cable to Nasdaq for General Cable ADSs to be delisted.
9. THE NEW TELEWEST SECURITIES
The new Telewest shares issued pursuant to the Offer will be credited as fully
paid and will rank pari passu in all respects with the existing Telewest
shares and the new Telewest shares to be issued pursuant
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to the Pre-emptive Issue and the Conversion, including the right to receive
all dividends and other distributions declared with a record date after the
date of issue of such shares. The new Telewest ADSs will rank pari passu in
all respects with existing Telewest ADSs and the new Telewest ADSs to be
issued pursuant to the Pre-emptive Issue, including the right to receive all
distributions made by the Depositary with a record date after the date of
issue of such ADSs relating to distributions on deposited new Telewest shares.
Telewest has filed with the SEC a Registration Statement on Form S-4 in
respect of the new Telewest shares and new Telewest ADSs to be issued pursuant
to the Offer. This document and the accompanying Disclosure Document together
constitute the Offer to Purchase/Prospectus for US law purposes only and
comprise a part of such S-4 Registration Statement.
Application has been made to the London Stock Exchange for the new Telewest
shares to be admitted to the Official List. It is expected the listing will
become effective and that dealings, for normal settlement, will commence on
the London Stock Exchange in the new Telewest shares on the first dealing day
following the day on which the Offer becomes or is declared unconditional in
all respects (save only for the admission of such shares to the Official List
becoming effective). In relation to new Telewest shares issued in certificated
form, temporary documents of title will not be issued pending the despatch by
post of definitive certificates for such new Telewest shares in accordance
with the terms of the Offer. Pending the issue of definitive certificates of
such new Telewest shares, transfers of new Telewest shares will be certified
against the registers held by the Receiving Agent. However, since holders of
General Cable shares who make Mix and Match elections will not know the exact
number of new Telewest shares which they will receive until they receive
settlement of consideration under the Offer, such holders should consult the
Receiving Agent on telephone number 01903 702767 before dealing before that
time.
Notice will be given for the new Telewest ADSs to be approved for quotation on
Nasdaq. It is anticipated that transactions in the new Telewest ADSs on Nasdaq
will commence (other than for holders of General Cable ADSs who make Mix and
Match elections) when dealings, for normal settlement, commence on the London
Stock Exchange in the new Telewest shares.
Fractions of new Telewest shares will not be allotted or issued to holders of
General Cable shares who accept the Offer (including such holders who are
deemed to accept the Offer) but will be aggregated and sold in the market and
the net proceeds of sale will not be paid to such shareholders but will be
retained for the benefit of the Combined Group. Fractions of new Telewest ADSs
will not be allotted to accepting holders of General Cable ADSs (including
such holders who are deemed to accept the Offer) but will be aggregated by the
Depositary and sold in the market on behalf of such accepting holders and the
proceeds, net of any expenses, will be paid in cash to those entitled thereto.
However, individual cash entitlements in amounts of less than (Pounds)3.00
(net) will not be paid but will be retained for the benefit of the Combined
Group.
10. INFORMATION ON TELEWEST
A description of Telewest and its activities is set out in "Part I--Section
Two--Information on Telewest" of the Disclosure Document.
11. INFORMATION ON GENERAL CABLE
A description of General Cable and its activities is set out in "Part I--
Section Three--Information on General Cable" of the Disclosure Document.
12. BACKGROUND TO THE OFFER
During the past few years, the directors and officers of Telewest and
representatives of TINTA, MediaOne, SBC and Cox, have from time to time
engaged in preliminary discussions with representatives of other UK cable
operators about various potential transactions, which have not resulted in any
agreements or understandings except in relation to Telewest's acquisition of
SBC CableComms (UK) (as described in "Part I--Section Two--Information on
Telewest" of the Disclosure Document) and in
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relation to General Cable as set out below. The directors and officers of
General Cable and representatives of Vivendi have also engaged in similar
discussions, which have not resulted in any agreements or understandings.
On 5 February 1998, NTL and Comcast announced a proposed merger of their UK
cable interests (the "NTL/Comcast Merger"), which will result in a change of
control of Comcast. Comcast's assets include an interest of approximately
27.5% in Birmingham Cable and an interest of approximately 50% in Cable
London. Pursuant to existing arrangements between the Telewest Group and
Comcast, the Telewest Group has the right to acquire Comcast's interests in
both Birmingham Cable and Cable London following completion of the proposed
change of control of Comcast. On 6 February 1998, Comcast delivered a notice
to Telewest confirming the proposed change of control, as required by the
existing arrangements relating to Birmingham Cable, and commenced the process
provided in such arrangements by which the value of Comcast's interest in
Birmingham Cable is to be established.
On 6 February 1998, Mr. Burdick and Mr. Miller (Finance Director of General
Cable) discussed the implications of the proposed NTL/Comcast Merger, and
particularly its impact on Birmingham Cable, and explored the alternatives
available to them in respect of their interests in Birmingham Cable.
On 11 February 1998, Telewest received a letter from NTL offering to purchase
Telewest's interests in Birmingham Cable and Cable London or otherwise to
negotiate a settlement of Telewest's rights to Comcast's interests in such
companies. Mr. Burdick (Group Finance Director of Telewest) met with Mr. Gregg
(Vice President of Corporate Development of NTL) on 12 February 1998 to
discuss the proposal.
On 12 February 1998, the Telewest Board met to consider the implications of
the NTL/Comcast Merger. Following a discussion of the implications of the
merger, the Telewest Board directed management to develop a proposal for the
acquisition of Comcast's interests in Birmingham Cable and Cable London,
including the financing for any such acquisition. The Telewest Board also
discussed the NTL/Comcast Merger in the context of the state of the overall UK
cable industry and the further consolidation anticipated by them and directed
management to examine the broader strategic issues arising from such matters.
At the meeting, the Telewest Board appointed Schroders to act for Telewest in
connection with the exercise of Telewest's pre-emptive rights in relation to
Birmingham Cable and Cable London and management's examination of the
strategic issues.
From 12 February to 21 February 1998, senior Telewest management, assisted by
their legal, financial and accounting advisers, analysed the potential
advantages and risks associated with a combination of the Telewest Group and
the General Cable Group and the potential structures to achieve such a
combination.
On 16 February 1998, members of senior management of the Telewest Group and
the General Cable Group and their respective legal, financial and accounting
advisers met to discuss matters relating to Birmingham Cable. Representatives
of the General Cable Group indicated their desire to increase their
operational control over Birmingham Cable and various methods of doing so were
discussed. General Cable also raised the possibility of a merger between
Telewest and General Cable.
Also on 16 February 1998, the General Cable Board appointed financial and
legal advisers and met with them to consider the implications of the
NTL/Comcast Merger and the various options available to General Cable in light
of the trend towards consolidation in the UK cable industry. The General Cable
Board discussed the various methods of operating Birmingham Cable and initial
proposals for combining the businesses of Telewest and General Cable. The
General Cable Board also discussed the recent approaches made by third parties
for the shares or assets of General Cable and agreed to proceed with further
discussions with such parties to clarify the options available to General
Cable. A committee consisting of Messrs. Cleaver, Galteau and Miller (all
directors of General Cable) was appointed to take all necessary action to
pursue the foregoing objectives.
On 19 February 1998, there was a further meeting between Telewest, General
Cable and their respective financial advisers at which General Cable indicated
that it had received a preliminary proposal from a third party but that the
General Cable Board believed that greater industrial logic and/or commercial
synergies could result from a combination with Telewest. General Cable
indicated that it desired to continue to explore the potential for a merger of
the two businesses and sought confirmation from
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Telewest and its major shareholders that they wished to explore such a merger.
Mr. Burdick indicated that Telewest might be willing to make an offer for
General Cable at a price in excess of General Cable's then current share
price, payable in Telewest shares, but conditional on, among other things, an
irrevocable commitment from Vivendi to accept an offer, if made. Telewest and
General Cable agreed to enter into confidentiality agreements and thereafter
exchanged due diligence materials.
On 23 February 1998, the Telewest Board met to consider pursuing discussions
with General Cable. At the meeting, Mr. Davidson (then Chief Executive Officer
of Telewest) and Mr. Burdick discussed the potential benefits of a combination
of the two companies, including strengthening the Telewest Group's position in
the industry, improving the Telewest Group's capital structure and capital
raising ability, and improving the Telewest Group's purchasing power.
Schroders advised the Telewest Board that it would not be advisable to make a
public offer for General Cable unless an irrevocable undertaking to accept the
offer was obtained in advance from Vivendi. Following the presentations and
discussions, the Telewest Board authorised management and Schroders to
negotiate an all share offer with the General Cable Board with respect to a
possible offer for General Cable of up to 150p per share (based on the value
of Telewest shares at that time), payable in Telewest shares, but subject to
further Board approval.
On 23 February 1998, General Cable issued a press announcement stating that it
was in discussions which might lead to an offer for the company.
On 25 February 1998, the General Cable Board met with its financial advisers
and discussed the approaches made by third parties, including Telewest, for
the shares or assets of General Cable. The General Cable Board discussed the
indicative offer received from a third party, and determined it was inadequate
in light of the market value of General Cable at that time. The General Cable
Board also discussed the proposed composition of Telewest's management and
board of directors.
On 26 February 1998, Telewest wrote to NTL and Comcast reiterating that it did
not wish to sell its interests in Birmingham Cable or Cable London and
requesting that NTL and Comcast proceed with the required valuation processes.
On 27 February 1998, Mr. Ames (Chairman of Telewest) met with Mr. Villaneau (a
Director of General Cable and a Director of Vivendi) to discuss strategy,
management and valuation for a combined group. Later that day Mr. Stenham
(Deputy Chairman of Telewest) and a representative of Schroders met with Sir
Anthony Cleaver (Chairman of General Cable) to discuss potential strategies
and management and board structures for a combined Telewest and General Cable
group.
On 28 February 1998, the Telewest Board met to consider further a possible
offer for General Cable and to review the various meetings that had taken
place during the previous week. At the meeting, Schroders discussed a possible
offer by Telewest for General Cable, including, among other things, (a) the
competitive situation for General Cable, (b) the strategic benefits and risks
of a combination of Telewest and General Cable, (c) the impact of the
combination on the Telewest Group's financial condition and (d) the
comparative value of General Cable under various methodologies. Following the
discussions, the Telewest Board decided to proceed with discussions with
General Cable with a view to making an offer.
From 28 February to 18 March 1998, directors and management of Telewest and
General Cable, assisted by their respective legal, financial and accounting
advisers, continued to exchange due diligence materials, conduct due diligence
investigations and negotiate the terms and structure of a possible offer.
Discussions also were ongoing between representatives of MediaOne, TINTA and
General Cable and Vivendi regarding shareholder, management and board issues.
During February and March, General Cable discussed potential mergers and
acquisitions with a number of parties, including Telewest, and exchanged
information with a number of parties, including Telewest. During this time,
representatives of General Cable discussed with representatives of Vivendi the
intentions of Vivendi in relation to the holding by its subsidiary, GUHL, of
approximately 40.2% of General Cable and the position of General Cable's
investment in Birmingham Cable.
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On 3 March 1998, Telewest wrote to General Cable setting out the strategic
rationale for combining Telewest and General Cable and the proposed
composition of the board and senior management of the Combined Group and the
terms on which Telewest might be prepared to make an offer. The terms
included: (a) a share exchange offer valuing each General Cable share at 140p,
on the basis of the average value of Telewest shares in the days preceding the
publication of the relevant offer documents, (b) a combination of corporate
shareholder, executive and independent non-executive directors and (c)
satisfaction of certain pre-conditions (including completion of due diligence
satisfactory to Telewest, confirmation that the General Cable Board would
recommend acceptance of the offer to its shareholders and receipt of an
irrevocable undertaking from Vivendi to accept the offer) and customary offer
conditions.
With little progress being made on the required Birmingham Cable and Cable
London valuation processes, on 11 March 1998, in an effort to resolve the
matter amicably and quickly, Telewest wrote to NTL and Comcast offering to
purchase Comcast's interests in Birmingham Cable and Cable London. NTL and
Comcast rejected this offer on 16 March 1998.
On 23 March 1998, the Telewest Board met to review the progress of the
discussions with General Cable. Schroders gave a presentation concerning,
among other things (a) the increasingly competitive situation for General
Cable, (b) the updated comparative value of General Cable under various
methodologies and (c) the proposed board structure. Mr Burdick also gave a
presentation on the synergies anticipated to arise from a combination with
General Cable. Following discussions of the presentations, the Board agreed
the terms of a letter to be sent to General Cable setting out revised
indicative terms on which Telewest might be willing to make an offer for
General Cable. The revised indicative offer terms were on the basis of a share
exchange offer of 1,882 new Telewest shares for every 1,000 General Cable
shares. Based on Telewest's share price at that time of 93p, this valued each
General Cable share at approximately 175p. The letter also set out a revised
board and management structure for the Combined Group and the basis of the
future relationships between Telewest's principal shareholders.
The due diligence review conducted by General Cable with a number of parties
in connection with a potential merger or acquisition led to the receipt of two
indicative proposals: the proposal set out in Telewest's 23 March 1998 letter
and a proposal from another bidder. Representatives of General Cable reviewed
the terms of the two proposals with their financial and legal advisers. On 25
March 1998, General Cable responded to Telewest's 23 March 1998 letter,
indicating, among other things, that the General Cable Board considered the
inclusion of a cash element in any Telewest offer to be essential. General
Cable also suggested an offer with a minimum aggregate value of 180p,
including 60p in cash. General Cable's financial adviser then requested that
the respective financial advisers of Telewest and the other bidder arrange for
their respective clients' improved and final proposals to be presented to the
General Cable Board.
The Telewest Board met on 26 March 1998 to consider General Cable's response.
The Telewest Board approved a revised indicative offer consisting of 1.33 new
Telewest shares and 57p in cash for every General Cable share and which at
that time valued each General Cable share at 180p. TINTA, MediaOne and Cox
indicated their willingness to underwrite a pre-emptive issue to all Telewest
shareholders to raise an aggregate of approximately (Pounds)210 million to
finance the cash element of the offer. The revised indicative offer also
contemplated a specified board and management structure and certain pre-
conditions and other conditions, including Vivendi providing an irrevocable
undertaking to Telewest to accept the revised offer, if made. The terms of the
revised indicative offer were communicated to General Cable in a letter from
Telewest dated 27 March 1998.
On 27 March 1998, representatives of Telewest, General Cable and Vivendi
continued to negotiate the terms of a possible offer by Telewest, including
the terms under which Vivendi would irrevocably undertake to accept such an
offer. At a meeting that day, the General Cable Board reviewed the respective
terms of the improved proposals of Telewest and the other bidder. BT
Wolfensohn, General
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Cable's financial adviser, made a presentation to the General Cable Board
regarding the financial terms of Telewest's offer and the other bidder's
indicative proposal. The General Cable Board also assessed the commercial
aspects of the proposed offer from Telewest and the other bidder's indicative
proposal. After full and careful consideration, the General Cable Board
informed both parties that it was not able to recommend either proposal and
requested revised proposals from both parties.
Following a Telewest Board meeting on 27 March 1998, Telewest proposed on 28
March 1998 a revised indicative offer consisting of 1.243 new Telewest shares
and 65p in cash per General Cable share and 0.6215 new Telewest ADSs and the
equivalent in US$ of 325p in cash for each General Cable ADS. The increase in
the cash element was to be funded by increasing the size of the pre-emptive
issue to approximately (Pounds)240 million with the increased element to be
subscribed for by MediaOne if not taken up by other holders of Telewest
securities.
On 28 March 1998, the General Cable Board met and reviewed the revised terms
of the proposals of Telewest and the other bidder with its financial and legal
advisers. The General Cable Board considered, among other things, the factors
discussed under "Recommendation of the Board of Directors" in the Letter from
General Cable's Chairman set out on pages 1 to 4 of this document. After full
and careful consideration of the revised terms of both proposals, the General
Cable Board unanimously resolved to recommend the Telewest offer to General
Cable shareholders upon receipt of a formal offer from Telewest by 15 April
1998.
On 29 March 1998, Telewest, General Cable, Vivendi and GUHL entered into the
Merger Agreement, pursuant to which, among other things, (a) General Cable
confirmed that, if Telewest announced an offer to shareholders on the terms
set out in the agreement, its directors would, subject to their fiduciary
duties and responsibilities under the City Code, recommend the offer to
General Cable shareholders and (b) GUHL confirmed that if such an offer were
made and posted by 30 June 1998, it would accept the offer. The Merger
Agreement also provided Telewest certain exclusivity periods with respect to
General Cable and Vivendi. A copy of the Merger Agreement is available for
inspection as provided in "Part I--Section Seven--Documents for Inspection and
Available Information" of the Disclosure Document, and is filed as an exhibit
to the Registration Statement to which this document and the Disclosure
Document form a part and is, for the purposes of the US securities laws,
incorporated by reference herein.
On 29 March 1998, Telewest and General Cable announced that merger discussions
between the two companies were at an advanced stage that could lead to a
recommended offer being made by Telewest for General Cable and that the Merger
Agreement had been entered into.
Between 29 March and 15 April 1998, various meetings were held between
Telewest and its principal shareholders and between Telewest, General Cable
and their respective advisers with a view to documenting the agreements
necessary to announce an offer. These discussions included agreeing the terms
on which General Cable would sell and Telewest would acquire General Cable's
interest in Birmingham Cable for (Pounds)100 million.
On 7 April 1998, the Telewest Board met to review progress on the proposed
offer for General Cable. At that meeting, Schroders advised the Telewest Board
that, in its opinion, as at such date, after taking into account the Telewest
Directors' commercial assessments and such other matters as it considered
relevant, it considered the terms of the proposed offer to be fair to the
holders of Telewest securities from a financial point of view. On the same
day, the General Cable Board met with its financial and legal advisers and
reviewed a draft of the joint press announcement setting out the details of a
proposed offer by Telewest. BT Wolfensohn made a presentation to the General
Cable Board regarding the terms of the proposed offer and advised the General
Cable Board, after taking into account the General Cable Directors' commercial
assessments, that as at such date it considered the terms of the proposed
offer to be fair and reasonable. See "Recommendation of the Board of
Directors" in the letter from General Cable's Chairman set out on pages 1 to 4
of this document. After full and careful consideration of Telewest's proposed
offer, the General Cable Board unanimously resolved to approve the proposed
offer and recommend it for acceptance by General Cable shareholders.
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On 15 April 1998, the Telewest Board met to consider the final terms of the
proposed offer. At the meeting, senior management of Telewest, representatives
of Schroders and Telewest's legal and accounting advisers reviewed the final
terms of the proposed offer (including the terms of the Relationship Agreement
and the financing to be provided by TINTA, MediaOne and Cox in connection with
the Pre-emptive Issue). Representatives of Schroders also confirmed its
previous advice to the Telewest Board that, based on certain matters set out
in a letter to the Telewest Board dated 15 April 1998 and such other matters
as Schroders considered relevant, it was of the opinion that, at that time,
the consideration to be paid in connection with the proposed offer was fair to
the shareholders of Telewest from a financial point of view. Following such
discussions, the Telewest Board unanimously approved the terms of the proposed
offer and related matters, subject to certain pre-conditions. Later that day,
Telewest and General Cable agreed the final terms of the proposed offer
subject to certain pre-conditions and other conditions, Telewest and certain
of its shareholders entered into a relationship agreement (which has since
been amended and restated as the Relationship Agreement) and the Subscription
Agreement relating to the Pre-emptive Issue, and Telewest and General Cable
issued a joint press release announcing the terms on which Telewest intended
to make an offer (including various pre-conditions to which the making of the
formal offer was subject).
Today, Telewest announced that the pre-conditions to the proposed offer had
been satisfied. Documentation relating to the Offer is being posted to holders
of General Cable securities and documentation relating to the Offer, the Pre-
emptive Issue and the EGM is being posted to holders of Telewest securities
today.
13. REASONS FOR THE OFFER
The UK cable industry is currently undergoing significant structural change.
Recent corporate activity has highlighted the potential commercial benefits
available from consolidation, principally economies of scale, increased
purchasing power and operational efficiency.
Telewest believes that the businesses of Telewest and General Cable are
complementary and that benefits will arise from combining them. In addition,
Telewest believes that the Combined Group will be better placed to benefit
from the development of the UK cable industry as a result of the greater scale
and scope of its operations.
Telewest believes that the combination of Telewest and General Cable will
strengthen the Combined Group's position as a leading provider of voice, video
and data services. Telewest expects that the Combined Group will have a
stronger competitive position than either of its constituent companies as a
provider of packaged services for residential and business customers within
its franchises. Telewest believes that the Combined Group's national network
and local broadband network will provide access to approximately 24% of all UK
households. As a result, Telewest believes that the Combined Group will be a
more powerful competitor in both the business and residential markets.
Specifically, Telewest believes the Merger will:
. strengthen the Combined Group's ability to deliver advanced
business voice and data services, digital television and high-
speed Internet access using its broadband network;
. accelerate the development of the Combined Group's business
telephony capabilities using General Cable's expertise in this
area and enable the Combined Group to develop a wholesale
telephony business;
. produce incremental revenue from delivering integrated services to
residential market segments across a larger subscriber base; and
. allow the Combined Group to achieve cost savings and scale
economies from reducing interconnect and programming costs,
consolidating network operations and maintenance, and removing
duplicate overheads.
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There can be no assurance that Telewest will be able to integrate General
Cable successfully or to realise the anticipated benefits of the Merger. See
"Part I--Section Six--Risk Factors" of the Disclosure Document. The extent and
timing of achieving these potential benefits will also depend, among other
things, on the continued availability of the necessary funding. See "Part I--
Section Four--Information on the Combined Group--Working Capital" of the
Disclosure Document.
14. RECOMMENDATION OF GENERAL CABLE'S BOARD OF DIRECTORS
The recommendation of General Cable's Board of Directors is set out in the
letter from Sir Anthony Cleaver contained in this document.
15. ADVICE OF GENERAL CABLE'S FINANCIAL ADVISER
Please refer to Appendix IV for a summary of the financial advice received by
General Cable.
16. MANAGEMENT AND EMPLOYEES
Telewest intends that, following completion of the Merger, the Board of
Telewest should initially consist of up to 14 Directors comprising seven non-
executive Directors (designated by MediaOne, TINTA, Cox, SBC and Vivendi),
four executive Directors and three further independent non-executive
Directors.
Mr WA Rice and Mr MJC Villaneau are currently Directors of General Cable and
will be appointed as Directors of Telewest upon completion of the Merger. Mr
Rice will serve as an independent non-executive Director and Mr Villaneau as
the Vivendi designated Director. Telewest expects to appoint an executive
member of the General Cable Board as a Director of Telewest if terms are
agreed with the appropriate individual.
Telewest is currently conducting a search for a new Chief Executive Officer
and expects to make this appointment in due course.
Existing employment rights, including pension rights, of employees of both
Telewest and General Cable and their respective subsidiaries will be fully
safeguarded.
17. REGULATION
On 17 June 1998 the DTI announced that the Secretary of State for Trade and
Industry had decided not to refer the Merger to the Monopolies and Mergers
Commission.
In addition, confirmation has been sought and received from both the DTI and
the ITC that they will not seek to revoke any of the licences of the General
Cable Group granted under the Telecommunications Act 1984 or the Cable and
Broadcasting Act 1984 (as continued in force by the Broadcasting Act 1990), as
a result of the change of control in General Cable resulting from the Merger.
18. GENERAL CABLE SHARE SCHEMES
The Offer will extend to any General Cable shares issued or unconditionally
allotted before the date on which the Offer closes (or such earlier date as
Telewest may, subject to the City Code, decide) including General Cable shares
issued or unconditionally allotted pursuant to the exercise of options granted
under the General Cable Share Schemes. As part of the Offer, holders of
options under the General Cable Share Schemes will, in due course be offered
appropriate proposals, as an alternative to exercising their options, which
will include both cash cancellation and roll-over alternatives. These
proposals will be made subsequent to, or conditional upon, the Offer becoming
or being declared unconditional in all respects.
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19. TAXATION
(A) UNITED KINGDOM TAXATION
The following paragraphs, which are intended as a general guide only, are
based on current legislation (as amended by the Finance (No. 2) Bill assuming
it is enacted in its current form) and Inland Revenue practice. They summarise
certain limited aspects of the UK taxation treatment of the acceptance of the
Offer, and they relate only to the position of holders of General Cable
securities who hold their General Cable securities beneficially as an
investment. IF YOU ARE IN ANY DOUBT AS TO YOUR TAXATION POSITION OR IF YOU ARE
SUBJECT TO TAXATION IN ANY JURISDICTION OTHER THAN THE UK, YOU SHOULD CONSULT
AN APPROPRIATE PROFESSIONAL ADVISER IMMEDIATELY.
(A) TAX ON CHARGEABLE GAINS
Liability to tax on chargeable gains will depend on the individual
circumstances of holders of General Cable securities and on the form of
consideration received. For holders of General Cable securities who are
resident or ordinarily resident in the UK for UK taxation purposes, the
position will generally be as described at (i) to (iii) below.
(i) Cash
To the extent that a holder of General Cable securities receives cash
under the Offer this will constitute a disposal, or part disposal, of his
General Cable securities which may, depending on the holder's individual
circumstances, give rise to a liability to tax on chargeable gains.
(ii) Acquisition of new Telewest securities
A holder of General Cable securities who, either alone or together with
persons connected with him, does not hold more than 5% of any class of
shares in or debentures of General Cable should not be treated as having
made a disposal of his General Cable securities for the purposes of tax
on chargeable gains to the extent that he receives new Telewest
securities in exchange for his General Cable securities under the Offer.
Any gain or loss which would otherwise have arisen on a disposal of his
General Cable securities will be "rolled-over" into the new Telewest
securities, and the new Telewest securities will be treated as the same
asset as his General Cable securities acquired at the same time and for
the same consideration as he acquired his General Cable securities.
Any holder of General Cable securities who, either alone or together with
persons connected with him, holds more than 5% of any class of shares in
or debentures of General Cable is advised that an application for
clearance has been made to the Inland Revenue under Section 138 of the
Taxation of Chargeable Gains Act 1992 in respect of the Offer. If such
clearance is given, any such holder will be treated in the manner
described in the preceding paragraph. The Offer is not conditional on
such clearance being obtained.
(iii) Disposal of new Telewest securities
A subsequent disposal of new Telewest securities may, depending on
individual circumstances, give rise to a liability to tax on chargeable
gains. Any chargeable gain or allowable loss on disposal of the new
Telewest securities should be calculated taking into account the
allowable original cost to the holder of acquiring the relevant General
Cable securities, and (when calculating a chargeable gain but not an
allowable loss) indexation allowance on that cost (save that, except in
the case of taxpayers liable to corporation tax, no indexation will be
allowable in respect of periods after April 1998). In broad terms it is
expected that the allowable original cost of the relevant General Cable
securities will be apportioned to the new Telewest securities and cash
received according to the market value of the Telewest securities at the
time of the exchange.
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A holder of General Cable securities who is neither resident nor ordinarily
resident in the UK for UK taxation purposes will not be liable for UK tax on
capital gains on his disposal of General Cable securities pursuant to the
Offer or on any disposal or deemed disposal of his new Telewest securities
unless such securities are held in connection with a trade, profession or
vocation carried on by such holder in the UK through a branch or agency and
those securities are or have been used, held or acquired for the purposes of
such trade, profession or vocation.
(B) TAX ON DIVIDENDS ON NEW TELEWEST SECURITIES
Holders of General Cable securities who are issued new Telewest securities
pursuant to the Offer are referred to the Disclosure Document for a
description of the tax position in respect of dividends on those shares.
(C) OTHER TAX MATTERS
Special tax provisions may apply to holders of General Cable securities who
have acquired or who acquire their General Cable shares by exercising options
under the General Cable Share Schemes, including provisions imposing a charge
to income tax.
(D) STAMP DUTY AND STAMP DUTY RESERVE TAX ("SDRT")
No stamp duty or SDRT will be payable by holders of General Cable securities
as a result of accepting the Offer.
(B) UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material US federal income tax consequences
generally applicable to US Holders (as defined below) of General Cable
securities that accept the Offer. This summary is based on the law in effect
as of the date of this Offer Document.
In general, for US federal income tax purposes, beneficial owners of ADSs are
treated as the owners of the stock represented by the ADSs. Accordingly,
except as otherwise noted, references herein to ownership of General Cable
shares or Telewest shares includes ownership of the General Cable shares or
Telewest shares underlying the corresponding General Cable ADSs or Telewest
ADSs, respectively. This summary assumes that each obligation provided for in,
or otherwise contemplated by, the applicable deposit agreement and any related
agreement with respect to the ADSs will be and has been performed in
accordance with its terms.
This summary does not address the tax treatment of the Merger under applicable
state, local, foreign or other tax laws and generally does not take account of
rules that may apply to holders that are subject to special treatment,
including, without limitation, (i) insurance companies, dealers in securities,
certain retirement plans, financial institutions, tax exempt organizations,
holders of securities held as part of a "straddle", "hedge" or "conversion
transaction" with other investments and taxpayers whose functional currency is
not the US dollar, (ii) holders of General Cable shares owning directly,
indirectly or by attribution, 10% or more of the General Cable securities
prior to the Merger or 5% or more of the total voting power or total value of
Telewest securities following the Merger or (iii) holders of General Cable
securities who acquired General Cable securities pursuant to the exercise of
an employee stock option or otherwise as compensation. For purposes of this
discussion, a "US Holder" is any beneficial owner of General Cable securities
who or that is for US federal income tax purposes (i) a citizen or resident of
the US, (ii) a corporation created or organized in or under the laws of the US
or any political subdivision thereof, or (iii) any other person that is
subject to US federal income tax on a net basis in respect of its worldwide
income. The discussion below assumes that the General Cable securities
exchanged in the Merger are held as a capital asset within the meaning of
Section 1221 of the Internal Revenue Code of 1986, as amended (the "Code").
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HOLDERS OF GENERAL CABLE SECURITIES ARE URGED TO CONSULT THEIR OWN TAX
ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES TO THEM OF THE MERGER.
A US Holder that accepts the Offer should be treated for US federal income tax
purposes as exchanging such US Holder's General Cable shares or General Cable
ADSs (evidenced by ADRs), as the case may be, for such new Telewest shares,
new Telewest ADSs, cash, or combination of the foregoing, as is received by
such US Holder (such new Telewest shares, new Telewest ADSs, cash, or
combination of the foregoing, as the case may be, the "Offer Consideration").
The exchange of General Cable shares or General Cable ADSs for the Offer
Consideration will be a fully taxable exchange for US federal income tax
purposes, unless the Merger, together with the Pre-emptive Issue
(collectively, the "Overall Transaction"), qualifies for non-recognition
treatment as a transaction described under Section 351 of the Code (a "Section
351 Transaction").
It is uncertain whether the Overall Transaction will qualify as a Section 351
Transaction. Among other things, in order to qualify as a Section 351
Transaction either the holders of Telewest securities providing funds to
Telewest in exchange for new Telewest shares pursuant to the Pre-emptive Issue
(which funds in turn are being used by Telewest to provide the cash
consideration to holders of General Cable securities in the Merger) or the
holders of Telewest Convertible Preference shares receiving new Telewest
shares pursuant to the Conversion would have to be treated as "transferors"
for purposes of Section 351 of the Code (a treatment that, in each case, is
uncertain under present law). In addition, even if the holders of Telewest
securities participating in the Pre-emptive Issue or the holders of Telewest
Convertible Preference shares receiving new Telewest shares pursuant to the
Conversion are treated as "transferors," in order for the Overall Transaction
to qualify as a Section 351 Transaction, holders of Telewest securities that
are treated as "transferors," combined with the holders of General Cable
securities receiving Telewest securities in the Merger, would have to own
stock possessing at least 80% of the total combined voting power of all
classes of Telewest stock entitled to vote, and at least 80% of the total
number of shares of all other classes of stock of Telewest following the
Merger (taking into account in certain circumstances, for these purposes, pre-
arranged, post-Merger sales, if any, of Telewest shares and/or Telewest ADSs).
If the Overall Transaction qualifies as a Section 351 Transaction, US Holders
receiving Offer Consideration (other than solely cash) generally would
recognise gain (but not loss), determined separately for each block of General
Cable shares or General Cable ADSs (i.e., General Cable shares or ADSs
acquired at the same cost in a single transaction), with the amount of gain
recognised being limited to the lesser of the dollar value of any cash
received and the amount of gain realised (which gain realised would equal the
excess of (x) the sum of (i) the dollar value of any cash received and
(ii) the fair market value of any Telewest securities received, over (y) the
US Holder's adjusted basis, as determined under US federal income tax law, in
the General Cable securities exchanged in the Merger). In light of the legal
and factual uncertainties as to whether the Overall Transaction will qualify
as a Section 351 Transaction, US Holders are urged to consult their own tax
advisers regarding the potential qualification of the Overall Transaction as a
Section 351 Transaction and the US federal and other tax consequences to them
(including, without limitation, the computation and treatment of any gain
recognised and the US Holder's basis and holding period in any Telewest
securities received) if the Overall Transaction so qualifies.
If the Overall Transaction does not qualify as a Section 351 Transaction, US
Holders exchanging their General Cable shares or General Cable ADSs for the
Offer Consideration will be required to recognise gain or loss, determined on
a block-by-block basis, equal to the difference between (x) the sum of (i) the
dollar value of any cash received and (ii) the fair market value of any
Telewest securities received, and (y) the US Holder's adjusted basis, as
determined under US federal income tax law, in the General Cable securities
exchanged in the Merger. An exchanging US Holder will take a basis in any new
Telewest securities received equal to their fair market value and such US
Holder's holding period in any new Telewest securities received will begin the
day after such new Telewest securities are acquired.
Any gain or loss recognised by a US Holder will be long-term capital gain or
loss if the US Holder has held its General Cable securities for more than one
year. In the case of US Holders who are individuals,
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long-term capital gains are eligible for reduced rates of taxation.
Utilisation of capital losses is subject to certain limitations.
Gain recognised by a US Holder in the Merger generally will be treated as
United States source income for foreign tax credit purposes. Under existing
law, the source of any loss is uncertain. Under proposed regulations, a loss
generally would be a foreign source loss.
US Holders are advised to consult their own tax advisers about the capital
gain or loss provisions that may be relevant to their particular
circumstances. US Holders are also advised to consult their own tax advisers
regarding the treatment of foreign currency gain or loss, if any, on any
pounds sterling received in the Merger that are converted into dollars at an
exchange rate different from that used to determine the amount of gain or loss
recognised in the Merger.
A US Holder may be subject to US "backup withholding" at a rate of 31% with
respect to the amount of any cash received in the Merger unless such Holder
(i) is a corporation or is otherwise exempt from the backup withholding and,
when required, demonstrates such fact or (ii) provides an accurate taxpayer
identification number, certifies that it is not subject to backup withholding
and otherwise complies with applicable requirements of the backup withholding
rules. Backup withholding is not an additional US federal income tax. Rather,
the US federal income tax of persons subject to backup withholding will be
reduced by the amount of such tax withheld and, if backup withholding results
in an overpayment of taxes, application for a refund may be made with the US
Internal Revenue Service.
For a description of the US federal income tax consequences of owning Telewest
shares and Telewest ADSs, see "Part I--Section Seven--Additional Information--
Taxation" in the accompanying Disclosure Document.
20. ACCOUNTING TREATMENT
The Offer will be accounted for by Telewest as an acquisition for financial
accounting purposes in accordance with UK GAAP and as a purchase in accordance
with US GAAP. Under UK GAAP acquisition accounting and US GAAP purchase
accounting the results of General Cable will be included in the consolidated
financial statements of the Combined Group from the date of acquisition and
the assets and liabilities of General Cable will be included at their fair
value.
21. COMPARISON OF SHAREHOLDER RIGHTS
Each of Telewest and General Cable is a public limited company incorporated in
England. As set out in the respective Articles of Association of Telewest and
General Cable, there are no material differences between the rights of holders
of Telewest shares (following the proposed amendments to Telewest's Articles
of Association) and the corresponding rights of holders of General Cable
shares save for the different liquidation, voting and dividend rights
attaching to the Telewest Convertible Preference shares and the preferential
rights of certain major Telewest shareholders. Details of these rights are set
out in "Part I--Section Four--Information on the Combined Group--Principal
Shareholders" of the Disclosure Document.
22. PROCEDURE FOR ACCEPTANCE OF THE OFFER
This section should be read together with the notes on the relevant
Acceptance Form.
(A) ACCEPTANCE FORMS
All holders of General Cable shares, including persons in the US who hold
General Cable shares, have been sent a Form of Acceptance, which they must use
to tender their General Cable shares and accept the Offer. All General Cable
ADS holders have been sent a Letter of Transmittal and a Notice of Guaranteed
Delivery. To tender their General Cable ADSs and accept the Offer, holders of
General Cable
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ADSs must either use the Letter of Transmittal or use the Notice of Guaranteed
Delivery and comply with the Guaranteed Delivery Procedures described in
Section C(i) of this paragraph 22. Should any holder of General Cable
securities receive an incorrect form with which to accept the Offer or require
any additional forms, that person should contact the Receiving Agent or the US
Depositary, as appropriate, at the relevant addresses set out below, who will
provide the appropriate forms.
(B) HOLDERS OF GENERAL CABLE SHARES
(A) COMPLETION OF FORM OF ACCEPTANCE
You should note that if you hold General Cable shares in both certificated and
uncertificated form (that is in CREST) you should complete a separate Form of
Acceptance for each holding. In addition, you should complete a separate Form
of Acceptance for General Cable shares held in CREST, but under different
member account IDs and a separate Form of Acceptance for General Cable shares
held in certificated form but under different designations. If you hold
General Cable shares in CREST you should also refer to paragraphs (d) and (e)
below. Additional Forms of Acceptance are available from Lloyds Bank
Registrars, The Causeway, Worthing, West Sussex BN99 6DA (telephone number:
01903 702767).
(i) To accept the Offer
To accept the Offer in respect of all your General Cable shares, you must
complete Boxes [1] and [4] and, if your General Cable shares are in CREST,
Box [6]. In all cases you must sign Box [3] of the Form of Acceptance IN
THE PRESENCE OF A WITNESS, WHO SHOULD ALSO SIGN IN ACCORDANCE WITH THE
INSTRUCTIONS PRINTED THEREON.
(ii) To elect for the Mix and Match Election
To make an election under the Mix and Match Election you should complete
Boxes [1] and EITHER [2A] OR [2B] and [4] and, if your General Cable
shares are in CREST, Box [6]. In all cases you must sign Box [3] of the
Form of Acceptance IN THE PRESENCE OF A WITNESS WHO SHOULD ALSO SIGN IN
ACCORDANCE WITH THE INSTRUCTIONS PRINTED THEREON. YOU MUST NOT FILL IN
BOTH BOX [2A] AND BOX [2B]. IF YOU DO SO, YOU WILL BE DEEMED NOT TO HAVE
MADE A MIX AND MATCH ELECTION.
IF YOU HAVE ANY QUESTIONS AS TO HOW TO COMPLETE THE FORM OF ACCEPTANCE, PLEASE
TELEPHONE LLOYDS BANK REGISTRARS ON 01903 702767.
(B) RETURN OF FORM OF ACCEPTANCE
Completed Forms of Acceptance should be returned by post or by hand to Lloyds
Bank Registrars, The Causeway, Worthing, West Sussex BN99 6DA or by hand only
during normal business hours to Lloyds Bank Registrars, Antholin House, 71
Queen Street, London EC4 together (subject to paragraph (d) below) with the
relevant share certificate(s) and/or other document(s) of title as soon as
possible, BUT IN ANY EVENT SO AS TO ARRIVE NO LATER THAN 3.00 PM (LONDON
TIME), 10.00 AM (NEW YORK CITY TIME) ON 13 AUGUST 1998. A reply-paid envelope
for use in the UK only is enclosed for your convenience. No acknowledgement of
receipt of documents will be given by or on behalf of Telewest. The
instructions printed on the Form of Acceptance are deemed to form part of the
terms of the Offer.
Any Form of Acceptance received in an envelope postmarked in Canada, Australia
or Japan or otherwise appearing to Telewest or its agents to have been sent
from Canada, Australia or Japan may be rejected as an invalid acceptance of
the Offer.
Delivery of the Form of Acceptance and certificates representing General Cable
shares and/or other documents of title to the US Depositary will not
constitute delivery of them to the Receiving Agent for the purposes of this
paragraph 22 and Part C of Appendix I.
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(C) DOCUMENTS OF TITLE
If your General Cable shares are in certificated form, a completed and signed
Form of Acceptance should be accompanied by the relevant share certificate(s)
and/or other document(s) of title. If for any reason the relevant share
certificate(s) and/or the other document(s) of title is/are lost or not
readily available, you should nevertheless complete, sign and lodge the Form
of Acceptance as stated above so as to be received no later than 3.00 pm
(London time), 10.00 am (New York City time), on 13 August 1998. You should
send with the Form of Acceptance any share certificate(s) and/or other
document(s) of title which you may have available and a letter stating that
the remaining documents will follow as soon as possible. No acknowledgement of
receipt of documents will be given. If you have lost your share certificate(s)
and/or other document(s) of title, you should contact General Cable's
registrars, Lloyds Bank Registrars, The Causeway, Worthing, West Sussex BN99
6DA (telephone 01903 702767), for a letter of indemnity for lost share
certificate(s) and/or other documents of title which, when completed in
accordance with the instructions given, should be returned by post to Lloyds
Bank Registrars as above.
(D) ADDITIONAL PROCEDURES FOR GENERAL CABLE SHARES IN UNCERTIFICATED FORM
(THAT IS, IN CREST)
If your General Cable shares are in uncertificated form, you should insert in
Box [6] of the enclosed Form of Acceptance the participant ID and member
account ID under which such General Cable shares are held by you in CREST and
otherwise complete and return the Form of Acceptance as described above. In
addition, you should take (or procure to be taken) the action set out below to
transfer the General Cable shares in respect of which you wish to accept the
Offer to an escrow balance (that is, a TTE instruction) specifying Lloyds Bank
Registrars (in its capacity as a CREST participant under the participant ID
referred to below) as the Escrow Agent, as soon as possible AND IN ANY EVENT
SO THAT THE TRANSFER TO ESCROW SETTLES NO LATER THAN 3.00 PM (LONDON TIME),
10.00 AM (NEW YORK CITY TIME) ON 13 AUGUST 1998.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before taking any action. Your CREST sponsor will be able to confirm details
of your participant ID and the member account ID under which your General
Cable shares are held. In addition, only your CREST sponsor will be able to
send the TTE instruction to CRESTCo in relation to your General Cable shares.
You should send (or, if you are a CREST sponsored member, procure that your
CREST sponsor sends) a TTE instruction to CRESTCo which must be properly
authenticated in accordance with CRESTCo's specifications and which must
contain, in addition to the other information that is required for a TTE
instruction to settle in CREST, the following details:
. the number of General Cable shares to be transferred to an escrow
balance;
. your member account ID. This must be the same member account ID as that
inserted in Box [6] of the Form of Acceptance;
. your participant ID. This must be the same participant ID as the
participant ID that is inserted in Box [6] of the Form of Acceptance;
. the participant ID of the Escrow Agent. This is 2RA69;
. the member account ID of the Escrow Agent. This is RA589401;
. the Form of Acceptance reference number. This is the reference number
that appears at the bottom of page 1 of the Form of Acceptance. This
reference number should be inserted in the first eight characters of the
shared note field on the TTE instruction. Such insertion will enable
Lloyds Bank Registrars to match transfer to escrow to your Form of
Acceptance. You should keep a separate record of this reference number
for future reference; and
. the intended settlement date. This should be as soon as possible and in
any event not later than 3.00 pm (London time), 10.00 am (New York City
time) on 13 August 1998.
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After settlement of the TTE instruction, you will not be able to access the
General Cable shares concerned in CREST for any transaction or charging
purposes. If the Offer becomes or is declared unconditional in all respects,
the Escrow Agent will transfer the General Cable shares concerned to itself in
accordance with paragraph (d) of Part C of Appendix I to this document.
You are recommended to refer to the CREST manual published by CRESTCo for
further information on the CREST procedures outlined above. For ease of
processing, you are requested, wherever possible, to ensure that a Form of
Acceptance relates to only one transfer to escrow.
If no Form of Acceptance reference number, or an incorrect Form of Acceptance
reference number, is included in the TTE instruction, Telewest may treat any
amount of General Cable shares transferred to an escrow balance in favour of
the Escrow Agent specified above from the participant ID and member account ID
identified in the TTE instruction as relating to any Form(s) of Acceptance
which relate(s) to the same member account ID and participant ID (up to the
amount of General Cable shares inserted or deemed to be inserted on the
Form(s) of Acceptance concerned).
YOU SHOULD NOTE THAT CRESTCO DOES NOT MAKE AVAILABLE SPECIAL PROCEDURES IN
CREST FOR ANY PARTICULAR CORPORATE ACTION. NORMAL SYSTEM TIMINGS AND
LIMITATIONS WILL THEREFORE APPLY IN CONNECTION WITH A TTE INSTRUCTION AND ITS
SETTLEMENT. YOU SHOULD THEREFORE ENSURE THAT ALL NECESSARY ACTION IS TAKEN BY
YOU (OR BY YOUR CREST SPONSOR) TO ENABLE A TTE INSTRUCTION RELATING TO YOUR
GENERAL CABLE SHARES TO SETTLE PRIOR TO 3.00 PM (LONDON TIME), 10.00 AM (NEW
YORK CITY TIME) ON 13 AUGUST 1998. IN THIS REGARD, YOU ARE REFERRED IN
PARTICULAR TO THOSE SECTIONS OF THE CREST MANUAL CONCERNING PRACTICAL
LIMITATIONS OF THE CREST SYSTEM AND TIMINGS.
Telewest will make an appropriate announcement if any of the details contained
in this paragraph (d) alter for any reason.
(E) DEPOSITS OF GENERAL CABLE SHARES INTO, AND WITHDRAWALS OF GENERAL CABLE
SHARES FROM, CREST
Normal CREST procedures (including timings) apply in relation to any General
Cable shares that are, or are to be, converted from uncertificated to
certificated form, or from certificated to uncertificated form during the
course of the Offer (whether any such conversion arises as a result of a
transfer of General Cable shares or otherwise). Holders of General Cable
shares who are proposing so to convert any such General Cable shares are
recommended to ensure that the conversion procedures are implemented in
sufficient time to enable the person holding or acquiring the General Cable
shares as a result of the conversion to take all necessary steps in connection
with an acceptance of the Offer (in particular, as regards delivery of share
certificate(s) or other document(s) of title or transfers to an escrow balance
as described above) prior to 3.00 pm (London time), 10.00 am (New York City
time) on 13 August 1998.
(F) VALIDITY OF ACCEPTANCE
Without prejudice to Parts B and C of Appendix I of this document, Telewest
reserves the right to treat as valid in whole or in part any acceptance of the
Offer which is not entirely in order or which is not accompanied by the
relevant TTE instruction or (as applicable) the relevant share certificate(s)
and/or other document(s) of title. In that event, no payment of cash or issue
of new Telewest shares under the Offer will be made until after the relevant
TTE instruction has settled or (as applicable) the relevant share
certificate(s) and/or other document(s) of title or indemnities satisfactory
to Telewest have been received.
Notes 4 to 6 to Rule 10 of the City Code contain detailed provisions for
verifying which acceptances and purchases may be counted towards fulfilling
the Acceptance Condition or in determining whether the Acceptance Condition
has been fulfilled and are principally concerned to ensure that the acceptor
is the registered owner of the securities which he is tendering. The principal
requirements of Notes 4 to 6 to Rule 10 are that any Acceptance Form must be
completed to a suitable standard (that is, it must constitute a transfer or a
valid and irrevocable appointment of Telewest or some person on its behalf as
agent or attorney for the purpose of executing a transfer) and it must be
accompanied by, where General
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Cable shares are in certificated form, the appropriate share certificate(s) or
other document(s) of title and, in all cases, any relevant supporting
documentation (such as powers of attorney). Immediately prior to the
satisfaction of the Acceptance Condition the Receiving Agent will issue a
certificate to Telewest stating the number of General Cable shares tendered
and not validly withdrawn pursuant to the Offer. Copies of such certificates
will be sent to the Panel as soon as possible after they are issued.
(C) HOLDERS OF GENERAL CABLE ADSS
(A) GENERAL
If you are a holder of General Cable ADSs evidenced by General Cable ADRs, you
will have received a Letter of Transmittal and Notice of Guaranteed Delivery
for use in connection with the Offer. This section should be read together
with the instructions on the Letter of Transmittal. The provisions of this
section shall be deemed to be incorporated in, and form a part of, the
relevant Letter of Transmittal. The Letter of Transmittal shall be deemed to
form part of the terms of the Offer.
(B) COMPLETION OF LETTER OF TRANSMITTAL
For a holder of General Cable ADSs evidenced by General Cable ADRs to tender
such General Cable ADSs validly pursuant to the Offer, either:
(i) a properly completed and duly executed Letter of Transmittal, together
with any required signature guarantees (or Agent's Message (as defined in
(d) below) in the case of book-entry transfers) and any other required
documents, must be received by the US Depositary at one of its addresses
set out in paragraph (e) below and the General Cable ADRs evidencing such
General Cable ADSs must be either received by the US Depositary at one of
such addresses or delivered pursuant to the procedures for book-entry
transfers set out below (and a confirmation of receipt of such transfer
received by the US Depositary); or
(ii) such holder must comply with the "Guaranteed Delivery Procedures" (as
set out in paragraph (i) below).
The Offer in respect of General Cable ADSs evidenced by General Cable ADRs
shall be validly accepted by delivery of a Letter of Transmittal, together
with any required signature guarantees (or Agent's Message in case of book-
entry transfers), the relevant General Cable ADRs evidencing General Cable
ADSs and other required documents to the US Depositary by holders of General
Cable ADSs (without any further action by the US Depositary), subject to the
terms and conditions set out in this document and the Letter of Transmittal.
The acceptance of the Offer by a tendering holder of General Cable ADSs
evidenced by General Cable ADRs pursuant to the procedures described above,
subject to the withdrawal rights described below, will be deemed to constitute
a binding agreement between such tendering holder of General Cable ADSs and
Telewest upon the terms and subject to the conditions of the Offer. IF A
GENERAL CABLE ADR EVIDENCING A GENERAL CABLE ADS HAS BEEN TENDERED BY A HOLDER
OF GENERAL CABLE ADSs, THE GENERAL CABLE SHARES REPRESENTED BY SUCH GENERAL
CABLE ADSs MAY NOT BE TENDERED INDEPENDENTLY.
A LETTER OF TRANSMITTAL AND OTHER REQUIRED DOCUMENTS CONTAINED IN AN ENVELOPE
POSTMARKED IN CANADA, JAPAN OR AUSTRALIA OR OTHERWISE APPEARING TO TELEWEST OR
ITS AGENTS TO HAVE BEEN SENT FROM CANADA, JAPAN OR AUSTRALIA MAY BE REJECTED
AS INVALID.
(C) ALTERNATIVE CONSIDERATION
Persons completing a valid Letter of Transmittal in respect of General Cable
ADSs will receive their cash in the form of US dollars and entitlement to new
Telewest shares in the form of new Telewest ADSs (each new Telewest ADS
representing ten new Telewest shares), but may elect to receive new Telewest
shares and pounds sterling instead by marking the box under "Special Exchange
Instructions" on the Letter of Transmittal. General Cable ADS holders may
elect to receive new Telewest shares and pounds sterling in
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exchange for all (but not part) of their holdings of General Cable ADSs.
Holders may not elect to receive new Telewest shares and US dollars or new
Telewest ADSs and pounds sterling.
(D) BOOK-ENTRY TRANSFER
The US Depositary will establish an account at The Depository Trust Company
with respect to interests in General Cable ADSs evidenced by General Cable ADRs
held in book-entry form for the purposes of the Offer within two US Business
Days from the date of this document. Any financial institution that is a
participant in any of The Depository Trust Company's systems may make book-
entry delivery of interests in General Cable ADSs by causing The Depository
Trust Company to transfer such interests in General Cable ADSs into the US
Depositary's account at The Depository Trust Company in accordance with The
Depository Trust Company's procedure for such transfer. Although delivery of
interests in General Cable ADSs evidenced by General Cable ADRs may be effected
through book entry transfer into the US Depositary's account at The Depository
Trust Company, either:
(i) the Letter of Transmittal, properly completed and duly executed,
together with any required signature guarantees; or
(ii) an Agent's Message (as defined below),
and, in either case, any other required documents, must in any case be
transmitted to, and received by, the US Depositary at one of its addresses set
out in paragraph (e) below before General Cable ADSs evidenced by General Cable
ADRs will be either counted as a valid acceptance or purchased, or such holder
must comply with the Guaranteed Delivery Procedures described below. The term
"Agent's Message" means a message transmitted by The Depository Trust Company
to, and received by, the US Depositary and forming part of a Book-Entry
Confirmation that states that The Depository Trust Company has received an
express acknowledgement from the participant in The Depository Trust Company
tendering the interests in General Cable ADSs that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that Telewest may enforce such agreement against the participant. The
confirmation of a book entry transfer of ADSs into the US Depositary's account
at The Depository Trust Company as described above is referred to herein as a
"Book Entry Confirmation". Delivery of documents to The Depository Trust
Company does not constitute delivery to the US Depositary.
(E) METHOD OF DELIVERY
The method of delivery of General Cable ADRs, the Letters of Transmittal and
all other required documents is at the option and risk of the tendering holder
of General Cable ADSs. General Cable ADSs will be deemed delivered only when
the General Cable ADRs representing such General Cable ADSs are actually
received by the US Depositary (including in the case of a book-entry transfer,
by Book-Entry Confirmation). If delivery is by mail, registered mail with
return receipt requested, properly insured, is recommended. In all cases,
sufficient time should be allowed to ensure timely delivery. No acknowledgement
of receipt of any Letter of Transmittal or other required documents will be
given by, or on behalf of, Telewest.
Documents may be transmitted to the US Depositary at one of the following
addresses:
By mail: By hand or overnight courier:
Tender & Exchange Department Tender & Exchange Department
P.O. Box 11248 101 Barclay Street
Church Street Station Receive and Deliver Window
New York, New York 10286-1248 New York, New York 10286
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(F) SIGNATURE GUARANTEES
No signature guarantee is required on the Letter of Transmittal if:
(i) the Letter of Transmittal is signed by the registered holder of the
General Cable ADSs tendered therewith and such registered holder has not
completed the box entitled "Special Payment Instructions", the box entitled
"Special Delivery Instructions" or the box entitled "Special Instructions
Regarding New Telewest Securities" on the Letter of Transmittal; or
(ii) such General Cable ADSs are tendered for the account of an Eligible
Institution.
IN ALL OTHER CASES ALL SIGNATURES ON LETTERS OF TRANSMITTAL MUST BE GUARANTEED
BY AN ELIGIBLE INSTITUTION. SEE INSTRUCTION 1 ON THE LETTER OF TRANSMITTAL.
(G) GENERAL CABLE ADSS AND ADRS
If the General Cable ADSs are registered in the name of a person other than
the person who signs the Letter of Transmittal, or if new Telewest ADSs or new
Telewest shares are to be issued to a person other than the registered owner
of the General Cable ADSs surrendered, then the tendered General Cable ADRs
must be endorsed or accompanied by appropriate stock powers, signed exactly as
the name or names of the registered owner or owners appear on the General
Cable ADRs, with the signatures on the General Cable ADRs or stock powers
guaranteed as described above. See Instructions 1 and 5 on the Letter of
Transmittal.
(H) PARTIAL ACCEPTANCES
If fewer than all of the General Cable ADSs evidenced by any General Cable
ADRs delivered to the US Depositary are to be tendered, the holder thereof
should so indicate in the Letter of Transmittal by filling in the number of
General Cable ADSs which are to be tendered in the box entitled "Number of
General Cable ADSs Tendered". In such case, a new General Cable ADR for the
remainder of the General Cable ADSs represented by the former General Cable
ADR will be sent to the person(s) signing such Letter of Transmittal (or
delivered as such person properly indicates thereon) as promptly as
practicable following the date the tendered General Cable ADSs are purchased.
All General Cable ADSs delivered to the US Depositary will be deemed to have
been tendered unless otherwise indicated. See Instruction 4 on the Letter of
Transmittal. In the case of partial tenders, General Cable ADSs not tendered
will not be reissued to a person other than the registered holder.
(I) GUARANTEED DELIVERY PROCEDURES
(i) If a holder of General Cable ADSs evidenced by General Cable ADRs
desires to tender General Cable ADSs pursuant to the Offer and the General
Cable ADRs evidencing such General Cable ADSs are not immediately available
or the procedures for book-entry transfer cannot be completed on a timely
basis, or if time will not permit all required documents to reach the US
Depositary prior to the expiry of the Initial Offer Period or the
Subsequent Offer Period, as the case may be, such holder's tender of
General Cable ADSs may be effected if all the following conditions are met
(the "Guaranteed Delivery Procedures"):
(aa) such tender is made by or through an Eligible Institution;
(bb) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by Telewest is received by
the US Depositary, as provided below, prior to the expiry of the
Initial Offer Period or the Subsequent Offer Period, as the case may
be; and
(cc) the General Cable ADRs evidencing all tendered General Cable ADSs
(or, in the case of interests in General Cable ADSs held in book-entry
form, timely Book-Entry Confirmation with respect to such General Cable
ADSs as described above), together with a properly completed and duly
executed Letter of Transmittal with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message) and any
other required documents, are received by the US Depositary within
three Nasdaq trading days after the date of execution of such Notice of
Guaranteed Delivery.
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(ii) The Notice of Guaranteed Delivery may be delivered by hand or mailed
to the US Depositary and must include a guarantee by an Eligible
Institution in the form set out in such Notice of Guaranteed Delivery.
(iii) Receipt of a Notice of Guaranteed Delivery will not be treated as a
valid acceptance for the purpose of satisfying the Acceptance Condition. To
be counted towards satisfaction of this requirement, General Cable ADRs
evidencing General Cable ADSs referred to in the Notice of Guaranteed
Delivery must, prior to the First Closing Date, be received by the US
Depositary (or, in the case of interests in General Cable ADSs evidenced by
General Cable ADRs held in book-entry form, timely Book-Entry Confirmation
with respect to such General Cable ADSs as described above), together with
a duly executed Letter of Transmittal with any required signature
guarantees (or, in the case of a book-entry transfer, an Agent's Message)
and any other required documents.
(J) OTHER REQUIREMENTS
By executing the Letter of Transmittal as set out above, the tendering holder
of General Cable ADSs evidenced by General Cable ADRs will agree that
effective from and after the date the Offer becomes or is declared
unconditional in all respects:
(i) Telewest or its agents shall be entitled to direct the exercise of any
votes and any or all other rights and privileges (including the right to
requisition the convening of a general meeting of General Cable or of any
class of its shareholders) attaching to the General Cable shares
represented by any General Cable ADSs, in respect of which the Offer has
been accepted or is deemed to have been accepted and not validly withdrawn;
and
(ii) the execution of the Letter of Transmittal and its delivery to the US
Depositary (or delivery of an Agent's Message to the US Depositary) will
constitute:
(aa) an authority to General Cable from the tendering holder of General
Cable ADSs to send any notice, circular, warrant, document or other
communication which may be required to be sent to him as a holder of
General Cable ADSs to Telewest at its registered office;
(bb) an authority to Telewest or any director of Telewest to sign any
consent to short notice of a general or separate class meeting on
behalf of the tendering holder of General Cable ADSs and/or to execute
a form of proxy in respect of such General Cable ADSs appointing any
person nominated by Telewest to attend general and separate class
meetings of General Cable (or any adjournments thereof) and to exercise
the votes attaching to such General Cable ADSs on the holder's behalf,
such votes to be cast so far as possible to satisfy any outstanding
Condition; and
(cc) the agreement of the tendering holder of General Cable ADSs not to
exercise any of such rights without the consent of Telewest and the
irrevocable undertaking of the tendering holder of General Cable ADSs
not to appoint a proxy for or to attend any such general meeting or
separate class meeting.
(D) OVERSEAS HOLDERS
The attention of holders of General Cable securities who are citizens or
residents of jurisdictions outside the UK or the US is drawn to paragraph 8 of
Part B and paragraph (b) of Part C of Appendix I of this document, and to the
relevant provisions of the Acceptance Form.
IF YOU ARE IN ANY DOUBT AS TO THE PROCEDURE FOR ACCEPTANCE OF THE OFFER WITH
RESPECT TO GENERAL CABLE SHARES, PLEASE CONTACT LLOYDS BANK REGISTRARS BY
TELEPHONE ON 01903 702767 OR AT THE ADDRESS(ES) IN PARAGRAPH (B)(B) ABOVE. YOU
ARE REMINDED THAT, IF YOU ARE A CREST SPONSORED MEMBER, YOU SHOULD CONTACT
YOUR CREST SPONSOR BEFORE TAKING ANY ACTION. IF YOU ARE A HOLDER OF GENERAL
CABLE ADSS AND ARE IN ANY DOUBT ABOUT THE PROCEDURE FOR ACCEPTANCE, PLEASE
TELEPHONE THE US DEPOSITARY TOLL FREE AT (888) BNY-ADRS ((888) 269-2377).
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Any questions or requests for assistance or additional copies of the Offer
to Purchase/Prospectus, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be directed to the Information Agent identified below at the
address and telephone number listed below, or to the US Depositary at the
respective addresses and telephone numbers mentioned in paragraphs (C)(e) and
(D) above.
The Information Agent for the Offer is:
INNISFREE M&A INCORPORATED
501 Madison Avenue, 20th Floor
New York, New York 10022
Telephone (212) 750-5833
or
CALL TOLL FREE (888) 750-5834
23. RIGHTS OF WITHDRAWAL
With certain exceptions pursuant to SEC exemptive relief, the Offer is subject
to the US tender offer rules applicable to securities registered under the US
Exchange Act, as well as the City Code. This has necessitated a number of
changes from the procedures which normally apply to offers for UK companies,
including those applicable to the rights of holders of General Cable
securities to withdraw their acceptance of an offer.
Under the Offer, holders of General Cable securities will be able to withdraw
their acceptances at any time prior to the First Closing Date and in certain
other circumstances. The Offer will not be deemed to have been validly
accepted in respect of any General Cable securities which have been withdrawn.
However, the Offer may be accepted again in respect of the withdrawn General
Cable securities by following one of the procedures described in paragraph 22
of this letter ("Procedure for acceptance of the Offer") above at any time
prior to the expiry or lapse of the Offer.
Further details of these rights of withdrawal and the procedure for effecting
withdrawals are set out in paragraph 3 of Part B of Appendix I ("Rights of
withdrawal") below.
24. SETTLEMENT
Holders of General Cable securities (especially those who make elections under
the Mix and Match Election) should refer to paragraph 9 ("the new Telewest
securities") above.
Subject to the Offer becoming or being declared unconditional in all respects
(except as provided in paragraph 8 of Part B of Appendix I in the case of
certain overseas holders of General Cable securities), settlement of the
consideration to which any holder of General Cable securities is entitled
under the Offer will be effected (i) in the case of acceptances received,
complete in all respects, by the date on which the Offer becomes or is
declared unconditional in all respects, within 14 days of such date, or (ii)
in the case of acceptances of the Offer received, complete in all respects,
after the date on which the Offer becomes or is declared unconditional in all
respects but while it remains open for acceptance, within 14 days of such
receipt, in the following manner:
(A) GENERAL CABLE SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
Where an acceptance relates to General Cable shares in uncertificated form:
(i) the new Telewest shares to which the accepting General Cable
shareholder is entitled will be issued to such shareholder in
uncertificated form. Telewest will procure that CRESTCo is instructed to
credit the appropriate stock account in CREST of the General Cable
shareholder concerned with such shareholder's entitlement to new Telewest
shares. The stock account concerned will be an account under the same
participant ID and member account ID as appeared on the Form of
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Acceptance concerned. In addition, the instruction to CRESTCo will specify
(in the shared note field) the Form of Acceptance Reference Number that
appeared on the Form of Acceptance concerned;
(ii) any cash consideration to which the accepting General Cable
shareholder is entitled will be posted or despatched by means of CREST by
Telewest procuring the creation of an assured payment obligation in favour
of the accepting General Cable shareholder's payment bank in respect of the
cash consideration due, in accordance with the CREST assured payment
arrangements.
Telewest reserves the right to settle all or any part of the consideration
referred to in this paragraph (a), for all or any accepting General Cable
shareholder(s), in the manner referred to in paragraph (b) below, if, for any
reason, it wishes to do so.
(B) GENERAL CABLE SHARES IN CERTIFICATED FORM AND CERTAIN GENERAL CABLE ADSS
Where an acceptance relates to General Cable shares in certificated form or
General Cable ADSs with respect to which an election to receive new Telewest
shares and pounds sterling has been received, the new Telewest shares to which
an accepting holder of General Cable securities is entitled will be issued in
certificated form. Definitive certificates for the new Telewest shares and
cheques for any cash due will be despatched by first class post (or by such
other method as the Panel may approve). All such payments will be made in
pounds sterling by cheque drawn on a branch of a UK clearing bank.
(C) GENERAL CABLE ADSS
Instead of pounds sterling and new Telewest shares, General Cable ADS holders
who do not elect otherwise will receive dollars and Telewest ADSs on the
following basis: (i) the cash amount payable in pounds sterling to which such
holder would otherwise be entitled pursuant to the terms of the Offer will be
converted, without charge, from pounds sterling to dollars at the exchange
rate obtained by the US Depositary on or about the date the cash consideration
is made available by Telewest to the US Depositary for delivery in respect of
the relevant General Cable ADSs; and (ii) such holder will receive one
Telewest ADS for every ten new Telewest shares to which such holder would
otherwise be entitled pursuant to the Offer. Holders of General Cable ADSs may
elect to receive new Telewest shares and pounds sterling in exchange for all
(but not part) of their holdings of General Cable ADSs. Holders may not elect
to receive new Telewest shares and dollars or new Telewest ADSs and pounds
sterling.
The actual amount of dollars received will depend upon the exchange rate
obtained by the US Depositary for the funds that are made available to the US
Depositary by Telewest. Holders of General Cable ADSs should be aware that the
exchange rate which is prevailing at the date on which an Acceptance Form is
transmitted and on the date of despatch of payments may be different from that
obtained by the US Depositary. In all cases, fluctuations in the dollar/pounds
sterling exchange rate are at the risk of accepting holders of General Cable
ADSs who do not elect to receive their consideration in pounds sterling. Such
currency exchange will be effected by the US Depositary on behalf of the
requesting holders of General Cable ADSs and Telewest shall have no
responsibility or obligation with respect thereto. Telewest shall have no
responsibility with respect to the cash consideration other than to make
payment in pounds sterling.
(D) GENERAL
If the Offer does not become or is not declared unconditional in all respects
(i) share or ADR certificate(s) and/or other document(s) of title will be
returned by post (or such other method as may be approved by the Panel),
within 14 days of the Offer lapsing, to the person or agent whose name and
address (outside Canada, Australia or Japan) is set out on the Acceptance Form
or, if none is set out, to the first named holder at his registered address
(outside Canada, Australia and Japan), (ii) the Escrow Agent will, immediately
after the lapsing of the Offer (or within such longer period, not exceeding 14
days after the Offer lapsing, as the Panel may approve), give TFE instructions
to CRESTCo to transfer all General Cable shares held in escrow balances and in
relation to which it is the Escrow Agent to the original available balances of
the General Cable shareholders concerned and (iii) in respect of General Cable
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ADRs in book-entry form, the US Depositary will return such General Cable ADRs
to the tendering holders unless otherwise instructed by such holder. All
documents and remittances sent by, to or from holders of General Cable
securities or their appointed agents will be sent at their own risk.
25. FURTHER INFORMATION
Your attention is drawn to the further information contained in the Appendices
to this document and to the accompanying Disclosure Document and Acceptance
Form.
26. ACTION TO BE TAKEN
ACCEPTANCE FORMS SHOULD BE RETURNED AS SOON AS POSSIBLE AND, IN ANY EVENT, SO
AS TO BE RECEIVED BY POST OR BY HAND BY THE RECEIVING AGENT OR THE US
DEPOSITARY AT THEIR RESPECTIVE ADDRESSES SET OUT ON PAGES 21 AND 25
RESPECTIVELY NO LATER THAN 3.00 PM (LONDON TIME), OR 10.00 AM (NEW YORK CITY
TIME) ON 13 AUGUST 1998.
Yours faithfully,
James Steel
Director
for and on behalf of J Henry Schroder & Co. Ltd
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- -------------------------------------------------------------------------------
APPENDIX I
Conditions and Further Terms of the Offer
- -------------------------------------------------------------------------------
Part A-CONDITIONS OF THE OFFER
The Offer is subject to the following conditions:
1. valid acceptances being received (and not, where permitted, withdrawn) by
3.00 pm (London time), 10.00 am (New York City time), on 13 August 1998
(or such later time(s) and/or date(s) as Telewest may, subject to the rules of
the City Code, decide) in respect of not less than 90% in nominal value (or
such lesser percentage as Telewest may decide) of the General Cable shares
(including General Cable shares represented by General Cable ADSs) to which the
Offer relates, provided that unless agreed by the Panel this condition will not
be satisfied unless Telewest (together with any of its wholly-owned
subsidiaries) shall have acquired or agreed to acquire, whether pursuant to the
Offer or otherwise, General Cable shares (including General Cable shares
represented by General Cable ADSs) carrying, in aggregate, more than 50% of the
voting rights then exercisable at general meetings of General Cable and
provided further that this condition shall be capable of being satisfied only
at a time when all of the other Conditions have been satisfied, fulfilled or,
where permitted, waived.
For the purposes of this condition:
(a) shares (including General Cable shares represented by General Cable
ADSs) which have beenNote 2 unconditionally allotted but not issued shall
be deemed to carry the voting rights they will carry upon issue; and
(b) the expression "General Cable shares (including General Cable shares
represented by General Cable ADSs) to which the Offer relates" shall be
construed in accordance with sections 428 - 430F of the Companies Act;
2. the passing at an extraordinary general meeting of Telewest and/or General
Cable (or at any adjournment thereof) of such resolutions as may be necessary
or incidental to approve, implement and effect the Offer and the Pre-emptive
Issue and the acquisition by Telewest of General Cable pursuant thereto;
3. the London Stock Exchange admitting, or (if determined by Telewest and
subject to the consent of the Panel) agreeing to admit, to the Official List,
the new Telewest shares to be issued pursuant to the Offer and the Pre-emptive
Issue and such admission becoming effective in accordance with the Listing
Rules;
4. the new Telewest ADSs issuable pursuant to the Offer and the Pre-emptive
Issue having been approved for quotation on Nasdaq;
5. necessary registration statements with respect to the Offer and the
Pre-emptive Issue having been declared and remaining effective under the US
Securities Act, and no stop order suspending the effectiveness of such
registration statements having been issued and no proceeding for that purpose
having been initiated or threatened by the SEC;
6. all necessary filings having been made and all applicable waiting periods
under the US Hart-Scott Rodino Antitrust Improvements Act of 1976 and the
regulations thereunder having expired, lapsed or been terminated as appropriate
in each case in connection with the Offer and the acquisition or proposed
acquisition of any shares in, or control of, General Cable by Telewest;
7. no relevant authority having:
(a) withdrawn or refused to renew, or threatened to withdraw or to refuse
to renew, any licence or permission; or
(b) instituted, implemented or taken, or threatened to take any other
action;
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the effect of which would adversely affect the businesses, assets,
prospects or profits of any member of the wider Telewest Group to an extent
which is material in the context of the Telewest Group taken as a whole or
of General Cable or any member of the wider General Cable Group to an
extent which is material in the context of the General Cable Group taken as
a whole, and no such licences or permissions terminating or otherwise
becoming invalid as a result of the Offer or its implementation the effect
of which would adversely affect the businesses, assets, prospects or
profits of General Cable or Telewest or any member of the wider General
Cable Group or the wider Telewest Group to an extent which is material in
the context of the General Cable Group or the Telewest Group, as the case
may be, taken as a whole;
8. no relevant authority having intervened in a way which would or might:
(a) make the Offer, its implementation or the acquisition or proposed
acquisition by any member of the Telewest Group of any shares in, or
control of, General Cable by any member of the Telewest Group, illegal,
void and/or unenforceable in or under the laws of any relevant
jurisdiction, or otherwise materially, whether directly or indirectly,
restrict, restrain, prohibit, delay, or otherwise materially interfere
with or challenge the implementation of, or impose additional
conditions or obligations with respect to, or otherwise challenge or
interfere with the Offer or such acquisition;
(b) require, prevent or materially delay the divestiture or materially
alter the terms envisaged for any proposed divestiture by any member of
the wider Telewest Group or any member of the wider General Cable Group
of all or any portion of their respective businesses, assets or
properties or impose any limitation on the ability of any of them to
conduct any of their respective businesses or to own any of their
respective assets or property or any part thereof in each case to an
extent which is material in the context of the Telewest Group taken as
a whole or the General Cable Group taken as a whole;
(c) impose any limitation on, or result in any material delay in, the
ability of any member of the wider Telewest Group or of the wider
General Cable Group to acquire or to hold or to exercise effectively,
directly or indirectly, any rights of ownership in respect of shares or
other securities in, or to exercise management control over, any member
of the wider General Cable Group or the wider Telewest Group, in each
case to an extent which is material in the context of the Telewest
Group taken as a whole or the General Cable Group taken as a whole;
(d) require any member of the wider Telewest Group or of the wider
General Cable Group to offer to acquire any shares or securities in any
member of the wider General Cable Group (other than General Cable) or
any member of the wider Telewest Group owned by a third party, in each
case to an extent which would be material in the context of the
Telewest Group or the General Cable Group, as the case may be, taken as
a whole;
(e) result in a material delay in the ability of any member of the
Telewest Group, or render any member of the Telewest Group unable to
acquire some or all of the General Cable shares;
(f) require, prevent or materially delay the divestiture by any member
of the wider Telewest Group of any shares or other securities in
General Cable;
(g) otherwise adversely affect any or all of the businesses, assets,
prospects or profits of any member of the wider General Cable Group or
the wider Telewest Group in each case to an extent which is material in
the context of the General Cable Group or the Telewest Group, as the
case may be, taken as a whole;
(h) impose any limitation on the ability of any member of the wider
General Cable Group or the wider Telewest Group to co-ordinate its
business, or any part of it, with the businesses of any other member of
the wider General Cable Group or the wider Telewest Group, as the case
may be, to an extent which is material in the context of the General
Cable Group or the Telewest Group taken as a whole, as the case may be;
or
(i) result in any member of the General Cable Group ceasing to be able
to carry on business under any name which it presently does so,
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and all applicable waiting and other time periods during which any relevant
authority could intervene in such a way having expired, lapsed or been
terminated;
9. all necessary filings having been made, all appropriate waiting periods
under any applicable legislation or regulation of any jurisdiction having
expired, lapsed or been terminated, in each case in connection with the
Offer or the acquisition of any shares or other securities in, or control
of, General Cable by Telewest, and all authorisations, waivers and
determinations which Telewest reasonably deems necessary or appropriate in
any relevant jurisdiction for or in respect of the Offer or the acquisition
or proposed acquisition of any shares in, or control of, General Cable by
Telewest having been obtained in a form reasonably satisfactory to
Telewest, from all relevant authorities or (without prejudice to the
generality of the foregoing) from any persons or bodies with whom any
member of the wider General Cable Group has entered into contractual
arrangements and such authorisations, waivers and determinations together
with all authorisations, waivers and determinations necessary or
appropriate for any member of the wider General Cable Group to carry on its
business (where such business is material in the context of the General
Cable Group taken as a whole and where the absence of such authorisation,
waiver or determination would have a material adverse effect on the General
Cable Group taken as a whole) remaining in full force and effect and all
filings necessary for such purpose having been made and there being no
notice or intimation of any intention to revoke or not to renew any of the
same, and all necessary statutory or regulatory obligations in all relevant
jurisdictions having been complied with;
10. except as publicly announced (by the delivery of an announcement to the
Company Announcements Office of the London Stock Exchange) before 15 April
1998, there being no provision of any arrangement, agreement, licence,
permit, franchise or other instrument to which any member of the wider
General Cable Group is a party, or by or to which any such member or any of
its assets is or are or may be bound, entitled or subject or any
circumstance, which, in each case as a consequence of the Offer or the
acquisition or proposed acquisition by any member of the Telewest Group of
any shares in, or change in the control or management of, General Cable,
would or might reasonably be expected to result in (to an extent which in
each case is material in the context of the General Cable Group taken as a
whole):
(a) any such arrangement, agreement, licence, permit, franchise or
instrument being terminated or adversely modified or affected or any
obligation or liability arising or any adverse action being taken or
arising thereunder;
(b) the rights, liabilities, obligations or interests of any member of
the wider General Cable Group under any such arrangement, agreement,
licence or instrument or the interests or business of any such member
in or with any other firm or company or body or person (or any
arrangement or arrangements relating to such business or interests)
being terminated, modified or adversely affected;
(c) any material assets or interests of any such member of the wider
General Cable Group being or falling to be disposed of or charged or
any right arising under which any such asset or interest could be
required to be disposed of or charged otherwise than in the ordinary
course of business;
(d) any material amount of moneys borrowed by, or any other material
indebtedness, actual or contingent, of, or grant available to, any
member of the wider General Cable Group being or becoming repayable, or
capable of being declared repayable immediately or prior to its stated
repayment date, or the ability of any such member to borrow moneys or
incur any material indebtedness being withdrawn or inhibited or
becoming capable of being withdrawn;
(e) the financial or trading position or prospects or value of any
member of the wider General Cable Group being prejudiced or adversely
affected;
(f) any member of the wider General Cable Group ceasing to be able to
carry on business under any name under which it presently does so; or
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(g) the creation or enforcement of any mortgage, charge or other
security interest over the whole or any part of the business, property,
assets or interests of any member of the wider General Cable Group,
and no event having occurred which, under any provision of any arrangement,
agreement, licence, permit or other instrument to which any member of the
wider General Cable Group is a party or by which any such member or any of
its assets may be bound, entitled or be subject, could result in any of the
events or circumstances as are referred to in sub-paragraphs (a) to (g) of
this condition 10 in any case where such result would be material in the
context of the General Cable Group taken as a whole;
11. except as publicly announced by General Cable (by the delivery of an
announcement to the Company Announcements Office of the London Stock
Exchange) prior to 15 April 1998, no member of the General Cable Group
having, since 31 December 1996:
(a) issued or agreed to issue, authorised or proposed the issue of
additional shares of any class, or securities convertible into, or
rights, warrants or options to subscribe for or acquire, any such
shares or convertible securities (save as between General Cable and
wholly-owned subsidiaries of General Cable and save for shares issued
or options granted pursuant to the General Cable share option schemes
before 15 April 1998) or redeemed, purchased or reduced any part of its
share capital or proposed the redemption, purchase or reduction of any
part of its share capital;
(b) merged with or demerged any body corporate or acquired or (other
than in the ordinary course of business) disposed of, or transferred,
mortgaged or charged or created any security interest over, any assets
or any right, title or interest in any assets (including shares and
trade investments other than in the ordinary course of business) or
made any change in its loan or share capital, authorised or proposed or
announced any intention to propose any merger, demerger, acquisition,
disposal, transfer, mortgage, charge or security interest (other than
in the ordinary course of business) which, in any case, is material in
the context of the General Cable Group taken as a whole;
(c) entered into or varied or announced its intention to enter into or
vary any contract, transaction, arrangement or commitment (whether in
respect of capital expenditure or otherwise) otherwise than in the
ordinary course of business which is, in any case, material in the
context of the General Cable Group taken as a whole;
(d) issued, authorised or proposed the issue of any debentures or
incurred or increased any indebtedness or contingent liability which
is, in any case, material in the context of the General Cable Group
taken as a whole and not in the ordinary course of business;
(e) recommended, declared, paid or made, or proposed the
recommendation, declaration, paying or making of, any bonus, dividend,
or other distribution whether in cash or otherwise other than to
General Cable or to a wholly-owned subsidiary of General Cable;
(f) been unable, or admitted in writing that it is unable, to pay its
debts or having stopped or suspended (or threatened to stop or suspend)
payment of its debts generally or ceased or threatened to cease
carrying on all or a substantial part of its business;
(g) waived or compromised any claim which is material in the context of
the relevant member of the wider General Cable Group;
(h) proposed any voluntary winding up;
(i) entered into or varied or made any offer (which remains open for
acceptance) to enter into or materially vary the terms of any service
agreements with any of the directors of any member of the General Cable
Group;
(j) entered into any contract, reconstruction, amalgamation, commitment
or other transaction or arrangement which would be materially
restrictive on the business of any member of the General Cable Group or
the Telewest Group;
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(k) made any alteration to its memorandum or articles of association or
other incorporation documents; or
(l) entered into any contract, commitment, agreement or arrangement or
passed any resolution or made any offer (which remains open for
acceptance) with respect to or announced an intention to effect or to
propose any of the transactions, matters or events referred to in this
condition 11;
12. since 31 December 1996 and except as announced publicly by General
Cable (by the delivery of an announcement to the Company Announcements
Office of the London Stock Exchange):
(a) there having been no receiver, administrative receiver or other
encumbrancer appointed over any material portion of the assets of any
member of the wider General Cable Group or any analogous proceedings or
steps having taken place under the laws of any relevant jurisdiction
and there having been no petition presented for the administration of
any member of the wider General Cable Group or any equivalent
proceedings or steps taken under the laws of any other jurisdictions;
(b) no adverse change or deterioration having occurred in the business,
assets, financial or trading position or profits of prospects of any
member of the wider General Cable Group which is material in the
context of the General Cable Group taken as a whole;
(c) save for matters fully and fairly disclosed to Telewest before 15
April 1998, no litigation or arbitration proceedings, prosecution or
other legal proceedings having been instituted, announced or threatened
by or against or remaining outstanding against any member of the wider
General Cable Group which is material in the context of the General
Cable Group taken as a whole;
(d) no contingent or other liability having arisen or become apparent
or increased which would or might be likely adversely to affect any
member of the wider General Cable Group which is material in the
context of the General Cable Group taken as a whole; and
(e) no investigation by any relevant authority having been threatened,
announced, implemented or instituted or remaining outstanding in
respect of any member of the wider General Cable Group which, in any
such case, is material in the context of the General Cable Group taken
as a whole;
13. Telewest not having discovered:
(a) that any financial, business or other information concerning the
wider General Cable Group disclosed at any time by or on behalf of any
member of the wider General Cable Group either is misleading or
contains a misrepresentation of fact which is material in the context
of the Offer or omits to state a fact necessary to make any information
contained therein not misleading to an extent which is so material;
(b) that any member of the General Cable Group is subject to any
liability (contingent or otherwise) which is not disclosed in the
annual report and accounts of General Cable for the year ended 31
December 1996 or the interim report for the six months ended 30 June
1997 and which is material in the context of the General Cable Group
taken as a whole;
(c) that any past or present member of the wider General Cable Group
has not complied with all applicable laws of any relevant jurisdiction
relating to environmental matters which non-compliance would be likely
to give rise to a material liability (whether actual or contingent) or
cost on the part of any member of the wider General Cable Group which
is, or would be, material in the context of the General Cable Group
taken as a whole;
(d) that there has been an emission, disposal, discharge, deposit,
spillage or leak of waste or hazardous or harmful substances on or
about or from any property now or previously owned, or occupied or made
use of by any past or present member of the wider General Cable Group
which would be likely to give rise to any liability (whether actual or
contingent) or cost on the part of any member of the wider General
Cable Group which is, or would be, material in the context of the
General Cable Group taken as a whole;
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(e) that there is or is likely to be any material liability (whether
actual or contingent) or requirement to make good, repair, reinstate or
clean-up any property now or previously owned, occupied or made use of
by any past or present member of the wider General Cable Group; and
(f) any information which affects the import of any information
disclosed at any time by or on behalf of any member of the wider
General Cable Group which is material in the context of the Offer.
For the purposes of these conditions: (a) "relevant authority" means any
central bank, government, government department or governmental, quasi-
governmental, supranational, statutory or regulatory body, court, trade
agency, association, institution or professional or environmental
association in any relevant jurisdiction; (b) a relevant authority shall be
regarded as having "intervened" if it has instituted, implemented,
threatened or decided to taken any action, proceedings, suit, investigation
or enquiry, or made, enacted or proposed any statute, regulation, decision
or order, or taken any measures or other steps and "intervene" shall be
construed accordingly; (c) "authorisations" means authorisations, orders,
grants, recognitions, confirmations, consents, licences, clearances,
permissions and approvals; (d) "wider Telewest Group" means Telewest and
its subsidiary undertakings, associated undertakings and any other
undertaking in which Telewest and such undertakings (aggregating their
interests) have a substantial interest; (e) "wider General Cable Group"
means General Cable and its subsidiary undertakings, associated
undertakings and any other undertaking in which General Cable and such
undertakings (aggregating their interests) have a substantial interest and
for these purposes, "subsidiary undertaking", "associated undertaking" and
"undertaking" have the meanings given by the Companies Act and "substantial
interest" means a direct or indirect interest in 20% or more of the voting
equity capital of an undertaking.
Telewest reserves the right to waive all or any of conditions 6 to 13
(inclusive) above, in whole or in part.
Telewest reserves the right, subject to the consent of the Panel, to extend
the time required under the City Code for fulfilment of condition 1 until
such time as conditions 2 to 13 inclusive have been fulfilled or waived.
The Offer will lapse unless all the Conditions set out above are fulfilled
or (if capable of waiver) waived or, where appropriate, have been
determined by Telewest in its reasonable opinion to be or to remain
fulfilled no later than the First Closing Date. If the Offer lapses, it
will cease to be capable of further acceptance and Telewest and holders of
General Cable securities shall thereupon cease to be bound by prior
acceptances. Telewest shall be under no obligation to waive or treat as
fulfilled any of the Conditions prior to 13 August 1998, or such later date
to which the First Closing Date may be extended, save that if at any
closing date all of the Conditions have been fulfilled or waived then the
Offer may only be extended without being declared unconditional in all
respects with the consent of the Panel. The First Closing Date cannot be
extended beyond midnight (London time), 7.00 pm (New York City time) on 28
August 1998, except with the consent of the Panel.
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PART B--FURTHER TERMS OF THE OFFER
Unless the context otherwise requires, any reference in Parts B or C of this
Appendix I and in the Acceptance Form:
(i) to the "Offer" shall include any revision, variation, renewal or
extension thereto;
(ii) to the "Offer becoming unconditional" shall include references to the
Offer becoming or being declared unconditional;
(iii) to "acceptances of the Offer" shall include deemed acceptances of the
Offer; and
(iv) to the "Offer Period" means, in relation to the Offer, the period
commencing on 23 February 1998 until the latest of:
(a) the date when the Offer lapses; and
(b) the date when the Offer becomes or is declared unconditional in all
respects.
1. ACCEPTANCE PERIOD
(a) The Offer will initially be open for acceptance until 3.00 pm (London
time), 10.00 am (New York City time) on 13 August 1998. Although no revision
is envisaged, if the Offer is revised it will remain open for acceptance for a
period of at least 14 days (or such other period as the Panel may permit) from
the date on which written notification of the revision is posted to holders of
General Cable securities. Except with the Panel's consent, no revision of the
Offer may be made or posted after 14 August 1998.
(b) The Offer, whether revised or not, shall not (except with the Panel's
consent) be capable of becoming unconditional after midnight on 28 August 1998
(or any earlier time and/or date beyond which Telewest has stated that the
Offer will not be extended unless Telewest has, where permitted, withdrawn
that statement or extended the Offer beyond the stated earlier date), nor of
being kept open for acceptance after that time and date unless it has
previously become unconditional, provided that Telewest reserves the right,
with the Panel's consent, to extend the Offer to a later time(s) and/or
date(s). Except with the Panel's consent, Telewest may not, for the purpose of
determining whether the Acceptance Condition has been satisfied, take into
account acceptances received or purchases of General Cable securities made
after 1.00 pm (London time), 8.00 am (New York City time) on 28 August 1998
(or any earlier time and/or date beyond which Telewest has stated that the
Offer will not be extended unless, where permitted, it has withdrawn that
statement or extended the Offer beyond the stated earlier date) or, if the
Offer is so extended, any such later time(s) and/or date(s) as may be agreed
with the Panel. If the latest time at which the Offer may become unconditional
is extended beyond midnight on 28 August 1998, acceptances received and
purchases of General Cable securities made in respect of which relevant
documents are received by the Receiving Agent or the US Depositary after 1.00
pm (London time), 8.00 am (New York City time) on 28 August 1998 may (except
where the City Code otherwise permits) only be taken into account with the
Panel's agreement.
(c) If the Offer becomes unconditional, it will remain open for acceptance for
not less than 14 days from the date on which it would otherwise have expired.
If the Offer has become unconditional and it is stated by or on behalf of
Telewest that the Offer will remain open until further notice, then not less
than 14 days' notice in writing will be given, before closing the Offer, to
those holders of General Cable securities who have not accepted the Offer.
(d) If a competitive situation arises after Telewest has made a "no extension"
statement and/or a "no increase" statement in relation to the Offer, Telewest
may, if it specifically reserved the right to do so at the time such statement
was made, or otherwise with the Panel's consent, withdraw that statement and
extend or revise the Offer (as appropriate) provided that it complies with the
requirements of the City Code and, in particular, that it announces such
withdrawal and that it is free to extend or revise the Offer (as appropriate)
as soon as possible (and in any event within four Business Days of the firm
announcement of the competing offer or other competitive situation) and
holders of General Cable securities are informed in writing at the earliest
practicable opportunity or, in the case of holders of
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General Cable securities with registered addresses outside the UK or whom
Telewest or Schroders knows to be a nominee, trustee or custodian holding
General Cable securities for such persons, by announcement in the United
Kingdom and the United States.
Telewest may, if it has reserved the right to do so, choose not to be bound by
a "no increase" or a "no extension" statement if it would otherwise prevent
the publication of an increased or improved offer (either as to the value or
nature of the consideration offered or otherwise) which is recommended for
acceptance by the Board of Directors of General Cable or in other
circumstances permitted by the Panel.
(e) For the purpose of determining at any particular time whether the
Acceptance Condition has been satisfied, Telewest shall be entitled to take
account only of those General Cable securities carrying voting rights which
have been unconditionally allotted or issued before that time and written
notice of allotment or issue of which, containing all the relevant details,
has been received from General Cable or its agents before that time by the
Receiving Agent or the US Depositary at the respective addresses specified in
paragraph 3(b) of this Part B. Telex, e-mail or facsimile transmission will
not be sufficient.
(f) In accordance with an SEC exemptive order received by Telewest, at least
five US Business Days prior to any reduction in the percentage of General
Cable shares (including General Cable shares represented by General Cable
ADSs) required to satisfy the Acceptance Condition, Telewest will announce
that it has reserved the right so to reduce the Acceptance Condition. Telewest
will not make such an announcement unless Telewest believes there is a
significant possibility that sufficient General Cable shares (including
General Cable shares represented by General Cable ADSs) will be assented to
the Offer to permit the Acceptance Condition to be satisfied at such reduced
level. Holders of General Cable securities who are not willing to accept the
Offer if the Acceptance Condition is reduced to the minimum permitted level
should either not accept the Offer until the Subsequent Offer Period or be
prepared to withdraw their acceptance promptly following an announcement by
Telewest of its reservation of the right to reduce the Acceptance Condition.
2. ANNOUNCEMENTS
(a) Without prejudice to paragraph 3 ("Rights of Withdrawal") below, by 8.30
am (London time) in the United Kingdom and 8.30 am (New York City time) in the
United States on the Business Day (the "relevant day") next following the day
on which the Offer is due to expire or becomes unconditional or is revised or
extended, as the case may be (or such later time(s) and/or date(s) as the
Panel may agree), Telewest will make an appropriate announcement and inform
the London Stock Exchange and the Dow Jones News Service, respectively, of the
position. Such announcements will also state (unless otherwise permitted by
the Panel) the total number of General Cable securities and rights over
General Cable securities (as nearly as practicable):
(i) for which acceptances of the Offer have been received;
(ii) acquired or agreed to be acquired by or on behalf of Telewest or any
person acting in concert with it during the course of the Offer Period;
(iii) held by or on behalf of Telewest or any person acting in concert with
it before the Offer Period; and
(iv) for which acceptances of the Offer have been received from any person
acting in concert with Telewest,
and will specify the percentages of the General Cable securities represented
by each of these figures.
(b) Any decision to extend the time and/or date by which the Acceptance
Condition has to be fulfilled may be made at any time up to, and will be
announced not later than, 8.30 am (London time) in the United Kingdom and 8.30
am (New York City time) in the United States on the relevant day (as defined
in paragraph 2(a) of this Part B) or such later time(s) and/or date(s) as the
Panel may agree. The announcement will state the next expiry date unless the
Offer is then unconditional, in which case a statement may instead be made
that the Offer will remain open until further notice. In computing the
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number of General Cable securities represented by acceptances and/or
purchases, there may be included or excluded for announcement purposes
acceptances and purchases which are not complete in all respects or which are
subject to verification, save that those which could not be counted towards
fulfilment of the Acceptance Condition under Notes 4 and 5 (and, if
applicable, Note 6) of Rule 10 of the City Code shall not (unless agreed by
the Panel) be included.
(c) In this Appendix I, references to the making of an announcement or the
giving of notice by or on behalf of Telewest include the release of an
announcement by public relations consultants or by Schroders to the press and
the delivery by hand or telephone or telex or facsimile or other electronic
transmission of an announcement to the London Stock Exchange and the Dow Jones
News Service, as the case may be. An announcement made otherwise than to the
London Stock Exchange shall be notified simultaneously to the London Stock
Exchange (unless otherwise agreed by the Panel).
(d) Without limiting the manner in which Telewest may choose to make any
public announcement and subject to Telewest's obligations under applicable law
(including Rules 14d-4(c) and 14d-6(d) under the US Exchange Act relating to
Telewest's obligations to disseminate promptly public announcements concerning
material changes to the Offer), Telewest will have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
making a release to the London Stock Exchange and the Dow Jones News Service.
3. RIGHTS OF WITHDRAWAL
(a) Except as otherwise provided in this paragraph, acceptances of the Offer
by holders of General Cable securities and elections under the Mix and Match
Election are irrevocable. Acceptances of the Offer may, however, be withdrawn
pursuant to the procedures set out below at any time during the Initial Offer
Period and in certain other circumstances described below. General Cable
securities assented to the Offer during the Initial Offer Period and not
validly withdrawn prior to the expiry of the Initial Offer Period, and General
Cable securities assented to the Offer during the Subsequent Offer Period, may
not be withdrawn. Holders of General Cable securities will not have withdrawal
rights during the Subsequent Offer Period, except in certain limited
circumstances described below.
(b) If Telewest, having announced that the Acceptance Condition has been
satisfied, fails by 3.30 pm (London time), 10.30 am (New York City time) on
the relevant day (or such later time or date as the Panel may agree) to comply
with any of the relevant requirements relating to the Offer specified in
paragraph 2(a) of this Part B of Appendix I, an accepting holder of General
Cable securities may immediately after that time withdraw his acceptance of
the Offer by written notice given by post or by hand to Lloyds Bank
Registrars, The Causeway, Worthing, West Sussex, BN99 6DA or, by hand only, to
Lloyds Bank Registrars, Antholin House, 71 Queen Street, London EC4N 1SL or to
the US Depositary at one of the addresses shown on page 25, in each case
receiving such notice on behalf of Telewest. This right of withdrawal may be
terminated not less than eight days after the relevant day by Telewest
confirming, if that be the case, that the Offer is still unconditional and
complying with the other relevant requirements relating to the Offer specified
in paragraph 2(a) of this Part B of Appendix I. If any such confirmation is
given, the first period of 14 days referred to in paragraph 1(c) of this Part
B of Appendix I will run from the date of that confirmation and compliance.
(c) If a no extension and/or a no increase statement is withdrawn in
accordance with paragraph 1(d) of this Part B of Appendix I above, any
acceptance of the Offer made after the date of that statement may be withdrawn
thereafter in the manner referred to in paragraph 3(b) of this Part B of
Appendix I, for a period of eight days following the date on which the notice
of the withdrawal of such statement is posted to holders of General Cable
securities.
(d) To be effective, a written notice of withdrawal must be received in good
time by the party (either the Receiving Agent or the US Depositary) to whom
the Acceptance Form was originally sent and must specify the name of the
person who accepted the Offer, the number of General Cable securities to be
withdrawn and (if certificates have been submitted) the name of the registered
holder of the relevant
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General Cable securities, if different from the name of the person who
accepted the Offer in respect of such General Cable securities.
(e) In respect of General Cable ADSs, if General Cable ADRs have been
delivered or otherwise identified to the US Depositary, then prior to the
physical release of such General Cable ADRs, the serial numbers shown on such
General Cable ADRs must be submitted and, unless the General Cable ADSs
evidenced by such General Cable ADRs have been submitted by an Eligible
Institution or by means of a Letter of Transmittal, the signatures on the
notice of withdrawal must be guaranteed by an Eligible Institution. If
interests in General Cable ADSs evidenced by General Cable ADRs have been
delivered pursuant to the procedures for book-entry transfer set out in
paragraph 22(C)(d) of the letter from Schroders set out above, any notice of
withdrawal must also specify the name and number of the account at the
appropriate Book-Entry Transfer Facility to be credited with the withdrawn
General Cable ADSs and must otherwise comply with such Book-Entry Transfer
Facility's procedures.
(f) Withdrawals of General Cable securities assented to the Offer may not be
rescinded (without Telewest's consent) and any General Cable securities
properly withdrawn and not properly re-submitted will thereafter be deemed not
validly assented to the Offer. Withdrawn General Cable securities may be
subsequently re-submitted, however, by following one of the procedures
described in paragraph 22 of the letter from Schroders set out above at any
time whilst the Offer remains open.
(g) All questions as to the validity (including time of receipt) of any notice
of withdrawal will be determined by Telewest, whose determination (except as
required by the Panel) will be final and binding. None of Telewest, General
Cable, Schroders, the Receiving Agent, the US Depositary or any other person
will be under any duty to give notification of any defects or irregularities
in any notice of withdrawal or incur any liability for failure to give such
notification.
4. THE MIX AND MATCH ELECTION
(a) Elections for the Mix and Match Election will only be accepted in respect
of whole numbers of General Cable securities. The number of General Cable
securities in respect of which a Mix and Match Election is made represents the
number of General Cable securities in respect of which the holder of General
Cable securities wishes to receive either all cash or, as the case may be, all
new Telewest shares (including, in the case of General Cable ADS holders, in
the form of new Telewest ADSs), as consideration under the Offer.
(b) The available cash and new Telewest securities will be allocated in
accordance with paragraphs (c) to (f) below among holders of General Cable
securities who elect for the Mix and Match Election.
(c) Elections for new Telewest securities by holders of General Cable
securities in excess of their basic entitlements to new Telewest securities
will be satisfied in full where sufficient new Telewest securities are
available as a result of other accepting holders of General Cable securities
validly making elections for cash in excess of their basic entitlements,
thereby releasing new Telewest securities to which they would otherwise be
entitled under the Offer.
If the number of new Telewest securities available as a result of elections
for the Mix and Match Election is insufficient to satisfy in full all
elections for new Telewest securities in excess of the basic entitlement to
such securities, then such excess elections will be satisfied in cash on the
basis of 149p in cash for each new Telewest share being the closing share
price of a Telewest share on 24 June 1998 (the latest practicable time prior
to publication of this document) as adjusted for the value attributable to the
right of Qualifying Telewest securityholders to subscribe for new Telewest
shares under the Pre-emptive Issue and, in respect of elections for new
Telewest ADSs on the basis of (Pounds)14.90 in cash for each new Telewest ADS,
being such closing price multiplied by ten. The US Depositary will, in
accordance with the terms of its appointment, arrange for such amount to be
translated to US dollars at the exchange rate obtained by the US Depositary on
or about the date the cash consideration is made available to the US
Depositary for delivery to holders of the General Cable ADSs.
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(d) Elections for cash made by holders of General Cable securities in excess
of their basic entitlements to cash will be satisfied in full where sufficient
cash is available as a result of other accepting holders of General Cable
securities validly making elections for new Telewest securities in excess of
their basic entitlements to such form of consideration, thereby releasing cash
to which they would otherwise be entitled under the Offer.
If the amount of cash available as a result of elections for the Mix and Match
Election is insufficient to satisfy in full all elections for cash in excess
of the basic entitlement to cash, then such excess will be satisfied in new
Telewest securities on the basis of one new Telewest share for each 149p in
cash and one new Telewest ADS for (Pounds)14.90 in cash.
(e) No election for the Mix and Match Election will be valid unless both a
valid acceptance of the Offer and a valid election for the Mix and Match
Election, duly completed in all respects and accompanied by all relevant share
or ADR certificate(s) and/or other document(s) of title in respect of General
Cable securities in certificated form, are duly received by the time and date
on which the Mix and Match Election closes.
(f) The Mix and Match Election will remain open until 3.00 pm (London time),
10.00 am (New York City time) on the date falling five calendar days after the
date on which the Offer becomes or is declared unconditional in all respects.
Holders of General Cable securities who accept after that date and holders of
General Cable securities whose shares (including those represented by General
Cable ADSs) are acquired in the Compulsory Acquisition will receive the Basic
Terms of the Offer. Holders of General Cable shares who do not make a Mix and
Match Election will receive the Basic Terms of the Offer.
(g) If any Acceptance Form which includes an election for the Mix and Match
Election is either received after the time and date upon which the Mix and
Match Election closes or is received before such time and date but is not
valid or complete in all respects at such time and date, such election shall,
for all purposes, be void and the holder of General Cable securities
purporting to make such election shall not, for any purpose, be entitled to
receive any variation of consideration under the Mix and Match Election, but
such acceptance if otherwise valid, shall be deemed to be an acceptance of the
Offer in respect of the number of General Cable securities covered by the
Acceptance Form and the relevant holder of General Cable securities will upon
the Offer becoming unconditional in all respects, be entitled to receive the
Basic Terms under the Offer in respect thereof.
(h) The Mix and Match Election will lapse if the Offer lapses or expires. An
election under the Mix and Match Election may only be made in respect of
General Cable securities for which the Offer is validly accepted.
5. REVISED OFFER
(a) No revision of the Offer is envisaged. However, if the Offer (in its
original or any previously revised form(s)) is revised (either in its terms
and conditions or in the value or nature of the consideration offered or
otherwise) and such revision represents on the date on which such revision is
announced (on such basis as Schroders may consider appropriate) an improvement
or no diminution in the value of the Offer as so revised compared with the
consideration or terms previously offered or in the overall value received
and/or retained by a holder of General Cable securities (under the Offer or
otherwise), the benefit of the revised Offer will, subject to paragraphs 5(c),
5(d) and 8 of this Part B, be made available to any holder of General Cable
securities who has accepted the Offer in its original or any previously
revised form(s) (hereinafter called a "previous acceptor"). The acceptance of
the Offer by or on behalf of a previous acceptor in its original or any
previously revised form(s) shall, subject as provided in paragraphs 5(c), 5(d)
and 8 of this Part B, be treated as an acceptance of the Offer as so revised
and shall also constitute the separate appointment of Telewest and each of its
directors and Schroders and each of its directors as his attorney and/or agent
with authority (i) to accept any such revised offer on behalf of such previous
acceptor, (ii) if such revised offer includes alternative forms of
consideration, to make such elections for and/or accept such alternative forms
of consideration in the proportions such attorney and/or agent in
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his absolute discretion thinks fit, and (iii) to execute on behalf of and in
the name of such previous acceptor all such further documents (if any) as may
be required to give effect to such acceptances and/or elections.
In making any such election and/or acceptance, such attorney and/or agent
shall take into account the nature of any previous acceptances and/or
elections made by or on behalf of the previous acceptor and such other facts
or matters as he may reasonably consider relevant.
(b) The authorities conferred by this paragraph 5 and any acceptance of a
revised offer and/or any election(s) pursuant thereto shall be irrevocable
unless and until the previous acceptor becomes entitled to withdraw his
acceptance under paragraph 3 of this Part B and duly does so.
(c) The deemed acceptance referred to in paragraph 5(a) of this Part B shall
not apply, and the authorities conferred by that paragraph shall be
ineffective, to the extent that a previous acceptor shall lodge with the
Receiving Agent or the US Depositary, within 14 days of the publication of the
document containing the revised offer, a form in which he validly elects to
receive the consideration receivable by him in some other manner.
(d) The deemed acceptance referred to in paragraph 5(a) of this Part B shall
not apply, and the authorities conferred by that paragraph shall not be
exercised if as a result thereof the previous acceptor would (on such basis as
Schroders may consider appropriate) thereby receive less in aggregate in
consideration under the revised offer than he would have received in aggregate
as a result of acceptance of the Offer in the form in which it was previously
accepted by him or on his behalf. The authorities conferred by paragraph 5(a)
of this Part B shall not be exercised in respect of any election available
under the revised offer save in accordance with this paragraph.
(e) Telewest and Schroders reserve the right to treat an executed Acceptance
Form (in respect of the Offer in its original or any previously revised
form(s)) which is received (or dated) on or after the announcement of any
revised offer as a valid acceptance of the revised offer and/or, where
applicable, a valid election for or acceptance of any of the alternative forms
of consideration. Such acceptances shall constitute an authority in the terms
of paragraph 5(a) of this Part B, mutatis mutandis, on behalf of the relevant
holder of General Cable securities.
6. ACCEPTANCES AND PURCHASES
Except as otherwise agreed by the Panel:
(a) an acceptance of the Offer shall not be treated as valid for the
purposes of the Acceptance Condition unless the requirements of Note 4 and,
if applicable, Note 6 of Rule 10 of the City Code are satisfied in respect
of it;
(b) a purchase of General Cable shares or General Cable ADSs by Telewest or
its nominee(s) or, in the case of a Rule 9 offer, any person acting in
concert with Telewest or its nominee will only be treated as valid for the
purposes of the Acceptance Condition if the requirements of Note 5 and, if
applicable, Note 6 of Rule 10 of the City Code are satisfied in respect of
it; and
(c) before the Offer may become unconditional, the Receiving Agent must
have issued a certificate to Telewest and/or to Schroders which states the
number of General Cable securities in respect of which acceptances have
been received and which comply with paragraph 6(a) of this Part B, and the
number of General Cable securities otherwise acquired, whether before or
during the Offer Period, which comply with paragraph 6(b) of this Part B.
Copies of such certificate will be sent to the Panel and to BT Wolfensohn
as soon as possible after issue.
7. GENERAL
(a) Save with the Panel's consent, the Offer will lapse unless all of the
Conditions have been satisfied or (if capable of waiver) waived or, where
appropriate, have been determined by Telewest in its reasonable
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opinion to be or remain satisfied in each case by midnight (London time) on 28
August 1998 or such later date(s) as Telewest may, with the Panel's consent,
decide. Telewest reserves the right, if appropriate to seek the Panel's
approval to extend such date to 18 September 1998 or such later date as the
Panel may permit. If the Offer lapses for any reason, then it shall cease to
be capable of further acceptance and Telewest, Schroders and holders of
General Cable securities shall cease to be bound by prior acceptances.
If the Offer lapses pursuant to the City Code, neither Telewest nor any person
acting in concert with Telewest (for purposes of the City Code) may make an
offer for General Cable for a period of one year following such lapse, except
with the consent of the Panel.
(b) Except with the Panel's consent, settlement of the consideration to which
any holder of General Cable securities is entitled under the Offer will be
implemented in full in accordance with the terms of the Offer without regard
to any lien, right of set-off, counterclaim or other analogous right to which
Telewest or Schroders, may otherwise be, or claim to be, entitled as against
such holder of General Cable securities and will be effected in the manner
described in the letter from Schroders contained in this document.
(c) The Offer is made on 29 June 1998 and is capable of acceptance thereafter.
Copies of this document, the Acceptance Form and any related documents are
available from the Receiving Agent and the US Depositary, at the addresses set
out in paragraph 3(b) of this Part B.
(d) The terms, provisions, instructions and authorities contained in or deemed
to be incorporated in the Acceptance Form constitute part of the terms of the
Offer. Words and expressions defined in this document have the same meanings
when used in the Acceptance Form, unless the context otherwise requires.
(e) (i) The Offer, all acceptances of it and all elections pursuant to it, the
Acceptance Form, all contracts made pursuant to the Offer, all action taken or
made or deemed to be taken or made pursuant to any of these terms and the
relationship between a holder of General Cable securities and Telewest,
Schroders, the Receiving Agent or the US Depositary shall be governed by and
interpreted in accordance with English law.
(ii) Execution of an Acceptance Form by or on behalf of a holder of General
Cable securities will constitute his agreement that the Courts of England are
(subject to paragraph 7(e)(iii) of this Part B) to have jurisdiction to settle
any dispute which may arise in connection with the creation, validity, effect,
interpretation or performance of, or the legal relationships established by,
the Offer and the Acceptance Form or otherwise arising in connection with the
Offer and the Acceptance Form, and for such purposes that he irrevocably
submits to the jurisdiction of the English Courts.
(iii) Execution of the Acceptance Form by or on behalf of an accepting holder
of General Cable securities will constitute his agreement that the agreement
in paragraph 7(e)(ii) of this Part B is included for the benefit of Telewest,
Schroders, the Receiving Agent and the US Depositary and accordingly,
notwithstanding such agreement, set out in paragraph 7(e)(ii) of this Part B,
Telewest, Schroders, the Receiving Agent and the US Depositary shall each
retain the right to, and may in its absolute discretion, bring proceedings in
the courts of any other country which may have jurisdiction and that the
accepting holder of General Cable securities irrevocably submits to the
jurisdiction of the courts of any such country.
(f) Any omission to despatch this document or the Acceptance Form or any
notice required to be despatched under the terms of the Offer to, or any
failure to receive the same by, any person to whom the Offer is made, or
should be made, shall not invalidate the Offer in any way or create any
implication that the Offer has not been made to any such person. Subject to
paragraph 8 of this Part B, the Offer extends to any such person and to all
holders of General Cable securities to whom this document, the Acceptance Form
and any related documents may not be despatched and who may not receive such
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documents, and such persons may collect copies of those documents from the
Receiving Agent at the addresses set out in paragraph 3(b) of this Part B.
(g) If the Offer lapses:
(i) the share or ADR certificate(s) and/or other document(s) of title will
be returned by post (or by such other method as the Panel may approve)
within 14 days of the Offer lapsing, at the risk of the holder of General
Cable securities concerned, to the person or agent whose name and address
(outside Canada, Australia or Japan) is set out in the relevant Box of the
Acceptance Form or, if none is set out, to the first-named holder at his
registered address;
(ii) the Receiving Agent will, immediately after the Offer lapses (or
within such longer period as the Panel may permit), give TFE instructions
to CRESTCo to transfer all General Cable shares held in escrow balances and
in relation to which it is the escrow agent for the purposes of the Offer
to the original available balances of the General Cable shareholders
concerned; and
(iii) in respect of General Cable ADRs in book-entry form, the US
Depositary will return such General Cable ADRs to the tendering holders
unless otherwise instructed by such holder.
(h) All powers of attorney, appointments as agent and authorities on the terms
conferred by or referred to in this Appendix I or in the Acceptance Form are
given by way of security for the performance of the obligations of the holder
of General Cable securities concerned and are irrevocable (in respect of
powers of attorney in accordance with Section 4 of the Powers of Attorney Act
1971) except in the circumstances where the donor of such power of attorney,
appointment or authority is entitled to withdraw his acceptance in accordance
with paragraph 3 of this Part B and duly does so.
(i) Without prejudice to any other provisions of this Part B, Telewest and
Schroders reserve the right to treat acceptances of the Offer as valid if
received by or on behalf of either of them at any place or places or in any
manner determined by either of them otherwise than as set out in this document
or in the Acceptance Form.
(j) All communications, notices, certificates, documents of title and
remittances to be delivered by or sent to or from any holders of General Cable
securities will be delivered by or sent to or from them (or their designated
agents) at their risk. No acknowledgement of receipt of any Acceptance Form,
transfer by means of CREST, communication, notice, share certificate(s) and/or
other document(s) of title will be given by or on behalf of Telewest.
(k) Telewest and Schroders reserve the right to notify any matter (including
the making of the Offer) to all or any holders of General Cable securities
with (i) registered addresses outside the UK or the US or (ii) whom Telewest
or Schroders know to be nominees, trustees or custodians for such holder of
General Cable securities with registered addresses outside the UK by
announcement or paid advertisement in any daily newspaper published and
circulated in the UK and the US or any part thereof, in which case such notice
shall be deemed to have been sufficiently given notwithstanding any failure by
any such securityholders to receive or see such notice. All references in this
document to notice in writing (other than in paragraph 3 of this Part B) shall
be construed accordingly.
(l) If sufficient acceptances are received and/or sufficient General Cable
securities are otherwise acquired, Telewest intends to apply the provisions of
Sections 428 to 430F of the Companies Act to acquire compulsorily any
outstanding General Cable shares (including General Cable shares represented
by General Cable ADSs) and to apply for the cancellation of General Cable's
listing of its shares on the London Stock Exchange and the quotation of the
General Cable ADSs on Nasdaq.
(m) Execution of an Acceptance Form will constitute an instruction to Telewest
that, on the Offer becoming unconditional in all respects, all mandates and
other instructions or notices recorded in General Cable's records immediately
prior to the Offer becoming so unconditional in relation to General Cable
securities will, unless and until revoked or varied, continue in full force,
mutatis mutandis, in
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relation to the new Telewest shares or new Telewest ADSs allotted or issued to
the relevant holders of General Cable securities pursuant to the Offer.
(n) If the Panel requires Telewest to make an offer for General Cable
securities under the provisions of Rule 9 of the City Code, Telewest may make
such alterations to the conditions of the Offer as are necessary to comply
with the provisions of that Rule.
(o) All references in this Appendix I to any statute or statutory provision
shall include a statute or statutory provision which amends, consolidates or
replaces the same (whether before or after the date hereof).
(p) In relation to any acceptance of the Offer in respect of a holding of
General Cable shares which are in uncertificated form, Telewest reserves the
right to make such alterations, additions or modifications as may be necessary
or desirable to give effect to any purported acceptance of the Offer, whether
in order to comply with the facilities or requirements of CREST or otherwise,
provided such alterations, additions or modifications are consistent with the
requirements of the City Code or are otherwise made with the Panel's consent.
(q) Fractions of new Telewest shares will not be allotted or issued to holders
of General Cable shares who accept the Offer (including such holders who are
deemed to accept the Offer) but will be aggregated and sold in the market and
the net proceeds of sale will not be paid to such shareholders, but will be
retained for the benefit of the Combined Group. Fractions of new Telewest ADSs
will not be allotted or issued to holders of General Cable ADSs who accept the
Offer (including such holders who are deemed to accept the Offer) but will be
aggregated by the Depositary and sold in the market on behalf of such General
Cable ADS holders and the proceeds net of any expenses will be paid in cash to
those entitled thereto. However, individual cash entitlements to amounts of
less than (Pounds)3.00 will not be paid but will be retained for the benefit
of the Combined Group.
8. OVERSEAS SHAREHOLDERS
(a) The making of the Offer in, or to persons resident in or nationals of or
citizens of, jurisdictions outside the UK and the US or who are nominees of,
custodians or trustees for, citizens or nationals of other countries
("overseas shareholders") may be affected by the laws of the relevant
jurisdictions. Such overseas shareholders should inform themselves about and
observe any applicable legal requirements. It is the responsibility of any
overseas shareholder wishing to accept the Offer (whether or not he elects for
the Mix and Match Election) to satisfy himself as to the full observance of
the laws and regulatory requirements of the relevant jurisdiction in
connection with the Offer, including obtaining any governmental, exchange
control or other consents which may be required, or compliance with other
necessary formalities needing to be observed and payment of any issue,
transfer or other taxes or duties due in such jurisdiction. Any such overseas
shareholder will be responsible for any such issue, transfer or other taxes or
other payments by whomsoever payable and Telewest and Schroders (and any
person acting on behalf of either of them) shall be fully indemnified and held
harmless by such shareholder for any such issue, transfer or other taxes or
duties as Telewest or Schroders (and any person acting on behalf of either of
them) may be required to pay.
(b) In particular, the Offer is not being made, directly or indirectly, in or
into Canada, Australia or Japan. Telewest will not (unless otherwise
determined by Telewest in its sole discretion and save as provided in
paragraph 8(f) of this Part B), mail or deliver or authorise the mailing or
delivery of, this document, the Acceptance Form, the Disclosure Document or
any related document in or into Canada, Australia or Japan including to
holders of General Cable securities with registered addresses in Canada,
Australia or Japan or to persons whom Telewest knows to be trustees, nominees
or custodians holding General Cable shares for such persons ("Restricted
Overseas Persons").
(c) Persons receiving such documents (including without limitation,
custodians, trustees and nominees) must not distribute, send or mail them,
directly or indirectly, in, into or from Canada, Australia or Japan
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or use such mails or any such means or instrumentality or facility for any
purpose, directly or indirectly, in connection with the Offer. Doing so may
invalidate any purported acceptance of the Offer. Persons wishing to accept
the Offer must not use such mails or any such means of instrumentality or
facility directly or indirectly for any purpose directly or indirectly related
to acceptance of the Offer.
(d) Envelopes containing the Acceptance Form should not be postmarked in
Canada, Australia or Japan or otherwise despatched from Canada, Australia or
Japan and all accepting holders of General Cable securites must provide
addresses outside Canada, Australia or Japan for the remittance of cash and/or
receipt of new Telewest shares or Telewest ADSs, or for the return of the
Acceptance Form, share or ADR certificates and/or other document(s) of title.
(e) Unless an exemption under the relevant securities laws is available,
Telewest will not issue new Telewest shares or new Telewest ADSs or authorise
the delivery of any document(s) of title in respect of new Telewest shares or
new Telewest ADSs to (i) any person who is or who Telewest has reason to
believe is, a Restricted Overseas Person, or (ii) any person who is unable or
fails to give the warranty set out in paragraph (b) of Part C or (iii) to any
person with a registered address in Canada, Australia or Japan.
(f) The receipt of any Form of Acceptance from a person who puts "Yes" in Box
[7] of the Form of Acceptance and thereby does not give the representation
and warranty set out in paragraph (b) of Part C of this Appendix I below
and/or who appears to be a Restricted Overseas Person and/or who completes Box
[4] of the Form of Acceptance with an address in Canada, Australia or Japan
(or who has an address in Canada, Australia or Japan) but who inserts in Box
[5] of the Form of Acceptance an address outside Canada, Australia or Japan
shall, at the discretion of Telewest constitute, in respect of any new
Telewest shares to which such acceptor of the Offer may become entitled, an
irrevocable and unconditional request and authority to Telewest and/or its
agents:
(i) to sell such new Telewest securities on behalf of such acceptor (and as
its agent) in the market within 14 days of such shares being allotted;
(ii) to receive the share certificates and/or other document(s) of title in
respect of such new Telewest securities and to execute instruments of
transfer in respect of such new securities; and
(iii) to remit the net proceeds of such sale (after deducting therefrom the
expenses of sale) as soon as reasonably practicable to the person or agent
whose name and address (outside Canada, Australia and Japan) is set out in
Box [5] of the Form of Acceptance, or, if none is set out, to the first-
named holder in Box [4] of such Form of Acceptance with a registered
address outside Canada, Australia and Japan. No consideration will be sent
to an address in Canada, Australia or Japan.
Neither Telewest nor its advisers nor any person acting on behalf of any of
them shall have any liability to any person for any loss or alleged loss
arising from the price, the timing or the manner of such sale or otherwise in
connection with such sale or any of the provisions of this paragraph 8.
(g) Each holder of General Cable ADSs executing and delivering a Letter of
Transmittal will represent and warrant that such holder (i) has not received
or sent copies of the Offer to Purchase/Prospectus or any Acceptance Form or
any related documents in, into or from Canada, Australia or Japan and has not
otherwise utilised in connection with the Offer, directly or indirectly, the
Canadian, Australian or Japanese mails or any means or instrumentality
(including, without limitation, facsimile transmission, telex, and telephone)
of interstate or foreign commerce, or any facilities of a national securities
exchange, of Canada, Australia or Japan, (ii) is accepting the Offer from
outside Canada, Australia and Japan and (iii) is not an agent or fiduciary
acting on a nondiscretionary basis for a principal, unless such agent or
fiduciary is an authorised employee of such principal or such principal has
given any instructions with respect to the Offer from outside Canada,
Australia and Japan.
(h) These provisions and any other terms of the Offer relating to overseas
shareholders may be waived, varied or modified as regards specific holders of
General Cable securities or on a general basis by Telewest in its absolute
discretion. Subject thereto, the provisions of this paragraph 8 supersede any
terms of the Offer inconsistent with them. References in this paragraph 8 to a
holder of General Cable
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securities include references to the person or persons executing an Acceptance
Form and, if more than one person executes the Acceptance Form, the provisions
of this paragraph 8 shall apply to them jointly and severally.
PART C--FORM OF ACCEPTANCE
Each General Cable shareholder by whom, or on whose behalf, a Form of
Acceptance is executed irrevocably undertakes, represents, warrants and agrees
to and with Telewest, Schroders and the Receiving Agent (so as to bind him,
his personal representatives, heirs, successors and assigns) to the following
effect:
(a) that the execution of the Form of Acceptance whether or not any Boxes
are completed shall constitute:
(i) if Box [1] is completed, an acceptance of the Offer in respect of
the number of General Cable shares inserted or deemed to be inserted in
Box [1] of the Form of Acceptance; and
(ii) if Box [2A] or Box [2B] is completed, an election under the Mix
and Match Election to receive, subject to availability as a result of
offsetting elections, new Telewest shares, instead of the cash
consideration, or cash, instead of the new Telewest shares, to which he
would otherwise be entitled under the Basic Terms of the Offer in
respect of the number of General Cable shares inserted, or deemed to be
inserted, in Box [2A] or Box [2B],
in each case on and subject to the terms and conditions set out or referred
to in this document and in the Form of Acceptance and that, subject only to
the rights of withdrawal set out or referred to in paragraph 3 of Part B of
this Appendix I, each such acceptance and election shall be irrevocable;
(b) unless "YES" is put in Box [7] of the Form of Acceptance, that such
General Cable shareholder has not received or sent copies of this document,
the Form of Acceptance, the Disclosure Document or any related offering
documents in, into or from Canada, Australia or Japan;
(c) that the execution of the Form of Acceptance constitutes, subject to
the Offer becoming unconditional in all respects in accordance with its
terms and to an accepting General Cable shareholder not having validly
withdrawn his acceptance, the irrevocable appointment of Telewest and/or
Schroders as such shareholder's attorney and/or agent (the "attorney") and
an irrevocable instruction and authorisation to the attorney:
(i) to complete and execute all or any form(s) of transfer and/or other
document(s) at the discretion of the attorney in relation to the
General Cable shares referred to in paragraph (a) of this Part C in
favour of Telewest or such other person or persons as Telewest or its
agents may direct;
(ii) to deliver such form(s) of transfer and/or other document(s) in
the attorney's discretion and/or the certificate(s) and/or other
document(s) of title relating to such General Cable shares for
registration within 6 months of the Offer becoming or being declared
unconditional in all respects; and
(iii) to do all such other acts and things as may in the attorney's
opinion be necessary or expedient for the purpose of, or in connection
with, the acceptance of the Offer and/or Mix and Match Election and to
vest the General Cable shares in Telewest or its nominee;
(d) that the execution of the Form of Acceptance constitutes the
irrevocable appointment of the Escrow Agent as such shareholder's attorney
and/or agent and an irrevocable instruction and authority to the attorney
and/or agent (i) subject to the Offer becoming or being declared
unconditional in all respects in accordance with its terms and to an
accepting General Cable shareholder not having validly withdrawn his
acceptance, to transfer all or any of the Relevant General Cable shares
(but not exceeding the number of General Cable shares in respect of which
the Offer is accepted or deemed to be accepted) to itself (or to such other
person or persons as Telewest or its agents may direct) by means of CREST
and (ii) if the Offer lapses, to give instructions to CRESTCo, immediately
after the Offer lapses (or within such longer period as the Panel may
permit not exceeding 14 days of the lapsing of the Offer) to transfer all
Relevant General Cable
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shares to the original available balance of the accepting General Cable
shareholder. "Relevant General Cable shares" means General Cable shares in
uncertificated form and in respect of which a transfer or transfers to
escrow has or have been effected pursuant to the procedures described in
the letter from Schroders contained in this document and where the
transfer(s) to escrow was or were made in respect of General Cable shares
held under the same member account ID and participant ID as the member
account ID and participant ID relating to the Form of Acceptance concerned
(but irrespective of whether or not any Form of Acceptance Reference
Number, or a Form of Acceptance Reference Number corresponding to that
appearing on the Form of Acceptance concerned, was included in the
instruction concerned);
(e) that the execution of the Form of Acceptance constitutes, subject to
the Offer becoming or being declared unconditional in all respects and to
an accepting General Cable shareholder not having validly withdrawn his
acceptance, an irrevocable authority and request:
(i) to General Cable or its agents to procure the registration of the
transfer of the General Cable shares pursuant to the Offer and the
delivery of the share certificate(s) and/or other document(s) of title
in respect of the General Cable shares to Telewest or as it may direct;
(ii) subject to the provisions of paragraph 8 of Part B of this
Appendix I, to Telewest and Schroders or their respective agents to
procure that such General Cable shareholder's name is entered in the
register of members in respect of the new Telewest shares to which he
becomes entitled pursuant to the Offer and to procure the issue of a
definitive certificate of title for such new Telewest shares;
(iii) if the General Cable shares concerned are in certificated form, or if
either of the provisos to sub-paragraph (e)(iv)(A) of this Part C of
Appendix I apply, to Telewest and Schroders or their respective agents to
procure that despatch by post (or by such other method as the Panel may
approve) of the cheque for the cash consideration and/or document(s) of
title for any new Telewest shares to which an accepting General Cable
shareholder is entitled, at the risk of such shareholder, to the person or
agent whose name and address outside Canada, Australia and Japan is set out
in Box [4] of the Form of Acceptance (or, if relevant, Box [5]), or if no
name and address is set out in Box [4] (or, if relevant, Box 5), to the
first-named holder at his registered address outside Canada, Australia or
Japan;
(iv) if the General Cable shares concerned are in uncertificated form,
to Telewest and Schroders or their respective agents:
(A) to procure the creation of an assured payment obligation in favour of
the relevant General Cable shareholder's payment bank in accordance with
the CREST assured payment arrangements in respect of any cash
consideration provided that (aa) Telewest may (if, for any reason, it
wishes to do so) determine that all or any part of any such cash
consideration shall be paid by cheque despatched by post and (bb) if the
General Cable shareholder concerned is a CREST member whose registered
address is in Canada, Australia or Japan, any cash consideration to which
such shareholder is entitled shall be paid by cheque despatched by post to
the address set out in Box [4] of the Form of Acceptance (or, if relevant,
Box [5]) or, if none is set out, to the first-named holder at his
registered address outside Canada, Australia or Japan; and
(B) to procure the despatch by post (or such other method as the
Panel may approve) of the documents of title for any new Telewest
shares to which such General Cable shareholder is entitled provided
that sub-paragraph (c)(iii) of this Part C of Appendix I shall apply
to the despatch of any consideration by post pursuant to this sub-
paragraph (iv);
(f) that the execution of the Form of Acceptance and its delivery
constitutes a separate authority to Telewest and/or Schroders and/or their
respective directors within the terms of paragraphs 5 and 7 of Part B of
this Appendix I;
(g) that, subject to the Offer becoming or being declared unconditional in
all respects (or if the Offer will become unconditional in all respects or
lapse immediately upon the outcome of the resolution in question) or if the
Panel otherwise consents and pending registration:
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(i) Telewest or its agents shall be entitled to direct the exercise of
any votes and any or all other rights and privileges (including the
right to requisition the convening of a general meeting of General
Cable or of any class of its shareholders) attaching to any General
Cable shares in respect of which the Offer has been accepted or is
deemed to have been accepted and not validly withdrawn; and
(ii) the execution of a Form of Acceptance by a General Cable
shareholder in respect of the General Cable shares comprised in such
acceptance and in respect of which such acceptance has not been validly
withdrawn:
(aa) constitutes an authority to General Cable from such General
Cable shareholder to send any notice, circular, warrant, document or
other communication which may be required to be sent to him/her as a
member of General Cable (including any share certificate(s) or other
document(s) of title issued as a result of a conversion of such
General Cable shares into certificated form) to Telewest at its
registered office;
(bb) constitutes an authority to Telewest or any director of
Telewest to sign any consent to short notice of a general or
separate class meeting as his attorney and/or agent and on his
behalf and/or to attend and/or execute a form of proxy in respect of
such General Cable shares appointing any person nominated by
Telewest to attend general and separate class meetings of General
Cable (and any adjournments thereof) and to exercise the votes
attaching to such shares on his behalf, where relevant, such votes
to be cast so far as possible to satisfy any outstanding condition
of the Offer; and
(cc) will also constitute the agreement of such General Cable
shareholder not to exercise any of such rights without the consent
of Telewest and the irrevocable undertaking of such General Cable
shareholder not to appoint a proxy to attend any such general
meeting or separate class meeting;
(h) that he will deliver or procure the delivery to the Receiving Agent at
either of the addresses referred to in paragraph 3(b) of Part B of this
Appendix I of his share certificate(s) or other document(s) of title in
respect of all General Cable shares in certificated form held by him in
respect of which the Offer has been accepted or is deemed to have been
accepted and not validly withdrawn, or an indemnity acceptable to Telewest
in lieu thereof, as soon as possible and in any event within six months of
the Offer becoming or being declared unconditional in all respects;
(i) that he is the sole legal and beneficial owner of the General Cable
shares in respect of which the Offer is accepted or deemed to be accepted
or he is the legal owner of such General Cable shares and he has the
necessary capacity and authority to execute the Form of Acceptance;
(j) that the General Cable shares in respect of which the Offer is accepted
or deemed to be accepted are sold fully paid up and free from all liens,
equities, charges, encumbrances and other third party rights and/or
interests and together with all rights now or hereafter attaching thereto,
including the right to receive and retain all dividends, interests and
other distributions (if any) declared, made or paid after 15 April 1998;
(k) that he will take (or procure to be taken) the action set out in
paragraph 22 of the letter from Schroders contained in this document to
transfer all General Cable shares held by him in uncertificated form in
respect of which the Offer has been accepted or is deemed to have been
accepted and not validly withdrawn to an escrow balance as soon as possible
and in any event so that the transfer to escrow settles within six months
of the Offer becoming or being declared unconditional in all respects;
(l) that if, for any reason, any General Cable shares in respect of which a
transfer to an escrow balance has been effected in accordance with
paragraph 22 of the letter from Schroders contained in this document are
converted to certificated form, he will (without prejudice to paragraph
(g)(ii)(aa) of this Part C) immediately deliver or procure the immediate
delivery of the share certificate(s) or other document(s) of title in
respect of all such General Cable shares as so converted to the Receiving
Agent at either of the addresses referred to in paragraph 3(b) of Part B of
this Appendix I or to Telewest at its registered office or as Telewest or
its agents may direct;
I-19
<PAGE>
(m) that the creation of an assured payment obligation in favour of his
payment bank in accordance with the CREST assured payment obligations as
referred to in paragraph (e)(iv) of this Part C shall, to the extent of the
obligation so created, discharge in full any obligation of Telewest and/or
Schroders to pay him the cash consideration to which he is entitled
pursuant to the Offer;
(n) that the terms and conditions of the Offer contained in this document
shall be deemed to be incorporated in, and form part of, the Form of
Acceptance which shall be read and construed accordingly;
(o) that he will do all such acts and things as shall be necessary or
expedient to vest the General Cable shares in Telewest or its nominee(s) or
such other persons as it may decide and all such acts and things as may be
necessary or expedient to enable the Receiving Agent to perform its
functions as escrow agent for the purposes of the Offer;
(p) that he agrees to ratify each and every act or thing which may be done
or effected by Telewest or Schroders or the Receiving Agent or any director
of Telewest or any director of Schroders or any director of the Receiving
Agent or their respective agents or General Cable or its agents, as the
case may be, in the exercise of any of his powers and/or authorities under
this document;
(q) that the execution of the Form of Acceptance constitutes his agreement
to the terms of paragraph 5(e) of Part B of this Appendix I;
(r) that on execution the Form of Acceptance shall take effect as a deed;
and
(s) that if any provision of Part B or Part C of this Appendix I shall be
unenforceable or invalid or shall not operate so as to afford Telewest or
Schroders or the Receiving Agent or any director of any of them the benefit
or authority expressed to be given therein, he shall with all practicable
speed do all such acts and things and execute all such documents as may be
required to enable Telewest and/or Schroders and/or the Receiving Agent
and/or any director of any of them to secure the full benefits of Part B
and this Part C of Appendix I.
References in this Part C of Appendix I to a General Cable shareholder shall
include references to the person or persons executing a Form of Acceptance,
and if more than one person executes a Form of Acceptance, the provisions of
this Part C shall apply to them jointly and severally.
I-20
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX II
FINANCIAL EFFECTS OF ACCEPTANCE
- -------------------------------------------------------------------------------
The following table sets out, for illustrative purposes only and on the bases
and assumptions set out below, the financial effects of the Offer on capital
value for a General Cable shareholder and a General Cable ADS holder accepting
the terms of the Offer if the Offer becomes or is declared unconditional in
all respects:
<TABLE>
<CAPTION>
NOTES PENCE
<S> <C> <C>
INCREASE IN CAPITAL VALUE FOR A SHAREHOLDER
Value of the Offer per General Cable share
- --new Telewest shares (i) 197.6
- --cash 65.0
-----
- --total value 262.6
Market value of one General Cable share on 20 February 1998 (ii) 109.0
Increase in capital value 153.6
-----
This represents an increase of 141%
-----
<CAPTION>
NOTES $ (V)
<S> <C> <C>
INCREASE IN CAPITAL VALUE FOR AN ADS HOLDER
Value of the Offer per General Cable ADS
- --new Telewest shares (i) 16.49
- --cash 5.42
-----
- --total value 21.91
Market value of one General Cable ADS on 19 February 1998 (iii) 8.88
Increase in capital value 13.04
-----
This represents an increase of 147%
-----
</TABLE>
Notes:
(i) Based on the middle market quotation of a Telewest share of 159 pence
as derived from the Official List on 24 June 1998, the latest
practicable dealing date prior to the publication of this document. No
adjustment has been made to the middle market quotation of a Telewest
share to allow for any value that may be attributable to the right of a
Qualifying Telewest securityholder to subscribe for new Telewest shares
under the Pre-emptive Issue, which will not be available to holders of
General Cable securities accepting the Offer.
(ii) Based on the middle market quotation of a General Cable share of 109
pence as derived from the Daily Official List of the London Stock
Exchange on 20 February 1998, the last dealing day prior to the
announcement by General Cable that it was in discussions which might
lead to an offer for it.
(iii) Based on the closing price of a General Cable ADS of $8 7/8 on Nasdaq
on 19 February 1998, the last day on which there was dealing in
General Cable ADSs in New York prior to the announcement by General
Cable that it was in discussions which might lead to an offer for it.
(iv) No account has been taken of any liability to taxation or the
treatment of fractions.
(v) Based on exchange rate of (Pounds)1 = $1.6683, the Noon Buying Rate as
at 24 June 1998
II-1
<PAGE>
- -------------------------------------------------------------------------------
APPENDIX III
ADDITIONAL INFORMATION
- -------------------------------------------------------------------------------
1. RESPONSIBILITY
(a) The Directors and the Proposed Directors of Telewest, whose names are set
out in paragraph 2(a) below, accept responsibility for the information
contained in this document save for the information relating to General Cable,
the directors of General Cable and their immediate families and related
trusts. To the best of the knowledge and belief of the Directors and the
Proposed Directors of Telewest (who have taken all reasonable care to ensure
that such is the case) the information contained in this document for which
they accept responsibility is in accordance with the facts and does not omit
anything likely to affect the import of such information.
(b) The directors of General Cable, whose names are set out in paragraph 2(b)
below, accept responsibility for the information contained in this document
relating to General Cable, the directors of General Cable and their immediate
families and related trusts. To the best of the knowledge and belief of the
directors of General Cable (who have taken all reasonable care to ensure that
such is the case), the information contained in this document for which they
accept responsibility is in accordance with the facts and does not omit
anything likely to affect the import of such information.
(c) The statements set out in paragraphs (a) and (b) above are included solely
to comply with the requirements of Rule 19.2 of the City Code and do not
impose responsibilities on, or impair the responsibilities of, the Directors
and the Proposed Directors of Telewest or the Directors of General Cable under
the laws of the US or any state thereof.
2. DIRECTORS
(a) The names of the Directors of Telewest are as follows:
AG Ames*
Lord Borrie*
SM Brett*
CJ Burdick
DJ Evans*
JO Robbins*
RW Shaner*
AWP Stenham*
DR Van Valkenburg
- ------------
* Non-executive
The names of the Proposed Directors of Telewest are as follows:
WA Rice*
MJC Villaneau*
- ------------
* Non-executive
The registered office of Telewest is Genesis Business Park, Albert Drive,
Woking Surrey GU21 5RW.
III-1
<PAGE>
(b) The directors of General Cable are:
Sir Anthony Cleaver*
PX Galteau
DJ Miller
I Gray
MJC Villaneau*
JC Banon*
CA Tritt*
Dr GG Gray*
WA Rice*
------------
*Non-executive
The registered office of General Cable is 37 Old Queen Street, London SW1H
9JA.
3. MARKET QUOTATIONS
The middle market quotations for Telewest shares and General Cable shares, as
derived from the London Stock Exchange Daily Official List, for the first
dealing day in each of the six months immediately prior to the date of this
document, for 20 February 1998 (the last dealing day prior to the commencement
of the Offer Period) and for 24 June 1998 (the latest practicable date prior
to the publication of this document) are set out in "Part I--Section Seven--
Additional Information--Certain Trading Market, Dividend and Exchange Rate
Information" of the Disclosure Document.
4. IRREVOCABLE UNDERTAKINGS
Irrevocable undertakings to accept the Offer have been received in respect of
146,785,916 General Cable shares registered in the name of GUHL. GUHL has a
beneficial interest in one further General Cable share. GUHL has also
undertaken to vote in favour of any required resolutions at any meeting of
General Cable in connection with any sale of its interest in Birmingham Cable
to Telewest.
5. SHAREHOLDINGS AND DEALINGS
(A) SHARES IN TELEWEST
(i) The interests of the Directors of Telewest, their immediate families
and connected parties in the share capital of Telewest (all of which are
beneficial unless otherwise stated), as shown in the register maintained
under Section 325 of the Companies Act are set out in "Part I--Section
Four--Information on the Combined Group--Senior Executives" of the
Disclosure Document.
(ii) As at the close of business on 24 June 1998 (being the latest
practicable date prior to the publication of this document), the options
over Telewest shares which have been granted to certain Directors of
Telewest and remain outstanding under the Telewest Share Schemes are set
out in "Part I--Section Seven--Additional Information--Employee Share
Schemes" of the Disclosure Document.
(iii) As at 24 June 1998 (being the latest practicable date prior to the
publication of this document) the persons acting in concert with Telewest,
in addition to those referred to in paragraphs 5(a)(i) and (ii) above, who
owned or controlled shares in Telewest were as set out in "Part I--Section
Four--Information on the Combined Group--Principal Shareholders" of the
Disclosure Document. In addition, as at 24 June 1998, Schroders and its
associates owned or controlled 418,273 Telewest shares.
(B) SHARES IN GENERAL CABLE
(i) The interests in the existing ordinary share capital of General Cable
(beneficial and non-beneficial), of the directors of General Cable and
their immediate families, which have
been notified to General Cable pursuant to Sections 324 and 328 of the
Companies Act or are
III-2
<PAGE>
required to be entered in the register of members of General Cable pursuant
to Section 325 of the Companies Act, including, so far as the directors of
General Cable are aware, interests of persons connected with them (within
the meaning of Section 346 of the Companies Act), were as follows:
<TABLE>
<CAPTION>
NON-
DIRECTOR BENEFICIAL BENEFICIAL
<S> <C> <C>
Sir Anthony Cleaver 50,520 --
PX Galteau 15,260 --
DJ Miller -- --
I Gray 25,000 --
MJC Villaneau -- --
JC Banon 630 --
GA Tritt -- --
Dr GG Gray 5,260 --
WA Rice 20,000 --
</TABLE>
(ii) As at 24 June 1998 (the latest practicable date prior to the
publication of this document), the following options over General Cable
shares had been granted to the directors of General Cable under the General
Cable Share Schemes and remain outstanding. All these options will become
exercisable in the event that the Offer becomes or is declared
unconditional in all respects:
<TABLE>
<CAPTION>
NO. OF
GENERAL
CABLE
SHARES EXERCISE
DATE OF SUBJECT PRICE PER PERIOD EXERCISE
DIRECTOR GRANT TO OPTION SHARE FROM PERIOD TO
<S> <C> <C> <C> <C> <C>
PX Galteau 25/04/94 270,000 100p 25/04/94 18/04/2001
14/11/95 230,218 191p 14/11/98 01/06/1999
14/08/96 61,524 163p 01/12/98 13/08/2003
14/08/96 18,404 163p 01/12/98 14/08/2006
DJ Miller 14/11/95 31,414 191p 14/11/98 14/11/2005
14/08/96 55,215 163p 14/08/99 13/08/2003
14/08/96 18,404 163p 14/08/99 14/08/2006
14/03/97 91,603 196.5p 14/03/2000 13/03/2004
05/12/97 90,000 100p 05/12/2000 14/12/2004
I Gray 26/11/96 14,925 201p 26/11/99 26/11/2006
26/11/96 64,677 201p 26/11/99 25/11/2003
14/03/97 81,425 196.5p 14/03/2000 13/03/2004
05/12/97 160,000 100p 05/12/2000 04/12/2004
MJC Villaneau 25/04/94 270,000 100p 25/04/94 18/04/2001
JC Banon -- -- -- -- --
CA Tritt -- -- -- -- --
Dr GG Gray -- -- -- -- --
WA Rice -- -- -- -- --
</TABLE>
(iii) As at 24 June 1998 (being the latest practicable date prior to the
publication of this document), Schroders and its associates owned or
controlled 164,533 General Cable shares.
III-3
<PAGE>
(iv) The dealings for value in General Cable shares (including the exercise
of options under the General Cable Share Schemes) by the directors of
General Cable during the disclosure period are set out below:
<TABLE>
<CAPTION>
DIRECTOR DATE TRANSACTION NO. OF SHARES PRICE PER SHARE
<S> <C> <C> <C> <C>
Sir Anthony Cleaver 12/09/97 Purchase 40,000 107p
PX Galteau 12/09/97 Purchase 10,000 107p
DJ Miller -- -- -- --
I Gray 15/12/97 Purchase 25,000 99p
MJC Villaneau -- -- -- --
JC Banon -- -- -- --
CA Tritt -- -- -- --
Dr GG Gray -- -- -- --
WA Rice 02/12/97 Purchase 20,000 98.5p
</TABLE>
(C) GENERAL
(i) Save as disclosed in this paragraph 5 or in the Disclosure Document,
neither Telewest nor any of the Directors of Telewest nor any member of
their immediate families nor any connected party nor (so far as the
Directors of Telewest are aware) any person acting in concert with Telewest
nor GUHL, owns, controls or is interested, directly or indirectly, in any
relevant securities nor has any such person dealt for value therein during
the disclosure period.
(ii) Save as disclosed in this paragraph 5 or in the Disclosure Document,
neither General Cable nor any of the directors of General Cable, nor any
member of their immediate families owns, controls or is interested,
directly or indirectly, in any relevant securities nor has any such person
dealt for value therein during the disclosure period.
(iii) Save as disclosed in paragraph 5 or in the Disclosure Document, so
far as General Cable is aware, no subsidiary of General Cable, no pension
fund of any member of the General Cable Group, nor any bank, stockbroker,
financial or other professional adviser (other than an exempt market-maker)
to General Cable nor any person controlling, controlled by or under the
same control as such bank, stockholder, financial or other professional
adviser owns or controls or is interested, directly or indirectly, in any
relevant securities nor has any such person dealt for value therein during
the period from 22 February 1998 to 24 June 1998 (the latest practicable
date prior to the publication of this document).
(iv) Save as disclosed in this document or in the Disclosure Document, none
of Telewest, any person acting in concert with Telewest, General Cable nor
any associate of General Cable has any indemnity or option arrangement or
any agreement or understanding, formal or informal, of any nature, relating
to relevant securities or shares in Telewest or General Cable or any
securities convertible into, rights to subscribe for, or options (including
traded options) in respect of, or derivatives referenced to, shares in
Telewest or General Cable which may be an inducement to deal or refrain
from dealing.
For the purposes of this paragraph 5:
"associate" of a company means:
(aa) the company's parent, its subsidiaries and fellow subsidiaries and the
company's parent, its associated companies and companies of which such
companies are associated companies ("relevant companies");
(bb) banks, financial and other professional advisers (including
stockbrokers) to the company or any relevant company, including persons
controlling, controlled by or under the same control as such banks,
financial or other professional advisers;
III-4
<PAGE>
(cc) the directors (together in each case with their close relatives and
related trusts) of the company and of any relevant company;
(dd) the pension funds of the company or any relevant company; and
a "bank" does not apply to a bank whose sole relationship with the company or
a relevant company is the provision of normal commercial banking services or
such activities in connection with the Offer as handling acceptances and other
registration work;
"disclosure period" means the period commencing on 22 February 1997 (the date
twelve months prior to the commencement of the Offer Period) and ending on 24
June 1998 (the latest practicable date prior to the publication of this
document); and
"relevant securities" means General Cable shares, Telewest shares or any
securities convertible into, rights to subscribe for, or options (including
traded options) in respect of, or derivatives referenced to, any of the
foregoing.
Ownership or control of 20% or more of the equity share capital of a company
is regarded as the test of associated company status and "control" means a
holding, or aggregated holdings, of shares carrying 30% or more of the voting
rights attributable to the share capital of a company which are currently
exercisable at a general meeting, irrespective of whether the holding or
aggregate holding gives de facto control.
6. MATERIAL CONTRACTS
(A) THE TELEWEST GROUP
Details of those contracts, not being contracts entered into in the ordinary
course of business, which have been entered into by Telewest or its
subsidiaries since 22 February 1996 and which are, or may be, material are set
out in "Part I--Section Seven--Additional Information--Material Contracts" of
the Disclosure Document.
(B) THE GENERAL CABLE GROUP
Details of those contracts, not being contracts entered into the ordinary
course of business, which have been entered into by General Cable or its
subsidiaries since 22 February 1996 and which are, or may be, material are set
out in "Part I--Section Seven--Additional Information--Material Contracts" of
the Disclosure Document.
7. SERVICE CONTRACTS AND REMUNERATION OF GENERAL CABLE DIRECTORS
Set out below is a summary of each of the service contracts with General Cable
Directors which have a remaining term of twelve months or more:
PX Galteau has a service contract with General Cable dated 19 April 1994, with
the commencement of his period of service being 1 January 1994. From 1 January
1998, his salary was increased from (Pounds)225,000 per annum to
(Pounds)235,000 per annum and his benefits in kind to be granted are estimated
to be (Pounds)46,061 per annum. The agreement is terminable on 12 months'
notice by General Cable or 6 months' notice by Mr Galteau.
I Gray has a service contract with General Cable dated 19 September 1996, with
the commencement of his period of service being 1 November 1996. From 1
January 1998, his salary was increased from (Pounds)160,000 per annum to
(Pounds)185,000 per annum. For the year ended 31 December 1997 he received
pension contributions from General Cable of (Pounds)19,200, equalling 12% of
his annual salary. Benefits in kind for the year ended 31 December 1997 were
(Pounds)10,272. The agreement is terminable on 12 months' notice by General
Cable or 6 months' notice by Mr Gray. By way of a side letter to his service
agreement dated 19 September 1996, Mr Gray's notice period was extended to 2
years in circumstances where Vivendi,
III-5
<PAGE>
through GUHL, ceases to be the major shareholder and Mr Galteau is replaced
for any other reason than for underperformance or normal retirement through a
decision made by the then dominant shareholder.
DJ Miller has a service contract with General Cable dated 1 May 1994, with the
commencement of his period of service being 1 May 1994. From 1 January 1998,
his salary was increased from (Pounds)120,000 per annum to (Pounds)150,000 per
annum. For the year ended 31 December 1997 he received pension contributions
from General Cable of (Pounds)11,520, equalling 9.6% of his annual salary.
Benefits in kind for the year ended 31 December 1997 were (Pounds)8,702. By
way of a letter dated 9 November 1996, the service agreement became terminable
on 12 months' notice by General Cable and 6 months' notice by Mr Miller. By a
further letter dated 29 July 1997, if Vivendi, through GUHL, ceases to be the
major shareholder in General Cable, Mr Miller's notice period would be
extended to 2 years.
The service contracts referred to above contain non-compete restrictions
prohibiting each relevant director from competing in the provision of certain
goods and services in certain specified locations with General Cable and, to
the extent applicable, any company which General Cable controls or which
controls General Cable, or which is controlled by a third party. These service
contracts also contain restrictive covenants prohibiting each Director from
soliciting those employees of General Cable who had access to confidential
information or employing such employees in limited circumstances. The service
contract of each Director also contains a covenant preventing him from dealing
with customers or suppliers of General Cable with whom they had contact during
the two years prior to termination to the extent such dealings compete with
General Cable. These restrictions apply during employment and for 12 months
after termination of employment.
Save as disclosed above, there are no service contracts between any director
of General Cable and any member of the General Cable Group having more than
twelve months to run and no such contract has been entered into or amended
within the six months preceding the date of this document.
REMUNERATION OF DIRECTORS AND OFFICERS
For the year ended 31 December 1997, the aggregate remuneration of all
Directors and executive officers (nine persons) paid by General Cable and its
subsidiaries or accrued for services in all capacities was (Pounds)813,244
(including (Pounds)30,720 that was paid in respect of pension contributions).
Under arrangements in effect as of 16 June 1998, the aggregate remuneration of
the Directors (including pension contributions and the value of benefits in
kind) are estimated to be approximately (Pounds)880,000 for the financial year
ending 31 December 1998.
NON-EXECUTIVE DIRECTORS TERMS OF APPOINTMENT
Sir Anthony Cleaver joined the Board of General Cable as a Non-Executive
Director from 16 May 1994. The fee payable to Sir Anthony currently is
(Pounds)48,000 per annum, and the appointment is terminable on three months'
notice.
Mr WA Rice joined the Board of General Cable as a Non-Executive Director from
16 October 1997. The fee payable to Mr. Rice currently is (Pounds)20,002 per
annum, and the appointment is terminable on three months' notice.
Dr GG Gray joined the Board of General Cable as a Non-Executive Director from
16 May 1994. The fee payable to Dr. Gray currently is (Pounds)20,002 per
annum, and the appointment is terminable on three months' notice.
III-6
<PAGE>
Ms C Tritt joined the Board of General Cable as a Non-Executive Director from
25 July 1995. The fee payable to Ms. Tritt currently is (Pounds)20,002 per
annum, and the appointment is terminable on three months' notice.
No benefits are payable to the Non-Executive Directors except for the travel
and accommodation costs of Ms Tritt when attending Board meetings.
DIRECTORS' REMUNERATION IN 1997 (IN (Pounds))
<TABLE>
<CAPTION>
BENEFITS IN 1997
EXECUTIVE DIRECTORS FEES SALARY BONUSES PENSION(1) KIND(2) TOTAL
<S> <C> <C> <C> <C> <C> <C>
PX Galteau -- 225,000 38,250 -- 46,061 309,311
DJ Miller -- 120,000 20,400 11,520 8,702 160,622
I Gray -- 159,996 27,200 19,200 10,272 216,668
NON-EXECUTIVE DIRECTORS
Sir Anthony Cleaver 48,000 -- -- -- -- 48,000
(Chairman)
WA Rice 4,257 -- -- -- -- 4,257
(appointed 16 October
1997)
Dr GG Gray 20,002 -- -- -- -- 20,002
Ms CA Tritt 20,002 -- -- -- 27,715 47,717
NN Walmsley 6,667 -- -- -- -- 6,667
(retired 29 April 1997)
VIVENDI REPRESENTATIVE
DIRECTORS
JC Banon -- -- -- -- -- --
MJC Villaneau -- -- -- -- -- --
------ ------- ------ ------ ------ -------
98,928 504,996 85,850 30,720 92,750 813,244
====== ======= ====== ====== ====== =======
</TABLE>
- ------------
(1) The Executive Directors are entitled to join the Energy and Technical
Services Group plc pension scheme. This pension scheme enables members to
retire at the age of 65 with a maximum pension equivalent to two-thirds of
their final salary after 30 years of service. It also offers lump sum
death benefits equal to four times base salary and dependents' pensions.
Mr Miller participated in the pension scheme and the value of his benefits
was calculated at a funding rate (net of his contribution) equivalent to
9.6% of his base salary. Mr Gray did not participate in the scheme;
however, General Cable contributed to Mr Gray's personal pension plan.
(2) Includes a car and life, disability and health insurance, and includes
accommodation costs in the case of Mr Galteau. The benefits are determined
on an annual basis by the Remuneration Committee after a review of the
individual's performance and market trends. The value of benefits, as
shown above, are not pensionable.
There is no arrangement under which any Director of General Cable has waived
or agreed to waive future compensation nor have there been any waivers of such
compensation during the financial year immediately preceding 24 June 1998.
INDEMNITY OF OFFICERS
Subject to the Companies Act, the board of General Cable has the power to
purchase and maintain insurance for, or for the benefit of, any persons who
are or were at any time directors, officers or employees of General Cable,
including insurance against any liability incurred by such persons in relation
to or in connection with their duties, powers or office in relation to General
Cable. Every director or other officer of General Cable or the auditor is
entitled to be indemnified by General Cable against all costs, charges,
losses, expenses and liabilities incurred by him or her in connection with his
or her duties, powers or office.
III-7
<PAGE>
8. THE COMPULSORY ACQUISITION
If, on or before the expiration of four months from the date of publication of
this document, Telewest has as a result of acceptances of the Offer, or,
subject to certain conditions, acquired or contracted to acquire, at least 90%
in value of the General Cable shares (including General Cable shares
represented by General Cable ADSs) to which the Offer relates, then Telewest
will be entitled, and intends to acquire compulsorily the remainder of the
outstanding General Cable shares (including General Cable shares represented
by General Cable ADSs) in accordance with Sections 428-430F of the Companies
Act. If Telewest acquires 90% or more of the entire issued share capital of
General Cable (including those General Cable shares represented by General
Cable ADSs), a holder of General Cable shares (including General Cable shares
represented by General Cable ADSs) may require Telewest to purchase his or her
General Cable shares (including General Cable shares represented by General
Cable ADSs) in accordance with the procedures and time limits described in
Section 430A of the Companies Act. A copy of Sections 428-430F of the
Companies Act is set out in Appendix V to this document.
If the level of acceptances of the Offer is insufficient to enable the
Compulsory Acquisition of the outstanding General Cable shares (including
General Cable shares represented by General Cable ADSs), Telewest will
evaluate its other alternatives to acquire the remaining General Cable shares
(including General Cable shares represented by General Cable ADSs). Such
alternatives could include acquiring additional General Cable shares
(including General Cable shares represented by General Cable ADSs) in the open
market, in privately negotiated transactions, in another tender or exchange
offer or by means of a scheme of arrangement under the Companies Act or
otherwise. Any such additional acquisitions could be for a consideration
greater or less than, or equal to, the consideration for General Cable shares
(including General Cable shares represented by General Cable ADSs) under the
Offer, and could be for cash or other consideration. However, under the City
Code, except with the consent of the Panel, Telewest may not make a second
offer to, or acquire, any General Cable shares (including General Cable shares
represented by General Cable ADSs) on better terms than those of the Offer
within six months of the closure of the Offer.
Holders of General Cable securities do not have appraisal rights as a result
of the Offer. In the event that the Compulsory Acquisition can be effected by
Telewest, holders of General Cable securities whose General Cable securities
have not been acquired pursuant to the Offer may have certain rights similar
to appraisal rights under the Companies Act as referred to above and as more
fully set out in Appendix V to this document.
9. CERTAIN CONSEQUENCES OF THE OFFER
(A) MARKET EFFECT
The purchase of General Cable securities pursuant to the Offer will reduce the
number of holders of General Cable securities and the number of General Cable
securities that might otherwise trade publicly and, depending upon the number
of General Cable securities so purchased, could adversely affect the liquidity
and market value of the remaining General Cable securities held by the public.
Whether or not Telewest is in a position to effect the Compulsory Acquisition
of any outstanding General Cable securities in accordance with the Companies
Act, and irrespective of the size of any outstanding minority in General
Cable, Telewest intends to seek to procure, after the Offer becomes or is
declared unconditional, an application by General Cable to the London Stock
Exchange for General Cable shares to be delisted and an application by General
Cable to Nasdaq for General Cable ADSs to be delisted.
(B) PUBLIC AVAILABILITY OF INFORMATION
In the event that General Cable shares continue to be listed on the London
Stock Exchange following the purchase of General Cable securities pursuant to
the Offer, General Cable shareholders who have not tendered their General
Cable shares pursuant to the Offer will continue to receive the same financial
and other information from General Cable as General Cable is currently
required by the Listing Rules to send to such shareholders. If General Cable
shares are no longer listed on the London Stock Exchange following the Offer,
General Cable would no longer be required by those rules to make available
such financial and other information.
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General Cable ADSs are currently registered under the US Exchange Act.
Registration of the General Cable ADSs may be terminated upon application of
General Cable to the SEC if General Cable ADSs are neither listed on a
national securities exchange nor held by 300 or more beneficial owners in the
US. Termination of registration of General Cable ADSs under the US Exchange
Act would substantially reduce the information required to be furnished by
General Cable to holders of General Cable ADSs and to the SEC and would make
certain provisions of the Exchange Act, such as the requirements of Rule 13e-3
thereunder in relation to "going private" transactions, no longer applicable
to General Cable. Furthermore, "affiliates" of General Cable and persons
holding "restricted securities" of General Cable may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under
the US Securities Act. If, as a result of the purchase of General Cable ADSs
pursuant to the Offer and prior to completing the Compulsory Acquisition
procedures referred to in paragraph 9 above, General Cable is not required to
maintain registration of the General Cable ADSs under the US Exchange Act,
Telewest intends to cause General Cable to apply for termination of such
registration. If registration of General Cable ADSs is not terminated prior to
completion of the Compulsory Acquisition procedures, then General Cable ADSs
will cease trading on Nasdaq and the registration of General Cable ADSs under
the Exchange Act would be terminated following completion of the Compulsory
Acquisition procedures.
(C) MARGIN SECURITIES
General Cable ADSs are currently "margin securities" under the regulations of
the Board of Governors of the US Federal Reserve System, which status has the
effect, among other things, of allowing US brokers to extend credit on the
collateral of General Cable ADSs for the purposes of buying, carrying and
trading in securities ("Purpose Loans"). Depending on factors such as the
number of holders of record of General Cable ADSs and the number and market
value of publicly held General Cable ADSs following the purchase of General
Cable securities pursuant to the Offer, it is possible that General Cable ADSs
would no longer be eligible for quotation on Nasdaq. As a result, General
Cable ADSs might no longer constitute margin securities and could therefore no
longer be used as collateral for Purpose Loans made by US brokers.
10. FEES AND EXPENSES
Details of the fees and expenses incurred by Telewest in connection with the
Offer are set out in "Part I--Section Seven--Additional Information--
Miscellaneous" of the Disclosure Document.
11. CERTAIN LEGAL AND REGULATORY MATTERS
Except as set out herein and other than in compliance with the Panel's
requirements in relation to the City Code and with US securities laws,
Telewest is not aware of (i) any licence or regulatory permit that appears to
be material to the business of the General Cable Group taken as a whole which
might be adversely affected by Telewest's acquisition of General Cable as
contemplated herein or (ii) any approval or other action by any domestic or
foreign governmental, administrative or regulatory agency or authority that
appears to be material to General Cable and its subsidiaries, taken as a
whole, and required for the acquisition or ownership of General Cable
securities by Telewest as contemplated herein. Should any such approval or
other action be required, Telewest currently contemplates that such approval
or other action be sought. There can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained without
substantial conditions attached thereto or that failure to obtain any such
approval or other action might not result in consequences adverse to General
Cable's business.
UK Antitrust Laws. See paragraph 17 of the letter from Schroders set out
above.
US State Takeover Laws. A number of states of the US have adopted takeover
laws and regulations which purport, in varying degrees, to be applicable to
attempts to acquire securities of corporations which have substantial assets,
security holders, principal executive offices or principal places of business
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in such states. Telewest believes that no state takeover statutes apply to the
Offer and Telewest has not attempted to comply with any state takeover
statutes in connection with the Offer.
12. OTHER INFORMATION
(a) Schroders is satisfied that sufficient financial resources are available
to Telewest to satisfy full acceptance of the Offer.
(b) Save as disclosed in this document, no proposal exists in connection with
the Offer that any payment or other benefit be made or given to any director
of General Cable as compensation for loss of office or as consideration for,
or in connection with, his retirement from office.
(c) Save as disclosed in this document or in the Disclosure Document, no
agreement, arrangement or understanding (including any compensation
arrangement) exists between Telewest or any party acting in concert with
Telewest for the purposes of the Offer and any of the directors, recent
directors, shareholders or recent shareholders of General Cable having any
connection with or dependence upon the Offer.
(d) Neither the payment of interest on, nor the repayment of, nor the security
for, any liability (contingent or otherwise) of Telewest will depend to any
significant extent on the business of General Cable. The right is reserved,
however, to utilise the resources of General Cable in financing or re-
financing the borrowing requirements of the Combined Group.
(e) Save as disclosed in this document or in the Disclosure Document, no
agreement, arrangement or understanding exists whereby the beneficial
ownership of any General Cable shares acquired in pursuance of the Offer will
be transferred to any other person, save that Telewest reserves the right to
transfer any General Cable shares so acquired to any other member of the
Telewest Group.
(f) Schroders and BT Wolfensohn, which are regulated by the Securities and
Futures Authority, have given and not withdrawn their written consent to the
issue of this document with the inclusion in it of their respective names and
the respective references to them in the form and context in which they
appear.
(g) Save as disclosed in this document or the Disclosure Document, the total
remuneration receivable by the Directors of Telewest will not be varied as a
consequence of the proposed acquisition of General Cable, or by any other
associated transaction.
(h) Save as disclosed in this document or the Disclosure Document, there has
been no material change in the financial or trading position of Telewest since
31 December 1997 (the date to which the last audited accounts of Telewest were
prepared).
(i) Save as disclosed in this document or the Disclosure Document, there has
been no material change in the financial or trading position of General Cable
since 31 December 1997 (the date to which the last audited accounts of General
Cable were prepared).
(j) Further information relating to Telewest and General Cable required by the
City Code and US securities laws is set out in the Disclosure Document.
(k) General Cable has informed Telewest that, as at 24 June, 1998, (i)
365,496,540 General Cable shares (including General Cable shares represented
by General Cable ADSs) were in issue, and (ii) 5,266,779 General Cable shares
were reserved for issue upon the exercise of options under the General Cable
Share Schemes.
13. DOCUMENTS AVAILABLE FOR INSPECTION
A copy of the consent of BT Wolfensohn referred to in paragraph 12(f) above
and copies of the documents referred to in "Part I--Section Seven--Additional
Information--Documents for Inspection and Available Information" of the
Disclosure Document will be available for inspection at the offices of
Freshfields, 65 Fleet Street, London EC4Y 1HS, during usual business hours on
any weekday (weekends and public holidays excepted) while the Offer remains
open for acceptance.
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APPENDIX IV
ADVICE OF GENERAL CABLE'S FINANCIAL ADVISER
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On 7 April 1998, BT Wolfensohn, the financial adviser to General Cable,
advised the Board of Directors of General Cable (the "General Cable Board")
that, as of such date, BT Wolfensohn considered that the terms of the Offer
were fair and reasonable. In providing advice to the General Cable Board, BT
Wolfensohn took into account the General Cable directors' commercial
assessments. BT Wolfensohn concluded that, as of 7 April 1998, the Offer
valued General Cable shares at approximately 176 pence per General Cable share
(the "Offer Value"), assuming a Telewest share price of 89 pence per Telewest
share (being the closing share price on the London Stock Exchange of Telewest
shares on 6 April 1998). As of 24 June 1998, the last practicable date prior
to the publication of this document, the closing share price for Telewest
shares on the London Stock Exchange was 159 pence per Telewest share, and, as
a result, the Offer valued General Cable shares at approximately 262.6 pence
per General Cable share. On 15 April 1998, BT Wolfensohn orally confirmed its
advice to a committee of the General Cable Board. The advice of BT Wolfensohn
to the General Cable Board was provided for the information and assistance of
the General Cable Board in connection with its consideration of the Offer, and
does not constitute a recommendation to any General Cable shareholder or
General Cable ADS holder as to whether such shareholder or ADS holder should
tender any General Cable shares or General Cable ADSs pursuant to the Offer.
In connection with its advice, BT Wolfensohn reviewed and considered, among
other things, (i) drafts of press releases describing the principal terms and
conditions of the Offer; (ii) certain publicly available information for
General Cable, including the Annual Reports of General Cable to its
shareholders for the two fiscal years ended 31 December 1996 and a draft of
the Annual Report of General Cable to its shareholders for the year ended 31
December 1997; (iii) certain publicly available information for Telewest,
including the Annual Reports of Telewest to its shareholders for the three
fiscal years ended 31 December 1997; (iv) certain internal financial analyses
of General Cable and forecasts of the financial performance of General Cable
prepared by its management; (v) the reported price and trading activity for
the General Cable shares and the Telewest shares, certain financial, stock
market and operating information for General Cable and Telewest and similar
information for certain comparable companies, the securities of which are
publicly traded; and (vi) the financial terms of certain recent business
combinations in the UK cable television industry. In addition, BT Wolfensohn
held discussions with senior executive officers of General Cable regarding
past and current operations, financial condition and future prospects of
General Cable. BT Wolfensohn also participated in certain discussions and
negotiations regarding the Offer between representatives of General Cable and
Telewest and their respective advisers.
BT Wolfensohn has, with the consent of the General Cable Board, relied without
independent verification upon the accuracy and completeness of all the
financial and other information reviewed by it. BT Wolfensohn has, with the
consent of the General Cable Board, also relied upon the management of General
Cable as to the reasonableness and achievability of the financial and
operating forecasts for General Cable (and the assumptions and bases therefor)
provided to BT Wolfensohn by the management of General Cable, and has assumed
that such forecasts reflect the best currently available estimates and
judgments of the management of General Cable, and that such forecasts will be
realised in the amounts and time periods contemplated thereby. In addition,
with the consent of the General Cable Board, BT Wolfensohn has not made an
independent evaluation or appraisal of the assets and liabilities of General
Cable, and has not been furnished with any such evaluation or appraisal.
The following is a summary of the financial analyses used by BT Wolfensohn in
connection with advising the General Cable Board on the Offer:
(i) Share Premium Analysis. BT Wolfensohn reviewed and analysed the closing
share price of General Cable shares on the following dates: 5 February 1998
(the date of the announcement of the
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proposed acquisition by NTL of Comcast, a UK cable company that BT
Wolfensohn deemed comparable to General Cable); 20 February 1998 (the last
trading day in General Cable shares prior to the date that General Cable
announced it was in negotiations concerning a possible business combination
with another party); 27 March 1998 (the last trading day in General Cable
shares prior to the issuance of the press release dated 29 March 1998,
announcing the principal terms and conditions of the Offer); and 6 April
1998 (the last trading day in General Cable shares prior to the General
Cable Board's voting to recommend the Offer to the General Cable
shareholders). The closing share prices of General Cable shares on 5
February 1998, 20 February 1998, 27 March 1998 and 6 April 1998, were 81
pence, 109 pence, 155.5 pence, and 169.5 pence, respectively. BT
Wolfensohn's analysis indicated that offers valuing General Cable shares at
170 pence, 176 pence (being the Offer Value), 180 pence and 190 pence,
represented: (a) a premium of 0%, 4%, 6% and 12%, respectively, on the
closing share price of General Cable shares on 6 April 1998; (b) a premium
of 9%, 13%, 16% and 22%, respectively, on the closing share price of
General Cable shares on 27 March 1998; (c) a premium of 56%, 61%, 65% and
74%, respectively, on the closing middle share of General Cable shares on
20 February 1998; and (d) a premium of 110%, 117%, 122% and 135%,
respectively, on the closing share price of General Cable shares on 5
February 1998. On the basis of the foregoing analysis, BT Wolfensohn
concluded that offers that valued General Cable shares at 170 pence or more
represented a significant premium to the recent trading prices of General
Cable shares.
(ii) Comparable Companies Analysis. BT Wolfensohn reviewed certain
financial, stock market and operating information for the following UK
cable television companies (the "Comparable Companies"): (a) NTL; (b)
Telewest; and (c) Cable & Wireless Communications PLC ("CWC"). The
financial and operating information for General Cable was based on General
Cable management's estimates and the financial and operating information
for NTL, Telewest and CWC was based on estimates published by independent
brokers.
BT Wolfensohn's analysis indicated that the firm values (determined as the
sum of market capitalisation and net debt) of the foregoing Comparable
Companies were as follows: (a) 2.8x; 3.5x and 2.9x, respectively, of
projected year 2000 revenues, and 1.9x; 2.0x and 1.9x, respectively, of
projected year 2004 revenues; (b) 8.1x; 10.7x and 7.9x, respectively, of
projected year 2000 earnings before interest, taxes, depreciation and
amortization ("EBITDA"), and 4.3x; 4.5x and 5.2x, respectively, of
projected year 2004 EBITDA; and (c) 20.3x; 42.0x and 17.3x, respectively,
of projected year 2000 earnings before interest and taxes ("EBIT"), and
7.4x; 6.1x; and 8.3x, respectively, of projected year 2004 EBIT. By
comparison, assuming a General Cable share price equal to the Offer Value
of 176 pence per General Cable share, the firm value of General Cable was:
(a) 3.8x projected year 2000 revenues and 2.1x projected year 2004
revenues; (b) 10.7x projected year 2000 EBITDA, and 5.0x projected year
2004 EBITDA; and (c) 34.3x projected year 2000 EBIT and 7.2x projected year
2004 EBIT.
BT Wolfensohn's analysis also calculated the goodwill value (determined as
the sum of market capitalisation and net debt, less gross fixed asset
value) for the above Comparable Companies, namely, (a) NTL, (b) Telewest
and (c) CWC. Due to differences in their mixes of businesses, BT Wolfensohn
believed that the data for NTL and CWC were not comparable to General
Cable. The goodwill values for Telewest were as follows: (a) (Pounds)82 for
each equity home; (b) (Pounds)114 for each equity home marketed; (c)
(Pounds)513 for each equity cable television subscriber; and (d)
(Pounds)394 for each equity residential telephony subscriber. By
comparison, assuming a General Cable share price equal to the Offer Value
of 176 pence per General Cable share, the goodwill value of General Cable
was as follows: (a) (Pounds)201 for each equity home; (b) (Pounds)317 for
each equity home marketed; (c) (Pounds)1,572 for each equity cable
television subscriber; and (d) (Pounds)1,249 for each equity residential
telephony subscriber.
On the basis of the above analyses, BT Wolfensohn concluded that at an
offer price above 170 pence, General Cable would be valued at significantly
higher multiples than the Comparable Companies.
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<PAGE>
(iii) Comparable Transactions Analysis. BT Wolfensohn reviewed certain
financial, stock market and operating data relating to the proposed
acquisition of Comcast by NTL. The analysis was conducted on the assumption
that the proposed acquisition of Comcast by NTL will be effected through
one of the following two transactions: (a) that NTL will acquire Comcast,
including Comcast's interest in Birmingham Cable and Cable London (the
"Total Comcast Acquisition"); or (b) that NTL will acquire Comcast, but
further assuming that Comcast's interests in Birmingham and Cable London
will be sold to a third party under certain pre-emption rights that have
been granted by Comcast, and that the proceeds of such sales will be
retained by Comcast's shareholders pursuant to the terms of the Agreement
and Plan of Merger, dated 4 February 1998, between NTL and Comcast (the
"Partial Comcast Acquisition"). Based on the foregoing assumptions, BT
Wolfensohn's analysis indicated that the firm values (determined as the sum
of market capitalisation and net debt) implied by the Total Comcast
Acquisition and the Partial Comcast Acquisition were as follows: (a) 2.5x
and 2.2x, respectively, of projected year 2000 revenues, and 1.7x and 1.4x,
respectively, of projected year 2004 revenues; (b) 8.2x and 7.2x,
respectively, of projected year 2000 EBITDA, and 4.0x and 3.3x,
respectively, of projected year 2004 EBITDA; and (c) 59.7x and not
meaningful, respectively, of projected year 2000 EBIT, and 6.0x and 5.1x,
respectively, of projected year 2004 EBIT. By comparison, assuming a
General Cable share price equal to the Offer Value of 176 pence per General
Cable share, the firm value of General Cable was: (a) 3.8x projected year
2000 revenues and 2.1x projected year 2004 revenues; (b) 10.7x projected
year 2000 EBITDA and 5.0x projected year 2004 EBITDA; and (c) 34.3x
projected year 2000 EBIT and 7.2x projected year 2004 EBIT.
BT Wolfensohn's analysis also calculated the goodwill value (determined as
the sum of market capitalisation and net debt, less gross fixed asset
value) implied by the Total Comcast Acquisition and the Partial Comcast
Acquisition. The goodwill values implied by the Total Comcast Acquisition
and the Partial Comcast Acquisition were as follows: (a) (Pounds)139 and
(Pounds)74, respectively, for each equity home; (b) (Pounds)222 and
(Pounds)146, respectively, for each equity home marketed; (c) (Pounds)803
and (Pounds)500, respectively, for each equity cable television subscriber;
and (d) (Pounds)680 and (Pounds)376, respectively, for each equity
residential telephony subscriber. By comparison, assuming a General Cable
share price equal to the Offer Value of 176 pence per General Cable share,
the goodwill value of General Cable was as follows: (a) (Pounds)201 for
each equity home; (b) (Pounds)317 for each equity home marketed; (c)
(Pounds)1,572 for each equity cable television subscriber; and (d)
(Pounds)1,249 for each equity residential telephony subscriber.
The financial and operating information reviewed by BT Wolfensohn in
conducting the foregoing comparable transactions analysis was, for General
Cable and Birmingham Cable, based on General Cable management's estimates
and for Comcast, Cable London and NTL, based on estimates published by
independent brokers. On the basis of the above analyses, BT Wolfensohn
concluded that at an offer price above 170 pence, General Cable would be
valued at significantly higher multiples than those implied by the
Comparable Transactions.
(iv) Discounted Cash Flow Analysis of General Cable. BT Wolfensohn
performed a discounted cash flow analysis of General Cable based on
forecasts prepared by General Cable's senior management. Based on a range
of discount rates of 11.5%, 12% and 12.5%, and a range of terminal cash
flow growth rates of 2%, 3% and 4%, the discounted cash flow analysis
indicated a range for General Cable's equity market capitalisation of
(Pounds)527 million to (Pounds)797 million, or 144 pence to 218 pence per
General Cable share. BT Wolfensohn noted that the Offer Value of
approximately 176 pence fell approximately in the middle of this range.
(v) Discounted Cash Flow Analysis of Telewest. BT Wolfensohn performed a
discounted cash flow analysis of Telewest based on forecasts published by
Merrill Lynch & Co. Based on a range of discount rates of 11.5%, 12% and
12.5%, and a range of terminal cash flow growth rates of 2%, 3% and 4%, the
discounted cash flow analysis indicated a range for Telewest's market
capitalisation of (Pounds)1,297 million to (Pounds)2,145 million, or 91
pence to 151 pence per Telewest share. BT Wolfensohn noted that the
Telewest share price on 6 April 1998 was 89 pence. Any increase in the
Telewest share price would result in a proportionate increase in the value
of the non-cash consideration under the Offer. BT Wolfensohn noted that
such non-cash consideration under the Offer would represent
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21.3% of Telewest's outstanding share capital following the consummation of
the Offer regardless of any increase in Telewest's share price.
(vi) Analysis of General Cable and Telewest Share Price Performance. BT
Wolfensohn reviewed the reported price and trading activity for the General
Cable shares and the Telewest shares from 7 April 1997 through 6 April
1998. This analysis indicated that the implied exchange ratio of 1.973
Telewest shares per General Cable share under the Offer at a Telewest share
price of 89 pence is 42% higher than the average ratio of such share prices
of 1.393 over the six months ended 6 April 1998.
Advising on the fairness and reasonableness of the Offer is a complex process
and is not necessarily susceptible to partial analysis or summary description.
Selecting portions of the analyses or of the summary set out above, without
considering the analyses as a whole, could create an incomplete view of the
processes underlying BT Wolfensohn's advice. In providing its advice, BT
Wolfensohn considered the results of all such analyses, and did not assign
relative weights to any of the analyses. No company or transaction used in the
above analyses as a comparison is directly comparable to General Cable or
Telewest or the contemplated transaction. The analyses were prepared solely
for purposes of providing advice to the General Cable Board as to the fairness
and reasonableness of the Offer. These analyses do not purport to be
appraisals or necessarily reflect the prices at which businesses or securities
actually may be sold. Analyses based on forecasts of future results are not
necessarily indicative of actual future results, which may be significantly
more or less favorable than those suggested by such analyses. Because such
analyses are inherently subject to uncertainty, being based upon numerous
factors or events beyond the control of the parties or their respective
advisers, none of General Cable, BT Wolfensohn or any other person assumes
responsibility if future results are materially different from those forecast.
As part of its investment banking business, BT Wolfensohn and its affiliates
are continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive bidding, secondary distributions of listed and unlisted
securities, private placements and valuations for estate, corporate and other
purposes. General Cable selected BT Wolfensohn because it is an
internationally recognised investment banking firm that has substantial
experience in transactions similar to the Offer.
Pursuant to a letter agreement dated 19 March 1998, as amended (the
"Engagement Letter"), General Cable engaged BT Wolfensohn to act as its
financial adviser in connection with a possible transaction involving General
Cable. Pursuant to the Engagement Letter, General Cable will pay BT Wolfensohn
a retainer fee of (Pounds)50,000 per month with effect from 1 January 1998.
Pursuant to the Engagement Letter, if a recommended offer was made for General
Cable, General Cable agreed to pay BT Wolfensohn a fee calculated as a
percentage of the aggregate value (defined as equity value plus net debt
assumed) of the Offer. However, such aggregate value shall not (except if a
third party announces an offer for Telewest before the Offer becomes or is
declared unconditional in all respects) exceed an amount that values each
General Cable share at 200 pence. The applicable percentage amount is 0.5625%
in the case of an offer that values General Cable shares at or up to 150 pence
per share, and increases to a maximum of 0.9375% in the case of an Offer that
values General Cable shares at 200 pence per share or more. Any retainer fees
which are paid will be credited against the payment of the fees referred to in
the preceding sentence. Pursuant to the Engagement Letter, General Cable will
also reimburse the reasonable fees and expenses of BT Wolfensohn's counsel and
BT Wolfensohn's reasonable travel and out-of-pocket expenses (up to a maximum
amount of (Pounds)20,000 for such travel and out-of-pocket expenses). General
Cable will also indemnify BT Wolfensohn and certain related persons against
certain liabilities relating to or arising out of its engagement. Since the
announcement of the Offer, the UK and European equities division (the
"Division") of NatWest Securities Limited has been acquired by an affiliate of
BT Wolfensohn. The Division acts as stockbroker for General Cable and may
engage in market making transactions on the London Stock Exchange in General
Cable shares and ADSs.
As described in "Recommendation of the Board of Directors" in the letter from
the Chairman of General Cable above, the advice of BT Wolfensohn to the
General Cable Board was one of many factors taken into consideration by the
General Cable Board in making its determination to recommend that General
Cable shareholders accept the Offer.
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APPENDIX V
CERTAIN PROVISIONS OF THE COMPANIES ACT
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Set out below is an extract from the Companies Act:
"PART XIIIA
TAKEOVER OFFERS
428. TAKEOVER OFFERS
(1) In this Part of this Act "takeover offer" means an offer to acquire all
the shares, or all the shares of any class or classes, in a company (other
than shares which at the date of the offer are already held by the offeror),
being an offer on terms which are the same in relation to all the shares to
which the offer relates or, where those shares include shares of different
classes, in relation to all the shares of each class.
(2) In subsection (1) "shares" means shares which have been allotted on the
date of the offer but a takeover offer may include among the shares to which
it relates all or any shares that are subsequently allotted before a date
specified in or determined in accordance with the terms of the offer.
(3) The terms offered in relation to any shares shall for the purposes of this
section be treated as being the same in relation to all the shares or, as the
case may be, all the shares of a class to which the offer relates
notwithstanding any variation permitted by subsection (4).
(4) A variation is permitted by this subsection where:
(a) the law of a country or territory outside the United Kingdom precludes
an offer of consideration in the form or any of the forms specified in the
terms in question or precludes it except after compliance by the offeror
with conditions with which he is unable to comply or which he regards as
unduly onerous; and
(b) the variation is such that the persons to whom an offer of
consideration in that form is precluded are able to receive consideration
otherwise than in that form but of substantially equivalent value.
(5) The reference in subsection (1) to shares already held by the offeror
includes a reference to shares which he has contracted to acquire but that
shall not be construed as including shares which are the subject of a contract
binding the holder to accept the offer when it is made, being a contract
entered into by the holder either for no consideration and under seal or for
no consideration other than a promise by the offeror to make the offer.
(6) In the application of subsection (5) to Scotland, the words "and under
seal" shall be omitted.
(7) Where the terms of an offer make provision for their revision and for
acceptances on the previous terms to be treated as acceptances on the revised
terms, the revision shall not be regarded for the purposes of this Part of
this Act as the making of a fresh offer and references in this Part of this
Act to the date of the offer shall accordingly be construed as references to
the date on which the original offer was made.
(8) In this Part of this Act "the offeror" means, subject to section 430D, the
person making a takeover, offer and "the company" means the company whose
shares are the subject of the offer.
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429. RIGHT OF OFFEROR TO BUY OUT MINORITY SHAREHOLDERS
(1) If, in a case in which a takeover offer does not relate to shares of
different classes, the offeror has by virtue of acceptance of the offer
acquired or contracted to acquire not less than nine-tenths in value of the
shares to which the offer relates he may give notice to the holder of any
shares to which the offer relates which the offeror has not acquired or
contracted to acquire that he desires to acquire those shares.
(2) If, in a case in which a takeover offer relates to shares of different
classes, the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire not less than nine-tenths in value of the shares of any
class to which the offer relates, he may give notice to the holder of any
shares of that class which the offeror has not acquired or contracted to
acquire that he desires to acquire those shares.
(3) No notice shall be given under subsection (1) or (2) unless the offeror
has acquired or contracted to acquire the shares necessary to satisfy the
minimum specified in that subsection before the end of the period of four
months beginning with the date of the offer; and no such notice shall be given
after the end of the period of two months beginning with the date on which he
has acquired or contracted to acquire shares which satisfy that minimum.
(4) Any notice under this section shall be given in the prescribed manner, and
when the offeror gives the first notice in relation to an offer he shall send
a copy of it to the company together with a statutory declaration by him in
the prescribed form stating that the conditions for the giving of the notice
are satisfied.
(5) Where the offeror is a company (whether or not a company within the
meaning of this Act) the statutory declaration shall be signed by a director.
(6) Any person who fails to send a copy of a notice or statutory declaration
as required by subsection (4) or makes such a declaration for the purposes of
that subsection knowing it to be false or without having reasonable grounds
for believing it to be true shall be liable to imprisonment or a fine, or
both, and for continued failure to send the copy or declaration, to a daily
default fine.
(7) If any person is charged with an offence for failing to send a copy of a
notice as required by subsection (4) it is a defence for him to prove that he
took reasonable steps for securing compliance with that subsection.
(8) When during the period within which a takeover offer can be accepted the
offeror acquires or contracts to acquire any of the shares to which the offer
relates but otherwise than by virtue of acceptances of the offer, then, if:
(a) the value of the consideration for which they are acquired or
contracted to be acquired ("the acquisition consideration") does not at
that time exceed the value of the consideration specified in the terms of
the offer; or
(b) those terms are subsequently revised so that when the revision is
announced the value of the acquisition consideration, at the time mentioned
in paragraph (a) above, no longer exceeds the value of the consideration
specified in those terms,
the offeror shall be treated for the purposes of this section as having
acquired or contracted to acquire those shares by virtue of acceptances of the
offer, but in any other case those shares shall be treated as excluded from
those to which the offer relates.
430. EFFECT OF NOTICE UNDER S 429
(1) The following provisions shall, subject to section 430C, have effect where
a notice is given in respect of any shares under section 429.
V-2
<PAGE>
(2) The offeror shall be entitled and bound to acquire those shares on the
terms of the offer.
(3) Where the terms of an offer are such as to give the holder of any shares a
choice of consideration the notice shall give particulars of the choice and
state:
(a) that the holder of the shares may within six weeks from the date of the
notice indicate his choice by a written communication sent to the offeror
at an address specified in the notice; and
(b) which consideration specified in the offer is to be taken as applying
in default of his indicating a choice as aforesaid;
and the terms of the offer mentioned in subsection (2) shall be determined
accordingly.
(4) Subsection (3) applies whether or not any time-limit or the other
conditions applicable to the choice under the terms of the offer can still be
complied with; and if the consideration chosen by the holders of the shares:
(a) is not cash and the offeror is no longer able to provide it; or
(b) was to have been provided by a third party who is no longer bound or
able to provide it,
the consideration shall be taken to consist of an amount of cash payable by
the offeror which at the date of the notice is equivalent to the chosen
consideration.
(5) At the end of six weeks from the date of the notice the offeror shall
forthwith:
(a) send a copy of the notice to the company; and
(b) pay or transfer to the company the consideration for the shares to
which the notice relates.
(6) If the shares to which the notice relates are registered the copy of the
notice sent to the company under subsection (5)(a) shall be accompanied by an
instrument of transfer executed on behalf of the shareholder by a person
appointed by the offeror; and on receipt of that instrument the company shall
register the offeror as the holder of those shares.
(7) If the shares to which the notice relates are transferable by the delivery
of warrants or other instruments the copy of the notice sent to the company
under subsection (5)(a) shall be accompanied by a statement to that effect;
and the company shall on receipt of the statement issue the offeror with
warrants or other instruments in respect of the shares and those already in
issue in respect of the shares shall become void.
(8) Where the consideration referred to in paragraph (b) of subsection (5)
consists of shares or securities to be allotted by the offeror the reference
in that paragraph to the transfer of the consideration shall be construed as a
reference to the allotment of the shares or securities to the company.
(9) Any sum received by a company under paragraph (b) of subsection (5) and
any other consideration received under that paragraph shall be held by the
company on trust for the person entitled to the shares in respect of which the
sum or other consideration was received.
(10) Any sum received by a company under paragraph (b) of subsection (5), and
any dividend or other sum accruing from any other consideration received by a
company under that paragraph, shall be paid into a separate bank account,
being an account the balance on which bears interest at an appropriate rate
and can be withdrawn by such notice (if any) as is appropriate.
(11) Where after reasonable enquiry made at such intervals as are reasonable
the person entitled to any consideration held on trust by virtue of subsection
(9) cannot be found and twelve years have elapsed since the consideration was
received or the company is wound up the consideration (together with any
interest, dividend or other benefit that has accrued from it) shall be paid
into court.
V-3
<PAGE>
(12) In relation to a company registered in Scotland, subsections (13) and
(14) shall apply in place of subsection (11).
(13) Where after reasonable enquiry made at such intervals as are reasonable
the person entitled to any consideration held on trust by virtue of subsection
(9) cannot be found and twelve years have elapsed since the consideration was
received or the company is wound up--
(a) the trust shall terminate;
(b) the company or, as the case may be, the liquidator shall sell any
consideration other than cash and any benefit other than cash that has
accrued from the consideration; and
(c) a sum representing--
(i) the consideration so far as it is cash;
(ii) the proceeds of any sale under paragraph (b) above; and
(iii) any interest, dividend or other benefit that has accrued from the
consideration,
shall be deposited in the name of the Accountant of Court in a bank account
such as is referred to in subsection (10) and the receipt for the deposit
shall be transmitted to the Accountant of Court.
(14) Section 58 of the Bankruptcy (Scotland) Act 1985 (so far as consistent
with this Act) shall apply with any necessary modifications to sums deposited
under subsection (13) as that section applies to sums deposited under section
57(1) (a) of that Act.
(15) The expenses of any such enquiry as is mentioned in subsection (11) or
(13) may be defrayed out of the money or other property held on trust for the
person or persons to whom the enquiry relates.
430A. RIGHT OF MINORITY SHAREHOLDER TO BE BOUGHT OUT BY OFFEROR
(1) If a takeover offer relates to all the shares in a company and at any time
before the end of the period within which the offer can be accepted--
(a) the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire some (but not all) of the shares to which the offer
relates; and
(b) those shares, with or without any other shares in the company which he
has acquired or contracted to acquire, amount to not less than nine-tenths
in value of all the shares in the company,
the holder of any shares to which the offer relates who has not accepted the
offer may by a written communication addressed to the offeror require him to
acquire those shares.
(2) If a takeover offer relates to shares of any class or classes and at any
time before the end of the period within which the offer can be accepted--
(a) the offeror has by virtue of acceptances of the offer acquired or
contracted to acquire some (but not all) of the shares of any class to
which the offer relates; and
(b) those shares, with or without any other shares of that class which he
has acquired or contracted to acquire, amount to not less than nine-tenths
in value of all the shares of that class,
the holder of any shares of that class who has not accepted the offer may by a
written communication addressed to the offeror require him to acquire those
shares.
(3) Within one month of the time specified in subsection (1) or, as the case
may be, subsection (2) the offeror shall give any shareholder who has not
accepted the offer notice in the prescribed manner of the rights that are
exercisable by him under that subsection; and if the notice is given before
the end of the period mentioned in that subsection it shall state that the
offer is still open for acceptance.
V-4
<PAGE>
(4) A notice under subsection (3) may specify a period for the exercise of the
rights conferred by this section and in that event the rights shall not be
exercisable after the end of that period; but no such period shall end less
than three months after the end of the period within which the offer can be
accepted.
(5) Subsection (3) does not apply if the offeror has given the shareholder a
notice in respect of the shares in question under section 429.
(6) If the offeror fails to comply with subsection (3) he and, if the offeror
is a company, every officer of the company who is in default or to whose
neglect the failure is attributable, shall be liable to a fine and for
continued contravention, to a daily default fine.
(7) If an offeror other than a company is charged with an offence for failing
to comply with subsection (3) it is a defence for him to prove that he took
all reasonable steps for securing compliance with that subsection.
430B. EFFECT OF REQUIREMENT UNDER S 430A
(1) The following provision shall, subject to section 430C, have effect where
a shareholder exercises his rights in respect of any shares under section
430A.
(2) The offeror shall be entitled and bound to acquire those shares on the
terms of the offer or on such other terms as may be agreed.
(3) Where the terms of an offer are such as to give the holder of shares a
choice of consideration the holder of the shares may indicate his choice when
requiring the offeror to acquire them and the notice given to the holder under
section 430A(3)--
(a) shall give particulars of the choice and of the rights conferred by
this subsection; and
(b) may state which consideration specified in the offer is to be taken as
applying in default of his indicating a choice;
and the terms of the offer mentioned in subsection (2) shall be determined
accordingly.
(4) Subsection (3) applies whether or not any time-limit or other conditions
applicable to the choice under the terms of the offer can still be complied
with; and if the consideration chosen by the holder of the shares--
(a) is not cash and the offeror is no longer able to provide it; or
(b) was to have been provided by a third party who is no longer bound or
able to provide it,
the consideration shall be taken to consist of an amount of cash payable by
the offeror which at the date when the holder of the shares requires the
offeror to acquire them is equivalent to the chosen consideration.
430C. APPLICATIONS TO THE COURT
(1) Where a notice is given under section 429 to the holder of any shares the
court may, on an application made by him within six weeks from the date on
which the notice was given--
(a) order that the offeror shall not be entitled and bound to acquire the
shares; or
(b) specify terms of acquisition different from those of the offer.
(2) If an application to the court under subsection (1) is pending at the end
of the period mentioned in subsection (5) of section 430 that subsection shall
not have effect until the application has been disposed of.
V-5
<PAGE>
(3) Where the holder of any shares exercises his rights under section 430A the
court may, on an application made by him or the offeror, order that the terms
on which the offeror is entitled and bound to acquire the shares shall be such
as the court thinks fit.
(4) No order for costs or expenses shall be made against a shareholder making
an application under subsection (1) or (3) unless the court considers--
(a) that the application was unnecessary, improper or vexatious; or
(b) that there has been unreasonable delay in making the application or
unreasonable conduct on his part in conducting the proceedings on the
application.
(5) Where a takeover offer has not been accepted to the extent necessary for
entitling the offeror to give notices under subsection (1) or (2) of section
429 the court may, on the application of the offeror, make an order
authorising him to give notices under that subsection if satisfied--
(a) that the offeror has after reasonable enquiry been unable to trace one
or more of the persons holding shares to which the offer relates;
(b) that the shares which the offeror has acquired or contracted to acquire
by virtue of acceptances of the offer, together with the shares held by the
person or persons mentioned in paragraph (a), amount to not less than the
minimum specified in that subsection; and
(c) that the consideration offered is fair and reasonable;
but the court shall not make an order under this subsection unless it
considers that it is just and equitable to do so having regard, in particular,
to the number of shareholders who have been traced but who have not accepted
the offer.
430D. JOINT OFFERS
(1) A takeover offer may be made by two or more persons jointly and in that
event this Part of this Act has effect with the following modifications.
(2) The conditions for the exercise of the rights conferred by sections 429
and 430A shall be satisfied by the joint offerors acquiring or contracting to
acquire the necessary shares jointly (as respects acquisitions by virtue of
acceptances of the offer) and either jointly or separately (in other cases);
and, subject to the following provisions, the rights and obligations of the
offeror under those sections and sections 430 and 430B shall be respectively
joint rights and joint and several obligations of the joint offerors.
(3) It shall be a sufficient compliance with any provision of those sections
requiring or authorising a notice or other document to be given or sent by or
to the joint offerors that it is given or sent by or to any of them; but the
statutory declaration required by section 429(4) shall be made by all of them
and, in the case of a joint offeror being a company, signed by a director of
that company.
(4) In sections 428, 430(8) and 430E references to the offeror shall be
construed as references to the joint offerors or any of them.
(5) In section 430(6) and (7) references to the offeror shall be construed as
references to the joint offerors or such of them as they may determine.
(6) In sections 430(4)(a) and 430B(4)(a) references to the offeror being no
longer able to provide the relevant consideration shall be construed as
references to none of the joint offerors being able to do so.
(7) In section 430C references to the offeror shall be construed as references
to the joint offerors except that any application under subsection (3) or (5)
may be made by any of them and the reference in subsection (5)(a) to the
offeror having been unable to trace one or more of the persons holding shares
shall be construed as a reference to none of the offerors having been able to
do so.
V-6
<PAGE>
430E. ASSOCIATES
(1) The requirement in section 428(1) that a takeover offer must extend to all
the shares, or all the shares of any class or classes, in a company shall be
regarded as satisfied notwithstanding that the offer does not extend to shares
which associates of the offeror hold or have contracted to acquire; but,
subject to subsection (2), shares which any such associate holds or has
contracted to acquire, whether at the time when the offer is made or
subsequently, shall be disregarded for the purposes of any reference in this
Part of this Act to the shares to which a takeover offer relates.
(2) Where during the period within which a takeover offer can be accepted any
associate of the offeror acquires or contracts to acquire any of the shares to
which the offer relates, then, if the condition specified in subsection (8)(a)
or (b) of section 429 is satisfied as respects those shares they shall be
treated for the purposes of that section as shares to which the offer relates.
(3) In section 430A(1)(b) and (2)(b) the reference to shares which the offeror
has acquired or contracted to acquire shall include a reference to shares
which any associate of his has acquired or contracted to acquire.
(4) In this section "associate", in relation to an offeror means:
(a) a nominee of the offeror;
(b) a holding company, subsidiary or fellow subsidiary of the offeror or a
nominee of such a holding company, subsidiary or fellow subsidiary;
(c) a body corporate in which the offeror is substantially interested; or
(d) any person who is, or is a nominee of, a party to an agreement with the
offeror for the acquisition of, or of an interest in, the shares which are
the subject of the takeover offer, being an agreement which includes
provisions imposing obligations or restrictions such as are mentioned in
section 204(2)(a).
(5) For the purposes of subsection (4)(b) a company is a fellow subsidiary of
another body corporate if both are subsidiaries of the same body corporate but
neither is a subsidiary of the other.
(6) For the purposes of subsection (4)(c) an offeror has a substantial
interest in a body corporate if--
(a) that body or its directors are accustomed to act in accordance with his
directions or instructions; or
(b) he is entitled to exercise or control the exercise of one-third or more
of the voting power at general meetings of that body.
(7) Subsections (5) and (6) of section 204 shall apply to subsection (4)(d)
above as they apply to that section and subsections (3) and (4) of section 203
shall apply for the purposes of subsection (6) above as they apply for the
purposes of subsection (2)(b) of that section.
(8) Where the offeror is an individual his associates shall also include his
spouse and any minor child or step-child of his.
430F. CONVERTIBLE SECURITIES
(1) For the purposes of this Part of this Act securities of a company shall be
treated as shares in the company if they are convertible into or entitle the
holder to subscribe for such shares; and references to the holder of shares or
a shareholder shall be construed accordingly.
(2) Subsection (1) shall not be construed as requiring any securities to be
treated--
(a) as shares of the same class as those into which they are convertible or
for which the holder is entitled to subscribe; or
(b) as shares of the same class as other securities by reason only that the
shares into which they are convertible or for which the holder is entitled
to subscribe are of the same class."
V-7
<PAGE>
DISCLOSURE DOCUMENT
TELEWEST COMMUNICATIONS PLC
Information relating to
the proposed merger of
Telewest Communications plc
and General Cable PLC
and pre-emptive issue
by way of open offer of
new Telewest shares to
qualifying Telewest
securityholders
29 June 1998
- --------------------------------------------------------------------------------
GENERAL CABLE SECURITYHOLDERS: THIS DOCUMENT SHOULD BE READ IN CONJUNCTION
WITH THE ACCOMPANYING OFFER DOCUMENT (THE "OFFER DOCUMENT") RELATING TO THE
RECOMMENDED OFFER BY TELEWEST COMMUNICATIONS PLC ("TELEWEST") FOR GENERAL CABLE
PLC ("GENERAL CABLE").
TELEWEST SECURITYHOLDERS: THIS DOCUMENT SHOULD BE READ IN CONJUNCTION WITH
THE ACCOMPANYING (A) OFFER DOCUMENT, (B) CIRCULAR RELATING TO THE PRE-EMPTIVE
ISSUE BY WAY OF OPEN OFFER OF 260,665,436 NEW TELEWEST SHARES TO QUALIFYING
TELEWEST SECURITYHOLDERS (THE "PRE-EMPTIVE ISSUE CIRCULAR") AND (C) CIRCULAR
RELATING TO THE MEETING OF TELEWEST SHAREHOLDERS TO CONSIDER THE PROPOSED
MERGER OF TELEWEST AND GENERAL CABLE AND CERTAIN RELATED MATTERS (THE "EGM
CIRCULAR").
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
For purposes of disclosure under the securities laws of the US, the documents
set out below previously filed with the SEC pursuant to the US Exchange Act are
incorporated herein.
(A) With respect to Telewest's Registration Statement on Form S-3:
1. Telewest's Annual Report on Form 10-K for the year ended December 31,
1997, and
2. All other reports filed by Telewest pursuant to Section 13(a) or 15(d)
of the US Exchange Act since December 31, 1997.
(B) With respect to Telewest's Registration Statement on Form S-3 and
Registration Statement on Form S-4:
All documents filed with the SEC by Telewest or General Cable pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the US Exchange Act, and, to the
extent designated therein, reports on Form 6-K furnished by General Cable
subsequent to the date hereof and during the period in which the Offer
remains open for acceptance shall be deemed to be incorporated by reference
herein and to be a part hereof from the date any such document is filed.
In addition, for purposes of US securities laws, the Merger Agreement is
incorporated into the Registration Statement on Form S-4 by reference.
Any statement contained in a document incorporated by reference herein shall
be deemed to be modified or superseded for purposes hereof to the extent that a
statement contained herein (or in any subsequently filed document that is also
incorporated by reference herein) modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part hereof. All information appearing in this
document is qualified in its entirety by the information and financial
statements (including notes thereto) appearing in the documents incorporated by
reference, except to the extent set forth in the immediately preceding
sentence.
THIS DOCUMENT (FOR US LAW PURPOSES ONLY) INCORPORATES DOCUMENTS BY REFERENCE
THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. THESE DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED BY REFERENCE HEREIN) ARE AVAILABLE WITHOUT CHARGE, UPON WRITTEN OR
ORAL REQUEST BY ANY PERSON TO WHOM THIS DOCUMENT HAS BEEN DELIVERED, FROM THE
RECEIVING AGENT OR THE INFORMATION AGENT AT THE ADDRESSES AND TELEPHONE NUMBERS
SET OUT HEREIN. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY SUCH
REQUEST SHOULD BE MADE BY 8 AUGUST 1998.
<PAGE>
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - GENERAL INFORMATION
Contents--Part 1................................................... I-2
Directors, Secretary, Registered Office and Advisers of Telewest... I-3
Definitions........................................................ I-4
Notes.............................................................. I-10
Expected Timetable................................................. I-12
Section One The Merger and Related Matters........................ I-13
Section Two Information on Telewest............................... I-18
Section Three Information on General Cable......................... I-36
Section Four Information on the Combined Group..................... I-53
Section Five Regulatory Matters and Competition.................... I-85
Section Six Risk Factors.......................................... I-98
Section Seven Additional Information............................... I-106
PART II - UK FINANCIAL INFORMATION
Section One UK GAAP Financial Information of Telewest............. II-3
Section Two UK GAAP Financial Information of General Cable........ II-44
Section Three UK GAAP Pro Forma Financial Information of the
Combined Group....................................... II-89
PART III - US FINANCIAL INFORMATION
Section One US GAAP Financial Information of Telewest............. III-3
Section Two UK GAAP Financial Information of General Cable
(including reconciliation to US GAAP)................. III-55
Section Three US GAAP Pro Forma Financial Information,
Capitalization and Comparative Per Share Information
of the Combined Group................................ III-156
Section Four Experts............................................... III-171
</TABLE>
REGISTERED OFFICE, PRINCIPAL PLACE OF BUSINESS AND EXECUTIVE OFFICES:
<TABLE>
<CAPTION>
TELEWEST COMMUNICATIONS PLC: GENERAL CABLE PLC:
---------------------------- -------------------
<S> <C>
Genesis Business Park 37 Old Queen Street
Albert Drive London
Woking, Surrey SW1H 9JA
GU21 5RW United Kingdom
United Kingdom Phone Number:
Phone Number: 44-171-393-2828
44-1483-750-900
</TABLE>
<PAGE>
------
PART I
------
- --------------------------------------------------------------------------------
The Directors and the Proposed Directors of Telewest, whose names are set out
on page I-3 herein, accept responsibility for the information contained in this
document, save for the information relating to General Cable, the Directors of
General Cable and their immediate families and related trusts. To the best of
the knowledge and belief of the Directors and the Proposed Directors of
Telewest (who have taken all reasonable care to ensure that such is the case),
the information contained in this document for which they accept responsibility
is in accordance with the facts and does not omit anything likely to affect the
import of such information.
The Directors of General Cable, whose names are set out on page I-52 herein,
accept responsibility for the information contained in this document relating
to General Cable, the Directors of General Cable and their immediate families
and related trusts. To the best of the knowledge and belief of the Directors of
General Cable (who have taken all reasonable care to ensure that such is the
case), the information contained in this document for which they accept
responsibility is in accordance with the facts and does not omit anything
likely to affect the import of such information.
The foregoing statements are required by the rules of the London Stock
Exchange and relate to the responsibilities of the Directors and Proposed
Directors of Telewest and the Directors of General Cable under the laws of the
UK and do not impose responsibilities on, or impair the responsibilities of,
the Directors and Proposed Directors of Telewest or the Directors of General
Cable under the laws of the US or any state thereof.
Application has been made to the London Stock Exchange for the new Telewest
shares to be issued pursuant to the transactions described in this document to
be admitted to the Official List of the London Stock Exchange. It is expected
that admission of the new Telewest shares to the Official List will become
effective and that dealings in the new Telewest shares will commence on the
business day after the Offer becomes or is declared unconditional in all
respects. Notice will be given to Nasdaq for the new Telewest ADSs to be
approved for quotation on Nasdaq. It is expected that quotation of the new
Telewest ADSs will also commence on the business day after the Offer becomes or
is declared unconditional in all respects.
Parts I and II of this document, which comprise a prospectus and listing
particulars relating to Telewest in accordance with the listing rules made
under Section 142 of the FSA, have been delivered to the Registrar of Companies
in England and Wales for registration in accordance with Section 149 of the
FSA.
This document may not be forwarded or transmitted in or into Canada,
Australia or Japan.
- --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
PROPOSED MERGER OF TELEWEST COMMUNICATIONS PLC AND GENERAL CABLE PLC AND PRE-
EMPTIVE ISSUE BY WAY OF OPEN OFFER OF 260,665,436 NEW TELEWEST SHARES TO
QUALIFYING TELEWEST SECURITYHOLDERS
- --------------------------------------------------------------------------------
ORDINARY SHARE CAPITAL OF TELEWEST FOLLOWING THE OFFER, THE PRE-EMPTIVE ISSUE
AND THE CONVERSION
<TABLE>
<CAPTION>
Authorised Issued and Fully Paid
Nominal Value Number Nominal Value Number
<S> <C> <C> <C> <C>
(Pounds)290,000,000 2,900,000,000 Telewest Shares (Pounds)214,515,855 2,145,158,549
================================== ==================================
</TABLE>
Each new Telewest share and new Telewest ADS in issue after completion of the
Offer, the Pre-emptive Issue and Conversion will rank pari passu in all
respects with the existing Telewest shares and Telewest ADSs, respectively. The
above table assumes that all Telewest Convertible Preference shares are
converted into Telewest shares and options outstanding under the General Cable
Share Schemes will be exercised and the General Cable shares received in
connection therewith will be tendered in the Offer. See " -- Section One -- The
Merger and Related Matters -- Conversion of Telewest Convertible Preference
Shares".
- --------------------------------------------------------------------------------
INDEBTEDNESS
At the close of business on 29 May 1998, the indebtedness of the Telewest
Group, the General Cable Group and the total indebtedness of the two groups was
as follows:
<TABLE>
<CAPTION>
TELEWEST GENERAL CABLE COMBINED
GROUP GROUP GROUP
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
SHORT-TERM BORROWINGS -- SECURED 500 6,701 7,201
SHORT-TERM BORROWINGS -- UNSECURED -- 500 500
LONG-TERM BORROWINGS -- SECURED 578,000 299,733 877,733
LONG-TERM BORROWINGS -- UNSECURED 920,700 10,000 930,700
OBLIGATIONS UNDER FINANCE LEASES 76,900 201,124 278,024
--------- ------- ---------
1,576,100 518,058 2,094,158
========= ======= =========
CONTINGENT LIABILITIES -- GUARANTEES
TO THIRD PARTIES 4,800 -- 4,800
========= ======= =========
</TABLE>
Except as set out above and apart from indebtedness between or among Telewest
and other members of the Telewest Group and General Cable and other members of
the General Cable Group, none of Telewest, General Cable or any other member of
their respective groups had outstanding, at the close of business on 29 May
1998, any loan capital (whether outstanding or created but unissued), term
loans, mortgages, charges or other borrowings or indebtedness in the nature of
borrowing, including bank overdrafts (demand facilities), liabilities under
acceptances (other than normal trade bills), acceptance credits, hire purchase
commitments, obligations under finance leases, guarantees or other material
contingent liabilities. As at the close of business on 29 May 1998, the
Telewest Group had cash balances of (Pounds)27.2 million and the General Cable
Group had cash balances of (Pounds)202.3 million, which in respect of the
General Cable Group includes (Pounds)185.7 million of cash restricted as to use
to providing security to lessors. Included within General Cable's unsecured
long-term borrowings is (Pounds)6 million owed to Telewest.
<PAGE>
CONTENTS - PART I
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS OF TELEWEST........... I-3
DEFINITIONS................................................................ I-4
NOTES...................................................................... I-10
EXPECTED TIMETABLE......................................................... I-12
SECTION ONE - THE MERGER AND RELATED MATTERS
- --------------------------------------------
The Merger................................................................ I-13
The Pre-emptive Issue..................................................... I-13
Conversion of Telewest Convertible Preference Shares...................... I-15
New Telewest Securities................................................... I-15
The Extraordinary General Meeting......................................... I-15
Birmingham Cable and Cable London......................................... I-16
SECTION TWO - INFORMATION ON TELEWEST
- -------------------------------------
Overview.................................................................. I-18
History................................................................... I-20
Recent Developments....................................................... I-20
Cable Television.......................................................... I-21
Cable Telephony........................................................... I-22
Pricing................................................................... I-24
Sales and Marketing....................................................... I-25
Customer Service.......................................................... I-26
Churn..................................................................... I-26
Networks.................................................................. I-26
Franchises................................................................ I-28
Telewest Affiliated Companies............................................. I-30
Employees................................................................. I-35
Directors................................................................. I-35
SECTION THREE - INFORMATION ON GENERAL CABLE
- --------------------------------------------
Overview.................................................................. I-36
History................................................................... I-37
Recent Developments....................................................... I-37
The Systems............................................................... I-38
Description of Networks................................................... I-41
Management of the General Cable Group's Business.......................... I-46
Relationships Among Owners of the Systems................................. I-49
Employees................................................................. I-52
Directors................................................................. I-52
SECTION FOUR - INFORMATION ON THE COMBINED GROUP
- ------------------------------------------------
Business of the Combined Group............................................ I-53
Rationale for the Merger.................................................. I-55
Strategy for the Combined Group........................................... I-55
Acquisitions and Disposals................................................ I-56
Recent Results and Future Outlook......................................... I-56
Dividend Policy........................................................... I-56
Financial Year End........................................................ I-57
Working Capital........................................................... I-57
Board of Directors........................................................ I-58
Senior Executives......................................................... I-63
Principal Shareholders.................................................... I-69
Certain Related Party Transactions........................................ I-82
SECTION FIVE - REGULATORY MATTERS AND COMPETITION
- -------------------------------------------------
Regulatory Matters...................................................... I-85
Competition............................................................. I-94
SECTION SIX - RISK FACTORS
- --------------------------
Integration of Telewest and General Cable............................... I-98
Ability to Manage Growth and Expansion.................................. I-98
Limited Consumer Acceptance of Cable Television and Cable Telephony in
the UK................................................................. I-98
Need to Renegotiate or Refinance Existing Facilities; Requirement for
Additional Funds....................................................... I-99
Anticipated Bond Offering; Adverse Consequences of Additional Financial
Leverage............................................................... I-100
History of Losses....................................................... I-100
Uncertainty as to Percentage Interests in Birmingham Cable and Cable
London................................................................. I-100
Significant Competition................................................. I-101
Construction of Networks................................................ I-102
Influence of Principal Shareholders..................................... I-102
Extensive Government and European Regulation............................ I-103
Technological Changes................................................... I-103
Limited Access to Programming Supply.................................... I-103
Year 2000 Compliance.................................................... I-104
Potential Volatility of Share Price..................................... I-104
Impact of Shares Eligible for Future Sale............................... I-104
SECTION SEVEN - ADDITIONAL INFORMATION
- --------------------------------------
Incorporation........................................................... I-106
Share Capital........................................................... I-106
Certain Trading Market, Dividend and Exchange Rate Information.......... I-108
Subsidiary Undertakings and Other Interests............................. I-112
Summary of Memorandum and Articles of Association....................... I-116
Description of American Depositary Receipts............................. I-127
Shares Eligible for Future Sale......................................... I-135
Employee Share Schemes.................................................. I-135
Telewest Pension Schemes and Other Employee Benefit Schemes............. I-145
Experts................................................................. I-146
Validity of Securities.................................................. I-146
Legal Proceedings....................................................... I-146
Financing Arrangements.................................................. I-146
Material Contracts...................................................... I-156
Licences................................................................ I-160
Premises................................................................ I-161
Taxation................................................................ I-164
Stamp Duty and Stamp Duty Reserve Tax................................... I-169
Consents................................................................ I-170
Service of Process and Enforcement of Liabilities....................... I-170
Miscellaneous........................................................... I-170
No Significant Change................................................... I-171
Additional Sources of Information....................................... I-171
Documents for Inspection and Available Information...................... I-171
Directors and Executive Officers of MediaOne Group, Inc. ............... I-173
Directors and Executive Officers of Tele-Communications, Inc. .......... I-175
</TABLE>
I-2
<PAGE>
DIRECTORS, SECRETARY, REGISTERED OFFICE AND ADVISERS OF TELEWEST
- --------------------------------------------------------------------------------
DIRECTORS
ARTHUR GARY AMES (CHAIRMAN)*
ANTHONY WILLIAM PAUL STENHAM (DEPUTY CHAIRMAN)*
CHARLES BURDICK (GROUP FINANCE DIRECTOR)
STEPHEN MARC BRETT*
LORD BORRIE QC*
DAVID JOHN EVANS*
JAMES OLIVER ROBBINS*
ROBERT WAYNE SHANER*
DAVID VAN VALKENBURG (ACTING CHIEF EXECUTIVE OFFICER)
PROPOSED DIRECTORS+
WILLIAM ANTHONY RICE*
MICHEL JEAN CHARLES VILLANEAU*
+ to be appointed upon completion of the Merger
* Non-Executive
SECRETARY
Victoria Hull LLB (Hons)
REGISTERED OFFICE
Genesis Business Park
Albert Drive
Woking
Surrey GU21 5RW
FINANCIAL ADVISER AND SPONSOR
J. HENRY SCHRODER & CO. LIMITED
120 Cheapside
London EC2V 6DS
BROKER
KLEINWORT BENSON SECURITIES LIMITED
20 Fenchurch Street
London EC3P 3DB
LEGAL ADVISERS TO TELEWEST
AS TO ENGLISH LAW
FRESHFIELDS
65 Fleet Street
London EC4Y 1HS
AS TO US LAW
WEIL, GOTSHAL & MANGES
One South Place
London EC2M 2WG
AUDITORS AND REPORTING
ACCOUNTANT
KPMG AUDIT PLC
8 Salisbury Square
London EC4Y 8BB
REGISTRAR
LLOYDS BANK REGISTRARS
The Causeway
Worthing
West Sussex BN99 6DA
ADR DEPOSITARY
THE BANK OF NEW YORK
101 Barclay Street
New York, NY 10286
I-3
<PAGE>
DEFINITIONS
- --------------------------------------------------------------------------------
The following definitions apply throughout this disclosure document, unless the
context requires otherwise:
"Admission" the admission of the new Telewest shares issued
pursuant to the Offer and the Pre-emptive Issue
to the Official List becoming effective in
accordance with the Listing Rules and the
quotation of the new Telewest ADSs issued
pursuant to the Offer and the Pre-emptive Issue
on Nasdaq becoming effective
"Application Form" the personalised application form on which
Qualifying Telewest securityholders may apply for
new Telewest securities pursuant to the Pre-
emptive Issue
"BDB" British Digital Broadcasting plc
"BSkyB" British Sky Broadcasting Group plc
"BT" British Telecommunications plc
"Birmingham Cable" Birmingham Cable Corporation Limited
"Birmingham Cable the Articles of Association of Birmingham Cable
Articles"
"Board" or "Directors" the board of directors of Telewest
or "Board of Directors"
"CREST" the relevant system (as defined in the UK
Uncertificated Securities Regulations 1995) in
respect of which CRESTCo Limited is the Operator
(as defined in those regulations)
"CWC" Cable & Wireless Communications plc
"Cable Corporation" The Cable Corporation Limited
"Cable London" Cable London plc
"City Code" The City Code on Takeovers and Mergers
"closing share price" the middle-market quotation as derived from the
Daily Official List of the London Stock Exchange
"Combined Group" the Telewest Group as enlarged by the Merger
"Combined Group Birmingham Cable and Cable London
Affiliated Companies"
"Combined Group cable television and telephony franchises owned
Affiliated Franchises" by the Combined Group Affiliated Companies
"Comcast" Comcast UK Cable Partners Limited
"Companies Act" the Companies Act 1985 (as amended)
"Conversion" the proposed conversion by the TINTA Affiliate,
the MediaOne Affiliates, the Cox Affiliate and
the SBC Affiliate of their holdings of Telewest
Convertible Preference shares into new Telewest
shares after the Offer has become or been
declared unconditional in all respects
I-4
<PAGE>
"Cox" Cox Communications, Inc.
"Cox Affiliate" Cox U.K. Communications L.P., a limited
partnership the partners of which are indirect
wholly owned subsidiaries of Cox
"Cox Group" Cox, its holding companies and/or its subsidiary
undertakings, and/or any subsidiary undertakings
of its holding companies
"Deposit Agreement"
the Amended and Restated Deposit Agreement, dated
as at 30 November 1994, as amended as at 2
October 1995, between Telewest, The Bank of New
York and owners and beneficial owners of Telewest
ADRs issued thereunder
"Depositary" The Bank of New York, in its capacity as
depositary pursuant to the Deposit Agreement
"Director General" the office of the Director General of
Telecommunications established under the UK
Telecommunications Act of 1984
"dollars" or "$" or US dollars
"US$"
"EGM Circular" the circular to Telewest shareholders and holders
of Telewest Convertible Preference shares
containing notice of the EGM
"Excluded Holder" a Telewest securityholder on the Telewest Share
Register or the Telewest ADS Register, as
appropriate, as at the Record Date with a
registered address in Japan, Australia or Canada
or such other jurisdiction where the Pre-emptive
Issue is prohibited by applicable law or
regulation
"Extraordinary General the extraordinary general meeting of Telewest to
Meeting" or "EGM" be held on 28 July 1998 at which resolutions will
be proposed, among other things, to approve the
Offer and the Pre-emptive Issue
"FSA" the Financial Services Act 1986, as amended
"Flextech" Flextech plc
"GUHL" General Utilities Holdings Limited
"General Cable" General Cable PLC
"General Cable ADRs" American Depositary Receipts evidencing General
Cable ADSs
"General Cable ADSs" General Cable American Depositary Shares, each
representing five General Cable shares
"General Cable Group" General Cable and its subsidiaries and subsidiary
undertakings and, where the context so permits,
each of them
"General Cable General Cable shares and General Cable ADSs
securities"
"General Cable holders of General Cable securities
securityholders"
"General Cable Share the General Cable Limited Approved Executive
Schemes" Share Option Scheme, the General Cable Limited
Unapproved Executive Share Option Scheme, the
General Cable PLC 1996 Unapproved Executive Share
Option Scheme and the General Cable Sharesave
Scheme
"General Cable shares" the existing issued and fully paid ordinary
shares of (Pounds)1 each in the capital of
General Cable and any further such shares which
are unconditionally allotted or issued on or
before the date on which the Offer closes (or
such earlier date as Telewest may, subject to the
City Code, decide)
I-5
<PAGE>
"General Telecom" an operating division of the General Cable Group
"Groups" the Telewest Group and the General Cable Group
"ITC" Independent Television Commission
"LDSL" local delivery service licence
"Listing Rules" the rules and regulations made by the London
Stock Exchange under the FSA and contained in the
London Stock Exchange's publication of the same
name
"London Stock Exchange" London Stock Exchange Limited
"MediaOne" MediaOne Group, Inc., known as U S WEST, Inc.
prior to its name change on 12 June 1998
"MediaOne Affiliates" MediaOne UK Cable, Inc. and MediaOne Cable
Partnership Holdings, Inc.
"MediaOne Group" MediaOne and/or MediaOne International Holdings
and/or either of their holding companies, and/or
either of their subsidiary undertakings and/or
any subsidiary undertakings of either of their
holding companies
"MediaOne International" MediaOne International, Inc., previously known as
U S WEST International, Inc.
"MediaOne International MediaOne International Holdings, Inc., previously
Holdings" known as U S WEST International Holdings, Inc.
"Mercury" Mercury Communications Limited
"Merger"
the proposed merger of Telewest and General Cable
to be effected pursuant to the Offer
"Merger Agreement" the agreement relating to the merger of Telewest
and General Cable, dated 29 March 1998, between
Telewest, General Cable, Vivendi and GUHL
"Mix and Match Election" an election available to General Cable
securityholders who accept the Offer to vary the
proportion of new Telewest securities and cash
receivable under the Offer by electing to receive
additional new Telewest shares (including in the
case of General Cable ADS holders, in the form of
new Telewest ADSs) or additional cash in respect
of all or a designated portion of their holdings
of General Cable securities, subject to other
holders of General Cable securities making off-
setting elections and subject to scaling down on
a pro rata basis in the event that elections
cannot be satisfied in full
"NTL" NTL Incorporated
"NTL/Comcast Merger" the proposed merger of NTL and Comcast announced
on 5 February 1998
"Nasdaq" the Nasdaq National Market
I-6
<PAGE>
"new Telewest ADSs" American Depositary Shares of Telewest to be
issued pursuant to the Offer and the Pre-emptive
Issue, each representing ten new Telewest shares
"new Telewest securities" new Telewest shares and new Telewest ADSs
"new Telewest shares" new ordinary shares6.B.5 of 10 pence each in the
capital of Telewest to be6.B.6 issued pursuant to
the Offer, the Pre-emptive Issue and the
Conversion
"Noon Buying Rate" the noon buying rate in New York City for cable
transfers in pounds sterling as certified for
customs purposes by the Federal Reserve Bank of
New York
"OFT" the Office of Fair Trading
"OFTEL" the Office of Telecommunications
"Offer" the recommended offer made by Schroders on behalf
of Telewest to acquire all of the General Cable
securities on the terms and subject to the
conditions set out or referred to in the Offer
Document (including, where the context so requires
or permits, any subsequent revision, variation,
extension or renewal thereof)
"Offer Document" the document dated 29 June 1998 setting out the
terms and conditions of the Offer
"Official List" The Official List of the London Stock Exchange
"Old Telewest" Telewest Communications Cable Limited, previously
known as TeleWest Communications plc
"PDSL" prescribed diffusion service licence
"Panel" The Panel on Takeovers and Mergers
"Pre-emptive Issue" the issue, by way of open offer, of 260,665,436
new Telewest shares to Qualifying Telewest
securityholders
"Proposed Directors" MJC Villaneau and WA Rice
"Qualifying Telewest ADS
holders" holders of Telewest ADSs whose names appear on the
Telewest ADS Register on the Record Date, other
than Excluded Holders
"Qualifying Telewest
securityholders" Qualifying Telewest shareholders and Qualifying
Telewest ADS holders
"Qualifying Telewest
shareholders" Telewest shareholders and Telewest Convertible
Preference shareholders whose names appear on the
Telewest Share Register on the Record Date, other
than Excluded Holders
"Receiving Agent" the receiving6.B.15(f) agent for the Pre-emptive
Issue, being, in the case of Telewest shares and
Telewest Convertible Preference shares, Lloyds
Bank Registrars, The Causeway, Worthing, W.
Sussex, BN99 6DA, England, and, in the case of
Telewest ADSs, The Bank of New York, 101 Barclay
Street, New York, New York 10286 USA
"Record Date" the record date for the Pre-emptive Issue, being,
in the case of Telewest shares and Telewest
Convertible Preference shares 5.00 pm (London
time) on 23 June 1998 and, in the case of Telewest
ADSs, 5.00 pm (New York City time) on 2 July 1998
"Relationship Agreement" an amended and restated agreement, dated as of 15
April 1998, between MediaOne International
Holdings, the MediaOne Affiliates, TINTA, the
TINTA Affiliate, Cox, the Cox Affiliate, SBC, the
SBC Affiliate and Telewest
I-7
<PAGE>
"SBC" SBC Communications, Inc.
"SBC Affiliate" Southwestern Bell International Holdings (UK-1)
Corporation
"SBCC" SBC CableComms (UK)
"SBC Group" SBC, its holding companies and/or its subsidiary
undertakings, and/or any subsidiary undertakings
of its holding companies
"SBCC Merger" the merger of Old Telewest and SBCC completed in
October 1995, pursuant to which Telewest acquired
all the outstanding shares of Old Telewest and
SBCC pursuant to a scheme of arrangement
"SEC" the US Securities and Exchange Commission
"Schroders" J. Henry Schroder & Co. Limited
"Securities Act" the US Securities Act of 1933, as amended, and
the rules promulgated thereunder
"Subscription Agreement" the agreement, dated as of 15 April 1998, between
Telewest, TINTA, MediaOne and Cox pursuant to
which TINTA, MediaOne and Cox have undertaken to
subscribe for their full entitlement for new
Telewest shares under the Pre-emptive Issue and
to subscribe in accordance with the specific
provisions thereof, for any new Telewest shares
offered to but not subscribed for by other
Qualifying Telewest securityholders under the
Pre-emptive Issue
"TCHL" Telewest Communications Holdings Limited
"TCI" Tele-Communications, Inc.
"TINTA" Tele-Communications International, Inc.
"TINTA Affiliate" United Artists Programming--Europe, Inc.
"TINTA Group" TCI and/or TINTA and/or either of their holding
companies, and/or either of their subsidiary
undertakings and/or any subsidiary undertakings
of either of their holding companies
"Telecommunications Act" the Telecommunications Act 1984, which is the
primary legislation governing the provision and
regulation of telecommunications services in the
UK
"Telecommunications Act a licence granted under the Telecommunications
Licence" Act authorising the provision of certain
telecommunications services over particular
telecommunications systems
"Telewest" Telewest Communications plc (and, where the
context so requires, its predecessor, Old
Telewest)
"Telewest ADRs" American Depositary Receipts evidencing Telewest
ADSs
"Telewest ADS Register" the register of holders of Telewest ADSs
maintained by the Depositary
"Telewest ADSs" American Depositary Shares of Telewest, each
representing ten Telewest shares
I-8
<PAGE>
"Telewest Affiliated Birmingham Cable, Cable Corporation and Cable
Companies" London
"Telewest Affiliated cable television and telephony franchises owned
Franchises" by the Telewest Affiliated Companies
"Telewest Convertible holders of Telewest Convertible Preference shares
Preference shareholders"
"Telewest Convertible convertible preference shares of 10 pence each in
Preference shares" the capital of Telewest which are convertible
into Telewest shares on the basis of one Telewest
share for each Telewest Convertible Preference
share
"Telewest Group" Telewest and its subsidiaries and subsidiary
undertakings and, where the context so permits,
each of them
"Telewest securities" Telewest shares, Telewest Convertible Preference
shares and Telewest ADSs
"Telewest holders of Telewest securities
securityholders"
"Telewest Share the register of holders of Telewest shares and
Register" Telewest Convertible Preference shares maintained
by the Registrars
"Telewest Share Schemes" the Telewest 1995 Restricted Share Scheme, the
Telewest 1995 Share Participation Scheme, the
Telewest 1995 (No. 1) Executive Share Option
Scheme, the Telewest 1995 (No. 2) Executive Share
Option Scheme, the Telewest 1995 Sharesave
Scheme, the Telewest Long Term Incentive Plan and
the Telewest Equity Participation Plan
"Telewest shares" ordinary shares of 10 pence each in the capital
of Telewest
"UK" the United Kingdom of Great Britain and Northern
Ireland
"US" the United States of America, its territories and
possessions, any state of the United States and
the District of Columbia
"US Exchange Act" the US Securities Exchange Act of 1934, as
amended, and the rules promulgated thereunder
"U S WEST" U S WEST, Inc., which was separated into two
independent companies on 12 June 1998. In such
separation, a new company called "U S WEST, Inc."
was formed that owns all the business previously
conducted by the U S WEST Communications Group
and the domestic directories business previously
conducted by the U S WEST Media Group. U S WEST,
which changed its name to "MediaOne Group, Inc."
in such separation, continues to own the
remaining businesses previously conducted by the
U S WEST Media Group. As used herein, "U S WEST"
shall refer to U S WEST, Inc. prior to such
separation.
"VAT" UK value added tax
"Vivendi" Vivendi S.A., formerly known as Compagnie
Generale des Eaux S.A. prior to its name change
in May 1998
"Vivendi Group" Vivendi and its subsidiaries, unless otherwise
indicated
"Yorkshire Cable" The Yorkshire Cable Group Limited
For the purposes of this document, "subsidiary", "subsidiary undertaking",
"associated undertaking" and "holding company" have the respective meanings
given by the Companies Act.
I-9
<PAGE>
NOTES
- --------------------------------------------------------------------------------
ASSUMPTIONS REGARDING PRESENTATION OF INFORMATION
Unless otherwise indicated, (a) references in this document to the Telewest
Group include its subsidiaries but not the Telewest Affiliated Companies and
(b) references in this document to the General Cable Group include its
subsidiaries but not Birmingham Cable.
Unless otherwise indicated, references in this document to the Telewest
shares to be in issue following completion of the Merger assume (a) Telewest
acquires 100% of the General Cable issued share capital pursuant to the Offer,
(b) all Telewest Convertible Preference shares are converted to Telewest shares
and (c) options outstanding under the General Cable Share Schemes will be
exercised and the General Cable shares received in connection therewith will be
tendered in the Offer. See "-- Section One -- The Merger and Related Matters --
Conversion of Telewest Convertible Preference Shares".
The Telewest Group, the General Cable Group and Comcast currently own 27.47%,
44.95% and 27.47%, respectively, of the issued share capital of Birmingham
Cable, and Telewest and Comcast each currently own approximately 50% of the
issued share capital of Cable London. Upon and subject to completion of the
NTL/Comcast Merger, the Telewest Group will have the right to acquire Comcast's
interests in Birmingham Cable and Cable London. In addition, General Cable has
undertaken (if so required by Telewest) to sell its interest in Birmingham
Cable to the Telewest Group, subject to the pre-emption rights contained in the
Birmingham Cable Articles. Consequently, such shares would be offered in
accordance with such rights to Telewest, Comcast and the other shareholders in
Birmingham Cable. Further details regarding these possible transfers are set
out in "-- Section One -- The Merger and Related Matters -- Birmingham Cable
and Cable London". Unless otherwise indicated in this document, references to
the interests of the Telewest Group, the General Cable Group and Comcast in
Birmingham Cable and Cable London, as the case may be, do not reflect any of
these possible transfers of interests.
TECHNICAL TERMS
References in this document to homes "passed" are to homes in respect of
which network construction has been completed, and references to homes "passed
and marketed" are to homes passed where marketing has commenced. References in
this document to the number of "equity homes", "equity homes passed", "equity
homes passed and marketed", "equity businesses", "equity customers" and "equity
lines" are to the number of homes, businesses, customers or lines,
respectively, within franchises owned by a company multiplied by such company's
effective equity interest in such franchises (e.g., a franchise with 100 homes
in which such company has an effective interest of 25% would represent 25
equity homes for such company). Unless otherwise indicated in this document,
"equity homes", "equity homes passed", "equity homes passed and marketed",
"equity businesses", "equity customers" and "equity lines" are calculated for
the purposes of this document for all periods on the basis of a company's
effective interest in its franchises as at the date of this document.
SOURCES OF INFORMATION
The financial statements in this document for the Telewest Group and the
General Cable Group for the three months ended 31 March 1998 are unaudited. All
financial statements contained in this document for the Telewest Group and the
General Cable Group as at 31 December 1997 and 1996 and for the three years
ended 31 December 1997 are audited. All operating statistics in this document
for the Telewest Group are as set out in Telewest's quarterly, interim or
annual announcements of financial results and/or operating statistics and for
the General Cable Group are as set out in General Cable's quarterly, interim or
annual announcements of financial results and/or operating statistics.
All information in this document with respect to the number of homes and
businesses in a franchise area is based, in the case of homes, on the most
recently published UK census data (1991), as updated by the management of
Telewest and General Cable, as the case may be, and in the case of
I-10
<PAGE>
businesses, the relevant management's estimates. All information with respect
to the number of homes "passed" or "passed and marketed" is based on physical
counts made by the relevant company during the network construction or
marketing phases (or in the case of homes acquired after network construction
or marketing was completed by another operator, based on the records of such
operator). All information with respect to the number of homes in Affiliated
Franchises is based on the most recently published UK census data (1991), as
updated by the managements of such franchises and all other information
concerning the Affiliated Companies has been provided by (or derived from data
provided by) the Affiliated Companies. All information in this document with
respect to the number of homes in the UK in areas for which cable franchises
have been awarded is based on recently published UK census data (1991) and ITC
data relating to the UK cable industry.
See also "-- Section Seven -- Additional Information -- Additional Sources of
Information".
FORWARD-LOOKING STATEMENTS
This document contains certain statements that are, or may be deemed to be,
forward-looking statements within the meaning of US securities laws. These
forward-looking statements relate to, among other things, anticipated cost
savings, revenue growth, operating efficiencies and anticipated interests in
equity homes as well as the plans and objectives of the Combined Group. By
their nature, forward-looking statements involve risks and uncertainties
because they relate to events and depend on circumstances that may or may not
occur in the future.
There are a number of important factors that could cause actual results and
developments to differ materially from those expressed or implied by such
forward-looking statements, including, but not limited to: the ability of the
Telewest Group successfully to integrate the General Cable Group business and
achieve the anticipated synergies; the extent consumer preference develops for
cable television over other methods of providing in-home entertainment and for
the Combined Group as a viable alternative to BT and others as a provider of
telephony service; the ability of the Combined Group to penetrate markets and
respond to changes or increases in competition (including the introduction of
digital services by BSkyB or other operators and digital terrestrial services
by BDB) and adverse changes in government regulation; the ability of the
Combined Group to manage growth and expansion; the ability of the Combined
Group to improve operating efficiencies (including through cost reductions);
the ability of the Combined Group to construct its network in a cost-efficient
and timely manner; the ability of the Combined Group to raise additional
financing if there is a material adverse change in the Combined Group's
anticipated revenues or expenses or to finance new initiatives; the extent to
which programming is available at reasonable cost; adverse changes in the price
of telephony interconnection; disruptions in supply of services and equipment;
the ability of Telewest to exercise its pre-emption rights with respect to
Birmingham Cable and Cable London and the timing of such exercise; Telewest's
ability to finance the acquisition of Comcast's interests in Birmingham Cable
and Cable London; and the performance of Combined Group Affiliated Companies
(to the extent not controlled by the Combined Group).
I-11
<PAGE>
EXPECTED TIMETABLE
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
EVENT TIME AND DATE NOTES
<S> <C> <C>
Record Date for Pre-emptive Issue with 5.00 pm on 23 June 1998
respect to Telewest shares and Telewest
Convertible Preference shares
Posting of the Offer Document, Pre- 29 June 1998
emptive Issue Circular, EGM Circular
and the Disclosure Document
Record Date for Pre-emptive Issue in re- 5.00 pm on 2 July 1998
lation to Telewest ADSs (New York City time)
Latest time for receipt of Forms of 10.00 am on 26 July 1998
Proxy for the EGM
Extraordinary General Meeting 10.00 am on 28 July 1998
Latest time and date for the splitting 3.00 pm on 11 August 1998 1
of Application Forms (to satisfy bona
fide market claims only) for the Pre-
emptive Issue
First closing date for the Offer 3.00 pm on 13 August 1998 2
Latest time and date for the receipt of 3.00 pm on 13 August 1998 3
completed Application Forms and payment
in full under the Pre-emptive Issue
Dealings in new Telewest shares to On the business day
commence on the London Stock Exchange following the date on
and quotations of new Telewest ADSs to which the Preemptive
commence on Nasdaq Issue closes and the
Offer is declared
unconditional in all
respects
Latest time and date for elections under Five days following
the Mix and Match Election the date on which
the Offer is
declared
unconditional
in all respects
Expected date of despatch of share Within ten
certificates pursuant to the Pre- business days
emptive Issue of the date on
which the Pre-
emptive Issue
closes
Expected date of despatch of cheques and Within 14 days
share certificates and crediting of of the date on
CREST accounts pursuant to the Offer which the Offer
for acceptances received prior to the is declared
close of the Mix and Match Election unconditional
in all respects
</TABLE>
- ------------
NOTES:
(1) This time and date may be extended from time to time by press release
issued by Telewest, and will, in any event, fall on the date two
business days preceding the acceptance and payment date then in effect.
(2) At this date the Offer may lapse, be extended or be declared
unconditional in all respects. The Offer shall not (except with the
Panel's consent) be capable of becoming unconditional in all respects
after 28 August 1998. However, Telewest reserves the right, if
appropriate, to seek the Panel's approval to extend the date for
satisfaction of all of the conditions to the Offer to 18 September 1998
or such later date as the Panel may agree.
(3) This time and date may be extended from time to time by press release
issued by Telewest not later than five calendar days prior to the
acceptance and payment date then in effect. Telewest intends to extend
the acceptance and payment date as may be necessary to coincide with
the date on which Telewest intends to declare the Offer unconditional
in all respects.
(4) Unless otherwise indicated, all references in this document are to
London times.
- --------------------------------------------------------------------------------
I-12
<PAGE>
SECTION ONE GENERAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE
THE MERGER AND RELATED MATTERS
- --------------------------------------------------------------------------------
THE MERGER
On 15 April 1998, Telewest and General Cable announced that their respective
boards of directors had agreed the terms of a proposed merger to be effected by
means of a recommended offer by Schroders on behalf of Telewest for the issued
share capital of General Cable. The recommended offer was mailed to General
Cable securityholders on 29 June 1998.
Telewest expects the Merger to strengthen the strategic position of the
Combined Group as a leading cable operator in the UK with interests in 41
franchises covering approximately 5.8 million homes. Pursuant to the Offer, (i)
holders of General Cable shares are being offered 1.243 new Telewest shares and
65 pence in cash for every General Cable share and (ii) holders of General
Cable ADSs are being offered 6.215 new Telewest shares and 325 pence in cash
for every General Cable ADS. General Cable securityholders who validly accept
the Offer within the relevant time period may utilise a Mix and Match Election
whereby they may elect to vary the proportion of new Telewest securities and
cash receivable under the Offer by electing to receive either all new Telewest
shares (including for General Cable ADS holders in the form of new Telewest
ADSs) or all cash in respect of all or a designated portion of their holdings
of General Cable securities, subject to other holders of General Cable
securities making off-setting elections. To the extent that elections cannot be
satisfied as a result of such off-setting elections, entitlements to cash and
new Telewest securities in excess of the basic terms of the Offer set out in
(i) and (ii) above will be scaled down on a pro rata basis.
Based on Telewest's closing share price of 94.5 pence on 27 March 1998 (the
last dealing day prior to the announcement by General Cable that it was in
discussions which might lead to an offer for General Cable by Telewest and the
possible terms thereof), the Offer values each General Cable share at
approximately 182 pence, each General Cable ADS at approximately $15.35 (based
on the Noon Buying Rate of (Pounds)1 = $1.6825 on such date) and the whole of
General Cable's issued share capital, fully diluted for the exercise of all
outstanding options, at approximately (Pounds)677 million. Based on Telewest's
closing share price of 159 pence on 24 June 1998 (the latest practicable date
prior to the publication of this document), the Offer values each General Cable
share at approximately 262.6 pence, each General Cable ADS at $21.91 (based on
the Noon Buying Rate of (Pounds)1 = $1.6683 on such date) and the whole of
General Cable's issued share capital, fully diluted for the exercise of all
outstanding options, at approximately (Pounds)974 million.
THE PRE-EMPTIVE ISSUE
The cash element of the Offer will be financed through the Pre-emptive Issue,
being an offer to Qualifying Telewest securityholders to subscribe for
260,665,436 new Telewest shares at a price of 92.5 pence per share, raising
approximately (Pounds)240 million (net of expenses solely attributable to the
Pre-emptive Issue). TINTA, MediaOne and Cox (being three of the four largest
holders of Telewest shares) have undertaken to subscribe for (or procure the
subscription of) their full entitlement of new Telewest shares under the Pre-
emptive Issue and to subscribe for any new Telewest shares not subscribed for
by other Qualifying Telewest securityholders. Completion of the Pre-emptive
Issue is conditional upon, among other things, the Offer becoming or being
declared unconditional in all respects and the relevant resolutions being
passed at the Extraordinary General Meeting. The new Telewest securities to be
issued pursuant to the Pre-emptive Issue will be issued free from any
encumbrances and will rank pari passu in all respects with the existing
Telewest shares and Telewest ADSs (as the case may be), including the right to
receive all dividends and other distributions declared, made or paid
thereafter. Qualifying Telewest securityholders may apply for any number of new
Telewest securities up to their pro rata entitlement, which will be determined
on the basis of:
13 new Telewest shares for every 71 Telewest shares or Telewest Convertible
Preference shares
or
130 new Telewest shares for every 71 Telewest ADSs,
I-13
<PAGE>
SECTION ONE GENERAL INFORMATION
in each case held by such Qualifying Telewest securityholders and registered in
their names at the close of business on the Record Date and so in proportion
for any other number of Telewest shares, Telewest Convertible Preference shares
or Telewest ADSs held at such date.
Telewest ADS holders will receive their entitlement of new Telewest shares in
the form of new Telewest ADSs (each new Telewest ADS representing ten new
Telewest shares) unless they elect to receive new Telewest shares.
Fractional entitlements to new Telewest shares will not be allotted or
issued, and entitlements to new Telewest shares will be rounded down to the
nearest whole number of new Telewest shares. Fractional new Telewest ADSs will
not be allotted or issued in respect of new Telewest shares and any such
fractional new Telewest ADSs will be aggregated and sold in the market with the
proceeds of the sale, net of expenses, to be paid in cash pro rata to the
Qualifying Telewest ADS holders otherwise entitled to such fractions. However,
individual cash entitlements in respect of fractional new Telewest ADSs of less
than (Pounds)3.00 will not be paid but will be retained for the benefit of
Telewest.
For holders of Telewest shares and Telewest Convertible Preference shares, an
application to subscribe for new Telewest shares is irrevocable and may only be
made on the Application Form sent to each Qualifying Telewest securityholder.
The Application Form is personal to the Qualifying Telewest securityholder(s)
named therein and cannot be assigned, transferred or split except up to 3.00 pm
(London time) on 11 August 1998 (or two business days before such later time
and/or date to which the Pre-emptive Issue may be extended) to satisfy bona
fide market claims in relation to purchases of Telewest shares through the
London Stock Exchange prior to the date on which the Telewest shares are marked
"ex" the entitlement to the Pre-emptive Issue. Qualifying Telewest shareholders
who have sold or transferred all or part of their registered holdings prior to
30 June 1998 are advised to consult their stockbroker, bank or other agent
through or by whom the sale or transfer was effected as soon as possible, since
the invitation to subscribe under the Pre-emptive Issue may represent a benefit
which can be claimed by purchasers or transferees of the Telewest shares under
the rules of the London Stock Exchange.
For holders of Telewest ADSs, an application to subscribe for new Telewest
ADSs is irrevocable and may only be made on the Application Form sent to each
Qualifying Telewest ADS holder, which is personal to the Qualifying Telewest
ADS holder(s) named therein.
Qualifying Telewest securityholders should be aware that the Pre-emptive
Issue is not a rights issue. Entitlements to new Telewest shares will not be
transferable and those new Telewest shares not applied for under the Pre-
emptive Issue will not be sold in the market for the benefit of those
Qualifying Telewest securityholders who do not apply for them. The rights of
Qualifying Telewest securityholders to apply to take up new Telewest shares
under the Pre-emptive Issue will lapse if they are not exercised in accordance
with the terms of the Pre-emptive Issue.
If Qualifying Telewest securityholders wish to take up their entitlement
under the Pre-emptive Issue, in whole or in part, the Application Form must be
properly completed and returned in accordance with the instructions printed
thereon, together with a cheque or banker's draft for the full amount payable
in respect of those new Telewest shares or new Telewest ADSs (as the case may
be) for which application has been made, by hand or by post as provided therein
so as to arrive as soon as possible but in any event not later than 3.00 pm
(London time) or 10.00 am (New York time) on 13 August 1998 (or such later time
and/or date to which the Pre-emptive Issue may be extended). Application Forms
received thereafter will not be valid.
All applications received under the Pre-emptive Issue will be irrevocable and
will only lapse if the conditions to the Pre-emptive Issue are not satisfied by
14 August 1998 (or such later date as Telewest and Schroders may agree).
Share certificates and ADRs in respect of new Telewest securities issued
pursuant to the Pre-emptive Issue are expected to be despatched, at the risk of
the persons entitled thereto, no later than 10
I-14
<PAGE>
SECTION ONE GENERAL INFORMATION
business days after the Offer becomes unconditional in all respects. No
temporary documents of title will be issued.
Other than pursuant to the Pre-emptive Issue, the new Telewest shares and the
new Telewest ADSs have not been marketed, nor are they available, in whole or
in part, to the public.
CONVERSION OF TELEWEST CONVERTIBLE PREFERENCE SHARES
The TINTA Affiliate, the MediaOne Affiliates, the Cox Affiliate and the SBC
Affiliate currently own an aggregate of 496,066,708 Telewest Convertible
Preference shares (representing all such shares in issue). They have indicated
to Telewest that, in order to minimise dilution of their voting interests in
Telewest as a result of the Merger and the Pre-emptive Issue, they intend to
convert all of their respective holdings of Telewest Convertible Preference
shares into new Telewest shares upon the allotment and issue of new Telewest
securities to General Cable securityholders pursuant to the Offer. Subject to
the terms of the Relationship Agreement, the Telewest Convertible Preference
shares may only be converted into new Telewest shares to the extent that,
following the conversion of such shares, at least 25% of the Telewest shares
then in issue will be held by "the public" for the purposes of the Listing
Rules. Under the Relationship Agreement, however, Telewest has agreed to
convert Telewest Convertible Preference shares held by the MediaOne Affiliates,
the TINTA Affiliate and/or the Cox Affiliate to the extent necessary to ensure
that TW Holdings maintains an interest of not less than 50.1% of the Telewest
shares in issue following the Offer and the Pre-emptive Issue, overriding the
requirement that 25% of Telewest shares are held by the "public" for the
purposes of the Listing Rules. The holding of the "public" in Telewest
following the Merger, the Pre-emptive Issue and Conversion will depend, among
other things, on the number of new Telewest shares subscribed for by Qualifying
Telewest securityholders (other than the subscribers under the Subscription
Agreement) in the Pre-emptive Issue, the level of acceptances of the Offer, the
nature of elections made under the Mix and Match Election and the extent to
which Telewest Convertible Preference shares are converted. Telewest believes
that immediately following completion of the Merger, assuming full acceptance
of the Offer and no purchase of either Telewest securities or General Cable
securities by TINTA, MediaOne, Cox, SBC or Vivendi save as pursuant to the Pre-
emptive Issue, the aggregate holding of Telewest shares of persons other than
TINTA, MediaOne, Cox, SBC and Vivendi will not fall below 25%. However,
depending on the factors outlined above, a number of Telewest Convertible
Preference shares may remain in issue following completion of the Merger.
NEW TELEWEST SECURITIES
A maximum of 1,217,590,949 new Telewest shares are expected to be issued
pursuant to the Offer, the Pre-emptive Issue and Conversion. Application has
been made for the new Telewest shares, which will be issued free from any
encumbrances and rank pari passu in all respects with the existing Telewest
shares, to be admitted to the Official List. Application has also been made to
Nasdaq for the new Telewest ADSs to be approved for quotation on Nasdaq.
Dealings in the new Telewest shares and new Telewest ADSs are expected to
commence on the business day following the date on which the Offer becomes or
is declared unconditional in all respects.
THE EXTRAORDINARY GENERAL MEETING
Telewest has convened the Extraordinary General Meeting to be held at 10.00
am (London time) on 28 July 1998 to consider and approve resolutions concerning
various matters relating to the Merger. The matters to be considered at the
meeting include (i) an ordinary resolution approving the Merger, (ii) ordinary
resolutions increasing Telewest's authorised share capital and authorising the
issue of new Telewest shares pursuant to the Offer, the Pre-emptive Issue and
the Conversion, (iii) an ordinary resolution approving the Relationship
Agreement and (iv) special resolutions approving changes to Telewest's Articles
of Association and disapplying statutory pre-emption rights. The Merger, the
Pre-emptive Issue and Conversion are conditional on, among other things,
approval of each of the resolutions to be proposed at the Extraordinary General
Meeting.
I-15
<PAGE>
SECTION ONE GENERAL INFORMATION
BIRMINGHAM CABLE AND CABLE LONDON
BIRMINGHAM CABLE
General Cable has an interest of 44.95% in the share capital of Birmingham
Cable. Telewest has an interest of 27.47% in Birmingham Cable, as does Comcast.
The remaining 0.11% of Birmingham Cable's issued share capital is held by three
minority shareholders.
Comcast's and Telewest's shares in Birmingham Cable are registered in the
joint names of Comcast and TCHL, a wholly owned subsidiary of Telewest. TCHL
and Comcast are parties to an agreement (the "Co-Ownership Agreement") which
regulates this joint holding. As a consequence of the NTL/Comcast Merger
announced on 5 February 1998, TCHL will, on completion of such merger, have the
right to acquire Comcast's interest in Birmingham Cable. If TCHL acquires
Comcast's shares in Birmingham Cable, the Co-Ownership Agreement will
terminate.
Telewest's acquisition of General Cable will result in the indirect
acquisition by Telewest, an "affiliate" of TCHL, for the purpose of the Co-
Ownership Agreement, of the Birmingham Cable shares held by General Cable. The
Co-Ownership Agreement provides that neither party nor its affiliates may
acquire, directly or indirectly, additional Birmingham Cable shares.
Accordingly, Telewest announced on 15 April 1998 that if the Co-Ownership
Agreement was not terminated prior to the Offer becoming unconditional, TCHL
would be willing to undertake to Comcast to procure that General Cable would,
once Telewest had acquired control of General Cable, offer to sell to Comcast
up to 50% of its holding in Birmingham Cable (less any shares representing the
interest of the minority shareholders). This undertaking would be without
prejudice to TCHL's rights under the Co-Ownership Agreement to acquire
Comcast's shares in Birmingham Cable on completion of the NTL/Comcast Merger.
Failing Comcast's agreement thereto, General Cable agreed with Telewest on 15
April 1998, subject to the operation of the pre-emption provisions in the
Birmingham Cable Articles, to sell its holding of shares in Birmingham Cable to
Telewest for (Pounds)100 million upon service of a written notice by Telewest
requiring such sale. The Birmingham Cable Articles will require Birmingham
Cable to offer General Cable's shares in Birmingham Cable to all members of
Birmingham Cable (other than General Cable) pro rata to their existing holdings
of Birmingham Cable shares for a total consideration of (Pounds)100 million in
cash. Telewest believes that this procedure is specifically permitted by the
Co-Ownership Agreement. Telewest intends to fund the purchase of General
Cable's shares in Birmingham Cable with the proceeds of the Unsecured Notes (as
defined herein) to be issued pursuant to the Securities Purchase Agreement (as
defined herein). See "-- Section Seven -- Additional Information -- Financing
Agreements -- New Financing to be Provided in Connection with the Merger". The
obligation to purchase the Unsecured Notes is subject to certain conditions.
Although Telewest believes that under the Securities Purchase Agreement that
these conditions will be satisfied, there can be no assurance that all of the
conditions will be satisfied and that funding will be available. Failure to
complete the acquisition of shares in Birmingham Cable from General Cable could
result in a breach by Telewest of its agreement with General Cable.
Telewest is not aware if Comcast or the minority shareholders in Birmingham
Cable propose to take up their pro rata entitlement to acquire shares from
General Cable. To the extent that the other shareholders fail to take up their
rights in full, TCHL intends to exercise its rights to acquire all of the
Birmingham Cable shares which are not acquired by the other shareholders.
It is Telewest's intention (subject to price and available financing) to
purchase, under the Co-Ownership Agreement, any Birmingham Cable shares
beneficially held by Comcast (including any shares acquired by Comcast from
General Cable under the Birmingham Cable Articles) on completion of the
NTL/Comcast Merger. There can be no assurance that Telewest will acquire the
Birmingham Cable shares held by Comcast nor can there be any assurance as to
the price at which any such shares will be acquired. The acquisition of
Birmingham Cable shares from Comcast is subject to the terms of the Co-
Ownership Agreement, including the requirement that, in the absence of
agreement, the purchase price is to be determined by the independent appraisal
process set out in the Co-Ownership Agreement. As at the date of this document,
the appraisal process has commenced but has not been completed. In addition,
Comcast has written to Telewest disputing Telewest's interpretation of the Co-
I-16
<PAGE>
SECTION ONE GENERAL INFORMATION
Ownership Agreement and the Birmingham Cable Articles in a number of respects
and contending that Telewest's acquisition of General Cable would violate the
Co-Ownership Agreement and the Birmingham Cable Articles. Telewest has written
to Comcast stating Telewest's belief that it has acted in full conformity with
the Co-Ownership Agreement and the Birmingham Cable Articles, and expressing
Telewest's intention to proceed with its acquisition of General Cable.
Representatives of Telewest, NTL and Comcast are engaged in discussions with
respect to a possible resolution of such disputes but there can be no assurance
that any agreement will be reached, what the terms of any such agreement may
be, or what the consequences of a failure to so agree may be. See "-- Section
Six -- Risk Factors --Uncertainty as to Percentage Interests in Birmingham
Cable and Cable London".
CABLE LONDON
Comcast and Telewest also each hold approximately 50% of the issued share
capital of Cable London. Under the Articles of Association of Cable London,
Telewest will have the right (which, subject to price and available financing,
it proposes to exercise) to acquire all of Comcast's shares in Cable London on
completion of the NTL/Comcast Merger. There can be no assurance that Telewest
will acquire the Cable London shares held by Comcast nor can there be any
assurance as to the price at which such shares will be acquired. The Articles
of Association of Cable London set out a valuation procedure for determining
the price of the Cable London shares, which will not commence until the
NTL/Comcast Merger has been completed. See "-- Section Six -- Risk Factors --
Uncertainty as to Percentage Interests in Birmingham Cable and Cable London".
I-17
<PAGE>
SECTION TWO GENERAL INFORMATION
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SECTION TWO
INFORMATION ON TELEWEST
- --------------------------------------------------------------------------------
Detailed financial information on Telewest is set out elsewhere in this
document. Holders of Telewest securities and General Cable securities should
read the detailed financial information and not rely only on the information
contained in this section.
OVERVIEW
The Telewest Group is a leading provider of cable television and residential
and business cable telephony services in the UK. The Telewest Group owns and
operates 28 cable franchises (the "Telewest Owned and Operated Franchises") and
has minority equity interests in the Telewest Affiliated Companies, which own
and operate the nine Telewest Affiliated Franchises. As at 31 March 1998, the
Telewest Owned and Operated Franchises and the Telewest Affiliated Franchises
covered approximately 27% of the homes in the UK in areas for which cable
franchises have been awarded. As at such date, the Telewest Owned and Operated
Franchises and the Telewest Affiliated Franchises together included
approximately 5.2 million homes and approximately 344,500 businesses, of which
approximately 4.4 million and approximately 290,000 were the Telewest Group's
equity homes and equity businesses, respectively. As at 31 March 1998, the
network in such franchises had passed approximately 3.3 million of the Telewest
Group's equity homes (approximately 3.1 million of which had been passed and
marketed) and the Telewest Group had approximately 700,600 equity cable
television customers, 954,800 equity residential telephone lines and 126,800
equity business telephone lines.
The Telewest Group's 28 Owned and Operated Franchises, which include
approximately 4.0 million homes and 260,500 businesses, are managed in four
regional franchise areas (the "Regional Franchise Areas"): (i) London South and
the South East (including Croydon, Kingston, Richmond, Basildon, Chelmsford and
Gravesend); (ii) Scotland and the North East (including Dundee, Edinburgh,
Perth, Gateshead and Newcastle upon Tyne); (iii) Avon, Cotswolds and the
Midlands (including Bath, Bristol, Cheltenham, Gloucester, Telford, Dudley,
Wolverhampton, Walsall, Worcester and Kidderminster); and (iv) the North West
(including St. Helens and Knowsley, Wigan, Preston, Southport, North and South
Liverpool and Blackpool). The Telewest Affiliated Franchises include
approximately 1.2 million homes and 84,000 businesses and provide the Telewest
Group with approximately 405,000 additional equity homes and 29,000 additional
equity businesses. The Telewest Affiliated Franchise areas include Birmingham,
parts of North London and Windsor.
The Telewest Group provides a variety of cable television, cable telephony
and on-line services. Such services are provided over a hybrid fibre-coaxial
network (i.e., high-capacity broadband) which has been designed to enable the
Telewest Group to provide customers with a range of interactive and integrated
entertainment, telecommunications and information services as they become
available in the future. The Telewest Group currently provides analogue
services over the network, and expects to begin introducing digital services
over the network in 1999. Such digital services may include pay-per-view
programming, near-video-on-demand ("NVOD"), electronic mail and other
interactive services as they become available.
As at 31 March 1998, network construction with cable television and cable
telephony capability had been completed for approximately 75.4% and 70.9%,
respectively, of the homes in the Telewest Owned and Operated Franchises and
87.3% and 87.4%, respectively, of the homes in the Telewest Affiliated
Franchises, approximately (Pounds)2.1 billion had been invested in the
construction of the network of the Telewest Owned and Operated Franchises
(including the costs of cable, ducting, network electronic equipment and
subscriber connections). Telewest anticipates that network construction with
cable television and cable telephony capability will be completed for more than
77.6% and 72.9%, respectively, of the homes in the Telewest Owned and Operated
Franchises and 92.0% and 96.0%, respectively, of the homes in the Telewest
Affiliated Franchises by 31 December 1998 and expects that the remaining
construction of the networks will be substantially completed by the end of
2003.
I-18
<PAGE>
SECTION TWO GENERAL INFORMATION
The following table sets out certain operating and financial data concerning
the Telewest Owned and Operated Franchises and the Telewest Affiliated
Franchises at and for the years ended 31 December 1995, 1996 and 1997 and as
at and for the three months ended 31 March 1998. Except as otherwise noted in
the footnotes to this table, all information with respect to SBCC has been
included from 3 October 1995 (the date of completion of the SBCC Merger). All
the data set out below have been extracted from Telewest's annual financial
statements or quarterly, interim or annual announcements of financial results
and/or operating statistics for the relevant period.
<TABLE>
<CAPTION>
OWNED AND OPERATED FRANCHISES TELEWEST AFFILIATED FRANCHISES (1)
---------------------------------------------------------------- ----------------------------------------
1995 1996 1997 1998(2) 1995 1996 1997 1998(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CABLE TELEVISION
Homes passed 1,987,344 2,575,142 2,970,168 2,988,116 242,415 316,878 347,563 349,704
Homes passed and
marketed 1,831,458 2,335,953 2,760,184 2,794,836 235,196 290,276 336,398 337,432
Customers 401,469 528,142 605,988 617,877 56,003 71,457 81,364 82,722
Penetration rate
(3) 21.9% 22.6% 22.0% 22.1% 23.8% 24.6% 24.2% 24.5%
Average monthly
revenue per
customer (4) (Pounds)21.32 (Pounds)22.95 (Pounds)23.40 (Pounds)23.72 N/A N/A N/A N/A
Average churn
rate (5) 41.0% 33.4%(6) 34.0%(6) 34.8% N/A N/A N/A N/A
RESIDENTIAL
TELEPHONY
Homes passed 1,750,288 2,396,658 2,791,684 2,809,632 237,940 299,603 347,913 350,122
Homes passed and
marketed 1,652,604 2,254,734 2,725,154 2,760,826 229,956 287,701 337,173 337,851
Residential
customers (7) 429,405 620,377 810,358 831,585 48,250 65,724 84,324 87,888
Penetration rate
(9) 26.0% 27.5% 29.7% 30.1% 21.0% 22.8% 25.0% 26.0%
Residential
lines connected 430,916 627,009 836,168 864,325 48,549 66,512 86,372 90,427
Average monthly
revenue per line
(9) (Pounds)20.48 (Pounds)20.26 (Pounds)19.19 (Pounds)19.10 N/A N/A N/A N/A
Average churn
rate per
line (10) 20.9% 19.6%(6) 20.0%(6) 20.5% N/A N/A N/A N/A
BUSINESS
TELEPHONY
Business
customers 14,225 20,882 25,475 26,532 1,760 2,416 2,856 2,988
Business lines
connected 40,021 67,823 100,989 110,015 7,496 10,746 15,684 16,791
Average number
of business
lines per
customer (11) 2.8 3.2 4.0 4.1 4.3 4.4 5.5 5.6
Average monthly
revenue per line
(12) (Pounds)58.92 (Pounds)54.48 (Pounds)43.62 (Pounds)42.81 N/A N/A N/A N/A
<CAPTION>
TOTAL (1)
---------------------------------------
1995 1996 1997 1998(2)
<S> <C> <C> <C> <C>
CABLE TELEVISION
Homes passed 2,229,759 2,892,020 3,317,731 3,337,820
Homes passed and
marketed 2,066,654 2,626,229 3,096,582 3,132,268
Customers 457,472 599,599 687,352 700,599
Penetration rate
(3) N/A N/A N/A N/A
Average monthly
revenue per
customer (4) N/A N/A N/A N/A
Average churn
rate (5) N/A N/A N/A N/A
RESIDENTIAL
TELEPHONY
Homes passed 1,986,228 2,696,261 3,139,597 3,159,554
Homes passed and
marketed 1,882,560 2,542,435 3,062,327 3,098,677
Residential
customers (7) 477,655 686,101 894,682 919,473
Penetration rate
(9) N/A N/A N/A N/A
Residential
lines connected 479,465 693,521 922,540 954,752
Average monthly
revenue per line
(9) N/A N/A N/A N/A
Average churn
rate per
line (10) N/A N/A N/A N/A
BUSINESS
TELEPHONY
Business
customers 15,985 23,298 28,331 29,520
Business lines
connected 47,517 78,569 116,673 126,806
Average number
of business
lines per
customer (11) N/A N/A N/A N/A
Average monthly
revenue per line
(12) N/A N/A N/A N/A
</TABLE>
- ----------
Notes:
"N/A" means not applicable or publicly available.
(1) Information with respect to Telewest Affiliated Franchises reflects
Telewest's equity interest therein.
(2) Information relating to 1998 data is for the three months ended 31 March
1998, except for the churn rates, which, due to their seasonal nature, are
for the 12 months then ended.
(3) Cable television penetration rate at a specified date represents (i) the
total number of cable television customers at such date, divided by (ii)
the total number of homes passed and marketed for cable television at such
date.
(4) Average monthly revenue per customer for each period represents (i) one-
twelfth (or one-third with respect to the 1998 period) of the total cable
television revenue for such period, divided by (ii) the average number of
basic cable television customers in such period.
(5) Average cable television churn rate for the period represents (i) the
total number of cable television customers who terminated basic service or
whose service was terminated by the Telewest Group during such period,
divided by (ii) the average number of cable television customers in such
period.
(6) Prior to 1996, the calculation of churn included those customers who moved
homes and reconnected elsewhere in one of the Owned and Operated or
Telewest Affiliated Franchises and consequently overstated customer
dissatisfaction with the service provided. From 1996, Telewest revised the
basis on which "churn" is calculated to exclude those customers who moved
their cable service from one premises to another within one of the
Telewest Owned and Operated or Telewest Affiliated Franchises. Average
churn rate for 1996, 1997 and 1998 represents (i) the total number of
customers who voluntarily or involuntarily terminated service during such
period, divided by (ii) the average number of customers in such period.
(7) The information set out under "Residential customers" for the Telewest
Affiliated Franchises includes information for Birmingham Cable and Cable
London representing the number of residential lines connected, which is
greater than the actual number of residential customers.
(8) Residential telephony penetration rate at a specified date represents (i)
the total number of residential cable telephony customers at such date,
divided by (ii) the total number of homes passed and marketed for
residential cable telephony at such date.
(9) Average monthly revenue per residential line for each period represents
(i) one-twelfth (or one-third with respect to the 1998 period) of the
total residential cable telephony revenue for such period, divided by (ii)
the average number of residential cable telephony lines in such period.
(10) Average residential telephony churn rate per line for the period
represents (i) the total number of residential cable telephony lines
terminated by customers or Telewest during such period, divided by (ii)
the average number of residential cable telephony lines in such period.
(11) Average number of business lines per customer at a specified date
represents (i) the number of business cable telephony lines at such date,
divided by (ii) the number of business cable telephony customers at such
date.
(12) Average monthly revenue per business line for each period represents (i)
one-twelfth (or one-third with respect to the 1998 period) of the total
business cable telephony revenue for such period, divided by (ii) the
average number of business cable telephony lines in such period.
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SECTION TWO GENERAL INFORMATION
HISTORY
During the 1980's and early 1990's, TINTA and MediaOne acquired interests in
various UK cable franchises. In December 1991, TINTA and MediaOne combined
their respective UK cable interests by contributing certain of such interests
to a joint venture (the "Joint Venture") that was managed by TCI and MediaOne
through various affiliates. In November 1994, Old Telewest acquired all the
assets of the Joint Venture and certain other interests of TCI and MediaOne in
UK cable entities. Immediately following such acquisition, Old Telewest
completed a public offering of its ordinary shares and ADSs, raising an
aggregate of approximately (Pounds)414 million, net of commissions and
expenses. Immediately following completion of the public offering, TINTA and
MediaOne each beneficially owned approximately 36.7% of the Old Telewest
ordinary shares and 50% of the Old Telewest convertible preference shares.
In October 1995, Telewest acquired the entire issued share capitals of Old
Telewest and SBCC, then the owner of seven cable franchises in the UK, in
connection with the SBCC Merger. Since the SBCC Merger, the Telewest Group has
acquired the Worcester, East Lothian, Taunton & Bridgewater, Southport and
Blackpool cable franchises.
RECENT DEVELOPMENTS
As at 31 March 1998, the Telewest Owned and Operated Franchises and Telewest
Affiliated Franchises included approximately 27.5% of the UK homes in areas
covered by cable licences. One in every three homes passed by the networks of
the Telewest Owned and Operated Franchises subscribes for one or more of the
Telewest Group's services and more than 50% of the Telewest Group's customers
subscribe for both cable television and cable telephony services.
Over the past few years, the Telewest Group has devoted substantial resources
to constructing its network in accordance with licence construction milestones,
while also actively developing and marketing various cable telephony,
television and Internet products and servicing its customers. In the second
quarter of 1997, Telewest decided to reduce significantly the pace of its
network construction commencing at the end of 1997 and increase its focus on
developing and marketing attractive product offerings and enhancing customer
service.
The Telewest Group has reduced the pace of its network construction from
passing an average of approximately 35,000 new premises per month in 1997 to
passing an average of approximately 5,000 new premises per month in 1998. In
addition, to improve operating and management efficiencies, during 1997 the
Telewest Group streamlined its franchise operations by consolidating the
management of its franchises into four Regional Franchise Areas, rather than
the previous seven. In connection with the consolidation of franchise
management and other initiatives to improve operating efficiencies, during the
second half of 1997 Telewest announced and implemented a 25% reduction in the
size of its work force. The reduction in the pace of network construction is
expected to reduce significantly the Telewest Group's annual capital
expenditure as compared to prior years and the introduction of various
operating efficiencies are expected to result in significant ongoing operating
cost reductions.
During 1997, the Telewest Group also implemented an initiative to strengthen
its product offerings. The Telewest Group trialed a further development of
"Teleplus", a combined cable television and telephony package offering
customers a "mini basic" package with a smaller number of channels, telephone
line rental and free local calls among Telewest Group cable telephony customers
at certain times, for a cost lower than that of Telewest's traditional basic
package. Based on the success of these trials, in early 1998 the Telewest Group
introduced a new mini basic package, marketed as "Millennium", into all of its
Owned and Operated Franchises.
In October 1997, the Telewest Group entered into a consortium with other UK
cable operators (including General Cable) to provide a pay-per-view movie
service for their cable television subscribers, marketed as "Front Row". The
Front Row consortium has entered into contracts with three major movie studios
and additional contracts are currently under negotiation. Telewest began
providing the Front Row service to its customers during May 1998. It is
anticipated that all of the Telewest Group's
I-20
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SECTION TWO GENERAL INFORMATION
cable television customers will have access to the Front Row service, with more
than half being able to order programmes directly from their television remote
controls.
As part of its initiative to improve customer service and provide improved
management information, the Telewest Group has committed to invest
approximately (Pounds)30 million to develop a new customer management system
for the Telewest Group. Parts of the system were completed in the first quarter
of 1998 and the system is currently expected to be substantially complete by
the end of the first quarter of 1999.
On 5 February 1998, NTL and Comcast announced a proposed merger of their UK
cable interests. Comcast's assets include a 27.47% interest in Birmingham Cable
and an interest of approximately 50% in Cable London. Telewest currently has
interests of 27.47% in Birmingham Cable and approximately 50% in Cable London.
Pursuant to existing arrangements between Comcast and Telewest, Telewest has
the right to acquire Comcast's interest in both Birmingham Cable and Cable
London upon completion of the NTL/Comcast Merger as a result of the proposed
change of ownership of Comcast. See "-- Section One -- The Merger and Related
Matters -- Birmingham Cable and Cable London -- Birmingham Cable".
On 15 April 1998, the boards of directors of Telewest and General Cable
announced that they had agreed to the terms of a proposed merger. See "--
Section One -- The Merger and Related Matters".
CABLE TELEVISION
OVERVIEW
The Telewest Group derives its cable television revenues from connection
charges, monthly basic and premium service fees, pay-per-view programme fees,
cable publications and advertising charges. As at 31 March 1998, the Telewest
Group had passed and marketed approximately 2,794,800 of the homes in the
Telewest Owned and Operated Franchises and had a cable television penetration
rate of approximately 22.1%.
PROGRAMMING
CHANNELS AND SERVICES
The Telewest Group currently offers more than 45 channels to its customers as
part of its basic service and up to 12 channels as part of its premium service
offerings (including bonus channels provided in connection with the
subscription for certain premium channels). The Telewest Group obtains its
programming from a variety of sources, including BSkyB, Flextech, terrestrial
broadcasters and other programming suppliers. See "-- Sources of Programming".
Customers can choose to receive basic service programming alone or together
with premium programming.
The recently introduced Front Row service is provided by a cable industry
consortium owned by Telewest (40%), CableTel Programming Inc. (40%), General
Cable (13%) and Diamond Cable Communications Ltd. (7%). The Front Row
consortium has entered into contracts with Columbia Tristar, Warner Brothers
and Buena Vista International which entitle the consortium members to
distribute movies on a pay-per-view basis to their customers. The pay-per-view
window is generally six months in advance of the time movies are released for
pay television premium channels. This service was launched by Telewest during
May 1998. The Telewest Group intends to carry other pay-per-view services as
and when they become available.
SOURCES OF PROGRAMMING
The Telewest Group obtains most of its programming from suppliers pursuant to
arrangements that run for periods from six months to ten years. The
arrangements generally provide for payments by the Telewest Group based on the
number of its customers subscribing to that particular channel. In many cases,
the per-subscriber charges for the Telewest Group decrease as the number of its
customers subscribing to that channel increases. Telewest and the Telewest
Affiliated Companies contract together
I-21
<PAGE>
SECTION TWO GENERAL INFORMATION
for some programme channels, which increases the aggregate number of contract
customers and thereby reduces the cost per subscriber. Under the terms of
their PDSLs, the Telewest Group is also required to provide its customers with
certain specified terrestrial television services without charge. The
aggregate cost of programming acquired by the Telewest Group in the year ended
31 December 1997 was (Pounds)93.4 million. See "-- Section Five -- Regulatory
Matters and Competition -- Regulatory Matters".
The Telewest Group obtains a significant amount of its programming from
BSkyB, a leading supplier of cable programming in the UK and the exclusive
supplier of certain programming. Its programming is generally popular in the
UK and is important in terms of attracting and retaining cable television
customers. In April 1995, Old Telewest entered into a seven-year contract with
BSkyB (the "BSkyB Contract") pursuant to which BSkyB provides the Old Telewest
franchises with a non-exclusive right and licence to receive ten BSkyB
channels and digital pay-per-view sports and movies. Since 16 February 1996,
the former SBCC Franchises have been provided with BSkyB programming pursuant
to an industry rate card, which sets out the terms and conditions for the
supply of programming by BSkyB to those operators in the UK cable industry who
do not have separate agreements with BSkyB. BSkyB also offers this programming
(together with additional programming) to its satellite customers, in
competition with the Telewest Group and all other cable operators throughout
the UK.
Under the BSkyB Contract, and in respect of the industry rate card for the
former SBCC franchise areas, customer fees payable to BSkyB for each customer
are different for residential, commercial and public premises customers and
vary according to the channels subscribed for and, in the case of commercial
customers, according to the number of rooms for which the service is provided.
Fee arrangements for pay-per-view programmes are negotiated separately for
each event. The monthly fees for basic channels under the BSkyB Contract and
the industry rate card are subject to annual increases which are equal to the
greater of 7% of the amount of the annual change in the UK Retail Price Index
under the contract and the industry rate card. Customer fees for premium
channels are linked to BSkyB's satellite subscription prices.
In 1995, the BSkyB Contract was submitted to the OFT and the European
Commission for review. In 1995, the OFT opined that amendments to the BSkyB
Contract agreed to by BSkyB and the Telewest Group addressed its concerns
about provisions it viewed as anti-competitive and the European Commission
expressed concern that certain provisions contravened European competition
law. Neither the OFT nor the European Commission has contacted Telewest
regarding this matter for more than two years and the Telewest Group cannot
predict what actions, if any, such authorities may take with respect to the
BSkyB Contract.
The Telewest Group also obtains a significant amount of its programming (13
programming channels) from providers which Flextech, a publicly quoted UK
company (approximately 36.8% of which (together with a special voting share)
is owned by an affiliate of TINTA, approximately 6.7% of which is owned by an
affiliate of MediaOne and approximately 13.2% of which is owned by Cox), and
other affiliates of TCI either own interests in or manage. In addition,
affiliates of MediaOne, TCI and SBC are partners in CPP-1, a joint venture
with three other US cable operators that has a 10% interest in Live! TV. Lord
Borrie (a Director of Telewest) is also a director of the Mirror Group plc,
which owns the other 90% of Live! TV. Live! TV is carried by the Telewest
Group's network. An affiliate of MediaOne has an interest in an affiliate of
Time Warner Inc., which owns CNN International, The Cartoon Network and TNT,
which are carried by Telewest's network.
CABLE TELEPHONY
OVERVIEW
The Telewest Group derives its cable telephony revenues from connection
charges, monthly line rental charges, call charges, residential service
charges (e.g., call waiting), business service charges (e.g., private business
line and CENTREX) and interconnection fees payable to the Telewest Group by
other
I-22
<PAGE>
SECTION TWO GENERAL INFORMATION
operators. As at 31 March 1998, the Telewest Group had passed and marketed
approximately 2,760,800 homes for cable telephony, had 864,325 residential
lines for 831,585 customers (representing a residential cable telephony
penetration rate of approximately 30.1%) and had installed an aggregate of
110,015 business lines for 26,532 customers.
SERVICES
The Telewest Group seeks to offer residential and business customers reliable
and high-quality telephony services over its broadband network at competitive
prices.
RESIDENTIAL SERVICES
The Telewest Group offers local, long-distance and international cable
telephony service as well as a broad range of additional services to its
residential customers. The Telewest Group's additional services include: call
waiting, call barring (prevents unauthorised outgoing calls), call diversion
(call forwarding), three-way calling, voice mail, caller line identification
and fully itemised monthly billing. The Telewest Group intends to offer other
telephony services as they become available in the future.
BUSINESS SERVICES
The Telewest Group operates a dedicated Business Services division to
capitalise on business opportunities within the Regional Franchise Areas. Until
recently, the Business Services division focused on offering a limited range of
telephony products to the small and medium-size business market. As the
Telewest Group's construction of the franchise networks and Interfranchise
Network have progressed, the Business Services Division has been expanding its
product range to include advanced voice and data solutions, which capitalise on
the high capacity of the Telewest Group's networks.
The Business Services Division offers standard telephony services, as well as
specialised products for businesses, including high-capacity private lines to
carry voice and data between two or more locations, both within a Regional
Franchise Area and throughout the UK via the Interfranchise Network and
interconnection with other networks. The Business Services Division also
provides a CENTREX service, which provides a customer with the versatility of a
private electronic switchboard without the expense of directly buying and
operating its own switchboard, and ISDN services which allow high-speed,
simultaneous transmission of voice, data and video over a telephone line.
INTERNET ACCESS
In 1996, the Telewest Group began offering customers Internet access through
its own Internet service provider, Cable Internet Limited. This access was
extended to all Regional Franchise Areas by the end of 1997. As at 31 March
1998, the Telewest Group had 17,059 Internet customers. The Telewest Group
currently provides three Internet access services: dial-up services primarily
for residential customers, leased lines for business customers and network
access for wholesale customers. The Telewest Group also offers higher-speed
Internet access to business customers using ISDN lines. At the end of 1997, the
Telewest Group completed a technical trial of high-speed Internet access using
cable modems and is considering developing this opportunity further as
international standards develop.
DIGITAL TELEVISION SERVICES
The Telewest Group intends to begin introducing digital services in its
franchises in 1999. Digital technology allows operators to provide more
channels (through digital compression of analogue signals). Through the
introduction of digital technology, the Telewest Group expects to be able to
offer customers up to 150 programming channels (as compared to the
approximately 45 channels currently offered by the Telewest Group through its
analogue service), which will enable the Telewest Group to provide services
such as pay-per-view and NVOD. It will also enable the Telewest Group to use
its broadband network to provide additional services such as cable television
Internet access, electronic mail, high-speed data transmission and other
interactive services as they become available. The Telewest Group believes that
digital technology will enable it to offer customers substantial additional
choice and flexibility in selecting the services desired.
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SECTION TWO GENERAL INFORMATION
The Telewest Group's digital head-end is being built at its Knowsley
franchise, where the programming and services will be received by satellite or
terrestrial broadcast and converted into a digital signal for transmission over
the Telewest Group's broadband franchise networks and into customer homes and
businesses. The Interfranchise Network will enable the Telewest Group to use a
single digital head-end to transmit the digital signal to remote units in each
of the Telewest Group's franchises, thereby avoiding the need to install a
separate digital head-end in each franchise and maintain personnel at each such
head-end. See "-- The Interfranchise Network". The Telewest Group intends to
continue to offer customers analogue services as it rolls out the digital
services.
THE INTERFRANCHISE NETWORK
In 1996, the Telewest Group commenced construction of the Interfranchise
Network, which will link the 28 Telewest Owned and Operated Franchise and the
seven Telewest Affiliated Franchises. The Interfranchise Network is on schedule
to be completed by the end of August 1998. The Telewest Group anticipates that
construction of the Interfranchise Network will increase telephony margins by
reducing the payment of interconnection fees to national carriers for long-
distance calls between locations in different franchise areas. The Telewest
Group expects that construction of the Interfranchise Network will also create
new business telephony revenue opportunities by enabling the Telewest Group to
create private networks for businesses with multiple sites located throughout
the various Telewest Group and Affiliated Company franchise areas.
Telewest expects that, when complete, the Interfranchise Network will include
approximately 2,700 kilometres of high-capacity multi-fibre optic cable, as
well as various high-capacity electronics. The Telewest Group is seeking to
build the network in a cost-effective manner, using a combination of parts of
the existing networks of the Telewest Group and the Affiliated Companies, parts
newly built by the Telewest Group or built and shared with other service
providers and parts consisting of leased lines (with electronics in place) and
leased fibre (without electronics in place).
Telewest expects that the total cost of constructing the Interfranchise
Network will be approximately (Pounds)50.4 million, funded from Telewest's
existing resources.
PRICING
The Telewest Group offers a variety of pricing options, including single-
service pricing and pricing for combinations of the Telewest Group's services.
COMBINED CABLE TELEVISION/CABLE TELEPHONY
In 1996, the Telewest Group began offering combined pricing packages under
the brand name "Teleplus". In 1997, the Telewest Group trialed a further
development of Teleplus, offering customers a "mini basic" package with a
smaller number of channels, telephone line rental and free local calls among
Telewest Group cable telephony customers at certain times, for a cost lower
than that of the Telewest Group's traditional basic package. Based on the
success of these trials, in early 1998 the Telewest Group introduced the
Millennium package into all of its Owned and Operated Franchises.
MILLENNIUM PACKAGE PRICING
The basic charge for the Millennium package varies between (Pounds)12.99 and
(Pounds)22.99 per month, depending on the options selected. The package
provides different combinations of basic telephony and television services
together with free local calls among Telewest Group cable telephony customers
at certain times and the option to acquire one or more premium channels for an
additional (Pounds)8.00 to (Pounds)20.00 per month (depending upon the number
of premium channels selected) and access to the Telewest Group's Front Row
service. The Millennium package at (Pounds)12.99 offers customers a low-priced
entry point for a "mini basic" service of up to 20 channels (reduced from the
more than 50 channels historically offered by the Telewest Group as part of its
basic service), telephone line rental and free local calls among Telewest Group
cable telephony customers at certain times. The installation charge for
customers subscribing for both cable television and telephony services at the
same time is (Pounds)30.00.
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SECTION TWO GENERAL INFORMATION
The Millennium packages enable customers to have more choice and flexibility
in programming packages and pricing plans, as well as the convenience of
dealing with a single provider for two services.
CABLE TELEVISION
The Telewest Group currently charges (Pounds)17.99 per month (paid by direct
debit from the customer's bank account) for its standard basic cable
television-only service (approximately 50 channels and one converter box which
provides cable service to one television). Premium channels range in price
from (Pounds)3.00 per month per channel to (Pounds)9.00 per month per channel,
depending on the channels selected. An additional monthly fee of (Pounds)4.49
is charged for each additional converter box. All converter boxes remain the
property of the Telewest Group and a refundable (Pounds)20.00 deposit may be
charged for each box. Typically, the Telewest Group charges a one-time cable
television connection fee of (Pounds)30.00, although the Telewest Group often
offers reduced connection charges or free connection for cable television when
service is first provided in an area or in special promotions when an area is
remarketed. All prices indicated above include VAT.
CABLE TELEPHONY
The Telewest Group currently seeks to provide its telephony customers with
savings on the cost of calls as compared to BT, its principal competitor. The
Telewest Group intends to provide such savings, although there can be no
assurance that the Telewest Group will choose to or be able to continue to
provide its residential customers with lower call prices than BT without
adverse effects on its profitability, particularly in light of continued
regulatory pressure on BT's charges. See "-- Section Five -- Regulatory
Matters and Competition -- Regulatory Matters".
For residential telephony customers, the Telewest Group offers a three-tier
price structure for line charges (which is in addition to the call charges
discussed above). The monthly charge for customers subscribing for the
telephony service only is (Pounds)7.87 per line. The monthly charges for
special services such as call waiting or call diversion vary between
(Pounds)1.00 and (Pounds)2.00 per service. Initial installation charges are
(Pounds)30.00, although the Telewest Group's installation fees are often
discounted to encourage customers to switch service providers.
Telewest believes that its line charges for business customers (which are in
addition to the call charges discussed above) are competitive with those of BT
and Cable & Wireless UK Link. The Telewest Group's monthly line rental charge
for a business customer as at 31 December 1997 was (Pounds)10.99 and its line
installation charge varied according to the number of lines installed (from
(Pounds)50 for the first line to (Pounds)30 for each subsequent line). All
prices indicated above exclude VAT.
SALES AND MARKETING
Historically, the Telewest Group's sales and marketing efforts have
consisted primarily of door-to-door sales. As the Telewest Group's business
develops, the Telewest Group is focusing less on door-to-door sales and more
on integrated marketing strategies, which combine direct sales, telemarketing,
direct mail and retail. As part of this strategy, specific campaigns were
conducted during 1997 to increase market awareness of the Telewest Group's
services and increase customer responses to the telemarketing and direct-mail
marketing initiatives.
Due to the specialised nature of the Telewest Group's business telephony
products and the competitive nature of the market, the Telewest Group has
separate sales and marketing groups to market, service and support business
customers.
To maximise the productivity of its sales staff, the Telewest Group pays its
field sales staff on either a salary plus commission or a straight commission
basis. The commissions generally are based on various factors, including the
type of services sold and the period during which services are provided to the
customer.
I-25
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SECTION TWO GENERAL INFORMATION
CUSTOMER SERVICE
Customer service is primarily handled locally by each of the Regional
Franchise Areas. A total of approximately 600 customer service representatives
report to the Managing Directors and Head of Customer Operations across the
four Regional Franchise Areas.
The Telewest Group has introduced a six-week customer care training course
for all customer service representatives, sales staff, installers and repair
technicians. The customer service department is organised so that customers
need call only one number to reach the appropriate service provider to address
their cable television and cable telephone service, billing and repair
questions. The Telewest Group seeks to provide customers with prompt telephony
and television service repair. Generally, repair service is done by the
Telewest Group's own employees and service installations and terminations are
done by a combination of its own employees and independent contractors.
CHURN
One important measure of customer satisfaction with the Telewest Group's
television programming, telephony services, pricing, sales and marketing
efforts and customer service is the churn rate. The churn rate for a period for
a given service represents (i) the total number of customers taking the given
service who terminate such service or whose service was terminated by the
Telewest Group during such period, divided by (ii) the average number of
customers taking such service in such period.
The Telewest Group's churn rates for basic cable television service increased
from 34.3% in the three-month period ended 31 March 1997 (on an annualised
basis) to 37.2% in the three-month period ended 31 March 1998 (on an annualised
basis) and from 32.6% in the 12-month period ended 31 March 1997 to 34.8% in
the 12-month period ended 31 March 1998. The Telewest Group believes that the
increase in cable television churn is primarily due to the significant increase
in the pricing of premium channels, resulting from an increase in their
wholesale cost of programming, which was implemented in November 1997, coupled
with a temporary decline in customer service standards as a result of the
restructuring and redundancy programme implemented in the fourth quarter of
1997. The Telewest Group's churn rates for residential telephony service
increased from 19.8% in the three-month period ended 31 March 1997 (on an
annualised basis) to 21.7% in the three-month period ended 31 March 1998 (on an
annualised basis) and from 19.5% in the 12-month period ended 31 March 1997 to
20.5% in the 12-month period ended 31 March 1998. The Telewest Group believes
that the increase in the residential telephony churn is primarily due to the
temporary decline in customer service and increased competition.
The Telewest Group seeks to minimise customer churn by providing customers
with a combination of attractive, competitively priced programming and
telephone services and strong customer service. The Telewest Group is also
introducing a new customer management system to improve customer service and
implementing tighter credit procedures to reduce terminations by the Telewest
Group due to non-payment. The Telewest Group regularly surveys samples of its
customers to determine their satisfaction with the service provided and
attempts to improve such service based on the explanations offered by customers
who cancel their service.
NETWORKS
CONSTRUCTION
BROADBAND NETWORK
The Telewest Group expects that the broadband cable network in the Telewest
Owned and Operated Franchises will cover approximately 38,000 kilometres and
pass approximately 3.6 million homes when substantially completed. As at 31
March 1998, the Telewest Group had completed construction of the network with
cable television capability passing approximately 75.4%, and construction of
the network with telephony capability passing approximately 70.9% of the homes
in the Telewest Owned and Operated Franchises. The Telewest Group anticipates
that the remaining
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<PAGE>
SECTION TWO GENERAL INFORMATION
construction will be substantially completed by the end of 2003. Construction
of the broadband cable network has commenced in all of the 28 Telewest Owned
and Operated Franchises. The Telewest Group plans the construction in the
Telewest Owned and Operated Franchises based on various factors, including
construction milestone requirements (see "--Section Five -- Regulatory Matters
and Competition -- Regulatory Matters -- Telecommunications Regulation --
Network Construction"), network design considerations (e.g., location of head-
end), franchise demographics and ease of interconnection with other Telewest
Owned and Operated Franchises.
INTERFRANCHISE NETWORK
For information regarding the Telewest Group's Interfranchise Network, see
"-- Cable Telephony -- The Interfranchise Network".
NETWORK ARCHITECTURE
In the UK, cable operators generally have been required to install cable
underground. This makes it more time-consuming, costly and disruptive to
customers and others for the Telewest Group to replace cable or underground
components in the cable network in order to upgrade and expand its service. As
a result, the Telewest Group designed its distribution network (e.g., the
fibre-optic cable and underground components) to permit network upgrades and
expansions to be accomplished whenever practicable by installing or replacing
equipment at the head-end and/or the customers' premises and without
undertaking significant construction with respect to its existing underground
network and incurring substantial additional construction costs. The Telewest
Group is currently upgrading the network to carry digital services and is doing
so almost entirely through the addition of equipment at the head-ends and at
customers' premises and without the need for significant network construction
costs.
The network architecture of the Telewest Group's individual franchises
varies, generally depending on when the construction was started. Initially,
cable systems in the UK were built to provide only cable television service.
Following the review undertaken by the UK Government (when the UK Government
changed the duopoly policy to permit cable operators to operate their networks
to provide cable telephony services and call switching as principals, rather
than only as agents for and under agreements with BT or Mercury (the "Duopoly
Review")), telephony service was often added to existing networks and plans for
future networks were modified to carry both television and telephony services.
In some business areas, the Telewest Group has built cable telephony-only
networks. As a result, there are three types of networks in use by the Telewest
Group: cable television only, cable telephony only, and cable television with a
cable telephony overlay.
Currently, cable television-only service is provided to residential customers
in part of the Scotland Regional Franchise Area franchise. The overlay network
is used in all of the Telewest Group's other franchises under construction or
previously installed and is being used to upgrade those parts of the Scotland
Regional Franchise Area that currently provide cable television-only service.
SWITCHING
Digital telephony switches have been installed in all of the Telewest Group's
Regional Franchise Areas. The switches enable the Telewest Group to increase
its profitability and operating flexibility by (a) eliminating the need to pay
third parties for switching calls between its customers within a Regional
Franchise Area and reducing the cost of switching calls to other operators
outside of a Regional Franchise Area, (b) receiving revenues from other
telephony operators who use the Telewest Group's switches to complete calls to
the Telewest Group's customers and (c) eliminating the need to rely upon third
parties for the administration of new customer connections. In addition to the
installation of its own switches, the Telewest Group has established a central
network service centre in Woking that provides 24-hour-a-day centralised switch
engineering and related support services. The Telewest Group believes that this
centralised system is a cost-effective approach to managing cable telephony
networks with multiple switches.
By operating its own switches, the Telewest Group is able to gather
information about customer calling patterns and use this information in its
marketing programme and to structure customised call
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SECTION TWO GENERAL INFORMATION
pricing plans and discount programmes. This information also enables the
Telewest Group to monitor fraud by identifying unusual or excessive call
activity at an early stage.
In December 1996, the Telewest Group was awarded an international facilities
licence under the Telecommunications Act 1984 by the Secretary of State for
Trade and Industry. This has enabled the Telewest Group to establish direct
relationships with international PTOs and further reduce the cost of
international carriage. In December 1996, the Telewest Group began connecting
its Regional Franchise Areas to Telstra (the Australian PTO) to carry a portion
of the Telewest Group's international telephony traffic. See "-- Section
Five -- Regulatory Matters and Competition -- Regulatory Matters".
SOURCES OF SUPPLY
The Telewest Group obtains services and equipment for the construction and
operation of its cable systems from numerous independent suppliers. These
services, including civil engineering services, and equipment generally have
been purchased under short-term contracts (typically one year or less),
although the contracts for the Telewest Group's interconnect services are
longer. As a result of its increased operational size and purchasing needs, the
Telewest Group intends to use its increased buying power to obtain more
favourable contract terms.
The Telewest Group believes that it can purchase substantially all of the
services and equipment it needs to operate its business from more than one
source. However, if one of the suppliers of a product which involves
significant lead time for production and delivery were to be unwilling or
unable to supply the Telewest Group, the Telewest Group could suffer
disruptions in the operation of its business, which could have an adverse
effect on the Telewest Group.
The Telewest Group's principal suppliers include the following: McNicholas
Construction Limited, M&N Plant Limited, Avonline Communications Ltd, Moywest
Limited and Ashbourne Communications UK Ltd. (civils and activations
contractors); Nortel Ltd ("Nortel") and GPT Telecommunication UK Limited
(telephony switching equipment); General Instruments (Europe) Ltd. and
Scientific-Atlanta Broadband Europe Inc. (addressable converter boxes); Antec
International Ltd. and Harmonic Lightwaves Ltd. (cable TV distribution
equipment); Nokia Telecommunications Ltd., GPT Telecommunications Ltd. and DSC
Communications Limited (telephony transmission equipment); Times Fibre
Communications Inc. and CommScope Inc. (coaxial cable); GPT Telephone Cables
Ltd. (fibre-optic and copper cable); Eltek Limited and Alpha Technologies
(power supply equipment); and Cincinnati Bell Information Systems, Inc.
(customer management system).
The Telewest Group owns all of its cable network equipment other than its
Nortel switches. The Telewest Group leases these telephony switches under
finance leases from Nortel and The Royal Bank of Scotland plc.
The Telewest Group has experienced no significant difficulty in obtaining
timely deliveries of services and equipment within the past 12 months and
believes it maintains adequate inventories of significant equipment. In order
to reduce warehousing expenses, maximise inventory control and minimise the
possibility that the Telewest Group will not have sufficient inventory, the
Telewest Group has centralised warehouse operations through a third-party
supplier of warehousing services.
FRANCHISES
REGIONAL FRANCHISE AREAS
The Telewest Group owns 28 cable franchises in the UK and holds licences to
provide cable television and cable telephony services within each of its
franchise areas. The Telewest Group's 28 franchises are managed in four
Regional Franchise Areas: (i) London South and South East; (ii) Scotland and
North East; (iii) Avon, Cotswolds and Midlands; and (iv) the North West. The
franchises within each Regional Franchise Area are clustered together, which
provides the Telewest Group with several benefits, including (a) providing
economies of scale in the marketing of the cable network and the management of
the franchises and (b) enabling the Telewest Group to provide local switching
I-28
<PAGE>
SECTION TWO GENERAL INFORMATION
services for a large number of customers without incurring the high costs of
connecting geographically dispersed areas. Each of the Telewest Owned and
Operated Franchises is wholly owned by the Telewest Group.
The following table sets out certain operating and financial data concerning
the Telewest Group's four Regional Franchise Areas at and for the 12-month
period ended 31 March 1998. All the data set out below have been extracted from
Telewest's annual financial statements or quarterly, interim or annual
announcements of financial results and/or operating statistics for the relevant
period.
<TABLE>
<CAPTION>
LONDON SOUTH AND AVON, COTSWOLDS SCOTLAND AND
SOUTH EAST AND MIDLANDS NORTH EAST NORTH WEST TOTAL
<S> <C> <C> <C> <C> <C>
Franchise homes 913,843 1,198,908 1,020,559 828,694 3,962,004
Franchise businesses 65,396 90,472 43,034 61,612 260,514
CABLE TELEVISION
Homes passed 648,633 908,605 796,868 634,010 2,988,116
Homes passed and
marketed 618,356 832,637 747,995 595,848 2,794,836
Customers 144,142 177,814 169,704 126,217 617,877
Basic penetration rate
(1) 23.3% 21.4% 22.7% 21.2% 22.1%
Average monthly revenue
per customer (1) (Pounds)23.72
Average churn rate (1) 34.8%
RESIDENTIAL TELEPHONY
Homes passed 632,359 879,032 688,157 610,084 2,809,632
Homes passed and
marketed 612,226 832,757 720,818 595,025 2,760,826
Residential customers 154,609 272,739 222,641 181,596 831,585
Penetration rate (1) 25.3% 32.8% 30.9% 30.5% 30.1%
Residential lines
connected 164,540 282,089 229,903 187,793 864,325
Average monthly revenue
per line (1) (Pounds)19.10
Average churn rate per
line (1) 20.5%
BUSINESS TELEPHONY
Business customers 6,429 8,740 6,121 5,242 26,532
Business lines connected 30,617 39,863 19,227 20,308 110,015
Average number of
business lines per
customer (1) 4.8 4.6 3.1 3.9 4.1
Average monthly revenue
per line (1) (Pounds)42.81
</TABLE>
- ------------
(1) For the definitions of these terms, see the footnotes to the table on page
I-19.
DESCRIPTION OF REGIONAL FRANCHISE AREAS
The following is a brief description of each of the Telewest Group's four
Regional Franchise Areas:
LONDON SOUTH AND SOUTH EAST
The London South portion of this franchise area covers approximately 360
square kilometres and includes three franchise areas (Croydon, Sutton and
Merton, and Kingston and Richmond). The London South area has approximately
421,000 homes and approximately 30,000 businesses and includes a suburban
section of Greater London as well as the large business centre of Croydon.
Construction in Croydon, Sutton and Merton, and Kingston and Richmond began in
1985, 1990 and 1991, respectively. The construction of these franchises is now
complete.
I-29
<PAGE>
SECTION TWO GENERAL INFORMATION
The South East portion of this franchise area covers approximately 1,600
square kilometres and includes two franchise areas (North Thames Estuary and
South Thames Estuary) covering the areas of Basildon, Chelmsford, Gravesend and
Maidstone. The South East area has approximately 493,000 homes and
approximately 36,000 businesses. Construction in the South East area began in
February 1994 and is ongoing.
AVON, COTSWOLDS AND MIDLANDS
The Avon and Cotswolds portion of this franchise area covers approximately
2,120 square kilometres and includes Bath, Bristol, Cheltenham, Gloucester,
Frome, Warminster, Taunton and Bridgewater and Weston-super-Mare. The Avon and
Cotswolds area has approximately 564,100 homes and approximately 43,000
businesses. Construction in Avon and in the Cotswolds began in 1990 and 1994,
respectively, and construction is ongoing in both areas.
The Midlands portion of this franchise area includes the areas of Telford,
Dudley, Wolverhampton, Worcester, Walsall and Kidderminster. The Midlands area
includes approximately 635,000 homes and approximately 48,000 businesses.
Construction in Telford was completed in 1994 and construction in Dudley,
Wolverhampton, Walsall and Kidderminster is ongoing.
SCOTLAND AND NORTH EAST
The Scotland portion of this franchise area covers approximately 3,000 square
kilometres and includes nine franchise areas (Edinburgh, the second-largest
financial centre in the UK, as well as Cumbernauld and Monklands, Dumbarton,
Dundee, Falkirk and Livingston, Fife and East Lothian, Glenrothes and
Kirkcaldy, Motherwell and Perth) in the southern region of Scotland. The
Scotland Area covers approximately 666,500 homes and approximately 29,000
businesses.
The North East portion of this franchise area covers approximately 640 square
kilometres and includes Gateshead, Newcastle upon Tyne, North Tyneside and
South Tyneside. The North East area has approximately 354,000 homes and
approximately 14,000 businesses.
NORTH WEST
The North West Regional Franchise Area includes St. Helens and Knowsley,
Wigan, Preston, Southport, North and South Liverpool, and Blackpool. The North
West area includes approximately 829,000 homes and approximately 62,000
businesses. Construction in the North West area is ongoing.
MANAGEMENT OF THE REGIONAL FRANCHISE AREAS
The Telewest Group manages its Regional Franchise Areas from its corporate
headquarters in Woking, Surrey, England. The Telewest Group provides a number
of services on a centralised basis, including financial planning, legal
services, management information services, network design (including switching,
centralised planning and engineering), network service centre operations,
purchasing of programming and negotiation and administration of procurement and
construction contracts. Most other matters are handled by the respective
managements of the Regional Franchise Areas under the direction of their
managing directors. Although marketing programmes, pricing and programming
generally are standardised throughout the Telewest Group, the management of
each Regional Franchise Area may modify them in order to reflect local factors.
TELEWEST AFFILIATED COMPANIES
The Telewest Group owns minority equity interests in the three Telewest
Affiliated Companies: Birmingham Cable, Cable London and Cable Corporation. The
Telewest Affiliated Companies own an aggregate of seven cable franchises in the
UK. As at 31 December 1997, the aggregate amount invested by the Telewest Group
in the Telewest Affiliated Companies was approximately (Pounds)139 million. Of
the Telewest Group's 4.4 million equity homes, approximately 405,000 represent
the Telewest Group's equity interest in the approximately 1.2 million homes
owned and operated by the Telewest Affiliated Companies. These investments have
enabled the Telewest Group to grow by acquiring interests in a
I-30
<PAGE>
SECTION TWO GENERAL INFORMATION
number of franchises and homes. For information concerning the implications of
the NTL/Comcast Merger for the Telewest Group's interests in Birmingham Cable
and Cable London and of the proposed merger of the interests of the Telewest
Group and the General Cable Group in Birmingham Cable, see "-- Section One --
The Merger and Related Matters -- Birmingham Cable and Cable London".
The Telewest Group believes that it benefits by the regular exchange of
information with the Telewest Affiliated Companies. Although the Telewest Group
has certain shareholder rights and two representatives on the board of
directors of each of the Telewest Affiliated Companies, the Telewest Group does
not control the day-to-day management operations of the Telewest Affiliated
Companies.
The following table sets out, unless otherwise indicated, as at and for the
year ended 31 December 1997, certain information concerning the Telewest
Affiliated Companies. All the data set out below have been extracted from
Telewest's annual financial statements or quarterly, interim or annual
announcements of financial results and/or operating statistics for the relevant
period.
<TABLE>
<CAPTION>
BIRMINGHAM CABLE CABLE LONDON CABLE CORPORATION
-------------------- -------------------- --------------------
TELEWEST'S TELEWEST'S TELEWEST'S
EQUITY EQUITY EQUITY
TOTAL INTEREST TOTAL INTEREST TOTAL INTEREST
(100%) (27.5%) (100%) (50.0%) (100%) (16.5%)
<S> <C> <C> <C> <C> <C> <C>
Franchise homes 471,094 129,551 444,978 222,489 293,720 48,464
Franchise businesses 31,200 8,580 35,000 17,500 17,500 2,888
CABLE TELEVISION
Homes passed 444,069 122,119 358,707 179,354 279,337 46,091
Homes passed and
marketed 429,638 118,150 345,163 172,582 276,761 45,666
Customers 116,995 32,174 82,655 41,328 47,652 7,862
Penetration rate (1) 27.2% 27.2% 23.9% 23.9% 17.2% 17.2%
RESIDENTIAL TELEPHONY
Homes passed 444,069 122,119 358,707 179,354 281,459 46,441
Homes passed and
marketed 429,638 118,150 345,163 172,582 281,459 46,441
Residential customers
(2) 123,354 33,922 80,193 40,097 62,458 10,305
Penetration rate (1) 28.7% 28.7% 23.2% 23.2% 22.2% 22.2%
Residential lines
connected 123,354 33,922 84,289 42,145 62,458 10,305
BUSINESS TELEPHONY
Business customers 3,748 1,031 2,961 1,481 2,087 344
Business lines connected 19.379 5,329 12,713 6,357 24,230 3,998
Average lines per
customer 5.2 5.2 4.3 4.3 11.6 11.6
</TABLE>
- ------------
(1) For the definitions of the terms, see the footnotes to the table on page I-
19.
(2) The information set out under "Residential customers" for Birmingham Cable
and Cable London represents the number of residential lines connected,
which is greater than the actual number of residential customers.
DESCRIPTION OF TELEWEST AFFILIATED COMPANIES
The following is a brief description of each of the Telewest Affiliated
Companies, including a description of the terms of the Telewest Group's
investments therein. This summary does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Articles,
agreements and arrangements referred to herein.
BIRMINGHAM CABLE
Birmingham Cable covers approximately 400 square kilometres and operates in
Birmingham and Solihull. Birmingham Cable has approximately 471,000 franchise
homes and approximately 31,200 businesses (representing approximately 130,000
equity homes and approximately 8,600 equity businesses based on the Telewest
Group's current share ownership of Birmingham Cable).
I-31
<PAGE>
SECTION TWO GENERAL INFORMATION
TCHL (a wholly owned subsidiary of Telewest) and Comcast jointly own
approximately 55% of the issued share capital of Birmingham Cable. General
Cable owns approximately 45% and certain other investors own 0.11%. TCHL and
Comcast hold their interests pursuant to the Co-ownership Agreement, which
allocates beneficial ownership of the jointly owned shares between TCHL and
Comcast based on the amount each has contributed for the purchase of the
shares. Beneficial ownership of the shares currently is divided equally between
TCHL and Comcast. Each party has the right to direct the voting of the shares
beneficially owned by it.
Telewest Communications Group Limited ("TWG"), a wholly owned subsidiary of
Telewest, General Cable and an affiliate of Comcast have entered into
consulting agreements with Birmingham Cable and one of its affiliates
(collectively, the "Birmingham Cable Companies") to provide certain operational
consulting services in relation to the cable television and telecommunication
system being constructed by the Birmingham Cable Companies. Each consulting
agreement terminates in April 2000, subject to the Birmingham Cable Companies'
right to extend the term of each agreement by two successive five-year periods
and a final three-year period. The Birmingham Cable Companies have the right to
terminate the agreements with TWG and the Comcast affiliate upon not less than
six months' notice after April 2000.
TWG and a Comcast affiliate have entered into a management agreement with
Birmingham Cable that gives TWG and Comcast the right, subject to the overall
direction and control of the directors of the Birmingham Cable Companies, to
manage the day-to-day business and affairs of the Birmingham Cable Companies.
Pursuant to the Co-ownership Agreement, the Comcast affiliate is entitled to
make all the decisions of the co-owners under the management agreement until
terminated upon six months' notice at such time as (i) construction passing 90%
of the homes in the Birmingham Cable franchise area is complete and (ii)
Comcast and its affiliates beneficially own less than 20% of the shares jointly
owned by TCHL and Comcast and its affiliates; provided, however, that TWG
retains control over approval of budgets and business plans relating to cable
telephony operations and Comcast retains control over the budgets and business
plans relating to cable television operations.
Under the Birmingham Cable Articles, the consent of holders of 50% or more in
aggregate of its issued ordinary share capital (the "Majority Investor") and,
in certain cases, the holders of 33 1/3% or more (in aggregate) of its issued
ordinary share capital ("Significant Investors") is required before Birmingham
Cable can take certain actions relating to its business. Currently, TCHL and
Comcast are jointly the Majority Investor (and a Significant Investor) and
General Cable is a Significant Investor. The Co-ownership Agreement generally
requires TCHL and Comcast to agree with respect to the exercise of their joint
rights as a Significant Investor.
TCHL and Comcast (as the Majority Investor) have the right to appoint four
directors to Birmingham Cable's board of directors, General Cable has the right
to appoint three directors and the board of directors of Birmingham Cable as a
whole have the right to appoint two independent directors. TCHL and Comcast
have the right to nominate the managing director of Birmingham Cable and
General Cable has the right to nominate its chief financial officer. Under the
Co-Ownership Agreement, TCHL's and Comcast's joint right to appoint directors
of Birmingham Cable is shared in proportion to their percentage beneficial
ownership of the shares held in their joint names. As a result, TCHL currently
has the right to appoint two directors. The number of directors that TCHL and
Comcast have the right to appoint and maintain decreases in stages as their
joint shareholding falls below 50% of the issued ordinary shares of Birmingham
Cable. TCHL and the other shareholders of Birmingham Cable have also agreed to
certain restrictions with respect to their right to apply for or acquire cable
television licences and telecommunications licences in areas adjacent to the
Birmingham Cable franchise area.
The Birmingham Cable Articles generally prohibit a shareholder from
transferring legal or beneficial ownership of its shares without giving each
other shareholder a right of first refusal to acquire its proportionate amount
of such shares. The Co-Ownership Agreement also generally provides that neither
party thereto shall transfer (including by virtue of certain changes of control
(as defined
I-32
<PAGE>
SECTION TWO GENERAL INFORMATION
therein)) its interest in shares of Birmingham Cable without first offering the
other party a right of first refusal to purchase such shares in accordance with
the terms of such agreement. The Co-Ownership Agreement requires a party
intending to make such a transfer to notify the other party of its intention to
make such transfer, to participate in an appraisal of its shares of Birmingham
Cable and to offer such shares to the other party at the appraised value. See
"-- Section One -- The Merger and Related Matters -- Birmingham Cable and Cable
London".
On 15 February 1995, Birmingham Cable Limited ("BCL") and Birmingham Cable,
as guarantor, entered into an agreement with The Bank of New York, Canadian
Imperial Bank of Commerce and Chase Manhattan Bank, as lead arrangers, and the
banks and financial institutions parties thereto (the "Birmingham Banks"),
including the underwriters named therein and Chase Manhattan International
Ltd., as agent and security trustee, pursuant to which the Birmingham Banks
made available to BCL a facility to be repaid in full by 31 December 2005 of up
to (Pounds)175 million (as subsequently amended, the "BCL Facility"). The
proceeds of the facility are primarily available to finance the construction of
its network and operations.
The BCL Facility consists of two tranches: Tranche A and Tranche B, and a
guarantee facility. All advances outstanding under Tranche A were repaid before
31 March 1998 as required pursuant to the BCL Facility.
The maximum principal amount that may be outstanding under Tranche B is
(Pounds)175 million. Advances under Tranche B bear interest at a rate equal to
LIBOR plus additional costs and a margin that varies from 0.625% per annum to
2% per annum depending on the ratio of senior debt to the consolidated
annualised net operating cash flow of Birmingham Cable and its subsidiaries
from time to time.
Pursuant to the BCL Facility, payments or distributions to the shareholders
of Birmingham Cable, including payments of management fees, dividends, interest
and principal on loans to Birmingham Cable from its shareholders, are
restricted based on certain conditions relating to the financial performance of
Birmingham Cable and its subsidiaries.
As a condition precedent to the completion of the BCL Facility, the Telewest
Group and the other shareholders of Birmingham Cable entered into a deed of
subordination pursuant to which any restricted payments otherwise due to the
shareholders from Birmingham Cable and its subsidiaries will accrue and not be
paid until Birmingham Cable and its subsidiaries achieve certain performance
objectives set out in the BCL Facility.
The BCL Facility contains various financial and other covenants applicable to
Birmingham Cable and certain of its subsidiaries. The BCL Facility is secured
by a composite guarantee and debenture entered into by Birmingham Cable and
certain of its subsidiaries.
CABLE LONDON
Cable London covers approximately 160 square kilometres and operates in the
Camden, Haringey, Enfield, Hackney and Islington franchise areas. Cable London
has approximately 445,000 franchise homes and approximately 35,000 businesses
(representing approximately 222,000 equity homes and approximately 17,500
equity businesses based on the Telewest Group's current share ownership of
Cable London).
The Telewest Group and Comcast each own 50% of the A ordinary shares in Cable
London. In addition, Telewest owns approximately 36% and Comcast owns
approximately 64% of the B ordinary shares in Cable London. The Telewest Group
has the right, pursuant to an equalisation arrangement between Telewest and
Comcast, to require Comcast to transfer to Telewest any B ordinary shares held
by Comcast in excess of 50% of the total B ordinary shares on payment of a
specified amount calculated in accordance with the provisions of the
equalisation arrangement. There is no voting arrangement between the Telewest
Group and Comcast with respect to Cable London.
I-33
<PAGE>
SECTION TWO GENERAL INFORMATION
The articles of association of Cable London generally prohibit a shareholder
from transferring legal or beneficial ownership of its shares without giving to
provide certain operational consulting services in relation to the cable
television system being constructed by the Birmingham Cable Companies each
other shareholder a right of first refusal to acquire its proportionate amount
of such shares. A change of control in a "significant investor" in Cable London
will cause the issue by Cable London of a transfer notice in respect of that
company's shares in Cable London to the other shareholder in Cable London. See
"-- Section One -- The Merger and Related Matters -- Birmingham Cable and Cable
London".
TWG and an affiliate of Comcast have entered into consulting agreements with
Cable London to provide certain operational consulting services in relation to
the cable television and telecommunication system being constructed by the
Birmingham Cable Companies. Under TWG's consulting agreement, Cable London has
agreed to pay TWG an annual fee based on the greater of (a) the number of
dwelling units in the Cable London franchise areas or (b) a percentage of the
gross revenues of Cable London from telecommunications services. The consulting
agreement will expire in accordance with its terms in August 1999 and may be
terminated by TWG upon a change of control of Cable London.
On 9 May 1997, Cable London and certain subsidiaries entered into a loan
agreement with CIBC Wood Gundy plc, The Bank of New York and Banque Paribas, as
arrangers (the "Cable London Banks"), and CIBC Wood Gundy PLC ("CIBC"), as
agent and security trustee, pursuant to which the Cable London Banks made
available to Cable London a credit facility of (Pounds)170 million (the "Cable
London Facility"). The proceeds of this facility are available to finance
capital expenditure, working capital of Cable London and its subsidiaries and
general corporate purposes, and to refinance the (Pounds)60 million loan
facility entered into by Cable London in June 1995.
The Cable London Facility consists of two tranches: Tranche A and Tranche B.
The maximum principal amount that may be outstanding under Tranche A is
(Pounds)60 million (to be reduced to (Pounds)40 million from 30 June 1999).
Advances under Tranche A bear interest at a rate equal to LIBOR plus additional
costs and a margin that varies from 2.25% per annum to 2.375% per annum
depending on the amount of the Tranche A loan. All advances outstanding under
Tranche A are due to be repaid on or before 30 June 2000.
The maximum principal amount that may be outstanding under Tranche B until 30
June 2001 is a varying multiple of the previous rolling six months'
consolidated annualised net operating cash flow of Cable London and its
subsidiaries. Advances under Tranche B bear interest at a rate equal to LIBOR
plus additional costs and a margin that varies from 2.0% per annum to 0.5% per
annum depending on a ratio of the Tranche B loan to the consolidated annualised
net operating cash flow of Cable London and its subsidiaries from time to time.
On 30 June 2001, all revolving advances outstanding under Tranche B will
convert into a term loan repayable every six months commencing on 31 December
2001 and ending on 30 June 2006 in instalments ranging from 2.5% per annum to
16.25% per annum of the principal amount outstanding.
Voluntary prepayment of the Cable London Facility is permitted. The facility
is secured by cross-guarantees and debentures by Cable London and its
subsidiary companies, and each of Telewest and Comcast have granted a mortgage
over the shares they hold in Cable London in favour of CIBC, as security
trustee for the Cable London Banks. Under the terms of this mortgage, neither
Telewest nor Comcast is permitted to dispose of any of these shares without the
prior written consent of CIBC. However, consent will be deemed to have been
given by CIBC where before or at the same time as the disposal of the shares
the person acquiring the shares (i) enters into a mortgage on the same terms as
the original mortgage and a deed of subordination on the same terms as that
entered into pursuant to the original mortgage and (ii) the acquirer provides a
legal opinion confirming its capacity to enter into these documents and that
its obligations thereunder are legal, valid and binding.
The Cable London Facility contains various financial and other covenants
applicable to Cable London and certain of its subsidiaries.
I-34
<PAGE>
SECTION TWO GENERAL INFORMATION
As a condition precedent to the availability of the Cable London Facility,
Telewest and Comcast entered into deeds of subordination which provide that
certain payments (excluding management fees) otherwise due to Telewest and
Comcast from Cable London and its subsidiaries would accrue and would not be
paid until all sums due under the Cable London Facility have been satisfied.
CABLE CORPORATION
Cable Corporation covers approximately 490 square kilometres and operates in
the Windsor franchise area (including Windsor, Slough, Maidenhead, Staines,
Ashford and Iver) and the Middlesex franchise area (including the London
boroughs of Hounslow and Hillingdon). Cable Corporation has approximately
294,000 franchise homes and approximately 17,500 businesses (representing
approximately 49,000 equity homes and approximately 3,000 equity businesses
based on the Telewest Group's current share ownership of Cable Corporation).
TWH owns 16.5% of the issued share capital of Cable Corporation. The
remaining 83.5% is owned by General Cable.
EMPLOYEES
At 31 March 1998, the Telewest Group had approximately 4,500 employees. None
of these employees is covered by collective bargaining agreements. The Telewest
Group believes that its relationship with its employees is good.
DIRECTORS
The current directors of Telewest are: Gary Ames, Anthony Stenham, Lord
Borrie, Stephen Brett, Charles Burdick, David Evans, James Robbins, Robert
Shaner and David Van Valkenburg.
I-35
<PAGE>
SECTION THREE GENERAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE
INFORMATION ON GENERAL CABLE
- --------------------------------------------------------------------------------
Detailed financial information on General Cable is set out elsewhere in this
document. Holders of Telewest securities and General Cable securities should
read the detailed financial information and not rely only on the information
contained in this section.
As used in this Section Three, unless the context otherwise requires, the
term "Systems" refers to each of Cable Corporation (together with its
subsidiaries, the "Western London System"), Yorkshire Cable (together with its
subsidiaries, the "Yorkshire System") and Birmingham Cable (together with its
subsidiaries, the "Birmingham System") and their respective subsidiaries.
OVERVIEW
General Cable is a participant in the UK cable communications industry,
providing both cable television and cable telephony services to the residential
market within the Yorkshire System and the Western London System as well as
telecommunications services to the business community within such Systems and
throughout the UK. General Cable, through its ownership of 100% of the
Yorkshire System, 83.5% of the Western London System and approximately 45.0% of
the Birmingham System, has interests in nine cable franchises serving three of
the major UK cable markets. The Yorkshire System consists of six franchises
(covering Bradford, Barnsley, Doncaster & Rotherham, Halifax, Sheffield and
Wakefield), the Western London System consists of two franchises (covering
Windsor and Hillingdon & Hounslow) and the Birmingham System consists of one
franchise (covering Birmingham and Solihull).
As at 31 December 1997, the Systems together included approximately 1.7
million homes and approximately 104,000 businesses, covering approximately 7%
of all of the homes in the UK in areas for which cable franchises have been
awarded. The Systems provide General Cable with approximately 1.4 million
equity homes and approximately 84,000 equity businesses. Each System has built
and owns and operates an integrated communications network, which includes the
"last mile" distribution system (also known as the "local loop"). Based on
fibre-optic technology, each network provides high transmission capacity for
the delivery of voice, data, video and entertainment service.
General Cable operates its business through three divisions: the Consumer and
Small Business Division, General Telecom and the Network Division (each, a
"Division" and, collectively, the "Divisions"). The Consumer and Small Business
Division provides cable television and cable telephony services to the
residential and small business markets within the Yorkshire System and the
Western London System. General Telecom provides voice- and data-based
telecommunications services to businesses within these two Systems as well as
throughout the UK. The Network Division manages the Group's network operations,
including construction of the network and sourcing interconnection and lease
capacity from various interconnected operators. General Cable provides advice
to the Birmingham System relating to business telecommunications, financial and
strategy matters, but does not control the Birmingham System. See "--
Relationship Among Owners of the Systems -- Birmingham Cable Corporation
Limited".
I-36
<PAGE>
SECTION THREE GENERAL INFORMATION
The following chart sets out General Cable's ownership interest in its
subsidiaries and associates:
General Cable PLC
100% 45%
General Cable Holdings Birmingham Cable Corporation
Limited Limited
----------------------------------------------------------
83.5% 100% 100% 100%
The Cable The Yorkshire Imminus Limited General
Corporation Cable Group Telecommunications
Limited Limited Limited
HISTORY
General Cable was originally formed for the purpose of developing and
managing Vivendi's interests in the UK cable communications industry. Vivendi
commenced its investment in the UK cable communications industry in 1986 with a
minority investment in Windsor Television Limited ("WTL") (the licence holder
for the Windsor franchise) which became a subsidiary of Cable Corporation in
April 1987. Cable Corporation initially acquired an interest in the Birmingham
franchise in 1988 and subsequently transferred such interest to General Cable.
In 1990, General Cable was awarded the Bradford franchise which is now a part
of the Yorkshire System, and in 1991, a subsidiary of Cable Corporation was
awarded the Hillingdon & Hounslow franchise. General Cable acquired two
companies in 1992 and 1993 which owned additional franchises in Yorkshire and
these companies were, in turn, transferred to Yorkshire Cable. In 1993,
Yorkshire Cable acquired three companies which owned additional franchises in
Yorkshire. In August 1993, Singapore Telecom International Pte. Limited
("Singapore Telecom") acquired a 45.5% interest in Yorkshire Cable, and in
August 1996, General Cable purchased Singapore Telecom's interest in Yorkshire
Cable (the "Yorkshire Transaction"). In April 1995, General Cable completed an
initial public offering (the "IPO") of 90 million General Cable shares. In
connection with the IPO, the General Cable shares were listed on the London
Stock Exchange and the General Cable ADSs began quotation on Nasdaq. On
13 March 1997, General Cable acquired Filegale Limited ("Filegale") and its
wholly owned operating subsidiary, Imminus Limited ("Imminus").
RECENT DEVELOPMENTS
On 15 April 1998, General Cable announced that its Board of Directors had
agreed to the terms of the Merger following a statement by General Cable in
February 1998 that it was in discussions which might lead to an offer for it.
The Merger is conditional on the occurrence of certain events including
approval of certain resolutions (including special resolutions) by Telewest
shareholders and sufficient General Cable shares being tendered by General
Cable's shareholders in acceptance of the Offer. The Offer is being made on the
basis of 1.243 new Telewest shares and 65 pence in cash for each General Cable
share and 6.215 new Telewest shares and 325 pence in cash for each General
Cable ADS.
Pursuant to the Merger Agreement, GUHL, a subsidiary of Vivendi, agreed that
it would irrevocably accept the Offer in respect of its entire registered
holding of 146,785,916 General Cable shares if certain conditions were met.
Under the terms of the Merger Agreement, Vivendi will be entitled to designate
one director to the Telewest Board upon completion of the Merger, which Board
is expected initially to consist of up to 14 members.
I-37
<PAGE>
SECTION THREE GENERAL INFORMATION
In connection with the Merger Agreement, General Cable agreed, upon
Telewest's request and subject to certain conditions, to sell its shares in
Birmingham Cable to Telewest for (Pounds)100 million. For a discussion of the
terms of such agreement, see "-- Section One -- The Merger and Related
Matters --Birmingham Cable and Cable London -- Birmingham Cable".
In February 1998, NTL and Comcast announced the NTL/Comcast Merger pursuant
to which NTL would acquire Comcast's cable interests located in the UK.
Comcast's interests in the UK include approximately 27.5% of the shares of
Birmingham Cable. The press announcement issued on 15 April 1998 in connection
with the Merger stated that Telewest, through one of its subsidiaries pursuant
to the Co-Ownership Agreement, has the right upon completion of the NTL/Comcast
Merger to acquire Comcast's interest in Birmingham Cable. Telewest has
indicated that it intends to exercise its right to acquire Comcast's interest
in Birmingham Cable, subject to acceptable purchase price and available
financing.
Effective as of January 1998, General Cable's operating structure was
reorganised into the three Divisions, with each Division being responsible for
particular aspects of the General Cable Group's business. Prior to that time,
General Cable operated primarily on a geographical basis with each System being
responsible for implementation of new products and services in its respective
franchise areas.
In conjunction with the reorganisation of General Cable's operations, General
Cable announced in October 1997 that it was changing its strategy for the
operation of its cable television business. In particular, General Cable
believes that it was incurring unsustainable losses in providing cable
television services. In order to mitigate such losses, a number of detailed
changes have been made. Such changes include the following: all customers
taking pay television services now pay an installation charge of (Pounds)20;
cable television services are not supplied to new customers who do not take the
telephony service unless they purchase a set top box at a cost of between
(Pounds)125 and (Pounds)150; prices for new customers for the basic service
were raised by between (Pounds)1 and (Pounds)4 per month; and prices for all
customers taking premium channels were raised by between (Pounds)3 and
(Pounds)5 per channel per month. General Cable believes that these measures
will help mitigate losses resulting from its cable television operations;
however, due to the depth of these losses, General Cable has written off the
entirety of its investment in analogue cable television equipment. General
Cable believes that the impact of the changes to trading policy outlined above
will lead to a decrease in cable television penetration rate during 1998.
On 31 December 1997, General Cable Holdings Limited, a subsidiary of General
Cable ("GCH") entered into a (Pounds)500 million syndicated facility agreement
(the "GCH Facility Agreement") arranged by Banque Paribas, CIBC Wood Gundy plc,
NatWest Markets, a division of National Westminster Bank Plc ("NatWest
Markets"), and The Toronto-Dominion Bank.
On 13 March 1997, General Cable acquired Imminus as a result of its
acquisition of Filegale. The acquisition of Imminus has enabled General Cable
to expand the products offered to the business market to include managed data
network services.
THE SYSTEMS
GENERAL
General Cable owns or has interests in three systems: the Yorkshire System,
the Western London System and the Birmingham System.
I-38
<PAGE>
SECTION THREE GENERAL INFORMATION
The table below sets out, as at 31 December 1997, General Cable's percentage
ownership in the Systems, the total number of homes and businesses in the
Systems and General Cable's equity ownership in such homes and franchises.
<TABLE>
<CAPTION>
GENERAL
CABLE'S EQUITY
TOTAL OWNERSHIP
-------------------- --------------------
SYSTEM OWNERSHIP HOMES BUSINESSES HOMES BUSINESSES
<S> <C> <C> <C> <C> <C>
Yorkshire.................. 100.0% 875,000 55,000 875,000 55,000
Western London............. 83.5% 321,000 19,000 268,000 16,000
Birmingham................. 45.0% 471,000 30,000 212,000 13,000
--------- ------- --------- ------
Total.................... 1,667,000 104,000 1,355,000 84,000
</TABLE>
SYSTEM OPERATING DATA
The following table sets out certain operating and financial data concerning
the Systems at and for the years ended 31 December 1995, 1996 and 1997 and at
and for the three months ended 31 March 1998. All the data set out below have
been extracted from General Cable's annual financial statements or quarterly,
interim or annual announcements of financial results and/or operating
statistics for the relevant period.
<TABLE>
<CAPTION>
WESTERN LONDON YORKSHIRE BIRMINGHAM
---------------------------------- ---------------------------------- ----------------------------------
TOTAL 1995 1996 1997 1998(3) 1995 1996 1997 1998(3) 1995 1996 1997 1998(3)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Homes in
area(4)......... 321,000 321,000 875,000 875,000 471,000 471,000
Percentage
built(5)........ 94% 95% 56% 57% 95% 95%
Businesses in
area(4)......... 19,000 19,000 55,000 55,000 30,000 30,000
BUSINESS
TELECOMMUNICATIONS
Business lines.. 12,825 18,290 24,230 25,100 6,143 12,337 21,031 23,370 7,365 11,302 19,400 20,900
Revenue per line
((Pounds))(6)... 1,135 1,054 932 880 695 584 567 543 728 744 684 606
RESIDENTIAL
TELEPHONY
Homes live (7).. 184,409 247,976 N/A N/A 213,745 302,509 N/A N/A 292,503 374,451 N/A N/A
Homes passed
(8)............. 200,032 247,976 301,033 303,761 250,185 302,509 492,564 502,008 305,835 374,451 446,085 446,212
Homes
marketed(9)..... N/A N/A 278,883 283,602 N/A N/A 372,533 385,753 N/A N/A 429,638 414,700
Residential
subscribers..... 38,655 49,234 62,458 64,130 58,900 80,002 101,039 103,547 81,268 105,128 123,400 126,600
Penetration rate
(10)............ 22% 21% 22% 23% 30% 30% 27% 27% 28% 28% 29% 31%
Revenue per
subscriber
((Pounds))(6)... 354 362 349 345 238 233 244 243 272 262 265 251
Churn (%)(11)... 22% 25% 26% 29% 23% 22% 24% 25% 22% 25% 30% 22%
CABLE TELEVISION
Homes live (7).. 196,019 248,348 N/A N/A 213,745 302,509 N/A N/A 292,503 374,451 N/A N/A
Homes passed
(8)............. 214,248 248,348 301,033 303,761 250,185 302,509 492,564 502,008 305,835 374,451 446,085 446,212
Homes marketed
(9)............. N/A N/A 276,761 281,065 N/A N/A 372,553 385,753 N/A N/A 429,638 414,700
Subscribers..... 33,485 42,928 47,652 45,482 43,818 68,611 69,154 67,714 88,719 111,432 117,000 117,700
Penetration rate
(10)............ 18% 19% 17% 16% 22% 25% 19% 18% 30% 30% 27% 28%
Revenue per
subscriber
((Pounds))(6)... 265 266 284 295 198 204 216 223 222 217 235 268
Pay-to-basic
ratio(12)....... 159% 170% 186% 181% 121% 124% 113% 94% 168% 170% 173% 144%
Churn (%)(11)... 35% 30% 36% 47% 35% 28% 43% 36% 35% 27% 38% 33%
<CAPTION>
GROSS GENERAL CABLE
TOTAL(1) DATA (1)(2)
---------- ---------------------
TOTAL 1997 1997 1998(3)
<S> <C> <C> <C>
Homes in
area(4)......... 1,667,000 1,355,000 1,355,000
Percentage
built(5)........ 74% 70% 71%
Businesses in
area(4)......... 104,000 84,000 84,000
BUSINESS
TELECOMMUNICATIONS
Business lines.. 64,661 49,900 53,800
Revenue per line
((Pounds))(6)... 1,070 1,154 1,045
RESIDENTIAL
TELEPHONY
Homes live (7).. N/A N/A N/A
Homes passed
(8)............. 1,239,682 944,665 956,444
Homes
marketed(9)..... 1,081,054 798,737 809,195
Residential
subscribers..... 286,897 208,701 214,000
Penetration rate
(10)............ 27% 26% 26%
Revenue per
subscriber
((Pounds))(6)... 276 276 271
Churn (%)(11)... 27% 26% 25%
CABLE TELEVISION
Homes live (7).. N/A N/A N/A
Homes passed
(8)............. 1,239,682 944,665 956,444
Homes marketed
(9)............. 1,078,952 796,986 807,077
Subscribers..... 233,806 161,700 158,700
Penetration rate
(10)............ 22% 20% 20%
Revenue per
subscriber
((Pounds))(6)... 239 239 255
Pay-to-basic
ratio(12)....... 158% 150% 131%
Churn (%)(11)... 39% 39% 38%
</TABLE>
- -----------
"N/A" means not applicable or publicly available.
(1) Includes Imminus data for business revenues per line.
(2) Amounts attributable to General Cable based on its percentage ownership at
31 December 1997 of Cable Corporation (83.5%), Yorkshire Cable (100.0%),
Birmingham Cable (45.0%) and Imminus (100.0%).
(3) All 1998 data are for the three months ended 31 March 1998.
(4) The number of homes in a franchise area is based on data contained in the
1991 UK census as adjusted by management estimates, and the number of
businesses in a franchise area is based on management estimates.
(5) Homes passed for cable television purposes divided by homes in a franchise
area, expressed as a percentage.
(6) Revenue per line/subscriber is annual revenue of a business stream
(business telecommunications, residential telephony or cable television)
divided by the monthly weighted average number of lines/subscribers in the
period.
(7) Homes live means homes capable of receiving service.
(8) Homes passed means the total number of residential premises (in a
franchise area) which have the potential to be connected to the cable
system.
(9) Homes marketed means homes capable of receiving service and in respect of
which marketing activities have been undertaken.
(10) Penetration rate is a measurement of the take-up of cable or telephony
services. The number of customers for a particular service is expressed
as a percentage of the homes or businesses passed and marketed for that
service.
(11) Churn is calculated on the total number of subscribers/lines terminated
during a period divided by the monthly weighted average number of
subscribers/lines in such period expressed as an annual percentage.
(12) The pay-to-basic ratio is the number of subscriptions to premium channels
divided by total subscribers, expressed as a percentage. Each premium
channel is subscribed for separately so that any one subscriber may have
more than one subscription to a premium channel.
I-39
<PAGE>
SECTION THREE GENERAL INFORMATION
DESCRIPTION OF THE SYSTEMS
The following is a brief description of each of the Systems:
YORKSHIRE
The Yorkshire System's operations comprise six franchises which were acquired
between 1990 and 1993. The Yorkshire System contains approximately 930,000
homes and businesses.
The Bradford franchise commenced service in 1992, the Sheffield franchise in
May 1994 and the other franchises in December 1994. As at 31 December 1997, the
Yorkshire System had completed 56% of its network build (as measured by the
total number of homes passed and businesses passed ("premises passed")). The
final build milestone for the Bradford licence has been satisfied.
On 6 April 1998, the Yorkshire System franchises received assent to a request
to modify their build milestone obligations to extend the final build milestone
to 2003. This extension from the previous licence requirements was sought
pursuant to the strategic repositioning of the General Cable Group as described
in "-- Recent Developments".
WESTERN LONDON
The Western London System contains approximately 340,000 premises and
consists of two franchises: Windsor, one of the first UK cable franchises,
awarded in 1983 (extended to cover Iver and Iver Heath in 1991), and Hillingdon
& Hounslow, awarded in 1990. The area covered by the Western London System
includes Heathrow Airport and its surrounding business parks. As at 31 December
1997, the Western London System had completed 94% of its network and achieved
its final build milestone (as measured by premises passed).
The Western London System's number of business lines has increased as
existing customers have taken on more lines and as new customers have been
acquired.
BIRMINGHAM
General Cable's interest in the Birmingham System is not managed on a unified
basis with the rest of the General Cable Group; instead, it is managed as an
autonomous entity. See "-- Relationships among Owners of the Systems --
Birmingham Cable Corporation Limited".
The Birmingham System is the second largest single UK franchise and includes
the city of Birmingham, the UK's second largest city. The Birmingham franchise
was awarded in 1988, commenced service in 1989 and contains approximately
501,000 premises. The Birmingham System focused its network build on reaching
residential customers and, as at 31 December 1997, had connected more
subscribers in total than any other UK franchise and had built 95% of its
network. The final build milestone has been satisfied.
In April 1994, General Cable assumed responsibility for business
telecommunications at the Birmingham System in connection with increasing its
interest in the Birmingham System from 26.8% to approximately 45%. Since that
time, and in part as a result of General Cable assuming such responsibility,
the Birmingham System has refocused its network construction programme so as to
upgrade and provide additional telecommunications services for both the city
centre and the principal business parks. General Cable believes that this has
led to more effective development of the Birmingham System's business
telecommunications services, thereby resulting in new customers.
For information regarding the proposed sale of General Cable's interest in
Birmingham Cable, see "-- Recent Developments".
I-40
<PAGE>
SECTION THREE GENERAL INFORMATION
DESCRIPTION OF NETWORKS
TERMINOLOGY
For the purpose of this subsection, the following terms shall have the
meanings and explanations provided herein. "Bandwidth" refers to transmission
capacity and the range of frequencies that a network can carry (a larger
bandwidth implies a relatively greater capacity); "broadband" means a network
with a capacity of at least 450 MHz capable of delivering multiple channels and
other services; "coaxial cable" is a cable consisting of a central conductor
surrounded by and insulated from another conductor (Signals are transmitted
through coaxial cable at different frequencies, giving greater capacity than is
possible with twisted-pair cable, but less than is allowed by optical fibre.
Coaxial cable is currently used by the Systems to carry cable television
signals from the optical receiver point (the distribution node) to the home);
"fibre optic" refers to cable made of glass fibres through which signals are
transmitted as pulses of light (Capacity for a very large number of channels
can easily be provided. Optical fibre forms the backbone transmission network
in most modern cable communications systems); "head-end" is a collection of
satellite receiving and cable transmission equipment enabling the processing of
the signals (Signals, when processed, are then combined for distribution within
the cable network); "interconnect" refers to the arrangement and engineering by
which one telephone operator transfers telecom signals (or other
data/communication) to another telephone operator for forward transmission to
its appropriate termination point; "node" refers to an equipment housed in a
street cabinet taking signals from the head-end and serving a number of
distribution points for final delivery of signals to the home; "switch" is a
term for a telephone exchange used to route calls; "switch star system" refers
to a cable system in which full bandwidth is provided from the head-end to
neighborhood switching points which are programmed to supply each subscriber,
through an individual line of lower bandwidth, with whichever channels are paid
for by the subscriber (Channel selection then takes place at the switch, rather
than in the television set or set-top box, in response to the subscriber's
operation of his remote control); "twisted-pair copper wire networks" refers to
a telephone network where each exchange is connected by its own dedicated
copper wire pair to the local telephone switch and is not multiplied at any
stage (These networks typically have limited capacity and as such are often
described as narrowband networks); and "two-way broad band network" is a
network which allows both the sending and receiving of communications as
opposed to a one-way network such as broadcast television.
NETWORK DESIGN AND FUNCTIONALITY OF THE SYSTEMS
Each of the Systems has modern integrated, two-way broadband networks that
are based on fibre-optic technology. Such networks:
. have significantly more capacity than narrowband copper twisted-pair
networks, which are connected directly to the local telephone switch,
not multiplied at any stage and originally designed for voice-only
telecommunications;
. are more flexible and reliable and easier and less expensive to maintain
than narrowband copper twisted-pair networks;
. carry voice, data, video pictures and music with very low or no
distortion; and
. have been designed to incorporate evolving cable television and
telecommunications technologies as they become available both for
business uses (e.g., interactive databases, Internet connections and
video telephony) and for residential uses (e.g., interactive services
and entertainment, including pay-per-view and video-on-demand, games and
video telephony).
The networks utilise fibre-optic cable between the cable television head-end
or telephone and data switches and optical receiver points, which typically
serve approximately 500 homes. The Systems' telecommunications networks
generally utilise either fibre-optic cable (for business customers) or a
twisted-pair copper wire (for residential and small business customers). The
telephone networks are constructed utilising diverse routes for system
redundancy and reliability. The Systems' cable television networks generally
use coaxial cable to connect the distribution node to the customer's premises.
I-41
<PAGE>
SECTION THREE GENERAL INFORMATION
However, a limited number of homes that are sufficiently close (under 4,000 in
each System) are directly connected to the head-end utilising coaxial or copper
cable instead of fibre-optic cable at the trunk level and coaxial cable at the
distribution level.
Fibre-optic technology is based on the physical property of glass fibre,
which allows rapid transmission of light pulses over long distances with little
or no distortion. Fibre-optic systems are suitable for simultaneous
transmission of digitised voice, data and video signals. The main benefits of
deploying fibre in place of traditional coaxial cable or copper wire result
from its smaller size, greater capacity, freedom from electrical interference,
increased functionality and significant reduction of the requirement for
periodic amplification of the signal. These factors contribute to lower
installation and maintenance costs and increase the possible variety and
quality of the service offerings.
The networks are constructed in underground ducts installed in both the
residential and business sectors of the franchise areas. The Systems generally
endeavour to provide for excess fibre and duct capacity to handle possible
future product and service developments. Therefore, to the extent additional
fibre capacity is required in the future, General Cable believes that the
Systems will be able to run the fibre through their existing underground ducts
without incurring significant additional construction costs.
TELECOMMUNICATIONS
The Systems' telecommunications networks have historically been built using
PDH (pleisiochronous digital hierarchy), but are now built using a technology
known as SDH (synchronous digital hierarchy), which increases network
flexibility, further enhances system resilience and optimises the deployment of
ATM (asynchronous transfer mode). Both technologies allow for the delivery of
voice and high-speed data services such as ISDN (integrated services data
network), DASS2 (digital access signal system) and DPNSS (digital public
network signal system). General Cable believes that the architecture of the
networks that the Systems are constructing will allow them to implement more
easily new technologies and to provide enhanced or new services. During 1993
and early 1994, the Birmingham System and the Western London System installed
Nortel DMS-100 telephone switches and the Yorkshire System installed two Nokia
DX220 switches. Additional switches have been acquired as the subscriber base
has grown such that the Yorkshire System now has eight Nokia DX220 and two
Nortel DMS-100 switches, the Western London System has three Nortel DMS-100
switches and the Birmingham System has four Northern Telecom DMS-100 switches.
The Systems' switches connect to other operators' networks and route calls
between the Systems' subscribers as well as between the Systems' subscribers
and other networks.
In 1996, the Western London System bought a Stratacom (Cisco) data
communication switch and started to offer frame relay services (a communication
protocol allowing transmission of data up to 2 megabits per second) and native
ATM services (a very high speed protocol allowing the conveyance of data,
voice, image and video at speeds up to 155 megabits per second) from September
1996. The Yorkshire System bought two Stratacom (Cisco) data communication
switches in October 1996.
CABLE TELEVISION
Most of the Birmingham System and the Western London System networks have a
capacity of 750 MHz and the rest is designed to be able to be upgraded to a
capacity of at least 750 MHz. Most of the Yorkshire System's network has a
capacity of 860 MHz and the rest is designed to be able to be upgraded to this
same capacity. This is sufficient to carry over 50 analogue channels of
television, and hundreds of digitally compressed channels. Each System's
network is capable of conveying large volumes of voice, video, data and
entertainment services as well as providing Internet access. Television and
radio programmes for cable television services are received by over-the-air
antennae, satellite dishes, cable, through interconnect with other operators,
or on videotape or electronic jukebox and then distributed from the head-ends
to distribution nodes. Generally, cable television is "broadcast" (all signals
are delivered to all subscribers' homes, with a subscriber selecting which
signal to use) rather than "switched" (a single signal is sent to a particular
subscriber's home), although evolving technologies such as video-on-demand may
blur this distinction. Because of the nature of television
I-42
<PAGE>
SECTION THREE GENERAL INFORMATION
signals, substantial transmission capacity is required to provide a cable
television programme to a subscriber. A network's transmission capacity
requirement increases as additional cable television channels are broadcast to
subscribers. Digital compression techniques are likely to result in significant
increase in transmission capacity without the need for proportionately
increased bandwidth.
The networks of the Birmingham System and the Western London System were
originally designed utilising a switched star design. The Department of Trade
and Industry (the "DTI") initially encouraged the use of this design by
granting 23-year Telecommunications Act Licences to operators employing
switched star, but only 15-year Telecommunications Act Licences to operators
employing tree and branch architecture, a traditional cable system design
comprising a main or trunk cable from which each subscriber is tapped off.
Switched star, however, proved less efficient than tree and branch, and in
1992, the DTI adopted technology-neutral policies with respect to the franchise
specific telecommunications licences. In December 1992, after approximately
50,000 homes were passed using the switched star design, the Birmingham System
re-evaluated its network and discontinued using the switched star design for
new construction. Similarly, in early 1993, after approximately 100,000 homes
had been passed using the switched star design, the Western London System
discontinued using such design for construction of new areas. The switched star
systems receive the same cable and telecommunications services as those on the
tree and branch system. Therefore, there is no current need to replace the
switched star systems, and there is no plan to replace them in the near future.
General Cable believes that maintaining these two cable technologies within the
same network currently causes no significant inefficiencies.
The Systems' networks are already designed and implemented to deliver digital
television. Without any additional network investment, except at the head-end
and the set top boxes, the switched star networks are capable of carrying
approximately 64 additional digital channels and the tree and branch networks
are able to carry in excess of two hundred digital channels. If General Cable
determines that it is necessary or desirable to carry further additional
digital TV channels, upgrades to the switched star network will be required in
order to provide a uniform tree and branch architecture operating at 750 MHz.
These upgrades will also be required in the Western London System for
approximately 100,000 homes and in the Birmingham System for approximately
50,000 homes. An alternative which General Cable has identified is to replace
some analogue channels by digital transmission providing an 8:1 increase in
digital capacity. In addition, each of the Systems will be required to install
a digital TV head-end.
Further network upgrades will be required in order to provide full
interactivity throughout each System's network. These upgrades would be
required in addition to those otherwise required for digital television and
could involve upgrading a tree and branch architecture with capacity at 750 MHz
to 860 MHz. General Cable currently does not contemplate making such upgrades
until technology and software developments render interactive services
commercially viable. The timing and nature of these developments is unknown.
Because technology and regulations concerning subscriber terminal equipment,
including set top boxes for digital TV and interactive services, are still
developing, the likely timing and cost of this equipment may not be forecast
with accuracy. As a result, General Cable currently has no view as to whether
this cost will be borne by the Systems, subscribers or others, or in what
proportion any cost sharing or subsidisation may occur.
NETWORK DESIGN AND FUNCTIONALITY OF GENERAL TELECOM
General Telecom delivers secure private network services enabling local
access, if required, by more than 95% of the UK businesses and delivers traffic
via interconnection to 44 countries through international partners. General
Telecom's network is currently supported by X.25, Frame Relay and ATM
capabilities. The X.25 network is based around 180 Alcatel data network packet
switches across 60 nodal sites and points of presence, supporting fully
redundant switching, high security and interconnection. The Frame Relay network
is based around five Nortel Magellan Passport switches across five nodal sites
in London, Manchester, Bristol, Bradford and Birmingham, all interconnected by
an ATM backbone.
I-43
<PAGE>
SECTION THREE GENERAL INFORMATION
General Telecom customers access the network by dialling a single code for
direct routing. General Telecom controls the associated local call tariff. The
network supports asynchronous dial up speeds to 28.8 kbps, ISDN digital
capability up to 128 kbps and IP dial fast call set up and switching.
NETWORK CONSTRUCTION
Construction of integrated cable television and telecommunications networks
is capital intensive, requiring substantial investment for (a) "network assets"
including civils (trenching and constructing underground ducts), cable and
telecommunications plant and network electronics, (b) "subscriber costs"
including converters, subscriber electronics and installation of cable from the
network to the subscriber's home and (c) "other costs" including head-end
equipment, switches, offices, land and buildings, computers and capitalisation
of certain pre-operating costs.
Construction expenses have been high because nearly all cable installation in
the UK is in newly constructed underground ducts, and UK regulations do not
permit the use of overhead lines to run new cable networks. In addition,
because of the significant capital outlay involved in the initial construction
of the networks, the Network Division generally constructs ducts with excess
cable installation capacity in order to accommodate possible future expansion
without the need for further build. General Cable believes that such excess
capacity will be beneficial to General Telecom and the Consumer and Small
Business Division in connection with future product and service developments.
In connection with the construction and operation of its network, the General
Cable Group is required to obtain and maintain various licences and approvals,
including licences permitting the construction of the networks, the provision
of credit facilities and the maintenance of computer records. If and to the
extent such licences or approvals are not obtained or maintained, the General
Cable Group's operations could be disrupted. Each System uses a number of
construction contractors, and General Cable does not consider that any single
contractor is significant to any System.
Network outside the Systems has been leased from other operators and has been
selectively built. General Cable intends to continue such practice for the
foreseeable future in further developing its network outside the Systems.
In conjunction with the construction of its network, General Cable, where
appropriate, contacts residents in the neighbourhood to educate them on what to
expect during the construction period. Construction crews attempt to minimise
the disruption caused during construction and to restore the roadway, footpaths
and other areas affected by the construction as quickly as possible. General
Cable gives strict instructions to contractors with respect to conserving trees
passed by trenches. General Cable also makes representatives available to
handle questions and complaints that arise during construction, and endeavours
to ensure the restoration of any disrupted service as quickly as possible.
The General Cable Group either purchases from Nokia or leases from Nortel its
telecommunications switching equipment on a transaction-by-transaction basis.
If there were any material change to the terms of supply or in the performance
of these suppliers, such change may have a material adverse effect on the
financial performance of General Cable's business.
INTERCONNECTS
Each System routes calls made between its own telephone customers over its
network. Currently, calls to customers of other operators are completed through
network interconnections with BT, Cable & Wireless Communications plc ("CWC")
or other interconnected operators. Each of the Systems has entered into
interconnect agreements with BT (implemented in 1994) and CWC (implemented in
1993 and 1994) and subsequent agreements with other operators. The interconnect
arrangements enable calls originating on each System's network but terminating
off its network to be completed and vice versa. Each holder of a public
telecommunications licence is required to negotiate an interconnection
agreement with those holders of Telecommunications Act Licences who are
entitled to seek interconnect arrangements and either party may request
intervention from the Director General if there
I-44
<PAGE>
SECTION THREE GENERAL INFORMATION
is a failure to agree on the terms. The Director General also has the power to
mandate certain interfaces and interconnection agreements between operators,
particularly when one or more of them enjoys a degree of market power. However,
intervention by the Director General may be liable to challenge in the courts.
In addition, BT is required by its licence to make all interconnection
agreements that it has entered into publicly available.
The Systems have also interconnected with a number of other operators with a
view to reducing the wholesale cost of providing telephony services. Further
interconnect arrangements may be entered into in the future if to do so would
be beneficial from a cost or revenue perspective.
INFORMATION TECHNOLOGY
General Cable believes that access to accurate, comprehensive and timely
information is important to the successful development of its business. Because
the UK cable communications industry is the first in the world to combine cable
television and telecommunication services, there has been a lack of software to
support adequately the industry's information needs. Therefore, General Cable
has invested, and continues to invest, in the development of appropriate
information technology software (subscriber management systems and geographic
information systems). General Cable believes that by developing a comprehensive
database of customer demographics, calling and viewing patterns and other
activities, General Cable will be able to improve its performance and
responsiveness to its customers and, thus, its competitive position.
LICENCE MILESTONES AND BUILD SCHEDULE
Each Telecommunications Act Licence prescribes build obligations
("milestones") that require each System to construct its network to pass a
specified number of premises by prescribed dates. General Cable, through the
Network Division, establishes a schedule with respect to achieving such
milestones. The actual milestones that the General Cable Group is required to
meet are specified individually for each of the franchises within the Systems.
Consequently, the General Cable Group could meet the aggregate milestones for a
given System, but still fail to meet one or more individual franchise
milestones and, therefore, subject a telecommunications licence to the risk of
revocation or termination. Set out below are the aggregate current build
milestones for the franchises in the Systems on the basis of projected premises
passed (all figures are adjusted to 31 December):
<TABLE>
<CAPTION>
WESTERN LONDON YORKSHIRE BIRMINGHAM
SYSTEM SYSTEM SYSTEM
MILESTONE MILESTONE MILESTONE
<S> <C> <C> <C>
1998.................................... 268,000 499,000 394,000
1999.................................... 268,000 499,000 460,000
2000.................................... 268,000 499,000 460,000
2001.................................... 268,000 617,000 460,000
2002.................................... 268,000 734,000 460,000
2003.................................... 268,000 828,000 460,000
</TABLE>
The final build milestones for the Western London System and the Birmingham
System have been achieved. The number of premises passed for the Yorkshire
System currently exceeds their most recent build milestones. The final build
milestones for the Bradford franchise were passed during 1997. Following the
strategic review and restructuring of General Cable's operations which was
announced in October 1997, an agreement has been reached with OFTEL to delay
the build milestones for the other five franchises which comprise the Yorkshire
System. The revised milestones (as set out above) have the effect of delaying
the build in these franchises. The previous milestones required the final build
milestones to be attained in 2001.
The ability of the remaining franchises in the Yorkshire System to meet their
respective build schedules is dependent on a number of factors including, among
others, the availability of adequate financing on acceptable terms, the
availability of construction crews, the impact of the level of construction on
the relevant community, the ability to negotiate satisfactory access over
private property, the relationship of the Yorkshire System with local
government, and the continued viability of the UK cable communications industry
in general.
I-45
<PAGE>
SECTION THREE GENERAL INFORMATION
MANAGEMENT OF THE GENERAL CABLE GROUP'S BUSINESS
CONSUMER AND SMALL BUSINESS DIVISION
The Consumer and Small Business Division is responsible for providing cable
television and cable telephony services to the residential and small business
markets within the Yorkshire System and the Western London System. In addition
to basic telephone services, the Consumer and Small Business Division offers
its residential telephone subscribers additional services including voice mail,
call waiting, call divert, call barring, number display, distinctive ringing,
reminder call and speed dial. Residential telephony service features are an
increasingly important element in the development of the residential telephony
market. Such features are provided through the capabilities of the switch. The
General Cable Group uses its own switches to route its customers' calls to
other customers within the General Cable Group's networks and to other
customers of other telephone companies in the UK or elsewhere through network
interconnections with BT, CWC and other operators.
The Consumer and Small Business Division also provides entertainment and
information programming to the homes of cable television subscribers who pay a
monthly fee for the service, including use of the converter boxes (if the
converter box is not purchased). The Consumer and Small Business Division
currently offers its cable television subscribers an analogue service
comprising a choice of basic channel packages and supplementary premium
channels. Such channels include news services, sports channels, movies, music,
ethnic and foreign language channels. The monthly fee for cable television
services currently ranges from approximately (Pounds)15 to (Pounds)19,
including VAT, for a basic service to approximately (Pounds)42 to (Pounds)46,
including VAT, for a subscriber choosing a wide range of channels including the
principal premium channels. The rates charged to customers who commenced
subscribing to cable television services prior to 1 October 1997 and who also
subscribe to telephony services is (Pounds)3 to (Pounds)5 less per month than
the rates set out above.
General Cable believes that the availability of a wide variety of quality
programming is an important factor in influencing a consumer's decision to
subscribe for and retain a cable television service. Consequently, the Consumer
and Small Business Division devotes substantial resources to providing access
to a wide range of programming. Each System carries a number of alternative
packages consisting of terrestrial ("over-the-air"), cable-exclusive satellite
and local channels, as well as premium sports and movies as pay services,
totalling approximately 50 channels.
Although various sources of programming are available to cable operators in
the UK, BSkyB currently is the industry's and the Consumer and Small Business
Division's principal programming supplier. BSkyB provides the industry with a
range of programming, including some of the programming purchased by the
Consumer and Small Business Division, and is the principal provider of multi-
channel television services in the UK. BSkyB is also the sole source of certain
popular television programmes, including various sporting events, such as live
broadcast of English Premier League football. BSkyB's contract for English
Premier League football has been referred for review by the Restrictive
Practices Court. The Consumer and Small Business Division's previous
programming arrangements with BSkyB expired in February 1997, and are now
subject to BSkyB's standard industry trading terms. BSkyB currently provides
the Consumer and Small Business Division with eight channels (including The
Disney Channel), four premium, three bonus and one basic, on a non-exclusive
basis. BSkyB also offers these programming arrangements (together with
additional programming) to its DTH satellite customers and is expected to
provide elements of its programming to BDB as well as its own future DTH
digital satellite customers. The terms of the BSkyB arrangements generally
require General Cable to pay a monthly fee to BSkyB for programming based on
the number of residential and commercial (principally hotel) customers
subscribing to the various BSkyB channels at the end of each month. The fees
are different for residential and commercial subscribers and vary by channel.
The rate card provides for annual increases on the basic channel prices, and
premium channel prices are linked to DTH retail prices, which historically have
increased on an annual basis. BSkyB's position in the pay-TV market has been
reviewed by the OFT.
I-46
<PAGE>
SECTION THREE GENERAL INFORMATION
In October 1997, General Cable entered a consortium with other UK cable
operators to provide a pay-per-view movie service for their cable television
subscribers, marketed as "Front Row". The joint venture has entered into
contracts with Columbia Tristar, Warner Brothers and Buena Vista International
and additional contracts with other studios are currently under negotiation.
General Cable began providing the Front Row service to its customers in March
1998.
General Cable believes that digital television services will be introduced in
the UK in 1998, at least on a limited basis. General Cable's own plans for
introducing digital television services are in the development phase with plans
to launch digital services during the first quarter of 1999. No final decision
has been taken with respect to the technology to be deployed, or the services
that will be offered to those markets. However, General Cable believes that
digital technology will provide the basis for the introduction of interactive
services, including access to the Internet, through cable television using the
capabilities of digital set top boxes.
In addition to providing access to interactive services through digital
television technology, General Cable expects to introduce fast access to the
Internet and other data based services through deployment of cable modem
services in the future. Deployment of these services is dependent upon
definition of commercially acceptable standards on an industry-wide basis. No
agreement on such technical standards has yet been reached. In the meantime,
General Cable is seeking to benefit from the growth of Internet based services
through establishing commercial relationships with Internet service providers
rather than becoming an Internet service provider itself.
The Consumer and Small Business Division continues to emphasise improving
services being provided to its customers through ongoing investment in
information technology, including call centre management procedures.
GENERAL TELECOM
General Telecom provides larger business customers with the services offered
to the residential telephony market, such as call transfer, three-party
calling, call forwarding and speed-dialling as well as a variety of other
services, including data transmission services, either through point-to-point
links or bandwidth on demand. In addition, services that General Telecom
provides to the business market include:
. Advanced voice services. Advanced voice services include CENTREX
services, Virtual Private Networks, Automatic Call Distribution, Number
Translation Services, Number Portability and Indirect Access. These
services provide a variety of methods by which customers gain enhanced
services without necessarily having to invest directly in additional
equipment.
. High-speed data services. High speed data services, including ISDN,
DASS2, DPNSS, FR (frame relay, a communication protocol allowing the
conveyance of data up to two megabits per second), FDDI (fibre
distributed data interface) and up to 155 megabits per second ATM,
permit rapid exchange of data between subscriber-owned private exchanges
or between computers.
. Leased lines. Leased lines permit the subscriber to rent a circuit
between two points (e.g., between two office buildings) at favourable
rates. The subscriber can choose circuit capacities from 64 kilobits for
voice to 155 megabits for computer, other data, or multiplexed voice
applications.
. Bandwidth on demand. As a result of each System's network architecture,
variable capacity can be allocated for limited periods of time, thus
reducing the cost for the customer and maximising the usage of the
network for the operator.
. Wide Area Network. A WAN (wide area network) provides a link (bridge)
between LANs (local area networks), typically connecting computers.
I-47
<PAGE>
SECTION THREE GENERAL INFORMATION
. Switched Data Network. Through the data networks acquired in connection
with the Imminus acquisition, General Telecom offers managed data
services, hosting web servers and e-mail and securing Internet
platforms. The network utilises managed router, frame relay, X-25 and
ATM technologies. In addition, the General Cable Group offers system
integration services.
Business telecommunications is a significant contributor to the General Cable
Group's revenue, and it is expected to remain a major source of revenue in the
future. General Cable believes that the revenue and cost attributes of this
market are particularly attractive as business telecommunications customers
generally produce significantly higher average revenue per line than do
residential customers.
Business users frequently require higher transmission capacity to provide for
high speed data lines between computers, for video conferencing and for other
applications. For example, although business voice telephony and residential
voice telephony require transmission capacity of approximately 64 kilobits per
second per call, business video conferencing requires between 144 and 1,500
kilobits per second, and certain business computer data applications can
require up to 155 megabits per second. General Telecom's advanced networks are
capable of providing these services. In addition, the specialised requirements
of certain business markets for data transmission allow the General Cable Group
an opportunity to develop services that provide a competitive advantage
compared to operators not offering similar services. Servicing these markets
typically requires national capability. General Telecom manages the business
telecommunications operations within the Western London System and the
Yorkshire System as well as throughout the UK. Within the Western London and
the Yorkshire franchise areas, General Telecom operates under the respective
Systems' Telecommunications Act Licences. Outside such franchise areas,
however, General Telecom operates under the General Telecommunications Limited
and Imminus Telecommunications Act Licences.
In the future, General Cable believes that business customers increasingly
will turn to telecommunications suppliers that have the ability to deliver high
capacity advanced voice and data services. General Cable places, and expects to
continue to place, a high degree of emphasis on having the latest available
technology to provide its customers with competitive services.
NETWORK DIVISION
The Network Division is responsible for managing the Yorkshire System and the
Western London System network operations, including construction of networks
and sourcing interconnection and lease capacity from various interconnected
operators. Construction of networks is capital intensive, requiring substantial
investment. See "-- Description of Networks --Network Construction".
The Systems have extended their range of interconnect suppliers, thereby
reducing the wholesale cost of providing their telephony services in both
business and residential markets. With effect from 1 January 1998, the Network
Division is responsible for negotiating improved interconnect terms from the
market. General Cable expects the General Telecom and Consumer and Small
Business Divisions to continue to benefit from improvements in the
interconnection rates that the General Cable Group pays during 1998, and it
intends to expand the range of suppliers further, where it is cost effective to
do so.
SOURCES OF REVENUE
General Cable generally derives revenue from the following sources in
connection with the business telecommunications, residential telephony and
cable television services it offers to its customers:
TELECOMMUNICATIONS REVENUE
. Basic telecommunications charges -- charges for initial connection,
exchange line rental and usage.
. Feature charges -- charges for features such as call forwarding, call
waiting, three-way calling and voicemail (although some of these
features are, in some cases, offered free of charge in order to
encourage increased traffic).
I-48
<PAGE>
SECTION THREE GENERAL INFORMATION
. Enhanced services charges -- charges to business customers for various
special services and facilities including CENTREX, high speed data,
leased line, VPN and WAN.
. Managed data network charges -- charges to business customers for
implementing and managing data networks; charges may include guaranteed
minimum usage commitments.
CABLE TELEVISION REVENUE
. Basic programming -- a monthly fixed charge for use of the converter
boxes and a package of television channels; programming is usually
offered in tiers, with a larger basic package of programming carrying a
higher monthly charge.
. Pay programming -- an additional monthly fixed charge for certain
channels; these channels are offered at varying prices depending on the
combination of channels chosen by the subscriber; pay channels may only
be obtained as a supplement to basic programming.
. Pay-per-view -- subscribers pay on a per programme basis.
. Home shopping -- a percentage of the value of any goods sold is paid to
the Systems.
RELATIONSHIPS AMONG OWNERS OF THE SYSTEMS
The following is a brief description of the owners of the Systems and the
material provision of Cable Corporation's Articles of Association, the
Birmingham Cable Articles and related and other agreements. General Cable's
investments in Cable Corporation, Yorkshire Cable and Filegale were transferred
at book value to GCH, a wholly-owned subsidiary of General Cable, on 31
December 1997 in connection with the Group's restructuring and refinancing. See
"-- Recent Developments".
THE CABLE CORPORATION LIMITED
Cable Corporation owns the entire issued share capital of WTL and Middlesex
Cable Limited ("MCL"), the holders of the Windsor and the Hillingdon & Hounslow
licences, respectively. General Cable, through GCH, owns 83.5% of the ordinary
share capital of Cable Corporation, with the remaining 16.5% owned by TCHL. In
addition, General Cable, through GCH, holds two special shares which provide
General Cable with certain rights as described below.
The relationships between Cable Corporation and its shareholders are governed
by a number of agreements and by certain provisions of Cable Corporation's
Articles of Association, certain material provisions of which are summarised
below. This summary does not purport to be complete and is subject to, and
qualified in its entirety by, reference to the agreements and Cable Corporation
Memorandum and Articles of Association.
The Western London System has entered into a management agreement with
General Cable whereby General Cable has the right, subject to the overall
direction and control of the respective boards of directors, to manage the day-
to-day business and affairs of the Western London System. General Cable is
entitled to an annual management fee equal to 1% of the Western London System's
total revenue (subject to a minimum of (Pounds)420,000 per annum). In addition,
General Cable is reimbursed for its reasonable costs in managing the Western
London System. Either party may terminate the agreement in certain
circumstances, including circumstances in which the other party is in material
breach of the agreement or becomes insolvent.
The Western London System has also entered into a consultancy agreement with
Telewest Communications Group Limited ("TW"), a subsidiary of Telewest, whereby
TW provides support services with respect to the design, construction and
operation of the Western London System, including the marketing and pricing of
services provided by the Western London System. TW receives an annual fee equal
to the greater of (i) its costs in providing a consultant (subject to a minimum
of (Pounds)300,000) or (ii) an amount equal to a percentage (1.75% in 1996 and
1.5% thereafter) of the gross telecommunications revenues (subject to a maximum
of (Pounds)5 per home), although the parties agreed to a lower fee in 1996. The
consultancy agreement will continue until terminated by either party giving
I-49
<PAGE>
SECTION THREE GENERAL INFORMATION
notice prior to December 31 in any year beginning in 1997, such termination to
be effective on December 31 of the following year. TW has the right to
terminate the agreement at any time prior to 31 December 1998 on giving twelve
months' prior written notice. The terms of the GCH financing generally prohibit
the payment of management fees.
Under Cable Corporation's articles of association, the consent of each
Significant Investor in Cable Corporation (defined for the purposes of this
subsection as an investor who, together with any subsidiaries, controls not
less than 15% of the issued ordinary share capital of Cable Corporation) is
required before certain actions may be taken by Cable Corporation or any of its
subsidiaries. Matters requiring the consent of a Significant Investor include
substantial acquisitions or disposals, applications for or acquisitions of
certain franchises or licences, changes in control of material subsidiaries,
the creation of certain joint ventures or similar arrangements, and certain
borrowings or arrangements for the provision of security.
Each Significant Investor has the right to appoint up to two directors to
Cable Corporation's board of directors. The articles of association of Cable
Corporation generally prohibit a shareholder from transferring legal or
beneficial ownership of its shares without giving each other shareholder a
right of first refusal to acquire its proportionate amount of such shares.
Transfers by certain corporate shareholders to affiliates generally are
excluded from this restriction.
As the holder of two special shares of Cable Corporation, General Cable,
through GCH, also has the right, in respect of each special share it holds, to
appoint three directors to Cable Corporation's board of directors and its
consent is required to increase the number of directors beyond 11 or to any
resolution varying or modifying the rights attaching to the special shares.
General Cable has, however, agreed with Cable Corporation not to dispose of, or
exercise any rights attaching to, one of these special shares. In addition,
Cable Corporation's financing arrangements require General Cable, through GCH,
to own not less than 80% of the ordinary share capital of Cable Corporation.
In March 1996, Cable Corporation entered into financing arrangements,
including a nine-year (Pounds)16 million loan facility and certain finance
leases to finance the construction of its network and operations (the "Cable
Corporation Credit Facility"). The Cable Corporation Credit Facility was
terminated in December 1997 when Cable Corporation was party to a re-financing
of GCH, under which GCH received a revolving and term credit facility of up to
(Pounds)500 million.
BIRMINGHAM CABLE CORPORATION LIMITED
Birmingham Cable owns the entire issued share capital of Birmingham Cable
Limited, the holder of the Birmingham franchise. Birmingham Cable's
shareholders are TCHL and Comcast as joint shareholders (approximately 55% in
total) and General Cable (approximately 45%), excluding interests aggregating
approximately 0.1% held by minority investors.
The relationships between Birmingham Cable and its shareholders are governed
by a number of agreements and by the provisions of the Birmingham Cable
Articles, certain material provisions of which are summarised below. This
summary does not purport to be complete and is subject to, and qualified in its
entirety, by reference to the agreements and the Birmingham Cable Articles. In
particular, this summary does not purport to provide a comprehensive
description of arrangements between Telewest and Comcast in relation to
Birmingham Cable.
Birmingham Cable's board is comprised of nine directors, two of which are
independent directors (including the Chairman), four of which are appointed or
nominated by Telewest and Comcast jointly as a Majority Investor (defined as a
person or persons holding (alone or together) more than half of the issued
ordinary share capital of Birmingham Cable), and three of which are appointed
or nominated by General Cable. If General Cable's interest in Birmingham Cable
(measured by reference to its percentage interest in the nominal value of the
issued ordinary share capital held by General Cable (and
I-50
<PAGE>
SECTION THREE GENERAL INFORMATION
any subsidiary, holding company or subsidiary of such holding company)) falls
below 30%, its right to appoint and maintain directors will change as follows:
between 20% and 29.9%--two directors; between 10% and 19.9%--one director; and
less than 10%--no directors).
General Cable has the right to propose the candidate for any appointment by
Birmingham Cable's board of a new Chief Financial Officer. Telewest and Comcast
jointly have the right to propose the candidates on any appointment by the
board of a new Managing Director.
General Cable has a consultancy agreement with Birmingham Cable whereby
General Cable provides advice on the development and operation of business
telecommunications. Under other consultancy agreements with Birmingham Cable, a
Telewest subsidiary and a Comcast subsidiary provide certain consulting
services in relation to cable television and telecommunication operations.
General Cable and the other consultants will also provide advice on the
financial management of Birmingham Cable including matters of strategy and
preparation of budgets. Each agreement will terminate in April 2000, subject to
Birmingham Cable's right to extend the term of the agreements by up to two
further five-year periods and one final three-year period, which Birmingham
Cable has agreed to do where it would be reasonable to do so. Birmingham Cable
will have the right, upon not less than six months' notice, to terminate the
agreements after April 2000. It is anticipated that management fees will not be
payable in the immediate future as a result of restrictions in the terms of
Birmingham Cable's financing arrangements.
The Comcast affiliate and the Telewest subsidiary have a management agreement
with Birmingham Cable whereby they have the right, subject to the overall
direction and control of the Birmingham System boards of directors, to manage
the day-to-day business and affairs of the Birmingham System. The management
agreement may be terminated by Birmingham Cable upon 12 months' prior written
notice if the joint shareholding of Comcast and Telewest ceases to be the
largest shareholding in Birmingham Cable but only if requested by the new
Principal Shareholder (as defined in such management agreement). No
remuneration is payable under the management agreement but reasonable out-of-
pocket expenses are reimbursed.
The Birmingham Cable Articles give certain rights to Significant Investors
(defined for the purpose of this subsection as shareholders holding (alone or
together) at least 33.33% of the issued ordinary share capital of Birmingham
Cable). General Cable is currently a Significant Investor and Comcast and
Telewest are deemed a single Significant Investor as they hold their interests
jointly. The consent of Significant Investors is required before certain
actions may be taken by Birmingham Cable or any of its subsidiaries. Matters
requiring the consent of Significant Investors include substantial acquisitions
or disposals, applications for or acquisitions of certain franchises or
licences, changes in control of material subsidiaries, the creation of certain
joint ventures or similar arrangements, and certain borrowings or arrangements
for the provision of security. Certain other acquisitions or disposals, any
change in control of any subsidiary and any application for or acquisition of a
franchise or licence (whether or not they would require the consent of any
Significant Investor) require the consent of the Majority Investor. The
Birmingham Cable Articles generally prohibit a shareholder from transferring
legal or beneficial ownership of its shares without giving each other
shareholder a right of first refusal to acquire its proportionate amount of
such shares. Transfers by certain corporate shareholders to affiliates
generally are excluded from this restriction. The Birmingham Cable Articles
further provide
that the consent of Telewest is required to issues and transfers of shares to
persons (other than pro rata to the other members of Birmingham Cable) engaged
in the provision or operation of telecommunication services and the consent of
Comcast is required to issues or transfers of shares to persons (other than pro
rata to the other members of Birmingham Cable) engaged in the provision of
cable television communication systems or the operation of cable television or
communication systems.
General Cable previously had an arrangement with Telewest and Comcast under
which put options were granted in respect of the parties' shareholdings in
Birmingham Cable. These arrangements were terminated in December 1995.
I-51
<PAGE>
SECTION THREE GENERAL INFORMATION
EMPLOYEES
As at 31 December 1997, General Cable, Cable Corporation, Yorkshire Cable,
Birmingham Cable and Imminus had a total of 2,002 employees. None of these
employees is represented by a labour union. Neither General Cable nor Cable
Corporation, Yorkshire Cable, Birmingham Cable or Imminus has experienced a
work stoppage and General Cable believes that the relations of General Cable
and Cable Corporation, Yorkshire Cable, Birmingham Cable and Imminus with their
respective employees are good. The following table shows the average number of
employees during each of the three years ended 31 December:
<TABLE>
<CAPTION>
1995 1996 1997
----- ----- -----
<S> <C> <C> <C>
General Cable................................................. 18 27 42
Cable Corporation............................................. 337 401 475
Yorkshire Cable............................................... 544 648 707
Birmingham Cable.............................................. 571 639 678
Imminus....................................................... N/A N/A 100
----- ----- -----
Total employees............................................. 1,470 1,715 2,002
===== ===== =====
</TABLE>
DIRECTORS
The current directors of General Cable are: Sir Anthony Cleaver, Philippe
Galteau, Jean Claude Banon, Dr. George Gray, Ian Gray, David Miller, W.A. Rice,
Cheryl Tritt and Michel Villaneau.
I-52
<PAGE>
SECTION FOUR GENERAL INFORMATION
- --------------------------------------------------------------------------------
SECTION FOUR
INFORMATION ON THE COMBINED GROUP
- --------------------------------------------------------------------------------
BUSINESS OF THE COMBINED GROUP
OVERVIEW
Telewest believes that the Merger will strengthen the strategic position of
the Combined Group as a leading cable operator in the UK. The Combined Group
will own and operate the 28 franchises owned by the Telewest Group, the six
franchises owned and operated by the General Cable Group through its wholly
owned subsidiary, Yorkshire Cable and the two franchises owned by Cable
Corporation, which currently is jointly owned by the Telewest Group and the
General Cable Group (the "Combined Group Owned and Operated Franchises"). The
Combined Group expects it will also own at least 49.90% of Birmingham Cable
(representing the 27.47% interest in Birmingham Cable currently owned by the
Telewest Group and Telewest's pro rata share (49.90%) of General Cable's 44.95%
interest in Birmingham Cable that is expected to be offered to Telewest,
Comcast and the other Birmingham Cable shareholders as described under "--
Section One -- The Merger and Related Matters -- Birmingham Cable and Cable
London") and approximately 50.0% of Cable London (the "Combined Group
Affiliated Companies"). Birmingham Cable and Cable London together own and
operate six affiliated franchises (the "Combined Group Affiliated Franchises").
The Combined Group Owned and Operated Franchises and the Combined Group
Affiliated Franchises will cover approximately 32% of the homes in the UK areas
for which cable franchises have been awarded.
The following table sets out the approximate number of homes, equity homes,
businesses and equity businesses in the Telewest Group and the General Cable
Group as at 31 March 1998 and in the Combined Group on a pro forma basis
assuming the Merger had been completed on 31 March 1998:
<TABLE>
<CAPTION>
COMBINED
GENERAL CABLE GROUP
TELEWEST GROUP GROUP (1)(2) TOTAL (1)(2)(3)
<S> <C> <C> <C>
Homes 5,199,000 1,667,000 6,074,100
Equity Homes 4,367,000 1,355,000 5,722,000
Businesses 344,000 104,000 399,500
Equity Businesses 289,000 84,000 373,000
</TABLE>
- ------------
(1) The data contained in this table under "Telewest Group" and "General Cable
Group" are taken from the tables on pages I-19 and I-39, respectively, of
this Part I and the total amounts contained under "Combined Group Total"
are the aggregate of the amounts under "Telewest Group" and "General Cable
Group".
(2) The data with respect to "Homes" and "Businesses" for the Telewest Group
and the General Cable Group include all the homes and businesses in
Birmingham Cable; however, such duplication has been eliminated in the data
for the Combined Group.
(3) Information with respect to the Combined Group reflects the Combined
Group's equity interest based on the assumptions set out on page I-10
(including that the Combined Group will own approximately 72% of Birmingham
Cable and approximately 50% of Cable London).
I-53
<PAGE>
SECTION FOUR GENERAL INFORMATION
The following table sets out certain pro forma operating information
concerning the Combined Group Owned and Operated Franchises as at 31 December
1995, 1996 and 1997 and 31 March 1998. The following table also sets out
certain information concerning the Combined Group Affiliated Franchises as at
31 December 1995, 1996 and 1997 and 31 March 1998. This pro forma information
reflects the position as if the Merger had been completed on 31 December 1994.
All the data set out below under "Combined Group Owned and Operated Franchises"
and "Combined Group Affiliated Franchises" have been extracted from the annual
financial statements, or quarterly, interim or annual announcements of
financial results and/or operating statistics of Telewest and General Cable.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMBINED GROUP OWNED AND COMBINED GROUP AFFILIATED
OPERATED FRANCHISES (1) FRANCHISES (1)(2) COMBINED GROUP TOTAL (1)(3)
--------------------------------------- -------------------------------- ---------------------------------------
31 DECEMBER 31 MARCH 31 DECEMBER 31 MARCH 31 DECEMBER 31 MARCH
----------------------------- --------- ----------------------- -------- ----------------------------- ---------
1995 1996 1997 1998 1995 1996 1997 1998 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CABLE TELEVISION
Homes passed 2,451,777 3,125,999 3,763,765 3,793,885 344,690 444,404 496,631 500,379 2,796,467 3,570,403 4,262,396 4,294,264
Homes passed and
marketed 2,218,010 2,837,343 3,409,498 3,461,654 335,495 418,928 484,070 477,691 2,553,505 3,256,271 3,893,568 3,939,345
Basic
subscribers 478,772 639,681 722,794 731,073 90,402 114,518 126,149 128,182 569,174 754,199 848,943 859,255
RESIDENTIAL
TELEPHONY
Homes passed 2,200,505 2,947,143 3,585,281 3,615,401 342,560 427,190 498,981 500,797 2,543,065 3,374,333 4,084,262 4,116,198
Homes passed and
marketed 2,023,018 2,755,752 3,376,590 3,430,181 332,918 416,414 484,494 477,691 2,355,936 3,172,166 3,861,084 3,907,872
Residential
lines connected 528,481 756,245 999,665 1,032,002 78,742 105,696 131,576 136,816 607,223 861,941 1,131,241 1,168,818
BUSINESS
TELEPHONY
Business
subscribers 17,500 25,414 30,609 31,946 2,464 3,448 4,198 4,460 19,964 28,862 34,807 36,406
Business lines
connected 58,989 98,450 146,250 158,485 8,694 12,814 20,416 22,055 67,683 111,264 166,666 180,540
</TABLE>
- ------------
(1) The information contained in this table under "Combined Group Owned and
Operated Franchises" and "Combined Group Affiliated Franchises" is taken
from the tables on pages I-19, I-31 and I-39 of this Part I, and the total
amounts contained under "Combined Group Total" are the aggregate of the
amounts under "Combined Group Owned and Operated Franchises" and "Combined
Group Affiliated Franchises".
(2) Information with respect to the Combined Group Affiliated Franchises
reflects the Combined Group's equity interest based on the assumptions set
out on page I-10 (including that the Combined Group will own approximately
72% of Birmingham Cable and approximately 50% of Cable London).
(3) This pro forma does not purport to represent what the operating information
of the Combined Group Owned and Operated Franchises would actually have
been had the Merger been completed as at 31 December 1994 and does not
purport to project the Combined Group's results of operations for any
future period.
Telewest believes the Combined Group's advanced network will enable it to
provide customers with a range of interactive and integrated entertainment,
telecommunications and information services. Telewest also believes the
Combined Group will benefit from the Interfranchise Network which will link all
of the Combined Group's regional locations. The network is currently
substantially complete and is expected to be completed in August 1998.
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SECTION FOUR GENERAL INFORMATION
RATIONALE FOR THE MERGER
The UK cable industry is currently undergoing significant structural change.
Recent corporate activity has highlighted the potential commercial benefits
available from consolidation, principally economies of scale together with
increased purchasing power and operational efficiency.
Telewest believes that the businesses of Telewest and General Cable are
complementary and that benefits will arise from combining them. In addition,
Telewest believes that the Combined Group will be better placed to benefit from
the development of the UK cable industry as a result of the greater scale and
scope of its operations.
Telewest believes that the combination of Telewest and General Cable will
strengthen the Combined Group's position as a leading provider of voice, video
and data services. Telewest expects that the Combined Group will have a
stronger competitive position than either of its constituent companies as a
provider of packaged services for residential and business customers within its
franchises. Telewest believes that the Combined Group's national and local
broadband network will provide access to approximately 24% of all UK
households. As a result, Telewest believes the Combined Group will be a more
powerful competitor in both the business and residential markets.
Specifically, Telewest believes the Merger will:
. strengthen the Combined Group's ability to deliver advanced business
voice and data services, digital television and high-speed Internet
access using its broadband network;
. accelerate the development of the Combined Group's business telephony
capabilities using General Cable's expertise in this area and enable the
Combined Group to develop a wholesale telephony business;
. produce incremental revenue from delivering integrated services to
residential market segments across a larger subscriber base; and
. allow the Combined Group to achieve cost savings and scale economies
from reducing interconnection and programming costs, consolidating
network operations and maintenance, and removing duplicate overheads.
There can be no assurance that Telewest will be able to successfully
integrate General Cable or to realise the anticipated benefits of the Merger.
See "-- Section Six -- Risk Factors". The extent and timing of achieving these
potential benefits will depend on, among other things, the continued
availability of the necessary funding. See "-- Working Capital".
STRATEGY FOR THE COMBINED GROUP
Telewest's immediate objective will be to successfully integrate General
Cable in order to achieve, over time, the benefits of the Merger. In the short
term, Telewest expects the Groups to continue to pursue their current corporate
strategies, around which their existing financing facilities are tailored.
During this time the management of the Combined Group will evaluate how best to
optimise the potential economies of scale and other opportunities available to
it. Thereafter, and subject to any changes necessary to ensure availability of
the necessary funding under existing or new facilities, Telewest expects the
strategy of the Combined Group to focus on:
. building on the initial success of trials of its Millennium package to
re-market its residential customer base by providing competitive and
flexible packages of integrated entertainment, information and
telecommunications services;
. increasing the emphasis on penetration of the business market and, in
particular, larger business customers through the offer of a range of
facilities-based network services, including voice, data and Internet
services, building on General Cable's specialised business telephony
expertise;
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SECTION FOUR GENERAL INFORMATION
. negotiating more flexible programming arrangements with its principal
programming suppliers to support the offer of a wider range of packaged
services and reduce its reliance on its dominant programming suppliers;
. maximising use of the Interfranchise Network, thereby reducing reliance
on BT and Mercury for call switching and conveyance;
. continuing to develop new sales distribution channels, thereby reducing
reliance on more costly forms of direct sales programmes and increasing
utilisation of more cost-effective local radio and newspaper advertising
by building on the greater geographical concentration of the Combined
Group's residential customer base;
. developing a wholesale telephony offering targeted at business customers
for the carriage of voice and data using the substantial capacity
provided by the Interfranchise Network; and
. positioning itself as a leader in selected new broadband services (e.g.,
digital, high-speed data and interactive services) that Telewest
believes will provide new revenue streams.
ACQUISITIONS AND DISPOSALS
The Combined Group's strategy following the completion of the Merger will be
to build on its existing customer base and increase penetration and revenues
per customer. In order to increase revenues and economies of scale, however,
the Combined Group may from time to time acquire one or more new or existing
franchises either in public tenders by the ITC, acquisitions from other cable
operators or acquisitions of other cable operators. Telewest believes that
there may be attractive opportunities for acquisitions or franchise exchanges
in the future. Any such acquisitions or franchise exchanges may be funded, to
the extent available, from internally generated funds, the incurrence of
indebtedness or the issuance of equity, or a combination thereof.
See "-- Section One -- The Merger and Related Matters -- Birmingham Cable and
Cable London" for a description of potential acquisitions by the Telewest Group
of additional interests in Birmingham Cable and Cable London from Comcast.
RECENT RESULTS AND FUTURE OUTLOOK
In the announcement of Telewest's quarterly results for the three months
ended 31 March 1998, Telewest indicated that the results reflected substantial
progress following the restructuring of Telewest's business towards the end of
1997. As at 31 March 1998, Telewest's Owned and Operated Franchises and
Affiliated Franchises serviced 1,106,169 customers with revenue for the three
months ended 31 March 1998 of (Pounds)110.4 million, representing a 22.2%
increase from the comparable period of 1997 and all revenue streams
contributing to such growth. The quarterly results for the three months ended
31 March 1998 are included elsewhere in this document.
Telewest has already started the planning process for the integration of the
Groups. With the strong results of the first quarter of 1998 and the inclusion
of General Cable as part of the Combined Group, Telewest believes that the
Combined Group is well positioned for the future.
DIVIDEND POLICY
Telewest has not paid any dividends to date on the Telewest shares or
Telewest Convertible Preference shares and does not currently intend to pay
dividends on the Telewest shares or Telewest Convertible Preference shares.
General Cable has not paid any dividends to date on the General Cable shares.
Telewest intends to retain earnings, if any, for the foreseeable future to fund
the development and growth of the business of the Combined Group. In addition,
the ability of certain direct and indirect subsidiaries of Telewest to pay
dividends, or to make advances or other payments to Telewest or other members
of the Telewest Group for the payment of dividends is effectively prohibited by
the terms of certain financing arrangements. See "-- Section Seven --
Additional Information -- Financing Arrangements". However, if any dividends
are paid, holders of Telewest ADSs will receive their dividends net of fees,
expenses and taxes, if any, withheld by the Depositary, pursuant to the terms
of the Deposit Agreement relating to the Telewest ADSs. See "-- Section
Seven -- Additional Information -- Description of American Depositary
Receipts".
I-56
<PAGE>
SECTION FOUR GENERAL INFORMATION
FINANCIAL YEAR END
The financial year end for Telewest following the Merger will continue to be
31 December of each year, as it is for General Cable.
WORKING CAPITAL
Following the Merger, the Combined Group will contain a number of individual
borrowing groups (a Telewest group, a General Cable group, a Birmingham Cable
group and a Cable London group) with generally separate financing arrangements,
the terms of each of which have been structured to reflect the anticipated net
funding requirements of the relevant borrowing group based on its existing
strategy. Amongst other things, these financing arrangements restrict borrowing
and other funds flowing between the different borrowing groups. The anticipated
net funding requirements of each borrowing group represent the anticipated cost
of completing the construction of that group's franchises, the anticipated cost
of its operations, the anticipated net interest on its debt and repayment of
the principal of such debt less the anticipated net revenue generated.
As discussed in "-- Strategy for the Combined Group", Telewest will,
following completion of the Merger, consider how best to optimise the potential
economies of scale and other opportunities available to the Combined Group.
This may result in changes to the existing strategies of certain of these
borrowing groups which may affect their anticipated net funding requirements
and necessitate amendments to, or refinancings of, one or more of the Combined
Group's financing arrangements. There can be no assurance that such amendments
or refinancings would be achievable or achievable on acceptable terms.
Several of the Combined Group's financing arrangements limit the amount of
credit available to the relevant borrowing group to declining multiples over
time of its net operating cash flow and contain covenants (including covenants
linked to achieving certain levels of net operating cash flow), the breach of
which could result in all amounts outstanding under the relevant arrangement or
arrangements becoming due immediately. There can be no assurance that the
actual net funding requirements of individual borrowing groups (or the Combined
Group as a whole) will not be more than, or that their net operating cash flows
will not be less than, those currently anticipated. Differences may result from
the actual cost of constructing the network and operating the business and/or
the amount of revenues derived varying considerably from those currently
anticipated because they depend on many factors, including the numbers of
subscribers and the services for which they subscribe and changes in
technology. To the extent that differences arise, there can be no assurance
that such differences may not necessitate obtaining additional financing and/or
amendments to or refinancings of one or more of the Combined Group's financing
arrangements and that such new financing and/or amendments or refinancings may
be available or available on acceptable terms. Furthermore, if the Combined
Group were to fail to be in compliance with the other terms and conditions
governing the availability of funds under its financial arrangements, the
Combined Group's ability to meet its anticipated net funding requirements may
be impaired.
As discussed under "-- Section One -- The Merger and Related Matters --
Birmingham Cable and Cable London", the Telewest Group expects in due course
to serve notice on General Cable requiring General Cable to sell its holding of
shares in Birmingham Cable to Telewest for (Pounds)100 million, subject to the
operation of the pre-emptive provision in the Birmingham Cable Articles.
Telewest intends to fund such purchase with the proceeds of the Unsecured
Notes. The obligation to purchase the Unsecured Notes is subject to a number of
conditions. Although the Telewest Group believes that these conditions will be
satisfied, there can be no assurance that all of the conditions will be
satisfied and that the necessary funds for such purchase will be available from
the Unsecured Notes or otherwise. See "-- Section Seven -- Additional
Information -- Financing Arrangements -- New Financing to be Provided in
Connection with the Merger".
Subject to the above, Telewest is of the opinion that, taking into account
the Combined Group's existing financing arrangements and anticipated revenues
and the proceeds of the Pre-emptive Issue, the
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<PAGE>
SECTION FOUR GENERAL INFORMATION
Combined Group has sufficient working capital to meet its anticipated net
funding requirements over the period to 31 December 1999.
The Combined Group may require additional funding after 31 December 1999. If
additional funding were to be required before or after this date, the Combined
Group would review the alternative funding sources then available but would
currently intend to obtain this funding from institutional debt offerings in
the US or Europe and/or syndicated bank financing although there can be no
assurance that such funding or any other funding will be available to the
Combined Group, or that the Combined Group will not elect to use alternative
funding sources (including public debt offerings in the UK or Europe).
BOARD OF DIRECTORS
Telewest intends that, following completion of the Merger, the Board will
initially consist of up to 14 Directors comprising seven non-executive
Directors (designated by MediaOne, TINTA, Cox, SBC and Vivendi), four executive
Directors and three non-executive independent Directors. Following the
completion of the Merger, the individuals set out below are expected to serve
as Directors of Telewest. All such individuals other than Messrs. Rice and
Villaneau are currently Directors of Telewest. Messrs. Rice and Villaneau are
directors of General Cable, and will be appointed as Directors of Telewest upon
completion of the Merger. Telewest expects to appoint an executive member of
the General Cable Board as a Director of Telewest if terms are agreed with the
appropriate individual.
<TABLE>
<S> <C> <C>
DIRECTORS
<CAPTION>
NAME AGE POSITION HELD
<S> <C> <C>
Arthur Gary Ames 53 Chairman*
Anthony William Paul Stenham 66 Deputy Chairman*
Lord Borrie QC 67 Director*
Stephen Marc Brett 57 Director*
Charles Burdick 47 Group Finance Director
David John Evans 56 Director*
William Anthony Rice 46 Director*
James Oliver Robbins 55 Director*
Robert Wayne Shaner 49 Director*
David Van Valkenburg 56 Acting Chief Executive Officer
Michel Jean Charles Villaneau 62 Director*
</TABLE>
- ------------
*Non-Executive
Mr. Ames has served as the non-executive Chairman of the Board of Telewest
since April 1998 and as a non-executive director of Telewest since November
1995. He is the President and Chief Executive Officer of MediaOne
International, based in London, and is responsible for MediaOne International's
operations. Mr. Ames has served in this position since July 1995. Previously,
from January 1990 to June 1995, Mr. Ames was President and Chief Executive
Officer of U S WEST Communications, Inc. (a provider of residential and
business telephone services in the US). Mr. Ames also serves as a non-executive
director of Albertsons, Inc. (a US supermarket chain) and Tektronix, Inc. (a
manufacturer of IT and electronics equipment) and as a non-executive director
of Flextech. Mr. Ames is a US citizen and his business address is MediaOne
Group, Inc., 7th Floor, Lansdowne House, Berkeley Square, London W1X 5DH,
United Kingdom.
Mr. Stenham has served as a non-executive Director and Deputy Chairman of the
Board of Telewest since November 1994 and served as a consultant to the
Executive Committee of the Joint Venture from May 1994 until the Joint Venture
was acquired by Telewest in November 1994 in connection with Telewest's initial
public offering. He was chairman of Arjo Wiggins Appleton plc (a manufacturer
and distributor of paper products) from 1990 to November 1997. Previously, Mr.
Stenham was a Managing Director of Bankers Trust Company from 1986 to 1990. Mr.
Stenham serves
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<PAGE>
SECTION FOUR GENERAL INFORMATION
as a non-executive director of various companies, including The Rank Group plc
(an entertainment company), Standard Chartered PLC (a commercial bank), Unigate
PLC (a manufacturer and distributor of dairy products), Jarrold & Sons
(multiple retail shops and specialised printing) and Rothmans International BV
(a manufacturer and distributor of tobacco products). Mr. Stenham is a UK
citizen and his business address is Broughton House, 6-8 Sackville Street,
London W1X 1DD, United Kingdom.
Lord Borrie QC has served as a non-executive Director of Telewest since
November 1994 and served as a consultant to the Executive Committee of the
Joint Venture from May 1994 until the Joint Venture was acquired by Telewest in
November 1994 in connection with Telewest's initial public offering. He was
President of the Institute of Trading Standards Administration from 1992 to
1996 and the Director General of the OFT from 1976 to 1992. Lord Borrie also
serves as a non-executive director of The Mirror Group plc (a media company
which has an interest in Live! TV (as discussed below)), Woolwich plc (a
financial institution), Three Valleys Water plc and Newspaper Publishing plc.
Lord Borrie is a UK citizen and his business address is Third Floor, 1 Plowden
Buildings, Temple, London EC4Y 9BU, United Kingdom.
Mr. Brett has served as a non-executive Director of Telewest since April
1998. He is an Executive Vice President, the General Counsel and the Secretary
of TCI, having served in these positions since January 1994. He also serves as
an Executive Vice President of TCI Communications, Inc. ("TCIC"), having served
in that position since October 1997. Previously, Mr. Brett served as Senior
Vice President of TCIC from 1991 to October 1997 and he has served as the
General Counsel of TCIC since 1991. In addition, he is Vice President and the
Secretary of most of TCI's subsidiaries. Mr. Brett is a US citizen and his
business address is Telecommunications, Inc., Terrace Tower II, 5619 DTC
Parkway, Englewood, Colorado 80111.
Mr. Burdick has served as acting Group Finance Director since September 1996
and was appointed Group Finance Director in February 1997. He was Vice
President Finance and Assistant Treasurer of MediaOne from 1990 to October
1996. Prior to joining MediaOne, Mr. Burdick worked in Treasury and Corporate
Development positions at Time Warner Inc. and Carnation International. Mr.
Burdick is a US citizen and his business address is Telewest Communications
plc, Genesis Business Park, Albert Drive, Woking, Surrey GU21 5RW, United
Kingdom.
Mr. Evans has served as a non-executive Director of Telewest since March
1998. He has been President of TINTA since September 1997 and Chief Executive
Officer of TINTA since January 1998. He served as President and Chief Operating
Officer of TINTA since September 1997. From July 1996 until August 1997, Mr.
Evans was Executive Vice President of The News Corporation Limited and
President and Chief Executive Officer of Sky Entertainment Services Latin
America, Inc. Previously, from August 1994 to June 1996, he was President and
Chief Operating Officer of Fox Television. From May 1993 until July 1994, Mr.
Evans served as President of Fox Circle Productions, a division of Fox
Television. Prior to joining Fox Television, he served as President of the
international division of British Sky Broadcasting, overseeing all
international programming and the creation of new channels. Mr. Evans is a US
citizen and his business address is Telecommunications International, Inc.,
2121 Avenue of the Stars, Suite 1800, Los Angeles, California 90067.
Following completion of the Merger, it is anticipated that Mr. Rice will be
appointed to serve as a Director of Telewest. Mr. Rice has served as a non-
executive director of General Cable since October 1997. He has recently been
appointed Group Managing Director--Commercial Aircraft at British Aerospace Plc
("BAe"), responsible for the Airbus, Regional Aircraft and Asset Management
businesses of BAe. He is also a member of the Group Executive. Prior to his
present role he was responsible for British Aerospace Asset Management and
before that he was Group Treasurer of BAe. Mr. Rice is a British citizen and
his business address is Warwick House, Farnborough Aerospace Centre,
Farnborough, Hants GU14 67U, United Kingdom.
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<PAGE>
SECTION FOUR GENERAL INFORMATION
Mr. Robbins was appointed to serve as a non-executive Director of Telewest
upon completion of the SBCC Merger in October 1995. He is the President and
Chief Executive Officer of Cox, having served as the President of the Cable
Division of Cox Enterprises Inc. from 1985 until 1995 and the Chief Executive
Officer of Cox Enterprises, Inc. from January 1995. He is a past chairman of
the US National Cable Television Association and currently serves on its
executive committee. He is also a director of Teleport Communications Group (an
information technology company) and NCR Corporation (a local exchange carrier
company). Mr. Robbins is a US citizen and his business address is Cox
Communications Inc., 1400 Lake Hern Drive, Atlanta, Georgia 30319.
Mr. Shaner has served as a non-executive Director of Telewest since June
1997. He is President of European and Middle East operations for SBC
International, responsible for SBC International's telephony interests in
France, Switzerland and the Middle East, having served in this position since
March 1997. From 1995 to March 1997 he was President and Chief Executive
Officer for SBC International Wireless in France. Previously, from 1991 to
1995, Mr. Shaner was Executive Vice President of Southwestern Bell Mobile
Systems in Dallas. Mr. Shaner is a US citizen and his business address is SBC
International, Tour D'Esplanade, 92915 Paris, La Defense Cedex, France.
Mr. Van Valkenburg has served as a Director of Telewest and as Group
Operations Director since June 1997 and as Acting Chief Executive Officer since
April 1998. He is also Executive Vice President of MediaOne International in
London, and, prior to commencing work at Telewest, was responsible for
overseeing the development of MediaOne International's broadband cable
interests in mainland Europe and South America from January 1996 to June 1997.
Previously, from December 1994 until December 1995, he was a senior vice
president for the Multimedia Group of U S WEST Media Group, Inc. Prior to this
he was President and Chief Operating Officer for MultiVision Cable TV Corp. (a
partnership with Merrill Lynch and General Capital Corp.) from April 1990 until
December 1994. Mr. Van Valkenburg is a US citizen and his business address is
Telewest Communications plc, Genesis Business Park, Albert Drive, Woking,
Surrey GU21 5RW, United Kingdom.
Following completion of the Merger, it is anticipated that Mr. Villaneau will
be appointed to serve as a Director of Telewest. Mr. Villaneau has served as a
Non-Executive Director of General Cable since December 1989. He is a Director
of Vivendi and is also a Director and/or Chairman of numerous Vivendi Group
companies engaged in communications businesses. Mr. Villaneau is a French
citizen and his business address is Vivendi S.A., CNIT La Defense, 2 place de
la Defense, BP415, 92053 Paris la Defense Cedex, France.
BOARD POWERS, COMPOSITION AND TERM OF OFFICE AND QUALIFICATIONS
The following describes certain provisions of the Articles of Association of
Telewest as proposed to be amended upon completion of the Merger.
POWERS
The Telewest Board of Directors may exercise all the powers of Telewest that
are not specifically reserved for the shareholders by the Companies Act, by the
Articles or by a special resolution of the shareholders, whether relating to
the management of Telewest's business or otherwise. Every Director who is
present at a Board meeting shall have one vote. In the case of an equality of
votes, the Chairman of the Board has no casting vote. A Director may designate
an alternate to attend any Board meeting, and such alternate shall have all the
rights of a Director at such meeting.
The Articles require the vote of a majority of the Directors (or alternates)
present at a duly convened meeting for the approval of all Board actions.
COMPOSITION
The Articles provide that the Board of Directors shall consist of no less
than two Directors but do not set a maximum limit on the number of Directors.
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SECTION FOUR GENERAL INFORMATION
The Articles include provision for the principal shareholders to appoint
Directors for so long as they maintain a specified shareholding in Telewest. In
relation to each of the TINTA Group and the MediaOne Group, for so long as
members of such group hold (whether directly or via its interests in TW
Holdings, LLC ("TW Holdings")) at least 15% of the Telewest shares in issue
ignoring all ordinary shares issued pursuant to or for the purposes of share
options (reduced to 12.5% following certain dilutive issues), it shall have the
right to appoint two Directors. Where either group's shareholding is reduced
below this level, but remains at more than 7.5%, again ignoring all Telewest
shares issued pursuant to or for the purposes of share options (reduced to 5.0%
following certain dilutive issues) (defined as a "Lesser Qualifying Interest"),
that group shall have the right to appoint one Director. Each of the SBC Group,
the Cox Group and the Vivendi Group also have a right to appoint one Director
for so long as members of such group hold a Lesser Qualifying Interest. In the
case of the Cox Group, Telewest shares transferred to TW Holdings as to which
Cox has retained economic rights will be taken into account in determining the
level of its interest in Telewest. See "-- Principal Shareholders".
In calculating the interest of any group for the purposes of the appointment
rights summarised above, any Telewest Convertible Preference shares then in
issue will be treated as if they had been converted into Telewest shares.
As a condition to listing of the Telewest shares on the London Stock
Exchange, Telewest must demonstrate its "independence" from any "controlling
shareholder" (defined in the Listing Rules as a person (or persons acting
jointly) who is entitled to exercise or control the exercise of 30% or more of
the voting rights at Telewest general meetings or who is able to control the
appointment of directors who are able to exercise a majority of votes at Board
meetings). As a result of the Relationship Agreement (see below), the TINTA
Group and MediaOne Group, are a controlling shareholder for these purposes. To
comply with the independence requirement, Telewest must demonstrate that all
"significant" decisions can be made by a majority of Directors who are
independent of TW Holdings, the TINTA Group and the MediaOne Group as
controlling shareholders, and that contractual arrangements to this effect are
in place between the controlling shareholders and Telewest. In particular, each
of TINTA and MediaOne agrees that for so long as either the TINTA Group or the
MediaOne Group holds 15% or more of the shares giving the right to vote at
general meetings of Telewest, it will use its voting rights and instruct the
Directors nominated by it (subject to their fiduciary duties to Telewest) to
exercise their voting rights as Directors such as to ensure that the majority
of the Directors are independent of TINTA and MediaOne. The Relationship
Agreement includes a number of provisions that are relevant to establishing
Telewest's independence from MediaOne and TINTA, and which will apply for so
long as TINTA and MediaOne qualify as a controlling shareholder of Telewest for
the purposes of the Listing Rules.
The quorum for a meeting of the Board consists of a majority of the
Directors. In the Relationship Agreement, the TINTA Group and the MediaOne
Group have agreed that on any matter requiring Board approval they will cause
the Directors designated by them to vote together as agreed by them (subject to
each Director's fiduciary and other duties to Telewest) or, in the absence of
such agreement, to vote together in the manner that would most likely continue
the status quo without materially increasing Telewest's financial obligations
or materially deviating from its approved budget and business plan. If either
the TINTA Group or the MediaOne Group, as the case may be, is precluded from
voting on any matter because of a conflict of interest, the members of the
other group may vote on such matter as they deem appropriate.
TERM OF OFFICE AND QUALIFICATION
All Directors of Telewest shall hold office until the next annual general
meeting following their elections and, in any event, until their successors
have been elected or their earlier resignation or removal from office pursuant
to the Articles. Accordingly, at each annual general meeting of Telewest, the
term of each of the Directors will expire and all Director nominees will stand
for election or re-election.
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SECTION FOUR GENERAL INFORMATION
There is no maximum age for a Director and no Director is required to own any
shares of Telewest.
COMMITTEES
The Board may delegate any of its power and authority for such time and on
such terms and conditions as it deems appropriate to a committee consisting of,
subject (as set out below), two or more Directors. Pursuant to the Articles,
the chairman and the majority of members of any committee must be independent
of both TINTA and MediaOne.
The Articles provide that, for so long as they have the right to appoint
Directors, each committee shall include one representative designated by the
TINTA Group and one representative designated by the MediaOne Group (unless
such groups or Directors otherwise consent). In addition, for so long as either
the SBC Group, the Cox Group or the Vivendi Group retains the right to appoint
a Director, such group shall be entitled to appoint one observer to each
committee. For so long as both the SBC Group and the Cox Group retain the right
to appoint a Director they shall also together be entitled to designate one
representative to the Audit Committee (described below). In the event that
either the SBC Group or the Cox Group no longer has the right to appoint a
Director, the other shall continue to be entitled to appoint an observer to the
Audit Committee. Pursuant to the Articles, for all Board committees other than
the Audit Committee, the quorum consists of a majority of the Directors who are
committee members. For the Audit Committee, the quorum consists of a majority
of the Directors who are Audit Committee members.
Telewest has established an Audit Committee and a Remuneration Committee,
each with formally delegated duties and responsibilities. The Audit Committee
is comprised of Telewest's three independent non-executive Directors, one
designee from the MediaOne Group and one designee from each of the SBC Group
and the Cox Group. Following completion of the Merger the Audit Committee will
be chaired by Mr. Stenham and its other members will be Lord Borrie and Messrs.
Ames and Rice. Mr. Ames will serve as the representative of MediaOne and Mr.
Shaner will serve as the representative of both the SBC Group and the Cox
Group. The Audit Committee meets regularly (at least four times per year) and
is responsible for ensuring that the financial performance of Telewest is
properly measured and reported on and for reviewing reports from the auditors
relating to financial statements and internal controls. The Audit Committee has
unrestricted access to the independent auditors. The TINTA Group retains the
right to appoint a representative to the Audit Committee but has agreed that,
for so long as the SBC Group/the Cox Group has the right to appoint a Director,
it will not exercise such right. Telewest has agreed that for the period during
which the TINTA Group has a right to appoint a representative to the Audit
Committee but does not exercise such right, the TINTA Group will be able to
appoint an observer to attend meetings of the Audit Committee. Following
completion of the Merger, the observer appointed by the TINTA Group will be Mr.
Evans.
The Remuneration Committee is comprised of one of Telewest's independent non-
executive Directors, one designee from the TINTA Group and one designee from
the MediaOne Group. Following the completion of the Merger, the Remuneration
Committee will be chaired by Mr. Stenham, and its other members will be Lord
Borrie, Mr. Rice, Mr. Ames and Mr. Evans. Mr. Evans and Mr. Ames will serve as
the representatives of the TINTA Group and the MediaOne Group, respectively.
The observer appointed by the SBC Group and by the Cox Group to attend meetings
of the Remuneration Committee will be Mr. Shaner. The Remuneration Committee
meets at least twice per year and is responsible for setting the remuneration
and terms of employment of Telewest's senior executives. The Remuneration
Committee is also responsible for administering Telewest's share and other
employee incentive plans.
REMUNERATION OF DIRECTORS
Each independent Non-Executive Director of Telewest (other than the Deputy
Chairman of the Board) receives an annual payment of (Pounds)20,000. The Deputy
Chairman of the Board receives an annual
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<PAGE>
SECTION FOUR GENERAL INFORMATION
payment of (Pounds)35,000. Each independent non-executive Director will also
receive (Pounds)1,000 for each Board and committee meeting attended and
reimbursement for reasonable expenses incurred in the performance of his or her
duties as a Director. No compensation is paid to any other non-executive
Director or to any of the executive Directors for their service as Directors.
For information concerning the compensation of executive Directors, see " --
Senior Executives -- Executive Remuneration".
SENIOR EXECUTIVES
Following completion of the Merger, the individuals set out below are
expected to serve as senior executives of Telewest. All such persons are
currently senior executives of Telewest.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
<S> <C> <C>
David Van Valkenburg 56 Acting Chief Executive Officer
Charles Burdick 47 Group Finance Director
Richard Evans 55 Group Information Technology Director
Adrian Howe 36 Group Financial Controller
Victoria Hull 36 General Counsel and Company Secretary
Howard Watson 35 Managing Director of Network Services
Glenn Tookey 40 Managing Director of Business Services
</TABLE>
Telewest intends to appoint a permanent Chief Executive Officer and a search
is currently underway to identify an appropriate candidate.
For certain biographical information, including business addresses and
citizenship, concerning Messrs. Van Valkenburg and Burdick, see "-- Board of
Directors". The business address of each of the executive officers listed below
is Telewest Communications plc, Genesis Business Park, Albert Drive, Woking,
Surrey GU21 5RW, United Kingdom. Each of such executive officers is a UK
citizen.
Mr. Evans has served as Group IT Director of Telewest since July 1996.
Previously he worked with Pearl Assurance plc as General Manager of Information
Systems from 1992 through June 1996.
Mr. A. Howe has served as Group Financial Controller of Telewest since May
1995. Previously he worked for BT for four years, his last position being
Acting Finance Director of the Personal Communications Division of BT.
Ms. Hull has served as General Counsel and Company Secretary of Telewest
since July 1994. Prior to joining Telewest she was a solicitor in the corporate
department of Clifford Chance, where she qualified in 1987.
Mr. Watson has served as Managing Director of Network Services of Telewest
since November 1995. Previously, he was Director of Engineering of Telewest
from June 1995 until October 1995. Prior to joining Telewest he was Engineering
Manager of Cablecom Group of GPT from 1991 until June 1993.
Mr. Tookey has served as Managing Director of Business Services of Telewest
since August 1997. He joined Telewest in March 1996 as Business Services
Director of the South East franchise area. Previously he worked for BT for 20
years, most recently as head of Marketing and Development of BT's data products
portfolio.
I-63
<PAGE>
SECTION FOUR GENERAL INFORMATION
EXECUTIVE REMUNERATION
The following table sets out the compensation paid by the Telewest Group
during the years ended 31 December 1995, 1996 and 1997, to the Acting Chief
Executive Officer and the four other most highly compensated senior executives
of the Combined Group. The most highly compensated senior executives of the
Combined Group have been determined based on the salary and bonus such
executives received as executives of the Telewest Group for the year ended 31
December 1997. The table also sets out information with respect to Mr.
Davidson, Mr. Rexroth and Mr. Wilson, the Chief Executive Officer, Chief
Operations Officer and Senior Vice President of Residential Services,
respectively, of the Telewest Group during 1997 (and included in the group of
most highly compensated senior executives of the Telewest Group for 1997), but
who are no longer employed by the Telewest Group.
SUMMARY COMPENSATION TABLE(/1/)
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
----------------------------------------------- ------------------------------
TELEWEST
RESTRICTED SHARES
OTHER ANNUAL STOCK UNDERLYING
NAME AND POSITION YEAR SALARY BONUS COMPENSATION AWARDS (2) OPTIONS
<S> <C> <C> <C> <C> <C> <C>
Stephen J. 1997 (Pounds)333,367 (Pounds) 45,000 (Pounds) 18,835(4) -- 16,810
Davidson (3)
Former Chief 1996 (Pounds)235,756 (Pounds) 25,502 (Pounds) 11,903(4) -- 107,579
Executive
Officer 1995 (Pounds)143,100 (Pounds) 98,312 (Pounds) 11,443(4) (Pounds)819,691(6) 178,380
Charles Burdick 1997 (Pounds)225,000 (Pounds) 25,000 (Pounds) 8,617(8) -- 765,847
(7)
Group Finance 1996 -- -- -- -- --
Director
1995 -- -- -- -- --
David Van 1997 (Pounds) 94,258 (Pounds) 41,584 (Pounds)170,234(11) -- --
Valkenburg (10)
Acting Chief 1996 -- -- -- -- --
Executive
Officer
1995 -- -- -- -- --
Lynn C. Rexroth 1997 (Pounds)132,962 (Pounds) 53,485 (Pounds) 89,149(14) (Pounds) 32,670(15) --
(13)
Former Chief 1996 (Pounds)175,000 (Pounds) 17,093 (Pounds)143,660(14) (Pounds) 63,584(15) 104,280
Operations
Officer 1995 (Pounds) 84,969 (Pounds) 59,649 (Pounds)166,274(14) (Pounds)119,957(15) 107,882
Roger P. Wilson 1997 (Pounds)116,705 (Pounds) 12,164 (Pounds) 9,904(18) -- --
(17)
Former Senior 1996 (Pounds) 98,000 (Pounds) 9,155 (Pounds) 8,479(18) -- 139,007
Vice President
of Residential 1995 (Pounds) 83,970 (Pounds)108,132 (Pounds) 7,350(18) (Pounds) 98,710(20) --
Services
Richard H. Evans 1997 (Pounds)105,870 (Pounds) 22,885 (Pounds) 10,455(22) -- 162,962
(21)
Group
Information
Technology
Director
<CAPTION>
ALL OTHER
NAME AND POSITION COMPENSATION
<S> <C> <C>
Stephen J. (Pounds)24,447(5)
Davidson (3)
Former Chief (Pounds)12,599
Executive
Officer (Pounds)10,017
Charles Burdick (Pounds) 6,300(9)
(7)
Group Finance --
Director
--
David Van (Pounds) 3,107(12)
Valkenburg (10)
Acting Chief --
Executive
Officer
--
Lynn C. Rexroth (Pounds) 9,323(16)
(13)
Former Chief (Pounds) 4,808
Operations
Officer (Pounds) 4,827
Roger P. Wilson (Pounds)14,630(19)
(17)
Former Senior (Pounds)11,760
Vice President
of Residential (Pounds)10,076
Services
Richard H. Evans (Pounds)11,375(23)(24)
(21)
Group
Information
Technology
Director
</TABLE>
- ------------
(1) Certain amounts reflected in this table and elsewhere in this section
were paid in US dollars, but are represented in this table in pounds
sterling based on an average exchange rate for the year ended 31
December 1997 of $1.64 to (Pounds)1.00.
(2) The value of the restricted stock (the "Restricted Stock") reflected in
this table represents the product of the number of Telewest shares
underlying the award multiplied by the closing price per Telewest share
on the date of the grant: 13 January 1995 (172.5 pence) in the case of
Restricted Stock awards granted to Mr. Davidson on that date, 10 March
1997 (121 pence), 24 January 1996 (132.5 pence) and 13 January 1995
(172.5 pence) in the case of Restricted Stock Awards granted to Mr.
Rexroth on those dates and 8 November 1995 (175.0 pence) in the case of
Restricted Stock Awards granted to Mr. Wilson on that date.
(3) Mr. Davidson served as a Director of Telewest from 7 June 1994 until 24
April 1998 and as Chief Executive Officer from 12 February 1997 until
his resignation on 15 June 1998.
(4) Mr. Davidson's "Other Annual Compensation" includes (Pounds)12,211,
(Pounds)11,060 and (Pounds)10,322 for a car and related expenses for
the years 1997, 1996 and 1995, respectively.
(5) Mr. Davidson's "All Other Compensation" consists of payments made by
Telewest to his private pension plan.
(6) On 13 January 1995, Mr. Davidson was granted an award of 475,183 shares
of Restricted Stock. As at 31 December 1997, the aggregate value of
such shares was (Pounds)332,628 based on a price per Telewest share of
70 pence (the closing price per Telewest share on 31 December 1997).
Such shares vested on 13 January 1998.
I-64
<PAGE>
SECTION FOUR GENERAL INFORMATION
(7) Mr. Burdick served as Acting Chief Financial Officer from September
1996 and was appointed Finance Director in February 1997.
(8) Mr. Burdick's "Other Annual Compensation" includes (Pounds)8,363 for
car and related expenses.
(9) Mr. Burdick's "All Other Compensation" consists of payments made by
Telewest to his private pension plan.
(10) Mr. Van Valkenburg is a secondee to Telewest from MediaOne and
consequently, as described below under "-- Employment and Service
Agreements", certain amounts reflected in this table for Mr. Van
Valkenburg were paid by an affiliate of MediaOne, which was reimbursed
by Telewest for all such payments. Mr. Van Valkenburg commenced
employment with Telewest on 1 July 1997.
(11) Mr. Van Valkenburg's "Other Annual Compensation" includes
(Pounds)55,330 in respect of his UK income taxes for 1997 and
(Pounds)74,057 in respect of his housing allowance for 1997.
(12) Mr. Van Valkenburg's "All Other Compensation" represents matching
contributions to his 401(k) pension plan.
(13) Mr. Rexroth was a secondee to Telewest from MediaOne and consequently,
as described below under "-- Employment and Service Agreements",
certain amounts reflected in this table for Mr. Rexroth were paid by
an affiliate of MediaOne, which was reimbursed by Telewest for all
such payments. Mr. Rexroth's employment with Telewest commenced on 1
December 1992 and he returned to MediaOne on 30 June 1997.
(14) Mr. Rexroth's "Other Annual Compensation" includes (Pounds)13,491,
(Pounds)74,253 and (Pounds)102,968 in respect of his UK income taxes
for the years 1997, 1996 and 1995, respectively, and ((Pounds)11,318),
(Pounds)30,462 and (Pounds)32,496 in respect of housing allowances for
1997, 1996 and 1995, respectively.
(15) On 10 March 1997, 24 January 1996 and 13 January 1995, Mr. Rexroth was
granted an award of 27,000, 47,988 and 69,540 shares, respectively, of
Restricted Stock. As of 31 December 1997, the aggregate value of such
shares was (Pounds)101,170 based on a price per Telewest share of 70
pence (the closing price per Telewest share on 31 December 1997).
69,540 of such shares vested on 13 January 1998 and 47,988 of such
shares vest and will be distributed to Mr. Rexroth (without payment of
consideration for such distribution) on 24 January 1999 subject to
earlier vesting and distribution under certain circumstances, and
27,000 of such shares will be distributed to Mr. Rexroth on 10 March
2000. Until such shares are vested, Mr. Rexroth will not be entitled
to vote or receive dividends in respect of such shares.
(16) Mr. Rexroth's "All Other Compensation" represents matching
contributions to his 401(k) pension plan.
(17) Mr. Wilson commenced employment with Telewest upon completion of the
SBCC Merger on 3 October 1995. Amounts reflected for Mr. Wilson prior
to completion of the SBCC Merger were paid by SBCC.
(18) Mr. Wilson's "Other Annual Compensation" includes (Pounds)9,329,
(Pounds)7,779 and (Pounds)6,731 for a car and related expenses for the
years 1997, 1996 and 1995, respectively.
(19) Mr. Wilson's "All Other Compensation" consists of payments made by
Telewest to his private pension plan.
(20) On 8 November 1995, Mr. Wilson was granted an award of 56,406 shares
of Restricted Stock. As of 31 December 1997, the aggregate value of
such shares was (Pounds)39,484 based on a price per Telewest share of
70 pence (the closing price per Telewest share on 31 December 1997).
Such shares vest and will be distributed to Mr. Wilson (without
payment of consideration for such distribution) on 8 November 1998,
subject to earlier vesting and distribution under certain
circumstances. Until such shares are vested, Mr. Wilson will not be
entitled to vote or receive dividends in respect of such shares.
(21) Mr. Evans commenced employment with Telewest in July 1996.
(22) Mr. Evans' "Other Annual Compensation" includes (Pounds)9,831 for car
and related expenses.
(23) Mr. Evans' "All Other Compensation" represents matching contributions
to his private pension plan.
(24) See "LTIP Awards" for information concerning an LTIP award made to Mr.
Evans in 1997.
I-65
<PAGE>
SECTION FOUR GENERAL INFORMATION
The following table sets out certain information with respect to options and
long-term incentive plan ("LTIP") awards granted to Telewest senior executives
and Directors in 1997.
OPTION GRANT TABLE
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALISABLE
--------------------------------------------------------- VALUE AT ASSUMED
PERCENT OF ANNUAL RATES OF
NUMBER OF TOTAL SHARE PRICE
SHARES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED OPTION TERM
OPTIONS TO EMPLOYEES IN EXERCISE ---------------------------------
NAME GRANTED 1997 PRICE(1) EXPIRATION DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Stephen J. Davidson 16,810(2) 0.31% 58.0 pence June 1, 2001 (Pounds) 3,005 (Pounds) 5,239
Charles Burdick 687,144(4) 7.68% 117.5 pence March 12, 2007 (Pounds)507,766 (Pounds)1,286,778
53,280(4) 0.60% 117.5 pence March 12, 2007 (Pounds) 39,371 (Pounds) 99,775
25,423(3) 0.28% 118.0 pence March 12, 2007 (Pounds) 18,659 (Pounds) 47,481
Richard H. Evans 140,740(4) 1.57% 135.0 pence October 30, 1999 (Pounds) 19,475 (Pounds) 39,900
22,222(3) 0.25% 135.0 pence October 30, 1999 (Pounds) 3,075 (Pounds) 6,300
</TABLE>
- ------------
(1) The exercise prices reflect the middle-market quotation on the London Stock
Exchange for the Telewest shares on the day of grant in the case of
incentive stock options under Section 422 of the US Internal Revenue Code
of 1986, as amended, and on the day before the grant in the case of other
options.
(2) Represents grants under the Telewest Sharesave Scheme.
(3) Represents grants under the Telewest 1995 (No. 1) Executive Share Option
Scheme.
(4) Represents grants under the Telewest 1995 (No. 2) Executive Share Option
Scheme.
The following table sets out certain information with respect to all options
held by Telewest senior executives and Directors as at 31 December 1997.
LTIP AWARDS
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES PAYOUT
- ---- ---------------- ---------------
<S> <C> <C>
Richard H. Evans 105,569(1) October 1, 2000(2)
</TABLE>
- ------------
(1) Represents an award equal to 75% of Mr. Evans' 1997 annual salary based on
a mid-market share price of 81.7 pence five days prior to the date of the
grant.
(2) The award will vest if certain performance criteria, based on total
shareholder return ("TSR") measured over a three-year period, are met. The
award is divided equally, with 50% of the award vesting if Telewest meets a
performance condition relating to the TSR of the Financial Times Stock
Exchange 100 Index ("FTSE 100") companies, and the remaining 50% vesting if
Telewest meets a performance condition relating to the TSR of a group of
comparable companies (including cable, broadcasting and telecommunications
companies listed on the London Stock Exchange and cable companies operating
in the UK and quoted on Nasdaq), in each case over a three-year period. If
Telewest's TSR is in the top quartile of the FTSE 100 over the three-year
period, Mr. Evans will receive 50% of the award; if Telewest's TSR is 50th
place in the FTSE 100, Mr. Evans will receive 12.5% of the award; and if
Telewest's TSR is below 50th place in the FTSE 100, Mr. Evans will receive
nothing in respect of this portion of the award. Similarly, if Telewest's
TSR is in the top quartile of the group of comparable companies in the
three-year period, Mr. Evans will receive 50% of the award; if Telewest's
TSR is at the median position of such group, Mr. Evans will receive 12.5%
of the award; and if Telewest's TSR is below the median position, Mr. Evans
will receive nothing in respect of this portion of the award. If Mr. Evans
remains employed by Telewest, at the end of the third year after the date
of grant, 50% of the vested award will be transferred to him and the
balance will be transferred to him at the end of the fourth year after the
date of the grant if he is then employed by Telewest.
In November 1997 and March 1998, certain senior executives were granted
awards under the LTIP. However, in accordance with the Listing Rules, grants
were not made to Mr. Davidson or Mr. Burdick at that time because they were
then in a "closed period" (as defined in the Listing Rules). The Board agreed
that when such period ended, appropriate arrangements would be made so that Mr.
Davidson and Mr. Burdick would not be prejudiced by the failure of Telewest to
make LTIP awards to them at that time. Telewest entered into an agreement with
Mr. Davidson on 24 April 1998 (described below) to compensate him for his
rights under the LTIP and to address other matters relating to his resignation
from Telewest.
I-66
<PAGE>
SECTION FOUR GENERAL INFORMATION
OPTION EXERCISES AND YEAR-END VALUE TABLE(1)
<TABLE>
<CAPTION>
NUMBER OF SHARES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES ACQUIRED VALUE OPTIONS AT YEAR-END AT YEAR-END
NAME ON EXERCISE REALISED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE(2)
<S> <C> <C> <C> <C>
Stephen Davidson 0 0 0/302,679 0/0
Charles Burdick 0 0 0/765,847 0/0
David Van Valkenburg 0 0 0 0/0
Lynn Rexroth 0 0 0/212,162 0/0
Roger Wilson 0 0 0/139,007 0/0
Richard Evans 0 0 0/162,962 0/0
</TABLE>
- ------------
(1) References to grants of options are options granted by Telewest under its
Executive Share Option Schemes and Sharesave Scheme.
(2) Based on the closing share price of 70 pence per Telewest share on 31
December 1997.
EMPLOYMENT AND SERVICE AGREEMENTS
Mr. Van Valkenburg commenced secondment with Telewest on 24 June 1997.
Pursuant to an agreement with MediaOne Overseas International Inc. (previously
known as U S WEST Overseas International, Inc.), Mr. Van Valkenburg was
assigned to serve as Director of Group Operations for an indefinite term.
MediaOne Overseas International, Inc. and Telewest each have the right to
terminate the arrangement at any time. Pursuant to this arrangement Mr. Van
Valkenburg receives a base salary of (Pounds)157,738 per annum plus foreign
service premiums and other expatriate compensation and is eligible for a bonus
of up to 40% of his base salary each year based upon Telewest's achievement (or
for 1997, MediaOne's achievement) of target performance. Telewest has agreed to
reimburse MediaOne Overseas International, Inc. for all amounts paid to Mr. Van
Valkenburg during the term of the assignment. Mr. Van Valkenburg continues to
receive benefits under certain MediaOne plans.
Mr. Burdick has agreed to serve as Group Finance Director of Telewest for an
initial two-year fixed term, commencing on 12 February 1997, and to continue
thereafter unless terminated by either party giving no less than one year's
notice. Mr. Burdick's employment agreement provides that he will receive a base
salary of (Pounds)225,000 per annum and also provides that he will be eligible
for a bonus of 25% of his base salary each year upon Telewest's achievement of
target performance, increasing to a maximum of 50% of his base salary if
Telewest exceeds target performance by specified amounts.
Mr. Davidson and Telewest entered into an agreement on 24 April 1998
outlining the terms of Mr. Davidson's resignation from Telewest. Pursuant to
this agreement, Mr. Davidson will receive a severance payment of
(Pounds)494,375 comprising salary, pension contribution and bonus, and will
continue to have private medical, permanent health and life insurance coverage
and use of a Telewest car until 30 April 1999. Mr. Davidson also will continue
to have Directors' and Officers' Insurance Cover until 30 April 2004. Telewest
has agreed to immediately vest the 475,183 Telewest shares awarded to
Mr. Davidson under the Telewest 1995 Restricted Share Scheme and to provide Mr.
Davidson (i) (Pounds)7,205 for a matching award of 7,790 shares which has
lapsed under the Telewest Equity Participation Plan and (ii) two additional
payments in cash or shares, subject to satisfaction of the performance criteria
under the LTIP, as compensation for two awards under the LTIP to which he was
entitled but which he did not receive.
The aggregate remuneration paid and benefits in kind granted to the Directors
of Telewest in respect of the year ended 31 December 1997 was
(Pounds)1,179,000. The total compensation payable to the Directors of Telewest
will not be varied as a consequence of the Merger.
I-67
<PAGE>
SECTION FOUR GENERAL INFORMATION
DIRECTOR AND SENIOR EXECUTIVE OWNERSHIP OF TELEWEST SECURITIES
As at 24 June 1998 (the latest practicable date prior to the publication of
this document), the interests of the Directors of Telewest and persons
connected with them (within the meaning of Section 346 of the Companies Act) in
the issued share capital of Telewest which have been notified to Telewest
pursuant to Sections 324 or 328 of the Companies Act or are required to be
entered in the register of members of Telewest pursuant to Section 325 of the
Companies Act, including interests of persons connected with them (within the
meaning of Section 346 of the Companies Act) the existence of which was known
or could with reasonable diligence be ascertained by that Director, were as
follows:
<TABLE>
<CAPTION>
HOLDER TELEWEST SHARES
<S> <C>
Charles Burdick 40,000 (1)(2)
All Directors and Executive Officers as a group 40,000 (2)
</TABLE>
- ------------
(1) Held in the form of Telewest ADSs. If Mr. Burdick subscribes for his
entitlement to new Telewest ADSs in the Pre-Emptive Issue, following the
Merger, the Pre-emptive Issue and Conversion, he would be interested in
47,323 Telewest shares, representing less than 0.01% of the then-issued
Telewest shares.
(2) Represents less than 0.01% of issued Telewest shares. None of the other
senior executives named in the table captioned "Summary Compensation Table"
set out above beneficially owns any Telewest shares.
As at the close of business on 24 June 1998 (being the latest practicable
date prior to the publication of this document), the following options over
Telewest shares have been granted to certain Directors of Telewest and remain
outstanding under the Telewest Share Schemes:
<TABLE>
<CAPTION>
NUMBER UNDER
HOLDER OPTION EXERCISE PERIOD EXERCISE PRICE
<S> <C> <C> <C>
Charles Burdick 740,424 12.3.99-10.3.06 117.5 pence
25,423 12.3.99-10.3.06 118.0 pence
</TABLE>
The options over Telewest shares set out above are exercisable in accordance
with the terms of the Telewest Share Schemes, details of which are set out
under " -- Section Seven -- Additional Information -- Employee Share Schemes".
I-68
<PAGE>
SECTION FOUR GENERAL INFORMATION
PRINCIPAL SHAREHOLDERS
PRE-MERGER BENEFICIAL OWNERSHIP OF TELEWEST
The following table sets out certain information with respect to persons
known to Telewest to be the beneficial owners, as at 24 June 1998 (being the
latest practicable date prior to the publication of this document), of more
than 3% of the Telewest shares. So far as Telewest is aware, unless otherwise
discussed below, the persons named in the table have sole voting and investment
power with respect to all Telewest shares and Telewest Convertible Preference
shares indicated as being beneficially owned by them.
<TABLE>
<CAPTION>
NUMBER OF PERCENTAGE
NUMBER OF PERCENTAGE CONVERTIBLE OF CONVERTIBLE
NAME AND ADDRESS OF TELEWEST OF TELEWEST PREFERENCE PREFERENCE
BENEFICIAL OWNER SHARES (1) SHARES SHARES (1) SHARES
<S> <C> <C> <C> <C>
Tele-Communications, Inc. 246,111,750 26.5 132,638,250 26.7
5619 DTC Parkway
Englewood, Colorado
80111 (2)
MediaOne Group, Inc. 246,111,750 26.5 132,638,250 26.7
188 Inverness Road West
Englewood, Colorado
80112 (3)
SBC Communications, Inc. 91,997,480 9.9 115,395,104 23.3
2 Read's Way
Suite 222, Corporate
Commons
New Castle, Delaware
19720 (4)
Cox Communications, Inc. 91,997,480 9.9 115,395,104 23.3
1400 Lake Hearn Drive
Atlanta, Georgia 30319
(5)
Mercury Asset Management 41,045,900 4.4 0 0.0
Group Ltd (6)
33 King William Street
London EC4
Prudential Portfolio 30,792,000 3.3 0 0.0
Managers Ltd. (7)
142 Holborn Bars
London EC1
</TABLE>
- ------------
(1) For so long as the Telewest shares are listed on the London Stock Exchange,
subject to certain exceptions (see footnote (8) below), a holder of
Telewest Convertible Preference shares is not entitled to convert any of
its Telewest Convertible Preference shares into Telewest shares to the
extent that, immediately following such conversion, the number of Telewest
shares in the hands of the public (as specified in the Listing Rules) would
be less than 25%. As noted under " -- Section One -- The Merger and Related
Matters", the TINTA Affiliate, the MediaOne Affiliates, the SBC Affiliate
and the Cox Affiliate hold all of the Telewest Convertible Preference
shares in issue and have stated that it is their intention to convert the
maximum possible number of Telewest Convertible Preference shares held by
them into Telewest shares following the Offer becoming or being declared
unconditional in all respects. The ability of the holders to convert
Telewest Convertible Preference shares is dependent upon, among other
things, consummation of the Merger. Accordingly, the Telewest shares
reflected in this table do not include any Telewest shares that may be
issued on Conversion.
(2) All of the Telewest shares and Telewest Convertible Preference shares that
are listed as beneficially owned by TCI are owned by TW Holdings (which
also directly owns the 246,111,750 Telewest shares and 132,638,250 Telewest
Convertible Preference shares that are listed as beneficially owned by
MediaOne and therefore has an interest in a total of 492,223,500 Telewest
shares and a total of 265,276,500 Telewest Convertible Preference shares
(53.2% of the issued Telewest shares assuming full conversion of the
Telewest Convertible Preference shares)). 50% of TW Holdings is
I-69
<PAGE>
SECTION FOUR GENERAL INFORMATION
owned by the TINTA Affiliate, a wholly owned subsidiary of TINTA. TINTA in
turn, is a subsidiary of TCI. The TINTA Affiliate is the registered holder
of the shares owned by TW Holdings.
(3) All of the Telewest shares and Telewest Convertible Preference shares that
are listed as beneficially owned by MediaOne are owned by TW Holdings
(which also directly owns the 246,111,750 Telewest shares and 132,638,250
Telewest Convertible Preference shares that are listed as beneficially
owned by TCI and therefore has an interest in a total of 492,223,500
Telewest shares and a total of 265,276,500 Telewest Convertible Preference
shares (53.2% of the issued Telewest shares assuming full conversion of the
Telewest Convertible Preferences shares)). 50% of TW Holdings is owned by
the Media One Affiliates (45.6% is owned by MediaOne UK Cable, Inc.
("MediaOne UK") and 4.4% owned by MediaOne Cable Partnership Holdings, Inc.
("MediaOne Cable")). MediaOne UK and MediaOne Cable are each wholly owned
subsidiaries of MediaOne International Holdings, which in turn is a wholly
owned subsidiary of MediaOne. MediaOne UK (as to 224,717,516 Telewest
shares and 121,027,284 Telewest Convertible Preference shares) and MediaOne
Cable (as to 21,394,234 Telewest shares and 11,610,966 Telewest Convertible
Preference shares) are the registered holders of the shares owned by TW
Holdings.
(4) All of the Telewest shares and the Telewest Convertible Preference shares
which are beneficially owned by SBC are owned by and registered in the name
of the SBC Affiliate, which is an indirect wholly owned subsidiary of SBC.
Assuming full conversion of the Telewest Convertible Preference shares, SBC
would beneficially own 14.6% of the issued Telewest shares.
(5) All of the Telewest shares and Telewest Convertible Preference shares that
are listed as beneficially owned by Cox are owned by and registered in the
name of the Cox Affiliate. Assuming full conversion of the Telewest
Convertible Preference shares, Cox would beneficially own 14.6% of the
issued Telewest shares.
(6) The information with respect to Telewest shares beneficially owned by
Mercury Asset Management Group Ltd. ("MAM") is derived from MAM's Rule 8
Disclosure, dated 24 June 1998, under the City Code.
(7) The information with respect to Telewest shares beneficially owned by
Prudential Portfolio Managers Ltd ("PPM") is derived from PPM's Rule 8
Disclosure, dated 29 May 1998 under the City Code.
(8) Under the Relationship Agreement to be approved by Telewest shareholders at
the EGM, Telewest has agreed to convert Telewest Convertible Preference
shares held by the MediaOne Affiliates, the TINTA Affiliate and/or the Cox
Affiliate to the extent necessary to ensure TW Holdings maintains an
interest of not less than 50.1% of the Telewest shares in issue following
the Offer and the Pre-emptive Issue overriding the requirement in the
Articles that 25% of Telewest shares held by the "public". See "-- Disposal
and Acquisition of Telewest Shares and Telewest Convertible Preference
Shares -- Conversion of Telewest Convertible Preference Shares".
I-70
<PAGE>
SECTION FOUR GENERAL INFORMATION
POST-MERGER BENEFICIAL OWNERSHIP OF TELEWEST
The following table sets out certain information with respect to any person
or group of persons who are expected, following completion of the Merger, the
Pre-emptive Issue and Conversion, to own beneficially more than 3% of the then-
issued Telewest shares. The information in the table assumes that all such
events have taken place, all options outstanding under the General Cable Share
Schemes will be exercised and the General Cable shares received in connection
therewith will be tendered in the Offer and all Qualifying Telewest
securityholders take up their entitlements under the Pre-emptive Issue in full
(other than SBC, which has agreed that it will not take up its entitlement
under the Pre-emptive Issue) and 148,715,884 Telewest shares have been
transferred by the Cox Affiliate to TW Holdings (see "-- Voting Arrangements
between the TINTA Group and the MediaOne Group" below). So far as Telewest is
aware, unless otherwise indicated below, the persons named in the table will
have sole voting and investment power with respect to all of the then-issued
Telewest shares indicated as being beneficially owned by them.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF NUMBER PERCENTAGE
BENEFICIAL OWNER (I.E., OF TELEWEST OF TELEWEST
ULTIMATE PARENT) SHARES SHARES
<C> <C> <S>
Tele-Communications, Inc. 611,720,158 28.5
5619 DTC Parkway
Englewood, Colorado 80111 (1)(4)
MediaOne Group,Inc. 611,720,158 28.5
118 Inverness Road West
Englewood, Colorado 80112 (2)(4)
SBC Communications, Inc. 207,392,584 9.7
2 Read's Way
Suite 222, Corporate Commons
New Castle, Delaware 19720 (3)
Cox Communications, Inc. 104,811,911 4.9
1400 Lake Hearn Drive
Atlanta, Georgia 30319 (4)
Vivendi S.A. 182,454,893 8.5
52 Rue d'Anjou
Paris 75008
France (5)
Mercury Asset Management Group Ltd 108,136,355 5.01
(6)
33 King William Street
London EC4
</TABLE>
- ------------
(1) All of the Telewest shares that are listed as beneficially owned by TCI are
owned by TW Holdings and include 148,715,884 Telewest shares to be
transferred to it by the Cox Affiliate as to which (i) the Cox Affiliate
has retained all economic benefits and (ii) the TINTA Affiliate and the
MediaOne Affiliates, as the members of TW Holdings, share voting power. Cox
has agreed to transfer such Telewest shares by the fourteenth day after the
later of the first closing date of the Offer and the date the Offer becomes
or is declared wholly unconditional (the "Issue Date"). TW Holdings also
owns the 611,720,158 Telewest shares that are listed as beneficially owned
by MediaOne and therefore has an interest in a total of 1,074,724,432
Telewest shares (50.1% of the issued Telewest shares) (without double
counting the Telewest shares transferred to TW Holdings by the Cox
Affiliate). 50% of TW Holdings is owned by the TINTA Affiliate, a wholly
owned subsidiary of
I-71
<PAGE>
SECTION FOUR GENERAL INFORMATION
TINTA. TINTA, in turn, is a subsidiary of TCI. The TINTA Affiliate is the
registered holder of the Telewest shares owned by TW Holdings for TINTA.
(2) All of the Telewest shares that are listed as beneficially owned by
MediaOne are owned by TW Holdings and include 148,715,884 Telewest shares
to be transferred to TW Holdings by the Cox Affiliate on the Issue Date,
as to which (i) the Cox Affiliate has retained all economic benefits and
(ii) the TINTA Affiliate and the MediaOne Affiliates, as the members of TW
Holdings, share voting power. TW Holdings also directly owns the
611,720,158 Telewest shares that are listed as beneficially owned by TCI
and therefore has an interest in a total of 1,074,724,432 Telewest shares
(50.1% of the issued Telewest shares) (without double counting the
Telewest shares transferred to TW Holdings by the Cox Affiliate).
45.6% of TW Holdings is owned by MediaOne UK and 4.4% of TW Holdings is
owned by MediaOne Cable. MediaOne UK and MediaOne Cable are each wholly
owned subsidiaries of MediaOne International Holdings, which is a wholly
owned subsidiary of MediaOne. MediaOne UK (as to 490,074,341 Telewest
shares) and MediaOne Cable (as to 47,287,875 Telewest shares) are
registered holders of the shares owned by TW Holdings for MediaOne.
(3) All of the Telewest shares that are listed as beneficially owned by SBC
are owned by and registered in the name of the SBC Affiliate, which is an
indirect wholly owned subsidiary of SBC.
(4) All of the Telewest shares that are listed as beneficially owned by Cox
are owned by and registered in the name of the Cox Affiliate. The total
number of shares excludes 148,715,884 Telewest shares to be transferred to
TW Holdings by the Cox Affiliate on the Closing Date as to which (i) the
TINTA Affiliate and the MediaOne Affiliates, as the members of TW
Holdings, share voting power and (ii) the Cox Affiliate has retained
economic rights. The Cox Affiliate may elect to have such shares
retransferred to it on or after 31 December 1999 or earlier under certain
limited circumstances described under "--Disposal and Acquisition of
Telewest Shares and Telewest Convertible Preference Shares--Reacquisition
of Telewest Shares by Cox". TW Holdings is the registered holder of the
Telewest shares transferred to TW Holdings by Cox.
(5) All of the Telewest shares that are listed as beneficially owned by
Vivendi are owned by and registered in the name of GUHL. The information
for Vivendi assumes that GUHL accepts the Offer in respect of its entire
holding of General Cable shares and that no Mix and Match Election is made
with respect to the General Cable shares registered in the name of GUHL.
(6) The information with respect to Telewest shares beneficially owned by MAM
is derived from MAM's Rule 8 Disclosure, dated 24 June 1998, under the
City Code and assumes MAM takes up its entitlement under the Pre-emptive
Issue and tenders its 47,928,407 General Cable shares (see page I-81) in
the Offer for the basic terms.
I-72
<PAGE>
SECTION FOUR GENERAL INFORMATION
The relationships between and among Telewest and its principal shareholders
are governed by a Relationship Agreement and certain provisions of the
Articles. The principal terms of these arrangements are summarised below:
VOTING ARRANGEMENTS BETWEEN THE TINTA GROUP AND THE MEDIAONE GROUP
Telewest, TINTA and the TINTA Affiliate, MediaOne International Holdings, the
MediaOne Affiliates, Cox, the Cox Affiliate, SBC and the SBC Affiliate have
entered into the Relationship Agreement, with respect to the management of
Telewest and the ownership, voting and disposal of their beneficial shares in
Telewest. Pursuant to the Relationship Agreement and the TW Holdings operating
agreement, the TINTA Affiliate and the MediaOne Affiliates have agreed that, on
any matter requiring shareholder approval, they will vote their Telewest shares
together in such manner as may be agreed by them or, in the absence of such
agreement, will vote their Telewest shares together in the manner that would
most likely continue the status quo without materially increasing Telewest's
financial obligations or materially deviating from its approved budget and
business plan. If the TINTA Affiliate or the MediaOne Affiliates, as the case
may be, have a conflict of interest in any matter, they shall abstain from
voting (or the Telewest shares owned by TW Holdings and attributable to them
shall not be voted) and the members of the other affiliate group may vote (or
the other Telewest shares owned by TW Holdings shall be voted) on such matter
as they deem appropriate. These voting restrictions will lapse after 31
December 1999 if TINTA or MediaOne so notifies the other following the disposal
by the other of more than 43 million of its Telewest shares other than to an
Affiliate or pursuant to a Permitted Demerger (defined as certain distributions
which result in an Affiliate of the transferor owning 80% or more of the
transferor's shares in Telewest) or with the other's consent. As a result of
these ownership and voting arrangements, the TINTA Affiliate and the MediaOne
Affiliates together generally will be able to influence materially the outcome
of any matter requiring shareholder approval (other than one involving a
special resolution), including the election or removal of Directors, the
creation and issue of further shares and the granting of the necessary
authority to the Directors to allot any unissued shares.
The Relationship Agreement also provides that for so long as either the TINTA
Group or the MediaOne Group holds 15% or more of the Telewest shares in issue
assuming conversion of all Telewest Convertible Preference shares then in issue
and ignoring all Telewest shares issued pursuant to or for the purposes of
share options, the consent of the TINTA Group and/or the MediaOne Group (as
appropriate) must be obtained by Telewest before: (a) making any material
acquisition or disposal out of the ordinary course of business including any
transaction which would qualify as a Class 2 transaction for the purposes of
the Listing Rules or which the Board intends to announce; (b) incurring any
borrowings or indebtedness in the nature of borrowings or granting any security
interests in excess of (Pounds)50 million in aggregate (excluding borrowings
under facilities in place at the date the Relationship Agreement became
unconditional and any borrowings or security interests consented to after that
date); (c) allotting or issuing shares or securities convertible into shares or
granting options other than pursuant to the Offer, the Pre-emptive Issue or the
Conversion or pursuant to options (depending on their terms), convertibles or
similar securities granted or issued before the date of the Relationship
Agreement or with the necessary consents after the date on which the
Relationship Agreement becomes unconditional; (d) appointing or removing the
chief executive officer of Telewest; or (e) increasing the number of directors
holding office beyond 14.
The Cox Affiliate has agreed to transfer up to a maximum of 153,704,666
Telewest shares to TW Holdings. As a result, the TINTA Affiliate and the
MediaOne Affiliates (through their ownership of TW Holdings) will have the
ability to vote such shares as directed by their designees on the TW Holdings
board of directors and in accordance with the shareholder arrangements. Cox has
the right to have such shares retransferred to it at any time after 31 December
1999 or earlier under certain limited circumstances described under "--
Disposal and Acquisition of Telewest Shares and Telewest Convertible Preference
Shares--Reacquisition of Telewest Shares by Cox".
I-73
<PAGE>
SECTION FOUR GENERAL INFORMATION
DISPOSAL AND ACQUISITION OF TELEWEST SHARES AND TELEWEST CONVERTIBLE
PREFERENCE SHARES
The Relationship Agreement imposes certain restrictions on transfers of
Telewest shares by its principal shareholders, as described below.
RESTRICTIONS APPLICABLE TO TINTA AND MEDIAONE
TINTA and MediaOne have agreed amongst themselves that no transfers are
permitted by members of the TINTA Group or the MediaOne Group before 31
December 1999 other than (a) to an "Affiliate" (defined as a person controlled
by, controlling or under joint control with the relevant member of the TINTA
Group or the MediaOne Group) or (b) with the written consent of the other and
approval of the identity of the transferee and (if the transferee becomes a
member of the TINTA Group or the MediaOne Group) the transferee agreeing to
adhere to the Relationship Agreement or (c) pursuant to a Permitted Demerger.
After 31 December 1999, any proposed transfers by a member of the MediaOne
Group or the TINTA Group will be subject to rights of first refusal in favour
of the other of TINTA or MediaOne. These provisions will not apply to (a)
transfers to an Affiliate of TINTA or MediaOne or (b) a transfer pursuant to a
Permitted Demerger, provided that any transferee which becomes a member of the
relevant group executes a deed of adherence to the Relationship Agreement.
The Relationship Agreement also contains provisions for rights of first
offer as between the MediaOne Group and the TINTA Group in the event of
certain changes of control. Where the MediaOne Group or the TINTA Group is
subject to a change of control for these purposes, the group which is
unaffected by the change of control may offer to buy the shares of the
affected group (or to sell its shares to the affected group) specifying a
price at which it is prepared to buy or sell for these purposes or to consent
to the change of control. If the unaffected group does not consent, the
affected group has the right to choose whether to buy or sell at that price.
RESTRICTIONS APPLICABLE TO SBC AND COX
Any transfers by a member of the SBC Group or the Cox Group are subject to
rights of first offer in favour of MediaOne International Holdings and TINTA
other than in respect of: (a) "Public Transfers" (defined in the Relationship
Agreement as a transfer of shares through a brokerage transaction effected on
a national securities exchange, Nasdaq or the London Stock Exchange, including
a private transfer to a broker in anticipation of such a transfer); (b)
transfers where the shares remain controlled by the transferor; (c) the
transfers between members of the same shareholder group or from a shareholder
in one group to a shareholder in the other, provided the transferee executes a
deed of adherence to the Relationship Agreement; or (d) transfers following a
general takeover offer for Telewest (whether by a third party or by SBC or
Cox).
REACQUISITION OF TELEWEST SHARES BY COX
The Cox Affiliate has agreed to transfer certain Telewest shares to TW
Holdings on the Closing Date as to which (i) the TINTA Affiliate and the
MediaOne Affiliates, as the members of TW Holdings, will share voting power on
the bases described above and (ii) the Cox Affiliate will retain all economic
benefits. TW Holdings may at any time elect to transfer all or part of these
shares to the Cox Affiliate and the Cox Affiliate is entitled to require TW
Holdings to transfer all or part of these Telewest shares to the Cox Affiliate
in the following circumstances (among others): on or after 31 December 1999;
with the agreement of either TINTA or MediaOne International Holdings, on or
after 31 December 1998 and prior to 31 December 1999; with the agreement of
Cox, TINTA and MediaOne International Holdings prior to 31 December 1998;
following any disposal of Telewest shares or Telewest Convertible Preference
shares by the MediaOne Group or the TINTA Group (other than to each other or
to TW Holdings or any of their Affiliates); following termination of the
Relationship Agreement; or if TW Holdings ceases to hold 50.1% of the Telewest
shares in issue for the time being
I-74
<PAGE>
SECTION FOUR GENERAL INFORMATION
by reason of the TINTA Group or the MediaOne Group failing to exercise their
pre-emptive rights (see "-- Pre-emptive Rights" below).
CONVERSION OF TELEWEST CONVERTIBLE PREFERENCE SHARES
Telewest and MediaOne, TINTA, Cox and SBC have agreed that TW Holdings shall
be entitled to maintain an interest of not less than 50.1% of Telewest shares
in issue following the Offer and the Pre-emptive Issue (the "Relevant
Interest"). In certain circumstances, depending on the level of acceptances of
the Offer and the take-up of the Pre-emptive Issue, TW Holdings and/or other
members of the MediaOne Group, the TINTA Group or the Cox Group will need to
convert Telewest Convertible Preference shares into Telewest shares so as to
ensure that TW Holdings maintains the Relevant Interest. The Relationship
Agreement contains provisions requiring the conversion of Telewest Convertible
Preference shares so as to enable TW Holdings to maintain the Relevant
Interest. These provisions override the requirements of the Articles which
otherwise require that 25% or more of the Telewest shares in issue following
any conversion be in public hands.
PRE-EMPTIVE RIGHTS
Pursuant to the Companies Act, if Telewest issues new equity shares for cash,
it is required to offer those shares to existing Telewest shareholders on a
pre-emptive pro rata basis unless otherwise waived by special resolution of the
Telewest shareholders in general meeting. Pursuant to a special resolution
passed by the Telewest shareholders at the Annual General Meeting held on 8 May
1998, this requirement has been waived in respect of issues for cash of up to
5% of the nominal value of the issued Telewest shares (in aggregate 46,378,380
Telewest shares) until the next Annual General Meeting. A proposal to grant a
waiver in relation to the issue of new Telewest shares for cash pursuant to the
Pre-emptive Issue and to extend the waiver to reflect the increase in
Telewest's share capital is set out in the Notice of Extraordinary General
Meeting referred to in " -- Section Seven -- Additional Information -- Share
Capital".
In addition to the statutory pre-emption provisions, Telewest has agreed
pursuant to the Relationship Agreement that the TINTA Group, the MediaOne Group
and the Cox Group will have the right to maintain a certain level of interest
in Telewest going forward.
For so long as TW Holdings and/or the MediaOne Group and the TINTA Group
control 50.1% or more of the voting rights in Telewest they will have the
right, on a dilutive issue of shares, to require Telewest to issue sufficient
Telewest shares to them to enable them to maintain their interest at 50.1% or
more on a fully diluted basis.
Otherwise, and for so long as the MediaOne Group or the TINTA Group
individually hold 15% or more of the Telewest shares (assuming conversion of
all Telewest Convertible Preference shares then in issue and ignoring Telewest
shares issued pursuant to or for the purposes of share options), they will have
the right to be notified of any issue of shares and (other than in the case of
a rights issue by Telewest) to increase their holdings in Telewest to enable
them to maintain their interest at 15% of the fully diluted Telewest shares.
The Cox Group has equivalent rights (as well as each of the MediaOne Group and
the TINTA Group if their respective shareholdings fall below 15%) to maintain
their interest at 7.5% of the fully diluted Telewest shares for so long as it
holds at least 7.5% of the Telewest shares in issue (assuming conversion of all
Telewest Convertible Preference shares then in issue and ignoring Telewest
shares issued pursuant to or for the purpose of share options).
These rights entitle the relevant shareholder group to purchase (at the time
of the dilutive issue) additional newly issued Telewest shares for cash at a
purchase price per share based on the average of the prices quoted on the
London Stock Exchange for the ten days ending on the day preceding the day on
which the right is exercised.
I-75
<PAGE>
SECTION FOUR GENERAL INFORMATION
Telewest also has a general obligation to use its best efforts to ensure that
any issue of shares is done in a manner that provides each shareholder group,
regardless of their then-current shareholding in Telewest, with an opportunity
to acquire additional Telewest shares to enable them to maintain their
percentage of ownership.
The Panel has confirmed that Rule 9 of the City Code ("Rule 9") will not
apply to the issue of Telewest shares to the MediaOne Group, the TINTA Group or
TW Holdings in the limited circumstances described under " -- City Code
Implications".
REGISTRATION RIGHTS
Telewest has agreed that the TINTA Affiliate, the MediaOne Affiliates, the
SBC Affiliate, the Cox Affiliate and Vivendi will have the right, subject to
certain limited exceptions, to require Telewest to include all or any portion
of their Telewest shares (including those arising from a conversion of Telewest
Convertible Preference shares) in any registered offering by Telewest of
Telewest shares under the Securities Act or in a public offering under UK law.
In addition, the TINTA Affiliate, the MediaOne Affiliates, the SBC Affiliate,
the Cox Affiliate and Vivendi will have the right to cause Telewest on up to
ten separate occasions (two exercisable by each of the TINTA Affiliate, the
MediaOne Affiliates, the SBC Affiliate, the Cox Affiliate and Vivendi) to offer
all or any part of their Telewest shares for sale in a registered offering
under the Securities Act or in a public offering under UK law.
CITY CODE IMPLICATIONS
The City Code regulates various aspects of takeovers and mergers relating to
UK public companies.
Rule 9 provides that, except in cases where a dispensation is granted by the
Panel, when any person or group of persons acting in concert acquires shares
which represent 30% or more of the voting rights in a public company, or when
any person or group of persons acting in concert already holding not less than
30% and not more than 50% of the voting rights acquires in any period of 12
months additional shares representing more than 1% of the voting rights, such
person or group of persons is normally required to make a mandatory offer to
purchase from all the shareholders all of their shares in the company. Rule 9
also provides that the exercise of conversion rights attaching to convertible
preference shares to convert into ordinary shares will be considered to be an
acquisition of such shares for the purposes of Rule 9.
As noted in "-- Pre-Merger Beneficial Ownership of Telewest", the Telewest
shares and Telewest Convertible Preference shares in which members of the TINTA
Group and MediaOne Group currently have an interest are beneficially owned by
TW Holdings, a company owned 50% by each of them. The new Telewest shares to be
acquired by members of the TINTA Group and the MediaOne Group under the Pre-
emptive Issue and the Subscription Agreement will also be beneficially owned by
TW Holdings and Cox will transfer a number of Telewest shares to TW Holdings as
to which Cox will retain all economic rights but TINTA and MediaOne, as the
members of TW Holdings, will share voting power. TW Holdings currently owns
some 53.4% of the issued Telewest shares and, following completion of the said
transfer, the Merger, the Pre-emptive Issue and the Conversion, will own at
least 50.1% of the Telewest shares. The exact percentage of the Telewest shares
held by TW Holdings will depend on the number of new Telewest shares acquired
by holders of Telewest securities other than members of the TINTA Group, the
MediaOne Group and the Cox Group under the Pre-emptive Issue, on the number of
General Cable shares in respect of which acceptances of the Offer are received
and on the proportion of the Telewest Convertible Preference shares which are
converted.
50% of TW Holdings is owned by the TINTA Affiliate and 50% is owned by the
MediaOne Affiliates. Assuming completion of the Merger, the Pre-emptive Issue
and Conversion and that all Qualifying Telewest shareholders take up their
entitlements under the Pre-emptive Issue, TW Holdings
I-76
<PAGE>
SECTION FOUR GENERAL INFORMATION
will remain owned as to 50% by the TINTA Affiliate and as to 50% by the
MediaOne Affiliates. In the event that in excess of 62,373,342 new Telewest
shares are not subscribed for by Qualifying Telewest shareholders, TW Holdings
will no longer be owned as to 50% by the TINTA Affiliate and 50% by the
MediaOne Affiliates, although the management of TW Holdings will remain
deadlocked between MediaOne and TINTA.
The Panel has confirmed that neither the TINTA Group nor the MediaOne Group
will, as a result of the issue of new Telewest shares pursuant to the Pre-
emptive Issue or the Conversion, be required to make an offer under Rule 9 for
the outstanding Telewest shares not owned by them. Further, the Panel has
confirmed that, on the basis that TW Holdings is a deadlocked entity (as
described herein) between the TINTA Group and the MediaOne Group, Rule 9 will
not apply to the contributions by members of the TINTA Group and the MediaOne
Group and by the Cox Affiliate to TW Holdings and that the Panel will continue
to treat the voting rights attaching to Telewest shares owned by TW Holdings as
being held in equal proportions by the TINTA Group and the MediaOne Group,
respectively. Accordingly, any acquisition by TW Holdings, members of the TINTA
Group or members of the MediaOne Group which results in the total deemed voting
rights of either the MediaOne Group or the TINTA Group individually (whether as
a result of Telewest shares held directly or through TW Holdings) amounting to
30% or more will, in the absence of any future dispensation, give rise to an
obligation to make a general offer under Rule 9. In addition, the Panel has
indicated that if the deadlock arrangements in TW Holdings were to change so
that either TINTA or MediaOne could be said to control TW Holdings or a third
(or more) person held an ownership interest in TW Holdings, then an obligation
to make a general offer under Rule 9 may arise.
The Panel has confirmed that Rule 9 will not apply to the issue of Telewest
shares to either members of the TINTA Group or the MediaOne Group or TW
Holdings pursuant to the Pre-emptive Rights set out above provided that the
Telewest shares held or treated as held by the TINTA Group or the MediaOne
Group individually, as the case may be, represent less than 30% of the voting
rights attaching to Telewest shares and that the amount of Telewest shares held
or treated as held by the TINTA Group and the MediaOne Group collectively
represent 49% or more of the voting rights attaching to Telewest shares.
Further, the Panel has confirmed that Rule 9 shall not apply upon the exercise
of conversion rights attaching to any Telewest Convertible Preference shares
which are not converted into new Telewest shares on Conversion.
The Panel has also confirmed that, in the absence of any arrangements other
than those described herein, SBC, Cox and Vivendi are not acting in concert for
the purposes of the City Code with TINTA or MediaOne.
LIMITATIONS OF SCOPE OF BUSINESS OF TELEWEST AND ITS PRINCIPAL SHAREHOLDERS
The Relationship Agreement contains a number of provisions which affect, and
in some cases restrict, the business of Telewest and members of the TINTA
Group, the MediaOne Group, the SBC Group and the Cox Group.
RESTRICTIONS ON TELEWEST
Telewest has agreed in the Relationship Agreement that its business will be
limited to providing "Cable Television", "Cable Telephony" and "Wireless
Telephony" services in the UK and all matters incidental thereto, including
engaging in television programming in the UK incidental to its cable television
business. Any change to this scope of business will require the consent of the
TINTA Group and/or the MediaOne Group, for so long as such group(s) holds 15%
or more of the issued Telewest shares. For these purposes, "Cable Television"
is defined as any service provided to customers on a subscription or pay-per-
view basis which sends sounds or visual images or both by means of cable, radio
or microwave transmission systems for television reception at two or more
locations, whether sent for simultaneous reception or at different times in
response to subscribers' requests, including, without limitation, video-on-
demand services and other interactive services and other entertainment,
I-77
<PAGE>
SECTION FOUR GENERAL INFORMATION
telecommunications and information services; "Cable Telephony" is defined as
any voice or data telecommunications service which operates in whole or in part
by cable links to subscribers' premises, is interconnected at some point to a
public switching network and is intended to serve customers in the UK; and
"Wireless Telephony" is defined as any voice or data telecommunications
transmission service which operates by means of radio wave, microwave, cellular
or other similar technology as part of a licensed mobile communications system
or personal communications network.
Telewest has also agreed with TINTA and MediaOne in the Relationship
Agreement that so long as the TINTA Group or the MediaOne Group owns more than
5% of the issued Telewest shares, Telewest will not knowingly engage in any
business, activity or practice which will result in a violation of certain
contractual arrangements to which TINTA or MediaOne, as the case may be, was a
party on 15 April 1998 (details of each of which are set out below).
RESTRICTIONS ON TELEWEST'S PRINCIPAL SHAREHOLDERS
Pursuant to the Relationship Agreement, the TINTA Group, the MediaOne Group,
the SBC Group and the Cox Group have also accepted certain restrictions on
their ability to own assets comprising Cable Television or Cable Telephony
systems in the UK and to acquire equity interests in companies with such assets
without Telewest's consent or without first offering Telewest the opportunity
to undertake such activity.
In relation to each of the TINTA Group and the MediaOne Group, these
restrictions will apply for so long as members of the TINTA Group or the
MediaOne Group (as appropriate) have the right to appoint two Directors (i.e.,
a 15% interest allowing for dilution to 12.5% following certain issues,
assuming conversion of all Telewest Convertible Preference shares and ignoring
Telewest shares issued pursuant to or for the purposes of share options) and
for one year thereafter. In relation to each of the SBC Group and the Cox
Group, these restrictions will apply for so long as they have the right to
appoint one Director (i.e., a 7.5% interest allowing for dilution to 5%
following certain issues and on the same bases) and for one year thereafter.
The business restriction and first-offer obligation summarised above will not
apply to: (a) owning or acquiring 10% or less of the outstanding equity of any
entity that engages in Cable Television or Cable Telephony in the UK; (b)
owning or acquiring any interest in an entity engaged in (i) Wireless
Telephony, (ii) billing, validation or call authorisation services and related
or ancillary services for use by any provider of telecommunications services or
(iii) any subscriber voice or data telecommunications transmission service that
interconnects a Telewest Group network with other telecommunications networks
outside the licensed territory of a Telewest Group network but does not compete
with a Telewest Group network for Cable Telephony customers; (c) directly or
indirectly providing any subscriber voice or data telecommunications
transmission service (including, but not limited to, Wireless Telephony) that
operates only in part by cable links to subscribers' premises (except in
respect of the interconnection of such service to cable links that service
customers in the licensed territory of any Telewest Group network); (d) owning
or acquiring, directly or indirectly, an interest in any entity that provides
programming or content services in the UK; or (e) acquiring an interest in any
entity whose annual gross revenues from Cable Television and Cable Telephony in
the UK constitutes 20% or less of its total gross revenues, provided that if
(other than in the case of certain specified entities) TINTA, MediaOne, SBC or
Cox obtains control of the entity, it offers Telewest an opportunity (after
such acquisition) to acquire the interest in the Cable Television and Cable
Telephony assets in the UK of that entity.
The foregoing restrictions do not apply to certain specified investments of
TCI, MediaOne, SBC and Cox in companies that operate in the UK television and
broadcast industry. In particular, the foregoing restrictions do not apply to
the interests of TCI, MediaOne and Cox in Flextech, to TCI and MediaOne's
interests in a partnership that operates a mobile radio voice telephony network
in the UK ("One2One") or to MediaOne's interest in Time Warner Entertainment
Company, L.P. ("TWE").
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FLEXTECH
Flextech, an English company whose shares are traded on the London Stock
Exchange, is owned approximately 36.8%, 6.7% and 13.2% by an affiliate of TCI,
by an affiliate of MediaOne and by Cox, respectively.
Flextech owns interests (in some cases, controlling interests) in certain
programming channels and provides management services to certain of such
channels and other channels. Some of the channels in which Flextech owns an
interest or to which it provides management services are offered by Telewest to
its subscribers and some are included in the BSkyB "Sky Multi-Channel" package.
The Telewest Group believes that programming obtained from Flextech or entities
in which Flextech has a material interest is obtained on terms no less
favourable than those available to unrelated third parties.
Without regard to the foregoing contractual restrictions, employees and
officers of TCI (other than employees and officers of Telewest) may be
approached from time to time by third parties offering opportunities to
participate in business ventures in the UK involving television programming.
Such persons may present these opportunities to entities other than the
Telewest Group.
Flextech also has an 18.7% interest in SMS (which holds terrestrial
broadcasting licences covering a significant portion of the area covered by the
Scotland Regional Franchise Area). There are no contractual arrangements
between Telewest and TCI or any of its affiliates (including Flextech or SMS)
and there will be no contractual arrangements between Telewest and MediaOne or
any of its affiliates limiting the ability of TCI or MediaOne, as the case may
be, to increase its interest in Flextech or SMS or the ability of either
Flextech or SMS to operate in the UK cable television and telephony industry or
to expand their operations, including through acquisitions of additional cable
businesses or franchises. TCI has advised Telewest that it believes that the
existing and anticipated operations and strategy of Flextech is compatible with
that of Telewest and that TCI does not currently expect that the operations of
Flextech will have a substantial adverse competitive effect on Telewest.
TWE
In 1993, MediaOne acquired a 25.51% pro rata priority capital and residual
equity interest in TWE. The relationship between MediaOne and the other TWE
partners are governed by a partnership agreement (the "TWE Partnership
Agreement") which contains certain non-competition provisions that
restrict the ability of MediaOne to compete with TWE in the cable television
and programming businesses (the "Non-Competition Restrictions"). So long as
Telewest is a "controlled affiliate" of MediaOne (as defined in the TWE
Partnership Agreement to include, among other things, any company in which
MediaOne beneficially owns 50% or more of the equity or which MediaOne
controls, contractually or otherwise), it will be subject to the Non-
Competition Restrictions. As a result of the voting arrangements between TCI
and MediaOne discussed above, Telewest will be a controlled affiliate of
MediaOne upon completion of the Merger.
In any region in the US in which TWE is engaged in the cable television
business, MediaOne (and indirectly the Telewest Group) is not permitted to
engage in such business. In Japan and in regions in the US where TWE is not
engaged in the cable television business, MediaOne (and indirectly the Telewest
Group) will only be permitted to engage in such business if it complies with a
right of first refusal in favour of TWE. The Non-Competition Restrictions do
not prohibit MediaOne (and indirectly the Telewest Group) from engaging in the
cable television business outside of the US or Japan. Accordingly, the Telewest
Group believes its existing and planned Cable Television and Cable Telephony
businesses in the UK will not be restricted by the Non-Competition
Restrictions. The Non-Competition Restrictions also prohibit MediaOne (and
indirectly the Telewest Group) from engaging in the programming and filmed
entertainment businesses, provided that the Telewest Group may provide
programming outside of the US if such programming does not account for more
than 20% of the revenues of the Telewest Group. These restrictions will be
binding upon Telewest.
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SECTION FOUR GENERAL INFORMATION
ONE2ONE
Mercury Personal Communications ("MPC"), a partnership between a subsidiary
of MediaOne, Mercury Personal Communications Limited (a company owned by
affiliates of MediaOne and CWC) and a subsidiary of CWC, operates a mobile
radio voice telephony network known as "One2One". In the MPC partnership
agreement, MediaOne agreed not to engage in, or have an interest in any entity
(other than One2One) that engages in, the business of operating certain other
mobile radio voice telephony networks to provide telecommunications services to
the general public within the UK. These restrictions will be binding on
Telewest. These restrictions do not prevent the Telewest Group from engaging in
"Fixed Wireless Telephony" services or acting as a distributor or retailer of a
wireless telephony service (where the Telewest Group has no ownership interests
and does not act as an operator of such service) or from jointly investing with
MPC in mobile radio voice telephony networks. For these purposes, "Fixed
Wireless Telephony" means a telecommunications service consisting of the
conveyance of messages through the agency of Wireless Telegraphy (as defined in
the UK Wireless Telegraphy Act 1949) to and from any Applicable Cable System
(as defined in the relevant telecommunications licence) operated by Telewest or
an affiliate under a telecommunications licence held by it or an affiliate,
directly from or to any apparatus designed or adapted to be capable of being
used while in motion, provided that such service would not involve the
operation of a network capable of "handing calls off" from radio or cell site
to cell site.
PRE-MERGER BENEFICIAL OWNERSHIP OF GENERAL CABLE
GUHL, a subsidiary of Vivendi, owns approximately 146.8 million General Cable
shares or 40.21% of the issued General Cable shares. Vivendi is one of the
largest public companies in France based on market capitalisation, and has been
an investor in the UK cable communication industry since 1986. Among its many
diversified activities, Vivendi is active in the telecommunications and cable
television industry.
Through Cegetel, a partnership with other international operators, Vivendi is
a private telecommunications provider in France. Other sector interests include
the Havas publishing and multimedia group and Canal Plus, an audiovisual
company.
GUHL is the principal holding company of Vivendi's interests in the UK. In
addition to its interest in General Cable, GUHL holds interests in Vivendi's
subsidiaries engaged in water treatment and supply, waste management, energy
services and facilities management, passenger rail transport and construction.
Under GUHL's Articles of Association, the holders of a separate class of
"Cable Shares" in GUHL participate in the value attributable to its
shareholding in General Cable and exercise indirect control over the rights
attaching to such shareholding. The issued Cable Shares of GUHL are, as at the
date hereof, held as follows:
<TABLE>
<CAPTION>
NUMBER OF
CABLE SHARES PERCENTAGE OF
REGISTERED HOLDER OF (Pounds)1 EACH CABLE SHARES
<S> <C> <C>
Compagnie Generale de Services et Applications
de Telecommunications S.A. ("CG SAT")(1) 90,428,236 76%
Lamballe Limited, a subsidiary of Lamballe
Holding N.V. 28,556,285 24%
</TABLE>
- ------------
(1) CG SAT is a subsidiary of Vivendi.
All rights attaching to GUHL's shareholding in General Cable are exercisable
by a committee of the Board of Directors of GUHL, which comprises two
directors, of whom one is appointed by Vivendi and one is a director of
Lamballe Holding N.V., selected by Vivendi. In the event of any disagreement
between the members of the committee, the director appointed by Vivendi has a
deciding vote. Lamballe Holding N.V. is a Netherlands company and has no
affiliation with Vivendi.
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SECTION FOUR GENERAL INFORMATION
Lamballe Holding N.V. has an option entitling it to require Vivendi to
purchase the entire share capital of Lamballe Limited during the 30-day period
commencing 30 July 1998, or earlier in the event of certain defaults by Vivendi
under its arrangements with Lamballe Holding N.V.
The following table sets out certain information as at 24 June 1998 (the
latest practicable date prior to the publication of this document) regarding
ownership of issued General Cable shares by GUHL and each person who owns at
least 3% of General Cable and General Cable's Directors and officers as a
group.
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
GENERAL CABLE ISSUED
NAME SHARES OWNED SHARE CAPITAL
<S> <C> <C>
GUHL 146,785,917 40.21%
Mercury Asset Management plc 47,928,407 13.12%
Prudential Corporation PLC 14,750,000 4.04%
Legal & General Investment Management Limited 10,993,360 3.01%
Directors and officers of General Cable as a group 116,670 0.03%
</TABLE>
Pursuant and subject to the terms of the Merger Agreement, dated 29 March
1998, GUHL irrevocably committed to Telewest to accept the proposed offer in
respect of its registered holding of 146,785,916 General Cable shares provided,
among other things, such offer is posted by 30 June 1998. Under the proposed
terms of the Merger, Vivendi will be entitled to designate one director to the
Board upon completion of the Merger, which board is expected to initially
consist of up to 14 members. On 15 April 1998, GUHL agreed with Telewest to
vote in favour of any resolution of General Cable's shareholders to approve a
sale of General Cable's interest in Birmingham Cable to Telewest pursuant to
the terms of a letter agreement. See "-- Section Three -- Information on
General Cable -- Recent Developments".
INFORMATION REGARDING THE GENERAL CABLE BOARD OF DIRECTORS
The General Cable board of directors (the "General Cable Board") currently
comprises nine directors, of whom two are non-executive directors who represent
the Vivendi Group (the "Designated Directors"), three are independent directors
having executive responsibilities ("Executive Directors") and four are
independent non-executive directors ("Non-executive Directors").
General Cable's Articles of Association (the "General Cable Articles")
provide that for so long as the Vivendi Group controls between 30% and 50% of
the voting rights in General Cable, Vivendi will have the right to maintain and
from time to time replace the two Designated Directors. If the Vivendi Group's
interest is reduced to between 10% and 30%, Vivendi is entitled to appoint one
Designated Director. If the Vivendi Group's interest is reduced to below 10%,
Vivendi will not have the right to appoint any Designated Directors. Should the
Vivendi Group control more than 50% of the voting rights in General Cable,
Vivendi would have the right to appoint three Designated Directors.
The General Cable Articles provide that for so long as the Vivendi Group
continues to control at least 30% or more of the voting rights in General
Cable, a majority of directors on the General Cable Board and on any committee
of the General Cable Board must be "Independent Directors" (i.e., directors who
are not Designated Directors or Directors, officers or employees of, or persons
having a relationship, association or interest which is material to such
directors with or in Vivendi (which for the purposes of these provisions has
the extended meaning referred to below)). The General Cable Articles provide
that no person may be appointed as an Executive Director if, as a result, there
would not be a majority of directors who are Independent Directors. The quorum
necessary for the transaction of any business by the General Cable Board is two
directors, of whom one must be an Independent Director, and no business may be
determined by the General Cable Board or any committee unless the majority of
the Directors present throughout the meeting are Independent Directors.
Directors other than Independent Directors may not vote on any resolution of
the General Cable Board or any General Cable Board committee proposed in
connection with any transaction with
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Vivendi (except where the transaction is one in which Vivendi is treated
similarly to shareholders generally).
The Independent Directors (as defined in the Articles) are Sir Anthony
Cleaver, Philippe X. Galteau, David J. Miller, Ian Gray, W. A. Rice, Dr. George
G. Gray and Cheryl A. Tritt.
The directors have established an Audit Committee which currently comprises
Sir Anthony Cleaver, Dr. George Gray and Mr. W. A. Rice (all of whom are
independent and non-executive) and any one of the Designated Directors from
time to time. In addition to the normal functions of an audit committee, the
Audit Committee has power to negotiate all transactions between General Cable
and Vivendi, to approve all payments between General Cable and Vivendi and to
monitor the application of the Relationship Agreement referred to in "--
Relationship Agreement with Vivendi". The Audit Committee is required to
consider and report to the General Cable Board on transactions between General
Cable and Vivendi before they are entered into. For the purposes of the above
provisions, Vivendi includes its subsidiaries (other than General Cable and its
subsidiaries) and any person having a relationship, association or interest
which is material to such person with or in Vivendi.
The directors have also appointed Remuneration and Nominations Committees
which comprise Sir Anthony Cleaver, Dr. George Gray, Mr. W. A. Rice and any two
of the Designated Directors.
The directors comply with the requirements of the Code of Best Practice
published by the Committee on the Financial Aspects of Corporate Governance
(the Cadbury Committee).
CERTAIN RELATED PARTY TRANSACTIONS
SECONDMENT OF PERSONNEL
Affiliates of TCI, MediaOne, SBC and Cox have seconded personnel to Telewest
to provide certain business and technical expertise and support. Currently four
of Telewest's employees are on secondment from affiliates of TCI, MediaOne, SBC
and Cox. Telewest has agreed in secondment agreements to reimburse the
affiliates of TCI, MediaOne, SBC and Cox, as the case may be, for the full
costs each incurs in respect of any personnel seconded to Telewest. The
aggregate amount expensed by Telewest to TCI, MediaOne and Cox (or affiliates
thereof) in respect of such personnel and certain technical consultants in 1997
was approximately (Pounds)1,000, (Pounds)967,000 and (Pounds)202,000,
respectively.
TECHNOLOGY SHARING AGREEMENTS
TINTA and MediaOne have agreed to make available to Telewest proprietary
technology and know-how which they are permitted to license and which is
related to cable television and cable telephony at fair market prices. Telewest
has agreed to make available to TINTA and MediaOne any of Telewest's
proprietary technology and know-how which it is permitted to license and which
is related to cable television and cable telephony at a fair market price which
is generally not less favourable than those provided to any unaffiliated
customers.
PROGRAMMING
For a description of certain interests of affiliates of TCI, MediaOne and
SBC, as well as Cox, in programming provided by Telewest, see "-- Section
Two -- Information on Telewest -- Cable Television -- Programming".
DISPOSITION OF CERTAIN ASSETS BY TELEWEST
Affiliates of TINTA, MediaOne, SBC and Cox entered into "gain recognition
agreements" (the "GRAs") with the US Internal Revenue Service in connection
with the transfer of stock to Telewest. GRAs provide that for a specified
number of years (generally, 10 years). A US person who transfers stock to a
foreign corporation will be required to recognise gain, for US tax purposes,
attributable to
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the transferred stock in the event the transferee foreign corporation disposes
of the transferred stock (or all or a substantial portion of the assets of the
corporation whose stock was transferred). So that gain will not be triggered
under the GRAs, Telewest has made certain covenants under the Relationship
Agreement, in favour of the TINTA Group, the MediaOne Group, the SBC Group and
the Cox Group and to the extent any group individually holds, or MediaOne/TINTA
or SBC/Cox collectively hold, 7.5% or more of the Telewest shares, restricting
its ability to dispose of its stock or assets. These covenants are consistent
with the current arrangements between the shareholder groups and Telewest, save
that the threshold for application of the controls has been reduced.
REGISTRATION RIGHTS
For a description of certain registration rights granted by Telewest to the
TCI Affiliate, the MediaOne Affiliates, the SBC Affiliates, the Cox Affiliate
and Vivendi, see "-- Principal Shareholders --Registration Rights".
PRE-EMPTIVE ISSUE
For a description of the agreement between TINTA, MediaOne and Cox to
subscribe for their full entitlement of new Telewest shares under the Pre-
emptive Issue and to subscribe for any new Telewest shares not subscribed for
by other Qualifying Telewest securityholders, see "-- Section One -- The Merger
and Related Matters -- The Pre-emptive Issue" and "-- Section Seven --
Additional Information -- Material Contracts -- Telewest Group".
RELATIONSHIP AGREEMENT WITH VIVENDI
Vivendi and General Cable are parties to an agreement (the "General Cable
Relationship Agreement") which provides for a geographical restriction on the
fixed telecommunications network interests of Vivendi and the undertakings
which it controls.
Vivendi undertakes with General Cable that, so long as it controls 30% or
more of the voting rights of General Cable, it and the undertakings under its
control (other than General Cable and undertakings under its control) will not,
without the prior written consent of General Cable, carry on or acquire or hold
a relevant interest in an undertaking carrying on a fixed telecommunications
network business within General Cable's territory, which is defined as the UK,
the Channel Islands and the Isle of Man. The restriction of Vivendi's
activities does not extend to the provision of cellular telephony services. A
"relevant interest" is a holding of 10% or more of the voting rights in or of
the right to participate in the profits or assets of an undertaking, and
"control" is the holding or control (directly or through other controlled
undertakings) of more than half of the voting rights in an undertaking.
The General Cable Relationship Agreement does not prevent the acquisition by
Vivendi of an undertaking which holds a relevant interest in a fixed
telecommunications network business in General Cable's territory, provided that
relevant interest does not represent more than 20% of such undertaking's
revenues. In such a case, if reasonably practicable, taking into account
taxation, accounting and other financial considerations, where Vivendi has
effective control over the undertaking acquired it must use its best endeavours
to offer the relevant interest to General Cable at a price equivalent to that
part of the price paid by Vivendi which was attributable to the relevant
interest. The General Cable Relationship Agreement contains provisions for
arbitration in the event of disagreement as to the terms of the sale.
The General Cable Relationship Agreement also provides that Vivendi (or, with
the consent of General Cable, any subsidiary of Vivendi) will provide General
Cable with strategic advice and guidance in the management of General Cable,
assistance in the analysis of business plans, development projects and their
financial implications and specific assistance in negotiations on
telecommunications matters. For these services General Cable will pay to
Vivendi an annual fee of (Pounds)260,000 (index-linked
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<PAGE>
to the UK RPI). The agreement will terminate upon Vivendi ceasing to control
20% or more of the voting rights of General Cable.
Vivendi Facility
For a description of the loan facility provided by Vivendi to General Cable,
see "-- Section Seven -- Additional Information -- Financing Arrangements".
Directors' Interests in Transactions
None of the Directors has or has had any interest in any transactions which
are or were unusual in their nature or conditions or significant to the business
of the Telewest Group taken as a whole and which were effected during the
current or immediately preceding financial year or during any earlier financial
year and which remain in any respect outstanding or unperformed.
SECTION FOUR I-84 GENERAL INFORMATION
<PAGE>
SECTION FIVE GENERAL INFORMATION
- --------------------------------------------------------------------------------
SECTION FIVE
REGULATORY MATTERS AND COMPETITION
- --------------------------------------------------------------------------------
Except as otherwise indicated, the following section describes regulatory
matters and competition relating to the business of the Telewest Group and the
General Cable Group and which, following the completion of the Merger, will
relate to the Combined Group.
REGULATORY MATTERS
OVERVIEW
Cable television and telephony services in the UK are regulated under the
Broadcasting Act 1990 (the "Broadcasting Act"), which replaced the Cable and
Broadcasting Act 1984, the Telecommunications Act, and the Broadcasting Act
1996. The supply of cable television and telephony services by the Telewest
Group and by the General Cable Group requires two principal licences for each
franchise area: (i) a licence issued under either the Cable and Broadcasting
Act 1984 (prior to 1991) or under the Broadcasting Act (after 1991), which
permits the holder to provide cable television services within a defined
geographic area or "franchise" (a "Cable Television Licence"), and (ii)
a Telecommunications Act Licence. The Telewest Group and the General Cable
Group have 28 and 9 licensed cable franchises, respectively.
In addition, operators may apply for a national licence under the
Telecommunications Act to provide telecommunications services outside the area
covered by their franchise-specific Telecommunications Act Licences. Both the
Telewest Group and the General Cable Group have national telecommunications
licences. The Telewest Group also has an international facilities licence which
permits it to provide international telecommunication services and operate
networks to provide such services.
REGULATORY AUTHORITIES
The principal regulators of the UK cable television and telephony industry
are the ITC, OFTEL, OFT, the DTI and the Department of Culture, Media and Sport
(the "DCMS").
ITC
The Broadcasting Act established the ITC to license and regulate commercial
broadcast television services (terrestrial, cable and satellite) and the Radio
Authority to regulate radio services. The ITC's functions are, among other
things, to grant licences for television broadcasting activities (including
Cable Television Licences) and to regulate the commercial television sector by
issuing codes on programming, advertising and sponsorship, monitoring
programming content and enforcing compliance with the Broadcasting Act and
licence conditions. The ITC has the power to vary licences, impose fines and
revoke licences in the event of a breach of licence conditions. The ITC also
enforces ownership restrictions on those who hold or may hold an interest in
licences issued under the Broadcasting Act. The ITC is also overseeing the
introduction of digital television in the UK.
OFTEL
The Telecommunications Act provides a licensing and regulatory framework for
telecommunications activities in the UK and established the office of the
Director General, supported by OFTEL, as an independent regulatory authority.
The functions of the Director General under the Telecommunications Act include
monitoring and enforcing compliance with Telecommunications Act Licence
conditions, establishing and administering standards for telecommunications
equipment and contractors, investigating complaints and exercising certain
functions to promote or ensure competition in telecommunications markets. The
Director General may modify Telecommunications Act Licence conditions either
with the agreement of the licensee and (if necessary) following a statutory
period of public consultation or following a report of the MMC. The Director
General is also empowered to
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SECTION FIVE GENERAL INFORMATION
issue enforcement orders requiring compliance, where the conditions of a
Telecommunications Act Licence have been breached.
OFT
The OFT is primarily responsible for enforcing UK general competition law, in
particular investigating relevant mergers, restrictive practices and anti-
competitive behaviour.
DTI
The DTI oversees telecommunications policy and the Secretary of State for
Trade and Industry (the "Secretary of State") is responsible for, among other
things, issuing Telecommunications Act Licences and implementing European
directives issued by the Council of Ministers or the European Commission
("Directives") relating to telecommunications. In addition, the Secretary of
State has ultimate responsibility for enforcing UK general competition law.
DCMS
The DCMS is responsible for, among other things, determining the principles
of broadcasting and media ownership policy.
CABLE TELEVISION REGULATION
CABLE TELEVISION LICENCES
The Telewest Group operates pursuant to, and in accordance with, two types of
Cable Television Licence: PDSLs and LDSLs. The General Cable Group operates
pursuant to PDSLs. PDSLs, which were issued prior to 1991 under the Cable and
Broadcasting Act 1984, allow an operator to provide cable television services
by means of a cable network. LDSLs, issued since 1991 under the Broadcasting
Act, allow an operator to deliver television and other licensed programming
services by means of a licensed telecommunications network, including a cable
network or microwave distribution system.
Prior to April 1998, the ITC's policy was to grant only one Cable Television
Licence in any one given area. Further, in 1991 the DTI placed limitations on
PTOs, preventing them from using their principal national telephony licence to
provide, or convey for others, broadcast television to homes. On 23 April 1998,
the DTI and the DCMS issued a joint document entitled "Broadband Britain: A
Fresh Look at the Broadcast Entertainment Restrictions" ("Broadband Britain")
setting out the UK Government's decision that PTOs should immediately have the
option to compete in the provision of broadcast entertainment services to those
UK homes which are currently outside the existing cable franchise areas and
should be allowed to compete in the provision of broadcast services in existing
cable franchises from 1 January 2001. The effect of this policy change is that
all new franchises will be awarded on a non-exclusive basis with immediate
effect and existing franchises will become non-exclusive as of 1 January 2001.
The UK Government has indicated that it intends to carry out a review of the
telecommunications and broadcasting framework later in 1998. This consultation
process will include consideration of the licensing, regulatory and competition
issues which arise from this change in policy.
LDSLs historically have been awarded by competitive tendering to the
applicant submitting the highest cash bid (payable annually over the 15-year
term of the LDSL), unless the ITC determined that there were "exceptional
circumstances" (primarily geographic coverage) which made it appropriate to
award a licence to another applicant. In addition, all applicants undertook to
pay a percentage of qualifying revenue ("PQR") to the ITC in each year of the
licence, together with an annual sum equal to the cash bid indexed against
inflation plus certain other payments. As a result of the policy change
announced in Broadband Britain, these arrangements are under review.
As a result of the policy change, the Telewest Group intends to apply to the
ITC to have its franchises for Blackpool and Southport designated as non-
exclusive. Telewest expects that, if this
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SECTION FIVE GENERAL INFORMATION
application is successful, the fees payable under the relevant Cable Television
Licences would be reduced from 1 January 1999.
Under the Broadcasting Act, cable operators may carry certain licensed
services on their networks. Cable Television Licences also require cable
operators to ensure that advertising and certain foreign satellite programmes
carried by them as part of their services conform to the restrictions set forth
in the codes on advertising, sponsorship and programming issued by the ITC.
The Telewest Group and the General Cable Group also each hold 16 and 1
licensable programme service licence, respectively, which enable them to
produce local programming, including local advertisements.
TERM, RENEWAL AND REVOCATION OF CABLE TELEVISION LICENCES
The term and renewal of PDSLs and LDSLs are governed by the Broadcasting Act.
For details of the PDSLs and LDSLs held by the Telewest Group, the General
Cable Group and the Affiliated Companies, see "-- Section Seven -- Additional
Information -- Licences". In relation to Cable Television Licences held by the
Telewest Group and the General Cable Group which are due to expire in the near
future, the Telewest Group and the General Cable Group intend to seek
extensions to the terms of the relevant licences for periods of 8 to 15 years
(depending on the licence), as they are entitled to do by the Broadcasting Act.
The ITC is empowered to revoke Cable Television Licences where the licensee
fails to comply with its conditions or a direction from the ITC, in certain
circumstances on a change of control of a licensee, and to enforce ownership
restrictions in the Broadcasting Act (as amended by the Broadcasting Act 1996).
Cable Television Licences are transferable only with the consent of the ITC.
OWNERSHIP RESTRICTIONS
The ITC has a general duty to ensure that Cable Television Licences are held
by "fit and proper" persons. The Broadcasting Act also contains specific
restrictions on the types of entities which may hold Cable Television Licences
or interests therein.
PRICE REGULATION OF CABLE TELEVISION
Cable television pricing in the UK is not subject to pricing restrictions,
including price limitations, rate of return assumptions or similar mechanisms
of the kind imposed under US cable regulations. However, cable television
pricing is subject to fair trading regulation by the ITC, to the application of
general competition law and, at the wholesale and retail level, examination by
the OFT. As a result of its review in December 1996 of BSkyB's position in the
wholesale pay-TV market, the OFT required undertakings from BSkyB in connection
with the industry rate card (which governs the price for the wholesale supply
of BSkyB programming where no other contract for such programming has been
entered into). One result of these undertakings has been that OFT approval is
required for the structure of prices charged by BSkyB under the rate card.
CHANNEL BUNDLING
On 1 April 1998, the ITC issued a consultation paper on channel bundling in
the retail pay-TV market. In that paper the ITC expressed the view that this
bundling imposed a restriction on the ability of cable and satellite operators
to offer various programming packages to the customer. The ITC's proposals to
remedy such restriction include the prohibition of minimum carriage
requirements in contracts for the wholesale supply of programming. On 26 June
1998 the ITC confirmed that minimum carriage requirements are to be prohibited
in contracts for the wholesale supply of programming. This prohibition will
take effect from 1 July 1998 for all new agreements. With regard to existing
agreements the prohibition will apply from 1 July 1998 where the services
provided under those agreements are broadcast for digital reception and from 1
January 2000 where the services are
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broadcast for analogue reception. There are exceptions for trials of new
channels and existing channels which are contractually exclusive to one
delivery platform. The ITC will also issue a direction to Cable Television
Licence holders aimed at preventing undue discrimination in the terms on which
distributors contract with different channel providers and requiring
distributors to research viewers' preferences with regard to bundling basic
channels.
TELECOMMUNICATIONS REGULATION
TELECOMMUNICATIONS ACT LICENCES
A Telecommunications Act Licence authorises a cable operator to operate and
(if Telecommunications Code powers are attached to the licence) install the
physical network used to provide cable television and telecommunications
services in the franchise area to which the licence relates. It also authorises
the operator to connect its system to other telecommunications systems.
The Telewest Group and the General Cable Group also have national
telecommunications licences (awarded on 14 January 1997 and 18 July 1997,
respectively) which allow them to provide telecommunications networks and
services outside of their franchise areas. An additional Telecommunications Act
Licence is held by the General Cable Group in the name of Imminus, which
authorises the provision of national data communication services. In addition,
the Telewest Group has an international facilities licence (awarded on 18
December 1996) which allows it to provide international telecommunications
services and operate networks to provide such services. The Telewest Group also
holds three licences for Satellite Master Antenna Television systems, issued
under the Telecommunications Act. These licences are required when satellite
delivered television programmes are supplied to a discrete area of customers of
between 2 and 1,000 homes.
The Telewest's Group and the General Cable's Group Telecommunications Act
Licences contain conditions regulating the manner in which the licensee
operates its telecommunications system, provides telecommunications services,
connects its systems to others and generally operates its business. The
Telecommunications Act Licences also contain a number of detailed provisions
relating to the technical aspects of the licensed system (e.g., numbering,
metering and the use of technical interfaces) and the manner in which the
licensee conducts its business (e.g., publicity of certain prices, terms and
conditions). In addition, the Telecommunications Act Licences contain
prohibitions on undue preference and discrimination in providing a service. A
cable operator's Telecommunications Act Licences also require the relevant
licensee to comply with certain codes of practice and to provide information
which the Director General may require to carry out his statutory functions.
Pricing and interconnection matters are discussed below, see "-- Interconnect
Arrangements" and "-- Price Regulation".
All of the Telewest Group and General Cable Group Telecommunications Act
Licences have been amended by the Director General to replace a number of
existing conditions dealing with specific forms of anti-competitive behaviour
with a "fair trading" condition, thereby enabling the Director General to act
against anti-competitive behaviour such as predatory pricing and undue cross-
subsidisation. The Director General has published guidelines on the types of
behaviour which he considers to be anti-competitive and on the enforcement
procedure to be used. In addition, the Telewest Group and General Cable Group
Telecommunications Act Licences have been modified, resulting in some detailed
obligations (e.g., concerning linked sales), being removed, but with others
(e.g., an obligation to provide number portability) being implemented.
The fees payable for the Telecommunications Act Licences consist of an
initial fee payable on the grant of the licence and annual fees thereafter. The
fees are based on a proportion of the costs of the Director General in
exercising his duties under the Telecommunications Act. OFTEL recently
initiated consultation with the industry on a new framework for calculating
licence fees, but with the underlying policy of recovering administration costs
remaining unchanged.
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A Telecommunications Act Licence is not transferable. However, a change of
control of a licensee may be permitted subject to compliance with a
notification requirement, provided the proposed change is not, in the opinion
of the Secretary of State, against the interests of national security or
relations with the government of a country or territory outside the UK.
SERVICE OBLIGATIONS
A cable operator has no obligation under its Telecommunications Act Licences
to provide voice telephony services, but (as per amendments to the relevant
licences effective in September 1997) where it does provide such services and
achieves a 25% or more share of the relevant market (as determined by the
Director General) within its licensed area, a cable operator may, at the
direction of the Director General, be required to ensure that voice telephony
services are available to anyone in the licensed area who reasonably requests
them. No directions have been received by the Telewest Group or the General
Cable Group stating that any member of the relevant Group is considered to have
a 25% share of a relevant market.
TELECOMMUNICATIONS CODE
Under Telecommunications Act Licences, a cable operator is subject to and has
the benefit of the Telecommunications Code promulgated under the
Telecommunications Act. The Telecommunications Code provides certain rights and
obligations with respect to installing and maintaining equipment such as ducts,
cables and cabinets on public or private land (including the installation of
equipment on public highways). Cable operators also have the benefit of the New
Roads and Street Works Act 1991, which provides them with the same rights and
responsibilities with respect to construction on public highways as other
public utilities. Currently in order to install equipment on private property,
cable operators must obtain the agreement of occupiers, property owners and
others. Cable operators generally are required to post bonds with local
authorities in respect of their obligation to ensure reinstatement of roads and
streets in the event the operator becomes insolvent, ceases to carry on
business or has its Telecommunications Act Licences terminated. This procedure
is under review by OFTEL.
TERM, RENEWAL AND REVOCATION OF TELECOMMUNICATIONS LICENCES
The franchise-specific Telecommunications Act Licences of the Telewest Group
and the General Cable Group are awarded for periods of between 15 and 23 years
(depending on the technology used by the licensee). See "-- Section Seven --
Additional Information -- Licences". The national telecommunications licence
held by the Telewest Group and the General Cable Group are for periods of 25
years each. On expiry, a Telecommunications Act Licence cannot be extended and
application must be made for a new licence.
A Telecommunications Act Licence may be revoked if the licensee fails to pay
the licence fees when due, fails to comply with an enforcement order, upon the
occurrence of certain insolvency-related events or if the Cable Television
Licence relating to the licensee's system is revoked (in relation to franchise-
specific licences only). A Telecommunications Act Licence may also be revoked
if, among other things, the licensee fails to give the required notification to
the DTI of changes in shareholdings and changes in control and agreements
affecting control of the licensee, or if the Secretary of State is of the
opinion that any such change would be against the interests of national
security or the UK Government's international relations.
INTERCONNECT ARRANGEMENTS
The ability of cable operators to provide viable voice and other
telecommunications services is dependent on their ability to interconnect cost-
effectively with other telecommunications networks such that calls originating
on one network may terminate on another network. Licensees (including the
Telewest Group and the General Cable Group) are required under their
Telecommunications Act Licences to enter into interconnect agreements with
other PTOs for the interconnection of calls on to their network. The Director
General also has the power to make determinations in respect of certain
obligations of any party under an interconnection agreement.
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OFTEL has determined standard interconnect charges until 31 March 1997. These
rates apply retroactively to the charges the Telewest Group and the General
Cable Group and BT levy on each other. Since October 1997, a network charge cap
of RPI-8% per annum (where "RPI" is the UK retail price index) has been imposed
by OFTEL on most BT interconnect services. Certain services are considered by
OFTEL to be fully competitive and are therefore subject to a safeguard cap of
RPI-0%. This price cap will remain in effect until 2001.
Licensed operators are currently discussing with the DTI the proposed
implementation in the UK of the Interconnection Directive, which may result in
modifications to the interconnect rights and obligations in their
Telecommunications Act Licences. Telewest is not able to predict the outcome of
the implementation process.
PRICE REGULATION
BT currently is subject to controls over the prices it may charge residential
and small business customers, including a requirement that for residential and
small business customers the overall charges it makes for a basket of services,
including local, long-distance and international calls, comply with a cap of
RPI-4.5% until 2001. In general, the controls impose downward pricing pressure
in the UK telephony market, and any change in such controls may influence the
pricing policies of the Telewest Group and the General Cable Group. Although to
date the Telewest Group and the General Cable Group generally have been able to
price their cable telephony call charges for both business and residential
services below those of BT, there can be no assurance that they will be able to
continue to do so in the future.
BT's licence has also now been modified to include the "fair trading"
condition which prohibits BT from engaging in anti-competitive activity. This
provision gives OFTEL broad powers to stop anti-competitive activity by BT,
including with respect to pricing. Procedural guidelines have been issued
regarding the application of the fair trading condition, for instance on the
manner in which BT may offer discounted services.
The prices charged by the Telewest Group, the General Cable Group and most
service providers other than BT are not currently regulated by the Director
General, but are subject to the fair trading condition in all
Telecommunications Act Licences.
NUMBER PORTABILITY
After the introduction of "number portability" in the UK in September 1996,
the Telewest Group and the General Cable Group began offering BT customers the
opportunity to transfer their service to the Telewest Group and the General
Cable Group without changing their existing telephone number. The Telewest
Group and the General Cable Group have now introduced number portability in all
of their franchises for residential and most business customers of all other
service providers and will, on request, provide reciprocal portability from its
network to those other operators (as required by their Telecommunications Act
Licences).
CARRIER PRE-SELECTION
The EC Interconnection Directive includes an obligation on operators deemed
to have significant market power to provide carrier pre-selection (i.e., the
ability for telephone subscribers to access the services of another
interconnected service provider). Member states (including the UK) can apply
for deferral of such obligations on technical grounds and/or if it can be
proved that the obligation would constitute an undue burden on various classes
of organisation. A common position has been reached on a draft directive
amending the Interconnection Directive, allowing Member states to extend the
obligation to operators without significant market power where this does not
impose a disproportionate burden on such organisations or create a barrier for
entry in the market for new operators. Telewest cannot predict the outcome of
any future implementation of that draft directive in the UK and cannot
guarantee that it will not result in an obligation on the Telewest Group to
offer carrier pre-selection.
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NETWORK CONSTRUCTION
Prior to December 1994, milestones for cable networks were contained in the
Telecommunications Act Licence for the relevant franchise area. Since that
date, they have been included in the LDSL for the relevant franchise area.
Telewest has been awarded four LDSLs since December 1994, all of which include
build milestones obligations. The Telewest Group has completed negotiations
with the ITC amending build milestones for the Blackpool & Southport franchise
with the effect that the Telewest Group has no build obligations under those
two licences until 2000. The franchise licences for East Lothian and Taunton do
not come into force until 1999 and associated milestones will be reviewed as
part of the current ITC consultation on non-exclusive LDSL franchises.
With the exception of franchise areas for which an LDSL has been granted
since December 1994, the telecommunications licence in relation to each cable
franchise area prescribes milestones that require the licensee to construct its
network to pass a specified number of premises by certain dates. The Telewest
Group has completed negotiations with OFTEL to amend cumulative build
milestones, up to the year 2000, as follows:
<TABLE>
<CAPTION>
YEAR FRANCHISE BUILD MILESTONE DEADLINE
<S> <C> <C> <C>
1998 South East Region 133,000 31 December 1998
1999 South East Region 159,000 (S. Thames) 31 December 1999
South East Region 205,000 (N. Thames) 31 December 1999
2000 South East Region 228,000 (N. Thames) 31 December 2000
Midlands Region 69,000 31 December 2000
</TABLE>
All other franchises are currently compliant and built with regard to milestone
requirements up to 2000.
Following the UK Government's April 1998 announcement in Broadband Britain on
franchise exclusivity, Telewest will, where appropriate, seek to re-negotiate
all further build obligations after 2000.
Details of the General Cable Group's build milestone obligations are set out
at "-- Section Three-- Information on General Cable -- Description of
Networks".
REGULATION OF DIGITAL BROADCASTING
THE ITC AND DIGITAL BROADCASTING
The Broadcasting Act 1996 introduced provisions for the licensing of digital
terrestrial broadcasting. It also required the ITC to introduce a "must carry"
requirement on cable companies holding LDSLs, where both programme provider and
cable operator use digital technology, to ensure the universal availability of
designated free-to-air service channels. Must carry obligations concerning
public service channels already applied to holders of PDSLs.
The Broadcasting Act 1996 provides for the assignment of frequencies for the
provision of digital "multiplex services". It also provides for the grant of
licences in relation to digital "multiplexes" (transmission networks capable of
carrying multiple television channels), or frequency bands, which give
substantial national terrestrial coverage, each with the ability to carry
several television channels, to "multiplex providers". Each multiplex provider
will contract with programme suppliers for the transmission of the programme
suppliers' television services via its allocated frequency band. The initial
frequency capacity assigned to digital terrestrial television is divided into
six multiplexes, each of which will be able to carry a number of different
television channels. Of these six multiplexes, two are wholly reserved for
existing broadcasters who are guaranteed places on the multiplexes under the
Broadcasting Act 1996. The first will be used by the BBC to transmit existing
programmes in digital form and develop new digital services. The second is
reserved for Channel 3, Channel 4 and Teletext Ltd. This multiplex will be
licensed and regulated by the ITC. Licences to operate the remaining four
multiplexes
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SECTION FIVE GENERAL INFORMATION
were advertised and three have now been awarded to BDB. The fourth multiplex
has been awarded to S4C Digital Networks Ltd. It will carry Channel 5 and S4C
in Wales.
INTEROPERABILITY
In May 1998 the ITC initiated a consultation on the extent to which the
digital decoder (or set top) boxes and integrated digital television sets
required by viewers to receive and view digital television services should be
interoperable across all digital platforms, rather than compatible exclusively
with one system. There can be no assurance as to the outcome of the ITC's
consultation on this issue.
OFTEL REGULATION OF DIGITAL CONDITIONAL ACCESS AND ACCESS CONTROL SERVICES
The EC Advanced Television Standards Directive covers the supply of technical
conditional access for digital television services and has been implemented in
the UK by the Advanced Television Services Regulations which became effective
on 7 January 1997 (the "Regulations"). The Regulations provide that conditional
access operators, such as BSkyB, are required to co-operate with broadcasters
on a fair, reasonable and non-discriminatory basis so that broadcasters are
able to receive and rebroadcast television services using their own conditional
access system without incurring unnecessary or unreasonable expense.
The Regulations also modify the Telecommunications Act 1984 to provide that
conditional access systems which make available conditional access services
including encryption, subscriber management or subscriber authorisation
services should be treated as telecommunications systems. Each such system must
be licensed and the Secretary of State granted a class licence to authorise the
running of these conditional access systems which came into force also on 7
January 1997 and runs until 31 July 2001 unless previously revoked. The licence
contains similar provisions to those in the Regulations and, in addition,
includes the fair trading condition.
Under the class licence, the Director General can order a licensee to make
available its intellectual property rights if the licensee is using them to
prevent or obstruct products from being made available. The Director General
can also designate an interface between the licensed system and a broadcaster's
conditional access or other transmission system as an "essential interface" and
thereafter the licensee must comply with any relevant standard specified by a
broadcaster which includes applicable European standards or other standards
specified by the Director General.
Following public consultation, OFTEL published guidelines on the regulation
of conditional access for digital television. The guidelines set out how OFTEL
would propose to deal with anti-competitive behaviour in relation to the
provision of conditional access services. The guidelines are not legally
binding and are expected to be reviewed where market developments so require.
OFTEL has also recently published guidelines on conditional access charges for
digital television and is consulting further on the prices broadcasters and
other third-party service providers are required to pay for access to digital
television receivers to provide television and interactive services.
COMPETITION LAW
In addition to regulation by OFTEL and the ITC through the fair trading and
competition conditions in their Cable Television and Telecommunications Act
Licences, the Telewest Group and the General Cable Group are subject to the
competition rules in the EC Treaty and in individual national regimes in the
countries where they operate, principally the UK. These rules regulate
commercial agreements which may restrict competition, the anti-competitive
exploitation by companies of dominant market power, as well as the competitive
structure of markets, through merger control and monopoly provisions.
As a result, commercial agreements of the Telewest Group and the General
Cable Group may be subject to general competition law scrutiny by the OFT and
the European Commission, as was a contract for the supply of programming
between the Telewest Group and BSkyB entered into in April
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SECTION FIVE GENERAL INFORMATION
1995. See "-- Section Two -- Information on Telewest -- Cable Television --
Sources of Programming".
In this context, the UK Government has introduced a Competition Bill (the
"Bill") which proposes to grant concurrent powers to the industry-specific
regulators and the DGFT for the enforcement of prohibitions modelled on
Articles 85 and 86 of the EC Treaty. The Bill introduces in UK law prohibitions
on anti-competitive agreements and the abuse of a dominant position, and
introduces third-party rights, stronger investigative powers, interim measures
and effective enforcement powers.
The Bill proposes that the Director General is able, but not required, to
exercise concurrent powers with the Director General of Fair Trading in
relation to "commercial activities connected with telecommunications". The Bill
will enable third parties to bring enforcement actions directly against
telecommunications operators who are in breach of the prohibitions and seek
damages rather than be required to wait for the Director General to take
enforcement action.
EUROPEAN REGULATION
In the context of the European Commission's programme of regulatory
liberalisation and harmonisation of the telecommunications sector, a number of
legislative initiatives must be implemented by EU member states, including the
UK. These initiatives include the following:
THE LICENSING DIRECTIVE
The Licensing Directive sets out principles for EU member states' regimes for
general authorisations (known as "class licences" in the UK) and individual
Telecommunications Act Licences. As a result of implementation of the Licensing
Directive in the UK the DTI will be seeking to make modifications to all
individual licences in 1998 to bring them into line with the Licensing
Directive.
THE INTERCONNECTION DIRECTIVE
The Interconnection Directive sets out a regulatory framework for regulation
of interconnection of public telecommunications networks and services. Public
telecommunications networks operators and/or service providers identified in
the Interconnection Directive would have a right and, when requested, an
obligation to negotiate interconnection with each other. OFTEL and the DTI are
currently consulting on the application of this Directive in the UK.
PROPOSED DIRECTIVE AMENDING THE INTERCONNECTION DIRECTIVE
The draft amending Directive concerns number portability and carrier pre-
selection. Number portability has already been introduced into the UK for fixed
networks (see "-- Regulatory Matters -- Telecommunications Regulation --
Number Portability"). For carrier pre-selection see "-- Regulatory Matters --
Telecommunications Regulation -- Carrier Pre-Selection".
TELECOMMUNICATIONS DATA PROTECTION DIRECTIVE
The Telecommunications Data Protection Directive seeks to harmonise Member
States' provisions on the processing of personal data in the telecommunications
sector. In particular, this Directive contains provisions on caller-line
identification, telephone bills and directories. The DTI is currently
consulting on implementation of this Directive.
PROPOSED DIRECTIVE ON SEPARATION OF TELECOMMUNICATIONS AND TELEVISION
ACTIVITIES
The proposal aims to ensure that telecommunications networks and cable
television networks owned by a single operator who is a dominant
telecommunications company are separate legal entities.
OTHER
The European Commission is planning to review the regulation of
telecommunications in 1999 and has published a Green Paper on Convergence as
the first stage of consultation on regulation across the telecommunications,
broadcasting and IT sectors in the longer term.
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Telewest cannot predict the result of implementation of these and other
future liberalising initiatives, nor the potential impact on the business of
the Combined Group.
COMPETITION
The cable television and cable telephony businesses of the Telewest Group and
the General Cable Group compete (and the Combined Group will compete) with a
wide range of companies using a variety of technologies.
CABLE TELEVISION
GENERAL
Prior to April 1998, the ITC's policy was to grant only one Cable Television
Licence in any one given area. Further, in 1991 the DTI placed limitations on
PTOs, preventing them from using their principal national telephony licence to
provide, or convey for others, broadcast television to homes. On 23 April 1998,
the DTI and the DCMS issued the joint document entitled Broadband Britain,
which sets out the UK Government's decision that PTOs should immediately have
the option to compete in the provision of broadcast entertainment to those UK
homes which are currently outside the existing cable franchise areas, and from
1 January 2001 should be allowed to compete in the provision of broadcast
services in existing cable franchises. The effect of this policy change is that
all new franchises will be awarded on a non-exclusive basis with immediate
effect and existing franchises will become non-exclusive as of 1 January 2001.
The principal current and potential competitors for the cable television
business of the Telewest Group and the General Cable Group are the following:
BROADCAST
Television viewing in the UK has long been one of the most popular forms of
entertainment and daily viewing time in the UK has been among the highest in
the world. Five broadcast channels are the predominant source of television
programming. Although the terrestrial television channels in the UK generally
are perceived as providing high-quality programming, Telewest believes that
viewers have a desire for a wider variety of television programming. Telewest
believes that acceptance of alternative programming, together with the
relatively high penetration of DTH satellite services, evidences a willingness
by many consumers in the UK to pay for additional programming.
DTH SATELLITE
DTH satellite services are widely available in the UK. Telewest believes that
BSkyB is a leading supplier of satellite programming in the UK. BSkyB is also a
principal competitor of the Telewest Group and the General Cable Group in the
UK pay television market as well as one of their most important sources of
programming. The Telewest Group and the General Cable Group purchase a large
number of the channels provided by BSkyB to their DTH satellite customers.
Telewest believes that DTH satellite services will continue to be significant
competitors for a cable operator in the future. The Telewest Group competes
against BSkyB in several areas, including: (i) variety of television packages
available to customers, (ii) differentiation in content compared to the BSkyB
DTH satellite service, (iii) provision of local programming, (iv) provision in
some areas of impulse pay-per-view services (e.g., programme services that can
be ordered through the remote control rather than via the telephone), and (v)
provision of telecommunications services in conjunction with broadcast
services. In addition, satellite customers need to purchase set top box
equipment and a satellite dish, in contrast to cable customers who generally
lease set top boxes through their agreement to purchase cable services and do
not have to purchase a satellite dish or other special equipment.
BSkyB currently offers its DTH satellite service customers pay-per-view
services throughout the UK, including in the Telewest Group and General Cable
Group franchise areas. The Telewest Group and the General Cable Group currently
offer their Front Row service. See "-- Section Two --
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SECTION FIVE GENERAL INFORMATION
Information on Telewest -- Cable Television". BSkyB's pay-per-view services
are also available to certain cable subscribers when their operator has elected
to subscribe to the services.
DIGITAL TELEVISION SERVICES
The Broadcasting Act 1996 provides for the assignment of frequencies for the
provision of digital terrestrial television. For details of the licensing
framework and the companies licensed to provide digital broadcasting, see "--
Regulatory Matters -- Regulation of Digital Broadcasting".
In addition to digital terrestrial services, BSkyB has indicated that it
intends to launch a digital satellite service in the third quarter of 1998.
The Telewest Group and the General Cable Group currently expect to begin
introducing digital services in 1999. Telewest believes its services will have
several advantages over the BSkyB and BDB systems, including:
. Unlike BSkyB and BDB, Telewest will operate a return path in support of
interactive services over their broadband network rather than via a
telephone network.
. Capacity of the Telewest digital system will be greater than that
available on the BDB system (which is expected by Telewest to offer the
equivalent of 30 television channels).
. Digital broadcast services on the Telewest system may be integrated with
generic broadband access services e.g., those available via cable
modems. This integration is expected to be unique to cable systems,
although telecommunications network providers and satellite operators
may upgrade their networks in the future to provide similar capability.
. As in the analogue broadcast entertainment market, Telewest will
continue to offer telecommunications services in conjunction with
broadcast services.
Telewest expects the competitive advantages of the BSkyB and BDB digital
systems will include their earlier launch and the national coverage available
on those services at their launch. Telewest expects the digital broadcast and
entertainment market to be highly competitive.
Viewers desiring a digital service will require a digital decoder (or set
top) box or integrated digital television set to receive and view digital
services. As discussed under "-- Regulatory Matters --Regulation of Digital
Broadcasting -- Interoperability", the ITC currently is consulting on the
extent to which digital set top boxes and integrated digital televisions should
be interoperable between all digital platforms, rather than compatible
exclusively with one operator's system. Telewest believes that digital set top
boxes and integrated digital television should be fully interoperable. Full
interoperability would, Telewest believes, enhance its ability to compete in
digital services.
INTERACTIVE SERVICES
British Interactive Broadcasting, a proposed joint venture between BT, BSkyB,
Matsushita (Panasonic) and Midland Bank, intends to provide digital interactive
services initially on the BSkyB network, although the Telewest Group and the
General Cable Group have also requested access to those services. The European
Commission is currently considering the extent to which this joint venture may
involve a restriction of competition.
NEW TECHNOLOGIES
The extent to which new media and technologies will compete with cable
television systems in the future cannot be predicted. Telewest believes that
such media or technologies may become dominant in the future and render cable
television systems less profitable or even obsolete. The UK Government has
stated its intention to auction spectrum for use of future and universal mobile
telecommunications services, as well as other tranches of radio frequency which
may support broadband services. Telewest believes that such auctions of
spectrum could result in increased competition for the Combined Group.
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OTHER COMPETITORS
The Telewest Group and the General Cable Group also compete with home
entertainment media such as home video. Currently, no video-on-demand service
is commercially available in the UK. The introduction of such a service in the
Combined Group's franchise areas would result in increased competition for the
Combined Group's services.
CABLE TELEPHONY
Telewest believes that competition in the provision of telephony services in
the UK has been substantial and that, because of the number of competitors, it
is expected to intensify. BT is the principal competitor of the Telewest Group
and the General Cable Group in providing telephony services to residential and
business customers. BT has an established market presence, a fully built
network and resources substantially greater than those of Telewest. OFTEL
figures for the second quarter of 1997/98 indicate that BT accounts for 88% of
the residential lines and almost 90% of business lines.
Currently, the Telewest Group and the General Cable Group compete against BT
through price competition, both in the provision of calls and exchange lines.
They also compete through service differentiation. To date, the Telewest Group
and the General Cable Group have been able to price below BT, although there
can be no assurance they will be able to continue to do so. Telewest offers
free local calls between Telewest customers in the same local call area, and is
also pursuing a gradual rebalancing of line rental prices against call prices.
BT currently is subject to regulatory controls over the prices it may charge
customers. See "-- Regulatory Matters -- Telecommunications Regulation -- Cable
Telephony -- Price Regulation". As a result of these controls, BT has in the
past reduced and will in the future be required by its telecommunications
licence to reduce its prices further in each of the next few years. The
Telewest Group and the General Cable Group have modified their rates in order
to maintain their price advantage over BT. There can be no assurance, however,
that any such price cuts will not adversely impact the profitability of the
telephony operations of the Telewest Group and the General Cable Group.
Number portability is available to all the Telewest Group's and the General
Cable Group's residential customers and to certain business customers. Number
portability allows customers to switch from BT to the Telewest Group or the
General Cable Group or vice versa without changing their telephone number. To
date, BT has initiated the final stages of number portability from Telewest in
one region, the Midlands. This will allow those Telewest Group customers who
choose to switch to BT to do so without changing their telephone number. BT is
seeking number portability from the General Cable Group in the majority of the
General Cable Group's franchise areas.
As a result of changes to the Interconnection Directive (see "-- Regulatory
Matters -- Telecommunications Regulation -- Carrier Pre-Selection"), Telewest
expects that BT will be required to offer carrier pre-selection services from
1999 onwards. This will allow other operators to sell call services directly to
customers on BT exchange lines without the customer having to dial an access
code to obtain such services. Telewest believes that the launch of such
services may have an adverse impact on the ability of Telewest to sell its
exchange lines and call services to BT customers. There can be no assurance
that a similar obligation will not, in the future, be imposed on Telewest.
OTHER COMPETITORS
Other telecommunications competitors of the Telewest Group and the General
Cable Group include CWC, Ionica, Energis, Torch, AT&T, Sprint, Esprit,
Worldcom, Swiftcall and COLT. In addition, the Telewest Group and the General
Cable Group compete with cellular telephone operators and personal
communications network operators such as Cellnet, Vodafone, One2One and Orange
Personal Communications Limited.
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SECTION FIVE GENERAL INFORMATION
In addition to the exchange line competition provided by cable operators and
wireless operators such as Ionica, several operators offer services to the
residential sector via indirect access over BT lines, for users with high
national and international usage. However, as of the second quarter of 1997
(the latest figures available) less than 10% of UK residential customers use
these indirect access operators.
Telewest believes that in the UK business market, the number of lines is
increasing rapidly, with new services such as ISDN and CENTREX recently showing
high growth rates. Cable operators are having increasing success in attracting
smaller businesses, and other operators, such as COLT and Worldcom, who have
their own fibre-optic networks in city centres, are increasingly attracting
larger business. However, much of BT's competition for business customers'
calls comes from operators that use indirect access over BT's local network to
reach customers. Approximately 15% of BT's business lines are used for indirect
access.
Telewest believes that the international business call market is highly
competitive. As a result of competition through simple resale and from CWC,
BT's market share for international calls from business customers is lower than
that for other services.
MANAGED DATA NETWORK SERVICES
The acquisition of Imminus has enabled the General Cable Group to provide
managed data network services. Traditionally Imminus has concentrated on the
travel sector, primarily competitive with AT&T and Istel, and is likely to face
competition from BT in the future.
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SECTION SIX GENERAL INFORMATION
- --------------------------------------------------------------------------------
SECTION SIX
RISK FACTORS
- --------------------------------------------------------------------------------
In connection with the Merger, shareholders should consider carefully, among
other things, the following risk factors.
INTEGRATION OF TELEWEST AND GENERAL CABLE
The Telewest Group believes that the Merger provides the Combined Group with
the potential for considerable benefits over time, including (a) strengthening
the Combined Group's ability to deliver advanced business data services,
digital television and high-speed Internet access using its broadband network;
(b) producing incremental revenue from delivering integrated services to
residential market segments across a larger subscriber base; (c) allowing the
Combined Group to achieve cost savings and scale economies from reducing
interconnect and programming costs, consolidating network operations and
maintenance, and removing duplicate overheads; and (d) accelerating the
development of the Combined Group's business telephony capabilities using
General Cable's expertise in this area and a wholesale telephony business.
However, there can be no assurance that difficulties will not arise in
integrating the operations of the Groups or that the synergies anticipated from
combining such operations will actually be realised. If currently unanticipated
difficulties arise or such synergies are not realised, the integration of the
operations of the Groups may have a material adverse effect on the Combined
Group.
ABILITY TO MANAGE GROWTH AND EXPANSION
The Groups have experienced rapid growth and development in a relatively
short period of time owing to construction milestone requirements, regulatory
changes permitting cable television operators to provide cable telephony
services and call switching in their own right (rather than under agreements
with, or as agents for, BT or Mercury) and franchise acquisitions. The
management of such growth has required and is likely to continue to require an
expansion of management and financial controls and has placed and is likely to
continue to place strain on the management and operational resources of the
Groups and the Combined Group. Telewest currently is searching for a permanent
chief executive officer for the Combined Group. Although Telewest believes it
will be able to identify and hire an appropriate chief executive officer within
a reasonable period of time, there can be no assurance it will be able to do so
and any failure or delay in doing so could have a material adverse effect on
the Combined Group.
LIMITED CONSUMER ACCEPTANCE OF CABLE TELEVISION AND CABLE TELEPHONY IN THE UK
Cable television and cable telephony have a relatively limited history in the
UK and the Groups are unable to predict with certainty how consumer demand for
these services will continue to develop over time. The Combined Group's future
profitability depends in large measure on the development of increased consumer
preference for cable television over other methods of providing in-home
entertainment and consumer acceptance of the Combined Group as a viable
alternative to BT and CWC as providers of telephony services. For further
information on cable television and cable telephony competition, see "--
Significant Competition" and "-- Section Five -- Regulatory Matters and
Competition -- Competition". The Groups continue to experience relatively high
levels of customer churn in cable television and an increasing cable telephony
churn rate. Telewest believes that these churn rates will decline over time
from the current levels; however, there can be no assurance that the Combined
Group will not continue to experience high churn rates or that such churn rates
will not increase, either of which could have a material adverse effect on the
Combined Group.
I-98
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SECTION SIX GENERAL INFORMATION
NEED TO RENEGOTIATE OR REFINANCE EXISTING FACILITIES; REQUIREMENT FOR
ADDITIONAL FUNDS
Following the Merger, the Combined Group will contain a number of individual
borrowing groups (a Telewest group, a General Cable group, a Birmingham Cable
group and a Cable London group) with generally separate financing arrangements,
the terms of each of which have been structured to reflect the anticipated net
funding requirements of the relevant borrowing group based on its existing
strategy. Amongst other things, these financing arrangements restrict borrowing
and other funds flowing between the different borrowing groups. The anticipated
net funding requirements of each borrowing group represent the anticipated cost
of completing the construction of that group's franchises, the anticipated cost
of its operations, the anticipated net interest on its debt and repayment of
the principal of such debt less the anticipated net revenue generated.
As discussed in "-- Section Four -- Information on the Combined Group --
Strategy for the Combined Group", Telewest will, following completion of the
Merger, consider how best to optimise the potential economies of scale and
other opportunities available to the Combined Group. This may result in changes
to the existing strategies of certain of these borrowing groups, which may
affect their anticipated net funding requirements and necessitate amendments
to, or refinancings of, one or more of the Combined Group's financing
arrangements. There can be no assurance that such amendments or refinancings
would be achievable or achievable on acceptable terms.
Several of the Combined Group's financing arrangements limit the amount of
credit available to the relevant borrowing group to declining multiples over
time of its net operating cash flow and contain covenants (including covenants
linked to achieving certain levels of net operating cash flow), the breach of
which could result in all amounts outstanding under the relevant arrangement or
arrangements becoming due immediately. There can be no assurance that the
actual net funding requirements of individual borrowing groups (or the Combined
Group as a whole) will not be more than, or that their net operating cash flows
will not be less than, those currently anticipated. Differences may result from
the actual cost of constructing the network and operating the business and/or
the amount of revenues derived varying considerably from those currently
anticipated because they depend on many factors, including the numbers of
subscribers and the services for which they subscribe and changes in
technology. To the extent that differences arise, there can be no assurance
that such differences may not necessitate obtaining additional financing and/or
amendments to or refinancings of one or more of the Combined Group's financing
arrangements and that such new financing and/or amendments or refinancings may
be available or available on acceptable terms. Furthermore, if the Combined
Group were to fail to be in compliance with the other terms and conditions
governing the availability of funds under its financial arrangements, the
Combined Group's ability to meet its anticipated net funding requirements may
be impaired.
As discussed under "-- Section One -- The Merger and Related Matters --
Birmingham Cable and Cable London", the Telewest Group expects in due course
to serve notice on General Cable requiring General Cable to sell its holding of
shares in Birmingham Cable to Telewest for (Pounds)100 million subject to the
operation of the pre-emptive provision in the Birmingham Cable Articles.
Telewest intends to fund such purchase with the proceeds of the Unsecured
Notes. The obligation under the Securities Purchase Agreement to purchase the
Unsecured Notes is subject to a number of conditions. Although the Telewest
Group believes that these conditions will be satisfied, there can be no
assurance that all of the conditions will be satisfied and that the necessary
funds for such purchase will be available from the Unsecured Notes or
otherwise.
The Combined Group may require additional funding after 31 December 1999. If
additional funding were to be required before or after this date, the Combined
Group would review the alternative funding sources then available but would
intend to obtain this funding from institutional debt offerings in the US
and/or syndicated bank financing although there can be no assurance that such
funding or any other funding will be available to the Combined Group, or that
the Combined Group will not elect to use alternative funding sources (including
public debt offerings in the UK or Europe).
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SECTION SIX GENERAL INFORMATION
ANTICIPATED BOND OFFERING; ADVERSE CONSEQUENCES OF ADDITIONAL FINANCIAL
LEVERAGE
Telewest currently is considering a private placement of long-term debt
securities to finance its anticipated purchase of Comcast's interests in
Birmingham Cable and Cable London, to refinance the Second Secured Facility and
to provide additional working capital. See "-- Section Seven -- Additional
Information -- Financing Arrangements". Such debt securities would likely
include covenants similar to those included in Telewest's existing debt
securities issued in October 1995, including covenants which limit indebtedness
and the payment of dividends, restrict asset sales and dictate the use of
proceeds from the sale of assets. These restrictions, in combination with the
leveraged nature of the Combined Group (as described below), could limit the
ability of the Combined Group to respond to market conditions or meet
extraordinary capital needs or otherwise could restrict corporate activities.
There can be no assurance that such restrictions will not adversely affect the
Combined Group's ability to finance its future operations or capital needs or
to engage in other business activities, such as acquisitions, which may be in
the interest of the Combined Group.
Increasing the Combined Group's indebtedness could have significant
consequences for the Combined Group, including (a) increasing the Combined
Group's vulnerability to general adverse economic and industry conditions; (b)
limiting the Combined Group's ability to obtain additional financing to fund
future working capital, capital expenditures, acquisitions or other general
corporate purposes, including the construction of its network; (c) requiring a
substantial portion of the Combined Group's cash flow to be dedicated to debt
service requirements, thereby reducing the funds available for operations and
future business opportunities; and (d) increasing the Combined Group's exposure
to increases in interest rates in the event that any such long-term debt
securities are at variable rates of interest.
HISTORY OF LOSSES
The Groups have incurred operating and net losses since their inception.
Based on the UK GAAP financial information, during the two years ended 31
December 1997 and the three months ended 31 March 1998, the Telewest Group
incurred aggregate net losses of approximately (Pounds)632 million, including
non-cash depreciation and amortisation expenses of approximately (Pounds)354
million. Based on the UK GAAP financial information, during the two years ended
31 December 1997 and the three months ended 31 March 1998, the General Cable
Group incurred aggregate net losses of approximately (Pounds)123 million,
including non-cash depreciation and amortisation expenses of approximately
(Pounds)72 million. On a pro forma basis the combined losses of the Combined
Group for the year ended 31 December 1997 would have been (Pounds)440 million.
Although Telewest believes that the continued expansion of the Combined Group's
networks ultimately will provide it with a revenue base that will exceed its
operating expenses, Telewest expects the Combined Group to incur additional
losses for the foreseeable future and there can be no assurance that its
operations will become profitable. Failure to become profitable could impact
its ability to sustain operations and obtain required additional funds. In any
event, Telewest does not presently intend to pay any dividends on any of its
shares for the foreseeable future.
UNCERTAINTY AS TO PERCENTAGE INTERESTS IN BIRMINGHAM CABLE AND CABLE LONDON
The Telewest Group, the General Cable Group and Comcast currently own 27.47%,
44.95% and 27.47%, respectively, of the issued share capital of Birmingham
Cable, and Telewest and Comcast each currently own approximately 50% of the
issued share capital of Cable London. Upon and subject to completion of the
NTL/Comcast Merger, the Telewest Group will have the right to acquire Comcast's
interests in Birmingham Cable and Cable London. In addition, General Cable has
undertaken (if so required by Telewest) to sell its interest in Birmingham
Cable to the Telewest Group, subject to the pre-emption rights contained in the
Birmingham Cable Articles. Consequently, such shares would be offered in
accordance with such rights to Telewest, Comcast and the other shareholders in
Birmingham Cable. Further details regarding these possible transfers are set
out in "-- Section One -- The Merger
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SECTION SIX GENERAL INFORMATION
and Related Matters -- Birmingham Cable and Cable London". The precise
percentage interest to be owned by the Telewest Group in Birmingham Cable will
depend on a number of factors and events, including, among others: (a)
completion of the proposed NTL/Comcast Merger; (b) whether Comcast will
exercise its rights under the pre-emption provisions in the Birmingham Cable
Articles, (c) resolution of disputes between Telewest and Comcast concerning
the operation of the Co-Ownership Agreement and the Birmingham Cable Articles,
(d) the availability of funds under the Securities Purchase Agreement for the
purchase of General Cable's shares in Birmingham Cable and (e) the ability of
Telewest to obtain financing for the purchase of the Comcast interest in
Birmingham Cable. Representatives of Telewest, NTL and Comcast are engaged in
discussions which could resolve the disputes concerning the operation of the
Co-Ownership Agreement and the Birmingham Cable Articles, but there can be no
assurance that any agreement will be reached, what the terms of any such
agreement may be, or what the consequences of a failure to so agree may be. The
Combined Group's ability to acquire the Comcast Cable London interests will
depend on a number of factors and events, including, among others: (a) the
completion of the proposed NTL/Comcast Merger and (b) the ability of the
Combined Group to obtain financing for the purchase of the Comcast interest in
Cable London. In light of the foregoing factors, there can be no assurance as
to whether Telewest's interests in Birmingham Cable or Cable London will
increase or will not decrease.
Even if the Combined Group acquires more than a 50% interest in Birmingham
Cable and Cable London there can be no assurance as to when the Telewest Group
will have the ability to control the day-to-day management or operations of the
such companies. At present, although the Telewest Group has representatives on
each board of directors of Birmingham Cable and Cable London and has the right
to approve certain significant transactions and other corporate matters, the
Telewest Group's ability to control the day-to-day management or operations of
such companies is limited. Consequently, the value of the Telewest Group's
investment in these companies is dependent in large part on the skill and
performance of the management of these companies. In addition, the Telewest
Group is unable, without the consent of the other principal shareholder
(Comcast), to cause Birmingham Cable and Cable London to implement strategies
that the Telewest Group may favour, or to cause dividends or other
distributions to be made. The Telewest Group is also restricted by certain
agreements with other parties from transferring its interests in Birmingham
Cable and Cable London without the consent of the relevant partners.
Accordingly, there can be no assurance that the Telewest Group will be able to
realise the full economic benefit from its ownership interests in Birmingham
Cable and Cable London, whether through the receipt of dividends or other
distributions from the such companies or the sale of its interests or
otherwise.
SIGNIFICANT COMPETITION
CABLE TELEVISION
The Groups compete directly with television programming provided by
terrestrial (over-the-air broadcast television) stations and DTH satellite
services (including BSkyB). The Groups' programming also competes with other
entertainment media, including home video (generally video rentals) and films.
The Combined Group expects, in the near future, to face competition from
digital terrestrial and digital satellite television. BSkyB has indicated it
intends to launch a digital satellite service in the third quarter of 1998 and
the Telewest Group and the General Cable Group currently expect to begin
introducing digital services in 1999. The scheduled later introduction by the
Telewest Group and the General Cable Group of digital services or any delay by
them in launching such services may have a negative impact on the ability of
the Combined Group to compete in digital television market and to retain
existing, and attract new, cable television customers. The Combined Group
expects that in the future it may also face competition from programming
provided by video-on-demand services, including those that may be provided by
PTO. The extent of competition from other service providers depends upon, among
other factors, the quantity and quality of the programming offered, the price
(including the level of up-front service costs) and, with respect to DTH
satellite and broadcast services, the quality of the broadcast signal. The
Groups also compete with other companies (which may include PTOs and other
cable operators) for the award of new franchises, the purchase of existing
franchises
I-101
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SECTION SIX GENERAL INFORMATION
and new sources of capital. Further information on cable television competition
can be found under "-- Section Five -- Regulatory Matters and Competition --
Competition -- Cable Television".
CABLE TELEPHONY
The Groups compete primarily with BT in providing telephony services to
residential and small and medium-size business customers. BT has an established
market presence, a fully built network and resources substantially greater than
those of the Groups. As more than 88% of UK residential telephony customers are
currently customers of BT, the growth in telephony services depends upon the
Groups' ability to convince these customers to switch to the telephony services
provided by the Groups. Telewest believes that price is currently one of the
most important factors influencing the decision of UK customers to switch to a
cable telephony service. For example, the Groups currently seek to provide
their telephony subscribers with savings on the cost of calls compared to BT.
Telewest believes that BT will be required to reduce its prices further in each
of the next few years and may choose to further reduce its prices for
competitive reasons. There can be no assurance that such price cuts will not
adversely affect the telephony operations of the Groups or that the Groups will
be able to continue to offer customers the same level of savings.
In addition to BT, the Groups compete in the provision of telephony services
with other service providers such as CWC, Ionica, Energis, Torch, AT&T, Sprint,
Esprit, Worldcom, Swiftcall, MFS and COLT, and operators of mobile cellular
telephony networks, such as Cellnet and Vodafone, and personal communications
networks, such as Orange and One2One. Further details on competition can be
found under "-- Section Five -- Regulatory Matters and Competition --
Competition -- Cable Telephony".
CONSTRUCTION OF NETWORKS
The successful construction of the Combined Group's cable systems will depend
on, among other things, its ability to continue to design successfully network
routes, install cable and equipment, maintain and comply with the terms of
required government licences or approvals and finance construction. Although in
the past the Groups have from time to time not met certain milestones, they
have generally sought and received appropriate milestone modifications from the
Director General. In the event that the Combined Group is unable to meet the
construction milestones required by any of its licences, and is unable to
obtain further modifications, such licences could be revoked, which could have
a material adverse effect on the Combined Group.
INFLUENCE OF PRINCIPAL SHAREHOLDERS
Immediately following completion of the Merger, the Pre-emptive Issue
(assuming all Qualifying Telewest securityholders take up their entitlements
under the Pre-emptive Issue pro rata) and Conversion, the TINTA Group and the
MediaOne Group (through their interests in TW Holdings) are expected to
control, collectively, approximately 50.1% of the issued Telewest shares. As a
result of the ownership and voting arrangements set out in the Relationship
Agreement, the TINTA Group and the MediaOne Group will together generally be
able to determine the outcome of any matter requiring shareholder approval,
including the election or removal of Directors (subject to the requirements as
to Board composition included in the Articles), the creation and issuance of
shares and the granting of the necessary authority to the Directors to allot
any unissued shares. As a result of certain appointment and voting
arrangements, the TINTA Group and the MediaOne Group will also have significant
influence over decisions made by the Board. In addition to the MediaOne Group's
and the TINTA Group's general rights as shareholders and rights to appoint
Directors, the Relationship Agreement provides that, for so long as either the
TINTA or MediaOne Groups hold 15% or more of the Telewest shares in issue, the
consent of the TINTA Group and/or the MediaOne Group (as appropriate) must be
obtained by Telewest before certain significant corporate actions may be taken.
The Relationship Agreement also limits the scope of the Telewest Group's
business for so long as TINTA or MediaOne retains an interest of 15% or more of
the Telewest shares in issue. In addition, members of the TINTA Group and the
MediaOne Group are parties to certain contractual arrangements that affect, and
in some cases will restrict, the business of the Combined Group.
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SECTION SIX GENERAL INFORMATION
As a condition to the continued listing of the Telewest shares on the London
Stock Exchange, Telewest must demonstrate its "independence" from any
"controlling shareholder". Upon completion of the Merger, the TINTA Group and
MediaOne Group will both be deemed "controlling shareholders". To comply with
this independence requirement, Telewest must demonstrate that all "significant"
decisions can be made by a majority of Directors who are independent of TINTA
and MediaOne as controlling shareholders, and that contractual arrangements to
that effect are in place between Telewest and the relevant shareholders.
Consequently, a majority of the Board needs to be independent of TINTA and
MediaOne. If at any time Telewest were to lack the requisite independence (as a
result of action by TINTA or MediaOne or otherwise), the listing of the
Telewest shares on the London Stock Exchange could be suspended or cancelled.
Such a suspension or cancellation could have a material adverse effect on the
liquidity of the trading market for, and the value of, the Telewest shares and
Telewest ADSs. SBC, Cox and Vivendi will not be "controlling shareholders" for
the purposes of the Listing Rules.
TINTA and MediaOne have agreed that, on any matter requiring the approval of
the Board, they will cause the Directors designated by them to vote together as
agreed by them (subject to each Director's fiduciary duties to Telewest) or, in
the absence of such agreement, to vote together in the manner that would be
most likely to continue the status quo without materially increasing the
Telewest's Group's financial obligations or materially deviating from its
approved budget and business plan. If the Directors appointed by either the
TINTA Group or the MediaOne Group (as the case may be) are precluded from
voting on any matter because of a conflict of interest, the Directors appointed
by the members of the other group may vote on such matter as they deem
appropriate. For further details on the relationship with TCI, MediaOne, SBC,
Cox and Vivendi and their respective affiliates, see "-- Section Four --
Information on the Combined Group -- Principal Shareholders".
EXTENSIVE GOVERNMENT AND EUROPEAN REGULATION
The licensing, construction, operation, sale and acquisition of cable
television and cable telephony systems in the UK are regulated by various
entities. Telecommunications policy is established and overseen by the DTI.
Telecommunications regulations and licences are monitored and enforced by the
Director General. Broadcasting policy is established and overseen by the DCMS
and broadcasting licences are issued and monitored by the ITC. For further
information on regulatory issues, see "-- Section Five -- Regulatory Matters
and Competition". Changes in the regulation both at a UK and a European level
of the Groups' activities and those of their competitors (including in the
areas of licensing requirements, price regulation, interconnection
arrangements, number portability, carrier pre-selection or the ability to
access digital services) could have a material adverse effect on the Groups.
TECHNOLOGICAL CHANGES
The cable industry is subject to rapid and significant changes in technology.
Although Telewest believes that the Groups' current networks have been designed
to be sufficiently flexible to permit them to deliver a wide variety of
existing television and telephony services to their customers and advanced,
interactive and integrated multimedia services as they become available in the
future, the effect of any future technological changes on the viability or
competitiveness of their network and services cannot be predicted. In any
event, Telewest believes that if digital terrestrial or digital DTH satellite
television service is successfully introduced in the UK at competitive costs,
the Groups, as well as their digital terrestrial and digital DTH satellite
competitors, will be able to increase significantly the number of channels they
are currently able to offer to their customers. An increase in the number of
channels offered by terrestrial and DTH satellite services could reduce the
current competitive advantage of the Groups.
LIMITED ACCESS TO PROGRAMMING SUPPLY
The ability of the Groups to offer competitive cable television services is
dependent on their ability to obtain programming at a reasonable cost. While
various sources of programming are available to cable television operators in
the UK, BSkyB is a leading supplier of cable television programming and the
exclusive supplier of certain programming, including Sky Sports and the most
popular premium
I-103
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SECTION SIX GENERAL INFORMATION
film channels available in the UK. BSkyB's programming is important in terms of
attracting and retaining cable television subscribers. The Telewest Group
entered into a seven-year contract with BSkyB in 1995, pursuant to which the
Telewest Group receives programming from BSkyB. The General Cable Group
operates under the industry rate card.
YEAR 2000 COMPLIANCE
The Telewest Group has established a Steering Committee to oversee the
procedures for compliance with Year 2000 requirements. The Committee's work is
reviewed periodically by internal and external auditors, and integrated with
similar programmes run by the major corporate shareholders. The project
objective is to ensure complete compliance in advance of the Year 2000, which
is facilitated by the relatively modern systems in use in the Telewest Group
and the planned upgrades in 1998 of critical operating systems based on
external package solutions that are Year 2000 compliant. However, there can be
no assurance that such compliance will be achieved or that it will be achieved
without significant costs.
POTENTIAL VOLATILITY OF SHARE PRICE
The market price for the Telewest shares at times in the past has been highly
volatile and may continue to be highly volatile in the future. Telewest
believes that factors such as quarterly fluctuations in financial results or
announcements by Telewest or by its competitors or other industry participants
(such as CWC, BT and BSkyB), particularly with respect to service offerings and
prices, could cause the market price of the Telewest shares to fluctuate
substantially. In addition, the stock market may experience extreme price and
volume fluctuations which often are unrelated to the operating performance of
specific companies. Market fluctuations or perceptions regarding the
telecommunications industry, as well as general economic or political
conditions, may adversely affect the market price of the Telewest shares.
Telewest is currently a member of a number of indices (the "Indices"),
eligibility for which is reviewed by the FTSE Actuaries UK Indices Committee.
One of the eligibility criteria for membership of the Indices is that 25% of a
company's shares should be in "public hands" (as defined in the Listing Rules).
As discussed in "-- Section Four -- Information on the Combined Group --
Principal Shareholders", there may be circumstances in which the number of
Telewest shares in "public hands", falls below 25%. If this happens, Telewest
may not qualify for membership of the Indices. In this event, certain holders
of Telewest shares may be required to dispose of their investment in Telewest
and certain investors may be restricted in their ability to acquire Telewest
shares. Any such dispositions or restrictions could cause the market price of
Telewest shares to fluctuate substantially. In the past, following periods of
volatility in the market price for a company's securities, securities class
action litigation has often been instituted. Such litigation could result in
substantial costs and a diversion of management attention and resources, which
could have a material adverse effect on the Combined Group's financial
condition and results of operations.
IMPACT OF SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Merger, the Pre-emptive Issue and Conversion, Telewest
will have 2,145,158,549 Telewest shares in issue (assuming that all options
outstanding under the General Cable Share Schemes will be exercised and the
General Cable shares received in connection therewith will be tendered in the
Offer). All such Telewest shares, other than those not registered under the
Securities Act or those held by "affiliates" (as that term is used under the
Securities Act) of Telewest, will be directly transferable and tradable in the
US without restrictions or further registration under the Securities Act.
Telewest shares not registered under the Securities Act ("Restricted Shares")
and Telewest shares held by "affiliates" of Telewest will be eligible for sale
in the US public market subject to compliance with Rule 144 under the
Securities Act ("Rule 144"), but may be sold without such compliance inside the
US pursuant to Rule 144A under the Securities Act ("Rule 144A") or outside the
US in "offshore transactions" (as defined in Regulation S ("Regulation S")
under the Securities Act) on the London Stock Exchange or otherwise pursuant to
Regulation S. For a discussion of certain restrictions on the transfer or
disposal of Telewest shares and Telewest Convertible Preference shares by
members of the TINTA Group, the MediaOne Group, the SBC Group and the Cox
Group, see "-- Section Four -- Information on the Combined Group -- Principal
Shareholders -- Disposal and
I-104
<PAGE>
SECTION SIX GENERAL INFORMATION
Acquisition of Telewest Shares and Telewest Convertible Preference Shares".
Following completion of the Offer, there will be no such restrictions on the
transfer or disposal of Telewest shares by Vivendi. For information regarding
the rights of the TINTA Affiliate, the MediaOne Affiliates, the SBC Affiliate,
the Cox Affiliate and Vivendi to have Telewest register certain Telewest shares
owned by them, see "--Section Four -- Information on the Combined Group --
Principal Shareholders -- Registration Rights". Sales of substantial amounts
of Telewest shares pursuant to a registration statement, Rule 144 or otherwise,
whether in the US or abroad, could adversely affect the public market price of
the Telewest shares.
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SECTION SEVEN GENERAL INFORMATION
- --------------------------------------------------------------------------------
SECTION SEVEN
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
1. INCORPORATION
Telewest was incorporated in England and Wales on 20 October 1994 under the
Companies Act as a public company limited by shares and is registered in
England and Wales with registered number 2983307.
2. SHARE CAPITAL
(a) On incorporation the authorised share capital of Telewest was
(Pounds)50,000 divided into 50,000 ordinary shares of (Pounds)1 each of which
two shares were issued for cash at par to the subscribers to the Memorandum of
Association of Telewest (the "Memorandum"). Since then there have been the
following changes in the authorised and issued share capital of Telewest:
(i) On 9 August 1995, Telewest issued the following ordinary shares of
(Pounds)1 each for cash at par with 25 pence paid up on each such share and
another 75 pence to be paid up on each such share (which has now been
paid):
(l) 24,999 ordinary shares of (Pounds)1 each to United Artists
Programming -- Europe Holdings, Inc; and
(2) 24,999 ordinary shares of (Pounds)1 each to U S WEST Cable
Partnership Holdings, Inc.
(ii) On 14 August 1995:
(1) the issued share capital of Telewest was sub-divided into 500,000
Telewest shares of 10 pence each; and
(2) the authorised share capital of Telewest was increased to
(Pounds)267,100,000 by the creation of 2,009,500,000 ordinary shares of
10 pence each and 661,000,000 Convertible Preference shares of 10 pence
each.
(b) In connection with the SBCC Merger, Telewest issued 735,468,440 Telewest
shares and 265,276,500 Telewest Convertible Preference shares, in each case
issued credited as fully paid in consideration for the transfer of the same
number of Old Telewest shares then in issue to Telewest.
(c) In connection with the SBCC Merger, Telewest issued a total of
183,954,960 Telewest shares and 230,790,208 Telewest Convertible Preference
shares, with 91,997,480 Telewest shares and 115,395,104 Telewest Convertible
Preference shares being issued to the Cox Affiliate, 45,988,740 Telewest shares
and 57,707,552 Telewest Convertible Preference shares being issued to the SBC
Affiliate and 45,988,740 Telewest shares and 57,707,552 Telewest Convertible
Preference shares being issued to Southwestern Bell International Holdings (UK-
2) Corporation.
(d) Pursuant to a Sale and Purchase Agreement dated 1 April 1996, Telewest
issued 7,047,483 Telewest shares to Trans-Global (Guernsey) Limited in
consideration of the purchase from Trans-Global (Guernsey) Limited of certain
rights and interests in certain Telewest franchises and a shareholding of 150
fully paid B ordinary shares and 75,000 fully paid A ordinary shares in United
Artists Communications (Cotswolds) Limited.
(e) Pursuant to an ordinary resolution passed on 8 May 1998, pursuant to
Section 80 of the Companies Act, the Directors are generally and
unconditionally authorised to allot relevant securities up to an aggregate
nominal amount of (Pounds)30,918,920. This authority expires on the earlier of
7 August 1999 and the conclusion of the Annual General Meeting of Telewest to
be held in 1999. By a special resolution also passed on 8 May 1998, the
provisions of Section 89 of the Companies Act were disapplied in respect of
allotments made pursuant to the Section 80 authority referred to in this
paragraph for the same period.
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
(f) Ordinary resolutions will be proposed at the Extraordinary General
Meeting which, if passed, will (i) increase the authorised ordinary share
capital of Telewest from (Pounds)201,000,000 to (Pounds)290,000,000 by the
creation of 890,000,000 new Telewest shares and (ii) in substitution for all
previous powers, authorise the Directors pursuant to Section 80 of the
Companies Act to allot relevant securities up to an aggregate nominal amount of
(Pounds)121,759,095 pursuant to the Offer, the Pre-emptive Issue and the
Conversion for a period expiring on the conclusion of the Annual General
Meeting of Telewest to be held in 1999 and require a further general authority
to allot relevant securities up to an aggregate nominal amount of
(Pounds)71,505,285 for a period expiring on the earlier of 1 October 1999 and
the conclusion of the Annual General Meeting of Telewest to be held in 1999. A
special resolution will also be proposed at the Extraordinary General Meeting,
pursuant to Section 95 of the Companies Act to disapply the provisions of
Section 89 of the Companies Act in respect of allotments made pursuant to the
Section 80 authority referred to in this paragraph expiring on the earlier of
June 2003 or the conclusion of the Annual General Meeting of Telewest to be
held in 2003.
(g) At the date of this document, Telewest's authorised and issued share
capital is as follows:
<TABLE>
<CAPTION>
AUTHORISED ISSUED
------------------------- ---------------------------
(Pounds) Number (Pounds) Number
<S> <C> <C> <C> <C>
Telewest shares 201,000,000 2,010,000,000 92,756,760.0 927,567,600
Telewest Convertible
Preference shares 66,100,000 661,000,000 49,606,670.8 496,066,708
-----------------------------------------------------
TOTAL 267,100,000 2,671,000,000 142,363,430.8 1,423,634,308
-----------------------------------------------------
(h) Immediately following completion of the Merger, the Pre-emptive Issue and
Conversion (assuming that all options outstanding under the General Cable Share
Schemes will be exercised and the General Cable shares received in connection
therewith will be tendered in the Offer), Telewest's authorised ordinary share
capital and issued ordinary share capital (all of which will be fully paid-up)
will be as follows:
<CAPTION>
AUTHORISED ISSUED
------------------------- ---------------------------
(Pounds) Number (Pounds) Number
<S> <C> <C> <C> <C>
Telewest shares 290,000,000 2,900,000,000 214,515,854 2,145,158,549
</TABLE>
(i) Except as disclosed in this paragraph 2, no share capital or loan capital
of Telewest or any other member of the Telewest Group has, within three years
before the date of this document, been issued or agreed to be issued or is now
proposed to be issued fully or partly paid, either for cash or for
consideration other than cash and no commissions, discounts or brokerages have
been granted by Telewest or by any other member of the Telewest Group, in
connection with the sale or issue of any shares or any loan capital of any such
company.
(j) Except as disclosed in "-- Employee Share Schemes" in connection with the
Telewest Share Schemes, neither Telewest nor any other member of the Telewest
Group has granted any options over its share or loan capital that remain
outstanding or has agreed, conditionally or unconditionally, to grant any such
options or awards.
(k) Telewest is subject to the continuing obligations of the London Stock
Exchange with regard to the issue of securities for cash and provisions of
Section 89 of the Companies Act (which confer on shareholders rights of pre-
emption in respect of the allotment of equity securities which are, or are to
be, paid up in cash) which apply to the balance of the authorised but unissued
share capital of Telewest. Telewest has undertaken to affiliates of TCI,
MediaOne, SBC and Cox that it will use its best efforts (consistent with the
interests of shareholders generally) to ensure that any issue of shares
(whether for cash or other consideration) is structured in such a way as to
provide existing shareholders with an opportunity to purchase additional shares
to avoid dilution of their interests in Telewest.
(l) Telewest shares are, and the new Telewest shares will be, in registered
form and are capable of being held in uncertificated form in CREST.
I-107
<PAGE>
SECTION SEVEN GENERAL INFORMATION
(m) Telewest shares are traded on the Official List of the London Stock
Exchange, and Telewest ADSs representing Telewest shares are quoted on Nasdaq.
(n) (i) See "-- Section Four -- Information on the Combined Group --
Principal Shareholders" for information on pre- and post-Merger ownership of
Telewest by its principal shareholders.
(ii) Except as disclosed in "-- Section Four -- Information on the Combined
Group -- Principal Shareholders", Telewest is not aware of any person who
is or, immediately following completion of the Merger, the Pre-emptive
Issue and Conversion, will be, interested, directly or indirectly, in 3% or
more of the issued share capital of Telewest.
(iii) Except for TW Holdings and for the TINTA Affiliate and the MediaOne
Affiliates, through their holdings in TW Holdings, Telewest is not aware of
any persons who, directly or indirectly, jointly or severally, exercises or
could exercise control over Telewest.
3. CERTAIN TRADING MARKET, DIVIDEND AND EXCHANGE RATE INFORMATION
INFORMATION REQUIRED BY APPLICABLE UK REGULATIONS
The following tables show (a) the middle-market quotations for Telewest
shares and General Cable shares, as derived from the Daily Official List of the
London Stock Exchange, and (b) the last reported trade prices of Telewest ADSs
and General Cable ADSs on Nasdaq, for the first dealing day in each of the six
months immediately prior to the date of this document, for 20 February 1998
(the last dealing day prior to the announcement by General Cable that it was in
discussions that might lead to an offer for it), for 27 March 1998 (the last
dealing day prior to the announcement by General Cable that it was in advanced
negotiations that might lead to a recommended offer and the terms thereof), for
14 April 1998 (the last dealing day prior to announcement of the Pre-emptive
Issue and the Offer) and for 24 June 1998 (the latest practicable date prior to
the publication of this document):
(A) SHARES
<TABLE>
<CAPTION>
TELEWEST SHARE GENERAL CABLE SHARE
DATE (PRICE IN PENCE) (PRICE IN PENCE)
<S> <C> <C>
2 January 1998 70.00 83.50
2 February 1998 77.00 81.00
20 February 1998 80.00 109.00
2 March 1998 77.50 132.00
27 March 1998 94.50 155.50
1 April 1998 90.00 168.00
14 April 1998 88.50 159.00
1 May 1998 103.50 181.50
1 June 1998 99.0 180.50
24 June 1998 159.00 248.00
(B) ADSS
<CAPTION>
TELEWEST ADS GENERAL CABLE ADS
DATE (PRICE IN US$) (PRICE IN US$)
<S> <C> <C>
2 January 1998 12.25 7.00
2 February 1998 13.00 6.75
19 February 1998 13.00 8.88
2 March 1998 12.75 11.13
27 March 1998 16.00 13.00
1 April 1998 15.19 14.00
14 April 1998 15.25 13.13
1 May 1998 17.50 15.38
1 June 1998 16.38 15.13
24 June 1998 24.63 19.88
</TABLE>
I-108
<PAGE>
SECTION SEVEN GENERAL INFORMATION
INFORMATION REQUIRED BY APPLICABLE US REGULATIONS
TELEWEST
Telewest shares are listed and traded on the London Stock Exchange. Telewest
ADSs are traded on Nasdaq. Each Telewest ADS represents ten Telewest shares.
The Bank of New York is the depositary for the Telewest ADSs. The following
table sets out, for the periods indicated, (a) the high and low middle-market
quotations for Telewest shares on the London Stock Exchange and (b) the high
and low reported closing prices of Telewest ADSs on Nasdaq. For current price
information, Telewest and General Cable shareholders are urged to consult
publicly available sources.
<TABLE>
<CAPTION>
TELEWEST SHARES (1) TELEWEST ADSS (2)
----------------------- -----------------
HIGH LOW HIGH LOW
<C> <S> <C> <C> <C> <C>
1996 First Quarter 156 pence 118 pence $ 24.13 $ 18.25
Second Quarter 188.5 pence 145 pence $ 28.50 $ 22.38
Third Quarter 161 pence 119 pence $ 24.75 $ 18.50
Fourth Quarter 141.5 pence 117.5 pence $ 23.13 $ 18.75
1997 First Quarter 133.5 pence 106 pence $ 22.00 $ 17.38
Second Quarter 107.5 pence 63 pence $ 17.50 $ 10.75
Third Quarter 95 pence 74 pence $ 15.50 $ 12.13
Fourth Quarter 88.5 pence 68.5 pence $ 14.88 $ 11.75
1998 First Quarter 95.5 pence 70 pence $ 16.25 $ 11.63
Second Quarter (through 24
June) 159.0 pence 84.5 pence $25.63 $14.50
</TABLE>
- ------------
(1) The middle-market quotations set out for the Telewest shares are derived
from the Daily Official List of the London Stock Exchange.
(2) The prices set out for the Telewest ADSs are provided by Nasdaq.
On 14 April 1998, the last dealing day prior to the announcement of the
Offer, the high and low reported trades as derived from the Daily Official List
of the London Stock Exchange for Telewest shares on such date were 90 pence and
86 pence, respectively, and the high and low reported sale prices of Telewest
ADSs on such date on Nasdaq were $15.25 and $15.13, respectively.
On 24 June 1998, the latest practicable day prior to the publication of this
document, the middle- market quotation for Telewest shares as derived from the
Daily Official List of the London Stock Exchange was 159 pence and the last
reported sale price of Telewest ADSs on Nasdaq was $24.63.
On 24 June 1998, 676,807,492 Telewest shares (not including those held
through Telewest ADSs) were held by approximately 14 holders with registered
addresses in the US, equivalent to approximately 73.0% of the outstanding
Telewest shares. On such date, 2,254,253 Telewest ADSs were held by 11
registered holders of Telewest ADRs representing Telewest ADSs, equivalent to
approximately 2.4% of the outstanding Telewest shares. Since certain of such
Telewest shares and Telewest ADSs are held by nominees, the number of holders
may not be representative of the number of beneficial owners in the US or the
number of Telewest shares held by them.
Telewest has not paid any dividends on the Telewest shares.
GENERAL CABLE
General Cable shares are listed and traded on the London Stock Exchange.
General Cable ADSs are traded on Nasdaq. Each General Cable ADS represents five
General Cable shares. The Bank of New York is the depositary for the General
Cable ADSs. The following table sets out, for the periods indicated, (a) the
reported high and low middle-market quotations for General Cable shares on the
London Stock Exchange and (b) the high and low reported closing prices of
General Cable ADSs on Nasdaq. For current price information, Telewest and
General Cable shareholders are urged to consult publicly available sources.
I-109
<PAGE>
SECTION SEVEN GENERAL INFORMATION
<TABLE>
<CAPTION>
GENERAL CABLE SHARES (1) GENERAL CABLE ADSS (2)
------------------------- -----------------------
HIGH LOW HIGH LOW
<C> <S> <C> <C> <C> <C>
1996 First Quarter 193 pence 155 pence $ 14.88 $ 11.94
Second Quarter 209 pence 185 pence $ 16.00 $ 14.38
Third Quarter 193 pence 160.5 pence $ 15.00 $ 12.38
Fourth Quarter 214 pence 175 pence $ 17.38 $ 13.63
1997 First Quarter 196.5 pence 167 pence $ 16.50 $ 13.50
Second Quarter 179.5 pence 137 pence $ 15.00 $ 11.13
Third Quarter 161 pence 106.5 pence $ 13.50 $ 8.38
Fourth Quarter 129 pence 82.5 pence $ 10.75 $ 6.63
1998 First Quarter 168 pence 78 pence $ 14.13 $ 6.25
Second Quarter (through
24 June) 248 pence 157 pence $ 19.88 $ 13.13
</TABLE>
- ------------
(1) The middle-market quotations set out for the General Cable shares are
derived from the Daily Official List of the London Stock Exchange.
(2) The prices set out for the General Cable ADSs are provided by Nasdaq.
On 14 April 1998, the last dealing day in London prior to the announcement of
the Offer, the high and low reported trades as derived from the Daily Official
List of the London Stock Exchange for General Cable shares on such date were
161 pence and 157 pence, respectively, and the high and low reported sale
prices of General Cable ADSs on such date on Nasdaq were $13.13 and $13.13,
respectively.
On 24 June 1998, the latest practicable day prior to the publication of this
document, the middle- market quotation for General Cable shares as derived from
the Daily Official List of the London Stock Exchange was 248 pence, and the
last reported sale price of General Cable ADSs on Nasdaq was $19.88.
On 29 May 1998, 135,525 General Cable shares (not including those held
through General Cable ADSs) were held by one holder with a registered address
in the US, equivalent to approximately 0.04% of the issued General Cable
shares. On such date, 2,549,578 General Cable ADSs were held by approximately
400 registered holders of General Cable ADRs representing General Cable ADSs,
equivalent to approximately 3.49% of the issued General Cable shares. Since
certain of such General Cable shares and General Cable ADSs are held by
nominees, the number of holders may not be representative of the number of
beneficial owners in the US or the number of General Cable shares held by them.
Historically, General Cable has not paid any dividends. General Cable does
not anticipate paying any dividends in the foreseeable future. As a matter of
English law, General Cable may only pay dividends to the extent of its
accumulated realised profits less its accumulated realised losses. Similarly,
General Cable's subsidiaries will not be able to pay dividends to General Cable
until they have accumulated sufficient realised profits to offset their
accumulated losses of earlier years. In addition, the terms of the financings
arranged by the Systems restrict the ability of the Systems to pay dividends or
make other payments to shareholders and related companies, and future third-
party financing is expected to contain similar restrictions. Future dividend
policy will be dependent upon General Cable's accumulated realised profits, the
financial condition of General Cable, the terms of any then-existing debt
facilities and other relevant factors existing at such time.
CERTAIN COMPARATIVE MARKET PRICE INFORMATION
The following table sets out (i) the middle-market quotations for General
Cable shares and Telewest shares as derived from the Daily Official List of the
London Stock Exchange on 14 April 1998, the last dealing day in London prior to
the announcement of the Offer, and 24 June 1998, the latest practicable date
prior to the publication of this document, (ii) the "equivalent per share
price" (as hereinafter defined) of General Cable shares on 14 April 1998 and
24 June 1998. "Equivalent per share price" of the General Cable shares
represents the applicable middle-market quotation for Telewest
I-110
<PAGE>
SECTION SEVEN GENERAL INFORMATION
shares multiplied by 1.243, which is the number of Telewest shares being
offered in exchange for each of the issued General Cable shares in the Offer.
<TABLE>
<CAPTION>
PER SHARE GENERAL CABLE EQUIVALENT
PRICE GENERAL CABLE SHARES TELEWEST SHARES PER SHARE PRICE (1)
- --------- -------------------- ---------------- ------------------------
(PRICE IN PENCE) (PRICE IN PENCE) (PRICE IN PENCE)
<S> <C> <C> <C>
14 April 1998 159.00 88.50 110.00
24 June 1998 248.00 159.00 197.64
</TABLE>
- ------------
(1) Does not include 65 pence in cash to be received in respect of each General
Cable share.
The following table sets out (i) the closing price for the General Cable ADSs
and Telewest ADSs as reported on Nasdaq on 14 April 1998, the last full trading
day in the US prior to the announcement of the Offer, and 24 June 1998, the
latest practicable date prior to the publication of this document, (ii) the
"equivalent per ADSs price" (as hereinafter defined) of General Cable ADSs on
14 April 1998 and 24 June 1998. "Equivalent per ADS price" of the General Cable
ADSs represents the applicable closing price per Telewest ADS multiplied by
0.6215, which is the number of Telewest ADSs being offered in exchange for each
of the outstanding General Cable ADSs in the Offer.
<TABLE>
<CAPTION>
GENERAL CABLE EQUIVALENT
PER ADS PRICE GENERAL CABLE ADSS TELEWEST ADSS PER ADS PRICE (1)
- ------------- ------------------ ------------- ------------------------
(PRICE IN US$) (PRICE IN US$) (PRICE IN US$)
<S> <C> <C> <C>
14 April 1998 13.13 15.25 9.48
24 June 1998 19.88 24.63 15.31
</TABLE>
- ------------
(1) Does not include 325 pence in cash to be received in respect of each
General Cable ADS.
EXCHANGE RATE INFORMATION
The following table sets forth, for the periods ended and dates indicated,
certain information concerning the exchange rate for pounds sterling based on
the Noon Buying Rate. No representation is made that pound sterling amounts
have been, could have been or could be converted into, US dollars at the Noon
Buying Rate or at any other rate.
On 24 June 1998 (the latest practicable date prior to the publication of this
document), the Noon Buying Rate was (Pounds)1.00 = $1.6683.
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER PERIOD END (1) AVERAGE RATE (2) HIGH LOW
- ---------------------- -------------- ---------------- ---- ----
<S> <C> <C> <C> <C>
1993 1.48 1.50 1.59 1.42
1994 1.57 1.54 1.64 1.46
1995 1.55 1.58 1.64 1.53
1996 1.71 1.57 1.71 1.49
1997 1.64 1.64 1.70 1.58
1998 (through 24 June) 1.67 1.65 1.69 1.61
</TABLE>
- ------------
(1) Represents the Noon Buying Rate on the last business day of the applicable
fiscal year end.
(2) The average of the Noon Buying Rates on the last business day of each month
during the relevant period.
I-111
<PAGE>
SECTION SEVEN GENERAL INFORMATION
4. SUBSIDIARY UNDERTAKINGS AND OTHER INTERESTS
(A) SUBSIDIARY UNDERTAKINGS AND OTHER INTERESTS
(I) TELEWEST GROUP
Telewest is the holding company of the Telewest Group. The material
subsidiary undertakings of Telewest (excluding dormant companies), all of which
are either directly or indirectly wholly owned by Telewest, are listed below.
(1) TELEWEST GROUP COMPANIES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME OF COMPANY ISSUED AND FULLY PAID SHARE CAPITAL NATURE OF BUSINESS
<S> <C> <C>
Southwestern Bell 109,348,680 ordinary shares of Provision of cable television
International Holdings 5 pence each and telephony services
Limited
Telewest Communications 48,236,221 ordinary shares of Holding company for Scotland
(Scotland Holdings) (Pounds)1 each Group licence holding companies
Limited
Telewest Communications 1,518,610,235 ordinary shares Intermediate holding company
Networks Limited(1) of 10 pence each for the Telewest Group and the
SBCC Group
Telewest Communications 100 shares of (Pounds)1 each Holding company for the
Holdings Limited(1) Telewest Group's interest in
Telewest Scotland Holdings
Limited and the Affiliated
Companies
Theseus No. 1 Limited(1) 100,000 shares of (Pounds)1 50% partner in the Joint
each Venture and 0.5% partner in
each of the US limited
partnerships
Theseus No. 2 Limited(1) 100,000 shares of (Pounds)1 50% partner in the Joint
each Venture and 0.5% partner in
each of the US limited
partnerships
Telewest Communications 21,022,376 ordinary shares of Provision of cable television
(Liverpool) Limited (Pounds)1 each and telephony services
Telewest Communications 516,615,260 ordinary shares of Provision of cable television
(Midlands and North 10 pence each and telephony services
West) Limited
Telewest Communications 87,826 ordinary shares of Provision of cable television
(Midlands) Limited (Pounds)1,000 each and telephony services
Telewest Communications 114,298 ordinary shares of Provision of cable television
(North West) Limited (Pounds)1,000 each and telephony services
Telewest Communications 1,001,244,940 ordinary shares Provision of cable television
Cable Limited of 10 pence and telephony services
each
- ---------------------------------------------------------------------------------------------
</TABLE>
NOTES
(1) These companies have their registered office at Genesis Business Park,
Albert Drive, Woking, Surrey GU21 5RW.
I-112
<PAGE>
SECTION SEVEN GENERAL INFORMATION
(2) US PARTNERSHIPS
The Telewest Group also has indirect interests in the following material
partnerships, all of which (other than the Joint Venture and the London South
Cable Partnership, which are both US general partnerships) are US limited
partnerships formed under the laws of Colorado:
<TABLE>
- ----------------------------------------------------------------------------------------------
<CAPTION>
NAME OF PARTNERSHIP NATURE OF BUSINESS PRINCIPAL PLACE OF BUSINESS
<S> <C> <C>
United Cable (London Building and operation of cable Croydon
South) Limited telecommunications and television
Partnership networks, 97.75% partner in London South
Cable Partnership (US)
London South Cable Building and operation of cable Croydon
Partnership telecommunications and television
networks, 95% partner in London South
Joint Venture (UK)
Avon Cable Limited Building and operation of cable Bristol
Partnership telecommunications and television
networks, 75% partner in Avon Cable
Joint Venture (UK)
Estuaries Cable Limited Building and operation of cable Thames Estuary
Partnership telecommunications and television
networks, 99% partner in United Artists
Communications (South East) Partnership
(UK)
- ----------------------------------------------------------------------------------------------
</TABLE>
(3) UK PARTNERSHIPS AND JOINT VENTURES
The Telewest Group, through its interests in the above US partnerships, also
has indirect interests in the following material English partnerships and joint
ventures:
<TABLE>
- -----------------------------------------------------------------------------------------------
<CAPTION>
NAME OF PARTNERSHIP NATURE OF BUSINESS PRINCIPAL PLACE OF BUSINESS
<S> <C> <C>
London South Cable Building and operation of cable Croydon
Partnership and telecommunications and television
Telewest Communications networks
Joint Venture
Avon Cable Joint Venture Building and operation of cable Bristol
telecommunications and television
networks
Telewest Communications Building and operation of cable Thames Estuary
(South East) telecommunications and television
Partnership networks
- -----------------------------------------------------------------------------------------------
</TABLE>
I-113
<PAGE>
SECTION SEVEN
(4) ASSOCIATED UNDERTAKINGS
Telewest also holds shares, in the percentages shown below, in the following
material affiliated companies, each of which is incorporated in England and
Wales:
<TABLE>
- -----------------------------------------------------------------------------------------------
<CAPTION>
NAME AND REGISTERED OFFICE ISSUED AND FULLY PAID NATURE OF BUSINESS PERCENTAGE OF SHARE
SHARE CAPITAL CAPITAL HELD
<S> <C> <C> <C>
BIRMINGHAM CABLE(1)
Birmingham Cable 51,014,736 ordinary Building and 54.9 jointly with
Corporation Limited shares of (Pounds)1 operation of cable Comcast (half of
each telecommunications which is beneficially
and television owned)
networks
Birmingham Cable 2 ordinary shares of Holder of Birmingham 54.9 jointly with
Limited(1)(2) (Pounds)1 each Cable licences Comcast (half of
which is beneficially
owned)
CABLE LONDON
Cable London plc(3) 54,021,202 A shares Building and 50.0 A shares and
of 10 pence each and operation of cable 35.83 B shares
1,541,154 B shares of telecommunications
10 pence each and television
networks
Cable Camden 1,000 ordinary shares Holder of Camden 48.9
Limited(3)(4) of (Pounds)1 each licences
Cable Hackney and 1,000 ordinary shares Holder of Hackney and 48.9
Islington Limited(3)(4) of (Pounds)1 each Islington licences
Cable Haringey 1,000 ordinary shares Holder of Haringey 48.9
Limited(3)(4) of (Pounds)1 each licence
Cable Enfield 1,000 ordinary shares Holder of Enfield 48.9
Limited(3)(4) of (Pounds)1 each licence
Front Row Television 1,769,892 ordinary Pay-per-view movie 40.0
Limited shares of 10 pence service
each
Central Cable Sales 2 ordinary shares of Provision of cable 50.0
Limited (Pounds)1 each television and
telephony services
- -----------------------------------------------------------------------------------------------
</TABLE>
NOTES
(1) These companies have their registered office at CablePhone House, Small
Heath Business Park, Talbot Way, Small Heath, Birmingham B10 0HJ.
(2) This company is a wholly owned subsidiary of Birmingham Cable.
(3) These companies have their registered office at 66 Wigmore Street, London
W1H 0HQ.
(4) These companies are wholly owned subsidiaries of Cable London.
(5) OTHER
CABLE CORPORATION
Telewest has an interest in 16.55% of the issued ordinary share capital of
Cable Corporation. WTL, the holder of the Windsor licences, and MCL, the holder
of the Hillingdon and Hounslow licences, are wholly owned subsidiaries of Cable
Corporation.
LONDON INTERCONNECT
The Telewest Group has a 20% interest in London Interconnect Limited, a
company established to link cable networks in the London area together for the
purpose of sharing one or more programming channels with common advertising
inserted from a central control centre.
PARLIAMENTARY CHANNEL
The Telewest Group has an interest of 16.67% in The Parliamentary Channel
Limited, which provides coverage of the UK Parliament.
GENERAL INFORMATION
I-114
<PAGE>
SECTION SEVEN GENERAL INFORMATION
(II) GENERAL CABLE GROUP
General Cable has the following principal subsidiaries and associated
companies and owns, directly or indirectly: approximately 83% of Cable
Corporation, 100% of Yorkshire Cable and approximately 45% of Birmingham Cable.
WTL, MCL and The Cable Corporation Equipment Limited are each 100% owned by
Cable Corporation. General Cable Programming Limited and General Cable
Investments Limited are each 100% owned by General Cable and Cable Finance
Limited is 50% owned by the General Cable Programming Limited. Birmingham Cable
Finance Limited is 100% owned by the Birmingham Cable Limited, which is 100%
owned by Birmingham Cable. Each of the companies listed after Yorkshire Cable
(other than Filegale and Imminus) is 100% owned (directly or indirectly) by
Yorkshire Cable.
<TABLE>
- -------------------------------------------------------------------------------------------------
<CAPTION>
NAME OF COMPANY REGISTERED OFFICE ISSUED AND FULLY PAID PRINCIPAL ACTIVITY
SHARE CAPITAL
<S> <C> <C> <C>
SUBSIDIARY COMPANIES
General Cable Holdings 37 Old Queen Street, 100 deferred shares of Holding company
Limited London SW1H 9JA (Pounds)1 each, and
71,295,618 ordinary
shares of $1 each
General Cable Group 37 Old Queen Street, 1 ordinary share of 10 Employment of Staff and
Limited London SW1H 9JA pence provision of their
services to Group
companies
The Cable Corporation Cable House 18,225,389 ordinary Holding company
Limited Waterside Drive shares of 25 pence each,
Langley, Slough SL3 6EZ 1,000,000 "B"ordinary
shares of (Pounds)6.50
each, 2 special shares
of 25 pence each
Windsor Television Cable House 3,305,716 ordinary Construction and
Limited Waterside Drive shares of operation
Langley, Slough SL3 6EZ 25 pence each of cable network within
the
Windsor franchise
Middlesex Cable Limited Cable House 2 ordinary shares of Construction and
Waterside Drive (Pounds)1 each operation
Langley, Slough SL3 6EZ of cable network within
the Hillingdon &
Hounslow
franchise
The Cable Corporation Cable House 2 ordinary shares of Sale and hire of
Equipment Limited Waterside Drive (Pounds)1 each telecommunications
Langley, Slough SL3 6EZ hardware
General Cable 37 Old Queen Street 2 ordinary shares of 10 Participating in and
Programming Limited London SW1H 9JA pence each negotiating programming
arrangements
General Cable 37 Old Queen Street, 2 ordinary shares of Investment holding
Investments London SW1H 9JA (Pounds)1 each company
Limited and 100,000 fixed rate
cumulative redeemable
preference shares of
(Pounds)1 each
Cable Finance Limited 22 Grenville Street 40,000 ordinary shares Finance company
St Helier of
Jersey JE4 8PX 50 pence each and
100,000 fixed rate
cumulative redeemable
preference shares of
(Pounds)1 each
The Yorkshire Cable Communications House 88,950,048 ordinary Holding company
Group Limited Mayfair Business Park shares
Broad Lane of 10 pence each,
Bradford BD4 8PW 88,950,048
deferred shares of 10
pence each 88,950,048
ordinary shares of $0.01
each
The Yorkshire Cable Communications House 2 ordinary shares of Sale and hire of
Telecom Limited Mayfair Business Park (Pounds)1 each telephone
Broad Lane handsets
Bradford BD4 8PW
The Yorkshire Cable Communications House 51,808,773 ordinary Construction and
Communications Mayfair Business Park shares operation
Limited Broad Lane of 10 pence each of a cable network
Bradford BD4 8PW within
the Bradford franchise
</TABLE>
I-115
<PAGE>
SECTION SEVEN GENERAL INFORMATION
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
NAME OF COMPANY REGISTERED OFFICE ISSUED AND FULLY PAID PRINCIPAL ACTIVITY
SHARE CAPITAL
<S> <C> <C> <C>
Barnsley Cable Communications House 2 ordinary shares of Construction and
Communications Limited Mayfair Business Park (Pounds)1 each operation
Broad Lane of a cable network
Bradford BD4 8PW within
the Barnsley franchise
Doncaster Cable Communications House 2 ordinary shares of Construction and
Communications Limited Mayfair Business Park (Pounds)1 each operation
Broad Lane of a cable network
Bradford BD4 8PW within
the Doncaster &
Rotherham
franchise
General 37 Old Queen Street, 2 ordinary shares of Provision of
Telecommunications London SW1H 9JA (Pounds)1 each telecommunications
Limited services
Halifax Cable Communications House 2 ordinary shares of Construction and
Communications Limited Mayfair Business Park (Pounds)1 each operation
Broad Lane of a cable network
Bradford BD4 8PW within
the Halifax franchise
Sheffield Cable Communications House 1,530,750 ordinary Construction and
Communications Limited Mayfair Business Park shares of (Pounds)1 each operation
Broad Lane of a cable network
Bradford BD4 8PW within
the Sheffield franchise
Wakefield Cable Communications House 117,492 ordinary shares Construction and
Communications Limited Mayfair Business Park of (Pounds)1 each operation
Broad Lane of a cable network
Bradford BD4 8PW within
the Wakefield franchise
Yorkshire Cable Finance Communications House 2 ordinary shares of Finance company
Limited Mayfair Business Park (Pounds)1 each
Broad Lane and 10,000,000 fixed
Bradford BD4 8PW rate
cumulative redeemable
preference shares of
(Pounds)1 each
Filegale Limited Beechcroft 339,000 "A" Ordinary Holding company
Southgate Park Shares of 10 pence each
Bakewell Road 172,890 "C" Shares of 10
Orton Southgate pence each
Peterborough PE2 6YS
Imminus Limited Beechcroft 1,000 ordinary shares of Supplier of managed data
Southgate Park (Pounds)1 each network services
Bakewell Road
Orton Southgate
Peterborough PE2 6YS
ASSOCIATED COMPANIES
Birmingham Cable Cable Phone House 51,073,486 ordinary Building and operation
Corporation Limited Small Heath Business Park shares of cable
Talbot Way of (Pounds)1 each telecommunications and
Small Heath television networks
Birmingham B10 0HJ
Birmingham Cable Limited Cable Phone House 2 ordinary shares of Holder of Birmingham
Small Heath Business Park (Pounds)1 each Cable licences
Talbot Way
Small Heath
Birmingham B10 0HJ
</TABLE>
Telewest will, upon completion of the Merger, be the holding company of the
Telewest Group and the General Cable Group. Accordingly, all the subsidiary
undertakings set out above will, upon completion of the Merger, be subsidiary
undertakings of Telewest.
5. SUMMARY OF MEMORANDUM AND ARTICLES OF ASSOCIATION
The following is a summary of all material provisions of the Memorandum and
the Articles and the material rights of the Telewest shares and the Telewest
Convertible Preference shares. This description is based on the Memorandum and
Articles, as each will be in effect upon completion of the
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SECTION SEVEN GENERAL INFORMATION
Merger. This description does not purport to be complete and is qualified in
its entirety by reference to the full text of the Memorandum and the Articles,
which are available for inspection as described in "-- Documents for Inspection
and Available Information".
MEMORANDUM OF ASSOCIATION
The Memorandum provides that the principal objects of Telewest are to act as
a holding company, to construct and operate cable television and cable
telephony systems and to do anything incidental or ancillary to these purposes.
The objects of Telewest are set out in clause 4 of the Memorandum.
ARTICLES OF ASSOCIATION
(A) TELEWEST SHARES
(I) VOTING RIGHTS
Every holder of Telewest shares who is present in person or by proxy at a
general meeting shall have one vote on each matter to be presented, and on a
poll every shareholder who is present in person or by proxy shall have one vote
for every Telewest share held, in each case subject to (a) any special terms as
to voting that are attached to any shares that have been issued, and (b) to
disenfranchisement in the event of (i) non-payment of calls or other monies due
and payable in respect of the shares, (ii) non-compliance with a statutory
notice requiring disclosure as to beneficial ownership of shares or (iii) such
person's shareholding being detrimental to the grant, renewal or extension of
any of Telewest's Telecommunications Act Licences or Cable Television Licences.
Voting at a general meeting is by a show of hands unless a poll is demanded. A
poll may be demanded by (i) the chairman of the meeting, (ii) not less than
five shareholders present in person or by proxy and entitled to vote, (iii) any
shareholder or shareholders present in person or by proxy and representing in
the aggregate not less than one-tenth of the total voting rights of all
shareholders entitled to attend and vote at such meeting, or (iv) any
shareholder or shareholders present in person or by proxy and holding shares
conferring a right to vote at the meeting on which there have been paid-up sums
in aggregate equal to not less than one-tenth of the total sum paid on all
shares conferring such right. Since under English law voting rights are only
conferred on registered holders of shares, a person holding through a nominee
may not directly demand a poll.
Where a poll is not demanded, the interests of beneficial owners of Telewest
shares who hold through a nominee or record owners who have appointed a proxy
may not be reflected in votes cast on a show of hands if such nominee or proxy
does not attend the meeting or receives conflicting voting instructions from
different beneficial or record owners for whom it holds as nominee or acts as
proxy. In any event, on a show of hands, such nominee or proxy will have only
one vote, notwithstanding the number of beneficial or record owners for whom he
or she acts.
Unless otherwise required by law or the Articles, voting in a general meeting
is by ordinary resolution. An ordinary resolution (e.g., a resolution for the
election of Directors, the approval of financial statements, the declaration of
a final dividend, the appointment of auditors, the increase of authorised share
capital or the grant of authority to allot shares) requires the affirmative
vote of a majority of the shareholders present in person or by proxy, in the
case of a vote by show of hands, or present in person or by proxy and holding
shares conferring in the aggregate a majority of votes actually cast on the
ordinary resolution, in the case of a vote by poll. A special resolution (e.g.,
a resolution amending the Memorandum or Articles, changing the name of Telewest
or waiving the statutory pre-emption rights) or an extraordinary resolution
(e.g., relating to certain matters concerning the liquidation of Telewest)
requires the affirmative vote of not less than three-fourths of the
shareholders present in person or by proxy, in the case of a vote by show of
hands, or present in person or by proxy and holding shares conferring in the
aggregate at least three-fourths of the votes actually cast on the resolution,
in the case of a vote by poll. In the case of a tie vote, whether on a show of
hands or on a poll, the chairman of the meeting is not entitled to cast a
deciding vote.
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SECTION SEVEN GENERAL INFORMATION
Meetings generally are convened upon 21 days' notice (where a special or
extraordinary resolution is being proposed) or 14 days' notice (where an
ordinary resolution is being proposed), in each case not including the days of
delivery or receipt of the notice.
For certain voting arrangements among TINTA, MediaOne, SBC and Cox and their
respective affiliates, see "-- Section Four -- Information on the Combined
Group -- Principal Shareholders".
(II) QUORUM
The quorum at general meetings of Telewest shall be two or more persons
holding Telewest shares who are present in person or by proxy.
(III) DIVIDEND RIGHTS
Subject to the provisions of the Companies Act and of the Articles, Telewest
may by ordinary resolution of the shareholders declare a dividend to be paid to
the shareholders according to their respective rights and interests in the
profits of Telewest, but no such dividend shall exceed the amount recommended
by the Directors. The Directors alone may also declare or pay such interim
dividends (including any dividends payable at a fixed rate) as appear to them
to be justified by the profits of Telewest available for distribution. The
Directors may, with the prior authority of an ordinary resolution of the
shareholders, direct that payment of any dividend be satisfied wholly or in
part by the distribution of specific assets of Telewest or another company or
by the allotment, to those shareholders who have elected to receive them, of
Telewest shares credited as fully paid instead of cash. Except as otherwise
provided by the rights attached to shares, all dividends shall be declared and
paid according to the amounts paid up on the shares in respect of which the
dividend is declared and paid. All dividends unclaimed for a period of 12 years
from the date due for payment shall be forfeited by a holder of such shares.
(IV) DISTRIBUTION OF ASSETS ON A WINDING-UP
Upon a voluntary winding-up of Telewest, the liquidator, with the approval of
an extraordinary resolution of the shareholders and subject to English law, may
divide among the shareholders in kind the whole or any part of the assets of
Telewest, and for such purpose may set such value as he or she deems fair upon
any one or more class or classes of property. The liquidator may determine the
basis of such valuation and, in accordance with the then-existing rights of the
shareholders, how such division shall be carried out as between shareholders or
classes of shareholders. The liquidator may not, however, distribute to a
shareholder without his or her consent any asset to which there is attached a
liability or potential liability for the owner. Upon a liquidation of Telewest,
the assets of Telewest available for distribution to the shareholders will be
distributed first to the holders of Telewest Convertible Preference shares
until such holders have been repaid in full an amount equal to the amounts paid
up in respect of such shares. Thereafter the remaining assets available for
distribution will be paid to the holders of Telewest shares, including holders
of Telewest Convertible Preference shares who elect, upon liquidation, to have
those shares treated as though they had been converted. If, on a winding-up,
the assets available for distribution to shareholders of a given class are
insufficient to repay all the paid-up share capital of such class, such assets
shall be distributed so that as far as possible the losses shall be borne by
the shareholders of such class in proportion to the capital paid up on the
shares of such class held by each shareholder at the commencement of the
winding-up.
(V) PRE-EMPTIVE RIGHTS
The Articles do not contain any pre-emptive rights. The Companies Act confers
on shareholders, to the extent not waived, rights of pre-emption in respect of
the issuance of equity securities that are, or are to be, paid wholly in cash.
The term "equity securities" means: (a) shares of Telewest other than shares
which, with respect to dividends and capital, carry a right to participate only
up to a specified amount in a distribution and shares allotted pursuant to an
employee share plan and (b) rights to subscribe for, or to convert into, such
shares. These provisions may be waived by a special resolution of the
shareholders, either generally or specifically, for a maximum period not
exceeding five years. In
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SECTION SEVEN GENERAL INFORMATION
addition, an issuance of securities for cash other than to existing equity
shareholders in proportion to their holdings must be approved by an ordinary
resolution of the shareholders.
By special resolution of the Telewest shareholders passed at the Annual
General Meeting held on 8 May 1998, Telewest has disapplied the statutory pre-
emption rights applicable under the Companies Act in relation to issues for
cash of up to 5% of the issued Telewest shares. A proposal to extend this
waiver in relation to the issue of the new Telewest shares pursuant to the Pre-
emptive Issue and to increase the scope of the general disapplication to
reflect the increase in Telewest's authorised share capital will be proposed at
the Extraordinary General Meeting. Each of TINTA, MediaOne, SBC and Cox also
benefit from the rights set out in the Relationship Agreement entitling them to
maintain their interests in Telewest at a certain level. See "-- Section
Four -- Information on the Combined Group -- Principal Shareholders".
(VI) SANCTIONS ON SHAREHOLDERS
A holder of Telewest shares may lose the right to vote his or her Telewest
shares if he or she or any other person appearing to be interested in shares
held by him or her fails to comply within a prescribed period of time with a
request by Telewest under Section 212 of the Companies Act to provide certain
information with respect to past or present ownership or interests in such
shares. In the case of holders of more than 0.25% in nominal amount of the
share capital of Telewest (or any class thereof), in addition to
disenfranchisement, the sanctions that may be applied by Telewest include
withholding the right to receive payment of dividends and other monies payable
on Telewest shares and imposing restrictions on transfers of the relevant
Telewest shares.
(VII) DISCLOSURE OF INTERESTS
Section 198 of the Companies Act provides that a person (including a company
and other legal entities) that acquires an interest of 3% or more of any class
of shares (including through American Depositary Receipts) that comprise part
of an English public company's "relevant share capital" (i.e., Telewest's
issued share capital carrying the right to vote in all circumstances at a
general meeting of Telewest) is required to notify the company of its interest
within two business days following the day on which the notification obligation
arises. After the 3% level is exceeded, similar notifications must be made in
respect of increases or decreases of 1% or more.
For the purposes of the notification obligation, the interest of a person in
shares means any kind of interest in shares including interests in any shares:
(a) in which a spouse, child or stepchild under the age of 18, is interested;
(b) in which a corporate body is interested and either (i) that corporate body
or its directors generally act in accordance with that person's directions or
instructions or (ii) that person controls one-third or more of the voting power
of that corporate body or (c) in which another party is interested and the
person and that other party are parties to a "concert party" agreement under
Section 204 of the Companies Act. A "concert party" agreement provides for one
or more parties to acquire interests in shares of a particular company and
imposes obligations or restrictions on any one of the parties as to the use,
retention or disposal of such interest acquired pursuant to such agreement and
any interest in such company's shares is in fact acquired by any of the parties
pursuant to the agreement. Certain interests (e.g., those held by certain
investment fund managers) may be disregarded for the purposes of calculating
the 3% threshold, but the disclosure obligation will still apply where such
interests exceed 10% or more of any class of the company's relevant share
capital and to increases or decreases of 1% or more thereafter.
In addition, Section 212 of the Companies Act provides that a public company
may by written notice require a person whom the company knows or has reasonable
cause to believe to be, or to have been at any time during the three years
immediately preceding the date on which the notice is issued, interested in
shares consisting of the company's "relevant share capital" to confirm that
fact or to indicate whether or not that is the case, and where such person
holds or during the relevant time had held an interest in such shares, to give
such further information as may be required relating to such interest and any
other interest in the shares of which such person is aware.
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
Where notice is served by a company under the foregoing provisions on a
person who is or was interested in shares of the company and that person fails
to give the company any information required by the notice within the time
specified in the notice, the company may apply to the English court for an
order directing that the shares in question be subject to restrictions
prohibiting, among other things, any transfer of those shares, the exercise of
voting rights in respect of such shares, the taking up of rights in respect of
such shares and, other than in liquidation, payments in respect of such shares.
A person who fails to fulfil the obligations imposed by Sections 198 and 212
of the Companies Act described above is subject to criminal penalties.
(VIII) SPECIAL PROVISIONS FOR LICENCE PROTECTION; REQUIRED DISPOSALS AND
RESTRICTIONS ON VOTING
The Articles include special provisions designed to provide protection
against (a) revocation of Telecommunications Licences and Cable Television
Licences held by Telewest and (b) prejudice to its prospects of obtaining
further licences or licence extensions or renewals in the event of direct or
indirect interests in Telewest being acquired by persons whose holdings of such
interests would or might be prejudicial to Telewest with respect to the
Telecommunications Act Licences or Cable Television Licences. If the Board,
after requesting information from a shareholder and consulting with the ITC or
any other relevant authority it deems appropriate, determines that the interest
of such shareholder in Telewest's shares is or may be prejudicial to the
retention, grant, renewal or extension of a Telecommunications Act Licence or
Cable Television Licence, the Board may serve a written notice (a "Disposal
Notice") on the relevant shareholder requiring a disposal to be made of all or
some of those shares to a person not connected with such shareholders. If a
Disposal Notice is not complied with (or not complied with to the satisfaction
of the Board) the Board shall, under its authority contained in the Articles,
make the required disposal using its reasonable efforts to obtain the best
price reasonably obtainable in the circumstances within 30 days of the
expiration of the Disposal Notice. Neither Telewest nor the Directors shall be
liable to any person for failing to obtain the best price reasonably obtainable
provided the Board acted in good faith within the period specified above. The
net proceeds of the sale shall be paid (without interest) to the former
holder(s) on surrender by such holder(s) of the certificate(s) in respect of
the shares sold. Where any shares to be disposed of pursuant to the above
provisions are held by the TINTA Group, the MediaOne Group, the SBC Group, the
Cox Group or the Vivendi Group (defined in the Articles to include Vivendi, its
subsidiaries and any holding company of Vivendi), the Articles provide for
Telewest to use its reasonable endeavours to allow the TINTA Group, the
MediaOne Group, the SBC Group, the Cox Group or the Vivendi Group, as the case
may be, to exercise its rights of first refusal with respect to such shares to
be disposed.
Any shareholder served with a Disposal Notice shall not be entitled to
receive notice of, or to attend and vote at, any general meeting of Telewest or
at any separate class meeting in respect of such number of shares as such
shareholder shall have been required to dispose of pursuant to such notice.
The right to vote may also be removed from any share prior to the service of
a Disposal Notice where a shareholder has failed to comply with a request for
information from the Board to enable it to ascertain whether any of Telewest's
licences or proposed licences may be prejudiced by the holding of that share or
where the Board has given notice to the shareholder that such a prejudicial
situation exists in relation to any of its shares.
(IX) TRANSFER OF SHARES
A holder of Telewest shares may transfer all or any of its shares by an
instrument of transfer in writing in any customary form or in any form approved
by the Board. The instrument of transfer of a share shall be executed by or on
behalf of the transferor and (in the case of a transfer of a share which is not
fully paid up) by or on behalf of the transferee. The Board may, in its
absolute discretion (provided that the exercise of such discretion shall not
prevent dealings from occurring on an open and proper basis) and without giving
any reason (unless the refusal relates to a transfer that prejudices any
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SECTION SEVEN GENERAL INFORMATION
of Telewest's licences or proposed licences), refuse to register any share
transfer unless: (a) it is in respect of a share over which Telewest does not
have a lien, (b) it is in respect of only one class of shares, (c) it is in
favour of a single transferee or not more than four joint transferees, (d) it
is duly stamped (if so required), (e) it is delivered for registration to the
registered office of Telewest or such other place as the Board may determine,
accompanied (except in the case of certain transfers on the London Stock
Exchange where a certificate has not been issued) by the relevant share
certificate(s) and such other evidence as the Board may reasonably require to
prove the title of the transferor and due execution of the transfer by him or
her or, if the transfer is executed by some other person on his or her behalf,
the authority of that person to do so, (f) it will not be prejudicial to any of
Telewest's licences or proposed licences and (g) if the transfer is in respect
of shares held by a shareholder who holds more than 0.25% of the issued share
capital of Telewest, the shareholder has complied, in accordance with the
Articles, with a statutory notice requiring disclosure as to the beneficial
ownership of such shares.
The Board may also refuse to register the transfer of a share that is not
fully paid, provided that such refusal does not prevent dealings in the
Telewest shares taking place on an open and proper basis.
The registration of transfers may be suspended at such times and for such
periods (not exceeding 30 days in any year) as the Board may from time to time
determine.
(X) VARIATION OF RIGHTS
Subject to the provisions of the Companies Act, all or any of the rights
attaching to a class of shares may be varied as may be provided by those rights
or, in the absence of any such provision, with either the consent in writing of
the holders of at least three-fourths of the nominal amount of the issued
shares of such class or with the sanction of an extraordinary resolution passed
at a separate meeting of the holders of the issued shares of that class.
The rights attached to a class of shares are not (except as otherwise
provided in the terms of such shares) deemed to be varied by the creation or
issuance of further shares ranking pari passu with or subordinate to such
shares or by the purchase or redemption by Telewest of its own shares in
accordance with the provisions of the Companies Act and the Articles.
(XI) SHARE CAPITAL AND CHANGES IN CAPITAL
Subject to the rights and restrictions attached to the Telewest Convertible
Preference shares, Telewest may, by ordinary resolution of the shareholders,
increase its share capital, consolidate and divide all or any of its share
capital into shares of a larger amount than its existing shares, subdivide all
or any of such shares (subject to the provisions of the Companies Act) into
shares of smaller amounts, and as part of such subdivision determine that any
of such shares may have any preference or other advantage or be subject to any
restriction as compared with the other shares, and cancel any shares which, as
at the date of such resolution, have not been taken or agreed to be taken by
any person and reduce the amount of its share capital by the amount of the
shares so cancelled.
Telewest may, subject to the provisions of the Companies Act and the rights
attaching to existing shares, by special resolution of the shareholders and
subject to confirmation by the English court, reduce its share capital, any
capital redemption reserve or any share premium account or other
undistributable reserve in any way.
Telewest may, subject to the requirements of the Companies Act, the Articles
and the requirements of the London Stock Exchange, purchase all or any of its
shares of any class (including redeemable shares).
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SECTION SEVEN GENERAL INFORMATION
(XII) UNTRACED SHAREHOLDERS
Telewest may sell any shareholders' shares in Telewest, or shares to which a
person is entitled by transmission, if during a period of not less than 12
years: (a) no cheque, order or warrant sent by Telewest through the post
addressed to the shareholder or person entitled by transmission has been
cashed, (b) no communication has been received by Telewest from such
shareholder or person entitled by transmission and (c) Telewest has paid at
least three cash dividends in such 12-year period. After the expiration of such
12-year period, Telewest is required to give three months' notice of its
intention to sell the shares in a leading daily newspaper and a newspaper
circulating in the area of the shareholder's registered address. Telewest must
also provide a copy of such notice to the London Stock Exchange. Upon any such
sale, Telewest will become indebted to the former holder of the shares (or the
persons entitled to them upon the death of such former holder) for an amount
equal to the net proceeds of sale.
(XIII) NON-UK SHAREHOLDERS
There are no limitations in the Articles on the rights of non-UK citizens or
residents to hold, or exercise voting rights attaching to, the Telewest shares.
(B) TELEWEST CONVERTIBLE PREFERENCE SHARES
As noted under "-- Section One -- The Merger and Related Matters --
Conversion of Telewest Convertible Preference Shares", TINTA, MediaOne, SBC
and Cox have stated that it is their intention to convert all of the Telewest
Convertible Preference shares beneficially held by them (i.e., all of such
shares currently in issue) into Telewest shares upon the Offer becoming or
being declared unconditional in all respects. However, should any Telewest
Convertible Preference shares remain in issue (as a result of the restrictions
on conversion summarised in paragraph (vi) below) they will carry the following
rights:
(I) LISTING
The Telewest Convertible Preference shares are not listed on any stock market
or exchange.
(II) VOTING RIGHTS
Each holder of Telewest Convertible Preference shares shall be entitled
(subject to the provisions of the Companies Act and of the Articles) to receive
notice of and to attend all general meetings of Telewest but shall be entitled
to speak and vote at such meeting only with respect to resolutions involving
the liquidation of Telewest or modifying, varying or abrogating any of the
rights or privileges of the Telewest Convertible Preference shares. For any
resolution on which holders of the Telewest Convertible Preference shares are
entitled to vote, each such holder present in person shall, on a show of hands,
have one vote and, on a poll, each such holder present in person, by duly
appointed representative or by proxy, shall have one vote for each Telewest
share into which the Telewest Convertible Preference shares registered in the
name of such holder could have been converted immediately prior to the date of
the notice convening the general meeting at which the shares are to be voted.
(III) DIVIDEND RIGHTS
Each holder of Telewest Convertible Preference shares shall be entitled to
receive a dividend (the "Convertible Dividend") on each Telewest Convertible
Preference share in an amount equal to, and paid at the same time as, the
dividend paid on each Telewest share, provided that the maximum dividend
payable in respect of a Telewest Convertible Preference share at any one time
shall not exceed 20 pence per share (net of any associated tax credit). The
rights of the holders of the Telewest Convertible Preference shares to receive
the Convertible Dividend shall rank pari passu in all respects with the rights
of the holders of the Telewest shares to receive dividends. The Convertible
Dividend
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SECTION SEVEN GENERAL INFORMATION
shall be paid according to the amounts paid up or credited as paid up on the
Telewest Convertible Preference shares in respect of which the Convertible
Dividend is to be paid. The dividends on the Telewest Convertible Preference
shares shall be payable at the same time as the corresponding dividend payable
in relation to the Telewest shares and based on the same record date. Subject
to the foregoing, the Telewest Convertible Preference shares shall not confer
upon the holder any further rights to participate in the profits of Telewest
available for distribution.
(IV) RIGHTS ON LIQUIDATION OR OTHER RETURN OF CAPITAL
In the event of a liquidation of Telewest or other return of capital (except
on conversion or purchase of the Telewest Convertible Preference shares), the
assets of Telewest available for distribution among the shareholders shall be
divided in the following manner and order of priority:
(1) first, in paying to the holders of the Telewest Convertible
Preference shares (other than any Telewest Convertible Preference shares in
respect of which the right of election upon a liquidation of Telewest shall
have been exercised ("Elected Shares")), a sum equal to the capital paid up
or credited as paid up in respect of the Telewest Convertible Preference
shares held by them, respectively; and
(2) second, in paying any surplus to the holders of the Telewest shares
and the Elected Shares pari passu in accordance with the amount paid up or
credited as paid up on such shares held by them, respectively.
Subject to the foregoing, the Telewest Convertible Preference shares shall
not confer upon the holders any further right to participate in the assets of
Telewest available for distribution to shareholders.
(V) PURCHASE
Telewest may at any time purchase Telewest Convertible Preference shares in
the public market, by tender (available to all holders of Telewest Convertible
Preference shares) or in a private transaction.
(VI) CONVERSION
Subject to the Articles, each holder of the Telewest Convertible Preference
shares shall be entitled at any time and from time to time to convert all or
any Telewest Convertible Preference shares into fully paid Telewest shares on
the basis of one Telewest share for each Telewest Convertible Preference share,
subject to certain anti-dilution adjustments. Notwithstanding the foregoing
except in certain limited circumstances, for so long as the Telewest shares are
listed on the London Stock Exchange, a holder of any Telewest Convertible
Preference shares shall not be entitled to convert any of his or her Telewest
Convertible Preference shares into Telewest shares to the extent that,
immediately following such conversion, the number of Telewest shares held by
members of the public (as defined in the Listing Rules) would be less than 25%
of the issued Telewest shares. The decision as to whether any conversion is
permitted shall be made by the Directors, after consideration of the Listing
Rules. Under the Relationship Agreement, however, Telewest has agreed to
convert Telewest Convertible Preference shares held by the MediaOne Affiliates,
the TINTA Affiliate and/or the Cox Affiliate to the extent necessary to ensure
that TW Holdings maintains an interest of not less than 50.1% of the Telewest
shares in issue following the Offer and the Pre-emptive Issue overriding the
requirement that 25% of Telewest shares are held by the public. See "-- Section
Four -- Information on the Combined Group --Principal Shareholders".
The Articles contain provisions to maintain the conversion ratio of the
Telewest Convertible Preference shares and to protect the rights of the holders
of Telewest Convertible Preference shares upon a capitalisation of profits or
reserves to holders of Telewest shares or upon a consolidation and/or
subdivision of Telewest shares or upon an offer by way of rights to holders of
Telewest shares or of securities convertible into Telewest shares. The Articles
also contain provisions protecting the holders of Telewest Convertible
Preference shares upon an offer or invitation being made or extended to the
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SECTION SEVEN GENERAL INFORMATION
holders of the Telewest shares, a resolution for a voluntary liquidation of
Telewest being passed or a liquidation order in respect of Telewest being made.
The Telewest shares issued upon conversion of the Telewest Convertible
Preference shares shall be credited as fully paid and rank pari passu in all
respects with the Telewest shares then outstanding. Such Telewest shares shall
entitle the holder thereof to receive all dividends and other distributions
payable on the Telewest shares after conversion. Any Convertible Dividend
payable but not paid on the date of conversion shall continue to be payable to
the holder of the Telewest Convertible Preference shares converted.
The conversion of Telewest Convertible Preference shares from time to time
may be effected in such manner as the Directors shall determine (subject to the
provisions of the Companies Act and the Articles) and, without prejudice to the
generality of the foregoing, may be effected by the redemption of the Telewest
Convertible Preference shares involving the repayment of the amount paid up or
credited as paid up thereon or by a consolidation and subdivision of the
Telewest Convertible Preference shares.
(VII) COVENANTS
If Telewest in the future offers the right to acquire additional Telewest
shares to its then-existing holders of Telewest shares, Telewest shall make the
same offer to the holders of Telewest Convertible Preference shares. Telewest
shall use all reasonable efforts to ensure that all Telewest shares issued upon
conversion are admitted to the Official List and approved for quotation through
Nasdaq.
(VIII) RESTRICTIONS
So long as any Telewest Convertible Preference shares are convertible into
Telewest shares, Telewest is prohibited from taking certain actions, including
capitalising profits or making certain issues of new shares or reducing its
capital in certain circumstances, unless Telewest shall have obtained the
consent in writing of the holder or holders of Telewest Convertible Preference
shares representing three-fourths of the nominal value of the Telewest
Convertible Preference shares then outstanding or the approval of an
extraordinary resolution of the shareholders passed at a separate meeting of
the holders of the Telewest Convertible Preference shares then outstanding
validly held in accordance with the provisions of the Articles.
(C) DIRECTORS
(i) In relation to each of the TINTA Group and the MediaOne Group, for so
long as members of such groups hold (whether directly or via its interests in
TW Holdings) at least 15% of the Telewest shares in issue assuming that all
Telewest Convertible Preference shares then in issue have been converted and
ignoring all Telewest shares issued after the date of adoption of these
articles pursuant to or for the purposes of share options (reduced to 12.5%
following certain dilutive issues), it shall have the right to appoint (and
remove) two persons as Directors (respectively, each a "TINTA Designated
Director" or a "MediaOne Designated Director"). Where either group's
shareholding is reduced below this level, but remains at more than 7.5% on the
same assumptions (reduced to 5% following certain dilutive issues) (a "Lesser
Qualifying Interest"), that group shall have the right to appoint (and remove)
one Director. Each of the SBC Group, the Cox Group and the Vivendi Group also
have a right to appoint (and remove) one Director for so long as members of
such groups hold a Lesser Qualifying Interest (respectively, each an "SBC
Designated Director", a "Cox Designated Director" or a "Vivendi Designated
Director"). In the case of the Cox Group, Telewest shares held by TW Holdings
on behalf of Cox will be taken into account in determining the level of its
interest in Telewest.
Each of the TINTA Group and the MediaOne Group have agreed that so long as
they hold 15% or more of the issued Telewest shares they will exercise their
voting rights as members of Telewest and cause the Directors appointed by them
(subject to their fiduciary and other duties as Directors) to
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exercise their voting rights to ensure that, to the extent they are able to do
so, a majority of the Directors are independent of TINTA and MediaOne.
For all of the foregoing purposes, the percentage of Telewest shares held
shall be calculated on the assumption that all Telewest Convertible Preference
shares have been converted into Telewest shares.
(ii) All Directors will serve until the next annual general meeting following
their election and, in any event, until their successors have been elected or
their earlier resignation or removal from office in accordance with the
Articles.
(iii) The quorum for a meeting of the Directors will be a majority of the
Directors.
(iv) A person will be capable of being appointed or re-elected a Director
despite having attained the age of 70 or any other age and no special notice
will be required in connection with the appointment or the approval of the
appointment of any such person, nor will a Director be required to retire by
reason of his or her having attained that or any other age.
(v) A Director will not be required to hold any shares in Telewest.
(vi) Unless otherwise determined by Telewest by ordinary resolution, the
number of Directors will not be less than two but shall not be subject to any
maximum. In the case of equality of votes, the Chairman of the Board will not
have a second or casting vote.
(D) COMMITTEES OF THE BOARD
Any committee appointed by the Board must include at least one TINTA
Designated Director, one MediaOne Designated Director and one independent non-
executive Director (unless such Directors or shareholder groups appointing them
otherwise agree). The chairman and a majority of the members of any committee
must be independent of TINTA and MediaOne. The Audit Committee must also, so
long as there is both an SBC Designated Director and a Cox Designated Director,
include one of them, and for so long as there is an SBC Designated Director
and/or a Cox Designated Director and/or a Vivendi Designated Director such
Directors(s) will be entitled to attend other meetings of committees of the
Board as observer(s). The quorum for a meeting of a committee of the Board will
consist of a majority of the members of the committee who are Directors.
(E) REMUNERATION OF DIRECTORS
(i) Unless otherwise determined by Telewest by ordinary resolution, Telewest
shall pay to the Directors for their services as directors such amount of
aggregate fees as the Directors decide (not exceeding (Pounds)500,000 per annum
or such larger amount as Telewest by ordinary resolution may decide). Any such
fee shall be distinct from any salary, remuneration or other amounts payable to
a Director pursuant to other provisions of the Articles.
(ii) The Directors shall be entitled to be repaid all reasonable travelling,
hotel and other expenses properly incurred in the performance of their duties
as Directors, including any expenses incurred in attending meetings of the
Directors or of committees of the Directors or general meetings or separate
meetings of the holders of any class of shares or debentures of Telewest.
(F) INTERESTED DIRECTOR TRANSACTIONS
Pursuant to the Companies Act and the Listing Rules, a Director shall not
vote on any resolution of the Board or of a committee of the Board concerning
any contract, arrangement, transaction or proposal to which Telewest is, or
will be, a party and in which he or she is, or will be, to his or her
knowledge, directly or indirectly materially interested (other than by virtue
of his or her interest (direct or indirect) in shares, debentures or other
securities of Telewest). Notwithstanding the foregoing, a Director shall be
entitled to vote where the matter relates:
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(i) to giving such Director any guarantee, security or indemnity in
respect of money borrowed or obligations incurred by such Director or any
other person at the request of or for the benefit of Telewest;
(ii) to giving a third party any guarantee, security or indemnity in
respect of a debt or obligation of Telewest for which such Director has
personally assumed responsibility in whole or in part, either alone or
jointly with others, under a guarantee or indemnity or by the giving of
security;
(iii) to any contract, arrangement, transaction or proposal concerning an
offer of shares, debentures or other securities of Telewest in which such
Director is or may be entitled to participate as a holder of securities or
in the underwriting or sub-underwriting of which such Director is to
participate;
(iv) to any contract, arrangement, transaction or proposal to which
Telewest is, or will be, a party concerning any other company in which such
Director is interested (directly or indirectly), whether as an officer,
shareholder, creditor or otherwise, provided that such Director is not the
holder of or beneficially interested directly or indirectly in 1% or more
of any class of equity share capital (or voting rights) of such company nor
can cause 1% of such voting rights to be cast at his or her direction;
(v) to any contract, arrangement, transaction or proposal concerning the
adoption, modification or operation of a pension, or similar scheme,
retirement, death or disability benefits scheme or employees' share scheme
under which such Director may benefit and which either has been approved
(or is conditional upon approval) by the UK Inland Revenue for taxation
purposes or which relates both to Directors and employees of Telewest and
which does not provide any Director with any privilege or advantage not
provided to the other employees who are beneficiaries of such scheme;
(vi) to any contract, arrangement, transaction or proposal for the
benefit of the employees of Telewest pursuant to which such Director
benefits in a manner similar to employees and which does not provide such
Director with any privilege or advantage not provided to the other
employees who are beneficiaries of such contract, arrangement, transaction
or proposal to whom it relates; and
(vii) to any contract, arrangement, transaction or proposal concerning
the purchase or maintenance of any insurance policy under which such
Director may benefit.
A Director designated by the TINTA Group or by the MediaOne Group will not be
deemed to be interested in any contract, arrangement, transaction or proposal
relating to either TINTA in respect of a MediaOne Designated Director or
MediaOne in respect of a TINTA Designated Director by reason only of the
arrangement between TINTA and MediaOne and their respective affiliates as
described herein.
A Director shall not vote or be counted in the quorum with respect to any
resolution of the Board or a committee of the Board concerning such Director's
appointment (including fixing or varying the terms of an appointment or its
termination) as an officer of Telewest or to any other company in which
Telewest has an interest for which such Director is to be compensated.
(G) BORROWING POWERS
Subject to the provisions of the Articles, the Directors may exercise all of
the powers of Telewest to borrow money, to issue debentures and other
securities and to mortgage or encumber all or any part of its property and
other assets (present and future) and uncalled capital (subject to the
Companies Act). Telewest may also issue guarantees of obligations of its
subsidiaries and affiliates or of third parties. The Directors shall limit the
borrowing by Telewest to ensure that the aggregate amount of Telewest's
liability with respect to debt and guarantees (subject to certain exceptions in
the Articles) shall not (without the prior authorisation by an ordinary
resolution of the shareholders) exceed an
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amount equal to the greater of (a) 5.0 times the adjusted capital and reserves
of Telewest, based on Telewest's most recent published audited balance sheet,
adjusted for certain published events, and (b) (Pounds)4.0 billion.
(H) PENSIONS AND BENEFITS
(i) The Directors may exercise all the powers of Telewest to provide pensions
or other retirement benefits and to provide death or disability benefits or
other allowances or gratuities (by insurance or otherwise) for any person who
is or has at any time been a Director (or a director of a predecessor business)
or a subsidiary undertaking or affiliate of or otherwise allied or associated
with Telewest (and for any member of such Director's family, including a spouse
or former spouse or any person who is or was dependent on such Director). To
provide such benefits, Telewest may establish, maintain, subscribe or
contribute to any scheme, trust or fund and pay any premiums relating to such
benefits.
(ii) In connection with the cessation or transfer to any person of the whole
or part of the undertaking of Telewest or any subsidiary undertakings, the
Directors may exercise any power conferred upon Telewest by the Companies Act
to make provision for the benefit of an employee or an ex-employee of the
Telewest Group or any member of his or her family (including a spouse or former
spouse) or any person who is or was dependent on him or her.
(iii) The Directors may exercise all powers of Telewest to purchase and
maintain directors' and officers' insurance.
6. DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS
The following is a summary of the material provisions of the Deposit
Agreement.
This summary does not purport to be complete and is subject to and qualified
in its entirety by reference to the Deposit Agreement, including the form of
ADRs. Copies of the Deposit Agreement and the Articles are available for
inspection at the Corporate Trust Office of the Depositary, currently located
at 101 Barclay Street, New York, New York 10286, and at the London, England
office of the Custodian, currently located at 3 Birchin Lane, London, EC3V 9BY
England. The Depositary's principal executive office is located at 48 Wall
Street, New York, New York 10286.
(A) AMERICAN DEPOSITARY RECEIPTS
ADRs evidencing ADSs are issuable by the Depositary pursuant to the Deposit
Agreement. Each ADS will represent the right to receive ten Telewest shares
(together with any additional Telewest shares at any time deposited or deemed
deposited under the Deposit Agreement and any and all other securities, cash
and property received by the Depositary or the Custodian in respect thereof and
at such time held under the Deposit Agreement, "Deposited Securities"). Only
persons in whose names ADRs are registered on the books of the Depositary will
be treated by the Depositary and Telewest as registered holders of ADRs (the
"Owners") for purposes of determining the person entitled to distribution of
dividends or other distributions or to any notice provided for in the Deposit
Agreement and for all other purposes.
(B) DEPOSIT, TRANSFER AND WITHDRAWAL
The Depositary has agreed, subject to the terms and conditions of the Deposit
Agreement, that upon delivery to the Custodian of Telewest shares (or evidence
of rights to receive Telewest shares) and pursuant to appropriate instruments
of transfer in a form satisfactory to the Custodian, the Depositary will, upon
payment of the fees, charges and taxes as provided for in the Deposit
Agreement, execute and deliver at its Corporate Trust Office to, or upon the
written order of, the person or persons named in the notice of the Custodian
delivered to the Depositary or requested by the person depositing such Telewest
shares with the Depositary, an ADR or ADRs, registered in the name or names of
such person or persons, and evidencing any authorised number of ADSs as
requested by such person or persons.
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SECTION SEVEN GENERAL INFORMATION
Upon surrender at the Corporate Trust Office of the Depositary of an ADR for
the purpose of withdrawal of the Deposited Securities represented by the ADSs
evidenced by such ADR, and upon payment of the fees of the Depositary for the
surrender of ADRs, governmental charges and taxes provided in the Deposit
Agreement, and subject to the terms and conditions of the Deposit Agreement,
the Owner of such ADR will be entitled to delivery, to him or her or upon his
or her order, of the amount of Deposited Securities at the time represented by
the ADSs evidenced by such ADR. The forwarding of share certificates, other
securities, property, cash and other documents of title for such delivery will
be at the risk and expense of the Owner.
Subject to the terms and conditions of the Deposit Agreement and any
limitations established by the Depositary, the Depositary may execute and
deliver ADRs prior to the receipt of Telewest shares (a "Pre-release") and
deliver Telewest shares upon the receipt and cancellation of ADRs which have
been Pre-released, whether or not such cancellation is prior to the termination
of such Pre-release or the Depositary knows that such ADR has been Pre-
released. The Depositary may receive ADRs in lieu of Telewest shares in
satisfaction of a Pre-release. Each Pre-release must be (a) preceded or
accompanied by a written representation from the person to whom the ADRs or
Telewest shares are to be delivered that such person, or its customer, owns the
Telewest shares or ADRs to be remitted, as the case may be, (b) at all times
fully collateralised with cash or such other collateral as the Depositary deems
appropriate, (c) terminable by the Depositary on not more than five business
days' notice and (d) subject to such further indemnities and credit regulations
as the Depositary deems appropriate. The number of ADSs that are outstanding at
any time as a result of a Pre-release will not normally exceed 30% of the
Telewest shares deposited thereunder then outstanding; however, the Depositary
reserves the right to change or disregard such limit from time to time as it
deems appropriate.
(C) DIVIDENDS, OTHER DISTRIBUTIONS AND RIGHTS
Subject to any restrictions imposed by English law, regulations or applicable
permits, the Depositary is required to convert or cause to be converted into US
dollars, to the extent that in its judgment it can do so on a reasonable basis
and can transfer the resulting US dollars to the United States, all cash
dividends and other cash distributions denominated in a currency other than US
dollars, including pounds sterling ("Foreign Currency"), that it receives in
respect of the Deposited Securities, and to distribute the resulting US dollar
amount (net of reasonable and customary expenses incurred by the Depositary in
converting such Foreign Currency and any applicable fee of the Depositary) to
the Owners entitled thereto, in proportion to the number of ADSs representing
such Deposited Securities evidenced by ADRs held by them, respectively. Such
distribution may be made upon an averaged or other practicable basis without
regard to any distinctions among Owners on account of exchange restrictions or
the date of delivery of any ADR or ADRs or otherwise. The amount distributed to
the Owners of ADRs will be reduced by any amount on account of taxes to be
withheld by Telewest or the Depositary. See "-- Liability of Owner or
Beneficial Owner for Taxes". If such conversion or distribution can be effected
only with the approval or licence of any government or agency thereof, the
Depositary will file an application for such approval or licence as it may deem
desirable.
If the Depositary determines that in its judgment any Foreign Currency
received by the Depositary or the Custodian cannot be converted on a reasonable
basis into US dollars transferable to the United States, or if any approval or
licence of any government or agency thereof that is required for such
conversion is denied or in the opinion of the Depositary is not obtainable, or
if any such approval or licence is not obtained within a reasonable period as
determined by the Depositary, the Depositary may distribute the Foreign
Currency received by the Depositary or the Custodian (or an appropriate
document evidencing the right to receive such Foreign Currency) to, or in its
discretion may hold such Foreign Currency uninvested and without liability for
interest thereon for the respective accounts of, the Owners entitled to receive
the same. If any such conversion of Foreign Currency, in whole or in part,
cannot be effected for distribution to some of the Owners entitled thereto, the
Depositary may in its discretion make such conversion and distribution in US
dollars to the extent permissible to the Owners entitled thereto, and may
distribute the balance of the Foreign Currency received by the
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Depositary to, or hold such balance uninvested and without liability for
interest thereon for the respective accounts of, the Owners entitled thereto.
If Telewest declares a dividend in, or free distribution of, Telewest shares,
the Depositary may distribute to the Owners of outstanding ADRs entitled
thereto, in proportion to the number of ADSs evidenced by the ADRs held by
them, respectively, additional ADRs evidencing an aggregate number of ADSs that
represents the amount of Telewest shares received as such dividend or free
distribution, subject to the terms and conditions of the Deposit Agreement with
respect to the deposit of Telewest shares and the issuance of ADSs evidenced by
ADRs, including the withholding of any tax or other governmental charge and the
payment of fees of the Depositary. The Depositary may withhold any such
distribution of ADRs if it has not received satisfactory assurances from
Telewest that such distribution does not require registration under the
Securities Act or is exempt from registration thereunder. In lieu of delivering
ADRs for fractional ADSs in the event of any such dividend or free
distribution, the Depositary will sell the amount of Telewest shares
represented by the aggregate of such fractions and distribute the net proceeds
in accordance with the Deposit Agreement. If additional ADRs are not so
distributed, each ADS will thenceforth also represent the additional Telewest
shares distributed upon the Deposited Securities represented thereby.
If Telewest offers or causes to be offered to the holders of any Deposited
Securities any rights to subscribe for additional Telewest shares or any rights
of any other nature, the Depositary will have discretion as to the procedure to
be followed in making such rights available to any Owners or in disposing of
such rights for the benefit of any Owners and making the net proceeds available
to such Owners or, if by the terms of such rights offering or for any other
reason, the Depositary may not either make such rights available to any Owners
or dispose of such rights and make the net proceeds available to such Owners,
then the Depositary shall allow the rights to lapse; provided, however, if at
the time of the offering of any rights the Depositary determines in its
discretion that it is lawful and feasible to make such rights available to all
Owners or to certain Owners but not to other Owners, the Depositary may
distribute to any Owner to whom it determines the distribution to be lawful and
feasible, in proportion to the number of ADSs held by such Owner, warrants or
other instruments therefor in such form as it deems appropriate. If the
Depositary determines in its discretion that it is not lawful and feasible to
make such rights available to all or certain Owners, it may sell the rights,
warrants or other instruments in proportion to the number of ADSs held by the
Owners to whom it has determined it may not lawfully or feasibly make such
rights available, and allocate the net proceeds of such sales (net of the fees
of the Depositary and all taxes and governmental charges payable in connection
with such rights) for the account of such Owners otherwise entitled to such
rights, warrants or other instruments, upon an averaged or other practical
basis without regard to any distinctions among such Owners because of exchange
restrictions or the date of delivery of any ADR or otherwise. The Depositary
will not be responsible for any failure to determine that it may be lawful or
feasible to make such rights available to Owners in general or any Owner in
particular.
In circumstances in which rights would not otherwise be distributed, if an
Owner of ADRs requests the distribution of warrants or other instruments in
order to exercise the rights allocable to the ADSs of such Owner, the
Depositary will make such rights available to such Owner upon written notice
from Telewest to the Depositary that (a) Telewest has elected in its sole
discretion to permit such rights to be exercised and (b) such Owner has
executed such documents as Telewest has determined in its sole discretion are
reasonably required under applicable law. Upon instruction pursuant to such
warrants or other instruments to the Depositary from such Owner to exercise
such rights, upon payment by such Owner to the Depositary for the account of
such Owner of an amount equal to the purchase price of the Telewest shares to
be received in exercise of the rights, and upon payment of the fees of the
Depositary as set forth in such warrants or other instruments, the Depositary
will, on behalf of such Owner, exercise the rights and purchase the Telewest
shares, and Telewest shall cause the Telewest shares so purchased to be
delivered to the Depositary on behalf of such Owner. As agent for such Owner,
the Depositary will cause the Telewest shares so purchased to be deposited and
will execute and deliver ADRs to such Owner, pursuant to the Deposit Agreement.
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SECTION SEVEN GENERAL INFORMATION
The Depositary will not offer rights to Owners unless both the rights and the
securities to which such rights relate are either exempt from registration
under the Securities Act with respect to a distribution to all Owners or are
registered under the provisions of such Act; provided that nothing in the
Deposit Agreement will create, or be construed to create, any obligation on the
part of Telewest to file a registration statement with respect to such rights
or underlying securities or to endeavour to have such a registration statement
declared effective. If an Owner requests the distribution of warrants or other
instruments, notwithstanding that there has been no such registration under the
Securities Act, the Depositary will not effect such distribution unless it has
received an opinion from recognised counsel in the United States for Telewest
upon which the Depositary may rely that such distribution to such Owner is
exempt from such registration. The Depositary will not be responsible for any
failure to determine that it may be lawful or feasible to make such rights
available to Owners in general or any Owner in particular.
If the Depositary receives any distribution in a form other than cash,
Telewest shares or rights in respect of the Deposited Securities, the
Depositary will cause the securities or property received by it to be
distributed to the Owners entitled thereto, after deduction or upon payment of
any fees and expenses of the Depositary or any taxes or other governmental
charges, in proportion to their holdings, respectively, in any manner that the
Depositary may reasonably deem equitable and practicable for accomplishing such
distribution; provided, however, that if in the opinion of the Depositary such
distribution cannot be made proportionally among the Owners entitled thereto,
or if for any other reason (including, but not limited to, any requirement that
Telewest or the Depositary withhold an amount on account of taxes or other
governmental charges or that such securities must be registered under the
Securities Act in order to be distributed to Owners or owners of a beneficial
interest in book-entry ADRs (the "Beneficial Owners")) the Depositary deems
such distribution not to be feasible, the Depositary may adopt such method as
it may deem equitable and practicable for the purpose of effecting such
distribution, including, but not limited to, the public or private sale of the
securities or property thus received, or any part thereof, and the net proceeds
of any such sale (net of the fees of the Depositary) will be distributed by the
Depositary to the Owners entitled thereto as in the case of a distribution
received in cash.
If the Depositary determines that any distribution of property (including
Telewest shares and rights to subscribe therefor) is subject to any taxes or
other governmental charges which the Depositary is obligated to withhold, the
Depositary may, by public or private sale, dispose of all or a portion of such
property in such amount and in such manner as the Depositary deems necessary
and practicable to pay such taxes or charges and the Depositary will distribute
the net proceeds of any such sale after deduction of such taxes or charges to
the Owners entitled thereto in proportion to the number of ADSs held by them,
respectively.
Upon any change in nominal or par value, split-up, consolidation or any other
reclassification of Deposited Securities, or upon any recapitalisation,
reorganisation, merger or consolidation or sale of assets affecting Telewest or
to which it is a party, any securities which shall be received by the
Depositary or Custodian in exchange for, in conversion of, or in respect of
Deposited Securities will be treated as new Deposited Securities under the
Deposit Agreement, and the ADSs will thenceforth represent, in addition to the
existing Deposited Securities, the right to receive the new Deposited
Securities so received in exchange or conversion, unless additional ADRs are
delivered pursuant to the following sentence. In any such case the Depositary
may execute and deliver additional ADRs as in the case of a dividend in
Telewest shares, or call for the surrender of outstanding ADRs to be exchanged
for new ADRs specifically describing such new Deposited Securities.
(D) RECORD DATES
Whenever any cash dividend or other cash distribution shall become payable or
any distribution other than cash shall be made, or whenever rights shall be
issued with respect to the Deposited Securities, or whenever for any reason the
Depositary causes a change in the number of Telewest shares that are
represented by each ADS, or whenever the Depositary shall receive notice of any
meeting of
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holders of Telewest shares or other Deposited Securities, or whenever the
Depositary shall find it necessary or convenient, the Depositary will fix a
record date which shall be the same date as the record date for the Deposited
Securities, or as soon thereafter as practicable (a) for the determination of
the Owners who will be (i) entitled to receive such dividend, distribution or
rights, or the net proceeds of the sale thereof, or (ii) entitled to give
instructions for the exercise of voting rights at any such meeting, or (b) on
or after which each ADS will represent the changed number of Telewest shares,
all subject to the provisions of the Deposit Agreement.
(E) VOTING OF DEPOSITED SECURITIES
Upon receipt of notice of any meeting or solicitation of consents or proxies
of holders of Telewest shares or other Deposited Securities, if requested in
writing by Telewest, the Depositary will, as soon as practicable thereafter,
mail to all Owners a notice, the form of which notice will be in the sole
discretion of the Depositary, containing (a) the information included in such
notice of meeting received by the Depositary from Telewest, (b) a statement
that the Owners as at the close of business on a specified record date will be
entitled, subject to any applicable provision of English law and of the
Memorandum and Articles, to instruct the Depositary as to the exercise of the
voting rights, if any, pertaining to the amount of Telewest shares or other
Deposited Securities represented by their respective ADSs and (c) a statement
as to the manner in which such instructions may be given. Upon the written
request of an Owner on such record date, received on or before the date
established by the Depositary for such purpose, the Depositary will endeavour,
insofar as practicable, to vote or cause to be voted the number of Telewest
shares or other Deposited Securities represented by the ADSs evidenced by such
ADRs in accordance with the instructions set forth in such request. The
Depositary will not vote or attempt to exercise the right to vote that attaches
to the Telewest shares or other Deposited Securities, other than in accordance
with such instructions.
There can be no assurance that the Owners generally or any Owner in
particular will receive the notice described in the above paragraph
sufficiently prior to the date established by the Depositary for the receipt of
instructions to ensure that the Depositary will in fact receive such
instructions on or before such date.
(F) REPORTS AND OTHER COMMUNICATIONS
The Depositary will make available for inspection by Owners at its Corporate
Trust Office any reports and communications, including any proxy soliciting
material, received from Telewest, which are both (a) received by the Depositary
as the holder of the Deposited Securities and (b) made generally available to
the holders of such Deposited Securities by Telewest. The Depositary will also
send to the Owners copies of such reports when furnished by Telewest pursuant
to the Deposit Agreement.
(G) AMENDMENT AND TERMINATION OF THE DEPOSIT AGREEMENT
The form of ADRs and any provisions of the Deposit Agreement may at any time
and from time to time be amended by agreement between Telewest and the
Depositary in any respect which they may deem necessary or desirable without
the consent of the Owners or Beneficial Owners of ADRs; provided, however, that
any amendment that imposes or increases any fees or charges (other than taxes
and other governmental charges, registration fees, cable, telex or facsimile
transmission costs, delivery costs or other such expenses), or which otherwise
prejudices any substantial existing right of Owners, will not take effect as to
outstanding ADRs until the expiration of 30 days after notice of any amendment
has been given to the Owners of outstanding ADRs. Every Owner, at the time any
amendment so becomes effective, will be deemed, by continuing to hold such ADR,
to consent and agree to such amendment and to be bound by the Deposit Agreement
as amended thereby. In no event will any amendment impair the right of the
Owner of any ADR to surrender such ADR and receive therefor the Deposited
Securities represented thereby, except to comply with mandatory provisions of
applicable law.
The Depositary will at any time at the direction of Telewest terminate the
Deposit Agreement by mailing notice of such termination to the Owners of the
ADRs then outstanding at least 90 days prior
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to the date fixed in such notice for such termination. The Depositary may
likewise terminate the Deposit Agreement by mailing notice of such termination
to Telewest and the Owners of all ADRs then outstanding if, any time after 90
days have expired after the Depositary will have delivered to Telewest a
written notice of its election to resign, a successor depositary will not have
been appointed and accepted its appointment, in accordance with the terms of
the Deposit Agreement. If any ADRs remain outstanding after the date of
termination of the Deposit Agreement, the Depositary thereafter will
discontinue the registration of transfers of ADRs, will suspend the
distribution of dividends to the Owners thereof and will not give any further
notices or perform any further acts under the Deposit Agreement, except the
collection of dividends and other distributions pertaining to the Deposited
Securities, the sale of rights and other property and the delivery of Deposited
Securities, together with any dividends or other distributions received with
respect thereto and the net proceeds of the sale of any rights or other
property, in exchange for surrendered ADRs (after deducting, in each case, the
fee of the Depositary for the surrender of an ADR and other expenses set forth
in the Deposit Agreement and any applicable taxes or governmental charges). At
any time after the expiration of one year from the date of termination, the
Depositary may sell the Deposited Securities then held thereunder and hold
uninvested the net proceeds of such sale, together with any other cash,
unsegregated and without liability for interest, for the pro rata benefit of
the Owners that have not theretofore surrendered their ADRs, such Owners
thereupon becoming general creditors of the Depositary with respect to such net
proceeds. After making such sale, the Depositary will be discharged from all
obligations under the Deposit Agreement, except to account for net proceeds and
other cash (after deducting, in each case, the fee of the Depositary and other
expenses set forth in the Deposit Agreement for the surrender of an ADR and any
applicable taxes or other governmental charges). Upon termination of the
Deposit Agreement, Telewest shall be discharged from all obligations under the
Deposit Agreement except for its obligations to the Depositary as provided in
the Deposit Agreement.
(C) CHARGES OF DEPOSITARY
The Depositary will charge any party depositing or withdrawing Telewest
shares or any party surrendering ADRs or to whom ADRs are issued (including,
without limitation, issuance pursuant to a stock dividend or stock split
declared by Telewest or an exchange of stock regarding the ADRs or Deposited
Securities or a distribution of ADRs pursuant to the Deposit Agreement) where
applicable: (a) taxes and other governmental charges; (b) such registration
fees as may from time to time be in effect for the registration of transfers of
Telewest shares generally on the share register of Telewest or the appointed
agent of Telewest for transfer and registration of Telewest shares and
applicable to transfers of Telewest shares to the name of the Depositary or its
nominee or the Custodian or its nominee on the making of deposits or
withdrawals; (c) such cable, telex and facsimile transmission expenses as are
expressly provided in the Deposit Agreement to be at the expense of persons
depositing Telewest shares or Owners; (d) such expenses as are incurred by the
Depositary in the conversion of Foreign Currency pursuant to the Deposit
Agreement; (e) a fee not in excess of $5.00 per 100 ADSs (or portion thereof)
for the issuance and surrender, respectively, of ADRs pursuant to the Deposit
Agreement; (f) a fee not in excess of $0.02 per ADS (or portion thereof) for
any cash distribution made pursuant to the Deposit Agreement; (g) a fee for,
and deduct such fee from, the distribution of proceeds of sales of securities
or rights pursuant to the Deposit Agreement, respectively, such fee being in an
amount equal to the fee for the issuance of ADSs referred to above which would
have been charged as a result of the deposit by Owners of securities (for
purposes of this clause (g) treating all such securities as if they were
shares) or shares received in exercise of rights distributed to them pursuant
to the Deposit Agreement, but which securities or rights are instead sold by
the Depositary and the net proceeds distributed therefrom; and (h) a fee not in
excess of $1.50 per certificate for an ADR or ADRs for transfers made pursuant
to the Deposit Agreement.
The Depositary, pursuant to the Deposit Agreement, may own and deal in any
class of securities of Telewest and its affiliates and in ADRs.
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SECTION SEVEN GENERAL INFORMATION
(D) LIABILITY OF OWNER OR BENEFICIAL OWNER FOR TAXES
If any tax or other governmental charge shall become payable by the Custodian
or the Depositary with respect to any ADR or any Deposited Securities
represented by any ADR, such tax or other governmental charge will be payable
by the Owner or Beneficial Owner of such ADR to the Depositary. The Depositary
may refuse to effect any transfer of such ADR or any withdrawal of Deposited
Securities underlying such ADR until such payment is made, and may withhold any
dividends or other distributions, or may sell for the account of the Owner or
Beneficial Owner thereof any part or all of the Deposited Securities underlying
such ADR and may apply such dividends, distributions or the proceeds of any
such sale to pay any such tax or other governmental charge and the Owner or
Beneficial Owner of such ADR will remain liable for any deficiency.
(E) DISCLOSURE OF INTERESTS
Notwithstanding any other provision of the Deposit Agreement, the Memorandum
and Articles or applicable UK law, each Owner and Beneficial Owner will agree
to be bound by and subject to applicable provisions of the Companies Act and
the Memorandum and Articles to the same extent as if such ADSs evidenced by
such ADRs were Telewest shares. In particular, the obligation of a holder of
Telewest shares (or other persons with an interest therein) to disclose certain
information to Telewest under certain circumstances, as described under "--
Summary of Memorandum and Articles of Association -- Telewest Shares --
Disclosure of Interests", are also applicable to a holder of ADRs (and other
persons with an interest therein). The consequences to a holder of ADRs (or
other interested person) for failing to comply with the disclosure requirements
also are the same as those for a holder of Telewest shares (or other interested
person) described under "-- Summary of Memorandum and Articles of
Association -- Telewest Shares -- Disclosure of Interests". In addition, the
right of Telewest to require a holder of Telewest shares to dispose of its
shares or the right of Telewest itself to dispose of such shares, in each case
under certain circumstances described under "-- Summary of Memorandum and
Articles of Association -- Articles of Association -- Telewest Shares --
Special Provisions for Licence Protection; Required Disposals and Restrictions
on Voting" and "-- Untraced Shareholders", is also applicable to holders of
ADRs.
The Depositary will use reasonable efforts to forward to any Owners at the
request and at the expense of Telewest, any request by Telewest for information
and to comply with any instructions of Telewest, to the extent reasonably
practicable, given in connection with the foregoing. If Telewest requests
information from the Depositary or the Custodian, as the registered owners of
Telewest shares, pursuant to the Memorandum and Articles or the Companies Act,
the obligations of the Depositary or the Custodian, as the case may be, shall
be limited to disclosing to Telewest such information relating to the Telewest
shares in question as has in each case been recorded by it pursuant to the
terms of the Deposit Agreement.
(F) GENERAL
None of the Depositary or Telewest or any of their respective directors,
employees, agents or affiliates will be liable to any Owner or Beneficial Owner
of ADRs, if by reason of any provision of any present or future law or
regulation of the United States, England or any other country, or of any other
governmental or regulatory authority or stock exchange, or by reason of any
provision, present or future, of the Memorandum and Articles, or by reason of
any provision of any securities issued or distributed by Telewest, or any
offering or distribution thereof, or by reason of any act of God or war or
other circumstances beyond its control, the Depositary or Telewest or any of
their respective directors, employees, agents, or affiliates shall be
prevented, delayed or forbidden from, or be subject to any civil or criminal
penalty on account of, doing or performing any act or thing which by the terms
of the Deposit Agreement or the Deposited Securities it is provided will be
done or performed; nor will the Depositary or Telewest incur any liability to
any Owner or Beneficial Owner of any ADR by reason of any nonperformance or
delay, caused as aforesaid, in the performance of any act or thing which by the
terms of the Deposit Agreement it is provided will or may be done or performed,
or by reason of
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SECTION SEVEN GENERAL INFORMATION
any exercise of, or failure to exercise, any discretion provided for under the
Deposit Agreement. Where, by the terms of a distribution pursuant to the
Deposit Agreement, or an offering or distribution pursuant to the Deposit
Agreement, or for any other reason, such distribution or offering may not be
made available to Owners, and the Depositary may not dispose of such
distribution or offering on behalf of such Owners and make the net proceeds
available to such Owners, then the Depositary will not make such distribution
or offering, and will allow the rights, if applicable, to lapse.
Telewest and the Depositary assume no obligation and they will not be subject
to any liability under the Deposit Agreement to Owners or Beneficial Owners of
ADRs, except that they agree to perform their respective obligations
specifically set forth under the Deposit Agreement without negligence or bad
faith.
The ADRs are transferable on the books of the Depositary, provided that the
Depositary may close the transfer books at any time or from time to time when
deemed expedient by it in connection with the performance of its duties or at
the written request of Telewest. As a condition precedent to the execution and
delivery, registration of transfer, split-up, combination or surrender of any
ADR or withdrawal of any Deposited Securities, the Depositary, the Custodian or
the Registrar may require payment from the person presenting the ADR or the
depositor of the Telewest shares of a sum sufficient to reimburse it for any
tax or other governmental charge and any stock transfer or registration fee
with respect thereto (including any such tax or charge and fee with respect to
Telewest shares being deposited or withdrawn) and payment of any applicable
fees payable by the holders of ADRs. The Depositary may refuse to deliver ADRs,
to register the transfer of any ADR or to make any distribution on, or related
to, Telewest shares until it has received such proof of citizenship or
residence, exchange control approval or other information as it may deem
necessary or proper. The delivery, transfer, registration of transfer of
outstanding ADRs and surrender of ADRs generally may be suspended or refused
during any period when the transfer books of the Depositary are closed or if
any such action is deemed necessary or advisable by the Depositary or Telewest,
at any time or from time to time, subject to the provisions of the following
sentence. Notwithstanding anything to the contrary in the Deposit Agreement,
the surrender of outstanding ADRs and withdrawal of Deposited Securities may
not be suspended subject only to (a) temporary delays caused by closing the
transfer books of the Depositary or Telewest or the deposit of Telewest shares
in connection with voting at a shareholders' meeting, or the payment of
dividends, (b) the payment of fees, taxes and similar charges and (c)
compliance with any US or foreign laws or governmental regulations relating to
the ADRs or to the withdrawal of the Deposited Securities. Without limiting the
foregoing, the Depositary shall not knowingly accept for deposit under the
Deposit Agreement any Telewest shares required to be registered under the
provisions of the Securities Act, unless a registration statement is in effect
as to such Telewest shares.
The Depositary will keep books, at its Corporate Trust Office, for the
registration and transfer of ADRs, which at all reasonable times will be open
for inspection by the Owners, provided that such inspection will not be for the
purpose of communicating with Owners in the interest of a business or object
other than the business of the Telewest Group or a matter related to the
Deposit Agreement or the ADRs.
The Depositary may appoint one or more co-transfer agents for the purpose of
effecting transfers, combinations and split-ups of ADRs at designated transfer
offices on behalf of the Depositary. In carrying out its functions, a co-
transfer agent may require evidence of authority and compliance with applicable
laws and other requirements by Owners or persons entitled to ADRs and will be
entitled to protection and indemnity to the same extent as the Depositary.
(G) GOVERNING LAW
The Deposit Agreement is governed by the laws of the State of New York.
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SECTION SEVEN GENERAL INFORMATION
7.SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Merger, the Pre-emptive Issue and the Conversion,
Telewest will have 2,145,158,549 Telewest shares in issue (assuming that all
options outstanding under the General Cable Share Schemes will be exercised and
the General Cable shares received in connection therewith will be tendered in
the Offer). All such Telewest shares, other than those not registered under the
Securities Act or those held by "affiliates" of Telewest, will be directly
transferable and tradable in the US without restrictions or further
registration under the Securities Act.
Restricted Shares and Telewest shares held by "affiliates" of Telewest (as
that term is used under the Securities Act) will be eligible for sale in the US
public market subject to compliance with Rule 144, but may be sold without such
compliance inside the US pursuant to Rule 144A or outside the US in "offshore
transactions" (as defined in Regulation S) on the London Stock Exchange or
otherwise pursuant to Regulation S.
In general, under Rule 144 as currently in effect, a person (or persons whose
shares are aggregated) whose Restricted Shares were acquired from Telewest or
an affiliate at least one year prior to the date of sale are entitled to sell,
within any three-month period, a number of shares that does not exceed the
greater of (a) 1% of the then-outstanding Telewest shares or (b) the average
weekly trading volume in the Telewest shares during the four calendar weeks
preceding such sale, subject to the filing of a Form 144 with respect to such
sale and certain other limitations and restrictions. Affiliates of Telewest
must comply with all of the restrictions and requirements of Rule 144 (other
than the one-year holding period requirement) in order to sell Telewest shares
that are not Restricted Shares in the US public market. In addition, a person
who is not deemed to have been an affiliate of Telewest at any time during the
three months preceding a sale, and whose Restricted Shares proposed to be sold
were acquired from Telewest or an affiliate at least two years prior to the
date of sale, would be entitled to sell such shares under Rule 144(k) without
regard to the volume limitations described above.
Rule 144A permits, subject to certain conditions, the sale by holders of
Restricted Shares of all or a portion of their shares to certain "qualified
institutional buyers" (as defined in Rule 144A). Regulation S permits, subject
to certain conditions, the sale by holders of Restricted Shares of all or a
portion of their shares in offshore transactions, including transactions
effected on the London Stock Exchange.
For a discussion of certain restrictions on the transfer or disposal of
Telewest shares and Telewest Convertible Preference shares by members of the
TINTA Group, the MediaOne Group, the SBC Group and the Cox Group, see "--
Section Four -- Information on the Combined Group -- Principal Shareholders --
Disposal and Acquisition of Telewest Shares and Telewest Convertible
Preference Shares". There are no such restrictions on the transfer or disposal
of Telewest shares by Vivendi.
For information regarding the rights of the TINTA Affiliate, the MediaOne
Affiliates, the SBC Affiliate, the Cox Affiliate and Vivendi to have Telewest
register certain Telewest shares owned by them, see "-- Section Four --
Information on the Combined Group -- Principal Shareholders --Registration
Rights".
Sales of substantial amounts of Telewest shares pursuant to a registration
statement, Rule 144 or otherwise, whether in the US or abroad, could adversely
affect the public market price of the Telewest shares.
8.EMPLOYEE SHARE SCHEMES
(A) GENERAL
Telewest currently has seven employee share schemes: (a) the Telewest 1995
Restricted Share Scheme (the "RSS"), (b) the Telewest 1995 Sharesave Scheme
(the "Sharesave Scheme"), (c) the Telewest 1995 (No. 1) Executive Share Option
Scheme (the "No. 1 Scheme"), (d) the Telewest 1995 (No. 2) Executive Share
Option Scheme (the "No. 2 Scheme" and together with the No. 1 Scheme, the
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SECTION SEVEN GENERAL INFORMATION
"Executive Schemes"), (e) the Telewest 1995 Share Participation Scheme (the
"SPS"), (f) the Telewest Equity Participation Plan (the "EPP") and (g) the
LTIP. A description of each of the Telewest employee share schemes is set forth
below.
As at 24 June 1998 (the latest practicable date prior to the publication of
this document) the following options to subscribe for Telewest shares and
awards over Telewest shares were outstanding under the Telewest Share Schemes.
THE EXECUTIVE SCHEMES
<TABLE>
<CAPTION>
EXERCISE
PRICE PER NUMBER OF SHARES
DATE OF GRANT SHARE EXERCISE PERIOD UNDER OPTION
<S> <C> <C> <C>
12 May 1995 154.5 13/5/98 -- 11/5/2002 4,490,771
12 May 1995 155.5 13/5/98 -- 11/5/2002 205,395
16 June 1995 171.5 17/6/98 -- 15/6/2002 995,607
16 June 1995 173.5 17/6/98 -- 15/6/2002 36,125
9 November 1995 173.5 12/3/98 -- 8/11/2005 728,630
11 March 1996 141.0 12/3/99 -- 10/3/2006 3,243,073
11 March 1996 138.0 12/3/99 -- 10/3/2006 95,084
30 October 1996 135.0 30/10/99 -- 29/10/2006 162,962
13 March 1997 117.5 13/3/2000 -- 12/3/2007 740,424
13 March 1997 118.0 13/3/2000 -- 12/3/2007 25,423
1 October 1997 83.0 1/10/2000 -- 30/09//2004 3,570,095
1 October 1997 82.5 1/10/2000 -- 30/09/2007 1,361,528
31 October 1997 73.0 31/10/2000 -- 30/10/2004 2,172,394
31 October 1997 71.0 31/10/2003 -- 30/10/2007 494,519
20 March 1998 91.5 20/3/2001 -- 19/3/2008 196,716
20 March 1998 95.5 20/3/2001 -- 19/3/2008 3,471,977
----------
21,990,723
----------
THE SHARESAVE SCHEME
<CAPTION>
EXERCISE PRICE NUMBER OF SHARES
DATE OF GRANT PER SHARE EXERCISE PERIOD UNDER OPTION
<S> <C> <C> <C>
12 December 1994 150.0 1/2/2000 -- 31/7/2000 408,480
12 December 1995 134.0 1/2/2001 -- 31/7/2001 455,190
12 December 1996 102.5 1/2/2000 -- 31/7/2000 1,280,511
11 December 1997 58.0 1/2/2001 -- 31/7/2001 5,244,958
----------
7,389,139
----------
</TABLE>
The savings contracts associated with the options granted on 11 December 1997
became effective from 1 February 1998.
THE RSS
At 24 June 1998, awards over 419,601 shares were outstanding. The exercise
period of these awards is from 13 January 1998 to 20 January 2007.
THE LTIP
At 24 June 1998, awards in relation to 2,227,522 shares were outstanding. The
exercise period of these awards is from 1 October 2000 to 30 October 2007.
(B) THE RSS
(I) PURPOSE AND ELIGIBILITY
The RSS enables Telewest shares to be awarded to employees and directors of
the Telewest Group who devote all or substantially all of their working time to
the service of the Telewest Group.
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
(II) ADMINISTRATION OF THE SCHEME
The RSS is operated in conjunction with the Telewest 1994 Employees' Share
Option Plan Trust (the "ESOP"). The trustee of the ESOP (the "Trustee") will
receive recommendations and advice from the Remuneration Committee with respect
to the award of Telewest shares and other matters, but is not obligated to
follow such recommendations and advice. The ESOP initially was funded by an
interest-free loan of approximately (Pounds)7.3 million from Telewest, which is
intended to be repaid over time through cash contributions made to the Trustee
by Telewest and/or its subsidiaries. Telewest may provide further funding to
the ESOP to enable it to purchase additional Telewest shares. Telewest does not
intend to issue any additional shares under the RSS.
(III) GRANT OF AWARDS
Awards shall be made by the Trustee, to eligible employees, in its absolute
discretion. Awards may be granted at any time other than during a closed period
or when Telewest is prohibited from so doing under the rules of the London
Stock Exchange. No award may be made after 2 October 2005. The market value of
Telewest shares subject to an award shall be determined by the Trustee before
the grant of an award.
(IV) LIMITS
Unless the Trustee decides otherwise, the aggregate market value of Telewest
shares awarded in any ten-year period to any eligible employee under the RSS
may not exceed four times the greater of such employee's total remuneration
(expressed as an annual rate payable by members of the Telewest Group as at
that time) and the total remuneration paid by members of the Telewest Group to
such employee in the preceding year.
(V) ADJUSTMENTS
In the event of any increase or variation in the share capital of Telewest,
the Trustee may make such adjustments as it considers appropriate to the number
of Telewest shares subject to awards and the price (if any) at which such
Telewest shares may be acquired.
(VI) VESTING OF AWARDS
A participant will receive an award of a fixed number of Telewest shares
which, unless the Trustee otherwise provides, will normally be available for
release to the participant three years after the date of award. Until such
shares are released or vest early as described below, the participant will not
be entitled to vote or receive dividends on the Telewest shares awarded to such
participant.
If the participant ceases to be an employee or Director of Telewest before
the release date, such participant usually will forfeit his or her award.
However, early release is provided (scaled down to reflect service up to the
date of cessation of employment), if a participant ceases to be an employee
other than due to resignation or dismissal for cause. The RSS also provides for
early vesting in the event of a takeover, reconstruction or liquidation of
Telewest. The Trustee may, in its discretion, provide for earlier vesting in
other circumstances.
(VII) TRANSFERABILITY
Awards are personal to participants and may not be transferred, except on the
death of the participant.
(VIII) AMENDMENTS
The Trustee at any time may amend the RSS in any respect provided that any
amendment to the detriment of the participants requires the consent of a
majority of such participants.
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SECTION SEVEN GENERAL INFORMATION
(C) THE SHARESAVE SCHEME
(I) PURPOSE AND ELIGIBILITY
The Sharesave Scheme enables Telewest to grant options to purchase Telewest
shares to employees and full-time Directors of Telewest or any of its
participating subsidiaries who have been employees of Telewest for a period of
nine months ending on the day options are to be granted. The Sharesave Scheme
has been approved by the Inland Revenue under the UK Income and Corporation
Taxes Act 1988 ("ICTA 1988"), which gives potentially beneficial tax treatment
for option holders.
(II) ISSUE OF INVITATIONS AND GRANT OF OPTIONS
Invitations to apply for options may normally only be issued during the six-
week period following the announcement of Telewest's results for any period.
Options may be granted outside these periods in exceptional circumstances.
Eligible employees who apply for options under the Sharesave Scheme must also
enter into a savings contract with an authorised savings body to save an amount
of not less than (Pounds)5 and not more than (Pounds)250 per month for a three-
or five-year period. A holder of options granted under the Sharesave Scheme may
exercise such options to purchase Telewest shares only with funds available in
such holder's savings account (including any bonuses on such savings account).
No options may be granted under the Sharesave Scheme after 2 October 2005.
(III) NUMBER AND EXERCISE PRICE OF OPTIONS TO BE GRANTED
The number of shares over which options are granted under the Sharesave
Scheme is determined at the time the options are granted and is based on the
amount employees contribute to a savings contract, subject to any maximum
amount set by the Board; if the Board receives acceptances over this maximum
amount, applications may be scaled down. The exercise price of options will be
determined by the Board and shall not be less than 80% of the middle-market
quotation for the Telewest shares as derived from the Official List on the
trading day five days prior to the date on which employees are invited to apply
for options and, in relation to options to subscribe, shall also be not less
than the nominal value of a Telewest share.
(IV) ADJUSTMENTS
In the event of any increase or variation in the share capital of Telewest,
the number of Telewest shares under option and/or the exercise price may be
adjusted with the approval of the UK Inland Revenue.
(V) VESTING AND EXERCISE OF OPTIONS
Options will be exercisable early in certain specified circumstances
including death if the option holder ceases to be employed due to injury,
disability, redundancy, retirement, because the company or business that
employs the option holder is transferred out of the Telewest Group or in the
event of a takeover, reconstruction or liquidation of Telewest.
An option granted under the Sharesave Scheme usually may be exercised only
during the six-month period following completion by the option holder of his or
her required contributions under the savings contract. This may be three, five
or seven years from the date such savings contract commenced.
(VI) TRANSFERABILITY
Options granted under the Sharesave Scheme are personal to the option holder
and may not be transferred, except on the death of the option holder.
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
(VII) AMENDMENTS
The Board at any time may amend the Sharesave Scheme. However, no such
amendment may be made without the prior approval of the UK Inland Revenue. In
addition, the prior approval of Telewest's shareholders at a general meeting is
required for an amendment to benefit the option holders, unless the amendment
is a minor one to benefit the administration of the Sharesave Scheme, or is an
alteration or addition to obtain or maintain favourable tax, exchange control
or regulatory treatment for option holders or any member of the Telewest Group.
(D) THE NO. 1 SCHEME AND THE NO. 2 SCHEME
(I) PURPOSE AND ELIGIBILITY
The Executive Schemes enable Telewest to grant options to employees and full-
time directors of a participating company in the Telewest Group, in all cases
other than to persons within two years of retirement. For the purposes of the
No. 1 Scheme, directors are considered to be full-time if they devote at least
25 hours a week to the service of a participating company in the Telewest
Group.
The No. 1 Scheme (but not the No. 2 Scheme) has been approved by the Inland
Revenue under ICTA 1988, which gives potentially beneficial tax treatment to
option holders. These tax incentives are limited with respect to options
granted after 17 July 1995. Options granted under either of the Executive
Schemes may in certain circumstances also qualify as Incentive Stock Options
("ISOs").
The No. 2 Scheme contains substantially the same terms and conditions as the
No. 1 Scheme, except as described below and except that an individual granted
an option over Telewest shares under the No. 1 Scheme may be granted a
replacement option under the No. 2 Scheme over the same number of Telewest
shares exercisable at the same price, the same time and subject to the same
performance condition as the original option.
(II) GRANT OF OPTIONS
Options may be granted under the Executive Schemes during the six-week period
following the announcement of Telewest's results for any period. Options may be
granted outside these periods in exceptional circumstances. No option may be
granted after 2 October 2005.
(III) NUMBER AND PRICE OF OPTIONS TO BE GRANTED
Options granted under the Executive Schemes will be exercisable at a price
determined by the Board, provided that such price shall not be less than the
middle-market quotation for the Telewest shares as derived from the Official
List on the trading day immediately preceding the date of grant or on the date
of grant in the case of ISOs.
(IV) ADJUSTMENTS
In the event of any increase or variation in the share capital of Telewest,
the Board may make such adjustments as it considers appropriate to the number
of Telewest shares subject to options, and the price at which such Telewest
shares may be acquired. Adjustments to the terms of options granted under the
No. 1 Scheme must first be approved by the UK Inland Revenue.
(V) LIMITS ON INDIVIDUAL PARTICIPATION
In any ten-year period, the aggregate market value of Telewest shares that
may be subscribed for on the exercise of options granted to an executive in
such period under the Executive Schemes (excluding options that have been
exercised) may not exceed four times the greater of such executive's total
remuneration (expressed as an annual rate payable by Telewest to the executive)
and the total remuneration paid by Telewest to such executive in the preceding
12 months. Executives may be granted options to replace those that have been
exercised but in granting such replacement options, the
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SECTION SEVEN GENERAL INFORMATION
Remuneration Committee shall determine that the grant of such options is
justified by Telewest's performance in the previous three years.
In the case of the No. 1 Scheme, the aggregate market value of Telewest
shares that may be acquired by the exercise of subsisting options granted to
any employee or director under the No. 1 Scheme or any other UK Inland Revenue-
approved executive share option scheme may not exceed (Pounds)30,000.
When an option granted under the No. 2 Scheme is exercised, the Board may
elect, instead of issuing Telewest shares for such option, to pay to the option
holder in cash the amount by which the market value of the Telewest shares
subject to such option exceeds the exercise price.
(VI) VESTING AND EXERCISE OF OPTIONS
If the option holder ceases to be an employee or director of Telewest prior
to three years after the date on which the option was granted, such option
usually will lapse unless the Board decides otherwise. However, special
provisions similar to those contained in the Sharesave Scheme provide for early
exercise of an option granted under the Executive Schemes in certain
circumstances (subject, in the case of retirement, to the performance target
referred to below being satisfied).
Subject to satisfaction of the performance target specified by the Board
prior to the grant of an option, options will normally be exercisable after the
third anniversary of the date of grant. The performance target requires
Telewest's share price to outperform the FTSE 100 over a three-year period
before options can be exercised. An option granted under the No. 1 Scheme may
not be exercised more than ten years after the grant and an option granted
under the No. 2 Scheme may not be exercised more than seven years after the
grant.
The Board may, in certain circumstances, grant ISOs to US executives under
the Executive Schemes which will qualify for favourable tax treatment in the
US. Such options may not be granted to executives holding more than 10% of the
Telewest shares (or of Telewest's parent or subsidiary corporations within the
meaning of Section 424 of the US Internal Revenue Code of 1986, as amended)
unless the exercise price is 110% of the fair market value on the date of grant
and the term of the option does not exceed five years. The aggregate fair
market value determined at the date of grant with respect to which ISOs first
become exercisable by any option holder shall not exceed $100,000 in any
calendar year.
(VII) TRANSFERABILITY
Options granted under the Executive Schemes are personal to the option holder
and may not be transferred, except on the death of the option holder.
(VIII) AMENDMENTS
The Board may amend the Executive Schemes in any respect provided that any
amendment that is to the detriment of participants requires the consent of a
majority of such participants and any amendment to benefit the option holders
requires the prior approval of Telewest's shareholders at a general meeting,
unless the amendment is a minor one to benefit the administration of the
Executive Schemes, or is an alteration or addition to obtain or maintain
favourable tax, exchange control or regulatory treatment for option holders.
The No. 1 Scheme will cease to enjoy its tax-favoured status if any amendment
is not accepted by the UK Inland Revenue. Notwithstanding the foregoing, if any
amendment is made without shareholder approval to the aggregate number of
Telewest shares that may be issued under the Executive Schemes (other than an
increase resulting from an adjustment) or to the persons eligible to
participate in the Executive Schemes, then any options subsequently granted
under the Executive Schemes will not qualify as ISOs.
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SECTION SEVEN GENERAL INFORMATION
(E) THE SPS
(I) PURPOSE AND ELIGIBILITY
The SPS enables Telewest to allocate Telewest shares to employees and full-
time Directors of Telewest who have been employees of Telewest for a period of
at least nine months ending on the day Telewest shares are to be acquired, who
are UK citizens and who, in the case of full-time Directors are required to
devote not less than 25 hours per week to their duties with their employing
company. The Board may allow other employees to participate in the SPS. The SPS
has been approved by the Inland Revenue under ICTA 1988. This gives potentially
beneficial tax treatment to participants.
(II) ADMINISTRATION OF THE SCHEME
Telewest has entered into a trust deed with Telewest Share Trust Limited, as
trustee (the "SPS Trustee"), and the SPS may be operated at any time in the
future, at the discretion of the Board, as a free benefit plan.
(III) NUMBER AND VALUE OF TELEWEST SHARES TO BE ALLOCATED
The number of Telewest shares to be allocated under the SPS will be
determined at the time such Telewest shares are to be allocated. Such shares
will be allocated at no cost to eligible persons with funds provided by
Telewest to the SPS Trustee. Telewest shares subscribed for by the SPS Trustee
under the SPS will normally be subscribed for at a price not less than the
average market price for the Telewest shares on the London Stock Exchange on
any of the 14 days preceding such issue.
The market value of Telewest shares awarded to any employee in any year under
the SPS may not exceed the limit from time to time permitted by ICTA 1988. The
current limit per employee is the greater of (Pounds)3,000 or 10% of annual
salary, subject to an overall per-employee maximum of (Pounds)8,000 per year.
If the SPS Trustee subscribes for newly issued Telewest shares for use in the
SPS, Telewest may not contribute more than 5% of its annual pre-tax profits to
the SPS Trustee (this limitation does not apply if the SPS Trustee purchases
Telewest shares for use in the SPS in open-market transactions).
(IV) TIMING OF TELEWEST SHARE ALLOCATION
Telewest shares acquired by employees under the SPS normally will be held by
the SPS Trustee for two years, during which time they may not be sold, pledged
or otherwise disposed of by the employee. In certain circumstances, including
death, lay-off or reaching age 60, Telewest shares held by the SPS Trustee may
be released before the expiration of the two-year period. For a further year
after such two-year period, the SPS Trustee will retain the Telewest shares
(unless the beneficiary wishes to dispose of them), in which case such Telewest
shares may be transferred to the employee free of UK income tax. The employees
will be the beneficial owners of such Telewest shares while they are held by
the SPS Trustee.
(V) AMENDMENTS
The Board at any time may amend the SPS (although the SPS will cease to enjoy
its tax-favoured status if any amendment is not thereafter accepted by the UK
Inland Revenue). However, the prior approval of Telewest's shareholders at a
general meeting must be obtained for any amendment that benefits the
participants, unless the amendment is a minor one to benefit the administration
of the SPS, or is an alteration or addition to obtain or maintain favourable
tax, exchange control or regulatory treatment for participants, the SPS Trustee
or any shareholder of Telewest.
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(F) THE EPP
(I) ELIGIBILITY
Any director or employee of a participating company in the Telewest Group who
is required to devote the whole or substantially the whole of his or her
working time to the service of a participating company may be invited to
participate in the EPP (other than a person who is within two years of the date
on which he or she is bound to retire in accordance with the terms of his or
her contract of employment).
(II) AWARDS
Under Part A of the EPP, at the remuneration committee of the Board's
("Remuneration Committee") discretion, an eligible employee may be granted an
award offering a conditional right to acquire Telewest shares. Half of the
award shall comprise a Bonus Option and half a Matching Allocation.
Part B of the EPP provides that, at the Remuneration Committee's discretion,
a participant can use up to 50% of the bonus payable to him or her under the
Telewest Annual Performance-Related Short Term Incentive Plan ("STIP") (or such
other percentage as the Remuneration Committee may determine), after deduction
of tax, to buy Telewest shares ("Bonus Shares"). Such participant must deposit
the Bonus Shares with the Trustee of the ESOP, an independent trustee currently
located in Jersey, Channel Islands. In return, the participant is granted an
award of the right to be conditionally transferred a matching number of
Telewest shares ("Matching Shares") (after grossing up the value of the Bonus
Shares) for no payment.
(III) GRANTING OF AWARDS
Awards may be made during the six weeks following the announcement of
Telewest's final, interim and quarterly results (and at other times in
exceptional circumstances). No awards may be made more than ten years following
the adoption of the EPP. Awards made under the EPP are personal to the
participant and, except on the death of the participant, may not be
transferred.
(IV) RECEIPT OF SHARES
Under Part A, a Bonus Option may be exercised at any time but the Matching
Allocation may only be transferred after three years and only if the Bonus
Option has not been exercised before the third anniversary of the date of grant
of the Bonus Option and the participant is still a Director or employee of the
Telewest Group on the third anniversary. If a participant ceases employment
before the third anniversary for any reason, the Bonus Option may be exercised
within six months. If a participant ceases to be an employee of the Telewest
Group before the third anniversary because of his or her death, injury,
disability, redundancy, retirement at normal retirement age or because the
company or business that employs the participant is transferred out of the
Telewest Group, the Matching Allocation will be transferred early. If the
participant ceases employment for any other reason, the Matching Allocation may
not be transferred unless the Remuneration Committee decides otherwise. If the
Bonus Option has been partially exercised before the third anniversary of the
date of the grant of the Bonus Option, the extent to which the Matching
Allocation shall be transferred shall be reduced proportionately. Special
provisions apply if there is a take-over, reconstruction or winding-up of
Telewest, whereby shares can be transferred early.
Under Part B, Bonus Shares may be withdrawn by the participant at his or her
discretion at any time after the date of the award but the Matching Shares
provisionally allocated by Telewest may only be transferred after the third
anniversary of this date and only if the Bonus Shares have not been withdrawn
before such third anniversary and the participant is still a Director or
employee of the Telewest Group on such third anniversary. If a participant
ceases employment for any reason before the third anniversary, the Bonus Shares
shall be transferred to the participant as soon as reasonably
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practicable. If a participant ceases to be an employee of the Telewest Group
before the third anniversary for the same reasons listed above in relation to
Part A, the Matching Shares shall be treated in the same manner as the Matching
Allocation in Part A. The number of Matching Shares so transferred will be
reduced proportionately to the number of Bonus Shares that are withdrawn before
the third anniversary of the date of grant. Special provisions apply if there
is a take-over, reconstruction or winding-up of Telewest, whereby shares can be
transferred early.
(V) ADJUSTMENTS
In the event of any increase or variation in the share capital of Telewest,
the Remuneration Committee may make such adjustments as it considers
appropriate to the number of shares that which may be acquired under the award.
(VI) SUBSCRIPTION FOR SHARES
The ESOP may subscribe for or purchase Telewest shares for the purposes of
the EPP or Telewest may grant an option to the ESOP to subscribe for Telewest
shares for the purposes of the EPP. The Board does not intend to issue Telewest
shares to the ESOP at a price below the middle-market quotation for a Telewest
share on the dealing day before the date of grant or, if issued other than on
exercise of an option, on the dealing day before the date of issue.
(VII) AMENDMENTS
The Remuneration Committee may at any time amend the EPP, or the terms of any
award granted under it, save that the prior approval of Telewest in general
meeting will be required for amendments to the advantage of the participants,
to the eligibility requirements, to the limit on the number of Telewest shares
that can be issued under awards, to the maximum entitlement for any one
participant and to the rule concerning adjustments in the event of a variation
of capital unless the amendment is a minor alteration to benefit the
administration of the EPP, to take account of a change in legislation or to
obtain or maintain favourable tax, exchange control or regulatory treatment for
participants or any participating company in the Telewest Group.
(G) THE LTIP
(I) ELIGIBILITY
Any director or employee of a participating company in the Telewest Group
(other than a person who is within two years of the date on which he or she is
bound to retire in accordance with the terms of his or her contract of
employment) may be invited to participate in the LTIP.
(II) AWARDS
An award consists of a right to receive Telewest shares for no payment, 50%
of the shares vesting being transferred on the third anniversary of the award
date and the remaining 50% of the shares being transferred on the fourth
anniversary of the award date.
(III) PERFORMANCE CONDITIONS
Vesting of an award is dependent on meeting performance conditions. The award
is divided equally, with vesting of 50% depending on Telewest's TSR meeting a
performance condition relating to the TSR of FTSE 100 companies and the
remaining 50% depending on meeting a performance condition relating to the TSR
of a group of comparative companies (i.e., telecommunications, broadcasting and
cable companies operating in the UK with shares listed on the London Stock
Exchange and cable companies operating in the UK with shares listed on Nasdaq)
in each case over a three-year period. If Telewest's TSR is in the top quartile
of the FTSE 100 companies over that period, the participant will receive 50% of
the number of shares awarded to him or her; if Telewest's TSR is
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50th place in the FTSE 100, the participant will receive 12.5% of the number of
shares awarded to him or her; if below 50th place in the FTSE 100, the
participant will receive nothing in respect of this portion of the award.
Similarly, if Telewest's TSR is in the top quartile of the group of comparative
companies, over that period, the participant will receive 50% of the number of
shares awarded to him or her; if Telewest's TSR is at the median position, the
participant will receive 12.5% of the number of shares awarded to him or her;
if below the median position, the participant will receive nothing in respect
of that portion of the award. In either test, a proportionate number of shares
will be received for intermediate positions. TSR in each case will be
calculated by reference to the cash flow generated by dividends and capital
appreciation on a share purchased at the beginning and sold at the end of the
period. The purchase and sale price will be taken to be the average middle-
market quotation for the period of three months preceding the time in question.
(IV) GRANT OF AWARDS
Awards may be granted during the six weeks following the announcement of
Telewest's final, interim and quarterly results (and at other times in
exceptional circumstances). No award may be granted more than ten years
following the adoption of the LTIP. Awards granted under the LTIP are personal
to the participant and, except on the death of the participant, may not be
transferred.
(V) TRANSFER OF TELEWEST SHARES
If the participant remains employed by the Telewest Group and subject to the
satisfaction of the performance criteria, 50% of the Telewest shares subject to
the award will be transferred after three years from the date of grant, and 50%
after four years from the date of grant. In the event a participant ceases to
be employed by reason of death, injury, disability, redundancy or retirement at
normal contractual retirement age, or because the company or business that
employs the participant is transferred out of the Telewest Group, the
participant (or his or her personal representatives) shall only be entitled to
such number of Telewest shares as reflects his or her period of service up to
the date of cessation of employment and the Telewest shares shall not be
transferred before the third anniversary of the allocation date. Special
provisions apply if there is a takeover, reconstruction or winding-up of
Telewest, whereby Telewest shares can be transferred early.
(VI) ADJUSTMENTS
In the event of any increase or variation in the share capital of Telewest,
the Remuneration Committee may make such adjustments as it considers
appropriate to the number of shares that may be acquired under the award.
(VII) INDIVIDUAL LIMITS
The value of Telewest shares awarded under the LTIP in any financial year to
any individual may not exceed 100% of his or her annual salary (excluding
benefits in kind), save in exceptional circumstances.
(VIII) AMENDMENTS
The Remuneration Committee may at any time amend the LTIP, or the terms of
any award granted under it, save that the prior approval of Telewest in a
general meeting will be required for amendments to the advantage of
participants, to the eligibility requirements, to the limits on the number of
Telewest shares that can be issued under awards, to the maximum entitlement for
any one participant and to the rule concerning adjustments in the event of a
variation of capital unless the amendment is a minor alteration to benefit the
administration of the LTIP, to take account of a change in legislation or to
obtain or maintain favourable tax, exchange control or regulatory treatment for
participants or any participating company in the Telewest Group.
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SECTION SEVEN GENERAL INFORMATION
(H) SHARE SCHEME LIMITS
The share schemes described in sections (c), (d), (e), (f) and (g) above are
subject to the following overall limits on the number of Telewest shares that
may be acquired by subscription.
(i) In any calendar year, the number of Telewest shares that may be
issued to the SPS Trustee may not exceed 1% of the Telewest shares then
outstanding.
(ii) Subject to (iv) and (v) below, in any three-year period, not more
than 3% of the issued share capital of Telewest may be subject to options
or issued under the Sharesave Scheme, the Executive Schemes, the SPS, the
EPP and the LTIP (together, the "Employee Share Schemes").
(iii) In any five-year period, not more than 5% of the issued share
capital of Telewest may be subject to options or issued under the Employee
Share Schemes.
(iv) In relation to the Sharesave Scheme and the SPS, the limit in (ii)
above need not be complied with, provided that the limit in (iii) is
complied with at all times.
(v) In relation to the Executive Schemes, the limit in (ii) above need
not be complied with, provided that either of the following limits are
complied with at all times:
(a) the limit in (iii) above, or
(b) in any three-year period, not more than 3% of the issued share
capital of Telewest may be subject to options or issued under the
Executive Schemes or any other executive share option scheme adopted by
Telewest.
(vi) In any ten-year period, not more than 5% of the issued share capital
of Telewest may be subject to options or issued under the Executive
Schemes, the EPP, the LTIP or any other executive share option scheme
adopted by Telewest.
(vii) In any ten-year period, not more than 10% of the issued share
capital of Telewest may be subject to options or issued under the Employee
Share Schemes or any other employee share scheme adopted by Telewest.
(viii) Until 2 October 1999, not more than 2.5% of the issued share
capital of Telewest may be subject to options or issued under the Executive
Schemes or any other executive share option scheme adopted by Telewest.
(ix) The maximum number of Telewest shares subject to options that may be
granted under each of the No. 1 Scheme and the No. 2 Scheme is 91,992,340.
9. TELEWEST PENSION SCHEMES AND OTHER EMPLOYEE BENEFIT SCHEMES
Employees of the Telewest Group do not participate in an occupational pension
scheme. Instead the Telewest Group operates an arrangement under which, subject
to qualifying conditions, the Telewest Group contributes to a personal pension
scheme nominated by an employee and approved by the pension arrangement's
administrators. An employee qualifies for this benefit after he or she has been
employed by the Telewest Group for nine months and has agreed to contribute at
least 2% of his or her gross salary to a personal pension scheme. If the
conditions are satisfied the Telewest Group contributes 3% of gross salary plus
an additional sum equal to twice the employee's own personal contribution to
the scheme subject to a maximum total company contribution which varies between
7% and 12% of gross salary (depending on the length of the employee's service
with the Telewest Group).
The pension arrangement is administered on behalf of the Telewest Group by a
firm of accountants who are also independent financial advisers. Such
administration includes the provision of pensions-related financial advice to
employees on a regular basis and results in part of the commission normally
payable to the administrators being credited to members' individual policies.
Telewest Group employees also participate in a life assurance scheme
providing a benefit of four times annual salary on death in service that is
payable to that member's dependants. The entire cost of
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SECTION SEVEN GENERAL INFORMATION
providing this benefit (approximately (Pounds)163,600 for the year to 31
December 1997) is borne by the Telewest Group. The Telewest Group operates a
private medical insurance scheme which applies to all permanent full-time
employees. The entire cost of providing this benefit (approximately
(Pounds)819,161 for the year to 31 December 1997) is also borne by the Telewest
Group.
10. EXPERTS
References to financial information contained herein that has been included
in reliance on a report given on the authority of a firm as experts in
accounting and auditing are set out with such financial information.
11. VALIDITY OF SECURITIES
The validity under English law of the Telewest shares offered hereby will be
passed upon by Freshfields, UK counsel to Telewest.
12. LEGAL PROCEEDINGS
(A) THE TELEWEST GROUP
Neither Telewest nor any other member of the Telewest Group has been engaged
in any legal or arbitration proceedings, nor are any such proceedings pending
or threatened by or against it, which may have, or have had during the 12
months preceding the date of this document, a significant effect on the
Telewest Group's financial position.
(B) THE GENERAL CABLE GROUP
Neither General Cable nor any other member of the General Cable Group has
been engaged in any legal or arbitration proceedings, nor are any such
proceedings pending or threatened by or against it, which may have, or have had
during the 12 months preceding the date of this document, a significant effect
on the General Cable Group's financial position.
13. FINANCING ARRANGEMENTS
The following are summaries of the material terms of certain financing
agreements that have been entered into by the Telewest Group and the General
Cable Group. The following summaries are not complete and are qualified in
their entirety by reference to the full text of the documents described herein,
copies of which are available for inspection as provided under "-- Documents
for Inspection and Available Information".
13.1 TELEWEST FINANCING ARRANGEMENTS
(A) TCN SENIOR SECURED FACILITY
(I) GENERAL
On 22 May 1996, Telewest Communications Networks Limited ("TCN"), a wholly
owned subsidiary of Telewest and certain subsidiaries and associated
partnerships of TCN, entered into an agreement with The Bank of New York, CIBC
Wood Gundy plc, Chase Investment Bank Limited, NatWest Markets and The Toronto
Dominion Bank, as arrangers, the banks and financial institutions listed
therein (the "Banks") and CIBC Wood Gundy plc, as agent and security trustee
(as amended by amendment agreements dated 31 May 1996, 2 August 1996, 11
September 1997 and 27 March 1998) pursuant to which the Banks made available to
TCN a credit facility of up to (Pounds)1 billion (reduced from (Pounds)1.2
billion) (the "Senior Secured Facility"). The proceeds of the facility are
available to finance the capital expenditure, working capital requirements and
certain other permitted related activities for the construction and operation
of TCN's wholly owned telephony and television franchises, to fund certain
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loans to Telewest, to fund payments of cash interest on the 1995 Debentures (as
defined below), to assist in investment in the national network as projected in
the long-range plan dated 10 December 1997, to make loans to certain of TCN's
subsidiaries and related entities (the "TCN Entities"), to repay advances and
payment of interest, fees and expenses in respect of the Senior Secured
Facility and to repay any advances made by Telewest under the (Pounds)50
million credit facility made available to TCN under a letter agreement dated 11
September 1997 (the "1997 Telewest Facility").
The Senior Secured Facility consists of two tranches: Tranche A and Tranche
B. The aggregate principal amount that may be outstanding at any time under
both Tranche A and Tranche B is (Pounds)1 billion.
(II) RECENT AMENDMENT AND WAIVER
An amendment agreement, dated 27 March 1998, amended the Senior Secured
Facility to, among other things, (i) reduce the size of the facility to
(Pounds)1 billion, (ii) facilitate and permit the entering into of a Second
Secured Facility (described below), (iii) amend the Tranche A outstandings and
repayment provisions (detailed below) and certain financial covenants, and (iv)
provide additional security. A waiver letter, dated 12 June 1998 permits
Telewest to enter into the Securities Purchase Agreement.
(III) TRANCHES, CONVERSION BETWEEN TRANCHES AND PREPAYMENT
The Senior Secured Facility consists of two tranches: Tranche A and Tranche
B. The maximum principal amount that may be outstanding under Tranche A until
30 September 1998 is (Pounds)100 million (reduced from (Pounds)300 million on
31 March 1998). Advances under Tranche A bear interest at a rate equal to LIBOR
plus a margin of 2.25% per annum. Tranche A is made available on a revolving
basis and each advance thereunder is repayable at the end of its term unless
rolled over into a new advance. All advances outstanding under Tranche A are to
be repaid on or before 30 September 1998.
The maximum principal amount that may be outstanding under Tranche B is,
until 31 December 1998, an amount equal to six and one-half times trailing,
rolling six-month consolidated annualised TCN Group net operating cash flow and
thereafter gradually decreases, throughout the period of the facility, to, on
or after 1 January 2000, four times trailing, rolling six-month consolidated
annualised TCN Group net operating cash flow. Advances under Tranche B bear
interest at a rate equal to LIBOR plus a margin that varies from 1.875% per
annum to 0.500% per annum depending on the ratio of consolidated TCN Group cash
paying debt to consolidated annualised TCN Group net operating cash flow from
time to time.
Tranche B is made available initially on a revolving basis and each advance
thereunder is repayable at the end of its term unless rolled over into a new
advance. On 31 December 2000, all revolving advances outstanding under Tranche
B will convert to a term loan repayable in quarterly instalments beginning on
31 December 2001 and ending on 31 December 2005. The quarterly instalments are
in an amount equal to 5.00% of the principal amount outstanding for instalments
to 31 December 2002; and then increase to an amount equal to 6.25% of the
principal amount outstanding for instalments payable thereafter.
Until 30 September 1998, TCN may convert advances under Tranche A to advances
under Tranche B and vice versa. Converted advances bear interest at the rate
applicable to the tranche to which they are converted.
TCN may prepay advances outstanding under the Senior Secured Facility at any
time. In addition, TCN is required to make certain mandatory prepayments under
the Senior Secured Facility if specified operating ratios are not met by TCN.
(IV) SECURITY
All principal, interest and other obligations of TCN in respect of advances
under the Senior Secured Facility are secured in accordance with various
security documents by, among other things,
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security over all assets, partnership interests and shares of TCN and certain
charging subsidiaries and partnerships. By way of collateral obligation,
Telewest has entered into a Deed of Subordination restricting, amongst other
things, the raising of new debt unless it matures beyond 2007.
(V) COVENANTS
The Senior Security Facility contains various financial covenants given by
the TCN Entities relating to cash flow coverage, interest cover and debt
service cover.
The Senior Secured Facility contains various other covenants given by the TCN
Entities, including covenants relating to cable and telephony licences,
accounts, insurance, environmental claims, taxes, hedging arrangements and
accession of new TCN Entities to the security arrangements.
The Senior Secured Facility also contains covenants given by the TCN Entities
which restrict certain encumbrances, mergers, disposals, borrowings,
guarantees, share issues, investments, capital expenditures, swaps and hedging
arrangements, changes of business, changes to constitutional documents,
restricted payments, services to restricted persons, TCI and MediaOne,
liabilities of certain restricted persons and restrictions on carrying on
business in the US. These restrictions do not apply to Telewest. The limitation
on restricted payments prohibits members of the TCN Group from paying dividends
or making other distributions or payments to Telewest and its subsidiaries
(including TCN) other than for (i) payments on bona fide arm's-length
commercial terms in the ordinary course of business to non-TCN Entities, (ii)
payments to reimburse certain annual costs and expenses incurred by Telewest in
relation to the TCN Group, (iii) payments for cash interest on the 1995
Debentures, (iv) payments for rental due on certain Telewest leases, (v)
repayment of any advances made by Telewest to TCN under the 1997 Telewest
Facility and (vi) after 31 December 2000, dividends and other distributions and
repayments of capital (subject to compliance with certain financial tests).
TCN's ability to borrow under the Senior Secured Facility is subject to,
among other things, its compliance with the financial and other covenants
contained therein and failure to comply with such covenants could result in all
amounts outstanding under the facility becoming immediately due and payable.
(VI) EVENTS OF DEFAULT
The Senior Secured Facility contains various events of default including,
among other things, non-payment of amounts due under the facility, breach of
covenant, misrepresentation, challenge to security, cross-default of certain
other indebtedness, hedging default, certain events of insolvency or bankruptcy
and change of control of Telewest (including maintenance of ownership at
certain levels by TCI and MediaOne), TCN or any charging subsidiary or
partnership as well as events of default relating to certain principal
agreements, environmental matters, compliance with certain telecommunications
and cable laws and the occurrence of a material adverse change. Upon the
occurrence of an event of default the Banks may terminate the ability of TCN to
borrow under the facility, require that all amounts outstanding under the
facility are immediately repaid or become due and payable on demand and/or
enforce the security given in respect of the facility.
(B) TCN SECOND SECURED FACILITY
(I) GENERAL
On 27 March 1998, TCN and certain subsidiaries and associated partnerships of
TCN entered into an agreement with The Bank of New York, CIBC Wood Gundy plc,
Chase Manhattan plc, Greenwich NatWest and The Toronto-Dominion Bank, as
arrangers, the banks and financial institutions listed therein (the "Second
Facility Banks") and The Toronto-Dominion Bank, as agent and security trustee
(as amended by an amendment agreement dated 7 April 1998), pursuant to which
the Second Facility Banks agreed to make available to TCN a credit facility of
up to (Pounds)100 million (the
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"Second Secured Facility"). The proceeds of the facility are available for
substantially the same purposes as the proceeds of the Senior Secured Facility.
(II) ADVANCES
The facility is available from 1 July 1999 and advances may be drawn on a
revolving basis under the Second Secured Facility, but only if the Senior
Secured Facility has been drawn to the fullest extent possible at the relevant
time. The maximum principal amount that may be outstanding under the Second
Secured Facility is, until 31 December 1999, an amount equal to six times
trailing, rolling six-month consolidated annualised TCN Group net operating
cash flow, and thereafter gradually decreases throughout the period of the
facility to, on or after 1 January 2001, four and one-half times trailing,
rolling six-month consolidated annualised TCN Group net operating cash flow
(subject always to such amount not exceeding (Pounds)100 million).
Advances bear interest at a rate equal to LIBOR plus a margin that increases
during the period of the facility from 3.5% per annum, to 4.5% per annum, to
5.5% per annum.
The Second Secured Facility is made available initially on a revolving basis
and each advance thereunder is repayable at the end of its term unless rolled
over into a new advance. On 30 June 2001, all revolving advances outstanding
will convert to a term loan repayable in a single instalment on or before 30
June 2006.
(III) PREPAYMENT, COVENANTS AND EVENTS OF DEFAULT
The provisions as to prepayment, covenants and events of default in respect
of the Second Secured Facility are substantially similar to those for the
Senior Secured Facility. The granting of security ranking second in order of
priority, but otherwise substantially similar to that provided in respect of
the Senior Secured Facility, is a condition precedent to any drawdown under the
Second Secured Facility. Any proceeds from debt or equity capital raising by
Telewest, subject to certain exceptions, including (i) any such proceeds raised
for the purpose of purchasing the shares held by Comcast in Birmingham Cable
and/or Cable London provided that such proceeds are so applied within 90 days
of receipt and (ii) any such proceeds from any raising of equity finance
pursuant to a rights issue specifically to finance or part finance an
acquisition of General Cable by Telewest provided that the shares in relation
to the equity financing are issued no later than 31 December 1998, must be
applied in prepayment of this Second Secured Facility.
(IV) RECENT AMENDMENT AND WAIVER
A recent amendment and waiver letter dated 12 June 1998 was entered into by
the Banks to allow Telewest, among other things, to enter into the Securities
Purchase Agreement.
(C) 1995 DEBENTURES
Telewest's 9 5/8% Senior Debentures due 2006 (the "1995 Senior Debentures")
were issued on 3 October 1995 in an aggregate principal amount of $300 million
and bear interest at the rate of 9 5/8% per annum, payable semi-annually, and
mature on 1 October 2006. Telewest's 11% Senior Discount Debentures due 2007
(the "1995 Senior Discount Debentures" and, together with the 1995 Senior
Debentures, the "1995 Debentures" were issued on 3 October 1995 in an aggregate
principal amount at maturity of $1,536,413,000. The discounted amount of the
1995 Senior Discount Debentures accrete interest at an annual rate of 11%,
compounded semi-annually to 1 October 2000. Interest will not accrue on the
1995 Senior Discount Debentures prior to 1 October 2000. Thereafter, the 1995
Senior Discount Debentures will bear interest at a rate of 11% per annum on the
principal amount thereof, payable semi-annually on each 1 April and 1 October
commencing 1 April 2001. The 1995 Senior Discount Debentures mature on 1
October 2007. Capitalised terms used herein and not otherwise defined have the
meaning set forth in the Indentures governing the terms of the 1995 Debentures.
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SECTION SEVEN GENERAL INFORMATION
The 1995 Debentures are redeemable, at Telewest's option, in whole or in
part, at any time on or after 1 October 2000 at the redemption prices set forth
in the 1995 Indentures, plus accrued and unpaid interest to the date of
redemption. In addition, in the event of the first to occur prior to 1 October
1998 of (i) a Public Equity Offering by Telewest for gross proceeds of
(Pounds)150 million or more or (ii) a sale or a series of related sales by
Telewest of its Common Stock to one or more Strategic Equity Investors for an
aggregate purchase price of at least (Pounds)150 million, Telewest may use up
to 25% of all or such portion of the net proceeds thereof in the case of the
Senior Debentures, and 75% of all or such portion of the net proceeds thereof
in the case of the 1995 Senior Discount Debentures, to redeem up to 35% of the
original aggregate principal amount of the 1995 Senior Debentures and up to 35%
of the original aggregate principal amount at maturity of the 1995 Senior
Discount Debentures, at 109.625% of their principal amount, plus accrued and
unpaid interest, if any, to the date of redemption, in the case of the 1995
Senior Debentures, and at 111% of their accreted value, in the case of the 1995
Senior Discount Debentures.
In the event of certain changes affecting withholding taxes applicable to
certain payments on the 1995 Debentures, the 1995 Debentures will be
redeemable, as a whole only and not in part, at the option of Telewest, at any
time, on or after 1 October 2000 at 100% of the principal amount thereof, plus
accrued and unpaid interest, if any, to the date of redemption.
Upon a Change of Control Triggering Event (defined to consist of both a
Change of Control and a Rating Decline), each holder of the 1995 Debentures
will have the right to require Telewest to repurchase such holder's 1995
Debentures at a price of (i) in the case of the 1995 Senior Debentures, 101% of
the principal amount at maturity thereof, plus accrued unpaid interest, if any,
to the date of purchase and (ii) in the case of the 1995 Senior Discount
Debentures, 101% of the accreted value thereof (determined at the date of
purchase) if such purchase is prior to 1 October 2000 or 101% of the principal
amount at maturity thereof, plus accrued and unpaid interest, if any, to the
date of purchase, if such purchase is on or after 1 October 2000.
The indebtedness evidenced by the 1995 Debentures ranks pari passu in right
of payment with all other existing and future subordinated and unsecured
indebtedness of Telewest and senior in right of payment to all existing and
future subordinated indebtedness of Telewest.
The 1995 Indentures contain certain covenants which, among other things,
restrict the ability of Telewest and its Restricted Subsidiaries to (i) incur
additional indebtedness; (ii) pay dividends or make distributions in respect of
equity interests of Telewest or make certain other investments or restricted
payments; (iii) issue certain guarantees; (iv) enter into certain transactions
with shareholders or affiliates; (v) create certain liens; or (vi) sell certain
assets. In addition, the 1995 Indentures limit the ability of (a) Telewest to
consolidate, merge or sell all or substantially all of its assets and (b) the
Restricted Subsidiaries to issue capital stock.
The 1995 Indentures also contain events of default, including (i) non-payment
of amounts due; (ii) failure to comply with provisions relating to a
consolidation, merger or sale of all or substantially all of the assets of
Telewest; (iii) failure to repurchase the 1995 Debentures in accordance with
the terms of the 1995 Indentures; (iv) breach of covenants; (v) cross-defaults
by Telewest or its significant subsidiaries; (vi) certain judgment awards
against Telewest or its significant subsidiaries; and (vii) certain events of
bankruptcy and insolvency. Upon the occurrence of an event of default, the
trustee under the relevant 1995 Indenture or the holders of 25% of outstanding
1995 Senior Debentures or 1995 Senior Discount Debentures, as the case may be,
may declare the 1995 Debentures immediately due and payable at, in the case of
the 1995 Senior Debentures, 100% of the principal amount plus accrued unpaid
interest to the date of declaration and, in the case of the 1995 Senior
Discount Debentures, 100% of the accreted value thereof (determined at the date
of declaration) if such declaration is prior to 1 October 2000 or 100% of the
principal amount at maturity, plus accrued and unpaid interest to the date of
declaration, if such declaration is on or after 1 October 2000.
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SECTION SEVEN GENERAL INFORMATION
(D) FINANCE LEASE ARRANGEMENTS
The Company and certain members of the Telewest Group have entered into
certain finance lease arrangements with, among others, Nortel and various
subsidiaries of The Royal Bank of Scotland plc. The total obligations of the
Telewest Group under these finance lease arrangements amounts to
(Pounds)75,534,000.
13.2 GENERAL CABLE RELATED FINANCING ARRANGEMENTS
(A) THE GCH FACILITY AGREEMENT
(I) GENERAL
On 31 December 1997, GCH entered into the GCH Facility Agreement pursuant to
which a syndicate of banks agreed, upon and subject to the terms and conditions
of the GCH Facility Agreement, to make loan facilities available to GCH in two
tranches in an aggregate principal amount of up to (Pounds)500 million.
Advances under Tranche A are available on a revolving basis until 31 March
2000. Advances under Tranche B are available on a revolving basis until 30 June
2002, and thereafter on an agreed amortising term basis until 30 June 2007.
Interest on advances under both tranches is payable at a rate calculated by
reference to Sterling LIBOR plus associated costs and a margin determined in
accordance with the terms of the GCH Facility Agreement.
(II) HEDGING ARRANGEMENTS
In connection with its interest liabilities under the GCH Facility Agreement,
GCH is obliged to maintain interest-rate hedging in its own name or in the name
of the Yorkshire Cable or Cable Corporation. Yorkshire Cable has entered into
hedging arrangements with National Westminster Bank Plc and The Toronto-
Dominion Bank in the form of accreting interest rate swaps which run until
December 2001. Cable Corporation has entered into hedging arrangements with
National Westminster Bank Plc in the form of an interest rate cap which runs
until December 1999. GCH is also obliged to continue, and to ensure that
Yorkshire Cable, Cable Corporation and Imminus continue, with the interest
exposure management policies specified in the GCH Facility Agreement.
(III) COVENANTS AND EVENTS OF DEFAULT
The GCH Facility Agreement contains various financial and other covenants on
the part of GCH and its subsidiaries, including compliance with certain
leverage, interest cover, operating cashflow and debt service cover ratios and
the maintenance of a minimum amount of contributed shareholder funds. It also
contains various events of default, the occurrence of which would entitle the
syndicate banks to refuse to make further advances available under the facility
and to accelerate repayment of advances already outstanding. In certain
circumstances the syndicated facility agreement permits (but does not require)
breaches of certain covenants to be remedied by the shareholder of GCH by the
provision of subordinated debt to GCH and/or the subscription for equity share
capital in GCH.
One of these events of default is if, among other things, Vivendi ceases to
own directly or indirectly at least 20% of the issued ordinary share capital of
General Cable. GCH has entered into an amendment letter with the other parties
to the GCH Facility Agreement, dated 8 April 1998, under which the events of
default will be amended after the Offer is declared unconditional in all
respects; it will then be an event of default if, among other things, Telewest
does not maintain directly or indirectly its holding in General Cable, or TCI
and MediaOne do not maintain directly or indirectly a certain level of voting
and economic interest in Telewest.
(IV) GUARANTEES AND SECURITY
The obligations of GCH under the GCH Facility Agreement are guaranteed by
each of Yorkshire Cable, Cable Corporation, Filegale and certain subsidiary
undertakings of GCH (together, the "Original Guarantors"). The obligations of
GCH and the Original Guarantors under the GCH Facility
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SECTION SEVEN GENERAL INFORMATION
Agreement are secured by a debenture creating fixed and floating charges over
the assets of each of the companies and by a charge over General Cable's shares
in GCH.
(V) INTERCREDITOR AGREEMENT
In connection with the GCH Facility Agreement and the finance leasing
arrangements entered into by Cable Corporation and Yorkshire Cable, GCH, the
Original Guarantors, Banque Paribas, CIBC Wood Gundy PLC, National Westminster
Bank Plc, The Toronto-Dominion Bank, NatWest Specialist Finance Limited
("NWSFL"), Robert Fleming Leasing (Number 4) Limited ("RFL"), Lombard
Commercial Limited ("LCL"), Dexia Municipal Bank plc, Credit Agricole Indosuez
and Societe Generale have entered into an intercreditor agreement, dated 31
December 1997, which regulates the priority of the various security interests
created by GCH and the Original Guarantors and subordinates certain
indebtedness which is now or may from time to time be owing by GCH to General
Cable.
(B) VIVENDI FACILITY
General Cable has entered into a credit facility (the "Vivendi Facility")
pursuant to which Vivendi will provide loans of up to (Pounds)32 million in the
aggregate. Under the terms of the Vivendi Facility, drawings are unsecured and
will bear interest at a rate per annum equal to three-month sterling LIBOR plus
a margin of 1.25% per annum. Under the terms, repayment of the loans is to be
made in semi-annual instalments of (Pounds)5 million commencing on 19 April
1998 or, in the case of the last instalment, the then-outstanding amount of the
Vivendi Facility.
The size of the facility will be reduced by (Pounds)5 million every six
months commencing on 19 April 1998, irrespective of whether any amounts have
been drawn thereunder.
(C) CABLE CORPORATION FINANCING ARRANGEMENTS
(I) CABLE CORPORATION FACILITY AGREEMENT
On 26 February 1996, Cable Corporation entered into a syndicated facility
agreement (the "Cable Corporation Facility Agreement") arranged by NatWest
Markets pursuant to which a syndicate of banks agreed, upon and subject to the
terms and conditions of the Cable Corporation Facility Agreement, to make loan
facilities available to Cable Corporation in two tranches in an aggregate
principal amount of up to (Pounds)160 million.
This facility was refinanced following the arrangement of the GCH facility on
31 December 1997, as set out above. Amounts drawn under the Cable Corporation
Facility at this date were prepaid and amounted to (Pounds)120 million.
(II) FINANCE LEASE ARRANGEMENTS
Also on 26 February 1996, Cable Corporation, WTL and MCL entered into certain
finance lease arrangements with NWSFL. The operation of these finance lease
arrangements has not been altered as a result of the refinancing of the Cable
Corporation facility.
Under the terms of these arrangements and subject to the terms and conditions
of an agreement to acquire between WTL, MCL and NWSFL, WTL and/or MCL are
entitled from time to time to sell, and NWSFL will purchase, equipment which
NWSFL will then lease to Cable Corporation upon and subject to the terms and
conditions of two finance lease agreements entered into between Cable
Corporation and NWSFL. The maximum amount of equipment that may be the subject
of such sales is equipment having a purchase price of up to (Pounds)92 million.
The equipment that Cable Corporation has taken or will take on lease will be
subleased by it to WTL or MCL, on the terms of subleases between Cable
Corporation and each of these two companies. There is a general cross-default
with, among other things, the GCH Facility Agreement and certain of the
covenants in the GCH Facility Agreement are repeated separately.
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SECTION SEVEN GENERAL INFORMATION
The obligations of Cable Corporation under the finance lease agreements
entered into with NWSFL are guaranteed by each of WTL, MCL and The Cable
Corporation Equipment Limited ("TCCEL") and those obligations and the guarantee
obligations are secured by debentures creating fixed and floating charges over
the assets of Cable Corporation, WTL, MCL and TCCEL.
(III) LEASE SECURITY AGREEMENT
Under the terms of a lease security agreement entered into by Cable
Corporation and NWSFL, Cable Corporation has agreed that, in addition to the
guarantees and security described above, it will ensure that at all times NWSFL
has the benefit of certain other security for Cable Corporation's obligations
under the finance lease agreements, including (i) a letter of credit from
Societe Generale in an amount (which may increase or decrease from time to
time) determined in accordance with the provisions of the lease security
agreement and (ii) an assignment by way of security of Cable Corporation's
rights in relation to monies that may from time to time be credited to a
deposit account in Cable Corporation's name with National Westminster Bank Plc
in accordance with the requirements of that lease security agreement.
(IV) SOCIETE GENERALE FACILITY AGREEMENT
Pursuant to its obligations under the lease security agreement described in
the preceding paragraph, on 26 February 1996, Cable Corporation entered into a
facility agreement with Societe Generale (as subsequently amended, the "Societe
Generale Facility Agreement") pursuant to which, among other things, Societe
Generale agreed to issue a letter of credit for a principal amount of up to a
maximum of (Pounds)120 million (the "Letter of Credit") to NWSFL and Cable
Corporation agreed to indemnify Societe Generale in respect of any payments
made under the Letter of Credit and, among other things, any losses or
liabilities suffered or incurred by Societe Generale under or in connection
with the Letter of Credit. That indemnity obligation and other amounts owing
from Cable Corporation to Societe Generale under the Societe Generale Facility
Agreement are secured, among other things, pursuant to a security deposit
agreement creating security over a cash deposit made by Cable Corporation with
Societe Generale, which deposit will from time to time be increased each time
Cable Corporation requests an increase in the amount of the Letter of Credit.
General Cable has also entered into certain indemnity and security arrangements
in favour of Societe Generale in relation to this facility.
(V) INTERCREDITOR AGREEMENT
In connection with the finance leasing arrangements set out above, Cable
Corporation, together with the banks, financial institutions and other parties
thereto have entered into an intercreditor agreement, dated 31 December 1997,
which regulates the priority of the various security interests created by GCH
and the original guarantors to that facility and subordinates certain
indebtedness which is now or may from time to time be owing by GCH to General
Cable.
(D) YORKSHIRE CABLE FINANCING ARRANGEMENTS
(I) YORKSHIRE CABLE FACILITY AGREEMENT
On 24 December 1996, Yorkshire Cable entered into an underwritten loan
facility agreement (the "Yorkshire Cable Facility Agreement") arranged by
NatWest Markets and Chase Investment Bank Limited. This facility was syndicated
early 1997 and pursuant to this facility a syndicate of banks agreed, upon and
subject to the terms and conditions of the Yorkshire Cable Facility Agreement,
to make loan facilities available to Yorkshire Cable in two tranches in an
aggregate principal amount of up to (Pounds)325 million. This facility was
refinanced following the arrangement of the GCH facility on 31 December 1997 as
set out above. Amounts drawn under the Yorkshire Cable facility at this date
were prepaid and amounted to (Pounds)117 million.
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SECTION SEVEN GENERAL INFORMATION
(II) FINANCE LEASE ARRANGEMENTS
Also on 24 December 1996, Yorkshire Cable and a number of its subsidiaries
entered into certain finance lease arrangements as follows:
Yorkshire Cable, Barnsley Cable Communications Limited ("BCCL"), Doncaster
Cable Communications Limited ("DCC"), Halifax Cable Communications Limited
("HCC") and Wakefield Cable Communications Limited ("WCC") entered into certain
finance lease arrangements with NWSFL.
Yorkshire Cable and Sheffield Cable Communications Limited ("SCC") entered
into certain finance lease arrangements with LCL, a subsidiary of Lombard North
Central PLC.
Yorkshire Cable and Yorkshire Cable Communications Limited ("YCC") entered
into certain finance lease arrangements with RFL, a subsidiary of Robert
Fleming & Co Limited.
For the purposes of the description of the facilities below, the subsidiaries
of Yorkshire Cable set out above are referred to as the "sub-lessees" and
NWSFL, LCL and RFL are referred to as the "lessors."
The operation of these finance lease arrangements has not been altered as a
result of the refinancing of Yorkshire Cable facility.
Under the terms of these arrangements and subject to the terms and conditions
of the agreements to acquire between the sub-lessees and the lessors, the sub-
lessees are entitled from time to time to sell, and the lessors will purchase,
equipment which the lessors will then lease to Yorkshire Cable upon and subject
to the terms and conditions of two finance lease agreements entered into
between Yorkshire Cable and each of the lessors.
The maximum amount of equipment that may be the subject of such sales is
equipment having a purchase price of up to (Pounds)206 million. The equipment
that Yorkshire Cable has taken or will take on lease will be subleased by it to
the sub-lessees, on the terms of subleases between Yorkshire Cable and of the
sub-lessees. There is a general cross-default with, among other things, the GCH
Facility Agreement and certain of the covenants in the GCH Facility Agreement
are repeated separately.
The obligations of Yorkshire Cable under the finance lease agreements entered
into with the lessors are guaranteed by each of BCCL, DCC, HCC, WCC, SCC, YCC,
Bradford Cable Communications Limited, Eastern Derbyshire Cable Communications
Limited, Rotherham Cable Communications Limited, Yorkshire Cable Finance
Limited, Yorkshire Cable Limited and Yorkshire Cable Telecom Limited and those
obligations and the guarantee obligations are secured by debentures creating
fixed and floating charges over the assets of these companies, together with
those of Yorkshire Cable.
Under the terms of lease security agreements entered into by Yorkshire Cable
and each of the lessors, Yorkshire Cable has agreed that, in addition to the
guarantees and security described above, it will ensure that at all times the
lessors have the benefit of certain other security for Yorkshire Cable's
obligations under the finance lease agreements including (i) one or more
letters of credit in an aggregate amount (which may increase or decrease from
time to time) determined in accordance with the provisions of the relevant
lease security agreements and (ii) an assignment by way of security of
Yorkshire Cable's rights in relation to monies which may from time to time be
credited to a deposit account in Yorkshire Cable's name with National
Westminster Bank plc in accordance with the requirements of the relevant lease
security agreement.
(III) BANQUE PARIBAS FACILITY AGREEMENT
Pursuant to its obligations under the lease security agreements described in
the preceding paragraph, on 24 December 1996, Yorkshire Cable entered into
facility agreements with Banque
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SECTION SEVEN GENERAL INFORMATION
Paribas (the "Banque Paribas Facility Agreements") pursuant to which, among
other things, Banque Paribas agreed to issue letters of credit for an aggregate
principal amount of up to a maximum of (Pounds)45 million (the "Banque Paribas
Letters of Credit") to NWSFL, LCL and RFL, and Yorkshire Cable agreed to
indemnify Banque Paribas in respect of any payments made under the Banque
Paribas Letters of Credit and, among other things, any losses or liabilities
suffered or incurred by Banque Paribas under or in connection with the Banque
Paribas Letters of Credit. Since the time the Banque Paribas Facility
Agreements were entered into, the facility agreement entered into by Banque
Paribas pursuant to which it agreed to issue letters of credit to LCL has been
cancelled and the other Banque Paribas Facility Agreements were amended to
provide, among other things that the maximum amount of letters of credit
available under the Banque Paribas Facility Agreement is approximately
(Pounds)76,200,000. The indemnity obligation and other amounts owed to Banque
Paribas under each of the remaining Banque Paribas Facility Agreements are
secured, inter alia, pursuant to separate security deposit agreements creating
security over cash deposits made by Yorkshire Cable with Banque Paribas, which
deposits will from time to time be increased each time Yorkshire Cable requests
an increase in the amount of the relevant Banque Paribas Letter of Credit.
General Cable has also entered into certain indemnity and security arrangements
in favour of Banque Paribas in relation to these facilities.
(IV) CREDIT AGRICOLE FACILITY AGREEMENT
In addition to the Banque Paribas Facility Agreement, letter of credit
facilities were arranged with Credit Agricole Indosuez (the "Credit Agricole
Facility Agreement") on 24 June 1997, and with Dexia Municipal Bank plc (the
"Dexia Municipal Facility Agreement") on 30 June 1997, for principal amounts of
up to a maximum of (Pounds)100 million and (Pounds)55 million, respectively.
The security and indemnity arrangements relating to the Credit Agricole and
Dexia Municipal Facility Agreements are the same as those relating to the
Banque Paribas Facility Agreements as set out above.
(V) INTERCREDITOR AGREEMENT
In connection with the finance leasing arrangements set out above, Yorkshire
Cable, together with the banks, financial institutions and other parties
thereto have entered into an intercreditor agreement, dated 31 December 1997,
which regulates the priority of the various security interests created by GCH
and the original guarantors to that facility and subordinates certain
indebtedness that is now or may from time to time be owing by GCH to General
Cable.
13.3 NEW FINANCING TO BE PROVIDED IN CONNECTION WITH THE MERGER
(A) PRE-EMPTIVE ISSUE
For information concerning the Pre-emptive Issue, see "-- Section One -- The
Merger and Related Matters -- The Pre-emptive Issue".
(B) SECURITIES PURCHASE AGREEMENT
On 26 June 1998, Telewest entered into a Securities Purchase Agreement (the
"Securities Purchase Agreement") with a subsidiary of Donaldson, Lufkin &
Jenrette Securities Corporation providing for the purchase of senior unsecured
increasing rate notes of Telewest (the "Unsecured Notes") in an amount up to
the dollar equivalent of (Pounds)100 million to fund the purchase of General
Cable's 44.95% interest in Birmingham Cable. See "-- Section One -- The Merger
and Related Matters -- Birmingham Cable and Cable London -- Birmingham Cable".
Subject to certain limitations set out in the Securities Purchase Agreement,
the commitment to purchase the Unsecured Notes expires on the earlier of the
occurrence of certain events and 31 December 1998. Interest is payable on the
Unsecured Notes at a variable floating rate based on LIBOR plus a spread. In
addition, certain fees are payable in respect of the commitment and issuance of
the Unsecured Notes. The initial maturity date for the Unsecured Notes is 31
December 1998, but this date may in certain circumstances be extended to the
date falling 364 days after the issuance of the Unsecured Notes. The conditions
to funding of the Unsecured Notes
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SECTION SEVEN GENERAL INFORMATION
are substantially similar to the conditions required for Telewest to draw funds
under the Senior Secured Facility. The Securities Purchase Agreement contains
covenants that are substantially similar to Telewest's Senior Secured Facility
and, amongst other things, limit Telewest's ability to incur additional funded
debt until the Unsecured Notes have been repaid. The Securities Purchase
Agreement also contains certain mandatory redemption events and events of
default, the occurrence of which would require Telewest, or permit the holders
of the Unsecured Notes to require Telewest, to redeem the Unsecured Notes
before their stated maturity. Although Telewest believes it will be able to
satisfy the funding conditions in relation to the Unsecured Notes, as and when
needed, and to repay the Unsecured Notes when due, there can be no assurance
that it will be able to do so.
14. MATERIAL CONTRACTS
(A) THE TELEWEST GROUP
The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by Telewest or any other member of
the Telewest Group since 22 February 1996 (the date two years prior to the date
on which General Cable announced that it was in discussions which might lead to
an offer for General Cable) and which are, or may be, material:
(i)The Relationship Agreement (see "-- Section Four -- Information on the
Combined Group -- Principal Shareholders -- Limitations of Scope of
Business of Telewest and its Principal Shareholders").
(ii)The Subscription Agreement, pursuant to which TINTA, MediaOne and Cox
(the "Subscribers") have undertaken to Telewest, on the terms and subject
to the conditions of the Subscription Agreement, to subscribe for their
full entitlement of new Telewest shares under the Pre-emptive Issue at 92.5
pence per new Telewest share (69,348,592 new Telewest shares for MediaOne,
69,348,592 new Telewest shares for TINTA and 37,973,290 new Telewest shares
for Cox). In addition, on the terms and subject to the conditions of the
Subscription Agreement, the Subscribers have agreed to subscribe or procure
subscribers at 92.5 pence per new Telewest share for any new Telewest
shares not taken up by Qualifying Telewest securityholders pursuant to the
Pre-emptive Issue as follows:
(a) in respect of a maximum of 62,373,342 new Telewest shares not so taken
up, each Subscriber has agreed to subscribe or procure subscription for
such shares in the following proportions:
(i) MediaOne, 39.2530739% of such shares not taken up,
(ii) TINTA, 39.2530739% of such shares not taken up, and
(iii) Cox, 21.4938523% of such shares not taken up;
in each case rounded to the nearest whole number of new Telewest shares;
and
(b) to the extent that the number of new Telewest shares not subscribed
exceeds 62,373,342 new Telewest shares, MediaOne agrees to subscribe or
procure subscribers for such excess up to a maximum of 21,621,622 new
Telewest shares at 92.5 pence per new Telewest share.
The obligations of the Subscribers and Telewest under the Subscription
Agreement are conditional, among other things, on:
(a) the proposed resolutions being passed at the Extraordinary General Meeting,
and
(b) the Offer being declared unconditional in all respects on or before 15
September 1998.
The Subscription Agreement may be terminated by any Subscriber prior to
Admission if:
(a) Telewest or General Cable or any of their material subsidiaries is
unable, or admits in writing its inability, to pay its debts as they
fall due or stops or threatens to stop payment of its debts generally
or a receiver, administrator or liquidator is appointed over any assets
of or in
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SECTION SEVEN GENERAL INFORMATION
respect of Telewest, General Cable or any of their respective material
subsidiaries or any of them has proposed a voluntary arrangement with
its creditors;
(b) Telewest or General Cable goes into liquidation;
(c) any distress, execution, attachment, sequestration, winding up or
administration petition or other like process affects Telewest, General
Cable or any of their respective material subsidiaries, with certain
exceptions; or
(d) it shall be unlawful for Telewest to make or complete the Pre-emptive
Issue or to give effect to its obligations and exercise its rights as
contemplated by the Subscription Agreement, there being no reasonable
means to avoid such illegality.
Telewest cannot revise the financial terms of the Offer without the prior
written consent of each Subscriber, and must obtain the written consent of two
of the three Subscribers to (i) extend the closing date of the Offer beyond 18
August 1998, (ii) extend the Offer (unless it has by then been declared or
become unconditional in all respects), (iii) reduce the percentage of
acceptances required under the condition as to acceptance included as condition
1 in the conditions to the Offer (the "Conditions") or (iv) waive or vary any
other Condition if the Panel has consented to Telewest invoking that Condition.
Telewest has also agreed to approach the Panel for consent to invoke a
Condition if a Subscriber so requests, and to indemnify each Subscriber against
any loss, liability or cost which it suffers as a result of entering into or
performing its obligations under the Subscription Agreement (save where such
loss, liability or cost arises from a breach of the Subscription Agreement by
such Subscriber or the loss in value of the shares allotted pursuant to the
Subscription Agreement by that Subscriber).
(iii) The Securities Purchase Agreement (see "-- Financing
Arrangements -- New Financing to be Provided in Connection with the
Merger".
(iv) The Merger Agreement whereby, among other things and in each case
subject to the terms contained therein, (a) General Cable agreed to provide
all reasonable assistance to Telewest to enable it to effect the Offer
substantially on the terms set out therein, (b) Vivendi and GUHL
irrevocably committed to accept the Offer and restrict their dealings in
the securities of General Cable and Telewest and (c) General Cable, Vivendi
and GUHL agreed to certain exclusivity periods with respect to
participating in discussions or arrangements in relation to the acquisition
by a third party of General Cable or a substantial portion of its assets.
Pursuant to the Merger Agreement GUHL agreed that it would irrevocably
accept the Offer in respect of its entire registered holding of 146,785,916
General Cable shares if certain conditions were met.
The Merger Agreement also provides that until the Termination Time (as
defined below), General Cable, Vivendi and GUHL would not, and would ensure
that their directors, employees, agents, consultants or professional
advisers who were aware of the possible public offer would not:
(a) directly or indirectly solicit, initiate or enter into discussions
or negotiations or otherwise co-operate in any manner with any third
party in relation to:
(i) a bid or other business combination involving General Cable or
any of its subsidiaries, or
(ii) the acquisition of a substantial equity interest in, or a
substantial portion of the assets of, General Cable or any such
subsidiary (together with (i) above being a "General Cable
Transaction");
(b) provide any information to any third party with a view to that
third party investigating or entering into a General Cable Transaction,
except where the City Code or the Panel or other regulatory authority or
English law requires that General Cable provide the information to the
third party; or
(c) indicate its willingness, or agree, to do anything after the
period of exclusivity expires which it is not permitted to do during the
period of exclusivity.
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SECTION SEVEN GENERAL INFORMATION
The undertakings in the Merger Agreement would lapse (the "Termination
Time"):
(a) if the formal press announcement with respect to the Offer had
not been released by 3:00 pm (London time) on 15 April 1998 (or such
later time and/or date as CGE, the Company and Telewest may agree); or
(b) if the formal press announcement had been so released before that
time but:
(i) Telewest released an announcement on the London Stock Exchange
stating that it was not proceeding to post an offer document and was
therefore withdrawing from making an offer for the Company at that
time,
(ii) the Offer Document had not been posted by 30 June 1998, or
(iii) the Offer lapses or is withdrawn.
In the Merger Agreement, General Cable confirmed that each of its
directors had confirmed that, if the Offer were made, each of these
directors would, subject to their fiduciary duties and their
responsibilities under the City Code, recommend the Offer to General Cable
shareholders. Nothing in the Merger Agreement prohibits or restricts the
directors of General Cable from exercising their fiduciary duties or
responsibilities under the City Code to consider (including with advisers)
any approach from any third party in connection with any of the matters
referred to above.
In the Merger Agreement, General Cable agreed to irrevocably accept the
Offer in consideration for an undertaking by Telewest that, if the Offer
were made, it would use all reasonable endeavours to ensure that any pre-
conditions to the despatch of the Offer Document would be satisfied or
waived and that the Offer Document would be despatched as soon as possible.
In addition, Telewest confirmed that the directors who signed the Merger
Agreement on behalf of Telewest confirmed that they would, subject to their
fiduciary duties, recommend that Telewest's shareholders vote in favour of
such resolutions as may be necessary to implement and effect the Offer and
the acquisition by Telewest of General Cable pursuant thereto.
(v) A letter agreement between Telewest (1) and General Cable (2) dated
15 April 1998 (the "Birmingham Letter Agreement"), whereby General Cable
undertook that failing agreement between Comcast and TCHL, TCHL would have
the right by service of written notice to General Cable (subject to any
approval required from General Cable shareholders) to acquire all of
General Cable's holding of shares in Birmingham Cable for a consideration
of (Pounds)100 million payable in cash on completion, subject to certain
pre-emption rights of other shareholders contained in the Birmingham Cable
Articles.
(B) THE GENERAL CABLE GROUP
The following contracts (not being contracts entered into in the ordinary
course of business) have been entered into by General Cable or any other member
of the General Cable Group since 22 February 1996 (the date two years prior to
the date on which General Cable announced that it was in discussions which
might lead to an offer for General Cable) which are, or may be, material;
(i) a deed of covenant between Singapore Telecom (1) and General Cable
(2), dated 4 July 1996, pursuant to which General Cable granted Singapore
Telecom indemnities in relation to reorganisations of the share capitals of
STI (Yorkshire Cable) Limited ("STI UK") and of Yorkshire Cable;
(ii) a share exchange agreement between Singapore Telecom (1) and General
Cable (2), dated 8 July 1996 (the "Yorkshire Share Exchange Agreement"),
pursuant to which General Cable acquired from Singapore Telecom the
remaining 50% interest in Yorkshire Cable not already owned by it in
consideration for the allotment and issue of 84.458 million new General
Cable shares (the "Yorkshire Cable Consideration Shares"), of which
approximately 48 million General Cable shares were offered to investors
under an international offering, such offering also incorporating an open
offer of an additional 27 million General Cable shares (the "Yorkshire
Offering"). The Yorkshire Share Exchange Agreement contained lock-up
provisions preventing
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SECTION SEVEN GENERAL INFORMATION
Singapore Telecom from disposing of the Yorkshire Cable Consideration
Shares under certain circumstances without General Cable's consent. By 20
February 1997, Singapore Telecom had, with General Cable's consent,
disposed of its entire holding of Yorkshire Cable Consideration Shares;
(iii) a registration rights agreement between General Cable (1) and
Singapore Telecom (2), dated 8 July 1996 (the "Yorkshire Registration
Rights Agreement"). Pursuant to the terms of the Yorkshire Registration
Rights Agreement (subject to certain limited exceptions) Singapore Telecom
was given the right to require General Cable to include all or any of
Yorkshire Cable Consideration Shares received by Singapore Telecom in any
future registered offering by General Cable in the US or any public
offering in the UK, and to assist Singapore Telecom, in certain
circumstances, in registered offerings in the US or public offerings in the
UK by Singapore Telecom of its consideration shares;
(iv) a standby underwriting agreement between General Cable (1), NatWest
Markets Corporate Finance Limited and NatWest Markets Securities Limited
("NatWest") (2), dated 8 July 1996, under which NatWest agreed
conditionally to procure subscribers for, or itself to subscribe for, a
sufficient number of new General Cable shares in order to raise a working
capital requirement of (Pounds)25 million (the "Working Capital
Requirement") in the event that either the Yorkshire Offering of General
Cable shares required to finance the acquisition of Singapore Telecom's 50%
interest in Yorkshire Cable failed to complete, or such offering failed to
raise less than the Working Capital Requirement;
(v) an underwriting agreement between General Cable (1), Lehman Brothers
Inc. (2) and NatWest Securities Limited (3) (the latter two persons
constituting the "Yorkshire Underwriters"), dated 31 July 1996 (the
"Yorkshire Underwriting Agreement"), whereby the Yorkshire Underwriters
severally agreed to procure persons (or, failing which, to do so
themselves) to subscribe for or accept the allotment and issue of 75
million General Cable shares. The Yorkshire Underwriting Agreement granted
an over-allotment option in favour of the Yorkshire Underwriters in respect
of a further 11.25 million General Cable shares. The Yorkshire Underwriters
were further granted the benefit of certain warranties and indemnities by
General Cable including, among other things, against liabilities arising
under the Securities Act;
(vi) a deed made between General Cable (1), Singapore Telecom (2), STI UK
(3), STI Europe Limited (4) and Yorkshire Cable (5), dated 31 July 1996,
relating to the termination of various agreements relating to Yorkshire
Cable;
(vii) a deed made between General Cable (1) and Singapore Telecom (2),
dated 31 July 1996, relating to tax liabilities of STI UK;
(viii) a share purchase agreement, as subsequently amended, between
General Cable (1), Apax Funds Nominees Limited ("Apax") (2), the Majority
Shareholders (as defined therein) (Apax and the Majority Shareholders
constituting the "Vendors") (3) and Filegale (4), dated 13 March 1997 (the
"Imminus Agreement"), whereby General Cable acquired the entire issued
share capital of Filegale from the Vendors. Filegale is the holding company
of Imminus Limited, a provider of managed data network services. The total
consideration payable by General Cable under the Imminus Agreement was
approximately (Pounds)33 million, such consideration having been satisfied
by cash payments to the Vendors and the issue to certain of the Majority
Shareholders of guaranteed variable rate loan notes (the "Guaranteed Loan
Notes") to the amount of (Pounds)7,145,708. The Guaranteed Loan Notes are
due to be redeemed on 12 March 2002, or at the option of noteholders
concerned on the occurrence of certain specified events including, among
other things, the acquisition by a third party of shares representing 50%
or more of the voting rights in General Cable. General Cable was granted
the benefit of certain representations, warranties and indemnities (subject
to certain limitations) contained in the Imminus Agreement;
(ix) the Merger Agreement and the Birmingham Letter; and
(x) the GCH Facility Agreement described in "-- Financing Arrangements --
General Cable Financing Arrangements".
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
15. LICENCES
(A) THE TELEWEST GROUP
The Telewest Group holds LDLs for the following franchise areas: Croydon
(expires 14 October 2000), Bristol (expires 31 August 2005), Taunton and
Bridgewater (expires 20 May 2014), Fylde and Wyre (expires 14 September 2011),
Southport (expires 8 June 2012), East Lothian (expires 20 May 2014), Edinburgh,
South Thames Estuary, North Thames Estuary and Cheltenham (each of which
expires 30 December 2005).
The Telewest Group holds PDSLs for the following franchise areas: Kingston
(expires 30 December 2013), Merton (expires 14 March 2013), Lancashire (expires
7 May 2005), Tyneside (expires 2 September 2005), Liverpool South (expires 27
October 2005), Black Country, Telford, Worcester, St. Helens and Knowsley,
Wigan, Liverpool North, Cumbernauld, Dumbarton, Dundee, Falkirk and
Livingstone, Glenrothes and Kirkcaldy, Motherwell, Perth (each of which expires
30 December 2005).
The Telewest Group holds Telecommunications Act Licences for the following
franchise areas: Croydon (expires 14 October 2008), Kingston (expires 7 May
2013), Merton (expires 22 January 2013), Avon (expires 4 December 2013),
Cumbernauld (expires 17 January 2005), Dumbarton (expires 17 January 2006),
Dundee (expires 16 January 2006), Edinburgh (expires 19 December 2005), Falkirk
and Livingston (expires 10 November 2005), Glenrothes and Kirkcaldy (17 April
2006), Motherwell (expires 17 January 2006), Perth (expires 16 January 2006),
Tyneside (expires 25 April 2006), South Thames Estuary (expires 29 November
2005), North Thames Estuary (expires 13 November 2005), Cheltenham (expires 25
August 2011), Black Country (expires 24 January 2014), Telford (expires 11
April 2014), Worcester (expires 24 September 2016), Lancashire (expires 13
October 2013), St. Helens and Knowsley (expires 7 December 2013), Wigan
(expires 13 November 2013), Liverpool South (expires 13 October 2012),
Liverpool North (expires 29 November 2013), Fylde & Wyre (expires 18 December
2021) and Southport (expires 18 December 2021).
The Telewest Group holds a national telecommunications licence (expires 13
January 2022) and an international telecommunications licence (terminable on
one month's notice).
(B) THE GENERAL CABLE GROUP
The General Cable Group holds PDSLs for the following franchise areas:
Windsor (expires 1 December 2000), Hillingdon & Hounslow, Bradford, Barnsley,
Doncaster & Rotherham, Halifax, Sheffield and Wakefield (each of which expires
30 December 2005).
The General Cable Group holds Telecommunications Act Licences for the
following franchise areas: Windsor (expires 4 December 2008), Iver and Iver
Heath (expires 1 December 2008), Hillingdon & Hounslow (expires 11 November
2014), Bradford (expires 26 July 2015), Sheffield (expires 30 April 2017),
Barnsley, Doncaster & Rotherham, Halifax and Wakefield (each of which expires
14 December 2017).
The General Cable Group holds national telecommunication licences (expiring
30 June 2004 and27 July 2022).
(C) THE AFFILIATED COMPANIES
Birmingham Cable holds a PDSL for the Birmingham franchise area (expires 30
December 2004) and an LDSL for the Wythall area (expires 31 March 2012).
Subsidiaries of Cable London hold PDSLs for Camden (expires 30 November 2004),
Haringey (expires 2 September 2005), Enfield (expires 30 December 2005) and
Hackney & Islington (expires 30 December 2005). For details of Cable
Corporation licences see (b) above.
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
Birmingham Cable holds Telecommunications Act Licences for Birmingham &
Solihull (expires 30 December 2012) and Wythall (expires 5 January 2022).
Subsidiaries of Cable London own Telecommunications Act Licences for Camden
(expires 6 August 2012), Haringey (expires 3 April 2013), Enfield (expires 24
November 2013) and Hackney & Islington (expires 19 October 2013). Subsidiaries
of Cable Corporation own Telecommunications Act Licences for Windsor & Iver
(expires 29 September 2008) and Hillingdom & Hounslow (expires 14 February
2014). For details of Cable Corporation licences see (b) above.
16.PREMISES
(A) TELEWEST
The Telewest Group leases or owns various leasehold and freehold property in
the UK for administrative and sales offices, warehouses and equipment sites.
The Telewest Group owns an aggregate of approximately 305,000 square feet (net)
at its various properties. The Telewest Group also leases an aggregate of
approximately 560,000 square feet (net).
Details of the Telewest Group's principal premises are summarised below:
(I) FREEHOLD PROPERTIES
<TABLE>
<CAPTION>
APPROXIMATE
AREA
ADDRESS CURRENT USE (SQUARE FEET)
<S> <C> <C>
Cable House North West Regional Headquarters, 25,200
Frenchwood Avenue office and technical facility
Preston
Lancs PR1 4QF
School Lane North West call centre; group data 56,000
Knowsley Industrial Estate centre and technical facility
Knowsley
Merseyside L34 9JD
Communications House London South Regional Franchise 34,000
5 Factory Lane Group headquarters, head-end
Croydon CR9 3RA equipment and warehouse
Unit 550 and Unit 700 Avon Regional Franchise Group 30,000
Aztec West headquarters, head-end equipment and
Waterside Drive warehouse
Almondsbury
Bristol
Units 3 and 4 Cotswold Regional Franchise Group 44,500
Midpoint Business Park headquarters, head-end equipment and
Staverton warehouse
Units 1 and 2 Offices for London South 27,000
Blue Riband Estate
Factory Lane
Croydon
</TABLE>
I-161
<PAGE>
SECTION SEVEN GENERAL INFORMATION
(II) LEASEHOLD PROPERTIES
<TABLE>
<CAPTION>
APPROXIMATE LENGTH CURRENT
AREA OF LEASE ANNUAL CURRENT
ADDRESS (SQUARE FEET) (YEARS) EXPIRY DATES RENT USE
<S> <C> <C> <C> <C> <C>
407-411 Century 29,035 25 February (Pounds)1 Offices and
Buildings 2016 technical
Summers Road facility
Brunswick Business Park
Liverpool L3 4BJ
Cable Plaza Waterfront 52,520 25 March 2018 (Pounds)558,500 Midlands/South
West West Regional
The Waterfront headquarters
Brierley Hill
West Midlands
Unit 1 38,921 7 December (Pounds)506,000 Corporate
Genesis Business Park 1998 headquarters,
Albert Drive offices
Woking
Surrey GU21 5RW
1 South Gyle 46,290 25 April 2017 (Pounds)191,000 Scotland and
Crescent Lane North East
Edinburgh Regional
EH12 9EG Franchise Group
headquarters,
head-end
equipment and
warehouse
Units 1 and 3 24,410 25 December (Pounds)160,136 North East
The Dukeries 18,100 25 2017 (Pounds)72,400 Regional
Gateshead NE11 0PW September Franchise Group
2017 headquarters,
head-end
equipment and
warehouse
Units 1 and 1A 50,225 25 October 2018 (Pounds)165,013 South East
Scimitar Centre Regional
and land adjoining Franchise Group
Courtauld Road headquarters,
Basildon SS1 31ND head-end
equipment and
warehouse
Plot 40 26,415 25 March 2020 (Pounds)242,145 Offices,
Campus Way warehouses and
Gillingham Business Park technical
Gillingham ME8 0PZ facility
Unit 3 Wells Court 11,645 10 September (Pounds)216,160 Corporate
Forsyth Road 2004 offices
Sheerwater
Woking
Surrey
</TABLE>
I-162
<PAGE>
SECTION SEVEN GENERAL INFORMATION
(B) GENERAL CABLE
Details of General Cable Group's principal premises are summarised below:
(I) FREEHOLD PROPERTIES
<TABLE>
<CAPTION>
APPROXIMATE AREA
ADDRESS (SQUARE FEET) CURRENT USE
<S> <C> <C>
Switch Centre 14,140 Housing of
Swallowfield Way switching equipment
Hayes, Middlesex and offices
Unit 4 14,530 Offices and storage
Shawfield Road
Barnsley
Charlesworth Way 8,000 Offices and storage
Wakefield
Units 1, 2, 4-11 66,670
Mayfair Business Park
Broad Lane
Bradford
(II) LEASEHOLD PROPERTIES
<CAPTION>
APPROXIMATE AREA
ADDRESS (SQUARE FEET) CURRENT USE
<S> <C> <C>
37-41 Old Queen Street 3,000 Corporate headquarters
London SW1H 9JA
35 Old Queen Street 2,615 Offices
London SW1H 9JA
Cable House 16,295 Offices and computer facility
Waterside Drive
Langley, Berks
84/85 Buckingham Avenue 7,500 Offices and switching
Slough Trading Estate, Berks equipment facility
Arun House 5,500 Offices and recording
Unit 3 Langley Quay studio
Langley, Berks
Unit 5A 6,765 Offices
Langley Business Centre
11-49 Station Road
Langley, Berks
Unit 5B 7,560 Offices
Langley Business Centre
11-49 Station Road
Langley, Berks
Communications House 29,310 Office equipment
1 Chippingham Street storage
Sheffield
3-9 Mona Road 680 Housing of equipment
Doncaster
DN4 8AP
Unit 17 Roydsdale Way 22,645 Offices and storage
Euroway Trading Estate
Bradford
642/643 Ajax Avenue 26,349 Offices and warehouse
Trading Estate
Slough
Berkshire
Beechcroft, Southgate Park 26,461 Offices
Bakewell Road
Orton Southgate
Peterborough
</TABLE>
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
17. TAXATION
(A) UK TAX TREATMENT OF DIVIDENDS PAID ON TELEWEST SHARES TO NON-US HOLDERS
The statements below, which are intended only as a general guide, are based
on current law and UK Inland Revenue practice in relation to UK taxation, but
take account of the provisions of the current Finance (No. 2) Bill. They are
not exhaustive, and do not address the tax position of special categories of
shareholders, such as dealers. They relate only to shareholders who are
ordinarily resident in the UK for taxation purposes. Any person who is in any
doubt as to his or her tax position or who is subject to tax in any
jurisdiction other than the UK should consult his or her professional adviser.
(i) Telewest is not required to withhold UK tax at source from the payment of
dividends. However, when paying a dividend:
(1) Telewest has to account to the Inland Revenue for an amount of
advance corporation tax ("ACT"). The rate of ACT is currently 25% of the
dividend paid (amounting to 20% of the sum of the cash dividend and the
ACT). Dividends currently carry an associated tax credit equal to 1/4 of
the cash dividend, amounting to 20% of the sum of the dividend paid and the
associated tax credit (the "gross dividend").
(2) Individual shareholders resident in the UK will be liable for UK
income tax on the amount of the gross dividend. Dividend income will be
treated as the top slice of an individual's income and will be subject to
UK income tax (if at all) at the lower rate (currently 20%) or the higher
rate (currently 40%) or part at the lower rate and part at the higher rate
depending upon the individual's circumstances. The tax credit referred to
above will discharge the liability for income tax of an individual
shareholder who is subject to UK income tax at the lower rate or the basic
rate (currently 23%) only. Higher-rate taxpayers will be able to offset the
tax credit against their liability to tax on the gross dividend which will
leave additional tax equal (at present rates) to 20% of the gross dividend
to the extent that such sum when treated as the top slice of his or her
income falls above the threshold for higher-rate income tax. To the extent
that a UK resident individual shareholder's total tax credits in respect of
such dividends exceed his or her overall UK tax liability, the shareholder
may (except in the case where the dividend is treated as a "foreign income
dividend") claim to have any excess paid to him or her by the Inland
Revenue.
(3) A UK resident corporate shareholder will not generally be liable for
corporation tax on any dividend received and will generally be able to
treat any dividend received (together with the associated tax credit) as
franked investment income (unless the dividend is a "foreign income
dividend").
(4) For dividends paid to trustees of UK resident discretionary trusts
the gross dividend will be subject to UK income tax at a rate of 34% with a
tax credit equal to 20% of the gross dividend, reducing the trustees'
additional income tax liability to 14% of the gross dividend.
(5) Subject to certain exceptions for Commonwealth citizens, residents of
the Isle of Man or the Channel Islands, nationals of any member state of
the European Economic Area and certain others, the right of a shareholder
who is not resident (for tax purposes) in the UK to claim payment of any
part of the tax credit will depend on the existence and terms of any double
tax convention between the UK and the jurisdiction in which the holder is
resident. Holders who are not resident in the UK should consult their own
tax advisers concerning their tax liabilities on dividends received,
whether they are entitled to claim any part of the tax credit and, if so,
the procedure for doing so.
(6) Legislation already enacted currently provides for fundamental future
changes to UK tax rates on, and tax credits in respect of, dividends. Such
changes are to have effect in respect of dividends paid on or after 6 April
1999. Under current law:
(a) the tax credit will be reduced from an amount equal to one-
quarter of the (net) dividend to an amount equal to one-ninth of the
(net) dividend;
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
(b) dividend income of individuals which, prior to 6 April 1999,
would have been taxed at the lower rate (20%) will be taxed at the
"Schedule F ordinary rate" of 10%;
(c) dividend income of individuals which, prior to 6 April 1999,
would have been taxed at the higher rate (40%) will be taxed at the
"Schedule F upper rate" of 32.5%; and
(d) dividend income of trusts which, prior to 6 April 1999, would
have been taxed at the rate applicable to trusts (34%) will be taxed at
the "Schedule F trust rate" of 25%; and
(e) individuals whose tax credits on dividends exceed their overall
tax liability will no longer be entitled to claim any payment of such
excess from the UK Inland Revenue.
(7) Under proposals contained in the Finance (No. 2) Bill currently
before the UK Parliament, ACT will be abolished in relation to dividends
paid on or after 6 April 1999.
(B) US FEDERAL INCOME AND UK TAX CONSEQUENCES TO US HOLDERS OF OWNERSHIP OF
TELEWEST SHARES AND TELEWEST ADSS
(I) GENERAL
The following generally summarises the principal UK tax and US federal income
tax consequences of the acquisition, ownership and disposition of Telewest
shares or Telewest ADSs (evidenced by ADRs) applicable to US Holders (as
defined below) that hold the Telewest shares or Telewest ADSs as capital
assets. For purposes of this summary, a "US Holder" is a beneficial owner of a
Telewest share or a Telewest ADS who or that is for US federal income tax
purposes (i) a citizen or resident of the United States, (ii) a corporation
organised under the laws of the United States or any political subdivision
thereof, or (iii) any other person who is subject to US federal income tax on a
net income basis in respect of its worldwide income. AS THIS IS A GENERAL
SUMMARY, PROSPECTIVE OWNERS OF TELEWEST SHARES OR TELEWEST ADSS WHO ARE US
HOLDERS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS WITH RESPECT TO THE US
FEDERAL, STATE AND LOCAL TAX CONSEQUENCES, AS WELL AS TO THE UK TAX
CONSEQUENCES, OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF TELEWEST SHARES
OR TELEWEST ADSS APPLICABLE IN THEIR PARTICULAR TAX SITUATIONS.
The statements of US federal income tax and UK tax law set out below are
based (a) on the law and practice in force, and as interpreted by the relevant
taxation authorities, as of the date of this Disclosure Document, and are
subject to any changes (which may apply retroactively) in US or UK law or
practice, or in the interpretation thereof by the relevant taxation
authorities, or in the conventions between the US and the UK relating to income
and capital gains (the "Income Tax Convention") and estate and gift taxes (the
"Estate and Gift Tax Convention"), occurring after such date and (b) in part,
on representations of the Depositary and on the assumption that each obligation
in, or otherwise contemplated by, the Deposit Agreement and any related
agreement will be performed in accordance with its terms.
This summary does not address the laws of any state or locality or any non-US
government (other than the UK). Further, this summary does not address the tax
consequences to (i) particular classes of taxpayers that are subject to special
rules including, without limitation, dealers in securities or currencies,
insurance companies, tax-exempt organisations, financial institutions, persons
that hold their Telewest shares or Telewest ADSs as part of a straddle, hedging
or "conversion transaction", persons whose functional currency is other than
the US dollar, tax-exempt investors or persons owning directly, indirectly or
constructively, 10% or more of General Cable's stock or Telewest's stock, (ii)
persons who acquired shares pursuant to the exercise of an employee stock
option or otherwise as compensation or (iii) certain expatriates or former
long-term residents of the United States. This summary does not address the UK
or US tax treatment of persons who hold Telewest shares or Telewest ADSs
through a partnership or other pass-through entity. This summary does not
consider any UK tax or US tax consequences to a Non-US Holder.
For US federal income tax purposes, for UK tax purposes and for purposes of
the Income Tax Convention and Estate and Gift Tax Convention, US Holders of
Telewest ADSs will be treated as the
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
owners of the Telewest shares represented by the Telewest ADSs. Accordingly,
except as noted below, the UK tax and US federal income tax consequences
discussed below apply equally to US Holders of both Telewest shares and
Telewest ADSs.
(II) TAXATION OF DIVIDENDS
Under current law, Telewest is required, when paying a dividend in respect of
the Telewest shares, to account to the UK Inland Revenue for ACT. The rate of
ACT at present is 25% of any dividend paid to shareholders before 6 April 1999,
which is equivalent to 20% of the sum of the dividend and the related ACT. The
Finance (No. 2) Bill currently before the UK Parliament provides for ACT to be
abolished in respect of dividends paid on or after 6 April 1999.
An Eligible US Holder (as defined below) is entitled under the Income Tax
Convention and current UK law to claim from the UK Inland Revenue a payment
(the "Treaty Payment") of a tax credit in respect of the dividend equal to 25%
of the dividend paid (the "Tax Credit Amount") but subject to a 15% UK
withholding tax on the combined sum of the dividend paid and the related Tax
Credit Amount. For example, assuming the Tax Credit Amount continues to be 25%
of a dividend paid, a dividend of (Pounds)8.00 paid to such an Eligible US
Holder would generally entitle the Eligible US Holder to claim (Pounds)0.50 (a
Tax Credit Amount of (Pounds)2.00 less a withholding of (Pounds)1.50) from the
UK Inland Revenue, giving a total cash received, after UK taxes but before US
taxes, of (Pounds)8.50. Under current law, with respect to dividends paid on or
after 6 April 1999, the Tax Credit Amount will be reduced from 25% of the
dividend paid to one-ninth of the dividend paid, with the result that an
Eligible US Holder will not be entitled to claim any Treaty Payment. In this
circumstance the UK withholding tax would be limited to the Tax Credit Amount
(i.e., no UK withholding tax in excess of the Tax Credit Amount would be due or
payable).
For the purposes of this summary, the term "Eligible US Holder" means a
beneficial owner of a Telewest share or a Telewest ADS (a) that derives and
beneficially owns the cash dividend paid thereon, (b) that is an individual, a
corporation, a trust or estate resident in the US (and, in the case of a
corporation, not also resident in the UK for UK tax purposes) for the purposes
of the Income Tax Convention, (c) whose holding is not effectively connected
with either a "permanent establishment" in the UK through which the Eligible US
Holder carries on business in the UK or a "fixed base" in the UK from which the
Eligible US Holder performs independent personal services and (d) that, under
certain circumstances, is not exempt from US federal income tax on divided
income. Such term excludes, however, (a) a beneficial owner who owns at least
10% of the new Telewest shares in respect of which the dividend is paid, (b)
under certain circumstances, a corporation 25% or more of the capital of which
is owned directly or indirectly by one or more persons who are not individual
residents or nationals of the US and (c) a US corporation that controls,
directly or indirectly (either alone or with one or more associated
corporations), 10% or more of the voting stock of Telewest. If the Eligible US
Holder is a US trust or estate, the Tax Credit Amount will be available only to
the extent that the income derived by such trust or estate is subject to US tax
as the income of a resident either in its hands or in the hands of its
beneficiaries, as the case may be.
For US federal income tax purposes, the amount of a dividend paid plus the
Tax Credit Amount, including the 15% UK withholding tax thereon, (a) will be
included in gross income by a US Holder and (b) will be treated as foreign
source dividend income to the extent paid out of current or accumulated
earnings and profits of Telewest as determined for US federal income tax
purposes. Subject to certain limitations, including certain holding-period
requirements with respect to the Telewest shares or Telewest ADSs, the 15% UK
withholding tax will be treated as a foreign income tax eligible for credit
against such Eligible US Holder's federal income tax (or, alternatively, a
deduction in computing such US Holder's taxable income). The consequences of
these limitations will depend on the nature and sources of each Eligible US
Holder's income and the deductions appropriately allocated or apportioned
thereto.
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
Thus, for example, for dividends paid before 6 April 1999, an Eligible US
Holder who receives the (Pounds)8.00 dividend in the above example would be
considered, for US federal income tax purposes, to receive a dividend of
(Pounds)10.00 (Pounds)8.00 dividend paid plus the (Pounds)2.00 tax credit) and
would include that amount in income. Such Eligible US Holder also would be
considered to have paid (Pounds)1.50 of UK tax that, subject to the limitations
described above, would be creditable against such holder's US federal income
tax liability.
For dividends paid on or after 6 April 1999 an Eligible US Holder who
receives the (Pounds)8.00 dividend in the above example for US federal income
tax purposes would be considered to receive a dividend of (Pounds)8.89
(Pounds)8.00 dividend plus the 89 pence tax credit) and would include that
amount in income. Such US Holder also would be considered to have paid 89 pence
of UK tax that, subject to the limitations described above, would be creditable
against such Eligible US Holder's US federal income tax liability.
The amount of any dividend paid by Telewest will equal the fair market value
in US dollars of the pounds sterling paid, regardless of whether the payment
is, in fact, converted into US dollars. Exchange gain or loss that is
recognised by a US Holder on a sale or other disposition of pounds sterling
received pursuant to the dividend will generally be US source ordinary income
or loss.
In general, no dividends received deduction will be allowed with respect to
dividends paid by Telewest.
For US foreign tax credit purposes, dividends on the shares will generally
constitute "passive income", or in the case of certain US Holders, "financial
services income". To the extent that an amount received by a US Holder exceeds
such US Holder's allocable share of Telewest's current and accumulated earnings
and profits, such excess will be applied first to reduce such US Holder's tax
basis in its shares and then, to the extent in excess of such US Holder's tax
basis, such excess will constitute gain from a deemed sale or exchange of
shares.
Eligible US Holders who are entitled to a refund of the Tax Credit Amount,
net of the UK withholding tax, must file a claim for the Tax Credit Amount in
the manner and at the times described in US Revenue Procedure 80-18, 1980-1
C.B. 623, as modified by US Revenue Procedures 81-58, 1981-2 C.B. 678; 84-60,
1984-2 C.B. 504, and 90-61, 1990-2 C.B. 657. Claims for such tax refund must be
made within six years of the UK year of assessment (generally the 12-month
period ending April 5 in each year) in which the related dividend was paid. The
first claim by a claimant for a refund under these procedures is made by
sending the appropriate UK form (FD/13) in duplicate to the Director of the US
Internal Revenue Service centre with which the holder's last US federal income
tax return was filed. Forms may be obtained from the US Internal Revenue
Service, Assistant Commissioner (International), 950 L'Enfant Plaza South,
S.W., Washington, D.C. 20024, United States, Attention: Taxpayers Service
Division. Because a refund claim is not considered made until the UK tax
authorities receive the appropriate form from the US Internal Revenue Service,
forms should be sent to the US Internal Revenue Service well before the end of
the applicable limitation period. Any refund claim by a claimant after the
first claim by such a US Holder for payment under these procedures should be
filed directly with the UK Financial Intermediaries and Claims Office, Fitz Roy
House, P.O. Box 46, Nottingham, NG2 1BD, England.
Under Section 812 of ICTA 1988, the UK Government has the power to deny the
payment of associated UK tax credits under the Income Tax Convention to a
corporation that controls, directly or indirectly, either alone or together
with one or more corporations, which are treated as associated for the purposes
of the Income Tax Convention, at least 10% of the voting power of a company, if
it or an "associated company" (as defined in Section 416 ICTA 1988) has a
"qualifying presence" (as defined in Section 812 ICTA 1988) in a state in the
US that operates a unitary system of corporation taxation. These provisions
will come into force only if the UK Government so determines by statutory
instrument. No such instrument has yet been made.
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SECTION SEVEN GENERAL INFORMATION
(III) TAXATION OF CAPITAL GAINS
A US Holder who is not resident or ordinarily resident in the UK for UK tax
purposes will not be liable for UK tax on capital gains realised or accrued on
the sale or other disposal of new Telewest
shares or Telewest ADSs unless the Telewest shares or Telewest ADSs are held in
connection with a trade, profession or vocation carried on by such US Holder in
the UK through a branch or agency and the new Telewest shares or Telewest ADSs
are or have been used, held or acquired for the purposes of such trade,
profession or vocation. A US Holder will be liable for US federal income tax on
such gains to the same extent as on any other gains from sales or disposition
of stock.
Assuming that gain on the disposition of Telewest shares or Telewest ADSs
would not be subject to UK tax, such gain would be US source income for US
foreign tax credit limitation purposes. Deposits and withdrawals of Telewest
shares by US Holders in exchange for Telewest ADSs will not result in the
realisation of gain or loss for UK capital gains tax or US federal income tax
purposes.
(IV) US BACKUP WITHHOLDING AND INFORMATION REPORTING
US Holders are generally subject to information reporting requirements with
respect to dividends paid in the US on Telewest shares or Telewest ADSs. Under
existing regulations, such dividends are not subject to US backup withholding.
However, under regulations generally effective 1 January 2000, such dividends
paid in the United States or through the office of a US-related person would be
subject to US backup withholding unless the US Holder provides an IRS Form W-9
or otherwise establishes an exemption.
US Holders generally will be subject to information reporting and backup
withholding at 31% on proceeds paid from the disposition of Telewest shares or
Telewest ADSs unless the US Holder provides an IRS Form W-9 or otherwise
establishes an exemption.
The amount of any backup withholding will be allowed as a credit against such
holder's US federal income tax liability and may entitle such holder to a
refund, provided that the required information is furnished to the US Internal
Revenue Service.
(V) PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
A company generally will be a passive foreign investment company ("PFIC") for
US federal income tax purposes for any taxable year (i.e., the period from 1
January to 31 December) in which either (a) 75% or more of its gross income is
passive income or (b) on average for the taxable year, 50% or more of its
assets (measured by value) produce or are held for the production of passive
income. The Internal Revenue Service has indicated that cash balances, even if
held as working capital, are considered to be passive assets that produce
passive income. As of the date of this document, Telewest does not believe it
is a PFIC for US federal income tax purposes and, based on current projections,
Telewest does not anticipate that it will become a PFIC. No assurance can be
given, however, that Telewest will not become a PFIC in the future.
Telewest will monitor its status and, promptly following the end of any
taxable year, will notify shareholders if it believes that it is properly
classified as a PFIC for that taxable year, in which case it will comply with
the reporting requirements necessary for US Holders to elect to treat Telewest
as a "qualified electing fund" (a "QEF election"). If Telewest were a PFIC, US
Holders of Telewest shares or Telewest ADSs may suffer unfavourable US federal
income tax consequences. This summary does not address the consequences if
Telewest were determined to be a PFIC. US Holders should consult their own tax
advisers concerning the US tax consequences of holding Telewest shares or ADSs
if Telewest were considered to be a PFIC, including the consequences of making
a QEF election.
(VI) UK INHERITANCE TAX
A Telewest share or Telewest ADS beneficially owned by an individual US
Holder who is domiciled in the US for the purposes of the Estate and Gift Tax
Convention and is not domiciled in the UK for such purposes is not subject to
UK inheritance tax on the individual's death or on a gift made by the
individual during his or her lifetime except where the Telewest share or
Telewest ADS is part of
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SECTION SEVEN GENERAL INFORMATION
the business property of a UK "permanent establishment" of the individual or
pertains to a UK "fixed base" of an individual used for the performance of
independent personal services. In a case where a Telewest share or Telewest ADS
is subject both to UK inheritance tax and to US federal gift or estate tax, the
Estate and Gift Tax Convention generally provides for tax paid in the UK to be
credited against any tax payable in the US and for tax paid in the US to be
credited against any tax payable in the UK, based on priority rules set forth
in that Convention. There are special individual rules applying to trusts;
Telewest shares or Telewest ADSs held in a trust created by a US Holder who is
not domiciled in the UK normally will fall outside the scope of UK inheritance
tax.
18. STAMP DUTY AND STAMP DUTY RESERVE TAX
(A) TRANSFERS OR ISSUES OF TELEWEST SHARES TO DEPOSITARY GENERALLY
Stamp duty or stamp duty reserve tax (depending on the type of documentation
used) at the then-applicable and relevant rate arises upon the deposit with the
Depositary of Telewest shares. The current rates of stamp duty and of stamp
duty reserve tax on such deposits are (Pounds)1.50 per (Pounds)100 (or part
thereof) and 1.5%, respectively. On the transfer of Telewest shares to the
Depositary, stamp duty or stamp duty reserve tax generally will be payable by
the Depositary and under the Deposit Agreement, holders of ADRs must pay an
amount equal to such duty or tax to the Depositary.
(B) TRANSFER OF ADSS
Provided that the instrument of transfer is not executed in the UK and
remains at all subsequent times outside the UK, no UK stamp duty will be
payable on the acquisition or transfer of ADSs evidenced by ADRs, nor will an
agreement to transfer ADSs evidenced by ADRs give rise to a liability to stamp
duty reserve tax. No stamp duty or stamp duty reserve tax will be payable by
holders of General Cable shares or General Cable ADSs on the transfer of, or
agreement to transfer, their holdings to Telewest pursuant to the Offer.
(C) TRANSFER OF TELEWEST SHARES BY DEPOSITARY TO PERSON BENEFICIALLY ENTITLED
A transfer of Telewest shares by the Depositary or its nominee to the
beneficial owner of the relevant ADS or its nominee when the beneficial owner
is not transferring beneficial ownership will give rise to UK stamp duty at the
rate of 50 pence per transfer.
(D) PURCHASE OF TELEWEST SHARES
Purchasing Telewest shares, as opposed to Telewest ADSs, will normally give
rise to a charge to UK stamp duty or stamp duty reserve tax at the rate of 50
pence per (Pounds)100 (or part) of the price payable for the new Telewest
shares, or 0.5%, respectively. Stamp duty and stamp duty reserve tax generally
are the liabilities of the purchaser. Where such Telewest shares are later
transferred to the Depositary's nominee, further stamp duty or stamp duty
reserve tax will normally be payable at the rate of (Pounds)1.50 per
(Pounds)100 (or part thereof) (or 1.5%) of the value of the Telewest shares at
the time of transfer. However, where Telewest shares being acquired are
transferred directly to the Depositary's nominee, the only charge will
generally be the higher charge of (Pounds)1.50 per (Pounds)100 (or part) (or
1.5%) of the price payable for the Telewest shares so acquired.
(E) ISSUE OF TELEWEST SHARES TO DEPOSITARY PURSUANT TO THE PRE-EMPTIVE ISSUE
Any issue of Telewest shares to the Depositary or its nominee pursuant to the
Pre-emptive Issue will be subject to stamp duty reserve tax at a rate of 1.5%
of the value of the issue price. Telewest will meet such liability. The issue
of Telewest shares pursuant to the Pre-emptive Issue to holders of Telewest
ADSs who elect to receive Telewest shares instead of Telewest ADSs under the
Pre-emptive Issue will not be subject to stamp duty or to stamp duty reserve
tax.
(F) ISSUE OF TELEWEST SHARES IN EXCHANGE FOR GENERAL CABLE ADSS
No stamp duty or stamp duty reserve tax will be payable by General Cable ADS
holders on the issue of Telewest shares to the Depositary or its nominee on
behalf of accepting General Cable ADS
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SECTION SEVEN GENERAL INFORMATION
holders who receive their entitlement to Telewest shares in the form of ADSs.
No stamp duty or stamp duty reserve tax will be payable by General Cable
securityholders on the issue to them of Telewest shares pursuant to the Offer.
However, any subsequent deposit of Telewest shares by former holders of General
Cable ADSs who elected to receive their entitlement to Telewest shares
otherwise than in ADS form, will attract stamp duty or stamp duty reserve tax
at the rate of (Pounds)1.50 per (Pounds)100 or part, or 1.5%, on the value of
the Telewest shares at such time.
19. CONSENTS
(a) Schroders, which is regulated by The Securities and Futures Authority
Limited, has given and has not withdrawn its written consent to the issue of
this document with the inclusion therein of its name and the references thereto
in the form and context in which they respectively appear.
(b) References to any consent required with respect to financial information
contained herein is set out with such financial information.
20. SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES
Certain of the Directors and a majority of the senior executives of Telewest
are not residents of the US. Virtually all of the assets of such persons and of
Telewest are located outside the US. As a result, it may not be possible for
shareholders to effect service of process within the US upon such persons or
Telewest or to enforce against them judgments of US courts predicated upon
civil liability provisions of the US federal or state securities laws.
The following discussion with respect to the enforceability of certain US
court judgments in the UK is based upon advice provided to Telewest by its
English counsel, Freshfields. The US and England currently do not have a treaty
providing for the reciprocal recognition and enforcement of judgments (other
than arbitration awards) in civil and commercial matters. Consequently, a final
judgment for payment rendered by any federal or state court in the US based on
civil liability, whether or not predicated solely upon US federal securities
laws, would not automatically be enforceable in England. In order to enforce
any US judgment in England, proceedings must be initiated by way of common law
action before a court of competent jurisdiction in England. In such common law
action, an English court generally will not (subject to the following sentence)
reinvestigate the merits of the original matter decided by a US court and will
order summary judgment on the basis that there is no defence to the claim for
payment. The entry of an enforcement order by an English court is conditional
upon the following: (a) the US court had jurisdiction over the original
proceeding, (b) the judgment is final and conclusive on the merits and is for a
definite sum of money, (c) the judgment does not contravene English public
policy, (d) the judgment is not for a tax, penalty or judgment arrived at by
doubling, trebling or otherwise multiplying a sum assessed as compensation for
the loss or damage sustained and (e) the judgment has not been obtained by
fraud or in breach of the principles of natural justice. Subject to the
foregoing, holders of new Telewest securities and holders of General Cable
securities may be able to enforce in England judgments in civil and commercial
matters obtained for US federal or state courts; however, there can be no
assurance that such judgments will be enforceable. In addition, there is doubt
as to whether an English court would accept jurisdiction and impose civil
liability in an original action predicated solely upon US federal securities
laws.
21. MISCELLANEOUS
(a) The expenses to be paid by Telewest relating to the Offer and the Pre-
emptive Issue are estimated to be approximately (Pounds)13.3 million (excluding
VAT). These expenses include approximately (Pounds)280,000 for SEC filing fees,
(Pounds)100,000 for the London Stock Exchange fees; (Pounds)350,000 for
printing expenses; (Pounds)4.75 million for financial advisers' fees;
(Pounds)2.4 million for legal fees; (Pounds)400,000 for accounting fees and
(Pounds)5.1 million for miscellaneous expenses.
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SECTION SEVEN GENERAL INFORMATION
(b) The new Telewest shares to be issued pursuant to the Pre-emptive Issue
are to be issued at a premium of 82.5 pence to their nominal value of 10 pence.
(c) The Pre-emptive Issue has been fully underwritten by TINTA, MediaOne and
Cox, whose registered addresses are 5619 DTC Parkway, Englewood, Colorado
80111, 188 Inverness Road West, Englewood, Colorado 80112 and 1400 Lake Hearn
Drive, Atlanta, Georgia 30319, respectively.
22. NO SIGNIFICANT CHANGE
(A) TELEWEST
There has been no significant change in the financial or trading position of
Telewest since 31 March 1998, the date to which its unaudited results for the
quarter then ended were prepared.
(B) GENERAL CABLE
There has been no significant change in the financial or trading position of
General Cable since 31 March 1998, the date to which its unaudited results for
the quarter then ended were prepared.
23. ADDITIONAL SOURCES OF INFORMATION
(i) The statement in "-- Section Two -- Information on Telewest -- Overview"
that the Telewest Group is a leading provider of cable television and
residential and business cable telephony in the UK is based on comparison with
ITC data relating to other UK cable operators in terms of, amongst other
things, Telewest's equity homes and customers.
(ii) The statement in "-- Section Five -- Regulatory Matters and
Competition -- Cable Telephony" that the number of lines in the UK business
market is continuing to increase rapidly, with ISDN and CENTREX showing high
growth rates is based on Oftel Market Information Update May 1998.
(iii) The statement in "-- Section Five -- Regulatory Matters and
Competition -- Competition -- Cable Telephony" that approximately 15% of BT's
business lines are used for indirect access is taken from Oftel Market
Information Update May 1998.
(iv) The statement in "-- Section Five -- Regulatory Matters and
Competition -- Competition -- Cable Telephony -- Other Competitors" that for
the second quarter of 1997/98, less than 10% of UK residential customers use
indirect access operators is taken from Oftel Market Information Update May
1998.
(v) The statement in "-- Section Five -- Regulatory Matters and
Competition -- Cable Telephony" that more than 88% of UK residential telephony
customers are currently customers of BT is taken from Oftel Market Information
Update May 1998.
(vi) Additional information on BT, BSkyB, Mercury, CWC and other competitors
of the Combined Group is extracted from public sources.
24. DOCUMENTS FOR INSPECTION AND AVAILABLE INFORMATION
(a) Copies of the following documents may be inspected at the offices of
Freshfields, 65 Fleet Street, London EC4Y 1HS and at the registered office of
Telewest, Genesis Business Park, Albert Drive, Woking, Surrey GU21 5RW, during
usual business hours on any weekday (Saturdays, Sundays and public holidays
excepted) for the duration of the Offer;
(i) the Memorandum and Articles of Association of Telewest (as proposed to be
amended);
(ii) the Memorandum and Articles of Association of General Cable;
(iii) the audited statutory accounts of the Telewest Group for the two
financial years ended 31 December 1997;
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<PAGE>
(iv) the audited statutory accounts of the General Cable Group for the two
financial years ended 31 December 1997;
(v) the service agreements referred to in "-Section Four - Information
on the Combined Group";
(vi) the service agreements with Directors of General Cable which have more
than 12 months to run;
(vii) the rules of the employee share schemes referred to in "- Employee
Share Schemes";
(viii) the rules of the General Cable Share Schemes; and
(ix) the material contracts referred to in "- Material Contracts";
(x) the Offer Document and Acceptance Forms, the EGM Circular, the
Pre-emptive Issue Circular and the Application Forms;
(xi) the letter from KPMG Audit Plc regarding pro forma financial information
in Part II of this document;
(xii) the written consent of KPMG Audit Plc to the inclusion of its letter
referred to in paragraph (xi) above and the written consent of Schroders
referred to in "-- Consents"; and
(xiii) the external sources of information referred to in "- Additional
Sources of Information".
(b) Telewest is subject to the information requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the SEC. Such reports, proxy statements and other information
concerning Telewest can be inspected and copied at the public reference
facilities maintained by the SEC at 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, and at the SEC's Regional Offices at Seven World Trade
Center, 13th Floor, New York, New York 10048, and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material
can also be obtained from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The SEC
also maintains a website at http.//www.sec.gov which contains reports, proxy
statements and other information regarding registrants such as Telewest, that
file electronically with the SEC. The ADSs are quoted through Nasdaq and such
reports, proxy materials and other information concerning Telewest may be
inspected at the offices of the National Association of Securities Dealers,
Inc., Market Listing Section, at 1735 K Street, N.W., Washington, D.C. 20006.
SECTION SEVEN GENERAL INFORMATION
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
25. DIRECTORS AND EXECUTIVE OFFICERS OF MEDIAONE GROUP, INC.
The name, business address, present principal occupation or employment, and
material occupations, positions, offices or employments during the last five
years of each director and executive officer of MediaOne Group Inc. ("MediaOne
Group") are set out below. MediaOne Group was known as U S WEST, Inc. ("U S
WEST") prior to its name change on June 12, 1998 in connection with the
separation of its businesses into two independent companies. Each such director
and executive officer is a United States citizen.
<TABLE>
<CAPTION>
MATERIAL OCCUPATIONS,
PRINCIPAL POSITIONS,
NAME BUSINESS ADDRESS OCCUPATION OFFICES OR EMPLOYMENTS
<S> <C> <C> <C>
A. Gary Ames MediaOne International Executive Vice Executive Vice President of
7th Floor Landsdowne House President of MediaOne Group since June 1998;
Berkeley Square MediaOne Group Vice President of MediaOne
London W1X 5DH International (formerly U S
WEST International Inc.) since
1995; from 1989 to 1995,
President of U S WEST
Communications Inc.
Roger K. Christensen MediaOne Group Senior Vice Senior Vice President--
188 Inverness Drive West President-- Administration of MediaOne
Englewood, CO 80112 Administration of Group since June 1998; from
MediaOne Group 1995 to June 1998--Vice
President--Group Operations and
Strategy of U S WEST Media
Group; from 1993 to 1995--Vice
President of U S WEST.
Kathleen A. Cote c/o MediaOne Group Former President Director of MediaOne Group
188 Inverness Drive West and Chief Executive since June 1998; from 1996 to
Englewood, CO 80112 Officer of 1998, President and Chief
Computervision Executive Officer of
Corporation Computervision Corporation;
from 1995 to 1996, President
and Chief Operating Officer of
Computervision Corporation;
from 1994 to 1995, Vice
President of Marketing and
Services of Computervision
Corporation; and from 1989 to
1994, President and General
Manager of Prime Service.
Robert L. Crandall AMR Corporation Former Chairman of Director of MediaOne Group
PO Box 619616 the Board, (and, prior to June 12, 1998,
Dallas/Fort Worth Airport President and Chief of U S WEST) since 1997; from
Texas 75261 Executive Officer 1985 to 1998, Chairman of the
of AMR Corporation Board, President and Chief
(the parent Executive Officer of AMR
corporation of Corporation.
American Airlines)
Grant A. Dove MediaOne Group Managing Partner of Director of MediaOne Group
188 Inverness Drive West Technology (and, prior to June 12, 1998,
Englewood, CO 80112 Strategies and of U S WEST) since 1988;
Alliances Managing Partner of Technology
Strategies and Alliances since
1992.
Frank M. Eichler MediaOne Group Executive Vice Executive Vice President,
188 Inverness Drive West President, General General Counsel and Secretary
Englewood, CO 80112 Counsel and of MediaOne Group since June
Secretary of 1998; President of Corporate
MediaOne Group Development of U S WEST from
1997 to June 1998; Vice
President--Public Policy and
Regulatory Law of U S WEST
Media Group from 1997 to June
1998; Vice President of U S
WEST from 1994 to June 1998;
from 1984 to 1994, various
positions in the Law Department
of U S WEST.
Allan D. Gilmour MediaOne Group Retired Director of MediaOne Group
188 Inverness Drive West (and, prior to June 12, 1998,
Englewood, CO 80112 of U S WEST) since 1992; from
1993-1995--Vice Chairman of
Ford Motor Co.
</TABLE>
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
<TABLE>
<CAPTION>
PRINCIPAL MATERIAL OCCUPATIONS, POSITIONS,
NAME BUSINESS ADDRESS OCCUPATION OFFICES OR EMPLOYMENTS
<S> <C> <C> <C>
Pierson M. Grieve MediaOne Group Retired Director of MediaOne Group
188 Inverness Drive West (and, prior to June 12, 1998,
Englewood, CO 80112 of U S WEST) since 1990; from
1983-1995--Chairman of the
Board and Chief Executive
Officer of Ecolab, Inc.
Charles M. Lillis MediaOne Group Chairman, President Chairman, President and Chief
188 Inverness Drive West and Chief Executive Executive Officer and Director
Englewood, CO 80112 Officer of MediaOne of MediaOne Group since June
Group 1998; from 1995-June 1998--
President and Chief Executive
Officer of U S WEST Media
Group; from 1992-June 1998--
Executive Vice President of U S
WEST.
Janice C. Peters MediaOne Group Executive Vice Executive Vice President of
188 Inverness Drive West President of MediaOne Group since June 1998;
Englewood, CO 80112 MediaOne and President of MediaOne cable
President and Chief operations since 1997; Vice
Executive Officer President of U S WEST from 1992
of MediaOne, Inc. to June 1998.
Richard A. Post MediaOne Group Executive Vice Executive Vice President and
188 Inverness Drive West President and Chief Chief Financial Officer of
Englewood, CO 80112 Financial Officer MediaOne Group since June 1998;
of MediaOne Group Vice President and Chief
Financial Officer of U S WEST
Media Group from 1997 to June
1998; President of Corporate
Development of U S WEST Media
Group from 1996 to 1997; Vice
President of U S WEST from 1990
to June 1998.
Charles P. Russ, III MediaOne Group Former Executive Director of MediaOne Group
188 Inverness Drive West Vice President, since 1998; from 1992-June
Englewood, CO 80112 General Counsel and 1998--Executive Vice President,
Secretary of U S General Counsel and Secretary
WEST of U S WEST; from 1995 to June
1998--Executive Vice President
for Human Resources of U S
WEST; from 1997 to June 1998--
Executive Vice President for
Public Policy of U S WEST.
Louis A. Simpson Geico Capital Operations President and Chief Director of MediaOne Group
One Geico Plaza, N.W. Executive Officer since 1998; President and Chief
Washington, D.C. 20076 of GEICO Capital Executive Officer of GEICO
Operations Capital Operations since 1993.
John "Jack" Slevin Comdisco, Inc. Chairman of the Director of MediaOne Group
6111 North River Road Board, President since 1998; Chairman of the
Rosemont, IL 60018 and Chief Executive Board of Comdisco, Inc. since
Officer of 1996; President and Chief
Comdisco, Inc. Executive Officer of Comdisco,
Inc. since 1994; from 1993-
1994--Executive Vice President
and Chief Operating Officer of
Comdisco, Inc.
Pearre Williams MediaOne Group Executive Vice Executive Vice President of
188 Inverness Drive West President of MediaOne Group and President
Englewood, CO 80112 MediaOne Group and and Chief Executive Officer of
President and Chief MediaOne Multimedia Ventures
Executive Officer since June 1998; from 1997 to
of MediaOne June 1998, President of
Multimedia Ventures Multimedia Ventures of U S WEST
Media Group; from 1993 to 1996,
President of Corporate
Development of U S WEST Media
Group; Vice President of U S
WEST from 1989 to June 1998.
</TABLE>
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<PAGE>
SECTION SEVEN GENERAL INFORMATION
26. DIRECTORS AND EXECUTIVE OFFICERS OF TELE-COMMUNICATIONS, INC.
The name, business address, present principal occupation or employment, and
material occupations, positions, offices or employments during the last five
years of each director and executive officer of TCI are set out below. Each
such director and executive officer is a United States citizen.
<TABLE>
<CAPTION>
PRINCIPAL MATERIAL OCCUPATIONS, POSITIONS,
NAME BUSINESS ADDRESS OCCUPATION OFFICES OR EMPLOYMENTS
<S> <C> <C> <C>
Robert R. Bennett TCI Executive Vice April 1997-Present: Executive
Terrace Tower II President of TCI Vice President of TCI and
5619 DTC Parkway and President and President and Chief Executive
Englewood, CO 80111 Chief Executive Officer of Liberty Media
Officer of Liberty Corporation; June 1995-March
Media Corporation 1997: Executive Vice President
and Chief Financial Officer,
Secretary and Treasurer of
Liberty Media Corporation;
September 1991-June 1995:
Senior Vice President of
Liberty Media Corporation.
Gary K. Bracken TCI Executive Vice December 1997-Present:
Terrace Tower II President & Executive Vice President of TCI
5619 DTC Parkway Controller of TCI Communications, Inc.; 1969-
Englewood, CO 80111 Communications, Present: Controller of TCI
Inc. Communications Inc.; December
1991-December 1997: Senior Vice
President of TCI
Communications, Inc.
Stephen M. Brett TCI Executive Vice October 1997-Present: Executive
Terrace Tower II President, Vice President of TCI
5619 DTC Parkway Secretary & General Communications, Inc.; January
Englewood, CO 80111 Counsel of TCI 1994-Present: Executive Vice
President, General Counsel and
Secretary of TCI; 1991-Present:
General Counsel and Secretary
of TCI; 1991-October 1997:
Senior Vice President of TCI
Communications, Inc.
Donne F. Fisher TCI Consultant & January 1996-Present:
Terrace Tower II Director of TCI Consultant to TCI; January
5619 DTC Parkway 1994-January 1996; Executive
Englewood, CO 80111 Vice President of TCI; December
1991-October 1994: Executive
Vice President of TCI
Communications, Inc.
John W. Gallivan TCI Director of TCI; Retired; 1953-July 1997:
400 Tribune Building Director of Kearns- Chairman of the Board of
Salt Lake City, UT84111 Tribune Corporation Kearns-Tribune.
(a newspaper
publishing company)
Paul A. Gould Allen & Company Inc. Executive Vice Executive Vice President and a
711 5th Avenue President and a Managing Director of Allen &
New York, New York Managing Director Company Incorporated for more
10022 of Allen & Company than five years.
Incorporated (an
investment banking
firm)
Leo J. Hindery, Jr. TCI President and Chief March 1997-Present: President
Terrace Tower II Operating Officer and Chief Operating Officer of
5619 DTC Parkway of TCI TCI; March 1997-April 1998:
Englewood, CO 80111 President and Chief Executive
Officer of TCI Communications,
Inc.; 1988-March 1997: Managing
General Partner and Chief
Executive Officer of Intermedia
Partners (a cable TV operator).
</TABLE>
I-175
<PAGE>
SECTION SEVEN GENERAL INFORMATION
<TABLE>
<CAPTION>
PRINCIPAL MATERIAL OCCUPATIONS, POSITIONS,
NAME BUSINESS ADDRESS OCCUPATION OFFICES OR EMPLOYMENTS
<S> <C> <C> <C>
Marvin L. Jones TCI President & Chief April 1998-Present: President
Terrace Tower II Executive Officer and Chief Executive Officer of
5619 DTC Parkway of TCI TCI Communications, Inc.; April
Englewood, CO 80111 Communications, 1998-Present: Executive Vice
Inc. President of TCI; March 1997-
April 1998: Executive Vice
President and Chief Operating
Officer of TCI Communications,
Inc.; November 1996-March 1997:
President of one of TCI
Communications, Inc's, cable
subsidiaries; December 1991-
Present: Consultant in the
cable television industry.
Jerome H. Kern TCI Business Director of TCI since June
Terrace Tower II Consultant; Special 1994; July 1996-Present:
5619 DTC Parkway Counsel to Baker & Business Consultant; Special
Englewood, CO 80111 Botts, L.L.P. (a Counsel to Baker & Botts
law firm) L.L.P.; September 1992-July
1996: Partner at Baker & Botts
L.L.P.
Kim Magness TCI Business Executive Director of TCI since June
Terrace Tower II 1994; Business Executive; has
5619 DTC Parkway managed numerous personal and
Englewood, CO 80111 business investments for more
than five years.
John C. Malone TCI Chairman off the January 1994-Present: Chief
Terrace Tower II Board and Chief Executive Officer of TCI;
5619 DTC Parkway Executive Officer January 1994-March 1997:
Englewood, CO 80111 of TCI President of TCI; March 1992-
October 1994: Chief Executive
Officer of TCI Communications,
Inc.; April 1973-October 1994:
President of TCI
Communications, Inc.
Robert A. Naify Todd-AO Corporation President & Chief President and Chief Executive
172 Golden Gate Avenue Executive Officer Officer of Todd-AO Corporation
San Francisco, CA 94102 of Todd-AO for more than five years.
Corporation (which
provides services
to the motion
picture industry)
Larry E. Romrell TCI Executive Vice January 1994-Present: Executive
Terrace Tower II President of TCI Vice President of TCI; December
5619 DTC Parkway 1997-Present: Senior Vice
Englewood, CO 80111 President of TCI Ventures Group
LLC; 1991-October 1994: Senior
Vice President of TCI
Communications, Inc.
Bernard W. TCI Senior Vice August 1997-Present: Senior
Schotters, II Terrace Tower II President & Vice President and Treasurer of
5619 DTC Parkway Treasurer of TCI TCI; December 1991-Present:
Englewood, CO 80111 Senior Vice President--Finance
and Treasurer of TCI
Communications, Inc.
J.C. Sparkman TCI Consultant March 1995-Present: Consultant;
Terrace Tower II January 1994-March 1995:
5619 DTC Parkway Executive Vice President of
Englewood, CO 80111 TCI; 1987-October 1994:
Executive Vice President of TCI
Communications, Inc.
</TABLE>
29 June 1998
I-176
<PAGE>
UK FINANCIAL INFORMATION
-------
PART II
-------
UK FINANCIAL INFORMATION
RELATING TO
TELEWEST COMMUNICATIONS PLC
AND
GENERAL CABLE PLC
II-1
<PAGE>
<TABLE>
<CAPTION>
UK FINANCIAL INFORMATION
CONTENTS -- PART II
- -------------------------------------------------------------------------------
PAGE
SECTION ONE
- -------------------------------------------------------------------------------
<S> <C>
UK GAAP FINANCIAL INFORMATION OF TELEWEST................................ II-3
UK GAAP Audited Financial Information .................................. II-4
UK GAAP Unaudited Financial Information for the Three Months ended 31
March 1998 ............................................................ II-29
UK GAAP Management's Discussion and Analysis of Financial Condition and
Results of Operations ................................................. II-35
SECTION TWO
- -------------------------------------------------------------------------------
UK GAAP FINANCIAL INFORMATION OF GENERAL CABLE .......................... II-44
UK GAAP Audited Financial Information .................................. II-45
UK GAAP Unaudited Financial Information for the Three Months ended 31
March 1998 ............................................................ II-78
SECTION THREE
- -------------------------------------------------------------------------------
UK GAAP PRO FORMA FINANCIAL INFORMATION OF THE COMBINED GROUP ........... II-89
UK GAAP Pro Forma Financial Information ................................ II-90
</TABLE>
II-2
<PAGE>
SECTION ONE UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE
UK GAAP FINANCIAL INFORMATION OF TELEWEST
- --------------------------------------------------------------------------------
II-3
<PAGE>
SECTION ONE UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
II-4
<PAGE>
SECTION ONE UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
BASIS OF PREPARATION
The financial information set out below has been extracted without material
adjustment from the audited consolidated financial statements of Telewest
Communications plc for the years ended 31 December 1995, 1996 and 1997.
KPMG were the UK statutory auditors for the year ended 31 December 1995. KPMG
Audit Plc were the UK statutory auditors for the years ended 31 December 1996
and 1997. The audit reports for the years ended 31 December 1995, 1996 and 1997
were unqualified. No audited financial statements of any company in the
Telewest Communications plc group have been made up in respect of any period
subsequent to 31 December 1997.
Financial Reporting Standard 1 (revised 1996), "Cash Flow Statements" was
adopted in the financial statements for the year ended 31 December 1997.
Financial information for prior periods has been restated in accordance with
the requirements of the revised standard. The revised standard had no effect on
previously reported net assets or losses. The cash flow statement presentation
was changed, movements previously reported as changes in "cash and cash
equivalents" being split into movements in cash (amounts payable, or obtainable
without penalty, within 24 hours) and liquid resources (other balances).
CONSENT
KPMG Audit Plc have given and have not withdrawn their consent to the
inclusion in this document of their letter and the references thereto in the
form and context in which they are included and have approved the content of
their letter for the purposes of Section 152(i)(e) of the FSA.
II-5
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
1.PROFIT AND LOSS ACCOUNTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
Note 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
TURNOVER 5.3 144,784 290,266 386,498
Operating costs 5.4 (228,556) (419,517) (514,262)
----------------------------------------
OPERATING LOSS (83,772) (129,251) (127,764)
Share of results of associated
undertakings 5.13 (12,103) (15,203) (21,312)
Other interest receivable and
similar income 5.8 15,645 17,222 9,097
Interest payable and similar
charges 5.9 (34,435) (122,671) (169,930)
----------------------------------------
LOSS ON ORDINARY ACTIVITIES
BEFORE TAXATION 5.5 (114,665) (249,903) (309,909)
Tax on loss on ordinary
activities 5.10 (690) (820) (521)
----------------------------------------
LOSS ON ORDINARY ACTIVITIES
AFTER TAXATION (115,355) (250,723) (310,430)
Minority interests 5.19 (16) (180) (293)
----------------------------------------
RETAINED LOSS FOR THE FINANCIAL
YEAR 5.21 (115,371) (250,903) (310,723)
----------------------------------------
Loss per equity share (pence) 5.11 (10.5) (17.7) (21.8)
----------------------------------------
2.BALANCE SHEETS
- -------------------------------------------------------------------------------
<CAPTION>
AT 31 DECEMBER
----------------------------------------
Note 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets 5.12 1,063,808 1,447,194 1,705,520
Investments 5.13 191,028 117,410 103,693
----------------------------------------
1,254,836 1,564,604 1,809,213
CURRENT ASSETS
Stock 5.14 40 53 32
Debtors 5.15 54,980 66,929 70,457
Cash at bank and in hand 464,818 79,116 29,582
----------------------------------------
519,838 146,098 100,071
CREDITORS: amounts falling due
within one year 5.16 (137,744) (212,434) (334,756)
----------------------------------------
NET CURRENT
ASSETS/(LIABILITIES) 382,094 (66,336) (234,685)
----------------------------------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 1,636,930 1,498,268 1,574,528
CREDITORS: amounts falling due
after more than one year 5.17 (795,066) (918,008) (1,305,708)
Minority interest 5.19 (167) (347) (640)
----------------------------------------
NET ASSETS 841,697 579,913 268,180
----------------------------------------
CAPITAL AND RESERVES
Called up share capital 5.20 141,603 142,363 142,363
Share premium account 5.21 -- 9,187 9,187
Merger reserve 5.21 556,095 535,267 534,257
Other reserves 5.21 270,237 270,237 270,237
Profit and loss account 5.21 (126,238) (377,141) (687,864)
----------------------------------------
EQUITY SHAREHOLDERS' FUNDS 841,697 579,913 268,180
----------------------------------------
</TABLE>
II-6
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
3.CASH FLOW STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
Note 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
(RESTATED) (RESTATED)
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES 5.23 (10,205) 28,479 68,624
RETURNS ON INVESTMENT AND
SERVICING OF FINANCE
Interest received 11,568 18,206 3,599
Interest paid (6,041) (25,795) (63,479)
Interest element of finance
lease payments (1,930) (2,754) (4,702)
----------------------------------------
NET CASH INFLOW/(OUTFLOW) FROM
RETURNS ON INVESTMENT AND
SERVICING OF FINANCE 3,597 (10,343) (64,582)
----------------------------------------
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Purchase of tangible fixed
assets (254,453) (464,367) (436,100)
Sale of tangible fixed assets 688 3,059 6,066
Other investing activities 335 -- --
----------------------------------------
NET CASH OUTFLOW FROM CAPITAL
EXPENDITURE AND FINANCIAL
INVESTMENT (253,430) (461,308) (430,034)
----------------------------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary
undertakings (3,232) (14,167) --
Investment in associated
undertakings and other
participating interests (9,143) (7,728) (9,633)
----------------------------------------
NET CASH OUTFLOW FROM
ACQUISITIONS AND DISPOSALS (12,375) (21,895) (9,633)
----------------------------------------
MANAGEMENT OF LIQUID RESOURCES
(Increase)/decrease in fixed
deposits (net) (234,058) 376,446 53,288
----------------------------------------
FINANCING
Payment for forex option
premium (88,070) -- --
Cash paid for credit facility
arrangement costs -- (18,400) --
Payment of share issue costs (6,141) -- --
Proceeds from debenture issue 754,812 -- --
Cash paid for debenture issue
costs (20,574) (829) --
Proceeds from borrowings -- 100,400 392,500
Repayment of borrowings (157,930) (937) (2,375)
Capital element of finance
lease repayments (1,291) (1,231) (3,971)
----------------------------------------
NET CASH INFLOW FROM FINANCING 480,806 79,003 386,154
----------------------------------------
(DECREASE)/INCREASE IN CASH 5.24 (25,665) (9,618) 3,817
----------------------------------------
</TABLE>
II-7
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
4.RECONCILIATION OF MOVEMENTS IN EQUITY SHAREHOLDERS' FUNDS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Opening equity shareholders' funds 743,716 841,697 579,913
Loss for the financial year (115,371) (250,903) (310,723)
Issue of shares 678,174 10,676 --
Goodwill written off (464,872) (21,557) (1,010)
Movement arising from group
reconstruction 50 -- --
----------------------------------------
CLOSING EQUITY SHAREHOLDERS' FUNDS 841,697 579,913 268,180
----------------------------------------
</TABLE>
5. NOTES
5.1 BASIS OF PREPARATION
5.1.1 The financial information for the years ended 31 December 1995, 1996 and
1997 is based on the audited consolidated financial statements of
Telewest Communications plc.
5.2 ACCOUNTING POLICIES
5.2.1 The following accounting policies were applied consistently in dealing
with items which were considered material in relation to the Group's
financial statements.
The financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost accounting
rules.
5.2.2 The Group financial statements consolidate the financial statements of
the Company and its subsidiary undertakings to the extent of the Group's
interest in those undertakings. The results of subsidiary undertakings
acquired during the year are included in the consolidated profit and loss
account from the date of acquisition.
5.2.3 INVESTMENTS
The consolidated profit and loss accounts include the Group's share of
the losses of associated undertakings and the consolidated balance sheet
includes the investment in these companies at the Group's share of their
net assets.
5.2.4 GOODWILL
Purchased goodwill on acquisition of subsidiary and associated
undertakings, representing the excess of the fair value of the
consideration given over the fair value of the separate net assets
acquired, is set off directly against reserves.
5.2.5 CAPITALISATION OF OVERHEADS
Subsidiary undertakings capitalise that proportion of overheads which
relates to the construction of the cable network.
II-8
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
5.2.6 DEPRECIATION
Depreciation is provided to write off the cost, less estimated residual
value, of tangible fixed assets by equal instalments over their
estimated useful economic lives as follows:
<TABLE>
<S> <C>
Freehold and long leasehold buildings 50 years
Cable and ducting 20 years
Electronics equipment
--Systems electronics 8 years
--Switching equipment 8 years
--Subscriber electronics 5 years
--Headend, studio and playback facilities 5 years
Other equipment
--Office furniture and fittings 5 years
--Motor vehicles 4 years
</TABLE>
Depreciation of cable and ducting and systems electronics is charged
monthly on their estimated cost at the end of the prematurity period,
scaled down by a ratio of average customers in the current period to the
estimated customer base at the end of the prematurity period.
Preconstruction costs are amortised over the life of the franchise from
the date of the first customer.
The estimated useful lives of cable and ducting and system electronics
assets were reassessed with effect from 1 January 1996 and changed from
25-30 years and 10 years, to 20 years and 8 years, respectively. The net
book value of these assets is being written off over their revised
estimated remaining lives.
In 1997, the treatment of activation costs was reviewed. With effect
from 1 January 1997 activation labour was reclassified from "cable and
ducting' to "system electronics' to be consistent with the
classification of activation materials, and asset lives were changed
accordingly from 20 years to 8 years. The assets costs and accumulated
depreciation are shown in note 5.12.
5.2.7 FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of
exchange ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies, to the extent that they
are not hedged by financial instruments, are translated using the rate
of exchange ruling at the balance sheet date and the gains or losses on
translation are included in the profit and loss account.
5.2.8 LEASES
Where the Group enters into a lease which entails taking substantially
all the risks and rewards of ownership of an asset, the lease is treated
as a finance lease. The asset is recorded in the balance sheet as a
tangible fixed asset and is depreciated over its estimated useful life
or the term of the lease, whichever is shorter. Future instalments under
such leases, net of finance charges, are included within creditors.
Rentals payable are apportioned between the finance element, which is
charged to the profit and loss account, and the capital element which
reduces
II-9
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
the outstanding obligation for future instalments. Costs in respect of
operating leases are charged to the profit and loss account on a
straight line basis over the life of the lease.
5.2.9 TURNOVER
Turnover represents the invoiced value (excluding value added tax) of
services supplied by the Group.
5.2.10 STOCKS
Stocks are stated at the lower of cost and net realisable value.
5.2.11 FRANCHISE COSTS
Expenditure incurred on successful applications for franchise licences
is included in tangible fixed assets and is amortised over the life of
the original franchise term. Costs relating to unsuccessful applications
are written off to the profit and loss account.
5.2.12 TAXATION
The charge for taxation is based on the loss for the year and takes into
account taxation deferred because of timing differences between the
treatment of certain items for taxation and accounting purposes.
Provision is made for deferred tax only to the extent that it is
probable that an actual asset or liability will crystallise.
5.2.13 PENSION COSTS
The Group operates a defined contribution pension scheme or contributes
to third-party schemes on behalf of employees. The amount charged
against the profit and loss account represents the contribution payable
to the selected schemes in respect of the accounting period.
5.2.14 RESTRICTED SHARE SCHEME/LONG TERM INCENTIVE PLAN ("LTIP")/EQUITY
PARTICIPATION PLAN ("EPP")
The value of awards over ordinary shares granted to eligible employees
under these schemes is charged to the profit and loss account based on
the purchase price of the shares and to the extent that the awards have
been earned by employees in the current period.
5.2.15 INTERCONNECTION WITH OTHER OPERATORS
When telephony traffic is carried by other operators the Group incurs
interconnect costs. Some interconnect costs are subject to regulation in
the form of a determination by the Office of Telecommunications. A
determination may give rise to amendments, most often in the form of
reductions, to interconnect costs relating to prior periods.
The Group reviews its interconnect costs on a regular basis and adjusts
the rate at which these costs are charged in the profit and loss account
in accordance with the estimated interconnect costs for the current
period. Amendments to costs relating to prior periods are made in the
current period, but only when recovery or payment of these amounts is
reasonably certain.
5.2.16 FINANCIAL INSTRUMENTS
The Group uses foreign currency options which permit, but do not
require, the Group to exchange foreign currencies at a future date with
another party at a contracted exchange rate (the "Forward Rate"). Such
contracts are used to hedge against adverse changes in foreign currency
exchange rates associated with certain obligations denominated in
foreign currency. The premium paid to enter into these options is
included on the balance sheet as a fixed asset
II-10
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
investment and is amortised to the profit and loss account over the life
of the option at a constant rate of the carrying value of the obligation
it hedges. The difference between the contracted amount to be exchanged
under the option translated at the Forward Rate and the contracted
amount translated at the spot rate at the inception of the contract is
also amortised to the profit and loss account over the life of the
option at a constant rate of the carrying value of the obligation. The
carrying value of the obligation is increased for the amortised portion
of the difference.
To the extent that the Sterling values of the Group's foreign currency
obligations, translated at the year-end exchange rate, are less than
their carrying values as determined above, the carrying values of the
obligation are reduced. The carrying value of the foreign currency
option used to hedge the obligations is reduced by an equivalent amount.
The Group also enters into combined foreign currency and interest rate
swap contracts ("Foreign Currency Swaps") to hedge against adverse
changes in foreign currency exchange rates associated with obligations
denominated in foreign currency. The principal element of Foreign
Currency Swaps is translated at the spot rate at the reporting date with
any gain or loss on translation recognised in the profit and loss
account. Such gains and losses are offset against gains and losses
arising on the translation of the obligations which have been hedged.
The interest element of Foreign Currency Swaps is accounted for on an
accruals basis with the next interest income or expense recognised in
the profit and loss account as it is earned and payable.
Interest rate swap agreements which are used to manage interest rate
risk on the Group's borrowings are accounted for using the accruals
method. Net income or expense resulting from the differential between
exchanging floating and fixed rate interest payments is recorded on an
accruals basis. To the extent that the interest rate swap agreements are
delayed starting, net income or expense is not recognised until the
effective date of the agreement.
5.2.17 FINANCE COSTS
Costs incurred in raising funds are deducted from the amount raised and
amortised over the life of the debt facility on a constant-yield basis.
Whilst the period and utilisation of the debt facility is uncertain, the
amortisation rate is determined by reference to the Group's estimated
future financing requirements.
5.3 SEGMENTAL INFORMATION
Turnover is attributable principally to the provision of cable
television and telephony services in the United Kingdom which the
Directors consider to be the same class of business and, accordingly, no
segmental analysis of operating loss or net assets is shown. Turnover
comprised the following:
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Cable television 64,740 121,224 159,918
Telephony -- residential 57,597 125,013 166,645
Telephony -- business 17,449 34,562 43,882
Other 4,998 9,467 16,053
--------------------------------------
144,784 290,266 386,498
--------------------------------------
</TABLE>
II-11
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
5.4 OPERATING COSTS
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Programming expenses 32,194 69,906 93,441
Telephony expenses 29,526 52,572 50,145
Selling, general and
administrative expenses 105,311 167,323 193,335
Depreciation 61,525 129,716 177,341
--------------------------------------
228,556 419,517 514,262
--------------------------------------
</TABLE>
Having regard to the special nature of the Group's business, the
analysis of operating costs as prescribed by the Companies Act 1985 is
not meaningful. In the circumstances therefore, as required by paragraph
3(3) of Schedule 4 of the Companies Act 1985, the Directors have adapted
the prescribed format to the requirements of the Group's business.
5.5 LOSS ON ORDINARY ACTIVITIES BEFORE TAX
<TABLE>
<CAPTION>
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION IS
STATED AFTER CHARGING 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Auditors' remuneration
--audit 250 290 320
--other services -- auditors and
their associates 219 168 79
Depreciation and other amounts
written off tangible fixed assets
--owned 56,825 122,610 166,452
--leased 3,194 7,106 10,889
Exchange losses 4,732 25,852 30,954
Hire of plant and machinery --
operating leases 116 129 371
Hire of other assets -- operating
leases 2,160 2,936 2,827
--------------------------------------
5.6 REMUNERATION OF DIRECTORS
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Fees to non-executive Directors 122 114 183
Remuneration as executives:
Basic salary, allowance and
benefits 1,071 416 851
Performance-related bonuses 79 25 112
Other bonuses 140 -- --
Pension contributions 24 18 33
Compensation for loss of office 487 539 --
--------------------------------------
1,923 1,112 1,179
--------------------------------------
</TABLE>
Of the above remuneration, (Pounds)62,000, (Pounds)93,000 and
(Pounds)426,000 was reimbursed to U S WEST for the years ended 31
December 1997, 1996 and 1995 respectively, for making available to the
Group the services of certain Directors.
II-12
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
The remuneration of the highest paid Director was as follows:
<TABLE>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Basic salary, allowance and
benefits 427 248 353
Performance-related bonuses 51 25 45
Other bonuses 70 -- --
Pension contributions 5 13 24
--------------------------------------
Total in respect of the year 553 286 422
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER 1995
-----------------------------------------------------------------------------------
COMPENSATION TOTAL EMOLUMENTS
SALARIES/ TAXABLE ANNUAL/SPECIAL FOR LOSS OF EXCLUDING PENSION PENSION
FEES BENEFITS BONUSES OFFICE CONTRIBUTIONS CONTRIBUTIONS
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
EXECUTIVE
A Michels 160 267 121 -- 548 5
SJ Davidson 143 12 98 -- 253 10
DF Bryan 145 344 -- 487 976 9
NON EXECUTIVE
FA Vierra -- -- -- -- -- --
AG Ames -- -- -- -- -- --
AWP Stenham 54 -- -- -- 54 --
Lord Borrie QC 36 -- -- -- 36 --
Lord Griffiths 32 -- -- -- 32 --
JA Atterbury -- -- -- -- -- --
JO Robbins -- -- -- -- -- --
AN Singer -- -- -- -- -- --
CM Lillis -- -- -- -- -- --
-----------------------------------------------------------------------------------
Total Board 570 623 219 487 1,899 24
-----------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER 1996
-----------------------------------------------------------------------------------
COMPENSATION TOTAL EMOLUMENTS
SALARIES/ TAXABLE ANNUAL/SPECIAL FOR LOSS OF EXCLUDING PENSION PENSION
FEES BENEFITS BONUSES OFFICE CONTRIBUTIONS CONTRIBUTIONS
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
EXECUTIVE
SJ Davidson 236 12 25 -- 273 13
A Michels 100 68 -- 539 707 5
DF Bryan -- -- -- -- -- --
NON EXECUTIVE
FA Vierra -- -- -- -- -- --
AG Ames -- -- -- -- -- --
AWP Stenham 50 -- -- -- 50 --
Lord Borrie QC 34 -- -- -- 34 --
Lord Griffiths 30 -- -- -- 30 --
JA Atterbury -- -- -- -- -- --
JO Robbins -- -- -- -- -- --
AN Singer -- -- -- -- -- --
CM Lillis -- -- -- -- -- --
-----------------------------------------------------------------------------------
Total Board 450 80 25 539 1,094 18
-----------------------------------------------------------------------------------
</TABLE>
II-13
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER 1997
-----------------------------------------------------------------------------------
COMPENSATION TOTAL EMOLUMENTS
SALARIES/ TAXABLE ANNUAL/SPECIAL FOR LOSS OF EXCLUDING PENSION PENSION
FEES BENEFITS BONUSES OFFICE CONTRIBUTIONS CONTRIBUTIONS
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C>
EXECUTIVE
SJ Davidson 334 19 45 -- 398 24
A Michels -- -- -- -- -- --
D Van Valkenburg 94 170 42 -- 306 3
CJ Burdick 225 9 25 -- 259 6
NON EXECUTIVE
FA Vierra -- -- -- -- -- --
AG Ames -- -- -- -- -- --
AWP Stenham 108 -- -- -- 108 --
Lord Borrie QC 39 -- -- -- 39 --
Lord Griffiths 36 -- -- -- 36 --
JA Atterbury -- -- -- -- -- --
JO Robbins -- -- -- -- -- --
AN Singer -- -- -- -- -- --
CM Lillis -- -- -- -- -- --
-----------------------------------------------------------------------------------
Total Board 836 198 112 -- 1,146 33
-----------------------------------------------------------------------------------
</TABLE>
5.7 STAFF NUMBERS AND COSTS
The average number of persons employed by the Group (including
Directors) during the year, analysed by category, was as follows:
<TABLE>
1995 1996 1997
NUMBER NUMBER NUMBER
<S> <C> <C> <C>
Sales and customer services 1,309 2,114 2,297
Construction and operations 889 1,827 1,985
Administration 578 715 691
---------------------------------
2,776 4,656 4,973
---------------------------------
The aggregate payroll costs of these persons including amounts which
have been capitalised in tangible fixed assets, were as follows:
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Wages and salaries 57,035 90,559 103,516
Social security costs 5,491 8,977 10,378
Other pension costs 1,538 2,580 2,801
--------------------------------------
Total in respect of the year 64,064 102,116 116,695
--------------------------------------
</TABLE>
II-14
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
5.8 OTHER INTEREST RECEIVABLE AND SIMILAR INCOME
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
On bank deposits and short-term
investments 14,014 14,928 4,231
On loans made to associated
undertakings 1,631 1,723 3,178
Other -- 571 1,688
--------------------------------------
15,645 17,222 9,097
--------------------------------------
5.9 INTEREST PAYABLE AND SIMILAR CHARGES
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
On bank loans and overdrafts and
other loans:
--Wholly repayable within five
years 2,583 3,816 16,941
--Wholly or partly repayable in
more than 5 years -- 1,924 14,741
Finance costs of Senior Discount
Debentures 13,663 60,696 71,661
Finance costs of Senior Debentures 5,643 22,471 22,657
Finance charges payable in respect
of finance leases and hire
purchase contracts 1,928 3,442 4,702
Exchange losses on foreign
currency translation, net 4,732 25,852 30,954
Loss on sale of interest rate swap 5,467 -- --
Other 419 4,470 8,274
--------------------------------------
34,435 122,671 169,930
--------------------------------------
5.10 TAX ON LOSS ON ORDINARY ACTIVITIES
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Corporation tax on taxable profit
at 31.5% (1996 and 1995: 33%) 16 50 137
Share of irrecoverable ACT of
associated undertakings 674 770 384
--------------------------------------
690 820 521
--------------------------------------
</TABLE>
5.11 LOSS PER SHARE
The calculation of loss per equity share is based on the loss on
ordinary activities after taxation and minority interests for the year,
divided by the weighted average number of equity shares of the Company
in issue during the year of 1,423,634,308 (1996: 1,421,492,181; 1995:
1,102,384,337).
II-15
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
5.12 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FREEHOLD
AND LONG
FREEHOLD LEASEHOLD CABLE AND ELECTRONIC OTHER
LAND BUILDINGS DUCTING EQUIPMENT EQUIPMENT TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C> <C>
COST
AT 1 JANUARY 1996 4,223 36,005 766,866 359,617 79,239 1,245,950
Additions -- 9,951 335,844 130,783 39,012 515,590
Disposals -- -- (749) (565) (4,792) (6,106)
---------------------------------------------------------------------------------
AT 31 DECEMBER 1996 4,223 45,956 1,101,961 489,835 113,459 1,755,434
Reclassification -- (62) (118,331) 117,954 439 --
Additions 11 8,683 280,814 101,204 49,882 440,594
Disposals -- -- (182) (556) (8,319) (9,057)
---------------------------------------------------------------------------------
AT 31 DECEMBER 1997 4,234 54,577 1,264,262 708,437 155,461 2,186,971
---------------------------------------------------------------------------------
DEPRECIATION
AT 1 JANUARY 1996 -- 4,920 74,532 70,810 31,880 182,142
Charge for year -- 2,458 47,374 60,220 19,664 129,716
Disposals -- -- (725) (547) (2,346) (3,618)
---------------------------------------------------------------------------------
AT 31 DECEMBER 1996 -- 7,378 121,181 130,483 49,198 308,240
Reclassification -- -- (12,792) 12,792 -- --
Charge for year -- 3,824 59,324 88,502 25,691 177,341
Disposals -- -- (182) (229) (3,719) (4,130)
---------------------------------------------------------------------------------
AT 31 DECEMBER 1997 -- 11,202 167,531 231,548 71,170 481,451
---------------------------------------------------------------------------------
NET BOOK VALUE
AT 31 DECEMBER 1996 4,223 38,578 980,780 359,352 64,261 1,447,194
---------------------------------------------------------------------------------
AT 31 DECEMBER 1997 4,234 43,375 1,096,731 476,889 84,291 1,705,520
---------------------------------------------------------------------------------
</TABLE>
Included in the net book value of electronic equipment is (Pounds)42,404,000
and (Pounds)10,057,000, respectively (1996: (Pounds)38,258,000 and
(Pounds)6,880,000, respectively) in respect of assets held under finance leases
and similar hire purchase contracts.
II-16
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
5.13 FIXED ASSET INVESTMENTS
<TABLE>
<CAPTION>
ASSOCIATED UNDERTAKINGS
--------------------------
FOREIGN
OTHER OWN CURRENCY
SHARE OF PARTICIPATING SHARES OPTION
NET ASSETS LOANS INTERESTS HELD PREMIUM TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C> <C>
COST
At 1 January 1996 69,997 24,593 20,666 7,280 88,070 210,606
Additions 194 4,496 5,000 -- -- 9,690
Released during the year -- -- -- (115) -- (115)
---------------------------------------------------------------------------------
At 31 December 1996 70,191 29,089 25,666 7,165 88,070 220,181
Additions 1,209 10,774 -- -- -- 11,983
Released during the year -- -- -- (2,044) -- (2,044)
---------------------------------------------------------------------------------
At 31 December 1997 71,400 39,863 25,666 5,121 88,070 230,120
---------------------------------------------------------------------------------
SHARE OF POST-
ACQUISITION LOSSES
At 1 January 1996 (13,887) -- -- -- -- (13,887)
Share of loss on
ordinary activities
before taxation (15,203) -- -- -- -- (15,203)
Share of tax on loss on
ordinary activities (770) -- -- -- -- (770)
PROVISION
At 1 January 1996 -- -- -- (2,806) -- (2,806)
Charge for the year -- -- -- (1,380) -- (1,380)
AMORTISATION OF FOREIGN
CURRENCY OPTION PREMIUM
At 1 January 1996 -- -- -- -- (2,885) (2,885)
Charge for the year -- -- -- -- (12,815) (12,815)
Valuation adjustment to
option premium -- -- -- -- (53,025) (53,025)
---------------------------------------------------------------------------------
At 31 December 1996 (29,860) -- -- (4,186) (68,725) (102,771)
Share of loss on
ordinary activities
before taxation (21,312) -- -- (21,312)
Share of tax on loss on
ordinary activities (384) -- -- (384)
PROVISION
Charge for the year -- -- -- (496) (496)
Exercised during the
year -- -- -- 2,044 2,044
AMORTISATION OF FOREIGN
CURRENCY OPTION PREMIUM
Charge for the year -- -- -- (15,131) (15,131)
Valuation adjustment to
option premium -- -- -- 11,623 11,623
---------------------------------------------------------------------------------
At 31 December 1997 (51,556) -- -- (2,638) (72,233) (126,427)
---------------------------------------------------------------------------------
NET INVESTMENTS
AT 31 DECEMBER 1997 19,844 39,863 25,666 2,483 15,837 103,693
---------------------------------------------------------------------------------
AT 31 DECEMBER 1996 40,331 29,089 25,666 2,979 19,345 117,410
---------------------------------------------------------------------------------
</TABLE>
OWN SHARES HELD
At 31 December 1997, own shares held comprised 2,814,000 ordinary shares of
10 pence held by the Telewest Employee Share Ownership Plan Trust (the
"Telewest ESOP") for awards under the Telewest Restricted Share Scheme, a
scheme designed to provide incentives to executives of the Group.
II-17
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
The market value at 31 December 1997 of the shares held was 70 pence per
share; the carrying value of the shares held is 182 pence per share, being the
cost of the shares at the date they were acquired by the Telewest ESOP.
At 31 December 1997, 1,747,000 ordinary shares had been awarded to executives
of the Group, leaving the remaining 1,067,000 shares available for future
awards to eligible executives. The provision made against own shares held
represents awards earned by executives in respect of services to the Group.
The Telewest ESOP received an interest-free loan of (Pounds)7,280,000 from
the Group to subscribe for the ordinary shares to establish the Telewest ESOP.
The loan is to be repaid by way of cash contributions made to the ESOP Trustees
by subsidiary undertakings of the Group. At 31 December 1997, the Telewest ESOP
owed (Pounds)3,239,000 to the Group.
5.14 STOCKS
All stock is in the form of raw materials and consumables.
5.15 DEBTORS
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
DUE WITHIN ONE YEAR
Trade debtors 29,305 36,627
Other debtors 27,925 17,742
Prepayments and accrued income 9,524 15,914
-------------------------
66,754 70,283
-------------------------
DUE AFTER MORE THAN ONE YEAR
Other debtors 175 174
-------------------------
66,929 70,457
-------------------------
5.16 CREDITORS--AMOUNTS FALLING DUE WITHIN ONE YEAR
1996 1997
(Pounds)'000 (Pounds)'000
Senior Secured Facility -- 121,009
Bank loans and overdrafts 2,949 574
Obligations under finance leases and hire
purchase contracts 2,716 10,221
Trade creditors 46,855 26,710
Taxation and social security 4,068 3,319
Other creditors 24,417 18,689
Accruals and deferred income 131,429 154,234
-------------------------
212,434 334,756
-------------------------
The bank loans are property loans secured on freehold land and buildings
held by the Group.
5.17 CREDITORS -- AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
1996 1997
(Pounds)'000 (Pounds)'000
Senior Debentures due 2006 171,499 179,777
Senior Discount Debentures due 2007 586,993 686,034
Senior Secured Facility 81,814 355,528
Other bank loans and overdrafts 400 400
Obligations under finance leases and hire
purchase contracts 51,674 65,313
Foreign Currency Swap 20,875 13,452
Other creditors 4,753 5,204
-------------------------
918,008 1,305,708
-------------------------
</TABLE>
II-18
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
The bank loan is a property loan secured on certain freehold land and
buildings held by the Group, carrying interest at 1.00% over LIBOR, and
is repayable as follows:
<TABLE>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Between two and five years 400 400
-------------------------
</TABLE>
SENIOR DEBENTURES DUE 2006
The Group has issued US$300,000,000 principal amount of Senior
Debentures (the "Senior Debentures") with a yield to maturity of 9.625%.
The Senior Debentures mature on 1 October 2006. Interest in the Senior
Debentures accrues semi-annually and is payable in arrears. The Senior
Debentures are redeemable, in whole or in part, at the option of the
Group at any time on or after 1 October 2000.
The Group has entered into a Foreign Currency Swap which expires on 1
October 2000 to hedge its exposure to adverse fluctuations in exchange
rates on the principal amount of the Senior Debentures. The terms of the
Foreign Currency Swap provided for the Group to make an initial exchange
of principal of US$300,000,000 in exchange for (Pounds)196,078,000.
During the term of the Foreign Currency Swap, the Group is to make
Sterling fixed-rate interest payments and is to receive US Dollar fixed-
rate interest payments on the initial exchange amounts. On expiration,
the initial principal amounts will be re-exchanged.
The Senior Debentures are unsecured liabilities of the Group.
SENIOR DISCOUNT DEBENTURES DUE 2007
The Group has issued US$1,536,413,000 principal amount at maturity of
Senior Discount Debentures (the "Senior Discount Debentures") with a
yield to maturity of 11%. At 31 December 1997, the unamortised portion
of the discount on issue is (Pounds)260,171,565 (1996:
(Pounds)328,946,000). The Senior Discount Debentures mature on 1 October
2007. Interest on the Senior Discount Debentures accrues semi-annually.
Cash interest will not accrue on the Senior Discount Debentures prior to
1 October 2000 and is thereafter payable in arrears on 1 April and 1
October of each year at a rate of 11% per annum. The Senior Discount
Debentures are redeemable, in whole or in part, at the option of the
Group at any time on or after 1 October 2000.
The Group has purchased a five-year Sterling put option to purchase
US$1,537,000,000 to hedge its exposure to adverse fluctuations in
exchange rates on the principal amount at the early redemption date of
the Senior Discount Debentures. The put option has a strike price at
expiration on 28 September 2000 of (Pounds)1 = US$1.4520 (the "Forward
Rate").
The option premium paid of (Pounds)88,070,000 has been included on the
balance sheet within fixed asset investments and is being amortised to
the profit and loss account over the five-year term of the option at a
constant rate of the carrying amount of the Senior Discount Debentures.
The difference between the contracted amount translated at the Forward
Rate and at the spot rate at the inception of the contract in the amount
of (Pounds)91,717,000 is also being amortised on the same basis to the
profit and loss account.
At 31 December 1997, the unamortised value of the option premium has
been reduced by (Pounds)41,402,000 representing the hedging of an
equivalent foreign exchange gain on the Senior Discount Debentures
during the year.
The Senior Discount Debentures are unsecured liabilities of the Group.
SENIOR SECURED FACILITY
On 22 May 1996, the Group entered into a senior secured credit facility
(the "Senior Secured Facility") with a syndicate of banks. The facility
is divided into two tranches: the first portion
II-19
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
(Tranche A) is available on a revolving basis for up to (Pounds)300
million, reducing to (Pounds)100 million by 30 June 1998 with full
repayment by 31 December 1998; the second portion (Tranche B) is
available on a revolving basis concurrently with Tranche A for an amount
up to 6.5 times the trailing, rolling six month annualised consolidated
net operating cash flow, gradually reducing throughout the period of the
facility to 4 times by 1 January 2000. Thereafter, the amount
outstanding under the Tranche B facility coverts to a term loan
amortising over 5 years. The aggregate drawing at any time under both
tranches cannot exceed (Pounds)1.2 billion.
Borrowings under the facility are secured by the assets of the Group,
including the partnership interest and shares of subsidiaries, and bear
interest at 2.25% above LIBOR for Tranche A and between 0.5% and 1.875%
above LIBOR (depending on the ratio of borrowings to the trailing,
rolling six month annualised consolidated net operating cash flow) for
Tranche B.
Since 31 December 1997, this facility has been restructured with revised
financial covenants, a reduction in the amount available under the
facility from (Pounds)1,200 million to (Pounds)1,000 million, a
supplementary (Pounds)100 million revolving credit facility secured with
a second fixed and floating charge over the Group's assets and interest
costs on the latter ranging from 3.5% -- 5.5% above LIBOR. As a result
of this restructuring of the facility, the repayment dates for Tranche
A, referred to above, have been accelerated by three months.
The Group's ability to borrow under the facility is subject to, among
other things, its compliance with the financial and other covenants and
borrowings conditions contained therein.
In September 1996, the group entered into certain delayed-starting
interest rate swap agreements in order to manage interest rate risk on
the Senior Secured Facility. The effective dates of the interest rate
swap agreements are 2 January 1997 and 31 March 1997, and the agreements
mature on 31 December 2001 and 28 March 2002, respectively. The
aggregate notional principal amount of the swaps adjusts upwards on a
semi-annual basis to a maximum of (Pounds)750 million. In accordance
with the swap agreements, the Group receives interest at the six-month
LIBOR rate and pays a fixed interest rate in the range of 7.835 --
7.975%.
5.18 DEFERRED TAXATION
The amounts provided and the full potential liability in respect of
deferred taxation is as follows:
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Tax effect of timing differences due to:
Excess capital allowances over depreciation 110,600 --
Other timing differences 27,900 15,900
Trading losses (138,500) (15,900)
--------------------------
-- --
--------------------------
</TABLE>
As at 31 December 1997, the Group estimated that it has, subject to
Inland Revenue agreement, (Pounds)587,000,000 (1996: (Pounds)478,000,000
as restated), of tax losses available to relieve future profits.
Accumulated tax losses at 31 December 1997 and 1996 have been adjusted
to exclude capital allowances on assets which were available to the
Group, but had not been claimed. These allowances are available for
future periods.
5.19 MINORITY INTERESTS
At 31 December 1997, the minority interests comprised 30,000 ordinary
shares of (Pounds)1 each and 20,000 cumulative convertible preference
shares of (Pounds)1 each in Cable Guide Limited, together with the
relevant minority share of the profits or losses of each entity. All
minority interests are equity interests.
II-20
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
5.20 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1996 1997
NUMBER NUMBER
<S> <C> <C>
AUTHORISED
Ordinary shares of 10
pence each 2,010,000,000 2,010,000,000
Convertible preference
shares of 10 pence each 661,000,000 661,000,000
---------------------------
(Pounds)'000 (Pounds)'000
Ordinary shares of 10
pence each 201,000 201,000
Convertible preference
shares of 10 pence each 66,100 66,100
---------------------------
Total 267,100 267,100
---------------------------
ALLOTTED, CALLED UP AND
FULLY PAID NUMBER NUMBER
Ordinary shares of 10
pence each 927,567,600 927,567,600
Convertible preference
shares of 10 pence each 496,066,708 496,066,708
---------------------------
(Pounds)'000 (Pounds)'000
Ordinary shares of 10
pence each 92,756 92,756
Convertible preference
shares of 10 pence each 49,607 49,607
---------------------------
142,363 142,363
---------------------------
</TABLE>
CONVERTIBLE PREFERENCE SHARES
The convertible preference shares are convertible into fully paid
ordinary shares at any time on the basis of one ordinary share for every
convertible preference share, provided that, immediately following the
conversion, the percentage of the issued ordinary share capital of the
Company held by members of the public, as defined by the listing rules
of the London Stock Exchange, does not fall below 25%. The ordinary
shares arising on conversion will rank pari passu in all respects with
the ordinary shares then in issue.
The holders of the convertible preference shares are entitled to receive
a dividend of such amount as is declared and paid in relation to each
ordinary share, subject to the dividend to be paid not exceeding 20
pence per share net of any associated tax credit.
In the event of a winding-up of the Company or other return of capital,
the assets of the Company available for distribution will be paid first
to the holders of the convertible preference shares up to the sum of
capital paid-up of credited as paid-up unless the right of election upon
a winding-up of the Company has been exercised in respect of the
convertible preference shares (the "Elected Shares"). If the election
has been exercised, the holders of the ordinary shares and the Elected
Shares will receive any surplus in accordance with the amount paid-up or
credited as paid-up on the shares held.
The holders of the convertible shares are not entitled to vote at any
general meeting of the Company unless the meeting includes the
consideration of a resolution for winding up the Company or a resolution
modifying the rights or privileges attaching to the convertible
preference shares.
II-21
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
EMPLOYEE SHARE SCHEMES
During the year, options and awards were granted over ordinary shares of
the Company in accordance with the rules of the various employee share
schemes. At 31 December 1997, taking into account options and awards
exercised, cancelled, and lapsed, during the year, the following options
to subscribe for the ordinary shares and awards over ordinary shares
were outstanding.
TELEWEST EXECUTIVE SHARE OPTION SCHEMES
<TABLE>
<CAPTION>
EXERCISE NUMBER OF SHARES
PRICE PER UNDER OPTION
DATE OF GRANT SHARE EXERCISE PERIOD ---------------------
1996 1997
<S> <C> <C> <C> <C>
12 May 1995 154.5 13/5/98 -- 11/5/2002 5,029,062 4,637,519
12 May 1995 155.5 13/5/98 -- 11/5/2002 246,474 205,395
16 June 1995 171.5 17/6/98 -- 15/6/2002 1,136,059 995,607
16 June 1995 173.5 16/6/98 -- 15/6/2002 36,125 36,125
9 November 1995 173.5 12/3/98 -- 8/11/2005 881,445 785,174
11 March 1996 141.0 12/3/99 -- 10/3/2006 3,803,186 3,368,879
11 March 1996 138.0 12/3/99 -- 10/3/2006 142,626 142,626
30 October 1996 135.0 30/10/99 -- 29/10/2006 162,962
13 March 1997 117.5 13/3/2000 -- 12/3/2007 740,424
13 March 1997 118.0 13/3/2000 -- 12/3/2007 25,423
1 October 1997 83.0 1/10/2000 -- 30/09//2004 3,826,892
1 October 1997 82.5 1/10/2000 -- 30/09/2007 1,470,617
31 October 1997 73.0 31/10/2000 -- 30/10/2004 2,172,394
31 October 1997 71.0 31/10/2003 -- 30/10/2007 494,519
---------------------
11,274,977 19,064,556
---------------------
TELEWEST SHARESAVE OPTION SCHEMES
<CAPTION>
NUMBER OF SHARES
EXERCISE PRICE UNDER OPTION
DATE OF GRANT PER SHARE EXERCISE PERIOD ---------------------
1996 1997
<S> <C> <C> <C> <C>
12 December 1994 150.0 1/2/2000 -- 31/7/2000 653,522 280,692
12 December 1995 134.0 1/2/2001 -- 31/7/2001 1,258,104 404,256
12 December 1996 102.5 1/2/2000 -- 31/7/2000 2,165,009 941,444
11 December 1997 58.0 1/2/2001 -- 31/7/2001 5,341,783
---------------------
4,076,635 6,968,175
---------------------
</TABLE>
The savings contracts associated with the options granted on 11 December
1997 became effective from 1 February 1998.
TELEWEST RESTRICTED SHARE SCHEME
At 31 December 1997, awards over 1,747,000 shares were outstanding. The
exercise period of these awards is from 13 January 1998 to 20 January
2007.
II-22
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
TELEWEST LONG TERM INCENTIVE PLAN ("LTIP")
At 31 December 1997, awards over 574,309 shares were outstanding. The
exercise period of these awards is from 1 October 2000 to 30 October
2007.
5.21 RESERVES
<TABLE>
SHARE MERGER OTHER PROFIT AND
PREMIUM RESERVE RESERVES LOSS ACCOUNT
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
At 1 January 1996 -- 556,095 270,237 (126,238)
Issue of shares 9,187 729 -- --
Goodwill written off -- (21,557) -- --
Loss for the financial
year -- -- -- (250,903)
------------------------------------------------
At 31 December 1996 9,187 535,267 270,327 (377,141)
Goodwill written off -- (1,010) -- --
Loss for the financial
year -- -- -- (310,723)
------------------------------------------------
At 31 December 1997 9,187 534,257 270,237 (687,864)
------------------------------------------------
</TABLE>
5.22 COMMITMENTS AND CONTINGENCIES
CAPITAL COMMITMENTS
The amount of capital expenditure authorised by the Group for which no
provision has been made in the financial statements at 31 December 1997
is (Pounds)12,715,000 (1996: (Pounds)13,539,000).
LEASING COMMITMENTS
Obligations of the Group in respect of finance leases, net of interest,
are payable over the following periods:
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Within one year 2,716 10,221
In the second to fifth years inclusive 22,812 35,796
Over five years 28,862 29,517
-------------------------
54,390 75,534
-------------------------
</TABLE>
Annual commitments of the Group under operating leases are set out
below:
<TABLE>
<CAPTION>
1996 1996 1997 1997
LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Within one year 162 709 -- 30
In the second to fifth
years inclusive 675 1,167 547 79
Over five years 3,092 -- 10,549 --
---------------------------------------------------
3,929 1,876 11,096 109
---------------------------------------------------
</TABLE>
II-23
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
5.23 RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Operating loss (83,772) (129,251) (127,764)
Depreciation 61,525 129,716 177,341
(Increase)/decrease in stocks (15) (13) 21
(Increase)/decrease in debtors (6,080) (16,493) (2,966)
Increase/(decrease) in
creditors 18,137 44,520 21,992
----------------------------------------
Net cash inflow from operating
activities (10,205) 28,479 68,624
----------------------------------------
</TABLE>
5.24 ANALYSIS OF CHANGES IN NET DEBT
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
DEBT DUE DEBT DUE
CASH IN HAND SHORT TERM AFTER ONE WITHIN ONE FINANCE
AND AT BANK DEPOSITS YEAR YEAR LEASES TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C> <C>
At 1 January 1995 30,891 217,111 (3,886) -- (14,553) 229,563
Cash flow (25,665) 234,058 (732,417) (937) 1,291 (523,670)
Other non-cash changes -- -- (21,162) -- (17,052) (38,214)
Exchange movements 8,423 -- -- -- -- 8,423
----------------------------------------------------------------------------------
At 31 December 1995 13,649 451,169 (757,465) (937) (30,314) (323,898)
Cash flow (9,618) (376,446) (78,222) (2,012) 1,231 (465,067)
Other non-cash changes -- -- (5,019) -- (25,307) (30,326)
Exchange movements 362 -- -- -- -- 362
----------------------------------------------------------------------------------
At 31 December 1996 4,393 74,723 (840,706) (2,949) (54,390) (818,929)
Cash flow 3,817 (53,288) (392,500) 2,375 3,971 (435,625)
Other non-cash changes -- -- (109,542) -- (25,115) (134,657)
Exchange movements (63) -- -- -- -- (63)
----------------------------------------------------------------------------------
At 31 December 1997 8,147 21,435 (1,342,748) (574) (75,534) (1,389,274)
----------------------------------------------------------------------------------
</TABLE>
5.25 RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Increase/(decrease) in cash (25,665) (9,618) 3,817
Cash inflow from increase in
debt and lease financing (732,063) (79,003) (386,154)
Cash outflow/(inflow) from
(decrease)/increase in liquid
resources 234,058 (376,446) (53,288)
----------------------------------------
Change in net debt resulting
from cash flows (523,670) (465,067) (435,625)
New finance leases (17,052) (25,307) (25,115)
Translation differences 8,423 362 (63)
Valuation adjustments (10,191) 57,589 (34,804)
Debenture issue costs -- (829) --
Amortisation of issue costs (10,971) (61,779) (74,738)
----------------------------------------
Movement in net debt in the
period (553,461) (495,031) (570,345)
Net funds/(debt) at 1 January 229,563 (323,898) (818,929)
----------------------------------------
Net debt at 31 December (323,898) (818,929) (1,389,274)
----------------------------------------
</TABLE>
II-24
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
5.26 PURCHASE OF SUBSIDIARY UNDERTAKINGS
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Tangible fixed assets 400,978 -- --
Fixed asset investments 314 -- --
Debtors 22,629 -- --
Cash at bank and in hand 4,159 -- --
Creditors (45,012) -- --
Loans and finance leases (158,062) -- --
---------------------------------------
225,006 -- --
Goodwill 464,872 19,723 --
---------------------------------------
689,878 19,723 --
---------------------------------------
Satisfied by:
Issue of shares 678,174 9,869 --
Cash 7,391 9,854 --
Accruals for costs incurred 4,313 -- --
---------------------------------------
689,878 19,723 --
---------------------------------------
5.27 ANALYSIS OF NET OUTFLOW OF CASH EQUIVALENTS IN RESPECT OF THE PURCHASE OF
SUBSIDIARY UNDERTAKINGS
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Cash consideration (7,391) (9,854) --
Payment of prior year accrual for
acquisition costs -- (4,313) --
Cash at bank and in hand acquired 4,159 -- --
---------------------------------------
Net outflow of cash and cash
equivalents (3,232) (14,167) --
---------------------------------------
</TABLE>
5.28 RELATED PARTY TRANSACTIONS
IDENTITY OF RELEVANT RELATED PARTIES
Tele-Communications International, Inc. ("TCI") and U S WEST Inc. ("U S
WEST") are related parties of the Group. Cox Communications, Inc.
("Cox") and SBC Communications, Inc. ("SBC") are also considered to be
related parties of the Group, in that they control substantial
proportions of the voting rights of the Group and hence are able to
exert influence over its financial and operating policies.
Birmingham Cable Limited and Cable London plc (together the
"Associates") are related parties of the Group by virtue of their status
as associated companies.
NATURE OF TRANSACTIONS
Transactions with related parties, other than those described in other
notes to the financial statements, were as follows:
II-25
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
The Group, in the normal course of providing cable television services,
purchases certain of its programming from associates of TCI. Such
programming is purchased on commercially available terms. Total
purchases in the year amounted to (Pounds)9,681,000 (1996:
(Pounds)6,951,000). The amount due to subsidiaries of TCI at 31 December
1997 is (Pounds)2,375,000 (1996: (Pounds)1,470,000).
The Group has management agreements with TCI, U S WEST, Cox and SBC
under which amounts are paid for employees who have been seconded to the
Group. The amounts charged under these agreements during the year and
total amounts due to TCI, U S WEST, Cox and SBC at 31 December 1996 and
1997 are set out below:
<TABLE>
<CAPTION>
AMOUNTS CHARGED UNDER TOTAL AMOUNTS DUE
MANAGEMENT AGREEMENTS AT 31 DECEMBER
RELATED PARTY ------------------------- -------------------------
1996 1997 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
TCI 375 1 810 43
U S WEST 1,810 967 365 198
Cox 281 202 600 357
SBC 93 -- -- --
---------------------------------------------------
</TABLE>
The Group has entered into consulting agreements with the Associates to
provide consulting services relating to telephony operations. Under the
agreements, the Group receives an annual fee based upon the revenue of
the Associates. The Group also receives a fee for providing switching
services to the Associates comprising a fixed element based on a number
of switches and a variable element based on a number of lines. Fees
received during 1997 in respect of these services amount to
(Pounds)1,526,000 (1996: (Pounds)1,383,000). The amounts due at 31
December 1997 from the Associates in respect of these services were
(Pounds)3,112,000 (1996: (Pounds)2,524,000).
5.29 PRINCIPAL SUBSIDIARY UNDERTAKINGS
Except where otherwise stated, the Company owns indirectly 100% of the
ordinary share capital of the following principal subsidiary companies
and holds indirectly a 100% interest in the following partnerships and
joint ventures. The Company also indirectly owns preference shares in
the subsidiary companies which are separately disclosed. The subsidiary
companies are incorporated in Great Britain and registered in England
and Wales except for the Scottish companies, being those companies
indicated by *, which are registered in Scotland. The proportion of the
ordinary shares held by the Group also represents the proportion of
voting rights held by the Group with the exception of Cable Guide
Limited, in which the Group holds 66.67% of the voting rights.
The principal activities of these entities, unless otherwise indicated,
are the building and operation of cable television and telephony
networks in the United Kingdom.
II-26
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
All subsidiary undertakings have been included in the consolidated
financial statements.
<TABLE>
<CAPTION>
COMPANIES
<S> <C>
Cable Adnet Limited Telewest Communications (Midlands)
Limited
Cable Guide Limited (Publisher)
(The company owns indirectly 70%
of the ordinary shares and 60% of
the cumulative convertible Telewest Communications (Midlands &
preference shares) North West) Limited
Cable Internet Limited Telewest Communications (Motherwell)
Limited*
Telewest Communications (Central Telewest Communications Networks
Lancashire)Limited Limited (Management Company)
Telewest Communications (Cotswolds) Telewest Communications (North East)
Limited Limited
Telewest Communications Telewest Communications (North West)
(Cumbernauld) Limited* Limited
Telewest Communications (Dumbarton) Telewest Communications Scotland
Limited* Holdings Limited* (holding company)
Telewest Communications (Dundee and Telewest Communications (Scotland)
Perth) Limited* Limited*
Telewest Communications (East Telewest Communications (South East)
Lothian and Fife) Limited* Limited
Telewest Communications (Falkirk) Telewest Communications (South Thames
Limited* Estuary) Limited
Telewest Communications (Fylde & Telewest Communications (South West)
Wyre) Limited Limited
Telewest Communications Telewest Communications (Southport)
(Glenrothes) Limited* Limited
Telewest Communications Group Telewest Communications (St Helens &
Limited (management company) Knowsley) Limited
Telewest Communications (Liverpool) Telewest Communications (Telford)
Limited Limited
Telewest Communications (London Telewest Communications (Wigan)
South) Limited Limited
Telewest Communications (Worcester)
Limited
<CAPTION>
PARTNERSHIPS
NAME PRINCIPAL PLACE OF BUSINESS
<S> <C>
Avon Cable Limited Partnership Bristol
Cotswold Cable Limited Partnership Cheltenham
Edinburgh Cable Limited Partnership Edinburgh
Estuaries Cable Limited Partnership Basildon
London South Cable Partnership Croydon
Telewest Communications (North
East) Partnership Newcastle
Telewest Communications (South
East) Partnership Basildon
Tyneside Cable Limited Partnership Newcastle
United Cable (London South) Limited
Partnership Croydon
<CAPTION>
JOINT VENTURES
NAME PRINCIPAL PLACE OF BUSINESS
<S> <C>
Avon Cable Limited Partnership and
Telewest Communications (South
West) Limited joint venture Bristol
London South Cable Partnership and
Telewest Communications (London
South) Limited joint venture Croydon
Telewest Communications (Cotswolds)
Venture Cheltenham
Telewest Communications (Scotland)
Venture Edinburgh
</TABLE>
5.30 PRINCIPAL ASSOCIATED UNDERTAKINGS AND OTHER PARTICIPATING INTERESTS
ASSOCIATED UNDERTAKINGS
<TABLE>
<CAPTION>
PERCENTAGE
NAME ISSUED AND FULLY PAID UP SHARE CAPITAL SHAREHOLDING
<S> <C> <C>
Birmingham Cable
Corporation Limited 51,073,486 ordinary shares of (Pounds)1 each 27.47
Cable London plc 55,572,916 ordinary shares of 10 pence each 50.00**
Front Row Television
Limited 707,193 ordinary shares of 10 pence each 40.00
</TABLE>
II-27
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
Cable London has also issued (Pounds)45,000,000 of convertible loan
stock which is convertible into ordinary shares. The Group held
(Pounds)22,500,000 of the issued loan stock at 31 December 1997.
All associated undertakings operate in the United Kingdom, are
incorporated in Great Britain and are registered in England and Wales.
The principal activities of Birmingham Cable Corporation Limited and
Cable London plc are the building and operation of cable television and
telephony networks. The principal activity of Front Row Television
Limited is the provision of pay-per-view cable television.
** The investment is held directly by Telewest Communications plc.
PARTICIPATING INTERESTS
<TABLE>
<CAPTION>
PERCENTAGE
NAME ISSUED AND FULLY PAID UP SHARE CAPITAL SHAREHOLDING
<S> <C> <C>
The Cable Corporation
Limited 18,225,389 ordinary shares of 25 pence each 17.45
1,000,000 ordinary "B" shares of (Pounds)6.50 each --
2 special shares of 25 pence each --
Percentage shareholding
of total ordinary
shares 16.50
</TABLE>
The principal activities of The Cable Corporation Limited are the
building and operation of cable television and telephony networks in the
United Kingdom. The Cable Corporation Limited is incorporated in Great
Britain and is registered in England and Wales.
II-28
<PAGE>
SECTION ONE UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
II-29
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
Set out below is an extract from the text of Telewest's unaudited results for
the three months ended 31 March 1998, which were announced on 7 May 1998:
<TABLE>
<CAPTION>
"TELEWEST COMMUNICATIONS PLC
1ST QUARTER RESULTS 1998
<S> <C> <C>
EBITDA (Pounds)25.8m +254%
Revenue (Pounds)110.4m +22.2%
CATV margin 42.8% +3.7% points
Telephony margin 77.1% +6.5% points
Household penetration 34.5% +0.7% points
</TABLE>
<TABLE>
<CAPTION>
QUARTER ENDING MAR. '98 MAR. '97 DEC. '97
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Television
Customers 617,877 541,728 (+14.1%) 605,988 (+2.0%)
Penetration 22.1% 22.2% (-0.1% points) 22.0% (+0.1% points)
Churn 34.8% 32.6% (+2.2% points) 34.0% (+0.8% points)
Av. Rev. per cust. (Pounds)23.72 (Pounds)23.57 (+0.6%) (Pounds)23.40 (+1.4%)
Residential telephony
Customers 831,585 669,577 (+24.2%) 810,358 (+2.6%)
Penetration 30.1% 28.2% (+1.9% points) 29.7% (+0.4% points)
Churn 20.5% 19.5% (+1.0% point) 20.0% (+0.5% points)
Av. Rev. per line (Pounds)19.10 (Pounds)20.31 (-6.0%) (Pounds)19.19 (-0.5%)
Business telephony
Lines 110,015 74,540 (+47.6%) 100,989 (+8.9%)
Av. Lines per cust. 4.1 3.5 (+17.1%) 4.0 (+2.5%)
Av. Rev. per line (Pounds)42.81 (Pounds)43.68 (-2.0%) (Pounds)43.62 (-1.9%)
Av. Rev. per cust. (Pounds)173.40 (Pounds)145.73 (+19.0%) (Pounds)158.05 (+9.7%)
Internet
Dial-up customers 17,059 4,895 (+248.5%) 16,713 (+2.1%)"
</TABLE>
Telewest today announced its 1st quarter results.
Commenting on the results Charles Burdick, Group Finance Director, said:
"The financial results for the first quarter of 1998 reflect substantial
progress following the restructuring of the business towards the end of last
year and underscore the strategic rationale of our proposed merger with General
Cable. Turnover has increased by 22.2% to (Pounds)110.4m with all revenue
streams contributing to the growth. EBITDA of (Pounds)25.8m has been achieved
through growth in customer numbers, margin improvements and continued emphasis
on the control of operating costs evidenced by declining SG&A in the face of
substantial growth in customer volumes and revenues.
Telephony margins increased 6.5% to 77.1% as a result of the increased volume
of traffic carried solely on our own networks and continued favourable terms in
interconnect provision. Second line penetration is 3.9% up from 1.5% reflecting
growth in the use of the Internet. The programming strategy we have employed
with our Millennium packages is creating a more favourable distribution of
services amongst our customer base. The change in product distribution, coupled
with revised contract arrangements with programme suppliers, contributed to an
increase of 3.7% in CATV margins to
II-30
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
42.8%. The recently announced ITC proposal on programme "bundling' is designed
to promote consumer choice and is welcomed by the company.
The company ended Q1, 1998 with (Pounds)1.42 billion of debt split between
(Pounds)0.55 billion of Senior Bank debt and (Pounds)0.87 billion of bond debt.
The company remains fully funded and is operating comfortably within its
recently restructured bank facilities. We are looking at financing options in
regard to the exercise of our pre-emption rights resulting from the Comcast/NTL
merger and the possible purchase of the Birmingham Cable and Cable London
shares held by Comcast.
David Van Valkenburg, Interim Chief Executive Officer of Telewest, continued:
1998 is off to a promising start. With the restructuring of the business now
behind us we have been able to concentrate of our core products. We now have
1,106,169 customers serviced by our owned and operated and affiliated
franchises.
Cable Television penetration is at 22.1% up 0.1% points on the previous
quarter while residential telephony penetration reached 30.1% up 0.4% points on
Q4 1997. An increase in churn over the previous quarter for both television (up
0.8% points) and telephone (up 0.5% points) was due in part to service related
issues flowing from our restructuring and the price increases of 1 November. We
are focusing the efforts of the company towards reducing this number.
Sales of the Millennium packages, launched in February, have exceeded
expectations. The majority of new subscribers are in re-market areas which
demonstrates the new audience created for our service offerings. This is
evidenced by total sales relative to the number of fresh homes available to
market. Despite a reduction in the number of fresh homes released to market,
gross sales for the quarter compare favourably to the corresponding period in
1997.
Excellent results were achieved in our business services division. Customers
increased to 26,532, a rise of 4.1% for the quarter and lines increased by 8.9%
to 110,015. Our business customers for the quarter averaged 8.5 lines and in
total now average 4.1 lines each, a slight increase on the previous quarter and
a continuation of the upward trend.
On 15 April 1998 we announced that Telewest and General Cable had agreed
terms of a proposed merger to be achieved by way of a recommended offer by
Telewest for General Cable shares. Documents are expected to be posted to
shareholders in June/July 1998. We have already started the planning process
for the integration of our two companies and expect this to progress smoothly.
With the strong results of the first quarter and the inclusion of General
Cable into an enlarged group we have an excellent platform for continued growth
and are positioned to assume market leadership."
II-31
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
The announcement continued including the financial information set out below:
"UNAUDITED SUMMARISED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE THREE MONTHS
ENDED 31 MARCH 1998
<TABLE>
<CAPTION>
Note 3 MONTHS 3 MONTHS
YEAR ENDED ENDED ENDED
31 DECEMBER 31 MARCH 31 MARCH
1997 1997 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
TURNOVER
Cable television 159,918 38,101 44,180
Telephony -- residential 166,645 39,674 48,436
Telephony -- business 43,882 9,287 13,502
Other (Internet, Ad Sales etc) 16,053 3,328 4,306
----------------------------------------
386,498 90,390 110,424
----------------------------------------
OPERATING LOSS (127,764) (30,172) (20,965)
Share of results of associated
undertakings (21,312) (4,978) (6,704)
Other interest receivable and
similar income 9,097 2,483 1,637
Interest payable and similar
charges 3 (169,930) (36,878) (44,213)
----------------------------------------
Loss on ordinary activities
before tax (309,909) (69,545) (70,245)
Tax on loss on ordinary
activities (521) (64) 20
----------------------------------------
(310,430) (69,609) (70,225)
Minority interest (293) (117) (26)
----------------------------------------
LOSS FOR THE FINANCIAL PERIOD (310,723) (69,726) (70,251)
----------------------------------------
Loss per equity share (21.8) (4.9) (4.9)
----------------------------------------
- -------------------------------------------------------------------------------
NOTES
1 EARNINGS/(LOSS) BEFORE
INTEREST, TAXES, DEPRECIATION,
AND AMORTISATION ("EBITDA")
Operating loss (127,764) (30,172) (20,965)
Add: Depreciation 177,341 37,456 46,724
----------------------------------------
EBITDA 49,577 7,284 25,759
----------------------------------------
2 OPERATING COSTS
Programming expenses 93,441 23,198 25,257
Telephony expenses 50,145 14,379 14,201
Selling, general, and
administrative expenses 193,335 45,529 45,207
Depreciation 177,341 37,456 46,724
----------------------------------------
514,262 120,562 131,389
----------------------------------------
3 INTEREST PAYABLE AND SIMILAR
CHARGES
On bank loans and overdrafts
and other loans
Wholly repayable within 5 years 16,941 3,320 1,064
Wholly or partly repayable in
more than 5 years 14,741 539 9,846
Finance costs of Senior
Discount Debentures 71,661 16,815 19,854
Finance costs of Senior
Debentures 22,657 5,657 5,686
Finance charges payable in
respect of finance lease and
hire purchase contracts 4,702 1,109 1,243
Exchange losses on foreign
currency translation, net 30,954 7,517 1,316
Other 8,274 1,921 5,204
----------------------------------------
169,930 36,878 44,213
----------------------------------------
</TABLE>
II-32
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
UNAUDITED SUMMARISED CONSOLIDATED BALANCE SHEET AT 31 MARCH 1998
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH 31 MARCH
1997 1997 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
FIXED ASSETS 1,809,213 1,657,750 1,785,383
----------------------------------------
CURRENT ASSETS
Stocks 32 62 96
Debtors 70,457 79,821 81,741
Cash at bank and in hand 29,582 106,802 43,875
----------------------------------------
100,071 186,685 125,712
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR (334,756) (220,425) (228,100)
----------------------------------------
NET CURRENT LIABILITIES (234,685) (33,740) (102,388)
----------------------------------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 1,574,528 1,624,010 1,682,995
CREDITORS: AMOUNTS FALLING DUE
AFTER MORE THAN ONE YEAR (1,305,708) (1,113,359) (1,484,400)
MINORITY INTERESTS (640) (464) (666)
----------------------------------------
CAPITAL AND RESERVES 268,180 510,187 197,929
----------------------------------------
</TABLE>
II-33
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
UNAUDITED SUMMARISED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS
YEAR ENDED ENDED ENDED
31 DECEMBER 31 MARCH 31 MARCH
1997 1997 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES 68,624 (18,706) 9,101
----------------------------------------
RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE
Interest received 3,599 1,045 1,194
Interest paid (63,479) (3,421) (13,090)
Interest element of finance lease
payments (4,702) (151) (1,243)
----------------------------------------
NET CASH OUTFLOW FROM RETURNS ON
INVESTMENTS AND SERVICING OF
FINANCE (64,582) (2,527) (13,139)
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Purchase of tangible fixed assets (436,100) (92,619) (49,345)
Sale of tangible fixed assets 6,066 999 3,188
----------------------------------------
NET CASH OUTFLOW FROM CAPITAL
EXPENDITURE AND FINANCIAL
INVESTMENT (430,034) (91,620) (46,157)
----------------------------------------
ACQUISITIONS AND DISPOSALS
Investment in associated
undertakings and other
participating interests (9,633) (8,505) (2,202)
----------------------------------------
NET CASH OUTFLOW FROM ACQUISITIONS
AND DISPOSALS (9,633) (8,505) (2,202)
<CAPTION>
----------------------------------------
MANAGEMENT OF LIQUID RESOURCES
Increase/(decrease) in fixed
deposits (net) 53,288 (16,052) (10,574)
<CAPTION>
----------------------------------------
FINANCING
Cash paid for credit facility
arrangement costs -- -- (5,900)
Proceeds from borrowings 392,500 150,000 75,000
Repayment of borrowings (2,375) -- (10)
Capital element of finance lease
payments (3,971) (1,020) (2,400)
----------------------------------------
NET CASH INFLOW FROM FINANCING 386,154 148,980 66,690
----------------------------------------
INCREASE/(DECREASE) IN CASH 3,817 11,570 3,719
----------------------------------------
</TABLE>
The consolidated financial statements as set out on pages II-32 to II-34
which are unaudited, have been prepared on the basis of the accounting policies
set out in the Telewest Group's 1997 Annual Report. The balance sheet, profit
and loss account and cash flow statement at 31 December 1997 is derived from
the statutory accounts for 1997 which will be delivered to the Registrar of
Companies following the Company's annual general meeting. The auditors have
reported on those accounts: their report was unqualified and did not contain a
statement under Section 237(2) or (3) of the Companies Act 1985."
II-34
<PAGE>
SECTION ONE UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
II-35
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
GENERAL
The following discussion and analysis of the financial condition and results
of the operations of the Telewest Group should be read in conjunction with the
financial information and related notes of the Telewest Group contained
elsewhere in this document. Capitalised terms used in this section and not
otherwise defined herein have the meanings ascribed to such terms in Part I of
this document.
RESULTS OF OPERATIONS
The following table provides certain operating and financial data for the
three years ended 31 December 1995, 1996 and 1997. It has been extracted
without material adjustment from the Group's published annual report for the
year ended 31 December 1997.
Telewest acquired SBCC on 3 October 1995. Pro forma information has been
included for 1995 to demonstrate the effect of including the results of former
SBCC franchises for the full year ended 31 December 1995. The pro forma
information is not commented upon in the discussion and analysis.
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL HIGHLIGHTS
(all amounts in (Pounds)million)
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
-------------------------------
1995 1995 1996 1997
PROFORMA
<S> <C> <C> <C> <C>
REVENUE:
Cable Television 83.7 64.7 121.2 159.9
Telephony -- residential 81.2 57.6 125.0 166.6
Telephony -- business 20.6 17.4 34.6 43.9
Other 5.7 5.1 9.5 16.1
-------------------------------
Total Revenue 191.2 144.8 290.3 386.5
-------------------------------
OPERATING COSTS AND EXPENSES:
Programming (42.9) (32.2) (69.9) (93.4)
Telephony (38.7) (29.5) (52.7) (50.1)
Selling, general and administrative (137.8) (105.4) (167.3) (193.3)
Depreciation (82.3) (61.5) (129.7) (177.4)
-------------------------------
(301.7) (228.6) (419.6) (514.3)
-------------------------------
Operating loss (110.5) (83.8) (129.3) (127.8)
OTHER INCOME (EXPENSE):
Share of loss of affiliates (12.1) (12.1) (15.2) (21.3)
Financial expenses, net (25.3) (18.8) (105.4) (160.8)
Other (0.7) (0.7) (1.0) (0.8)
-------------------------------
Net loss (148.6) (115.4) (250.9) (310.7)
-------------------------------
</TABLE>
- --------------------------------------------------------------------------------
II-36
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
SUMMARY OF OPERATIONS FOR THE YEARS ENDED 31 DECEMBER 1997 AND 1996
The Telewest Group's consolidated revenue increased by (Pounds)96.2 million
or 33% from (Pounds)290.3 million in 1996 to (Pounds)386.5 million in 1997. The
increase was attributable to the larger customer base created by the Telewest
Group's continuing network construction and penetration and price increases in
certain segments of its business.
CABLE TELEVISION REVENUE
Cable television revenue increased by 32% from (Pounds)121.2 million in 1996
to (Pounds)159.9 million in 1997. The increase was primarily attributable to a
28% increase (from 440,212 to 562,343) in the average number of customers in
1997 over 1996. The increase in the average number of customers is a result of
an increase in the number of homes passed and marketed (from 2,335,953 at 31
December 1996 to 2,760,184 at 31 December 1997).
Average monthly revenue per cable television customer increased 2% from
(Pounds)22.95 in 1996 to (Pounds)23.40 in 1997. This was due to the expansion
of pay-per-view events, a decrease in promotional discounts offered by the
Telewest Group and price increases implemented from 1 November 1997.
TELEPHONY REVENUE
Telephony revenue increased by 32% from (Pounds)159.6 million in 1996 to
(Pounds)210.5 million in 1997.
Residential telephony revenue increased by 33% from (Pounds)125.0 million in
1996 to (Pounds)166.6 million in 1997. Business telephony revenue increased by
27% from (Pounds)34.6 million in 1996 to (Pounds)43.9 million in 1997.
The increase in residential telephony in 1997 over 1996 was primarily due to
a 42% increase (from 514,156 to 732,487) in the average number of residential
lines. This resulted from an increase in the number of homes passed and
marketed (from 2,254,734 at 31 December 1996 to 2,725,154 at 31 December 1997)
and an increase in penetration of the total base of homes passed of 2.2
percentage points. The revenue increase from the growth in the average number
of residential lines was partially offset by a 5% decrease in the average
monthly revenue per residential line, from (Pounds)20.26 in 1996 to
(Pounds)19.19 in 1997. This decrease was mainly attributable to price
reductions in per minute call charges in response to price cutting by BT, the
Telewest Group's main competitor in residential telephony. The Telewest Group
intends to continue to reduce per minute call tariffs as necessary to compete
effectively and to seek to mitigate the revenue impact of these reductions
through higher line rentals, increased call volumes and sales of value added
services such as call-waiting and voice-messaging.
The increase in business telephony revenue in 1997 over 1996 was primarily
attributable to a 58% increase (from 52,849 to 83,552) in the average number of
business telephony lines in 1997, which was partially offset by a 20% decrease
in the average monthly revenue per business line, from (Pounds)54.50 in 1996 to
(Pounds)43.62 in 1997. This decrease was mainly attributable to price
reductions in per minute call charges and increased volume discounts, together
with increased sales of Centrex, a business telecommunications product which
provides more lines to customers but has a lower average monthly revenue per
line.
Other revenue increased by 70% from (Pounds)9.5 million in 1996 to
(Pounds)16.1 million in 1997. Other revenue is derived primarily from
management services provided to Affiliated Companies, Internet sales, cable
publications and network management services provided to other operators, and
advertising sales.
II-37
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OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
OPERATING COSTS AND EXPENSES
The Telewest Group's consolidated operating costs and expenses (which include
direct costs of programming and interconnection; selling, general and
administrative expenses; depreciation and amortisation expenses) increased by
23% from (Pounds)419.6 million in 1996 to (Pounds)514.3 million in 1997.
Programming fees are the largest component of the Telewest Group's operating
costs in providing cable television services. The Telewest Group obtains most
of its programming under contracts which provide for payments based upon the
number of subscribers. As a percentage of cable television revenues,
programming costs remained stable at 58% in both 1996 and 1997.
Interconnection charges are the largest component of the Telewest Group's
telephony operating costs in providing telephony services. As a percentage of
telephony revenue, telephony operating costs decreased from 33% in 1996 to 24%
in 1997 due to the continuing reduction in interconnection charges in the UK
telephony market, a growing percentage of calls handled within the Telewest
network and by credits relating to interconnection charges from earlier
periods, which had been recalculated based on the final agreed rates applicable
for that period.
Selling, general and administrative expenses, which include, among other
items, salary and marketing costs, decreased as a percentage of revenue from
58% in 1996 to 50% in 1997. The improvement was largely due to the rapid growth
in revenues and continued reduction in support costs per customer as the
Telewest Group benefited from the economies of scale resulting from its
enlarged operations. The Telewest Group expects that selling, general and
administrative expenses will continue to decline as a percentage of revenue as
revenues increase, efficiency gains from its fixed cost base are increasingly
exploited, and the full year benefits of a restructuring and redundancy
programme, completed in 1997, take effect. The restructuring programme,
announced in August 1997, resulted in a reduction in headcount of 1,400 staff
and contractors at a cost of approximately (Pounds)3 million, and is expected
to result in cash savings of approximately (Pounds)40 million in 1998. Total
labour and overhead costs capitalised in 1997 were (Pounds)76.9 million,
compared to (Pounds)54.0 million in 1996.
Depreciation expense increased 37% from (Pounds)129.7 million in 1996 to
(Pounds)177.3 million in 1997. The increase of (Pounds)47.6 million was
principally attributable to capital expenditure associated with the Telewest
Group's continuing construction activities ((Pounds)37.2 million) and a
reclassification of certain network assets in 1997 ((Pounds)10.4 million), as
set out in Note 5.2.6 to the UK GAAP financial statements.
OTHER INCOME/(EXPENSE)
The Telewest Group's share of the net losses of its Affiliated Companies
accounted for under the equity method, principally Birmingham Cable and Cable
London, was (Pounds)21.3 million and (Pounds)15.2 million in 1997 and 1996,
respectively.
Financial expenses, net, consisted primarily of interest expense of
(Pounds)139.0 million in 1997 ((Pounds)96.8 million in 1996), and foreign
exchange losses of (Pounds)31.0 million in 1997 ((Pounds)25.9 million in 1996)
offset in part by interest income earned on short-term investments and loans to
Affiliated Companies of (Pounds)9.1 million in 1997 ((Pounds)17.2 million in
1996).
Interest expense increased by (Pounds)42.2 million in 1997 primarily as a
result of the interest expense on higher outstanding borrowings relating to the
Senior Secured Facility and the higher accrued interest expense on the Senior
Discount Debentures issued by the Telewest Group in October 1995. The
debentures are described in the following discussion on "Liquidity and Capital
Resources." The foreign exchange losses in 1997 primarily relate to the
amortisation of the foreign currency option premium
II-38
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OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
which hedges the Senior Discount Debentures and the amortisation of exchange
losses arising on the translation of the debentures to Sterling using the
contracted exchange rate of the option. It is the Telewest Group's policy to
hedge non-Sterling denominated borrowings to reduce or eliminate exchange rate
exposure.
SUMMARY OF OPERATIONS FOR THE YEARS ENDED 31 DECEMBER 1996 AND 1995
The acquisition of SBCC on 3 October 1995 has been accounted for in the 1995
consolidated financial statements under the acquisition method of accounting.
Therefore, the 1995 consolidated profit and loss account includes the results
of SBCC from 3 October 1995 to 31 December 1995. The 1996 consolidated profit
and loss account includes the results of SBCC for the full year.
The Telewest Group's consolidated revenue increased by (Pounds)145.5 million
or 100% from (Pounds)144.8 million in 1995 to (Pounds)290.3 million in 1996.
The increase was attributable to the inclusion of the results of the former
SBCC franchises for a full year in 1996 and to the larger customer base created
by the enlarged Group's continuing network construction.
CABLE TELEVISION REVENUE
Cable television revenue increased by 87% from (Pounds)64.7 million in 1995
to (Pounds)121.2 million in 1996. The increase was primarily attributable to a
74% increase (from 253,049 to 440,212) in the average number of customers in
1996 over 1995. The increase in the average number of customers resulted from
the inclusion for a full year in 1996 of the results of the former SBCC
franchises (which contributed an average of 165,855 customers in 1996 compared
to an average of 35,192 customers in 1995) and from an increase in the number
of homes passed and marketed in the other franchises (from 1,142,860 at 31
December 1995 to 1,460,463 at 31 December 1996).
Average monthly revenue per cable television customer increased 8% from
(Pounds)21.32 in 1995 to (Pounds)22.95 in 1996. This was a result of an
increase in the basic channel charge implemented in December 1995 and the
additional revenue generated from pay-per-view programming. This was, however,
partially offset by a decrease in the average number of premium channels
purchased per customer due to the inclusion for a full year in 1996 of the
results of the former SBCC franchises which historically had a lower average
number of premium channels purchased per customer.
TELEPHONY REVENUE
Telephony revenue increased by 113% from (Pounds)75.0 million in 1995 to
(Pounds)159.6 million in 1996.
Residential telephony revenue increased by 117% from (Pounds)57.6 million in
1995 to (Pounds)125.0 million in 1996. Business telephony revenue increased by
98% from (Pounds)17.4 million in 1995 to (Pounds)34.6 million in 1996.
The increase in residential telephony in 1996 over 1995 was primarily due to
a 119% increase (from 234,400 to 514,156) in the average number of residential
lines. This increase resulted from the inclusion for a full year in 1996 of the
results of the former SBCC franchises (which contributed an average of 229,751
lines in 1996 compared to an average of 45,117 lines in 1995), and from an
increase in the number of homes passed and marketed in the other franchises
(from 968,863 at 31 December 1995 to 1,380,484 at 31 December 1996). The
revenue increase from the growth in the average number of residential lines was
slightly offset by a 1% decrease in the average monthly revenue per residential
line, from (Pounds)20.48 in 1995 to (Pounds)20.26 in 1996. This decrease was
mainly attributable to
II-39
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TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
price reductions in per minute call charges in response to price cutting by BT,
which were offset by increases in line rental rates.
The increase in business telephony revenue in 1996 over 1995 was primarily
attributable to a 114% increase (from 24,681 to 52,849) in the average number
of business telephony lines in 1996, which was partially offset by an 8%
decrease in the average monthly revenue per business line, from (Pounds)58.92
in 1995 to (Pounds)54.50 in 1996. This decrease was attributable to price
reductions in per minute call charges in response to competition and increased
sales of Centrex.
Other revenue increased by 89% from (Pounds)5.0 million in 1995 to
(Pounds)9.5 million in 1996. Other revenue was derived primarily from
management services provided to Affiliated Companies, cable publications and
network management services provided to other operators, and advertising sales.
OPERATING COSTS AND EXPENSES
The Telewest Group's consolidated operating costs and expenses (which include
direct costs of programming and interconnection; selling, general and
administrative expenses; depreciation expense and amortisation expense)
increased by 84% from (Pounds)228.6 million in 1995 to (Pounds)419.6 million in
1996.
As a percentage of cable television revenues, programming costs increased
from 50% in 1995 to 58% in 1996 as a result of programming fee increases,
providing more channels in the basic cable television package with no price
increase and the inclusion for a full year in 1996 of the results of the former
SBCC franchises which have higher per channel programming costs.
Interconnection charges are the largest component of the Telewest Group's
telephony operating costs in providing telephony services. As a percentage of
telephony revenue, telephony operating costs decreased from 39% in 1995 to 33%
in 1996 as line rental income, which incurs no third-party cost, represented a
larger proportion of total average revenue per line in 1996 than in 1995.
Interconnection charges in 1996 also were reduced by credits relating to
interconnection charges from earlier periods which had been calculated based on
revised estimates of prevailing interconnection charges in the UK.
Selling, general and administrative expenses, which include, among other
items, salary and marketing costs, decreased as a percentage of revenue from
73% in 1995 to 58% in 1996. The majority of this improvement was due to the
rapid growth in revenues and continued reduction in support costs per customer,
with the balance -- accounting for 5 percentage points of the year-on-year
reduction -- due to revised estimates used in determining the proportion of
labour and overhead costs which are capitalised as network assets. Total labour
and overhead costs capitalised in 1996 were (Pounds)54.0 million, compared to
(Pounds)26.6 million in 1995.
Depreciation expense increased 111% from (Pounds)61.5 million in 1995 to
(Pounds)129.7 million in 1996. This increase was principally attributable to
capital expenditure associated with the Telewest Group's continuing
construction activities, a full year of depreciation expense recorded in the
former SBCC franchises, and a reduction in the estimated useful lives of
certain network assets in 1996 as set out in Note 5.2.6 to the UK GAAP
financial information.
OTHER INCOME/(EXPENSE)
The Telewest Group's share of the net losses of the Telewest Affiliated
Companies accounted for under the equity method, principally Birmingham Cable
and Cable London, was (Pounds)15.2 million and (Pounds)12.1 million in 1996 and
1995, respectively.
II-40
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TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
Financial expenses, net, consisted primarily of interest expense of
(Pounds)96.8 million in 1996 ((Pounds)23.8 million in 1995), and foreign
exchange losses of (Pounds)25.9 million in 1996 ((Pounds)4.7 million in 1995)
offset in part by interest income earned on short-term investments and loans to
Telewest Affiliated Companies of (Pounds)17.2 million in 1996 ((Pounds)15.6
million in 1995). In 1995, financial expenses also included an accounting loss
on the sale of interest rate swaps of (Pounds)5.5 million.
Interest expense increased by (Pounds)73.0 million in 1996 primarily as a
result of the interest payments and accrued interest expense on the Senior
Debentures and the Senior Discount Debentures, issued by the Telewest Group in
October 1995. The foreign exchange losses in 1996 primarily relate to the
amortisation of the foreign currency option premium which hedges the Senior
Discount Debentures and the amortisation of exchange losses arising on the
translation of the debentures to Sterling using the contracted exchange rate of
the option. It is the Group's policy to hedge non-Sterling denominated
borrowings to reduce or eliminate exchange rate exposure.
LIQUIDITY AND CAPITAL RESOURCES
On 22 May 1996 the Telewest Group entered into a (Pounds)1.2 billion senior
secured credit facility with a syndicate of banks (the "Senior Secured
Facility"). The Senior Secured Facility is being used to finance the capital
expenditure, working capital requirements and other permitted related
activities for the construction and operation of the wholly owned telephony and
television franchises of the Telewest Group; to fund the payment of cash
interest on the Senior Debentures and Senior Discount Debentures; to fund the
repayment of existing secured borrowings of the Telewest Group in respect of
the London South and South West Regional Franchise Areas; to fund loans to or
investments in Telewest Affiliated Companies; to fund the acquisition and
subsequent construction of local delivery operators/franchises; and to
refinance advances and the payment of interest, fees and expenses in respect of
the Senior Secured Facility.
In connection with the restructuring of the Telewest Group's activities,
including the slowdown of construction activity, the terms of the Senior
Secured Facility were amended in the first quarter of 1998. The amount of the
Senior Secured Facility has been reduced to (Pounds)1.0 billion and the
Telewest Group has entered into a second secured facility (the "Second Secured
Facility") of (Pounds)100 million with certain of the banks that are party to
the Senior Secured Facility. In addition certain changes were made to the
financial covenants to accommodate the Telewest Group's anticipated cashflows.
The repayment dates for tranche A have been accelerated by three months as
described below.
The Senior Secured Facility is divided into two tranches, the first ("tranche
A") is available on a revolving basis for up to (Pounds)300 million, reduced to
(Pounds)100 million by 31 March 1998, with full repayment by 30 September 1998.
The second tranche ("tranche B") is available on a revolving basis concurrently
with tranche A for an amount up to 6.5 times the trailing, rolling six month
annualised consolidated net operating cash flow, gradually reducing throughout
the period of the facility to 4 times by 1 January 2000. Thereafter, the amount
outstanding under the facility converts to a term loan amortising over 5 years.
The aggregate drawing at any time under both tranches cannot exceed (Pounds)1.0
billion. Borrowings under the Senior Secured Facility are secured by assets,
including the partnership interests and shares of subsidiaries of the Telewest
Group, and bear interest at 2.25% above LIBOR for tranche A and between 0.5%
and 1.875% above LIBOR (depending on the ratio of borrowings to the trailing,
rolling six month annualised consolidated net operating cash flow) for tranche
B. The Telewest Group's ability to borrow under the Senior Secured Facility is
subject to, among other things, its compliance with the financial and other
covenants and borrowing conditions contained therein, and the failure to comply
with such covenants could result in all such amounts outstanding under the
facility becoming due and payable.
II-41
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TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
The Second Secured Facility is available from 1 July 1999 to 30 June 2001.
Advances under the Second Secured Facility may be drawn only if the Senior
Secured Facility has been drawn down to the fullest extent possible at the
relevant time. The Second Secured Facility is available on a revolving basis to
provide an aggregate under the Senior Secured Facility and the Second Secured
Facility of up to six times the trailing, rolling six month annualised
consolidated net operating cash flow through 31 December 1999, gradually
reducing thereafter throughout the period of the facility to 4.5 times by
1 January 2001. On 30 June 2001, the amount outstanding under the Second
Secured Facility converts to a term loan amortising over 5 years. Borrowings
under the Second Secured Facility bear interest at a rate equal to LIBOR plus a
margin that increases during the period of the facility from 3.5% per annum
through 31 December 1999, 4.5% per annum from 31 December 1999 through 30 June
2000 and to 5.5% per annum from 30 June 2000 to 30 June 2006. The provisions as
to prepayment, covenants and events of default in respect of the Second Secured
Facility are substantially similar to those for the Senior Secured Facility.
The Telewest Group has entered into certain delayed starting interest rate
swap agreements in order to manage interest rate risk on the Senior Secured
Facility. The interest rate swaps convert floating rate interest payable on
drawdowns under the facility to fixed interest rate payments in the range of
7.835%-7.975%. The swap agreements, which commenced in early 1997, have a five-
year maturity and a notional principal amount which adjusts upwards on a semi-
annual basis to a maximum of (Pounds)750 million.
On 3 October 1995, the Telewest Group raised (Pounds)734 million through the
issue of $300 million principal amount of 9 5/8% Senior Debentures due 2006
(the "Senior Debentures") and $1,536 million
principal amount at maturity of 11% Senior Discount Debentures due 2007 (the
"Senior Discount Debentures"). Interest on the Senior Debentures is payable
semi-annually and commenced on 1 April 1996. Interest on the Senior Discount
Debentures will be payable semi-annually commencing on 1 April 2001. The
proceeds of the issue were used by the Telewest Group to fund general working
capital, capital expenditures, additional investments in affiliated companies,
to repay a credit facility entered into by a direct wholly owned subsidiary and
to purchase the currency hedge arrangements described below.
The Telewest Group's hedge instruments relating to the debentures, are a
combined foreign currency and interest rate swap ("Foreign Currency Swap") and
a foreign currency option. The Foreign Currency Swap fully hedges against
adverse exchange rate fluctuations on the principal amount of the Senior
Debentures and the associated interest payments. The foreign currency option
provides protection against exchange rate fluctuations on the Senior Discount
Debentures below a rate of $1.452:(Pounds)1, and allows the Telewest Group to
benefit from positive exchange rate movements. Both hedging instruments provide
protection up to 1 October 2000, the early redemption date of the Senior
Debentures and the Senior Discount Debentures.
The Telewest Group's results may be materially influenced by future exchange
rate movements, due to the requirement that the hedge instruments are marked to
their market value at the end of the financial period and the US Dollar
denominated debentures are re-translated to Pounds Sterling using the period
end exchange rate.
The Telewest Group has established a Steering Committee to oversee the
procedures for compliance with Year 2000 requirements. The Committee's work is
reviewed periodically by internal and external auditors, and integrated with
similar programmes run by the major corporate shareholders. The project
objective is to ensure complete compliance in advance of the year 2000,
II-42
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UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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SECTION ONE UK FINANCIAL INFORMATION
which is facilitated by the relatively modern systems in use in the Telewest
Group and the planned upgrades in 1998 of critical operating systems based on
external package solutions that are Year 2000 compliant.
The Telewest Group incurred a net cash inflow/(outflow) from operating
activities of (Pounds)(10.2) million, (Pounds)28.5 million, (Pounds)68.6
million and (Pounds)9.1 million in 1995, 1996, 1997 and the three month period
ended 31 March 1998, respectively. The Telewest Group incurred a net cash
outflow from investing activities of (Pounds)265.8 million, (Pounds)483.2
million, (Pounds)439.7 million and (Pounds)48.4 million in 1995, 1996, 1997 and
the three month period ended 31 March 1998, respectively. The Telewest Group's
principal investing activities continue to be the construction of the network,
although at a reduced rate, and the provision of funding to the Telewest
Affiliated Companies.
Cash provided by financing activities amounted to (Pounds)480.8 million,
(Pounds)79.0 million, (Pounds)386.2 million and (Pounds)66.7 million in 1995,
1996, 1997 and the three month period ended 31 March, 1998, respectively. Cash
provided by financing activities was principally related to the drawdown of
(Pounds)100.0 million, (Pounds)392.5 million and (Pounds)75 million under the
Senior Secured Facility in 1996, 1997 and the three month period ended 31 March
1998, respectively.
At 31 December 1995, 1996, 1997 and 31 March 1998, respectively, the
construction of the Telewest Group's broadband network had passed approximately
52.5%, 65.0%, 75.0% and 75.4% of the homes in its owned and operated franchise
areas. Total capital expenditure in 1995, 1996 and 1997, respectively, was
(Pounds)269.1 million, (Pounds)515.6 million and (Pounds)440.6 million. The
substantial reduction in total capital expenditure was due to the Telewest
Group reducing the pace of its network construction and its expenditure on
certain discretionary capital projects.
The Telewest Group is obligated under the terms of its telecommunications
licences to construct its network to pass a specified number of premises by
prescribed dates. If such milestones are not met, the Telewest Group may be
subject to enforcement action from regulatory authorities which, if not
complied with, could result in revocation of the Telewest Group's
telecommunications licences.
Cash and deposit balances at 31 December 1995, 1996, 1997 and 31 March 1998,
respectively, were (Pounds)464.8 million, (Pounds)79.1 million, (Pounds)29.6
million and (Pounds)43.9 million, respectively.
For additional information concerning Telewest's liquidity and capital
resources, see "Part I --Section Four -- Information on the Combined Group --
Working Capital".
As set out on page I-14, Telewest has initiated the process governing the
exercise of Telewest's pre-emption rights in respect of Comcast's approximately
27.4% interest in Birmingham Cable. In addition, Telewest intends to initiate
the process governing the exercise of its pre-emption rights in respect of
Comcast's interest of approximately 50% in Cable London if the NTL/Comcast
Merger is completed. If Telewest decides to proceed with an acquisition of
either or both of such interests, the Combined Group would require additional
funding for such acquisition although there can be no assurance that such
funding would be available or available on favourable terms.
II-43
<PAGE>
SECTION TWO UK FINANCIAL INFORMATION
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SECTION TWO
UK GAAP FINANCIAL INFORMATION OF GENERAL CABLE
- --------------------------------------------------------------------------------
II-44
<PAGE>
SECTION TWO UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
II-45
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GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
1. BASIS OF PREPARATION
The financial information set out below has been extracted without material
adjustment from the audited consolidated financial statements of General
Cable PLC for the years ended 31 December 1995, 1996 and 1997.
Coopers & Lybrand and Robson Rhodes were both joint UK statutory auditors
of General Cable PLC for each year throughout this period. The audit
reports for the years ended 31 December 1995, 1996 and 1997 were
unqualified. No audited financial statements of any company in the General
Cable PLC group have been made up in respect of any period subsequent to 31
December 1997.
For the year ended 31 December 1997 General Cable PLC adopted an
alternative presentation of its consolidated profit and loss account to
provide better comparability with other companies in the telecommunications
sector. Results for prior periods have been restated on a comparable basis.
The revised presentation has no effect on previously reported net assets or
losses.
Financial Reporting Standard 1 (revised 1996), "Cash Flow Statements' was
adopted in the financial statements for the year ended 31 December 1996 and
1997. Financial information for prior periods has been restated in
accordance with the requirements of the revised standard. The revised
standard had no effect on previously reported net assets or losses. The
cash flow statement presentation was changed, movements previously reported
as changes in "cash and cash equivalents" being split into movements in
cash (amounts payable, or obtainable without penalty, within 24 hours) and
liquid resources (other balances).
CONSENTS
(a) Coopers & Lybrand have given and have not withdrawn their written
consent to the issue of this document with the inclusion of their name and
references to them in the form and context in which they are included.
(b) Robson Rhodes have given and have not withdrawn their written consent
to the issue of this document with the inclusion of their name and the
references to them in the form and context in which they are included.
2. PROFIT AND LOSS ACCOUNTS
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
Note 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Turnover--continuing
operations 30,695 55,733 98,238
--acquisitions 6.13 -- -- 13,610
----------------------------------------
30,695 55,733 111,848
Operating costs 6.4 (38,934) (69,781) (132,525)
----------------------------------------
Operating loss--
continuing operations (8,239) 14,048 (22,960)
--acquisitions -- -- 2,283
----------------------------------------
(8,239) (14,048) (20,677)
Share of results of
associated undertakings (11,944) (12,192) (12,626)
Reorganisation costs 6.5 -- -- (36,648)
Other interest receivable
and similar income 6.6 2,626 5,055 17,707
Interest payable and
similar charges 6.7 (3,615) (8,629) (36,707)
----------------------------------------
Loss on ordinary
activities before
taxation 6.9 (21,172) (29,814) (88,951)
Tax on loss on ordinary
activities 6.8 1,844 (1,058) 212
----------------------------------------
Loss on ordinary
activities after
taxation (19,328) (30,872) (88,739)
Minority interests 1,193 2,204 5,562
----------------------------------------
Retained loss for the
financial year 6.9 & 6.19 (18,135) (28,668) (83,177)
----------------------------------------
Loss per equity share
(pence) 6.10 (8.1) (9.6) (22.8)
------------------------------------
</TABLE>
II-46
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GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
3.BALANCE SHEETS
<TABLE>
<CAPTION>
AT 31 DECEMBER
----------------------------------------
Note 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets 6.11 152,120 411,335 488,928
Investments 6.12
Associated undertakings 118,132 42,930 29,675
Other investments 44 44 312
----------------------------------------
270,296 454,309 518,915
----------------------------------------
CURRENT ASSETS
Debtors--amounts falling
due after more than one
year 6.14 482 348 72
Debtors--amounts falling
due within one year 6.14 12,810 18,808 36,162
Secured cash deposit
restricted for more than
one year -- 136,763 179,424
Cash at bank and in hand 19,354 28,765 21,664
----------------------------------------
32,646 184,684 237,322
CREDITORS: amounts falling
due within one year 6.15 (34,334) (79,010) (76,118)
----------------------------------------
NET CURRENT
(LIABILITIES)/ASSETS (1,688) 105,674 161,204
----------------------------------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 268,608 559,983 680,119
CREDITORS: amounts falling
due after more than one
year 6.16 (19,304) (235,944) (466,573)
Provisions for liabilities
and charges 6.5/6.17 (319) -- (10,277)
Minority interest (8,767) (6,563) (1,001)
----------------------------------------
NET ASSETS 240,218 317,476 202,268
----------------------------------------
CAPITAL AND RESERVES
Called up share capital 6.18 253,374 365,092 365,092
Share premium account 6.19 81,910 94,614 94,917
Profit and loss account 6.19 (95,066) (142,230) (257,741)
----------------------------------------
EQUITY SHAREHOLDERS' FUNDS 240,218 317,476 202,268
----------------------------------------
</TABLE>
II-47
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
4.CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
Note 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES 5.1 4,244 14,732 11,577
Exceptional reorganisation -- -- (835)
----------------------------------------
NET CASH INFLOW FROM OPERATING
ACTIVITIES (AFTER EXCEPTIONAL
ITEM) 4,244 14,732 10,742
----------------------------------------
RETURNS ON INVESTMENT AND
SERVICING OF FINANCE
Interest received 2,507 4,256 22,948
Interest paid (4,098) (4,485) (36,413)
----------------------------------------
NET CASH (OUTFLOW) FROM
RETURNS ON INVESTMENT AND
SERVICING OF FINANCE (1,591) (229) (13,465)
----------------------------------------
TAXATION
Group relief received 2,344 3,100 2,305
Tax/ACT paid -- (85) (318)
----------------------------------------
NET TAX RECEIVED 2,344 3,015 1,987
----------------------------------------
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Purchase of tangible fixed
assets (63,854) (78,546) (128,569)
Sale of tangible fixed assets 61 201 405
Purchase of interest in
associated undertakings (31,973) (6,759) --
Purchase of fixed asset
investments--other (50) -- (332)
Loans made to others (50) -- --
----------------------------------------
NET OUTFLOW FROM CAPITAL
EXPENDITURE AND FINANCIAL
INVESTMENT (95,866) (85,104) (128,496)
----------------------------------------
ACQUISITIONS AND DISPOSALS
Cash acquired with subsidiary -- 878 3,339
Acquisition costs -- (2,503) (33,700)
----------------------------------------
NET CASH OUTFLOW FROM
ACQUISITIONS AND DISPOSALS -- (1,625) (30,361)
----------------------------------------
NET CASH OUTFLOW BEFORE
MANAGEMENT OF LIQUID
RESOURCES AND FINANCING (90,869) (69,211) (159,593)
----------------------------------------
MANAGEMENT OF LIQUID RESOURCES
Cash on short term deposit (13,300) 30,402 (12,770)
----------------------------------------
NET CASH (OUTFLOW)/INFLOW FROM
MANAGEMENT OF LIQUID
RESOURCES (13,300) 30,402 (12,770)
----------------------------------------
</TABLE>
II-48
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
CASH FLOW STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
Note 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
FINANCING
Issue of ordinary share
capital 171,012 43,460 --
Cost of ordinary share issue (14,890) (2,490) (212)
New secured loans -- 99,000 437,839
Other loans received 34,732 -- 17,000
Proceeds received from finance
leases -- 131,599 50,359
Placement of restricted cash
deposit -- (136,763) (42,660)
Financing costs -- (8,620) (983)
Repayment of secured loans -- (22,165) (273,001)
Other loans repaid (94,000) -- (17,000)
Loans to associates -- (38,862) (3,150)
Capital contribution 1,455 722 --
Finance leases--repayment of
principal (84) (761) (15,700)
Minority interest funding 10 -- --
----------------------------------------
NET CASH INFLOW FROM FINANCING 98,235 65,120 152,492
----------------------------------------
(DECREASE)/INCREASE IN CASH IN
THE PERIOD 5.3 (5,934) 26,311 (19,871)
----------------------------------------
</TABLE>
5.NOTES TO THE CASH FLOW STATEMENTS
5.1RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
BEFORE EXCEPTIONAL ITEMS
Operating loss (8,239) (14,048) (20,677)
Depreciation 9,114 20,376 40,632
Loss/(gain) on sale of fixed assets (21) 199 66
Decrease in stock 2 -- --
Increase in trade debtors (1,840) (3,108) (8,352)
Decrease/(increase) in other debtors (1,654) 943 2,245
(Decrease)/increase in trade
creditors 4,521 (3,509) (1,894)
Increase in other creditors 2,261 13,879 (443)
Provision against loan 100 -- --
----------------------------------------
4,244 14,732 11,577
----------------------------------------
</TABLE>
II-49
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
5.2RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
(Decrease)/increase in cash in the
period (5,934) 26,311 (19,871)
Cash outflow/(inflow) from decrease
in liquid resources 13,300 (30,402) 12,770
Cash outflow from increase in
restricted cash deposit -- 136,763 42,660
Cash (outflow)/inflow from increase
in net debt and leasing 59,268 (199,054) (208,251)
----------------------------------------
Change in net debt resulting from
cash flows 66,634 (66,382) (172,692)
Non cash movement in debt -- (777) --
New finance leases (4,998) (3,132) (9,302)
Liquid resources acquired with
subsidiary -- 13,502 --
Debt and leasing acquired with
subsidiary -- (12,884) --
----------------------------------------
Movement in net debt in the period 61,636 (69,673) (181,994)
Net debt at 1 January (73,624) (11,988) (81,661)
----------------------------------------
Net debt at 31 December (11,988) (81,661) (263,655)
----------------------------------------
</TABLE>
5.3ANALYSIS OF NET DEBT
<TABLE>
<CAPTION>
OTHER NON
CASH
1994 CASH FLOW MOVEMENTS 1995
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
NET CASH
Cash at bank and in
hand 11,988 7,366 -- 19,354
Less deposits treated
as liquid resources (3,950) (13,300) -- (17,250)
------------------------------------------------------
8,038 (5,934) -- 2,104
------------------------------------------------------
LIQUID RESOURCES
Deposits included in
cash 3,950 13,300 -- 17,250
------------------------------------------------------
RESTRICTED CASH
Placement of restricted
cash deposit -- -- -- --
------------------------------------------------------
DEBT
Debt (82,400) 59,268 -- (23,132)
Finance lease (3,212) -- (4,998) (8,210)
------------------------------------------------------
(85,612) 59,268 (4,998) (31,342)
------------------------------------------------------
Net debt (73,624) 66,634 (4,998) (11,988)
------------------------------------------------------
</TABLE>
II-50
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ACQUISITION
(EXCL CASH OTHER NON
AND CASH
1995 CASH FLOW OVERDRAFTS) MOVEMENTS 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
ANALYSIS OF NET DEBT
NET CASH
Cash at bank and in
hand 19,354 9,411 -- -- 28,765
Less deposits treated
as liquid resources (17,250) 16,900 -- -- (350)
--------------------------------------------------------------------
2,104 26,311 -- -- 28,415
--------------------------------------------------------------------
LIQUID RESOURCES
Deposits included in
cash 17,250 (30,402) 13,502 -- 350
--------------------------------------------------------------------
RESTRICTED CASH
Placement of restricted
cash deposit -- 136,763 -- -- 136,763
--------------------------------------------------------------------
DEBT
Debt (23,132) (68,613) (11,034) (777) (103,556)
Finance leases (8,210) (130,441) (1,850) (3,132) (143,633)
--------------------------------------------------------------------
(31,342) (199,054) (12,884) (3,909) (247,189)
--------------------------------------------------------------------
Net debt (11,988) (66,382) 618 (3,909) (81,661)
--------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
OTHER NON
CASH
1996 CASH FLOW MOVEMENTS 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
NET CASH
Cash at bank and in
hand 28,765 (7,101) -- 21,664
Less deposits treated
as liquid resources (350) (12,770) -- (13,120)
------------------------------------------------------
28,415 (19,871) -- 8,544
------------------------------------------------------
LIQUID RESOURCES
Deposits included in
cash 350 12,770 -- 13,120
------------------------------------------------------
RESTRICTED CASH
Placement of restricted
cash deposit 136,763 42,660 -- 179,423
------------------------------------------------------
DEBT
Debt (103,556) (172,687) -- (276,243)
Finance lease (143,633) (35,564) (9,302) (188,499)
------------------------------------------------------
(247,189) (208,251) (9,302) (464,742)
------------------------------------------------------
Net debt (81,661) (172,692) (9,302) (263,655)
------------------------------------------------------
</TABLE>
II-51
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
5.4 ACQUISITION OF SUBSIDIARIES
IMMINUS LIMITED AND ITS PARENT COMPANY FILEGALE LIMITED
On 13 March 1997 General Cable PLC (the "Company") acquired 100% of the
share capital of Filegale Limited and its subsidiary Imminus Limited. The
fair value of Filegale's identifiable net assets at the date of acquisition
is shown in note 6.13. Filegale contributed (Pounds)1.4 million to the
Group's net operating cash flows, paid (Pounds)0.3 million in respect of
tax and used (Pounds)3.2 million for capital expenditure and financial
investment.
THE OUTSTANDING 50% OF YORKSHIRE CABLE GROUP LIMITED ("YCG")
On 6 August 1996 the Company acquired the remaining 50% of YCG that it did
not own for consideration comprising the issue of 84,458,000 ordinary
shares, par value (Pounds)1, of the Company. The deemed fair market value
being 201 pence per share. The fair values of YCG's identifiable net assets
and liabilities at the date of acquisition (including goodwill) are shown
in note 6.13. YCG contributed (Pounds)13,853,000 to the Group's net
operating cash flows, received (Pounds)11,000 in respect of net returns on
investments and servicing of finance, paid (Pounds)85,000 in respect of
taxation and used (Pounds)31,218,000 for capital expenditure and financial
investment.
5.5 RECONCILIATION OF OPERATING LOSS TO OPERATING CASHFLOW
Year ended 31 December 1996
<TABLE>
<CAPTION>
CONTINUING ACQUIRED TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Operating loss (8,135) (5,913) (14,048)
Depreciation 13,414 6,962 20,376
Loss on sale of fixed assets 16 183 199
(Increase)/decrease in trade debtors (3,960) 852 (3,108)
Decrease in other debtors 454 489 943
(Decrease)/increase in trade
creditors (3,796) 287 (3,509)
Increase in other creditors 2,886 10,993 13,879
------
NET CASH INFLOW FROM CONTINUING
ACTIVITIES 879
------ ------
NET CASH INFLOW FROM ACQUIRED
ACTIVITIES 13,853
------ -------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 14,732
-------
</TABLE>
II-52
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
Year ended 31 December 1997
<TABLE>
<CAPTION>
CONTINUING ACQUIRED TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Operating loss (22,959) 2,282 (20,677)
Depreciation 39,218 1,414 40,632
Loss on sale of fixed assets 63 3 66
(Increase) in trade debtors (7,924) (428) (8,352)
Decrease/(increase) in other debtors 4,035 (1,790) 2,245
(Decrease)/increase in trade
creditors (2,805) 911 (1,894)
Increase/(decrease) in other
creditors 504 (947) (443)
-------
NET CASH INFLOW FROM CONTINUING
ACTIVITIES 10,132
------- ------
NET CASH INFLOW FROM ACQUIRED
ACTIVITIES 1,445
------ -------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 11,577
-------
</TABLE>
5.6 MAJOR NON CASH TRANSACTION
During 1997 the Group entered into finance lease arrangements in respect of
assets with a total capital value at the inception of the leases of
(Pounds)59.5 million (1996: (Pounds)162.0 million, 1995: (Pounds)5.2 million).
The consideration for the acquisition in 1997 of Imminus Limited and Filegale
Limited comprised bank guaranteed loan notes. Further details of the
acquisition are set out in note 6.13.
The consideration for the acquisition in 1996 of the remaining 50% of
Yorkshire Cable Group Limited comprised shares. Further details of the
acquisition are set out in note 6.13.
6. NOTES
6.1 BASIS OF PREPARATION
The financial information for the years ended 31 December 1995, 1996 and 1997
is based on the audited consolidated financial statements of General Cable PLC.
6.2 ACCOUNTING POLICIES
The financial statements have been prepared in accordance with generally
applicable accounting standards in the United Kingdom. A summary of the more
important Group accounting policies, which have been applied consistently by
all Group and associated companies, is set out below.
6.2.1 Basis of accounting
These accounts have been prepared under the historical cost basis of
accounting.
6.2.2 Presentation of financial information
For the year ended 31 December 1997, an alternative presentation of the Group
Profit and Loss Account has been adopted. In the opinion of the directors this
format provides better comparability with other companies in the
telecommunications sector. Results for prior periods have been restated on a
comparable basis. The revised presentation has no effect on previously reported
net assets or losses.
II-53
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.2.3 Basis of consolidation
The Group accounts include the accounts of the parent company and its
subsidiaries. The subsidiaries and the associated undertaking prepare their
accounts to coincide with the year end of the parent for consolidation purposes
apart from the Cable Finance Limited, a subsidiary of the Company which
prepares financial statements for the period to 31 March. Summary financial
statements have been prepared for the period ended 31 December.
The results of companies or businesses acquired or sold during the year are
dealt with from the effective date of acquisition or up to the effective date
of loss of control.
On acquisition of a subsidiary, all of the subsidiary's assets and
liabilities that exist at the date of acquisition are recorded at their fair
values reflecting their condition at that date. All changes to those assets and
liabilities, and the resulting gains and losses, that arise after the Group has
gained control of the subsidiary are charged to the post acquisition profit and
loss account.
6.2.4 Tangible fixed assets
Cost of fixed assets represents acquisition cost, including any incidental
costs of acquisition. Materials, labour and other costs directly attributable
to the construction of the telecommunications networks are included in fixed
assets.
Depreciation is provided on all tangible fixed assets at rates calculated to
write off the cost of valuation, less estimated residual value, of each asset
in equal instalments over its estimated useful life as follows:
<TABLE>
<S> <C>
Leasehold properties 50 years
Cables and ducting 40 years
Electronic equipment 2-10 years
Motor vehicles 4 years
Office equipment 3-10 years
Tools and test equipment 3 years
</TABLE>
Freehold land and assets in the course of construction are not depreciated.
6.2.5 Finance and operating leases
Rentals payable under operating leases are charged to the profit and loss
account as they fall due.
Assets acquired under finance leases and hire purchase agreements are
capitalised and the capital element of lease rentals is included in creditors.
Assets under finance leases are depreciated over the shorter of the lease
terms and the usefulness of equivalent owned assets.
6.2.6 Turnover
Turnover comprises the value of sales (excluding VAT) of goods and services
in the normal course of business.
II-54
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.2.7 Taxation
Corporation tax payable is provided on taxable profits at the current rate.
Deferred tax (which arises from differences in the timing of recognition of
items, principally depreciation in the financial statements and by the tax
authorities) has been calculated using the liability method. Deferred tax is
recognised on the timing differences, likely to reverse, at the rates of tax
anticipated to be in force at the time of reversal. Deferred tax is not
recognised on timing differences which, in the opinion of the Directors, will
probably not reverse in the foreseeable future.
6.2.8 Pension costs
The Group operates a number of defined contribution pension schemes and
participates in a defined benefit scheme administered by an associated company.
The assets of the schemes are held separately to those of the Group in
independently administered funds. The pension cost charge represents
contribution payable by the Group in the year.
6.2.9 Goodwill
Goodwill arising on acquisition is written off against reserves in the period
of acquisition.
6.2.10 Associated undertakings
The Group's share of profits less losses of associated undertakings is
included in the consolidated profit and loss account, and the Group's share of
their net assets is included in the consolidated balance sheet.
The financial statements of associated undertakings are adjusted so that
their accounting policies are consistent with those of the Group.
6.2.11 Foreign currencies
Transactions denominated in foreign currencies are translated at the rate
ruling at the time of the transaction. All monetary assets and liabilities are
subsequently translated at the period end rate or the hedged forward rate.
Differences arising are taken to the profit and loss account in the year in
which they arise.
II-55
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.3 EMPLOYEE INFORMATION
The average weekly number of persons (including executive directors) employed
by the Group during the year was:
<TABLE>
<CAPTION>
1995 1996 1997
NUMBER NUMBER NUMBER
<S> <C> <C> <C>
BY ACTIVITY:
Sales 105 210 453
Engineering 140 302 559
Administration 110 175 312
--------------------------------------
355 687 1,324
--------------------------------------
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
STAFF COSTS:
Wages and salaries 8,358 15,436 30,115
Social security 781 1,497 2,786
Pension costs 176 448 1,059
--------------------------------------
9,315 17,381 33,960
--------------------------------------
DIRECTORS' EMOLUMENTS
<CAPTION>
1995 1996 1997
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Fees 48,727 60,012 98,928
Salary payments 355,555 470,743 597,746
Pension contributions 5,760 11,840 30,720
Bonuses 27,500 57,000 85,850
Compensation for loss of office --
former Chairman 70,000 -- --
--------------------------------------
Total emoluments 507,542 599,595 813,244
--------------------------------------
Fees and other emoluments include
amounts paid to:
Highest paid director 223,547 286,300 309,311
--------------------------------------
</TABLE>
II-56
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER 1995
---------------------------------------------------------------------
COMPENSATION
BENEFITS IN FOR LOSS OF
FEES SALARY BONUSES PENSION KIND OFFICE TOTAL
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C> <C>
EXECUTIVE
DIRECTORS
PX Galteau -- 186,905 -- -- 36,642 -- 223,547
DJ Miller -- 60,000 27,500 5,760 8,467 -- 101,727
RCH Campbell-
Ross -- -- -- -- -- -- --
NON-EXECUTIVE
DIRECTORS
Sir Anthony
Cleaver
(Chairman) -- 44,232 -- -- -- -- 44,232
JJ Delahunty -- -- -- -- -- -- --
Dr GG Gray 20,004 -- -- -- -- -- 20,004
Lord Rees
(resigned
20/2/95) -- 5,000 -- -- 3,735 70,000 78,735
Ms CA Tritt
(appointed
25/7/95) 8,719 -- -- -- 10,574 -- 19,293
NN Walmsley 20,004 -- -- -- -- -- 20,004
---------------------------------------------------------------------
48,727 296,137 27,500 5,760 59,418 70,000 507,542
---------------------------------------------------------------------
<CAPTION>
YEAR ENDED 31 DECEMBER 1996
------------------------------------------------------------
BENEFITS IN
FEES SALARY BONUSES PENSION KIND TOTAL
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C> <C>
EXECUTIVE
DIRECTORS
PX Galteau -- 210,000 29,400 -- 46,900 286,300
DJ Miller -- 90,000 27,600 8,640 9,545 135,785
I Gray
(appointed
1/11/96) -- 26,666 -- 3,200 2,663 32,529
NON-EXECUTIVE
DIRECTORS
Sir Anthony
Cleaver
(Chairman) -- 48,000 -- -- -- 48,000
Dr GG Gray 20,004 -- -- -- -- 20,004
Ms CA Tritt 20,004 -- -- -- 36,969 56,973
NN Walmsley 20,004 -- -- -- -- 20,004
------------------------------------------------------------
60,012 374,666 57,000 11,840 96,077 599,595
------------------------------------------------------------
</TABLE>
II-57
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER 1997
--------------------------------------------------------
BENEFITS IN
FEES SALARY BONUSES PENSION KIND TOTAL
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C>
EXECUTIVE DIRECTORS
PX Galteau -- 225,000 38,250 -- 46,061 309,311
DJ Miller -- 120,000 20,400 11,520 8,702 160,622
I Gray -- 159,996 27,200 19,200 10,272 216,668
NON-EXECUTIVE DIRECTORS
Sir Anthony Cleaver
(Chairman) 48,000 -- -- -- -- 48,000
Dr GG Gray 20,002 -- -- -- -- 20,002
Ms CA Tritt 20,002 -- -- -- 27,715 47,717
WA Rice (appointed
16/10/97) 4,257 -- -- -- -- 4,257
NN Walmsley (retired
29/4/97) 6,667 -- -- -- -- 6,667
--------------------------------------------------------
98,928 504,996 85,850 30,720 92,750 813,244
--------------------------------------------------------
</TABLE>
Certain of the Directors of the Company are employed by CGE and are appointed
by CGE in accordance with the Articles of Association. These Directors receive
no remuneration in respect of services provided to the Company.
6.4 OPERATING COSTS
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Programming expenses 3,321 7,160 16,119
Telephony expenses 10,293 13,141 17,755
Selling, general and administrative
costs 16,206 29,104 58,019
Depreciation and amortisation 9,114 20,376 40,632
--------------------------------------
38,934 69,781 132,525
--------------------------------------
</TABLE>
Having regard to the nature of the Group's business, the analysis of
operating costs as prescribed by the Companies Act 1985 is not meaningful. In
the circumstances, therefore, as required by paragraph 3(3) of Schedule 4 of
the Companies Act 1985, the Directors have adapted the prescribed format to the
requirements of the Group's business.
II-58
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.5 EXCEPTIONAL ITEM--FUNDAMENTAL REORGANISATION--1997
In October 1997 the Group announced a fundamental reorganisation of its
business and a change in operating strategy to maximise the benefit of its
strength in business and residential telecommunications. As a result, total
related charges of (Pounds)36.6 million are recorded as an exceptional item in
1997. The charge comprises (Pounds)18.3 million for the write-down of certain
categories of analogue cable television equipment consistent with the strategy
referred to above, (Pounds)9.6 million for the reorganisation and restructuring
of the businesses and (Pounds)1.5 million relating to the disposal of
properties. The arrangement of a new debt facility referred to in note 6.15
entailed a write-down of capitalised finance charges of (Pounds)7.2 million
relating to the previous debt facilities.
A provision of (Pounds)10.3 million is carried at 31 December 1997.
<TABLE>
<CAPTION>
(Pounds)'000
<S> <C>
Provision as at 1 January 1997 --
Created during the year 11,112
Utilised during the year (835)
------
Balance on provision at 31 December 1997 10,277
------
</TABLE>
6.6 INTEREST RECEIVABLE AND SIMILAR INCOME
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Associated undertakings -- 995 225
On deposits at banks 2,626 4,060 17,482
--------------------------------------
2,626 5,055 17,707
--------------------------------------
</TABLE>
6.7 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
On bank loans, overdrafts and other
loans
Repayable after 5 years -- 31 180
Repayable within 5 years not by
instalments 1,902 4,941 25,432
Preference shares -- 301 --
Finance leases and hire purchase
contracts 416 3,251 11,095
Former parent and fellow subsidiary
undertakings 1,297 105 --
--------------------------------------
3,615 8,629 36,707
--------------------------------------
</TABLE>
II-59
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.8 TAXATION
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
UK Corporation tax at 31.5% (1996
and 1995 : 33%)
Group relief receivable 3,129 -- 842
Irrecoverable Advance Corporation
Tax -- (68) --
Share of tax of associated
undertakings (805) (1,309) (630)
Deferred taxation (480) 319 --
----------------------------------------
1,844 (1,058) 212
----------------------------------------
The Group has accumulated tax losses
available for offset against future
trading profits of the relevant
companies amounting to not less
than 67,500 156,000 186,300
----------------------------------------
Associated companies have
accumulated tax losses available
for offset against their future
trading profits amounting to not
less than 56,800 9,750 10,300
----------------------------------------
</TABLE>
II-60
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.9 LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
LOSS ON ORDINARY ACTIVITIES BEFORE
TAXATION IS STATED AFTER
CHARGING/(CREDITING):
Depreciation charge for the year:
Tangible fixed assets 8,573 14,484 37,308
Tangible assets held under finance
leases 536 5,887 21,700
Tangible fixed assets rented to
customers 5 -- --
Auditors' remuneration(Company 1997:
(Pounds)88,000, 1996:
(Pounds)74,000,
1995: (Pounds)54,000) 94 176 201
Non audit remuneration(Charged to
share premium 1997: (Pounds)59,000,
1996: (Pounds)207,000, 1995:
(Pounds)634,000) -- -- --
(Charged to cost of investment 1997:
(Pounds)8,000, 1996:
(Pounds)207,000, 1995: (Pounds)nil -- -- --
(Financing costs capitalised in
accordance
with FRS 4 1997: (Pounds)80,000,
1996: (Pounds)128,000,
1995: (Pounds)nil) -- -- --
(Other) 117 103 92
Hire of plant and machinery--
operating leases 172 117 269
Hire of other assets--operating
leases 824 1,964 4,949
Loss on disposal of fixed assets 21 199 66
Management charges from CGE 272 267 282
Management fees received from
associated undertakings (731) (597) (220)
----------------------------------------
LOSS FOR THE FINANCIAL YEAR
The loss for the financial year is
made up as follows:
Dealt with in the accounts of the
holding Company 668 3,115 (9,809)
Retained by subsidiary undertakings (6,054) (18,282) (60,113)
Retained by associated undertakings (12,749) (13,501) (13,255)
----------------------------------------
(18,135) (28,668) (83,177)
----------------------------------------
</TABLE>
6.10 LOSS PER ORDINARY SHARE
The calculation of loss per ordinary share is based on the loss on ordinary
activities after taxation and minority interests for the year of
(Pounds)83,177,000 (1996: (Pounds)28,668,000, 1995: (Pounds)18,135,000) and the
weighted average number of ordinary shares of the Company in issue during the
year of 365,092,338 (1996: 298,244,000, 1995: 224,766,000).
II-61
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.11 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FREEHOLD LAND LONG LEASEHOLD PLANT AND FIXTURES AND
& BUILDINGS PROPERTIES EQUIPMENT FITTINGS TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
COST
At 1 January 1996 3,777 -- 169,330 7,777 180,884
Reclassifications -- -- (208) 208 --
In respect of new
subsidiary 8,823 3,328 196,110 10,266 218,527
Additions 319 39 78,912 6,083 85,353
Disposals (293) -- -- (217) (510)
----------------------------------------------------------------------
At 31 December 1996 12,626 3,367 444,144 24,117 484,254
Reclassifications -- -- (38) 38 --
In respect of new
subsidiary -- 30 2,986 57 3,073
Additions 934 545 118,359 14,219 134,057
Disposals -- -- (87) (868) (955)
----------------------------------------------------------------------
At 31 December 1997 13,560 3,942 565,364 37,563 620,429
----------------------------------------------------------------------
DEPRECIATION
At 1 January 1996 -- -- 25,703 3,061 28,764
Reclassifications -- -- (93) 93 --
In respect of new
subsidiary 401 145 19,609 3,734 23,889
Charge for year 55 25 17,347 2,949 20,376
Written back on
disposal (74) -- -- (36) (110)
----------------------------------------------------------------------
At 31 December 1996 382 170 62,566 9,801 72,919
Reclassifications -- -- (23) 23 --
Charge for year 156 69 33,915 6,492 40,632
Charge for year--
exceptional -- -- 18,387 -- 18,387
Written back on
disposal -- -- (60) (377) (437)
----------------------------------------------------------------------
At 31 December 1997 538 239 114,785 15,939 131,501
----------------------------------------------------------------------
NET BOOK VALUE
AT 31 DECEMBER 1997 13,022 3,703 450,579 21,624 488,928
----------------------------------------------------------------------
AT 31 DECEMBER 1996 12,244 3,197 381,578 14,316 411,335
----------------------------------------------------------------------
</TABLE>
The net book value of assets held under finance leases by the Group was
(Pounds)153,356,000 in 1997, (Pounds)130,799,000 in 1996 and (Pounds)7,441,039
in 1995.
The ability of the Group to recover its investment in fixed assets is
dependent upon the continued successful development of the telecommunications
business.
II-62
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.12 INVESTMENTS
Analysis of movements in investments during the year:
<TABLE>
<CAPTION>
ASSOCIATED OTHER
UNDERTAKINGS INVESTMENTS TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
GROUP
At 1 January 1996 118,132 44 118,176
Transfer to subsidiary undertaking (61,701) -- (61,701)
Share of results of associated
undertakings (13,501) -- (13,501)
---------------------------------------
AT 31 DECEMBER 1996 42,930 44 42,974
Additions -- 268 268
Share of results of associated
undertakings (13,255) -- (13,255)
---------------------------------------
AT 31 DECEMBER 1997 29,675 312 29,987
---------------------------------------
</TABLE>
All investments are involved in the UK telecommunications industry.
The ability of the Group to recover its investment in associated undertakings
is dependent upon the continued successful development of the
telecommunications businesses.
The Group's share of post acquisition retained losses of the associated
undertakings was (Pounds)35,424,000 at 31 December 1997, (Pounds)22,170,000 at
31 December 1996 and (Pounds)18,824,000 at 31 December 1995.
II-63
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.13 SUBSIDIARY UNDERTAKINGS
The Company owns indirectly 100% of the ordinary share capital of the
following principal subsidiary undertakings, unless otherwise stated. The
subsidiary companies are incorporated in England and Wales and are all included
in the consolidated financial statements. All have issued shares of (Pounds)1
unless otherwise stated.
<TABLE>
<CAPTION>
SUBSIDIARY TOTAL ISSUED SHARES GROUP
%
<S> <C> <C>
The Cable Corporation
Limited 18,225,389 ordinary shares of 25 pence 82.55
1,000,000 "B" Ordinary shares of (Pounds)6.50 100.0
2 special shares of 25 pence 100.0
Overall 83.45
</TABLE>
<TABLE>
<S> <C>
*Windsor Television Limited Barnsley Cable Communications Limited
*The Cable Corporation Equipment Limited Yorkshire Cable Finance Limited
*Middlesex Cable Limited Doncaster Cable Communications Limited
*Cable Alarms Limited Rotherham Cable Communications Limited
*Windsor Alarms Limited Halifax Cable Communications Limited
*European Business Network Limited Sheffield Cable Communications Limited
*Chariot Collection Services Limited Wakefield Cable Communications Limited
**The Yorkshire Cable Group Limited Mayfair Way Management Limited
Yorkshire Cable Communications Limited Filegale Limited
Bradford Cable Communications Limited Fastrak Limited
Yorkshire Cable Telecom Limited Imminus (Ireland) Limited
Yorkshire Cable Limited Imminus Limited
Yorkshire Cable Properties Limited General Cable Group Limited (Ord. 10 pence)
Northern Credit Limited General Telecommunications Limited
</TABLE>
- ------------
* 100% owned by the Cable Corporation Limited
** 88,950,048 ordinary shares of 10 pence, 88,950,048 shares of US$0.01 and
88,959,048 deferred shares of 10 pence
The following subsidiary companies are all owned directly by the Company
(100% unless otherwise stated:
<TABLE>
<S> <C>
Bradford Cable Telecom Limited General Cable Programming Limited (Ord. 10
General Cable Communications Limited pence)
Middlesex Cable Telecom Limited General Cable Programming 1 Limited
Sheffield Cable Telecom Limited General Cable Investments Limited
Windsor Cable Telecom Limited Cable Finance Limited (50.0025% holding)
General Communications International Limited (Jersey) (Ord. 50 pence & pref (Pounds)1)
Applied Communication Solutions Limited New TCC Limited (Ord. 10 pence)
General Cable Holdings Limited General Communications Corporation Limited
General Telecommunications International General Media Communications Limited
Limited
</TABLE>
II-64
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
The Company holds the following interest in Birmingham Cable Corporation
Limited, an associated undertaking:
<TABLE>
<CAPTION>
COUNTRY OF INCORPORATION PROPORTION OF NOMINAL VALUE OF
AND OPERATION TOTAL ISSUED SHARE CAPITAL SHARES HELD BY THE GROUP:
<S> <C> <C>
England and Wales 51,073,486 ordinary shares of (Pounds)1 44.95%
</TABLE>
Held by Birmingham Cable Corporation Limited (100% unless otherwise stated):
Birmingham Cable Limited West Midlands Credit Limited
Birmingham Cable Finance Limited (Jersey) Central Cable Communications Limited
Cablephone Limited Central Cable Holdings Limited
Central Cable Limited Central Cable Sales Limited (60%)
Network 21 Limited Century 21 Cable Communications
Limited
ACQUISITION OF FILEGALE LIMITED
On 13 March 1997 the Company acquired Filegale Ltd and its subsidiary Imminus
Ltd for a fair value of (Pounds)33.7 million total consideration including fees
and costs associated with the acquisition of approximately (Pounds)0.7 million.
In accordance with the sale and purchase agreement (Pounds)7.1 million of the
consideration has been provided in the form of bank guaranteed loan notes and
up to a further (Pounds)6.4 million will be payable on the first and second
anniversaries of the acquisition. Payment of the deferred consideration is
dependent upon certain conditions being met. The form of the deferred
consideration is cash, bank guaranteed loan notes or General Cable PLC ordinary
shares to be issued at the price of (Pounds)1.90 per share after 12 months and
(Pounds)1.95 per share after 24 months at the option of the vendors.
Subsequent to the year-end: agreement has been reached between the Company
and the shareholders of Filegale Ltd to settle the outstanding deferred
consideration in advance of the terms of the sale and purchase agreement.
At 31 December 1997 (Pounds)13.1 million cash was held on deposit in order to
satisfy the outstanding consideration. The guaranteed loan notes carry a coupon
of six month LIBOR minus 0.35%. The fair value of the operating assets at the
date of acquisition was:
<TABLE>
<CAPTION>
BOOK VALUE REVALUATION FAIR VALUE
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Tangible fixed assets 3,073 -- 3,073
Intangible fixed assets--capitalised
goodwill 1,274 (1,274) --
Current assets/(liabilities)
Debtors 2,448 -- 2,448
Cash 3,339 -- 3,339
Creditors (7,430) -- (7,430)
----------------------------------------
2,704 (1,274) 1,430
----------------------------------------
100% thereof 1,430
Consideration satisfied as above 33,701
------
Goodwill 32,271
------
</TABLE>
II-65
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
The summarised profit and loss account for Imminus for the period from 1
January 1997, the beginning of the subsidiary's financial year, to the date of
acquisition, is as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
12 MARCH
1997
(Pounds)'000
<S> <C>
Turnover 3,146
Operating profit 536
Profit on ordinary activities before taxation 349
Tax on ordinary activities (148)
-----
Profit on ordinary activities after taxation 201
-----
</TABLE>
There were no recognised gains or losses in the period other than those
included in the profit and loss account and therefore no separate statement of
total recognised gains and losses has been presented.
In the opinion of the Directors, the book value of the net assets represents
their fair value except for capitalised goodwill on Filegale which has been
written off in order to align accounting policies with the Group.
The purchase has been accounted for as an acquisition and included in the
consolidated balance sheet at the year end. The goodwill of (Pounds)32.3
million has been written off against the profit and loss account reserve. For
the period since acquisition, revenue of (Pounds)13.6 million and operating
profit of (Pounds)2.3 million are included within the profit and loss account
as continuing operations--acquisition.
II-66
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
ACQUISITION OF YORKSHIRE CABLE GROUP LIMITED ("YCG")
On 6 August 1996 the Company acquired the remaining 50% of YCG that it did
not own for consideration comprising the issue of 84,458,000 ordinary shares,
par value (Pounds)1 per share, of General Cable PLC. The acquisition comprised
the purchase of a 25% shareholding in YCG held directly from STI and the whole
of the share capital of General Cable Holdings Limited, formerly called STI
(Yorkshire Cable) Limited, a company whose sole asset was a further 25%
interest in YCG. The fair value of the total consideration, including fees and
costs associated with the acquisition of approximately (Pounds)2.5 million
associated with the acquisition, amounted to (Pounds)172 million. The Company
has taken advantage of merger relief in accordance with Section 130 of the
Companies Act 1985 not to record any premium on the shares issued and the
difference between the fair value of the shares issued and their nominal value
has been taken to merger reserve. The fair value of the operating assets at the
date of acquisition of YCG was:
<TABLE>
<CAPTION>
BOOK VALUE REVALUATION FAIR VALUE
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Tangible fixed assets 194,638 -- 194,638
Current assets/(liabilities)
Debtors 7,396 -- 7,396
Cash 14,380 -- 14,380
Creditors (38,674) -- (38,674)
Liabilities due after one year (40,838) -- (40,838)
---------------------------------------
136,902 -- 136,902
---------------------------------------
50% thereof 68,451
Consideration satisfied as above 172,264
----------
Goodwill 103,813
----------
</TABLE>
The summarised profit and loss account for YCG for the period from 1 January
1996, being the beginning of the subsidiary's financial year, to the date of
acquisition is as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
6 AUGUST
1996
(Pounds)'000
<S> <C>
Turnover 17,698
Operating loss (9,482)
Loss on ordinary activities before taxation (10,286)
Tax on ordinary activities (101)
-------
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (10,387)
-------
</TABLE>
There were no recognised gains or losses in the period other than those
included in the profit and loss account and accordingly no separate statement
of total recognised gains and losses has been presented.
II-67
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
In the opinion of the Directors, the book value of the net assets represents
their fair value. The Companies Act 1985 normally requires goodwill arising on
the acquisition of a subsidiary to be calculated as the difference between the
total acquisition cost of the undertaking and the Group's share of the
identifiable net assets and liabilities at the date it became a subsidiary
undertaking. FRS2 recognises that where an investment in an associated
undertaking is increased and it becomes a subsidiary undertaking, in order to
show a true and fair view, goodwill should be calculated on each purchase as
the difference between the cost of that purchase and the fair value at the date
of that purchase. If goodwill had been calculated in accordance with the basis
set out in the Companies Act 1985, (Pounds)10,155,000 of the Group's share of
the retained earnings of YCG would have been reclassified as goodwill and in
total (Pounds)113,968,000 of goodwill would have been recognised.
The purchase has been accounted for as an acquisition and included in the
consolidated balance sheet at the year end. The goodwill of (Pounds)103,000,000
has been written off against the merger reserve and the profit and loss account
reserve in the sums of (Pounds)85,000,000 and (Pounds)18,000,000 respectively.
For the period since acquisition, revenue of (Pounds)13,069,000 and operating
loss of (Pounds)5,913,000 are included within the consolidated profit and loss
account as acquisitions.
The total figures for continuing operations in the year in the Group profit
and loss account include the following amounts relating to the acquisition:
cost of sales (Pounds)5,253,000, gross margin (Pounds)7,816,000, network
depreciation (Pounds)5,245,000, gross profit (Pounds)2,571,000, and
administration expenses, other depreciation and other operating costs of
(Pounds)8,484,000.
6.14 DEBTORS
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR:
Trade debtors 13,505 23,644
Amounts owed by group undertakings:
Former parent and its subsidiary undertakings 8 --
Amounts owed by associated undertakings 495 4,059
VAT recoverable -- 2,220
Group relief receivable 115 --
Other debtors 2,579 2,211
Prepayments and accrued income 2,106 4,028
--------------------------
18,808 36,162
--------------------------
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR:
Other debtors 348 72
--------------------------
348 72
--------------------------
19,156 36,234
--------------------------
</TABLE>
II-68
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.15 CREDITORS -- AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Other loans 538 538
Obligations under finance leases 11,801 13,967
Trade creditors 33,093 30,825
Amounts owed to group undertakings
Other taxation and social security payable 914 3,481
Retentions on civil contracts -- 2,591
Other creditors 18,835 2,624
Accruals and deferred income 13,829 22,092
-------------------------
79,010 76,118
-------------------------
</TABLE>
On 31 December 1997 the Group completed a (Pounds)500,000,000 underwritten
loan facility.
Proceeds from the first drawing under this loan facility were advanced to The
Cable Corporation Ltd ("TCC"), YCG and Imminus in order to prepay the loan
facilities previously arranged by these companies. As on the date of these
prepayments the loan facilities had been drawn as follows: TCC:
(Pounds)120,000,000 YCG: (Pounds)117,000,000 and Imminus: (Pounds)18,000,000
(see note 6.16).
As at 31 December 1997 (Pounds)260,000,000 had been drawn down under the
General Cable Holdings Ltd loan facility.
The purpose of the facility is to finance the construction of the networks in
the franchise area, to repay existing loan facilities and, within certain times
to repay shareholder loans.
The facilities are made available as a function of the achievements of
certain minimum levels of operating cashflow. Repayments of amounts drawn under
the facility commence on 31 March 2003. Final repayment is due by 30 June 2007.
Interest payable on amounts drawn is dependent upon the classification of
borrowings within the terms of the facility and the relationship between
borrowings and operating cashflow and is based on LIBOR plus a margin.
In association with the syndicated loan facilities arranged by TCC (1996) and
YCG (1997), the companies entered into finance lease facilities totalling
(Pounds)92,000,000 and (Pounds)206,000,000 respectively.
Under the terms of the (Pounds)500,000,000 loan facility, General Cable
Holdings Ltd and its subsidiaries (excluding those which are dormant) act as
guarantors. Extensive security is provided under the finance arrangements to
the syndicate banks and other banks providing finance under the lease
arrangements through fixed and floating charges over all the assets of the
Group.
The loan facility includes various restrictive covenants and events of
default. Generally events of default cause the borrowing under the facility to
become repayable on demand. In the event the security provided to the lessors
under TCC's and YCO's leasing arrangements is inadequate, the Company has the
ability to provide acceptable additional security. If such additional security
is not provided, this constitutes an event of default under the leases. The
leasing arrangements may be terminated at either of the parties options.
II-69
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
Most network assets with an estimated life of under 10 years are financed
under the Finance Lease facilities. Loan security is provided by a charge over
the cash realised in connection with the assets financed under the lease. The
lessors have security and protections which include guarantee and cash backed
security of the respective Group's obligations. Total cash restricted as to use
by providing backing for security to lessors amounted to (Pounds)179,424,000 at
31 December 1997, which has been classified as secured cash deposits restricted
for more than one year. There were no outstanding guarantees.
6.16 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Bank loans 86,436 255,000
Other loans 16,582 20,705
Obligations under finance leases 131,832 174,533
Retentions on civil contracts 706 738
Accruals and deferred income 388 15,597
-------------------------
235,944 466,573
-------------------------
</TABLE>
Further details of borrowings are included in note 6.15.
Other loans include (Pounds)100,000,000 6.0568% preference shares issued by a
subsidiary and guaranteed by the Company which have been included within
creditors in the consolidated financial statements in accordance with FRS 4.
(Pounds)90,000,000 has been deposited with the parent company of the preference
shareholder (an authorised banking institution) which has, in these financial
statements been set against the guaranteed preference shares under a legal
right of offset in accordance with FRS 5. Interest receivable on the deposit
has also been set against the dividend payable on the preference shares in the
profit and loss account.
Other loans also comprise a loan from Telewest Communications plc of
(Pounds)6 million (1996: (Pounds)6 million) to TCC which bears interest at 1%
above LIBOR, is unsecured and has no fixed repayment term. The Company has a
standby credit facility of (Pounds)32 million made available by CGE until 19
April 1998 after which time it amortises until 19 April 2001. At 31 December
1997 no monies had been drawn.
An analysis of the maturity of bank and other loans is as follows:
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Loans are repayable (all in instalments) as follows:
Within one year 538 538
Between one and two years 38 38
Between two and five years 24,718 114
Over five years 78,262 275,553
-------------------------
103,556 276,243
-------------------------
</TABLE>
II-70
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
FINANCE LEASES
The minimum future lease payments to which the Group is committed under
finance leases are as follows:
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Within one year 11,801 13,967
Between one and two years 11,493 16,218
Between two and five years 44,203 56,975
Over 5 years 76,136 101,340
-------------------------
143,633 188,500
-------------------------
</TABLE>
6.17 DEFERRED TAXATION
Deferred taxation comprises:
<TABLE>
<CAPTION>
AMOUNT PROVIDED FULL POTENTIAL LIABILITY
-------------------------- --------------------------
1996 1997 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Excess of tax allowance
over depreciation 45,640 33,480 47,322 33,581
Tax effect of losses
carried forward (45,640) (33,502) (45,640) (43,394)
Short term timing
differences -- 22 (58) (360)
------------------------------------------------------
-- -- 1,624 (10,173)
------------------------------------------------------
</TABLE>
Under the Group's accounting policy, no provision for deferred taxation is
needed in these statements (1996: (Pounds)nil, 1995: (Pounds)319,000).
6.18 SHARE CAPITAL
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Ordinary shares of (Pounds)1 each
Authorised 500,000 500,000
-------------------------
Issued and fully paid 365,092 365,092
-------------------------
</TABLE>
II-71
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
6.19 RESERVES
<TABLE>
<CAPTION>
SHARE MERGER PROFIT AND
PREMIUM RESERVE LOSS ACCOUNT TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
At 1 January 1996 81,910 -- (95,066) (13,156)
Share issue 16,200 85,302 -- 101,502
Expenses of share issue (3,496) -- -- (3,496)
Capital contribution
from parent
undertakings -- -- 30 30
Goodwill written off -- (85,302) (18,526) (103,828)
Retained loss -- -- (28,668) (28,668)
------------------------------------------------------
At 31 December 1996 94,614 -- (142,230) (47,616)
Release of provision for
expenses of share issue 303 -- -- 303
Goodwill written off -- -- (32,334) (32,334)
Retained loss -- -- (83,177) (83,177)
------------------------------------------------------
AT 31 DECEMBER 1997 94,917 -- (257,741) (162,824)
------------------------------------------------------
</TABLE>
The merger reserve in the Group was created on the issue of shares in the
Company to acquire YCG. The Company has recorded the shares issued and the
investment in YCG at fair value with the premium being credited to a merger
reserve.
The cumulative amount of goodwill charged to reserves in respect of
acquisitions amounts to (Pounds)194,324,000 (1996: (Pounds)161,990,000).
6.20 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Loss for the year (28,668) (83,177)
Capital contribution
from former parent
undertaking 30 --
New share capital
subscribed 213,221 --
Expenses of share issue (3,496) 303
Goodwill written off (103,829) (32,334)
--------------------------
77,258 (115,208)
Opening shareholders'
funds 240,218 317,476
--------------------------
CLOSING SHAREHOLDERS'
FUNDS 317,476 202,268
-------------------------
</TABLE>
6.21 EXECUTIVE OPTION SCHEME
On 24 March 1994 the Company adopted two executive share option schemes: the
Approved Share Option Scheme (Inland Revenue approved) and the Unapproved Share
Option Scheme both in substantially the same form, except as set out below.
On 23 April 1996 the Company adopted the 1996 Unapproved Share Option Scheme
in substantially the same form as the Approved Share Option Scheme.
The Schemes are controlled by the Remuneration Committee ("the Committee")
consisting wholly of non-executive Directors.
II-72
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
THE "APPROVED SCHEME" AND THE "1996 UNAPPROVED SCHEME"
All employees and directors of the Group nominated by the Committee are
eligible to participate if they:-
(1) are required to devote substantially all of their working time to Group
business.
(2) are not expected to retire within two years from date of grant.
Options granted are exercisable within a period of three to ten years from
the date of grant and entitle the recipient to acquire ordinary shares in the
Company at a price determined at the time the options were granted by the
Committee. The price of the option is not less than the average of the mid-
market value of a General Cable PLC ordinary share over the five trading days
immediately preceding the data of grant or, if the Committee so decides, the
value on the trading day prior to the date of grant (or the nominal value if
greater).
The options may only be exercised if, in respect of the last three annual
accounting periods ended prior to the proposed date of exercise of the option
General Cable PLC has, on the equity basis, exceeded the industry average in
respect of both total revenue per home live, and equivalent TV penetration as
certified by the Remuneration Committee.
The grant of options to any participant is limited so that the aggregate
price payable on the exercise of all options does not exceed four times the
participant's annual remuneration. Options are normally only exercisable after
three years from the date of grant by a participant who remains a director or
employee. Options may, however, be exercised earlier in special circumstances
such as death, disability, injury, redundancy or retirement or the employing
company ceasing to be a member of the Group or at the discretion of the
Committee for any other reason.
THE "APPROVED SCHEME"
544,750 options were granted in 1995, 356,753 in 1996 and 557,999 in 1997.
Options over 1,339,469 shares were outstanding as at 31 December 1997.
The outstanding options are exercisable as follows:
<TABLE>
<CAPTION>
NUMBER PRICE EXERCISABLE BETWEEN
<S> <C> <C> <C>
476,664 (Pounds) 1.91 14 Nov 1998 14 Nov 2005
289,881 (Pounds) 1.63 14 Aug 1999 14 Aug 2006
14,925 (Pounds) 2.01 26 Nov 1999 26 Nov 2006
86,448 (Pounds)1.965 14 Mar 2000 14 Mar 2007
123,176 (Pounds) 1.59 24 Jun 2000 24 Jun 2007
348,375 (Pounds) 1.00 05 Dec 2000 05 Dec 2007
</TABLE>
II-73
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
THE "1996 UNAPPROVED SCHEME"
376,726 options were granted in 1996 and 2,959,596 in 1997. Options over
3,330,512 shares were outstanding as at 31 December 1997.
The outstanding options are exercisable as follows:
<TABLE>
<CAPTION>
NUMBER PRICE EXERCISABLE BETWEEN
<S> <C> <C> <C>
306,239 (Pounds) 1.63 14 Aug 1999 13 Aug 2003
64,677 (Pounds) 2.01 26 Nov 1999 25 Nov 2003
790,355 (Pounds)1.965 14 Mar 2000 14 Mar 2007
19,081 (Pounds) 1.59 24 Jun 2000 24 Jun 2007
2,150,160 (Pounds) 1.00 05 Dec 2000 05 Dec 2007
</TABLE>
THE "UNAPPROVED SCHEME"
Other than as set out below, the terms of the Approved Scheme apply to the
Unapproved Scheme. Options granted are exercisable within a period of seven
years less seven days from the date of grant and entitle the recipient to
acquire ordinary shares in the Company at a price determined at the time the
options were granted by the Committee. The price of the option is not less than
the mid-market value of a General Cable PLC ordinary share on the trading day
immediately preceding the date of grant or the nominal value if greater.
No options were granted in 1995, 1996 or 1997 and options over 1,001,000
shares were outstanding as at 31 December 1997.
The outstanding options are exercisable up to 18 April 2001 at (Pounds)1 per
share.
6.22 PENSION COMMITMENTS
Certain Group employees participate in defined contribution pension schemes.
The assets of the schemes are held separately from the Group in an
independently administered fund. The pension costs charge represents
contributions payable by the Group to the fund and administered fund. The
pension costs charge represents contributions payable by the Group by the fund
and amounted to (Pounds)944,000 (1996: (Pounds)382,000, 1995: (Pounds)142,810).
Contributions payable at the year end amounted to (Pounds)8,000 (1996 and
1995: (Pounds)nil).
Certain employees of the Company were until 31 December 1997 members of the
Energy and Technical Services PLC (ETS) (a subsidiary of Compagnie Generale des
Eaux) pension scheme which is if the defined benefit type with assets held in a
separate trustee administered fund.
The total pension cost for the Company was (Pounds)115,000 (1996:
(Pounds)65,566, 1995: (Pounds)33,293). The pension cost relating to the scheme
is assessed in accordance with the advice of an independent qualified actuary
using the projected unit method. The latest actuarial valuation of the scheme
was at 1 April 1996. The assumptions that have the most significant effect on
the valuation are those relating to the rate of return on investments, rate of
increase in earnings and the rate of increase in pension. It is assumed that
the investments return would be 9% per annum, earnings increases would be 7%
per annum and that pension increased would increase at the rate of 4% per
annum.
II-74
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
At the date of the latest actuarial valuation, the market value of the assets
of the scheme was (Pounds)32,160,000 and the actuarial value of the assets was
sufficient to cover 102% of the benefits which had accrued to members, after
allowing for expected future increase in earnings. There were no funding
provisions or prepayments in the Balance Sheet as at 31 December 1995, 1996 or
1997.
On 1 January 1998 the General Cable Group Personal Pension Plan was
established. This is a defined contribution scheme, the assets of which are
held in an independently administered fund.
Former members of the ETS scheme have transferred to the new Group scheme
with effect from 1 January 1998 in additional to certain other Group employees.
6.23FINANCIAL COMMITMENTS
Annual commitments under non-cancellable operating leases are as follows:
<TABLE>
<CAPTION>
1996 1997
------------------------- -------------------------
LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Expiring within one year 184 355 165 203
Expiring between one and
two years inclusive 154 -- 156 246
Expiring between two and
five years inclusive 304 544 172 193
Expiring in over five
years 636 -- 1,204 --
<CAPTION>
---------------------------------------------------
<S> <C> <C> <C> <C>
1,278 899 1,697 642
<CAPTION>
---------------------------------------------------
</TABLE>
6.24 CAPITAL COMMITMENTS
Capital expenditure which has been contracted for but not provided for in the
financial statements is (Pounds)11,078,000 (1996: (Pounds)21,978,000):
6.25 RELATED PARTY TRANSACTIONS
YCG
In August 1993 the Company entered into a support agreement with YCG under
which the Company provided management advice and support to YCG for which it
was entitled to an annual fee of 1% of YCG's gross revenues, subject to a
minimum of (Pounds)500,000. In the period ended 6 August 1996, the Company
received (Pounds)424,000 (year ended 31 December 1995: (Pounds)500,000) under
this agreement.
BCC
In April 1994 the Company entered into a support agreement with BCC under
which the Company provides financial and management advice to BCC for which it
is entitled to an annual fee representing a percentage of the consolidated
gross revenue of BCC and its subsidiaries. In the year ended 31 December 1997,
the Company received (Pounds)220,000 (1996: (Pounds)173,000, 1995:
(Pounds)230,773) under this agreement. There was an outstanding balance of
(Pounds)627,893 (1996: (Pounds)495,283, 1995: (Pounds)66,120) at 31 December
1997 under the agreement.
During 1997 a loan of (Pounds)3,150,000 was made to BCC which was outstanding
at 31 December 1997. A further loan of (Pounds)3,150,000 was made by the
Company on 16 March 1998.
II-75
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
CGE
In March 1995, the Company entered into a Relationship Agreement with CGE
which provides for a geographical restriction on the fixed telecommunications
network interests of CGE and the undertakings which it controls, to restrict
CGE from carrying on specified activities in the United Kingdom. The
restrictions apply so long as CGE owns 20% or more of the voting rights of the
Company.
The Relationship Agreement also provides that CGE will provide the Company
with strategic advice and guidance in the management of the Company, assistance
in the analysis of business plans, development projects and their financial
implications and specific assistance in negotiations on telecommunications
matters, for which the Company would pay CGE an annual fee of (Pounds)260,000
in 1995 (before indexation which is linked to the UK retail price index for
future years). In the year ended 31 December 1997, the Company paid
(Pounds)282,000 (1996: (Pounds)267,525) under this agreement. There was no
outstanding balance at 31 December 1997 (1996: (Pounds)nil, 1995:
(Pounds)11,155).
GENERAL UTILITIES PLC
The Company holds a lease of its principal place of business from General
Utilities PLC (a subsidiary of CGE) of 37 Old Queen Street, London SW1 for a
term of 15 years which commenced on 10 June 1994. The Company is not entitled
to assign the lease or sublet the property, but the lease is excluded by an
order of the Court from the security of tenure generally afforded to business
tenants by statute and both General Utilities PLC and the Company are entitled
to terminate the lease at the expiration of each five years of the term. In the
year ended 31 December 1997 the Company paid rental and service charges of
(Pounds)128,407 (1996: (Pounds)128,049, 1995: (Pounds)122,342) and there was no
outstanding balance at 31 December 1995, 1996 or 1997.
6.26 ACCOUNTS OF ASSOCIATED UNDERTAKINGS
Summarised financial statements (prepared in accordance with Group accounting
policies) for Birmingham Cable Corporation:
Summary consolidated profit and loss account:
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Turnover 39,004 52,330 67,039
----------------------------------------
Operating costs (48,894) (62,128) (80,866)
----------------------------------------
Operating loss (9,890) (9,798) (13,827)
Interest receivable 24,906 27,680 19,776
Interest payable (25,388) (33,562) (34,036)
----------------------------------------
Loss before taxation (10,372) (15,680) (28,087)
Taxation (2,452) (2,802) (1,402)
----------------------------------------
Loss after taxation (12,824) (18,482) (29,489)
----------------------------------------
</TABLE>
II-76
<PAGE>
- -------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
Summarised consolidated balance sheet:
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Fixed assets 180,160 225,027 242,302
----------------------------------------
Current assets
Debtors 13,056 10,955 13,174
Secured cash deposit restricted for
more than one year 120,000 75,000 --
Cash at bank and in hand 6,523 7,690 2,254
----------------------------------------
139,579 93,645 15,428
Creditors: Amounts falling due
within one year
Other creditors (21,540) (36,074) (28,428)
----------------------------------------
Net current assets/(liabilities) 118,039 57,571 (13,000)
----------------------------------------
Total assets less current
liabilities 298,199 282,598 229,302
Creditors: amounts falling due after
more than one year
Other creditors (9,791) (12,529) (23,283)
Guaranteed redeemable preference
shares in subsidiary (174,420) (174,561) (140,000)
----------------------------------------
Net assets 113,988 95,508 66,019
----------------------------------------
</TABLE>
Notes to the summarised financial statements:
Turnover and gross margin
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
TURNOVER
Business telecommunications 4,767 7,004 9,463
Residential telephony 17,706 24,066 30,483
Cable television 16,531 21,260 27,093
GROSS MARGIN
Business telecommunications 2,553 4,754 6,517
Residential telephony 12,478 19,086 22,567
Cable television 7,615 7,826 9,012
CERTAIN ITEMS
Depreciation (13,619) (17,918) (24,476)
Gross fixed assets 211,044 274,568 327,563
Operating cash flow (EBITDA)* 3,729 8,121 10,649
</TABLE>
- ------------
* Operating cash flow is defined as earnings before interest, tax,
depreciation and amortisation. This definition is commonly styled "EBITDA"
and is not consistent with the definition employed in preparing UK cash flow
statements in accordance with FRS1, which requires adjustment for movements
in working capital.
II-77
<PAGE>
SECTION TWO UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
II-78
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
Set out below and concluding on page II-88 is an extract from the text of
General Cable's unaudited results for the three months ended 31 March 1998,
which were announced on 17 June 1998:
"HIGHLIGHTS
Compared to the three months ended 31 March 1997:
.Equity revenues up 24% to (Pounds)38,074,000 including acquisitions
. Equity operating cashflow increased to (Pounds)8,974,000 (1997
(Pounds)3,933,000). Consolidated operating cashflow increased to
(Pounds)7,627,000 (1997 (Pounds)2,649,000)
. 168,000 residential telephone lines (up 22%), 113,000 cable television
customers (up 2%) and 48,500 business exchange lines connected (up 45%)
Commenting on the results, Sir Anthony Cleaver, Chairman, General Cable PLC,
said:
"I am pleased to report another period of growth in both turnover and
operating cashflow. Results are in line with our expectations and growth in the
business is leading to the improvement in operating losses which is now our
main objective.
The business is well placed to benefit from consolidation of our industry and
a further announcement regarding progress of the proposed merger with Telewest
Communications plc will be made in due course."
CHAIRMAN'S STATEMENT FOR THE THREE MONTHS ENDED 31 MARCH 1998
"I am pleased to report our results for the quarter which are in line with
our expectations.
On 13 March 1997, the Group acquired Imminus Limited, a Managed Data Network
Service Company. The consolidated results include a full contribution from this
date. The equity results of the Group are stated on the basis that this
acquisition took place on 1 January 1997.
In 1997, we announced a change in our operating strategy, to emphasise supply
of cable television in those circumstances where the Group could be profitable.
This involves supplying cable television predominantly to customers who also
take residential telephony. Our objective in making this change was to
eliminate the losses that we had been incurring through supplying cable
television on the previous basis. In so doing, we recognised that we would
initially experience a fall in the rate of customer acquisition in television
services, and this has happened.
Birmingham Cable Corporation ("BCC"), our associated company in which the
Group holds 45%, had a satisfactory quarter, growing operating cashflow to
(Pounds)4,197,000 from (Pounds)1,939,000 in 1997.
II-79
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
FINANCIAL RESULTS
Consolidated revenues increased by 42% compared with the quarter ended 31
March 1997, reaching (Pounds)31,987,000. On this basis, the Group derived 40%
of revenues from business telecommunications, 37% from residential telephony
and 23% from cable television.
Margins in business telecoms reflected the mix of business achieved in the
quarter. The residential telephony margin fell slightly to 75% reflecting
pricing and interconnect cost of sale changes. The long decline in cable
television margins was reversed, reflecting significant price increases in the
last quarter of the year, in accordance with our revised operating strategy.
Equity operating cashflow improved significantly to (Pounds)8,974,000 from
(Pounds)3,933,000 in 1997, and on a consolidated basis to (Pounds)7,627,000
from (Pounds)2,649,000 in 1997.
As expected, the consolidated operating loss improved from (Pounds)6,196,000
to (Pounds)3,090,000. This reflects the growth in operating cashflow and the
acquisition of Imminus outweighing increased depreciation charges in the Group.
The share of losses of associated companies increased from (Pounds)2,725,000
to (Pounds)5,366,000 on the growth in operating cashflow in the year offset by
increased depreciation and interest charges in BCC.
The consolidated net interest charge increased following increases in
borrowings to fund network build and new customer connections. The Group is
expected to fund network expansion and new customer connections and services
during 1998 through increasing borrowings and this will lead to higher interest
charges.
Including minority interests and taxation, the overall loss for the period
was (Pounds)11,421,000 compared with (Pounds)11,561,000.
As previously stated, the franchise build was substantially complete in TCC
and BCC by the end of 1997. In YCG, the franchise build continues, but at a
much slower rate than previously.
OPERATING RESULTS
RESIDENTIAL SERVICES
Network reach extended from 56% built out at 31 March 1997 to 67% at 31 March
1998, excluding BCC. 29% of homes that we have marketed take a service from us
and 46% of customers take both services.
Total homes taking a service from the Group have increased by 16% from
166,000 at 31 March 1997 to 192,000 at 31 March 1998. The Group now serves a
total of 168,000 residential telephony subscribers and 113,000 cable television
customers. In addition BCC has connected 158,000 customers to either or both
services, up 10% on 1997.
As expected, overall net churn improved in television compared to the three
months ended 31 March 1997. Churn rose slightly in residential telephony to
18%.
II-80
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
TELEPHONY
Lines connected have increased by 23% to 167,700. Penetration was maintained
at 25% due to the slowdown in acquisition of dual customers resulting from
cable television price increases in the final quarter of 1997.
Despite ongoing price reductions throughout the market, overall revenues per
customer exceeded our expectations and were up by 3% at (Pounds)282 per annum
compared to the three months ended 31 March 1997. Further price reductions are
expected in 1998.
CABLE TELEVISION
Cable television penetration fell to 17%. The rate of customer acquisition
has slowed following the price rises for premium channels imposed in the final
quarter of 1997 and consequently penetration has, as expected, fallen. It is
anticipated that this trend will continue throughout 1998.
Our offer has continued to evolve, and during March we participated in the
launch of Front Row, a pay per view service operated by a joint venture of
which General Cable is a shareholder. Initial take up has been encouraging,
particularly in areas where impulse ordering is available. Further developments
in the product offering are anticipated for later in 1998.
Overall revenues per customer improved by some 11% to (Pounds)252 per annum
on price increases. The pay to basic ratio, the number of pay channels taken
divided by the number of basic subscribers, held at 129%.
BUSINESS TELECOMMUNICATIONS
General Telecom had another strong quarter, with lines connected up 45% on 31
March 1997 to 48,500. In addition, the managed data network business performed
satisfactorily.
Tariff reductions continued again throughout 1997 and further reductions for
basic voice telephony service are anticipated for 1998. However, exchange line
and other service growth, led to contribution ahead at (Pounds)5,100,000,
compared to (Pounds)4,230,000, excluding Imminus.
NETWORKS
1998 is intended to be a year in which network extension is slowed, having
obtained the assent from Oftel regarding the relaxation in our build milestone
commitments. Instead, investment will be focused on extending our networks'
capabilities, including implementation of digital television technology.
We anticipate being able to place orders with our equipment suppliers for
digital television technology in the near future, consistent with our aim of
being able to offer the advantages of digital television as soon as possible.
BIRMINGHAM
BCC, which is not managed by the Group, grew all areas of its business.
Network extension was substantially complete by the end of the year. Reported
penetrations have been increased by a reduction in homes recorded as passed and
marketed of 15,000 homes, following an audit of the relevant database.
II-81
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
The Company instituted a policy of encouraging further take up of dual
services through changing its discount to residential customers of both
services from the television to the telephony service in the later part of
1997. This has distorted the reported results of the television and telephony
services. Cable television penetration fell to 28% from 30% on price rises,
although residential telephony penetration improved to 31% from 28%. Revenues
and margins per subscriber were satisfactory
Business services developed satisfactorily, with exchange lines connected up
from 12,200 to 20,900.
Financial results progressed, with turnover 22% ahead at (Pounds)18,779,000
and operating cashflow ahead 116% at (Pounds)4,197,000. The Group's share of
losses grew from (Pounds)2,725,000 to (Pounds)5,366,000 on higher interest and
depreciation charges.
CONCLUSION
The operating results in 1998 are in line with our expectations and provide
us with confidence that we will achieve our objectives of rapidly reducing
accounting losses and establishing sustainable profitability.
On 15 April 1998 we announced that the terms of a proposed merger between the
Group and Telewest Communications plc had been agreed, with documents expected
to be posted before the end of June. Significant further progress towards
completion of that merger has been made and a further announcement will be made
in due course."
Sir Anthony Cleaver
Chairman
17 June 1998
II-82
<PAGE>
SECTION TWO UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 MARCH 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
3 MONTHS 3 MONTHS
ENDED ENDED YEAR ENDED
31 MARCH 31 MARCH 31 DECEMBER
1998 1997 1997
UNAUDITED UNAUDITED AUDITED
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
TURNOVER
Continuing operations 31,987 21,790 98,238
Acquisition -- 755 13,610
----------------------------------------
31,987 22,545 111,848
Operating costs (35,077) (28,741) (132,525)
----------------------------------------
OPERATING (LOSS)/ PROFIT
Continuing operations (3,090) (6,291) (22,960)
Acquisition -- 95 2,283
----------------------------------------
(3,090) (6,196) (20,677)
Share of losses of associated
undertakings (5,366) (2,725) (12,626)
Reorganisation costs -- -- (36,648)
Interest receivable and similar
income 8,411 3,527 17,707
Interest payable and similar charges (12,191) (6,472) (36,707)
----------------------------------------
Loss on ordinary activities before
taxation (12,236) (11,866) (88,951)
Taxation -- (315) 212
----------------------------------------
Loss on ordinary activities after
taxation (12,236) (12,181) (88,739)
Minority interest--equity 815 620 5,562
----------------------------------------
Loss for the period (11,421) (11,561) (83,177)
----------------------------------------
LOSS PER ORDINARY SHARE (3.2p) (3.2p) (22.8p)
</TABLE>
II-83
<PAGE>
SECTION TWO UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
BALANCE SHEET AT 31 MARCH 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
31 MARCH 31 MARCH 31 DECEMBER
1998 1997 1997
UNAUDITED UNAUDITED AUDITED
(Pounds)'000'S (Pounds)'000'S (Pounds)'000'S
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 494,756 438,176 488,928
Investments
Associated undertakings 24,310 39,891 29,675
Subsidiary undertakings -- -- --
Other investments 213 193 312
-------------------------------------------
519,279 478,260 518,915
-------------------------------------------
CURRENT ASSETS
Stocks -- 463 --
Debtors: amounts falling due
after more than one year 72 1,505 72
Debtors: amounts falling due
within one year 32,293 27,511 36,162
Secured cash deposit
restricted for more than one
year 186,379 150,516 179,424
Cash at bank and in hand 24,881 30,514 21,664
-------------------------------------------
243,625 210,509 237,322
-------------------------------------------
CREDITORS: amounts falling
due within one year (76,296) (97,517) (76,118)
NET CURRENT ASSETS 167,329 112,992 161,204
-------------------------------------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 686,608 591,252 680,119
CREDITORS: amounts falling
due after more than one year (485,815) (310,652) (466,573)
Provisions for liabilities
and charges (9,762) -- (10,277)
Minority interests--equity (184) (5,943) (1,001)
-------------------------------------------
NET ASSETS 190,847 274,657 202,268
-------------------------------------------
</TABLE>
II-84
<PAGE>
SECTION TWO UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
OPERATING STATISTICS--GROUP BASIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED YEAR ENDED
31 MARCH 31 MARCH 31 DECEMBER
1998 1997 1997
<S> <C> <C> <C>
Percentage built 67% 56% 66%
Annualised average revenue per
home live (Pounds)184 (Pounds)154 (Pounds)185
Penetration of homes taking a
service (homes marketed) 29% 31% 29%
Operating cashflow (consolidated) (Pounds)7,627 (Pounds)2,649 (Pounds)19,955
CABLE TV
Homes live 702,300 586,082 687,400
Subscribers 113,200 110,800 116,800
Penetration (of homes marketed) 17% 20% 18%
Annualised average revenue per
customer (Pounds)252 (Pounds)227 (Pounds)244
Gross churn 40% 52% 40%
Net churn 34% 45% 33%
Pay-to-basic ratio 129% 130% 143%
RESIDENTIAL TELEPHONY
Homes live 704,800 586,100 689,600
Subscribers 167,700 137,200 163,500
Penetration (of homes marketed) 25% 25% 25%
Annualised average revenue per
customer (Pounds)282 (Pounds)274 (Pounds)284
Gross churn 26% 25% 25%
Net churn 18% 16% 16%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 48,500 33,500 45,300
Annualised average revenue per
BEL (including Imminus) (Pounds)1,116 (Pounds)1,271 (Pounds)1,211
TURNOVER (000'S)
Business telecommunications
(including Imminus) (Pounds)13,023 (Pounds)10,158 (Pounds)45,915
Residential telephony (Pounds)11,712 (Pounds)9,109 (Pounds)41,340
Cable television (Pounds)7,252 (Pounds)6,316 (Pounds)27,569
GROSS MARGIN (000'S)
Business telecommunications
(including Imminus) (Pounds)7,440 (Pounds)6,311 (Pounds)27,488
Residential telephony (Pounds)8,811 (Pounds)7,008 (Pounds)33,011
Cable television (Pounds)3,343 (Pounds)2,392 (Pounds)11,450
GROSS MARGIN (%)
Business telecommunications
(including Imminus) 57% 62% 60%
Residential telephony 75% 77% 80%
Cable television 46% 38% 42%
</TABLE>
The aggregate figures represent 100% of the item concerned for the whole
period for TCC, YCG, Imminus and General Cable unless stated otherwise.
II-85
<PAGE>
SECTION TWO UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
OPERATING STATISTICS--EQUITY BASIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED YEAR ENDED
31 MARCH 31 MARCH 31 DECEMBER
1998 1997 1997
<S> <C> <C> <C>
Percentage built 71% 60% 70%
Annualised average revenue per
home live (Pounds)179 (Pounds)176 (Pounds)180
Turnover ((Pounds)'000) (Pounds)38,074 (Pounds)30,547 (Pounds)136,589
Operating cashflow
((Pounds)'000) (Pounds)8,974 (Pounds)3,933 (Pounds)24,479
Penetration of homes taking a
service (homes marketed) 31% 32% 31%
CABLE TV
Homes live 852,200 717,900 841,200
Subscribers 158,700 154,600 161,700
Penetration (of homes marketed) 20% 23% 20%
Annualised average revenue per
customer (Pounds)255 (Pounds)224 (Pounds)239
Gross churn 38% 46% 39%
Net churn 33% 40% 34%
Pay-to-basic ratio 131% 133% 150%
RESIDENTIAL TELEPHONY
Homes live 852,200 717,900 841,200
Subscribers 214,000 177,800 208,700
Penetration (of homes marketed) 26% 26% 26%
Annualised average revenue per
customer (Pounds)271 (Pounds)268 (Pounds)276
Gross churn 25% 25% 26%
Net churn 18% 18% 19%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 53,800 35,800 49,900
Annualised average revenue per
BEL (Pounds)1,045 (Pounds)1,037 (Pounds)1,154
TURNOVER (000'S)
Business telecommunications (Pounds)13,502 (Pounds)10,297 (Pounds)46,948
Residential telephony (Pounds)14,345 (Pounds)11,585 (Pounds)51,871
Cable television (Pounds)10,227 (Pounds)8,665 (Pounds)37,592
GROSS MARGIN
Business telecommunications 59% 62% 60%
Residential telephony 74% 76% 79%
Cable television 46% 35% 39%
</TABLE>
II-86
<PAGE>
SECTION TWO UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
OPERATING STATISTICS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED YEAR ENDED
31 MARCH 31 MARCH 31 DECEMBER
1998 1997 1997
<S> <C> <C> <C>
Percentage built 95% 90% 95%
Annualised average revenue per
home live (Pounds)170 (Pounds)161 (Pounds)164
Turnover ((Pounds)'000) (Pounds)18,779 (Pounds)15,351 (Pounds)67,039
Operating cashflow ((Pounds)'000) (Pounds)4,197 (Pounds)1,939 (Pounds)10,604
Penetration of homes taking a
service (homes marketed) 38% 37% 36%
CABLE TV
Homes marketed 414,700 385,200 429,638
Homes live 436,400 386,700 444,100
Subscribers 117,700 113,800 117,000
Penetration (of homes marketed) 28% 30% 27%
Annualised average revenue per
customer (Pounds)268 (Pounds)224 (Pounds)235
Gross churn 33% 31% 38%
Net churn 31% 28% 35%
Pay-to-basic ratio 144% 146% 173%
RESIDENTIAL TELEPHONY
Homes marketed 414,700 385,200 429,638
Homes live 436,400 386,700 444,100
Subscribers 126,600 109,200 123,400
Penetration (of homes marketed) 31% 28% 29%
Annualised average revenue per
customer (Pounds)251 (Pounds)264 (Pounds)265
Gross churn 22% 27% 30%
Net churn 20% 25% 28%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 20,900 12,200 19,400
Annualised average revenue per
BEL (Pounds)606 (Pounds)673 (Pounds)684
TURNOVER ((Pounds)'000)
Business telecommunications (Pounds)3,048 (Pounds)1,988 (Pounds)9,463
Residential telephony (Pounds)7,864 (Pounds)7,055 (Pounds)30,483
Cable television (Pounds)7,867 (Pounds)6,308 (Pounds)27,094
GROSS MARGIN
Business telecommunications 70% 65% 69%
Residential telephony 70% 73% 74%
Cable television 46% 30% 34%
</TABLE>
II-87
<PAGE>
SECTION TWO UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
OPERATING STATISTICS--ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
31 MARCH 31 DECEMBER
1998 1997
<S> <C> <C>
THE CABLE CORPORATION LTD
Percentage built 95% 94%
CABLE TV
Homes marketed 281,065 276,761
Subscribers 45,482 47,652
Penetration (of homes marketed) 16% 17%
Annualised average revenue per customer (Pounds)295 (Pounds)284
Gross churn 47% 36%
Pay-to-basic ratio 181% 186%
RESIDENTIAL TELEPHONY
Homes marketed 283,602 278,883
Subscribers 64,130 62,458
Penetration (of homes marketed) 23% 22%
Annualised average revenue per customer (Pounds)345 (Pounds)349
Gross churn 29% 26%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 25,100 24,230
Annualised average revenue per BEL (Pounds)880 (Pounds)932
YORKSHIRE CABLE GROUP LTD
Percentage built 57% 56%
CABLE TV
Homes marketed 385,753 372,553
Subscribers 67,714 69,154
Penetration (of homes marketed) 18% 19%
Annualised average revenue per customer (Pounds)223 (Pounds)216
Gross churn 36% 43%
Pay-to-basic ratio 94% 113%
RESIDENTIAL TELEPHONY
Homes marketed 385,753 372,553
Subscribers 103,547 101,039
Penetration (of homes marketed) 27% 27%
Annualised average revenue per customer (Pounds)243 (Pounds)244
Gross churn 25% 24%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 23,370 21,031
Annualised average revenue per BEL (Pounds)543 (Pounds)567"
</TABLE>
II-88
<PAGE>
SECTION THREE UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE
UK GAAP PRO FORMA FINANCIAL INFORMATION OF THE COMBINED GROUP
- --------------------------------------------------------------------------------
II-89
<PAGE>
SECTION THREE UK FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE COMBINED GROUP
UK GAAP PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
II-90
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
UK GAAP PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE UK FINANCIAL INFORMATION
BASIS OF INFORMATION
Set out below is the unaudited pro forma statement of net assets as at 31
March 1998 and profit and loss account for the year ended 31 December 1997 of
Telewest Communications plc. These have been prepared in accordance with the
accounting policies of the Telewest Group.
The unaudited pro forma profit and loss account and statement of net assets
("unaudited pro forma financial information') is based on the results and net
assets of Telewest Communications plc and adjusted to reflect the acquisition
of General Cable PLC as if it had been completed on 1 January 1997 for the
profit and loss account and 31 March 1998 for the statement of net assets.
Goodwill has been calculated on the estimated fair value of the net assets of
General Cable PLC at 31 March 1998.
Because of the nature of the unaudited pro forma financial information, the
unaudited pro forma statement of net assets and profit and loss accounts may
not give a true picture of the Combined Group's financial position or results
and has been prepared for illustrative purposes only.
II-91
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
UK GAAP PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE UK FINANCIAL INFORMATION
NET ASSETS
<TABLE>
<CAPTION>
TELEWEST GENERAL CABLE
AS AT 31 AS AT 31 PRO FORMA
MARCH 1998 MARCH 1998 ADJUSTMENTS COMBINED
-------------------------------
<S> <C> <C> <C> <C> <C>
(i) (ii) (iii)
<CAPTION>
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Intangible -- -- 845,434 (52,840) 792,594
Tangible 1,707,390 494,756 -- -- 2,202,146
Investments 77,993 24,523 (25,666) -- 76,850
-----------------------------------------------------------
1,785,383 519,279 819,768 (52,840) 3,071,590
-----------------------------------------------------------
CURRENT ASSETS
Stocks 96 -- -- -- 96
Debtors 81,741 32,365 -- -- 114,106
Secured cash deposit
restricted for more
than one year -- 186,379 -- -- 186,379
Cash at bank and in
hand 43,875 24,881 -- -- 68,756
-----------------------------------------------------------
125,712 243,625 -- -- 369,337
CREDITORS: AMOUNTS
FALLING DUE WITHIN ONE
YEAR (228,100) (76,296) (32,386) -- (336,782)
-----------------------------------------------------------
Net current
assets/(liabilities) (102,388) 167,329 (32,386) -- 32,555
-----------------------------------------------------------
Total assets less
current liabilities 1,682,995 686,608 787,382 (52,840) 3,104,145
Creditors: amounts
falling due after more
than one year (1,484,400) (485,815) 6,000 -- (1,964,215)
Provisions for
liabilities and
charges -- (9,762) -- -- (9,762)
Minority interests (666) (184) 184 -- (666)
-----------------------------------------------------------
Net assets 197,929 190,847 793,566 (52,840) 1,129,502
-----------------------------------------------------------
</TABLE>
II-92
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
UK GAAP PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE UK FINANCIAL INFORMATION
PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
GENERAL
TELEWEST CABLE
YEAR ENDED YEAR ENDED
31 DECEMBER 31 DECEMBER PRO FORMA
1997 1997 ADJUSTMENTS COMBINED
(I) (II) (III)
----------------------------------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
Turnover 386,498 111,848 -- -- 498,346
Operating costs (514,262) (132,525) -- (42,272) (689,059)
<CAPTION>
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating loss (127,764) (20,677) -- (42,272) (190,713)
Share of results of
associated undertakings (21,312) (12,626) -- -- (33,938)
Reorganisation costs -- (36,648) -- -- (36,648)
Other interest
receivable and similar
income 9,097 17,707 -- -- 26,804
Interest payable and
similar charges (169,930) (36,707) -- -- (206,637)
<CAPTION>
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loss on ordinary
activities before tax (309,909) (88,951) -- (42,272) (441,132)
Tax on loss on ordinary
activities (521) 212 -- -- (309)
<CAPTION>
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Loss on ordinary
activities after
taxation (310,430) (88,739) -- (42,272) (441,441)
Minority interests (293) 5,562 (5,562) -- (293)
<CAPTION>
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Retained loss for the
financial year (310,723) (83,177) (5,562) (42,272) (441,734)
<CAPTION>
--------------------------------------------------------------------
</TABLE>
II-93
<PAGE>
SECTION THREE UK FINANCIAL INFORMATION
NOTES
The relevant financial information for the purpose of preparing the unaudited
pro forma financial information has been based on the unaudited consolidated
quarterly financial statements of Telewest for the three months ended 31 March
1998 and the audited consolidated financial statements of Telewest for the year
ended 31 December 1997 as set out elsewhere in this document.
The adjustments made in preparing the pro forma financial information of the
Combined Group are explained below:
ADJUSTMENT (I)
-- to reflect the net assets and profit and loss account of General Cable PLC
("General Cable") based on the unaudited consolidated quarterly financial
statements of General Cable for the three months ended 31 March 1998 and the
audited consolidated financial statements for the year ended 31 December 1997
as set out elsewhere in this document;
ADJUSTMENT (II)
-- to reflect the issue of approximately 454 million new Telewest shares and
(Pounds)243.5 million (including costs associated with the cash cancellation of
the General Cable options) for the acquisition of General Cable PLC resulting
in a total purchase consideration before costs of (Pounds)965.6 million and
goodwill of (Pounds)845.4 million;
-- to reflect the issue of approximately 261 million new Telewest shares
under the Pre-emptive Issue at a price of 92.5p per share;
-- to reflect the estimated costs of the transaction (including the cash
cancellation of the General Cable options and the estimated excess of the
proceeds of the Pre-emptive Issue over the cash element of the purchase
consideration) of (Pounds)32.4 million;
-- to eliminate Telewest's existing investment in Cable Corporation of
(Pounds)25.7 million, the minority interest recorded in General Cable's balance
sheet attributable to Telewest's investment therein amounting to (Pounds)0.2
million at 31 March 1998 and (Pounds)5.6 million for the year ended 31 December
1997 and a loan of (Pounds)6 million from Telewest to Cable Corporation, all of
which now eliminate on consolidation.
ADJUSTMENT (III)
-- to reflect the amortisation of goodwill arising from the acquisition of
General Cable over 20 years with effect from 1 January 1997 comprising
(Pounds)42.3 million for the year ended 31 December 1997 and (Pounds)10.6
million for the three months ended 31 March 1998.
The adjustment relating to the amortisation of goodwill will have an ongoing
effect on the Combined Group's profit and loss account.
II-94
<PAGE>
- --------------------------------------------------------------------------------
PART III
----------------
- --------------------------------------------------------------------------------
US FINANCIAL INFORMATION
RELATING TO
TELEWEST COMMUNICATIONS PLC
AND
GENERAL CABLE PLC
III-1
<PAGE>
US FINANCIAL INFORMATION
<TABLE>
CONTENTS -- PART III
- --------------------------------------------------------------------------------
Page
SECTION ONE
- ----------------------------------------------------------------------------
<S> <C>
US GAAP FINANCIAL INFORMATION OF TELEWEST............................. III-3
US GAAP Selected Financial Information............................... III-4
US GAAP Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... III-7
US GAAP Audited Consolidated Financial Statements.................... III-19
US GAAP Unaudited Condensed Consolidated Financial Statements........ III-48
SECTION TWO
- ----------------------------------------------------------------------------
UK GAAP FINANCIAL INFORMATION OF GENERAL CABLE (WITH RECONCILIATION TO
US GAAP)............................................................. III-55
UK GAAP Selected Consolidated Financial Information.................. III-56
UK GAAP Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................... III-62
UK GAAP Audited Consolidated Financial Statements with a
Reconciliation of Net Income and Shareholders' Equity to US GAAP.... III-86
UK GAAP Audited Consolidated Financial Statements of Birmingham Cable
with a Reconciliation of Net Income and Shareholders' Equity to US
GAAP................................................................ III-123
UK GAAP Unaudited Financial Information for the Three Months ended 31
March 1998.......................................................... III-144
SECTION THREE
- ----------------------------------------------------------------------------
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION, CAPITALIZATION AND
COMPARATIVE PER SHARE INFORMATION OF THE COMBINED GROUP.............. III-156
US GAAP Unaudited Pro Forma Financial Information.................... III-157
US GAAP Unaudited Pro Forma Capitalization........................... III-163
US GAAP Unaudited Pro Forma Comparative per Share Information........ III-165
US GAAP Dilution..................................................... III-168
SECTION FOUR
- ----------------------------------------------------------------------------
EXPERTS............................................................... III-171
Experts.............................................................. III-172
</TABLE>
III-2
<PAGE>
SECTION ONE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE
US GAAP FINANCIAL INFORMATION OF TELEWEST
- --------------------------------------------------------------------------------
III-3
<PAGE>
SECTION ONE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
US GAAP SELECTED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
III-4
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP SELECTED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
The selected consolidated financial data set forth below for the Predecessor
Businesses (for definition, see note 1, page III-6) as at and for the year
ended December 31, 1993, the Joint Venture (for definition, see note 2, page
III-6) as at and for the year ended December 31, 1994 and for Telewest as of
December 31, 1995, 1996 and 1997, and for the three year period ended December
31, 1997 has been extracted or derived from the audited consolidated financial
statements of the Predecessor Business, the Joint Venture and Telewest. The
selected consolidated financial data set forth below as at March 31, 1998 and
for the three months ended March 31, 1997 and 1998 is derived from the
unaudited condensed consolidated financial statements of Telewest included
elsewhere herein and which, in the opinion of Telewest reflect all normal and
recurring adjustments necessary to present fairly the financial position and
results of operations of the unaudited period. The results of operations for
the three months ended March 31, 1998 are not necessarily indicative of the
results for the entire year.
The selected financial data should be read in conjunction with, and is
qualified in its entirety, by reference to "Management's Discussion and
Analysis of Financial Condition and Results of Operations' and the consolidated
financial statements of Telewest and the related notes thereto included
elsewhere in this Part III.
III-5
<PAGE>
- -------------------------------------------------------------------------------
TELEWEST
US GAAP SELECTED FINANCIAL INFORMATION
- -------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------
THREE MONTHS
PREDECESSOR JOINT ENDED
BUSINESSES(1) VENTURE(2) TELEWEST MARCH 31,
------------- ------------ -------------------------------------- -------------------------
1993 1994 1995(3) 1996 1997 1997 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
REVENUE
Cable television 20,729 35,875 64,740 121,224 159,918 38,101 44,180
Telephony--residential 11,261 23,471 57,597 125,013 166,645 39,674 48,436
Telephony--business 4,908 8,812 17,449 34,562 43,882 9,287 13,502
Other 3,440 3,869 4,998 9,467 16,053 3,328 4,306
----------------------------------------------------------------------------------------------
TOTAL REVENUE 40,338 72,027 144,784 290,266 386,498 90,390 110,424
----------------------------------------------------------------------------------------------
OPERATING COSTS AND
EXPENSES:
Programming (8,403) (15,500) (32,194) (69,906) (93,441) (23,198) (25,257)
Telephony (10,203) (14,714) (29,526) (52,572) (50,145) (14,379) (14,201)
Selling, general and
administrative (32,505) (60,414) (105,388) (167,323) (193,335) (45,529) (45,207)
Depreciation (17,635) (30,320) (60,019) (129,716) (177,341) (37,456) (46,724)
Amortisation (840) (1,827) (7,854) (26,149) (26,395) (6,594) (6,599)
----------------------------------------------------------------------------------------------
OPERATING LOSS (29,248) (50,748) (90,197) (155,400) (154,159) (36,766) (27,564)
----------------------------------------------------------------------------------------------
Share of loss of affili-
ates (7,540) (8,466) (12,777) (15,973) (21,696) (4,978) (6,704)
Financial expenses,
net(4) (651) (6,137) (34,607) (90,788) (156,167) (51,958) (34,454)
Extraordinary gain -- 7,287 (4) -- -- -- -- --
----------------------------------------------------------------------------------------------
Net loss (37,439) (58,050) (137,531) (262,391) (332,452) (93,883) (68,728)
----------------------------------------------------------------------------------------------
Basic and diluted
(loss)/gain per
ordinary share:
Before extraordinary
gain (pro forma loss
for 1994) (10 pence) (16 pence) (28 pence) (36 pence) (10 pence) (7 pence)
Extraordinary gain(5) 1 pence -- -- -- -- --
Loss (pro forma loss for
1994) (9 pence) (16 pence) (28 pence) (36 pence) (10 pence) (7 pence)
BALANCE SHEET DATA:
Property and equipment
(net) 269,974 454,843 1,063,808 1,447,194 1,705,520 1,704,907
Total assets 413,865 878,156 2,289,720 2,241,940 2,413,352 2,415,352
Investment in affiliates 68,838 81,907 80,703 69,420 59,707 52,327
Debt(4) 49,386 3,886 792,265 879,351 1,373,054 1,448,820
Equity 311,695 776,934 1,322,748 1,070,797 738,750 670,022
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(1) Predecessor Businesses refer to certain businesses owned by TCI prior to
the formation of the Joint Venture and which are now owned by the Company.
(2) See Note 1 (Organization and history) to the US GAAP Consolidated Financial
Statements.
(3) See Note 5 (Business combinations) to the US GAAP Consolidated Financial
Statements.
(4) See Note 13 (Debt) to the US GAAP Consolidated Financial Statements.
(5) Extraordinary gain relates to the fair value of interest rate swaps in the
US GAAP Consolidated Financial Statements arising on repayment of debt
following Telewest's initial public offering in November 1994.
III-6
<PAGE>
SECTION ONE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
III-7
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
GENERAL
The following discussion and analysis of the financial condition and results
of operations of the Telewest Group should be read in conjunction with the
financial statements and related notes of the Telewest Group contained
elsewhere in this document. Capitalized terms used in this section and not
otherwise defined herein have the meanings ascribed to such terms in Part I of
this document.
RESULTS OF OPERATIONS
The following table provides certain operating data for the Telewest Group
for the three years ended December 31, 1995, 1996 and 1997 and the three months
ended March 31, 1997 and 1998.
Telewest acquired SBCC on October 3, 1995. Pro forma information has been
included for 1995 to demonstrate the effect of including the results of former
SBCC franchises for the full year ended December 31, 1995. The pro forma
information is not commented upon in the discussion and analysis.
- --------------------------------------------------------------------------------
CONSOLIDATED FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED DECEMBER 31, ENDED MARCH 31,
----------------------------------- ----------------
1995 1995 1996 1997 1997 1998
PRO FORMA
(UNAUDITED) (UNAUDITED)
(ALL AMOUNTS IN (Pounds) MILLION)
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Cable Television 83.7 64.7 121.2 159.9 38.1 44.2
Telephony --
residential 81.2 57.6 125.0 166.6 39.7 48.4
Telephony -- business 20.6 17.4 34.6 43.9 9.3 13.5
Other 5.7 5.1 9.5 16.1 3.3 4.3
-----------------------------------------------------
Total Revenue 191.2 144.8 290.3 386.5 90.4 110.4
-----------------------------------------------------
Operating costs and
expenses:
Programming (42.9) (32.2) (69.9) (93.4) (23.2) (25.3)
Telephony (38.7) (29.5) (52.7) (50.2) (14.4) (14.2)
Selling, general and
administrative (137.8) (105.4) (167.3) (193.3) (45.5) (45.2)
Depreciation (80.8) (60.0) (129.7) (177.4) (37.5) (46.7)
Amortisation of
goodwill (25.3) (7.9) (26.1) (26.4) (6.6) (6.6)
-----------------------------------------------------
(325.5) (235.0) (445.7) (540.7) (127.2) (138.0)
-----------------------------------------------------
Operating loss (134.3) (90.2) (155.4) (154.2) (36.8) (27.6)
-----------------------------------------------------
Other income (expense):
Share of loss of
affiliates (12.8) (12.8) (16.0) (21.7) (5.0) (6.7)
Financial expenses, net (41.1) (34.6) (90.8) (156.2) (52.0) (34.4)
Other 0.1 0.1 (0.2) (0.4) (0.1) --
-----------------------------------------------------
Net loss (188.1) (137.5) (262.4) (332.5) (93.9) (68.7)
-----------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
III-8
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
SUMMARY OF OPERATIONS FOR THE THREE MONTH PERIODS ENDED MARCH 31, 1997 AND 1998
The Telewest Group's consolidated revenue increased by (Pounds)20.0 million
or 22.2% from (Pounds)90.4 million in the three month period ended March 31,
1997 to (Pounds)110.4 million in the three month period ended March 31, 1998,
primarily due to the larger customer base created by the Telewest Group's
continuing network construction.
CABLE TELEVISION REVENUE
Cable television revenue increased by (Pounds)6.1 million or 16.0% from
(Pounds)38.1 million in the three months ended March 31, 1997 to (Pounds)44.2
million in the three months ended March 31, 1998. The increase was primarily
attributable to a 14.3% increase (from 533,648 to 609,866) in the average
number of customers in the three month period ended March 31, 1998, compared to
the corresponding period in 1997. The increase in the average number of
customers results primarily from an increase in the number of homes passed and
marketed from 2,439,377 at March 31, 1997 to 2,794,836 at March 31, 1998.
Penetration improved slightly from 22.0% at December 31, 1997 to 22.1% at
March 31, 1998 compared to a slight decrease from 22.6% as at December 31, 1996
to 22.2% as at March 31, 1997. Churn increased from 34.3% in the three month
period ended March 31, 1997 to 37.2% in the three month period ended March 31,
1998 and from 32.6% in the twelve month period ended March 31, 1997 to 34.8% in
the twelve month period ended March 31, 1998. This increase in churn was due in
part to customer service related problems resulting from the Telewest Group's
restructure and redundancy program and the cable television price increases
implemented from November 1, 1997.
Average monthly revenue per cable television customer increased by 0.6% from
(Pounds)23.57 in the three month period ended March 31, 1997 to (Pounds)23.72
in the three month period ended March 31, 1998 due to the expansion of pay-per-
view events, a decrease in promotional discounts offered by the Telewest Group
and price increases implemented from November 1, 1997.
TELEPHONY REVENUE
Telephony revenue increased by (Pounds)12.9 million or 26.5% from
(Pounds)49.0 million in the three month period ended March 31, 1997 to
(Pounds)61.9 million in the three month period ended March 31, 1998.
Residential telephony revenue increased by (Pounds)8.8 million or 22.1% from
(Pounds)39.7 million in the three month period ended March 31, 1997 to
(Pounds)48.4 million in the three month period ended March 31, 1998. Business
telephony revenue increased by (Pounds)4.2 million or 45.4% from (Pounds)9.3
million in the three months ended March 31, 1997 to (Pounds)13.5 million in the
three months ended March 31, 1998.
The increase in residential telephony revenue in the three month period ended
March 31, 1998 compared to the corresponding period ended March 31, 1997 was
primarily due to a 30.5% increase (from 651,035 to 849,271) in the average
number of residential lines, which was partially offset by a decrease in the
average monthly revenue per residential line of 6.0%, from (Pounds)20.31 in the
three month period ended March 31, 1997 to (Pounds)19.10 in the three month
period ended March 31, 1998. The increase in the average number of residential
lines results primarily from an increase in the number of homes passed and
marketed (from 2,377,511 at March 31, 1997 to 2,760,826 at March 31, 1998) and
from increased penetration. The decrease in the average monthly revenue per
line was mainly attributable to price reductions in per minute call charges in
response to price cutting by BT, the Telewest Group's main competitor in
residential telephony. The Telewest Group intends to continue to reduce per
minute call tariffs as necessary to compete effectively and to seek to mitigate
the revenue
III-9
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TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
impact of these reductions through higher line rentals, increased call
volumes, and sales of value added services such as call waiting and voice
messaging.
Residential telephony penetration increased from 29.7% at December 31, 1997
to 30.1% at March 31, 1998 and from 27.5% at December 31, 1996 to 28.2% at
March 31, 1997. Churn increased from 19.8% in the three months ended March 31,
1997 to 21.7% in the three months ended March 31, 1998 and from 19.5% in the
twelve month period ended March 31, 1997 to 20.5% in the twelve months ended
March 31, 1998.
The increase in business telephony revenue in the three month period ended
March 31, 1998 compared to the corresponding period ended March 31, 1997 was
attributable to a 48.3% increase (from 70,871 to 105,125) in the average
number of business telephony lines. This increase was partially offset by a
decrease in the average monthly revenue per business line, which decreased by
2.0% from (Pounds)43.68 in the three month period ended March 31, 1997 to
(Pounds)42.81 in the three month period ended March 31, 1998. The increase in
the average number of business telephony lines was attributable to a 20.4%
increase in the number of business premises passed and marketed (from 107,491
at March 31, 1997 to 129,375 at March 31, 1998) and to an increased focus on
marketing services to larger businesses which generally purchase more lines.
The decrease in the average monthly revenue per line was mainly attributable
to price reductions in per minute call charges and increased volume discounts,
together with increased sales of Centrex, a business telecommunications
product which provides more lines to customers but which has a lower average
monthly revenue per line.
Other revenue increased by 29.4% from (Pounds)3.3 million in the three month
period ended March 31, 1997 to (Pounds)4.3 million in the three month period
ended March 31, 1998 and is derived primarily from management services
provided to affiliated companies, internet sales, cable publications and
network management services provided to other operators, and advertising
sales.
OPERATING COSTS AND EXPENSES
The Telewest Group's consolidated operating costs and expenses (which
include direct costs of programming and interconnection; selling, general and
administrative expenses; depreciation expense and amortization expense)
increased by 8.5% from (Pounds)127.2 million in the three month period
ended March 31, 1997 to (Pounds)138.0 million in the three month period ended
March 31, 1998.
Programming fees are the largest component of the Telewest Group's operating
costs in providing cable television services. The Telewest Group obtains most
of its programming under contracts which provide for payments based upon the
number of subscribers. As a percentage of cable television revenues,
programming costs decreased from 61% in the three month period ended March 31,
1997 to 57% in the three month period ended March 31, 1998, resulting from the
negotiation of more favourable contract terms.
Interconnection charges are the largest component of the Telewest Group's
telephony operating costs in providing telephony services. As a percentage of
telephony revenue, telephony operating costs decreased from 29% in the three
month period ended March 31, 1997 to 23% for the three month period ended
March 31, 1998. Interconnection charges in 1998 were reduced by the continuing
reduction in interconnection charges in the UK telephony market, a growing
percentage of interconnection charges handled within the Telewest network and
by credits relating to
interconnection charges from earlier periods, which have been recalculated
based on the final agreed rates applicable for that period.
III-10
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TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
Selling, general and administrative expenses, which include, among other
items, salary and marketing costs, decreased as a percentage of revenue from
50% in the three month period ended March 31, 1997 to 41% for the corresponding
period in 1998. The improvement is largely due to the rapid growth in revenues
and continued reduction in support costs per customer as the Telewest Group
benefits from the economies of scales resulting from its enlarged operations.
Total labour and overhead costs capitalised in the three month period ended
March 31, 1998 were (Pounds)15.3 million, compared to (Pounds)19.5 million for
the corresponding period in 1997. The Telewest Group expects that its selling,
general and administrative expenses will continue to decline as a percentage of
revenue, as revenues increase and the efficiency gains from its fixed cost base
are increasingly exploited, and the full year benefits of a restructuring and
redundancy programme, completed at the end of 1997, take effect.
Depreciation expense increased 24.7% from (Pounds)37.5 million in the three
month period ended March 31, 1997 to (Pounds)46.7 million in the three month
period ended March 31, 1998. With effect from January 1, 1997, activation
labour was reclassified from "Cable and Ducting' to "Electronics' to be
consistent with the classification of activation materials, with activation
labour now depreciated over 8 years rather than 20 years. Although the effect
of this revision was accounted for in the second half of 1997, had the revision
been accounted for with effect from the beginning of the first quarter of 1997,
depreciation expense for the three months ended March 31, 1997 would have
increased by approximately (Pounds)2.6 million.
Amortization expense remained stable at (Pounds)6.6 million in both the three
month periods to March 31, 1997 and March 31, 1998.
OTHER INCOME/(EXPENSE)
The Telewest Group's share of the net losses of its affiliated companies
accounted for under the equity method, principally Birmingham Cable and Cable
London, was (Pounds)5.0 million and (Pounds)6.7 million for the three month
periods ended March 31, 1997 and 1998, respectively.
Financial expenses, net, consist primarily of interest expense of
(Pounds)42.7 million for the three month period ended March 31, 1998,
((Pounds)30.3 million for the three month period ended March 31, 1997) and
foreign exchange gain of (Pounds)6.6 million for the three month period ended
March 31, 1998, ((Pounds)24.1 million foreign exchange loss for the three month
period ended March 31, 1997) offset in part by interest income earned on short-
term investments and loans to Telewest Affiliated Companies of (Pounds)1.1
million for the three month period ended March 31, 1998 ((Pounds)2.4 million
for the three month period ended March 31, 1997). Interest expense increased by
(Pounds)12.4 million in the three month period ended March 31, 1998, primarily
as a result of the interest expense on higher outstanding borrowings relating
to the Senior Secured Facility (as defined below) entered into in May 1996 and
higher accrued interest expense on the Senior Discount Debentures (as defined
below) issued by the Telewest Group in October 1995. The foreign exchange gains
and losses arose principally from the re-translation of the US Dollar
denominated debentures to Pounds Sterling using the March 31, 1998 exchange
rate and marking the associated hedging instruments to their market value at
March 31, 1998. It is the Telewest Group's policy to hedge non-Sterling
denominated borrowings to reduce or eliminate exchange rate exposure.
SUMMARY OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
The Telewest Group's consolidated revenue increased by (Pounds)96.2 million
or 33% from (Pounds)290.3 million in 1996 to (Pounds)386.5 million in 1997. The
increase was attributable to the larger customer base
III-11
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TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
created by the Telewest Group's continuing network construction and penetration
and price increases in certain segments of its business.
CABLE TELEVISION REVENUE
Cable television revenue increased by 32% from (Pounds)121.2 million in 1996
to (Pounds)159.9 million in 1997. The increase was primarily attributable to a
28% increase (from 440,212 to 562,343) in the average number of customers in
1997 over 1996. The increase in the average number of customers is a result of
an increase in the number of homes passed and marketed (from 2,335,953 at
December 31, 1996 to 2,760,184 at December 31, 1997).
Average monthly revenue per cable television customer increased 2% from
(Pounds)22.95 in 1996 to (Pounds)23.40 in 1997. This was due to the expansion
of pay-per-view events, a decrease in promotional discounts offered by the
Telewest Group and price increases implemented from November 1, 1997.
TELEPHONY REVENUE
Telephony revenue increased by 32% from (Pounds)159.6 million in 1996 to
(Pounds)210.5 million in 1997.
Residential telephony revenue increased by 33% from (Pounds)125.0 million in
1996 to (Pounds)166.6 million in 1997. Business telephony revenue increased by
27% from (Pounds)34.6 million in 1996 to (Pounds)43.9 million in 1997.
The increase in residential telephony in 1997 over 1996 was primarily due to
a 42% increase (from 514,156 to 732,487) in the average number of residential
lines. This resulted from an increase in the number of homes passed and
marketed (from 2,254,734 at December 31, 1996 to 2,725,154 at December 31,
1997) and an increase in penetration of the total base of homes passed of 2.2
percentage points. The revenue increase from the growth in the average number
of residential lines was partially offset by a 5% decrease in the average
monthly revenue per residential line, from (Pounds)20.26 in 1996 to
(Pounds)19.19 in 1997.
This decrease was mainly attributable to price reductions in per minute call
charges in response to price cutting by BT, the Telewest Group's main
competitor in residential telephony. The Telewest Group intends to continue to
reduce per minute call tariffs as necessary to compete effectively and to seek
to mitigate the revenue impact of these reductions through higher line rentals,
increased call volumes and sales of value added services such as call-waiting
and voice-messaging.
The increase in business telephony revenue in 1997 over 1996 was primarily
attributable to a 58% increase (from 52,849 to 83,552) in the average number of
business telephony lines in 1997, which was partially offset by a 20% decrease
in the average monthly revenue per business line, from (Pounds)54.50 in 1996 to
(Pounds)43.62 in 1997. This decrease was mainly attributable to price
reductions in per minute call charges and increased volume discounts, together
with increased sales of Centrex, a business telecommunications product which
provides more lines to customers but has a lower average monthly revenue per
line.
Other revenue increased by 70% from (Pounds)9.5 million in 1996 to
(Pounds)16.1 million in 1997. Other revenue is derived primarily from
management services provided to Affiliated Companies, Internet sales, cable
publications and network management services provided to other operators, and
advertising sales.
III-12
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TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
OPERATING COSTS AND EXPENSES
The Telewest Group's consolidated operating costs and expenses (which include
direct costs of programming and interconnection; selling, general and
administrative expenses; depreciation and amortization expenses) increased by
21% from (Pounds)445.7 million in 1996 to (Pounds)540.7 million in 1997.
Programming fees are the largest component of the Telewest Group's operating
costs in providing cable television services. The Telewest Group obtains most
of its programming under contracts which provide for payments based upon the
number of subscribers. As a percentage of cable television revenues,
programming costs remained stable at 58% in both 1996 and 1997.
Interconnection charges are the largest component of the Telewest Group's
telephony operating costs in providing telephony services. As a percentage of
telephony revenue, telephony operating costs decreased from 33% in 1996 to 24%
in 1997 due to the continuing reduction in interconnection charges in the UK
telephony market, a growing percentage of calls handled within the Telewest
network and by credits relating to interconnection charges from earlier
periods, which have been recalculated based on the final agreed rates
applicable for that period.
Selling, general and administrative expenses, which include, among other
items, salary and marketing costs, decreased as a percentage of revenue from
58% in 1996 to 50% in 1997. The improvement was largely due to the rapid growth
in revenues and continued reduction in support costs per customer as the
Telewest Group benefited from the economies of scale resulting from its
enlarged operations. The Telewest Group expects that selling, general and
administrative expenses will continue to decline as a percentage of revenue as
revenues increase, efficiency gains from its fixed cost base are increasingly
exploited, and the full year benefits of a restructuring and redundancy
program, completed in 1997, take effect. The restructuring program announced in
August 1997, resulted in a reduction in headcount of 1,400 staff and
contractors at a cost of approximately (Pounds)3.0 million, and is expected to
result in cash savings of approximately (Pounds)40 million in 1998. Total
labour and overhead costs capitalized in 1997 were (Pounds)76.9 million,
compared to (Pounds)54.0 million in 1996.
Depreciation expense increased 37% from (Pounds)129.7 million in 1996 to
(Pounds)177.3 million in 1997. The increase of (Pounds)47.6 million was
principally attributable to capital expenditure associated with the Telewest
Group's continuing construction activities ((Pounds)37.2 million) and a
reclassification of certain network assets in 1997 ((Pounds)10.4 million), as
set out in Note 3 to the US GAAP financial statements. Amortization expense
increased slightly from (Pounds)26.1 million in 1996 to (Pounds)26.4 million in
1997.
OTHER INCOME (EXPENSE)
The Telewest Group's share of the net losses of its Affiliated Companies
accounted for under the equity method, principally Birmingham Cable and Cable
London, was (Pounds)21.7 million and (Pounds)16.0 million in 1997 and 1996,
respectively.
Financial expenses consisted primarily of interest expense of (Pounds)141.7
million in 1997 ((Pounds)105.2 million in 1996), and foreign exchange losses of
(Pounds)23.5 million in 1997 ((Pounds)2.8 million in 1996) offset in part by
interest income earned on short-term investments and loans to Affiliated
Companies of (Pounds)8.0 million in 1997 ((Pounds)16.7 million in 1996).
Interest expense increased by (Pounds)36.5 million in 1997 primarily as a
result of the interest expense on higher outstanding borrowings relating to the
Senior Secured Facility and the higher accrued interest expense on the Senior
Discount Debentures issued by the Telewest Group in October 1995. The
III-13
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TELEWEST
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OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
debentures are described in the following discussion on "Liquidity and Capital
Resources." The foreign exchange losses in 1997 arose principally from the re-
translation of the US Dollar denominated debentures to Pounds Sterling, using
the December 31, 1997 exchange rate, and marking the associated hedging
instruments to their market value at December 31, 1997.
SUMMARY OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
The acquisition of SBCC on October 3, 1995 has been accounted for in the 1995
consolidated financial statements under the acquisition method of accounting.
Therefore, the 1995 consolidated profit and loss account includes the results
of SBCC from October 3, 1995 to December 31, 1995. The 1996 consolidated profit
and loss account includes the results of SBCC for the full year.
The Telewest Group's consolidated revenue increased by (Pounds)145.5 million
or 100% from (Pounds)144.8 million in 1995 to (Pounds)290.3 million in 1996.
The increase was attributable to the inclusion of the results of the former
SBCC franchises for a full year in 1996 and to the larger customer base created
by the enlarged Telewest Group's continuing network construction.
CABLE TELEVISION REVENUE
Cable television revenue increased by 87% from (Pounds)64.7 million in 1995
to (Pounds)121.2 million in 1996. The increase was primarily attributable to a
74% increase (from 253,049 to 440,212) in the average number of customers in
1996 over 1995. The increase in the average number of customers resulted from
the inclusion for a full year in 1996 of the results of the former SBCC
franchises (which contributed an average of 165,855 customers in 1996 compared
to an average of 35,192 customers in 1995) and from an increase in the number
of homes passed and marketed in the other franchises (from 1,142,860 at
December 31, 1995 to 1,460,463 at December 31, 1996).
Average monthly revenue per cable television customer increased 8% from
(Pounds)21.32 in 1995 to (Pounds)22.95 in 1996. This was a result of an
increase in the basic channel charge implemented in December 1995 and the
additional revenue generated from pay-per-view programming. This was, however,
partially offset by a decrease in the average number of premium channels
purchased per customer due to the inclusion for a full year in 1996 of the
results of the former SBCC franchises which historically had a lower average
number of premium channels purchased per customer.
TELEPHONY REVENUE
Telephony revenue increased by 113% from (Pounds)75.0 million in 1995 to
(Pounds)159.6 million in 1996.
Residential telephony revenue increased by 117% from (Pounds)57.6 million in
1995 to (Pounds)125.0 million in 1996. Business telephony revenue increased by
98% from (Pounds)17.4 million in 1995 to (Pounds)34.6 million in 1996.
The increase in residential telephony in 1996 over 1995 was primarily due to
a 119% increase (from 234,400 to 514,156) in the average number of residential
lines. This increase resulted from the inclusion for a full year in 1996 of the
results of the former SBCC franchises (which contributed an average of 229,751
lines in 1996 compared to an average of 45,117 lines in 1995), and from an
increase in the number of homes passed and marketed in the other franchises
(from 968,863 at December 31, 1995 to 1,380,484 at December 31, 1996). The
revenue increase from the growth in the average number of residential lines was
slightly offset by a 1% decrease in the average monthly revenue per residential
line, from (Pounds)20.48 in 1995 to (Pounds)20.26 in 1996. This decrease was
mainly attributable to price reductions in per minute call charges in response
to price cutting by BT, which were offset by increases in line rental rates.
III-14
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TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
The increase in business telephony revenue in 1996 over 1995 was primarily
attributable to a 114% increase (from 24,681 to 52,849) in the average number
of business telephony lines in 1996, which was partially offset by an 8%
decrease in the average monthly revenue per business line, from (Pounds)58.92
in 1995 to (Pounds)54.50 in 1996. This decrease was attributable to price
reductions in per minute call charges in response to competition and increased
sales of Centrex.
Other revenue increased by 89% from (Pounds)5.0 million in 1995 to
(Pounds)9.5 million in 1996. Other revenue was derived primarily from
management services provided to Affiliated Companies, cable publications and
network management services provided to other operators, and advertising sales.
OPERATING COSTS AND EXPENSES
The Telewest Group's consolidated operating costs and expenses (which include
direct costs of programming and interconnection; selling, general and
administrative expenses; depreciation expense and amortization expense)
increased by 90% from (Pounds)235.0 million in 1995 to (Pounds)445.7 million in
1996.
As a percentage of cable television revenues, programming costs increased
from 50% in 1995 to 58% in 1996 as a result of programming fee increases,
providing more channels in the basic cable television package with no price
increase and the inclusion for a full year in 1996 of the results of the former
SBCC franchises which have higher per channel programming costs.
Interconnection charges are the largest component of the Telewest Group's
telephony operating costs in providing telephony services. As a percentage of
telephony revenue, telephony operating costs decreased from 39% in 1995 to 33%
in 1996 as line rental income, which incurs no third-party cost, represented a
larger proportion of total average revenue per line in 1996 than in 1995.
Interconnection charges in 1996 also were reduced by credits relating to
interconnection charges from earlier periods which had been calculated based on
revised estimates of prevailing interconnection charges in the UK.
Selling, general and administrative expenses, which include, among other
items, salary and marketing costs, decreased as a percentage of revenue from
73% in 1995 to 58% in 1996. The majority of this improvement was due to the
rapid growth in revenues and continued reduction in support costs per customer,
with the balance -- accounting for 5 percentage points of the year-on-year
reduction -- due to revised estimates used in determining the proportion of
labor and overhead costs which are capitalized as network assets. Total labor
and overhead costs capitalized in 1996 were (Pounds)54.0 million, compared to
(Pounds)26.6 million in 1995.
Depreciation expense increased 116% from (Pounds)60.0 million in 1995 to
(Pounds)129.7 million in 1996. This increase was principally attributable to
capital expenditure associated with the Telewest Group's continuing
construction activities, a full year of depreciation expense recorded in the
former SBCC franchises, and a reduction in the estimated useful lives of
certain network assets in 1996 as set out in Note 3 to the US GAAP financial
statements. Amortization expense increased from (Pounds)7.9 million in 1995 to
(Pounds)26.1 million in 1996 primarily due to a full year of amortization of
the goodwill arising on the acquisition of SBCC in October 1995.
OTHER INCOME (EXPENSE)
The Telewest Group's share of the net losses of the Telewest Affiliated
Companies accounted for under the equity method, principally Birmingham Cable
and Cable London, was (Pounds)16.0 million and (Pounds)12.8 million in 1996 and
1995, respectively.
III-15
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TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
Financial expenses consist primarily of interest expense of (Pounds)105.2
million in 1996 ((Pounds)26.6 million in 1995), and foreign exchange losses of
(Pounds)2.8 million in 1996 ((Pounds)14.6 million in 1995), offset in part by
interest income earned on short-term investments and loans to Telewest
Affiliated Companies of (Pounds)16.7 million in 1996 ((Pounds)15.6 million in
1995). In 1995, financial expenses also included an accounting loss on the sale
of interest rate swaps of (Pounds)8.6 million.
Interest expense increased by (Pounds)78.6 million in 1996 primarily as a
result of the interest payments and accrued interest expense on the Senior
Debentures and the Senior Discount Debentures, issued by the Telewest Group in
October 1995. The foreign exchange losses in 1996 arose principally from the
re-translation of the US Dollar denominated debentures to pounds sterling using
the December 31, 1996 exchange rate and marking the associated hedging
instruments to their market value at December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
On May 22, 1996 the Telewest Group entered into a (Pounds)1.2 billion senior
secured credit facility with a syndicate of banks (the "Senior Secured
Facility"). The Senior Secured Facility is being used to
finance the capital expenditure, working capital requirements and other
permitted related activities for the construction and operation of the wholly
owned telephony and television franchises of the Telewest Group; to fund the
payment of cash interest on the Senior Debentures and Senior Discount
Debentures; to fund the repayment of existing secured borrowings of the
Telewest Group in respect of the London South and South West Regional Franchise
Areas; to fund loans to or investments in Telewest Affiliated Companies; to
fund the acquisition and subsequent construction of local delivery
operators/franchises; and to refinance advances and the payment of interest,
fees and expenses in respect of the Senior Secured Facility.
In connection with the restructuring of the Telewest Group's activities,
including the slow down of construction activity, the terms of the Senior
Secured Facility were amended in the first quarter of 1998. The amount of the
Senior Secured Facility has been reduced to (Pounds)1.0 billion and the
Telewest Group has entered into a second secured facility (the "Second Secured
Facility") of (Pounds)100 million with certain of the banks that are party to
the Senior Secured Facility. In addition certain changes were made to the
financial covenants to accommodate the Telewest Group's anticipated cashflows.
The repayment dates for tranche A have been accelerated by three months as
described below.
The Senior Secured Facility is divided into two tranches, the first ("tranche
A") is available on a revolving basis for up to (Pounds)300 million, reduced to
(Pounds)100 million by March 31, 1998, with full repayment by September 30,
1998. The second tranche ("tranche B") is available on a revolving basis
concurrently with tranche A for an amount up to 6.5 times the trailing, rolling
six month annualized consolidated net operating cash flow, gradually reducing
throughout the period of the facility to 4 times by January 1, 2000.
Thereafter, the amount outstanding under the facility converts to a term loan
amortizing over 5 years. The aggregate drawing at any time under both tranches
cannot exceed (Pounds)1.0 billion. Borrowings under the Senior Secured Facility
are secured by assets, including the partnership interests and shares of
subsidiaries of the Telewest Group, and bear interest at 2.25% above LIBOR for
tranche A and between 0.5% and 1.875% above LIBOR (depending on the ratio of
borrowings to the trailing, rolling six month annualized consolidated net
operating cash flow) for tranche B. The Telewest Group's ability to borrow
under the Senior Secured Facility is subject to, among other things, its
compliance with the financial and other covenants and borrowing conditions
contained therein, and the failure to comply with such covenants could result
in all such amounts outstanding under the facility
III-16
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TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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SECTION ONE US FINANCIAL INFORMATION
becoming due and payable. At March 31, 1998, (Pounds)20 million was drawn down
under tranche A and (Pounds)547.5 million was drawn down under tranche B.
The Second Secured Facility is available from July 1, 1999 to June 30, 2001.
Advances under the Second Secured Facility may be drawn only if the Senior
Secured Facility has been drawn down to the fullest extent possible at the
relevant time. The Second Secured Facility is available on a revolving basis to
provide an aggregate under the Senior Secured Facility and the Second Secured
Facility of up to six times the trailing, rolling six month annualized
consolidated net operating cash flow through December 31, 1999, gradually
reducing thereafter throughout the period of the facility to 4.5 times
by January 1, 2001. On June 30, 2001, the amount outstanding under the Second
Secured Facility converts to a term loan amortising over 5 years. Borrowings
under the Second Secured Facility bear interest at a rate equal to LIBOR plus a
margin that increases during the period of the facility from 3.5% per annum
through December 31, 1999, 4.5% per annum from December 31, 1999 through June
30, 2000 and to 5.5% per annum from June 30, 2000 to June 30, 2006. The
provisions as to prepayment, covenants and events of default in respect of the
Second Secured Facility are substantially similar to those for the Senior
Secured Facility.
The Telewest Group has entered into certain delayed starting interest rate
swap agreements in order to manage interest rate risk on the Senior Secured
Facility. The interest rate swaps convert floating rate interest payable on
drawdowns under the facility to fixed interest rate payments in the range of
7.835%-7.975%. The swap agreements, which commenced in early 1997, have a five-
year
maturity and a notional principal amount which adjusts upwards on a semi-annual
basis to a maximum of (Pounds)750 million. As at March 31, 1998, the aggregate
notional principal amount of the swaps was (Pounds)500 million.
On October 3, 1995, the Telewest Group raised (Pounds)734 million through the
issue of $300 million principal amount of 9 5/8% Senior Debentures due 2006
(the "Senior Debentures") and $1,536 million principal amount at maturity of
11% Senior Discount Debentures due 2007 (the "Senior Discount Debentures").
Interest on the Senior Debentures is payable semi-annually and commenced on
April 1, 1996. Interest on the Senior Discount Debentures will be payable semi-
annually commencing on April 1, 2001. The proceeds of the issue were used by
the Telewest Group to fund general working capital, capital expenditures,
additional investments in affiliated companies, to repay a credit facility
entered into by a direct wholly owned subsidiary and to purchase the currency
hedge arrangements described below.
The Telewest Group's hedge instruments relating to the debentures, are a
combined foreign currency and interest rate swap ("Foreign Currency Swap") and
a foreign currency option. The Foreign Currency Swap fully hedges against
adverse exchange rate fluctuations on the principal amount of the Senior
Debentures and the associated interest payments. The foreign currency option
provides protection against exchange rate fluctuations on the Senior Discount
Debentures below a rate of $1.452:(Pounds)1, and allows the Telewest Group to
benefit from positive exchange rate movements. Both hedging instruments provide
protection up to October 1, 2000, the early redemption date of the Senior
Debentures and the Senior Discount Debentures.
The Telewest Group's results may be materially influenced by future exchange
rate movements, due to the requirement that the hedge instruments are marked to
their market value at the end of the financial period and the US Dollar
denominated debentures are re-translated to Pounds Sterling using the period
end exchange rate.
III-17
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
The Telewest Group has established a Steering Committee to oversee the
procedures for compliance with Year 2000 requirements. The Committee's work is
reviewed periodically by internal and external auditors, and integrated with
similar programs run by the major corporate shareholders. The project objective
is to ensure complete compliance in advance of the year 2000, which is
facilitated by the relatively modern systems in use in the Telewest Group and
the planned upgrades in 1998 of critical operating systems based on external
package solutions that are Year 2000 compliant.
The Telewest Group incurred a net cash inflow/(outflow) from operating
activities of (Pounds)(6.6 million), (Pounds)18.1 million, (Pounds)3.0 million
and (Pounds)(4.0 million) in 1995, 1996, 1997 and the three month period ended
March 31, 1998, respectively. The Telewest Group incurred a net cash outflow
from investing activities of (Pounds)265.8 million, (Pounds)483.2 million,
(Pounds)439.7 million and (Pounds)48.4 million in 1995, 1996, 1997 and 1998,
respectively. The Telewest Group's principal investing activities continue to
be the construction of the network, although at a reduced rate, and the
provision of funding to the Telewest Affiliated Companies.
Cash provided by financing activities amounted to (Pounds)480.8 million,
(Pounds)79.0 million, (Pounds)386.2 million and (Pounds)66.7 million in 1995,
1996, 1997 and the three month period ended March 31, 1998, respectively. Cash
provided by financing activities was principally related to the drawdown of
(Pounds)100.0 million, (Pounds)392.5 million and (Pounds)75 million under the
Senior Secured Facility in 1996, 1997 and the three month period ended March
31, 1998, respectively.
At December 31, 1995, 1996, 1997 and March 31, 1998, respectively, the
construction of the Telewest Group's broadband network had passed approximately
52.5%, 65.0%, 75.0% and 75.4% of the homes in its owned and operated franchise
areas. Total capital expenditure in 1995, 1996, 1997 and the three month period
ended March 31, 1998, respectively, was (Pounds)269.1 million, (Pounds)515.6
million, (Pounds)440.6 million and (Pounds)48.4 million, the latter being
substantially lower than in the three month period ended March 31, 1997
((Pounds)111.5 million). The substantial reduction in total capital expenditure
was due to the Telewest Group reducing the pace of its network construction and
its expenditure on certain discretionary capital projects.
Cash and deposit balances at December 31, 1995, 1996, 1997 and March 31,
1998, respectively, were (Pounds)464.8 million, (Pounds)79.1 million,
(Pounds)29.6 million and (Pounds)43.9 million.
For additional information concerning Telewest's liquidity and capital
resources, see "Part I--Section Four--Information on the Combined Group--
Working Capital".
As set out on pages I-15 to I-16, Telewest has initiated the process
governing the exercise of Telewest's pre-emption rights in respect of Comcast's
approximately 27.47% interest in Birmingham Cable. In addition, Telewest
intends to initiate the process governing the exercise of its pre-emption
rights in respect of Comcast's interest of approximately 50% in Cable London if
the NTL/Comcast Merger is completed. If Telewest decides to proceed with an
acquisition of either or both of such interests, the Combined Group would
require additional funding for such acquisition although there can be no
assurance that such funding would be available or available on favourable
terms.
III-18
<PAGE>
SECTION ONE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
III-19
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
To the Board of Directors and Shareholders of Telewest Communications plc
We have audited the accompanying consolidated balance sheets of Telewest
Communications plc and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the years in the three year period ended December 31, 1997.
These consolidated financial statements are the responsibility of Telewest's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Telewest
Communications plc and subsidiaries as of December 31, 1997 and 1996, and the
results of their operations and their cash flows for each of the years in the
three year period ended December 31, 1997 in conformity with generally accepted
accounting principles in the United States of America.
KPMG AUDIT PLC
Chartered Accountants
Registered Auditors
London, England
March 18, 1998
III-20
<PAGE>
SECTION ONE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1996 1997 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000 $'000
(note 2)
<S> <C> <C> <C> <C>
REVENUE
Cable television 64,740 121,224 159,918 262,698
Telephony --
residential 57,597 125,013 166,645 273,748
Telephony -- business 17,449 34,562 43,882 72,085
Other ((Pounds)3,573,
(Pounds)1,600 and
(Pounds)1,451 in 1997,
1996 1995,
respectively, from
related parties) 4,998 9,467 16,053 26,370
-----------------------------------------------------
144,784 290,266 386,498 634,901
-----------------------------------------------------
OPERATING COSTS AND
EXPENSES
Programming (32,194) (69,906) (93,441) (153,496)
Telephony (29,526) (52,572) (50,145) (82,373)
(Selling, general and
administrative
(including
(Pounds)1,170,
(Pounds)2,560 and
(Pounds)3,257 in 1997,
1996 and 1995,
respectively, to
related parties) (105,388) (167,323) (193,335) (317,591)
Depreciation (60,019) (129,716) (177,341) (291,318)
Amortization of
goodwill (7,854) (26,149) (26,395) (43,359)
-----------------------------------------------------
(234,981) (445,666) (540,657) (888,137)
-----------------------------------------------------
OPERATING LOSS (90,197) (155,400) (154,159) (253,236)
OTHER INCOME/(EXPENSE)
Interest income
(including
(Pounds)3,178,
(Pounds)1,723 and
(Pounds)1,583 in 1997,
1996 and 1995,
respectively, from
related parties) 15,645 16,651 7,959 13,074
Interest expense (26,649) (105,172) (141,721) (232,805)
Loss on disposal of
interest rate swaps (8,609) -- -- --
Foreign exchange
losses, net (14,575) (2,838) (23,544) (38,676)
Share of net losses of
affiliates (12,777) (15,973) (21,696) (35,640)
Gain/(loss) on disposal
of assets (419) 571 1,139 1,871
Minority interests in
profits of
consolidated
subsidiaries, net (16) (180) (293) (482)
Other, net 82 -- -- --
-----------------------------------------------------
LOSS BEFORE INCOME TAXES (137,515) (262,341) (332,315) (545,894)
Income tax expenses
(note 14) (16) (50) (137) (225)
-----------------------------------------------------
NET LOSS (137,531) (262,391) (332,452) (546,119)
-----------------------------------------------------
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1995 1996 1997 1997
(Pounds)* (Pounds)* (Pounds)* $*
<S> <C> <C> <C> <C>
BASIC AND DILUTED LOSS
PER ORDINARY SHARE
Weighted average number
of ordinary shares
outstanding 861,424,848 925,425,473 927,567,600 927,567,600
-----------------------------------------------------
BASIC AND DILUTED LOSS
PER ORDINARY SHARE (0.16) (0.28) (0.36) (0.59)
-----------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
*Except number of shares
III-21
<PAGE>
SECTION ONE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------
1996 1997 1997
(Pounds)'000 (Pounds)'000 $'000
(note 2)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 79,116 29,582 48,595
Trade receivables (net of allowance for
doubtful accounts of (Pounds)6,507 and
(Pounds)5,405) 29,305 36,627 60,167
Other receivables (note 7) 32,394 26,207 43,050
Prepaid expenses 5,168 7,625 12,526
Investments in affiliates, accounted for
under the equity
method, and related receivables (note
8) 69,420 59,707 98,081
Other investments, at cost 25,666 25,666 42,162
Property and equipment (less accumulated
depreciation of (Pounds)481,451 and
(Pounds)308,240) (note 9) 1,447,194 1,705,520 2,801,658
Goodwill (less accumulated amortization
of (Pounds)64,301 and (Pounds)37,907) 491,290 465,905 765,342
Other assets (less accumulated
amortization of (Pounds)10,140 and
(Pounds)4,162) (note 11) 62,387 56,513 92,833
------------------------------------
TOTAL ASSETS 2,241,940 2,413,352 3,964,414
------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable 46,855 26,710 43,877
Other liabilities (note 12) 190,200 198,664 326,345
Debt (note 13) 879,351 1,373,054 2,255,516
Capital lease obligations (note 17) 54,390 75,534 124,080
------------------------------------
TOTAL LIABILITIES 1,170,796 1,673,962 2,749,818
------------------------------------
Minority Interests 347 640 1,051
------------------------------------
SHAREHOLDERS' EQUITY (note 15)
Convertible preference shares, 10 pence
par value; 661,000,000 shares
authorized and 496,066,708 shares
issued and outstanding 49,607 49,607 81,489
Ordinary shares, 10 pence par value;
2,010,000,000 shares authorized;
927,567,600
issued and outstanding in 1997 and 1996 92,757 92,757 152,372
Additional paid-in capital 1,332,887 1,332,887 2,189,533
Accumulated deficit (402,108) (734,560) (1,206,661)
------------------------------------
1,073,143 740,691 1,216,733
Ordinary shares held in trust for The
Telewest Restricted Share Scheme (note
16) (2,346) (1,941) (3,188)
------------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,070,797 738,750 1,213,545
------------------------------------
Commitments and contingencies (note 17)
TOTAL LIABILITIES AND SHAREHOLDERS' EQ-
UITY 2,241,940 2,413,352 3,964,414
------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
III-22
<PAGE>
SECTION ONE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1996 1997 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000 $'000
(note 2)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss (137,531) (262,391) (332,452) (546,119)
Adjustments to reconcile
net loss to net cash
provided by/(used in)
operating activities:
Depreciation 60,019 129,716 177,341 291,318
Amortization of goodwill 7,854 26,149 26,395 43,359
Amortization of deferred
financing costs and issue
discount on senior
discount debentures 16,605 74,104 77,482 127,280
Accrued interest on senior
debentures 5,451 -- -- --
Unrealized loss on foreign
currency translation 14,575 2,838 23,544 38,676
Loss on disposal of
interest rate swaps 8,609 -- -- --
Share of net losses of
affiliates 12,777 15,973 21,696 35,640
(Gain)/loss on disposals
of assets 419 (571) (1,139) (1,871)
Minority interests in
profits of consolidated
subsidiaries 16 180 293 482
Changes in operating
assets and liabilities,
net of effect of
acquisition of
subsidiaries:
Change in receivables (5,282) (15,908) (4,268) (7,011)
Change in prepaid expenses (3,367) 953 (2,457) (4,036)
Change in accounts payable (5,603) (4,575) (7,091) (11,648)
Change in other
liabilities 19,206 51,668 23,635 38,825
Other (356) -- -- --
--------------------------------------------------
NET CASH PROVIDED BY/(USED
IN) OPERATING ACTIVITIES (6,608) 18,136 2,979 4,895
--------------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES:
Cash paid for property and
equipment (254,453) (464,367) (435,037) (714,635)
Cash paid for acquisition
of subsidiaries (3,232) (14,167) (608) (999)
Additional investments in
and loans to affiliates (9,143) (2,728) (9,025) (14,825)
Additions to other
investments -- (5,000) -- --
Proceeds from disposals of
assets 688 3,059 6,066 9,962
Other investing activities 335 -- -- --
--------------------------------------------------
NET CASH USED IN INVESTING
ACTIVITIES (265,805) (483,203) (438,604) (720,497)
--------------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES:
Cash paid for credit
facility arrangement
costs -- (18,400) -- --
Proceeds from debenture
issue 754,812 -- -- --
Cash paid for foreign
currency option (88,070) -- -- --
Repayment of borrowings (157,930) (937) (2,375) (3,901)
Cash paid for debenture
issue costs (20,574) (829) -- --
Cash paid for share issue
costs (6,141) -- -- --
Proceeds from borrowings -- 100,400 392,500 644,760
Capital element of finance
lease repayments (1,291) (1,231) (3,971) (6,523)
--------------------------------------------------
NET CASH PROVIDED BY
FINANCING ACTIVITIES 480,806 79,003 386,154 634,336
--------------------------------------------------
NET (DECREASE)/INCREASE IN
CASH AND CASH EQUIVALENTS 208,393 (386,064) (49,471) (81,266)
EFFECT OF EXCHANGE RATE
CHANGES ON CASH AND CASH
EQUIVALENTS 8,423 362 (63) (103)
CASH AND CASH EQUIVALENTS
AT BEGINNING OF YEAR 248,002 464,818 79,116 129,964
--------------------------------------------------
CASH AND CASH EQUIVALENTS
AT END OF YEAR 464,818 79,116 29,582 48,595
--------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
III-23
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
<TABLE>
<CAPTION>
ADDITIONAL
CONVERTIBLE ORDINARY SHARES HELD PAID-UP ACCUMULATED TOTAL
PREFERENCE SHARES IN TRUST CAPITAL DEFICIT DEFICIT
-----------------------------------------------------------------------------
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31,
1994 15,300 84,824 (7,280) 686,276 (2,186) 776,934
Conversion of ordinary
shares into convertible
preference shares (note
15) 11,227 (11,277) -- -- -- ---
Shares issued in
connection
with the acquisition of
TCMN (notes 5 and 15) 23,080 18,399 -- 636,695 -- 678,174
Accrued employee
compensation relating
to the Telewest
Restricted Share Scheme -- -- 5,171 -- -- 5,171
Net loss -- -- -- -- (137,531) (137,531)
--------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1995 49,607 91,996 (2,109) 1,322,971 (139,717) 1,322,748
Ordinary shares issued -- 761 -- 9,916 -- 10,677
Accrued employee
compensation relating
to the Telewest
Restricted Share Scheme -- -- (237) -- -- (237)
Net loss -- -- -- -- (262,391) (262,391)
--------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1996 49,607 92,757 (2,346) 1,332,887 (402,108) 1,070,797
Accrued employee
compensation relating
to the Telewest
Restricted Share Scheme -- -- 405 -- -- 405
Net loss -- -- -- -- (332,452) (332,452)
--------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1997 49,607 92,757 (1,941) 1,332,887 (734,560) 738,750
================================================================================
</TABLE>
- --------------------------------------------------------------------------------
See accompanying notes to the consolidated financial statements.
III-24
<PAGE>
- -------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
1 ORGANIZATION AND HISTORY
Telewest Communications plc (the "Company") is a cable television and
telephony operator which offers these services to business and residential
customers in the United Kingdom ("UK"). Telewest derives its cable
television revenues from installation fees, monthly basic and premium
service fees and advertising charges. Telewest derives its telephony
revenues from connection charges, monthly line rentals, call charges,
special residential service charges and interconnection fees payable by
other operators. The cable television and telephony services account for
approximately 41% and 54%, respectively, of Telewest's revenue. This
revenue is predominantly derived from residential, rather than business,
customers.
Telewest was incorporated on October 20, 1994 under the laws of England and
Wales in preparation for the October 2, 1995 internal reorganization of
Telewest Communications Cable Limited ("TCCL"), then called TeleWest
Communications plc, and its subsidiaries whereby the entire issued share
capital of TCCL was transferred to Telewest in exchange for fully paid up
shares of Telewest. TCCL had traded since November 22, 1994 when affiliates
of Tele-Communications, Inc. (the "TCI Affiliates") and affiliates of U S
WEST, Inc. (the "U S WEST Affiliates") contributed their UK cable interests
to TCCL (the "Contribution"). These interests were previously held by the
TCI Affiliates and U S WEST Affiliates through TCI/U S WEST Cable
Communications Group, a general partnership. TCI/U S WEST Cable
Communications Group and its subsidiaries collectively are referred to
herein as the "Joint Venture" and the TCI Affiliates and U S WEST
Affiliates collectively are referred to herein as the "Joint Venturers".
2 BASIS OF PREPARATION
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America
("US GAAP"). The preparation of financial statements in conformity with US
GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
The economic environment and currency in which Telewest operates is the UK
and hence its reporting currency is Pounds Sterling ((Pounds)). Certain
financial information for the year ended December 31, 1997 has been
translated into US Dollars, with such US Dollar amounts being unaudited and
presented solely for the convenience of the reader, at the rate of $1.6427
= (Pounds)1.00, the Noon Buying Rate of the Federal Reserve Bank of New
York on December 31, 1997. The presentation of the US Dollar amounts should
not be construed as a representation that the Pounds Sterling amounts could
be so converted into US Dollars at the rate indicated or at any other rate.
3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Telewest and
those of all majority-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated upon consolidation.
All acquisitions have been accounted for under the purchase method of
accounting. Under this method, the results of subsidiaries and affiliates
acquired in the year are included in the consolidated statement of
operations from the date of acquisition.
III-25
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (FAS 121), "Accounting for Impairment of Long-
Lived Assets and Long-Lived Assets to Be Disposed Of". FAS 121 requires
that long-lived assets and certain identifiable intangibles, including
goodwill, to be held and used by an entity, be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Upon adoption of this standard,
Telewest evaluated its long-lived assets using projected undiscounted
future cash flows and operating income for each subsidiary and determined
that no material impairment of these assets existed at January 1, 1996 and
accordingly, no loss was recognized. Telewest believes that no material
impairment existed at December 31, 1997.
Goodwill arising on consolidation (representing the excess of the fair
value of the consideration given over the fair value of the identifiable
net assets acquired) is amortized over the acquisition's useful life or
over a maximum period of 40 years. Telewest assesses the recoverability of
this intangible asset by determining whether the amortization of the
goodwill balance over its remaining life can be recovered through projected
undiscounted future operating cash flows of the acquired operations. The
assessment of the recoverability of goodwill will be impacted if projected
future operating cash flows are not achieved. The amount of goodwill
impairment, if any, is measured based on the projected discounted future
operating cash flows using a discount rate reflecting Telewest's cost of
funds.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include highly-liquid investments with original
maturities of three months or less that are readily convertible into cash.
FINANCIAL INSTRUMENTS
Telewest uses foreign currency option contracts which permit, but do not
require, Telewest to exchange foreign currencies at a future date with
another party at a contracted exchange rate. Telewest also enters into
combined foreign currency and interest rate swap contracts ("Foreign
Currency Swaps"). Such contracts are used to hedge against adverse changes
in foreign currency exchange rates associated with obligations denominated
in foreign currency.
The foreign currency option and Foreign Currency Swaps are recorded on the
balance sheet in other assets or other liabilities at their fair value at
the reporting period with changes in their fair value during the reporting
period being reported as part of the foreign exchange gain or loss in the
consolidated statement of operations. Such gains and losses are offset
against foreign exchange gains and losses on the obligations denominated in
foreign currencies which have been hedged.
Interest rate swap agreements which are used to manage interest rate risk
on Telewest's borrowings are accounted for using the accruals method. Net
income or expense resulting from the differential between exchanging
floating and fixed rate interest payments is recorded on an accruals basis.
To the extent that the interest rate swap agreements are delayed starting,
net income or expense is not recognized until the effective date of the
agreement.
Other interest rate swaps which are held as trading assets are recorded on
the consolidated balance sheet at their fair value at the end of each
reporting period with changes in their fair value being recorded as gains
and losses in the consolidated statement of operations.
III-26
<PAGE>
- -------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
INVESTMENTS
Investments in partnerships, joint ventures and subsidiaries in which
Telewest's voting interest is 20% to 50%, and others where Telewest has
significant influence, are accounted for using the equity method.
Investments which do not have a readily determinable fair value, in which
Telewest's voting interest is less than 20%, and in which Telewest does not
have significant influence, are carried at cost and written down to the
extent that there has been an other-than-temporary diminution in value.
ADVERTISING COSTS
Advertising costs are expensed as incurred. The amount of advertising costs
expensed was (Pounds)25,920,000, (Pounds)24,846,000 and (Pounds)10,246,000
for the years ended December 31, 1997, 1996, and 1995, respectively.
PROPERTY AND EQUIPMENT
Property and equipment is stated at cost, including the historical
carryover basis cost from the Contribution. Except during the prematurity
period as described below, depreciation is provided to write off the cost,
less estimated residual value, of property and equipment by equal
installments over their estimated useful economic lives as follows:
<TABLE>
<S> <C>
Freehold and long leasehold buildings 50 years
Cable and ducting 20 years
Electronic equipment
-- System electronics 8 years
-- Switching equipment 8 years
-- Subscriber electronics 5 years
-- Headend, studio and playback facilities 5 years
Other equipment
-- Office furniture and fittings 5 years
-- Motor vehicles 4 years
</TABLE>
During the prematurity period, depreciation of cable and ducting and system
electronics is charged monthly to write off the estimated cost at the end
of the prematurity phase over a useful life of 20 and 8 years,
respectively. In accordance with Statement of Financial Accounting Standard
("SFAS") No. 51, "Financial Reporting by Cable Television Companies", the
monthly charge is scaled down by a ratio of average customers in the
current period to the estimated customer base at the end of the prematurity
period. The prematurity period covers the period between connecting the
first customer and substantial completion of the network.
Preconstruction costs which are included within cable and ducting are
amortized over the life of the franchise from the date of the first
customer.
Telewest accounts for costs, expenses and revenues applicable to the
construction and operation of its cable systems under SFAS No. 51.
The estimated useful lives of cable and ducting and systems electronics
were reassessed with effect from January 1, 1996, and were changed from 25-
30 years and 10 years to 20 years and 8 years, respectively. The net book
value of these assets are being written-off over their revised estimated
remaining lives.
III-27
<PAGE>
- -------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
In 1997, the treatment of activation costs was reviewed. With effect from
January 1, 1997, activation labor was reclassified from "cable and ducting"
to "electronics" to be consistent with the classification of activation
materials. The assets are now depreciated over 8 years rather than 20
years.
FRANCHISE COSTS
Expenditure incurred on successful applications for franchise licenses is
included in property and equipment and is amortized over the remaining life
of the original franchise term. Costs relating to unsuccessful applications
are charged to the consolidated statement of operations.
DEFERRED FINANCING COSTS
Costs incurred in raising debt are deferred and recorded on the
consolidated balance sheet in other assets. The costs are amortized to the
consolidated statement of operations at a constant rate to the carrying
value of the debt over the life of the obligation.
MINORITY INTERESTS
Recognition of the minority interests' share of losses of consolidated
subsidiaries is limited to the amount of such minority interests' allocable
portion of the equity of those consolidated subsidiaries.
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of exchange
in effect at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the consolidated statement of operations.
REVENUE RECOGNITION
Revenue is recognized as services are delivered. Other revenues include
connection fees which are recognized in the period of connection to the
extent that the fee is offset by direct selling costs. The remainder is
recognized over the estimated average period that customers are expected to
remain connected to the system.
PENSION COSTS
Telewest operates a defined-contribution scheme or contributes up to
specified limits to third-party schemes on behalf of the employees. The
amount included in losses in 1997, 1996 and 1995 of (Pounds)2,801,000,
(Pounds)2,580,000 and (Pounds)1,538,000, respectively, represents the
contributions payable to the selected schemes in respect of the relevant
accounting periods.
INCOME TAXES
Under the asset and liability method of SFAS No. 109, deferred tax assets
and liabilities are recognized for the future tax consequences attributable
to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax bases. Deferred tax assets
and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are
expected to be recovered.
SHARE-BASED COMPENSATION
SFAS No. 123, "Accounting for Stock-Based Compensation", encourages, but
does not require, companies to record compensation cost for share-based
employee compensation plans at fair value. Telewest has chosen to continue
to account for share-based compensation using the intrinsic value
III-28
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, compensation cost for share options is measured as the excess,
if any, of the quoted market price of Telewest's shares at the date of the
grant over the amount an employee must pay to acquire the shares.
Shares purchased by trustees in connection with the Telewest Restricted
Share Scheme, are valued at the market price on the date on which they are
purchased and are reflected as a reduction of shareholders' equity in the
consolidated balance sheet. This equity account is reduced when the shares
are awarded to employees based on the original cost of the shares to the
trustees. The value of awards of ordinary shares to be made to employees in
future years is charged to the consolidated statement of operations to the
extent that the awards have been awarded to and earned by employees in the
current accounting period. The value of shares which have been awarded to,
but have not been earned by employees, is included as deferred compensation
expense within other assets.
NEW ACCOUNTING STANDARDS APPLICABLE TO THE COMPANY
EARNINGS PER SHARE AND CAPITAL STRUCTURE
Telewest adopted the provisions of SFAS No. 128, "Earnings per Share". This
Statement required that all prior-period earnings per share calculations be
restated to conform with the provisions of this statement. Basic earnings
per share has been computed by dividing net income available to ordinary
shareholders by the weighted average number of ordinary shares outstanding
during the period. Diluted earnings per share is computed by adjusting the
weighted average number of ordinary shares outstanding during the period
for all dilutive potential ordinary shares outstanding during the period
and adjusting the net loss for any changes in income or loss that would
result from the conversion of such potential ordinary shares. There is no
difference in net income and number of shares used for basic and diluted
net income per ordinary share, as potential ordinary share equivalents are
not included in the computation as their effect would be to decrease the
loss per share.
COMPREHENSIVE INCOME
In June 1997, the FASB issued SFAS No. 130 "Reporting Comprehensive Income"
which is effective for fiscal years beginning after December 15, 1997.
Reclassification of financial statements for earlier periods for
comparative purposes is required. It requires that all items that are
required to be recognized under accounting standards as components of
comprehensive income be reported in a financial statement that is displayed
with the same prominence as other financial statements. It requires that an
enterprise (a) classify items of other comprehensive income by their nature
in a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-
in capital in the equity section of the statement of financial position.
Telewest is currently reviewing the likely impact on the classification of
items included in the shareholders' equity.
SEGMENT INFORMATION
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which is effective for fiscal years
beginning after December 15, 1997. In the initial year of application
comparative information for earlier years is to be restated. It requires
that companies disclose segment data based on how management makes
decisions about allocating resources to segments and measuring their
performance. It also requires entity-wide disclosures about the products
and services an entity provides, the material countries in which it holds
assets and reports revenues, and its major customers. Telewest is currently
reviewing the likely impact on the level of disclosure currently provided
in its consolidated financial statements.
III-29
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
PENSIONS AND OTHER POST RETIREMENT BENEFITS
In February 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 132, "Employers' Disclosure About
Pensions and other Post Retirement Benefits" ("SFAS No. 132"). SFAS No. 132
revises disclosure requirements about employers' pension and other post
retirement benefit plans. SFAS No. 132 is effective for fiscal years
beginning after December 15, 1997. The Company has not determined the
impact that SFAS No. 132 will have on its pension and post retirement
benefit disclosures.
4 FINANCIAL INSTRUMENTS
FOREIGN CURRENCY OPTION CONTRACT
At December 31, 1997, Telewest held a Pounds Sterling put option to
purchase US$1,537,000,000 to hedge its exposure to adverse fluctuations in
exchange rates on the principal amount at maturity of its US Dollar-
denominated Senior Discount Debentures due 2007 ("Senior Discount
Debentures"). The expiration date of this option contract is September 28,
2000. The put option has a strike price at expiration of (Pounds)1.00 =
US$1.4520. The foreign currency option has been included in other assets at
its fair value on December 31, 1997.
FOREIGN CURRENCY SWAP
Telewest has entered into a Foreign Currency Swap to hedge its exposure to
adverse fluctuations in exchange rates on the principal amount of its US
Dollar-denominated Senior Debentures due 2006 ("Senior Debentures"). The
terms of the contract provided for Telewest to make an initial exchange of
principal of US$300,000,000 in exchange for (Pounds)196,078,000. On
expiration on October 1, 2000, the initial principal amounts will be re-
exchanged. The interest element of the Foreign Currency Swap requires
Telewest to make Pounds Sterling fixed-rate interest payments and to
receive US Dollar fixed-rate interest payments on the initial exchange
amounts on a semi-annual basis. The Foreign Currency Swap contract has been
included in other liabilities at its fair value on December 31, 1997.
INTEREST RATE SWAPS
Telewest has also entered into certain delayed-starting interest rate swap
agreements in order to manage interest rate risk on its senior secured
credit facility ("Senior Secured Facility"). The effective dates of the
swap agreements are January 2, 1997 and March 31, 1997, and the agreements
mature on December 31, 2001 and March 28, 2002. The aggregate notional
principal amount of the swaps adjusts upwards on a semi-annual basis to a
maximum of (Pounds)750 million. In accordance with the swap agreements,
Telewest receives interest at the six month LIBOR rate and pays a fixed
interest rate in the range of 7.835-7.975%.
FAIR VALUE OF FINANCIAL INSTRUMENTS
SFAS No. 119 "Disclosures about Derivative Financial Instruments and Fair
Value of Financial Instruments" requires disclosure of an estimate of the
fair values of certain financial instruments. SFAS No. 119 defines the fair
value of a financial instrument as the amount at which the instrument could
be exchanged in a current transaction between willing parties other than in
a forced sale. Fair value estimates are made at a specific point in time,
based upon relevant market information and information about the financial
instrument. These estimates are subjective in nature and involve
uncertainties and matters of significant judgment, and therefore cannot be
determined precisely. Changes in assumptions could significantly affect the
estimates.
III-30
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
At December 31, 1997, Telewest's significant financial instruments include
cash and cash equivalents, trade receivables, a foreign currency option
contract, a Foreign Currency Swap, interest rate swap agreements, trade
payables and long-term borrowings. The following table summarizes the fair
value of the foreign currency option contract, the Foreign Currency Swap,
the interest rate swap agreements, the Senior Discount Debentures and the
Senior Debentures. The fair value of the other financial instruments held
by Telewest approximates their recorded carrying amount due to the short
maturity of these instruments and these instruments are not presented in
the following table.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT DECEMBER 31, 1996 AT DECEMBER 31, 1997
------------------------- -------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Assets:
Foreign currency option
contract 25,828 25,828 26,145 26,145
Liabilities:
Interest rate swap
agreements -- 4,776 -- 25,543
Foreign Currency Swap 26,481 26,481 18,039 18,039
Senior Discount
Debentures 600,799 621,367 696,954 729,532
Senior Debentures 175,203 179,582 182,626 189,931
</TABLE>
-----------------------------------------------------------------------------
The estimated fair value of the foreign currency option contract, the
interest rate swap agreements and the Foreign Currency Swap are based on
quotations received from independent, third-party financial institutions
and represent the net amount receivable or payable to terminate the
position, taking into consideration market rates and counterparty credit
risk. The estimated fair values of the Senior Discount Debentures and the
Senior Debentures are also based on quotations from independent third-party
financial institutions and are based on discounting the future cash flows
to net present values using appropriate market interest rates prevailing at
the year end.
MARKET RISK AND CONCENTRATIONS OF CREDIT RISK
Market risk is the sensitivity of the value of the financial instruments to
changes in related currency and interest rates. Generally, Telewest is not
exposed to such market risk because gains and losses on the financial
instruments are offset by gains and losses on the underlying assets and
liabilities.
Telewest may be exposed to potential losses due to the credit risk of non-
performance by the counterparties to its foreign currency option, interest
rate swap agreements and Foreign Currency Swap contract, however such
losses are not anticipated as these counterparties are major international
financial institutions.
Temporary cash investments also potentially expose Telewest to
concentrations of credit risk, as defined by SFAS No. 105 "Disclosure of
Information about Financial Instruments with Off-Balance-Sheet Risk and
Financial Instruments with Concentrations of Credit Risks". Telewest places
its temporary cash investments with major international financial
institutions and limits the amount of credit exposure to any one financial
institution. Concentrations of credit risk with respect to trade
receivables are limited due to the large number of customers comprising
Telewest's customer base.
At December 31, 1997, Telewest had no significant concentration of credit
risk.
III-31
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
5 BUSINESS COMBINATIONS
On January 10, 1996, Telewest acquired the entire issued share capital of
Telewest Communications (Worcester) Limited, then called Bell Cablemedia
(Worcester) Limited and owner of the Worcester cable franchise, for cash
consideration of (Pounds)9,849,000. Telewest Communications (Worcester)
Limited was otherwise a dormant company with net assets of (Pounds)2
representing its called up share capital. This acquisition has been
accounted for under the purchase method of accounting. The goodwill arising
on acquisition was (Pounds)9,849,000 and is being amortized on a straight-
line basis over 20 years.
During 1996, Telewest made various other minor acquisitions, largely for
share consideration. The goodwill arising on these acquisitions was
(Pounds)11,708,000 and is being amortized on a straight-line basis over 20
years.
On October 3, 1995, Telewest acquired the entire share capital of Telewest
Communications (Midlands & North West) Limited ("TCMN"), then called SBC
CableComms (UK), a company which holds cable television and telephony
interests in the UK, from an affiliate of Cox Communications, Inc. and
affiliates of SBC Communications, Inc., in exchange for an aggregate of
183,994,960 ordinary shares and 230,790,208 convertible preference shares
of 10 pence each. The value attributable to the shares issued was
(Pounds)1.635 per share, being the market price of the shares on June 8,
1995, the day the terms of the acquisition were agreed to and announced.
The fair value of the share consideration using this share price was
(Pounds)678,174,000. The aggregate cost of acquisition was
(Pounds)689,878,000 including the costs of acquisition. This acquisition
has been accounted for under the purchase method of accounting. The
goodwill arising on acquisition is (Pounds)464,872,000 and is being
amortized on a straight-line basis over 20 years.
6 SUPPLEMENTAL DISCLOSURES TO CONSOLIDATED STATEMENTS OF CASH FLOWS
Cash paid for interest was (Pounds)63,479,000, (Pounds)25,795,000 and
(Pounds)6,041,000 for the years ended December 31, 1997, 1996 and 1995,
respectively.
Significant non-cash investing activities of Telewest are described below.
The amounts stated for 1996 represent the purchase of former minority
shareholders' interests in certain UK cable interests held by Telewest. The
amounts stated for 1995 represent the purchase of TCMN for largely share
consideration as described in Note 5 to the consolidated financial
statements.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Purchase/contribution of cable
interests:
Assets 428,080 -- --
Liabilities assumed (45,144) -- --
Debt assumed (157,930) -- --
---------------------------------------
Net assets acquired contributed 225,006 -- --
Goodwill on acquisition 464,872 9,874 --
---------------------------------------
689,878 9,874 --
Share consideration capital
contribution 678,174 9,869 --
Costs of acquisition 11,704 5 --
---------------------------------------
689,878 9,874 --
---------------------------------------
</TABLE>
----------------------------------------------------------------------------
III-32
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
7 OTHER RECEIVABLES
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Value Added Tax refund 10,633 4,567
Interconnection receivables 3,865 1,505
Interest receivable 63 807
Accrued income 4,356 8,290
Prepaid expenses 5,714 3,161
Other 7,763 7,877
--------------------------
32,394 26,207
--------------------------
---------------------------------------------------------------------
8 INVESTMENTS
---------------------------------------------------------------------
Telewest has investments in affiliates accounted for under the equity
method at December 31, 1997 and 1996 as follows:
---------------------------------------------------------------------
<CAPTION>
PERCENTAGE OWNERSHIP
AT DECEMBER 31,
--------------------------
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Cable London plc 50.00% 50.00%
Birmingham Cable Corporation Limited 27.47% 27.47%
London Interconnect Limited 16.67% 16.67%
Central Cable Sales Limited 50.00% 50.00%
Front Row Television Limited -- 40.00%
--------------------------
</TABLE>
----------------------------------------------------------------------------
Telewest has accounted for its investment in London Interconnect Limited
under the equity method because it is in a position to exercise a
significant influence over London Interconnect Limited.
III-33
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
Summarized combined financial information for such affiliates which operate
principally in the cable television and telephony industries is as follows:
COMBINED FINANCIAL POSITION
<TABLE>
<CAPTION>
AT DECEMBER 31,
--------------------------
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Property and equipment, net 391,183 429,161
Intangible assets, net 3,845 4,859
Other assets, net 105,475 30,249
--------------------------
Total assets 500,503 464,269
--------------------------
Debt 281,500 293,492
Other liabilities 91,947 98,758
Owners' equity 127,056 72,019
--------------------------
Total liabilities and equity 500,503 464,269
--------------------------
COMBINED OPERATIONS
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Revenue 98,329 120,468
Operating expenses (124,358) (150,768)
--------------------------
Operating loss (26,029) (30,300)
Interest expense (15,945) (26,311)
--------------------------
Net loss (41,974) (56,611)
--------------------------
Telewest's investments in affiliates are comprised as follows:
<CAPTION>
AT DECEMBER 31,
--------------------------
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Loans 29,089 39,863
Share of net assets 40,331 19,844
--------------------------
69,420 59,707
--------------------------
</TABLE>
----------------------------------------------------------------------------
Any excess of the purchase cost over the value of the net assets acquired
is treated as goodwill and amortized over 20 years on a straight-line
basis.
III-34
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
9 PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
CABLE ELECTRONIC OTHER
LAND BUILDINGS DUCTING EQUIPMENT EQUIPMENT TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C> <C>
ACQUISITION COSTS
Balance at January 1,
1997 4,223 45,956 1,101,961 489,835 113,459 1,755,434
Reclassification -- (62) (118,331) 117,954 439 --
Additions 11 8,683 280,814 101,204 49,882 440,594
Disposals -- -- (182) (556) (8,319) (9,057)
---------------------------------------------------------------------------------
Balance at December
31,1997 4,234 54,577 1,264,262 708,437 155,461 2,186,971
---------------------------------------------------------------------------------
Accumulated depreciation
Balance at January 1,
1997 -- 7,378 121,181 130,483 49,198 308,240
Reclassification -- -- (12,792) 12,792 -- --
Charge for year -- 3,824 59,324 88,502 25,691 177,341
Disposals -- -- (182) (229) (3,719) (4,130)
Balance at December 31,
1997 -- 11,202 167,531 231,548 71,170 481,451
---------------------------------------------------------------------------------
1997 Net book value 4,234 43,375 1,096,731 476,889 84,291 1,705,520
Acquisition costs
Balance at January 1,
1996 4,223 36,005 766,866 359,617 79,239 1,245,950
Additions -- 9,951 335,844 130,783 39,012 515,590
Disposals -- -- (749) (565) (4,792) (6,106)
---------------------------------------------------------------------------------
Balance at December
31,1996 4,223 45,956 1,101,961 489,835 113,459 1,755,434
---------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION
Balance at January
1,1996 -- 4,920 74,532 70,810 31,880 182,142
Charge for year -- 2,458 47,374 60,220 19,664 129,716
Disposals -- -- (725) (547) (2,346) (3,618)
---------------------------------------------------------------------------------
BALANCE AT DECEMBER 31,
1996 -- 7,378 121,181 130,483 49,198 308,240
---------------------------------------------------------------------------------
1996 NET BOOK VALUE 4,223 38,578 980,780 359,352 64,261 1,447,194
---------------------------------------------------------------------------------
</TABLE>
----------------------------------------------------------------------------
Cable and ducting consists principally of civil engineering and fibre optic
costs. In addition, cable and ducting includes net book value of
preconstruction and franchise costs of (Pounds)9,807,000 and
(Pounds)13,220,000 as of December 31, 1997 and 1996, respectively.
Electronic equipment includes Telewest's switching, headend and converter
equipment. Other equipment consists principally of motor vehicles, office
furniture and fixtures and leasehold improvements.
III-35
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
10 VALUATION AND QUALIFYING ACCOUNTS
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ADDITIONS
CHARGED TO
BALANCE AT ACQUISITION COSTS AND BALANCE AT
JANUARY 1 OF TCMN EXPENSES DEDUCTIONS DECEMBER 31,
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
1995
Allowance for doubtful
accounts 1,736 1,063 5,920 (4,024) 4,695
---------------------------------------------------------------------
1996
Allowance for doubtful
accounts 4,695 -- 9,020 (8,310) 5,405
---------------------------------------------------------------------
1997
Allowance for doubtful
accounts 5,405 -- 8,815 (7,713) 6,507
---------------------------------------------------------------------
</TABLE>
----------------------------------------------------------------------------
11 OTHER ASSETS
The components of other assets, net of amortization, are as follows:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Deferred financing costs of
debentures 17,510 13,770
Deferred financing costs of
Senior Secured Facility 18,186 15,963
Foreign currency option contract 25,828 26,145
Other 863 635
-------------------------
62,387 56,513
-------------------------
</TABLE>
----------------------------------------------------------------------------
12 OTHER LIABILITIES
Other liabilities are summarized as follows:
<TABLE>
<CAPTION>
AT DECEMBER 31,
-------------------------
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Amounts due to
affiliated or other
related parties 1,901 61
Accrued interest 8,921 13,641
Accrued construction
costs 36,397 30,235
Accrued expenses and
deferred income 82,938 112,198
Foreign Currency Swap 26,481 18,039
Other liabilities 33,562 24,490
-------------------------
190,200 198,664
-------------------------
</TABLE>
----------------------------------------------------------------------------
III-36
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
13 DEBT
Debt is summarized as follows at December 31, 1997 and 1996:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED AVERAGE INTEREST RATE
--------------------------------------
1996 1997 1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Senior Debentures 9.625% 9.625% 175,203 182,626
Senior Discount Debentures 11.000% 11.000% 600,799 696,954
Senior Secured Facility 8.281% 9.071% 100,000 492,500
Other debt 7.790% 8.719% 3,349 974
-----------------------------------------
879,351 1,373,054
-----------------------------------------
</TABLE>
SENIOR DEBENTURES
In October 1995, Telewest issued US$300,000,000 principal amount of Senior
Debentures with a yield to maturity of 9.625%. The cash consideration
received at the date of issue was (Pounds)188,703,000. The Senior
Debentures mature on October 1, 2006. Interest on the Senior Debentures
accrues semi-annually and is payable in arrears. The Senior Debentures are
redeemable, in whole or in part, at the option of Telewest at any time on
or after October 1, 2000 at the redemption price of 104.813% of the
principal amount during the year commencing October 1, 2000, 102.406% of
the principal amount during the year commencing October 1, 2001, and
thereafter at 100% of the principal amount plus accrued and unpaid
interest.
The Senior Debentures and the Senior Discount Debentures, which are
described below, were issued to finance working capital, capital
expenditure, foreign currency swap and options to hedge against adverse
fluctuations in exchange rates, and additional investments in affiliated
companies. A portion of the net proceeds of the issue also was used to
repay the (Pounds)157,930,000 indebtedness outstanding under the loan
facility held by TCMN at the date that it was acquired by Telewest.
The indenture under which the Senior Debentures were issued contains
various covenants which, among other things, restrict the ability of
Telewest to incur additional indebtedness, pay dividends, create certain
liens, enter into certain transactions with shareholders or affiliates, or
sell certain assets. Telewest was in compliance with the covenants at
December 31, 1997.
Telewest has entered into a Foreign Currency Swap to hedge its exposure to
adverse fluctuations in exchange rates on the principal amount which will
be outstanding on October 1, 2000, the earliest redemption date, and the
associated interest payments of the Senior Debentures. The terms of the
Foreign Currency Swap are described in Note 4 to the consolidated financial
statements.
The Senior Debentures are unsecured liabilities of Telewest.
SENIOR DISCOUNT DEBENTURES
In October 1995, Telewest issued US$1,536,413,000 principal amount at
maturity of Senior Discount Debentures with a yield to maturity of 11%. The
cash consideration received at the date of issue was (Pounds)566,109,000
(US$900,000,000). At December 31, 1997, the unamortized portion of the
discount on issue was (Pounds)238,344,000 (US$391,528,000). The Senior
Discount Debentures mature on October 1, 2007. Interest on the Senior
Discount Debentures accrues semi-annually. Cash interest will not accrue on
the Senior Discount Debentures prior to October 1, 2000 and is
III-37
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
thereafter payable in arrears on April 1 and October 1 of each year at a
rate of 11% per annum. The Senior Discount Debentures are redeemable, in
whole or in part, at the option of Telewest at any time on or after October
1, 2000 at the redemption price of 100% of the principal amount plus
accrued and unpaid interest.
The indenture under which the Senior Discount Debentures were issued
contains various covenants as set out for the Senior Debentures above and
Telewest was in compliance with such covenants at December 31, 1997.
Telewest has purchased a five year Pounds Sterling put option to purchase
US$1,537,000,000 to hedge its exposure to adverse fluctuations in exchange
rates on the principal amount which will be outstanding on October 1, 2000,
the earliest redemption date, of the Senior Discount Debentures. The terms
of the foreign currency option contract are described in Note 4 to the
consolidated financial statements.
The Senior Discount Debentures are unsecured liabilities of Telewest.
SENIOR SECURED FACILITY
During 1996, a subsidiary of Telewest entered into a senior secured credit
facility (the "Senior Secured Facility") with a syndicate of banks. The
facility is available to finance the capital expenditure, working capital
requirements and other permitted related activities involving the
construction and operation of all Telewest's owned and operated franchises,
to pay cash interest on Telewest's unsecured debentures, to fund the
repayment of existing secured borrowings in respect of the London South and
South West Regional Franchise Areas, to fund loans to or investments in
affiliated companies, to bid for or purchase, and subsequently construct,
licenses or franchises which may become available and to refinance advances
and the payment of interest, fees, and expenses in respect of the Senior
Secured Facility.
The facility is divided into two tranches: the first portion (Tranche A) is
available on a revolving basis for up to (Pounds)300 million, reducing to
(Pounds)100 million by June 30, 1998 with full repayment by December 31,
1998; the second portion (Tranche B) is available on a revolving basis
concurrently with Tranche A for an amount up to 6.5 times the trailing,
rolling six month annualized consolidated net operating cash flow,
gradually reducing throughout the period of the facility to 4 times by
January 1, 2000. Thereafter, the amount outstanding under the Tranche B
facility converts to a term loan amortizing over 5 years. The aggregate
drawing at any time under both tranches cannot exceed (Pounds)1.2 billion.
At December 31, 1997, (Pounds)125,000,000 (1996: (Pounds)100,000,000) was
outstanding under Tranche A and (Pounds)367,500,000 under Tranche B (1996:
(Pounds)nil).
Borrowings under the facility are secured by the assets of Telewest,
including the partnership interests and shares of subsidiaries, and bear
interest at 2.25% above LIBOR for Tranche A and between 0.5% and 1.875%
above LIBOR (depending on the ratio of borrowings to the trailing, rolling
six month annualized consolidated net operating cash flow) for Tranche B.
Since December 31, 1997, this facility has been restructured with revised
financial covenants, a reduction in the amount available under the facility
from (Pounds)1,200 million to (Pounds)1,000 million, and a supplementary
(Pounds)100 million revolving credit facility secured with a second fixed
and floating charge over the Telewest Group's assets, and interest costs on
the latter ranging from 3.5%-5.5% above LIBOR. As a result of this
restructuring of the facility, the repayment dates for Tranche A, referred
to above, have been accelerated by three months.
III-38
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
In September 1996, Telewest entered into certain delayed-starting interest
rate swap agreements in order to manage interest rate risk on the Senior
Secured Facility. The terms of the swap agreements are described in Note 4
to the consolidated financial statements.
Telewest's ability to borrow under the facility is subject to, among other
things, its compliance with the financial and other covenants and borrowing
conditions contained therein.
Telewest was in compliance with the covenants at December 31, 1997.
OTHER DEBT
Other debt is represented by property loans which are secured on freehold
land and buildings held by Telewest which mature from 1998 onwards. The
property loans bear interest at a rate of between 1.00% and 1.5% above
LIBOR.
14 INCOME TAXES
Loss before income taxes is solely attributable to the UK.
The provisions for income taxes follow:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Currently payable 16 50 137
--------------------------------------
</TABLE>
A reconciliation of income taxes determined using the statutory UK rate of
31.5% (1996: 33%) to the effective rate of income tax is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1995 1996 1997
% % %
<S> <C> <C> <C>
Corporate tax at UK statutory rates (33) (33) (31.5)
Permanent differences 3 1 0.5
Valuation allowance and other tempo-
rary differences 26 30 29
Share of losses of affiliates 4 2 2
--------------------------------------
-- -- --
--------------------------------------
</TABLE>
III-39
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
Deferred income tax assets and liabilities at December 31, 1997 and 1996
are summarized as follows:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Deferred tax assets relating to:
Fixed assets -- 79,100
Net operating loss carried forward 310,300 181,800
Other 3,400 2,400
--------------------------
Deferred tax asset 313,700 263,300
Valuation allowance (175,200) (247,400)
--------------------------
138,500 15,900
Deferred tax liabilities relating to:
Fixed assets (110,600) --
Other (27,900) (15,900)
--------------------------
Deferred tax liabilities (138,500) (15,900)
--------------------------
DEFERRED TAX ASSET PER BALANCE SHEET -- --
--------------------------
</TABLE>
----------------------------------------------------------------------------
At December 31, 1997, Telewest estimates that it has, subject to Inland
Revenue agreement, net operating losses ("NOLs") of (Pounds)587,000,000
available to relieve against future profits. This excludes capital
allowances on assets which were available to Telewest, but had not been
claimed, of (Pounds)465,000,000.
Due to a history of operating losses Telewest has established a valuation
allowance with respect to deferred tax assets, except to the extent of
deferred tax liabilities.
The NOLs have an unlimited carry forward period under UK tax law, but are
limited in their use to the type of business which has generated the loss.
15 SHAREHOLDERS' EQUITY
MOVEMENTS IN SHARE CAPITAL
During 1996 Telewest issued 7,604,200 ordinary shares for the following
consideration: an additional 0.25% of the ordinary shares of Cable London
plc, the surrender by Trans-Global (UK) Limited of its option to acquire
9.9% of equity in the South East Regional Franchise Area, and the remaining
20% of the ordinary shares of Telewest Communications (Cotswolds) Limited
held by a minority interest.
On October 3, 1995, Telewest acquired the entire share capital of TCMN from
its former shareholders in exchange for an aggregate of 183,994,960
ordinary shares and 230,790,208 convertible preference shares of 10 pence
each. On October 2, 1995, pursuant to a court-approved scheme of
arrangement (the "Scheme of Arrangement"), Telewest exchanged 735,468,440
ordinary shares of 10p each and 265,276,500 convertible preference shares
of 10 pence each in consideration for the transfer of shares of TCCL to
Telewest. Dealings in ordinary shares and ADSs representing ordinary shares
of TCCL ceased on the London Stock Exchange and Nasdaq
III-40
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
National Market immediately prior to the execution of the Scheme of
Arrangement and upon completion of the Scheme of Arrangement, dealings in
the ordinary shares and ADSs representing ordinary shares of Telewest
commenced. Immediately prior to the execution of the Scheme of Arrangement
on October 2, 1995, TCCL restructured its share capital by converting
112,276,500 ordinary shares of 10 pence each into 112,276,500 convertible
preference shares of 10 pence each.
CONVERTIBLE PREFERENCE SHARES
The convertible preference shares are convertible into fully paid up
ordinary shares at any time on the basis of one ordinary share for every
convertible preference share provided that, immediately following the
conversion, the percentage of the issued ordinary share capital of Telewest
held by members of the public, as defined by the listing rules of the
London Stock Exchange, does not fall below 25%. The ordinary shares arising
on conversion will rank pari passu in all respects with the ordinary shares
then in issue.
The holders of the convertible preference shares are entitled to receive a
dividend of such amount as is declared and paid in relation to each
ordinary share, subject to the dividend to be paid not exceeding 20 pence
per share net of any associated tax credit.
In the event of a winding-up of Telewest or other return of capital, the
assets of Telewest available for distribution will be paid first to the
holders of the convertible preference shares up to the sum of capital paid-
up or credited as paid-up unless the right of election upon a winding-up of
Telewest has been exercised in respect of the convertible preference shares
(the "Elected Shares"). If the election has been exercised, the holders of
the ordinary shares and the Elected Shares will receive any surplus in
accordance with the amount paid-up or credited as paid-up on the shares
held.
The holders of the convertible preference shares are not entitled to vote
at any general meeting of Telewest unless the meeting includes the
consideration of a resolution for winding up Telewest or a resolution
modifying the rights or privileges attaching to the convertible preference
shares.
16 SHARE-BASED COMPENSATION PLANS
At December 31, 1997, Telewest operated five types of share-based
compensation plans: the Telewest Executive Share Option Schemes, the
Telewest Sharesave Schemes, and the Telewest Restricted Share Scheme, as
replaced in 1997 by the Telewest Long Term Incentive Plan ("LTIP") and an
Equity Participation Plan ("EPP").
Telewest applies APB Opinion Bulletin No. 25 and related interpretations in
accounting for its share-based compensation plans. Accordingly, no
compensation cost has been charged to the consolidated statement of
operations in respect of performance-based option grants since the options
do not have exercise prices less than the market value of ordinary shares.
Compensation cost has been recognized for fixed option grants since the
options have exercise prices less than the market value of ordinary shares
at the date of grant. Compensation cost has also been recognized for awards
over ordinary shares made under the Telewest Restricted Share Scheme since
the awards have no exercise price. Compensation cost recognized for fixed
option grants and awards under the Telewest Restricted Share Scheme was
(Pounds)496,000, (Pounds)1,380,000 and (Pounds)1,334,000 for 1997, 1996,
and 1995, respectively.
If compensation cost for share option grants and for awards under the
Telewest Restricted Share Scheme and Long Term Incentive Plan had been
determined based on their fair value at the date of
III-41
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
grant for 1997 and 1996 consistent with the method prescribed by SFAS 123,
Telewest's net loss and basic and diluted loss per share would have been
adjusted to the pro forma amounts set out below:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Net loss--As reported (137,531) (262,391) (332,452)
--Pro forma (138,468) (264,579) (336,737)
----------------------------------------
(Pounds) (Pounds) (Pounds)
Basic and diluted loss per share
--As reported (0.16) (0.28) (0.36)
--Pro forma (0.16) (0.29) (0.36)
----------------------------------------
</TABLE>
----------------------------------------------------------------------------
PERFORMANCE-BASED SHARE OPTION COMPENSATION PLANS
Telewest has two performance-based share option plans: the Telewest 1995
(No. 1) Executive Share Option Scheme and the Telewest 1995 (No. 2)
Executive Share Option Scheme. Under both plans, certain officers and key
employees are granted options to purchase ordinary shares. The exercise
price of each option generally equals the market price of ordinary shares
on the date of grant. The options are exercisable between three and ten
years after the date of the grant with exercise conditional on ordinary
shares out-performing by price the FT-SE100 Index over any three year
period preceding exercise. Telewest may grant options for up to 92,000,000
ordinary shares.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model using a weighted-average risk-
free interest rate of 6.8%, 8.1% and 8.3% for grants in 1997, 1996 and 1995
respectively, and an expected volatility of 30-45% used for grants in these
years. Telewest does not expect to pay a dividend on ordinary shares at any
time during the expected life of the option.
A summary of the status of Telewest's performance-based share option plans
as at December 31, 1997, 1996 and 1995, the first year in which the options
were granted, and changes during the years ended on those dates is
presented below:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year -- -- 8,645,229 160.4 pence 11,238,852 153.0 pence
Granted 8,871,398 160.3 pence 4,121,474 140.9 pence 8,994,654 83.7 pence
-----------------------------------------------------------------------
Forfeited (226,169) 158.0 pence (1,527,851) 162.6 pence (1,205,075) 147.1 pence
Outstanding at end 8,645,229 160.4 pence 11,238,852 153.0 pence 19,028,431 120.6 pence
-----------------------------------------------------------------------
Options exercisable at
year end -- -- 1,023,042 154.3 pence 3,375,739 152.3 pence
Weighted average fair
value of options
granted during the year 86.0 pence 75.6 pence 50.4 pence
</TABLE>
----------------------------------------------------------------------------
III-42
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
The following table summarizes information about Telewest's performance-
based share option plans outstanding at December 31, 1997.
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- --------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
OUTSTANDING AT REMAINING AVERAGE EXERCISABLE AT AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
1997 LIFE PRICE 1997 PRICE
RANGE OF EXERCISE PRICES -------------- ----------- ----------- -------------- -----------
<S> <C> <C> <C> <C> <C>
71.0--73.0 pence 2,666,913 7.4 years 72.6 pence
82.5--83.0 pence 5,297,509 7.6 years 82.9 pence
117.5--118.0 pence 765,847 9.2 years 117.5 pence
135.0--141.0 pence 3,674,467 6.2 years 140.6 pence 1,293,086 140.8 pence
154.5--155.5 pence 4,842,914 4.8 years 154.5 pence 1,502,527 154.6 pence
171.5--173.5 pence 1,780,781 5.9 years 172.4 pence 580,126 171.9 pence
-----------------------------------------------------------------
71.0--173.5 pence 19,028,431 6.5 years 120.6 pence 3,375,739 152.3 pence
-----------------------------------------------------------------
</TABLE>
----------------------------------------------------------------------------
FIXED SHARE OPTION COMPENSATION PLANS
Telewest also operates the Telewest Sharesave Scheme, a fixed share
option compensation scheme. Under this plan, Telewest grants options to
employees to purchase ordinary shares at a 20% discount to market price.
These options can be exercised only with funds saved by employees over time
in a qualified savings account. The options are exercisable between 37 and
66 months after the date of grant.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model using a weighted-average risk-
free interest rate of 6.95%, 7.4% and 7.2% for grants in 1997, 1996 and
1995, respectively, and an expected volatility of 30-45%. Telewest does not
expect to pay a dividend on ordinary shares at any time during the expected
life of the option.
A summary of the status of Telewest's fixed share option plans as of
December 31, 1995, 1996, and 1997 and the changes during the years ended on
those dates is presented below:
<TABLE>
<CAPTION>
1995 1996 1997
----------------------- ----------------------- -----------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
NUMBER EXERCISE NUMBER EXERCISE NUMBER EXERCISE
OF SHARES PRICE OF SHARES PRICE OF SHARES PRICE
---------- ----------- ---------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning
of year 1,666,534 150.0 pence 3,345,941 139.6 pence 4,076,635 119.8 pence
Granted 2,168,157 134.0 pence 2,165,009 102.5 pence 5,341,783 58.0 pence
Forfeited (488,750) 150.0 pence (1,434,315) 139.8 pence (2,450,243) 120.7 pence
-----------------------------------------------------------------------
Outstanding at end of
year 3,345,941 139.6 pence 4,076,635 119.8 pence 6,968,175 72.1 pence
-----------------------------------------------------------------------
Options exercisable at
year end -- -- --
Weighted average fair
value of options
granted during the year 79.3 pence 49.7 pence 42.7 pence
-----------------------------------------------------------------------
</TABLE>
----------------------------------------------------------------------------
III-43
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
The following table summarizes information about Telewest's fixed share
options outstanding at December 31, 1997.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
-------------------------------------------------------------
WEIGHTED AVERAGE
NUMBER OUTSTANDING REMAINING CONTRACTUAL
EXERCISE PRICE AT DECEMBER 31, 1997 LIFE
----------------- -------------------- ---------------------
<S> <C> <C>
58.0 pence 5,341,783 3.6 years
102.5 pence 941,444 2.6 years
134.0 pence 404,256 3.6 years
150.0 pence 280,692 2.6 years
58.0--150.0 pence 6,968,175 3.4 years
-------------------------------------------------------------
</TABLE>
----------------------------------------------------------------------------
TELEWEST RESTRICTED SHARE SCHEME
Telewest operates the Telewest Restricted Share Scheme in conjunction with
an employment trust, the Telewest Employees Share Ownership Plan Trust (the
"Telewest ESOP"), which has been designed to provide incentives to
executives of Telewest based on the performance of Telewest. Under the
Telewest Restricted Share Scheme, executives may be granted awards over
ordinary shares of Telewest based on a percentage of salary. The awards are
made for no consideration. The awards generally vest three years after the
date of the award and are exercisable for up to seven years after the date
when they vest. Awards granted under the Telewest Restricted Share Scheme
may be made over a maximum of 4,000,000 ordinary shares.
The fair value of each award is the share price of the ordinary shares on
the date the award was made.
A summary of the status of Telewest's Restricted Share Scheme at December
31, 1995, 1996 and 1997 and changes during the years ended on those dates
is presented below:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997
NUMBER OF NUMBER OF NUMBER OF
SHARES SHARES SHARES
------------ ------------ ------------
<S> <C> <C> <C>
Outstanding at beginning of year -- 2,616,857 2,648,433
Granted 2,857,191 328,297 377,975
Exercised -- (62,920) (1,123,324)
Forfeited (240,334) (233,801) (155,922)
----------------------------------------
Outstanding at end of year 2,616,857 2,648,433 1,747,162
----------------------------------------
Awards exercisable at year end 49,867 646,341 924,008
----------------------------------------
Weighted average fair value of
awards granted
during the year (Pounds)1.72 (Pounds)1.47 (Pounds)1.25
----------------------------------------
</TABLE>
----------------------------------------------------------------------------
At December 31, 1997, the 1,747,162 awards outstanding and the 924,008
awards exercisable have weighted average remaining contractual lives of 6.7
years and 6.6 years, respectively.
III-44
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
LONG-TERM INCENTIVE PLAN ("LTIP")
The Telewest Restricted Share Scheme has been replaced with a Long-Term
Incentive Plan ("LTIP") for share awards to executive Directors and senior
executives. Under the LTIP an executive will be awarded the provisional
right to receive, for no payment, a number of ordinary shares with a value
equating to a percentage of base salary. The shares will not vest unless
certain performance criteria, based on total shareholder return assessed
over a three-year period are met. The percentage of salary will be
determined by the Remuneration Committee and will be up to 100% of base
salary for executive Directors.
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 NUMBER
OF SHARES
<S> <C>
Outstanding at beginning of year --
Granted 574,309
------------
Outstanding at end of year 574,309
------------
Awards exercisable at year end --
------------
Weighted average fair value of awards granted during the year (Pounds)0.81
------------
</TABLE>
----------------------------------------------------------------------------
At December 31, 1997, the 574,309 awards outstanding have weighted average
remaining contractual lives of 9.8 years.
17 COMMITMENTS AND CONTINGENCIES
CAPITAL AND OPERATING LEASES
Telewest leases a number of assets under arrangements accounted for as
capital leases, as follows:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
ACQUISITION ACCUMULATED NET BOOK
COSTS DEPRECIATION VALUE
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
At December 31, 1996
Electronic equipment 46,634 (8,376) 38,258
Other equipment 8,780 (1,900) 6,880
---------------------------------------
At December 31, 1997
Electronic equipment 58,465 (16,061) 42,404
Other equipment 40,207 (8,050) 32,157
---------------------------------------
</TABLE>
----------------------------------------------------------------------------
Depreciation charged on these assets was (Pounds)10,889,000 and
(Pounds)7,106,000 for the years ended December 31, 1997 and 1996,
respectively.
Telewest leases business offices and uses certain equipment under lease
arrangements accounted for as operating leases. Minimum rental expense
under such arrangements amounted to (Pounds)3,198,000, (Pounds)3,065,000
and (Pounds)2,276,000 for the years ended December 31, 1995, 1996 and 1997,
respectively.
III-45
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
Future minimum lease payments under capital and operating leases are
summarized as follows as at December 31, 1997:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
(Pounds)'000 (Pounds)'000
<S> <C> <C>
1998 15,712 3,059
1999 14,488 2,989
2000 12,740 2,939
2001 11,883 2,885
2002 8,741 2,884
2003 and thereafter 38,413 14,323
----------------------
101,977
Imputed interest (26,443)
---------
TOTAL 75,534
---------
</TABLE>
----------------------------------------------------------------------------
It is expected that, in the normal course of business, expiring leases will
be renewed or replaced.
CONTINGENT LIABILITIES
Telewest is a party to various legal proceedings in the ordinary course of
business which it does not believe will result, in aggregate, in a material
adverse effect on its financial condition.
18 RELATED PARTY TRANSACTIONS
Telewest, in the normal course of providing cable television services,
purchases certain of its programming from UK affiliates of TCI. Such
programming is purchased on commercially-available terms. Total purchases
in the years ended December 31, 1997 and 1996 amounted to (Pounds)9,681,000
and (Pounds)6,951,000 respectively.
Telewest has management agreements with TCI and U S WEST under which
amounts are paid by Telewest relating to TCI and U S WEST employees who
have been seconded to Telewest. For the years ended December 31, 1997, 1996
and 1995, fees charged to Telewest under the agreements were
(Pounds)968,000, (Pounds)2,185,000 and (Pounds)3,042,000, respectively.
Telewest has similar management agreements with Cox Communications, Inc.
and SBC Communications, Inc. For the years ended December 31, 1997, 1996
and 1995, fees charged to Telewest under these agreements were
(Pounds)202,000, (Pounds)374,000 and (Pounds)233,000 respectively.
Telewest has entered into consulting agreements with its affiliates
pursuant to which Telewest provides consulting services related to
telephony operations. Under the agreements, Telewest receives an annual fee
from each affiliate based upon the affiliate's revenues. Fees received for
the years ended December 31, 1997, 1996 and 1995 were (Pounds)786,000,
(Pounds)642,000 and (Pounds)566,000, respectively. The affiliate banking
agreements contain certain deferred payment arrangements for these fees.
Telewest also receives a fee for providing switching support services,
comprising a fixed element based on a number of switches and a variable
element based on a number of lines. Fees received for the years ended
December 31, 1997, 1996 and 1995 were (Pounds)740,000, (Pounds)741,000 and
(Pounds)827,000, respectively.
III-46
<PAGE>
- -------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
19 QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996
--------------------------------------------------------------------------
TOTAL FOURTH QUARTER THIRD QUARTER SECOND QUARTER FIRST QUARTER
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
Revenue 290,266 83,663 73,123 68,320 65,160
Operating loss (155,400) (46,095) (34,512) (38,536) (36,257)
Finance expenses, net (90,788) 28,222 (30,710) (54,503) (33,797)
Net loss (262,391) (22,361) (69,303) (97,080) (73,647)
Basic and diluted loss
per ordinary share (28 pence) (2 pence) (7 pence) (10 pence) (8 pence)
--------------------------------------------------------------------------
<CAPTION>
1997
--------------------------------------------------------------------------
TOTAL FOURTH QUARTER THIRD QUARTER SECOND QUARTER FIRST QUARTER
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
Revenue 386,498 104,969 100,087 91,052 90,390
Operating loss (154,159) (39,578) (41,394) (36,421) (36,766)
Finance expenses, net (156,167) (29,604) (43,613) (30,992) (51,958)
Net loss (332,452) (74,887) (90,780) (72,902) (93,883)
Basic and diluted loss
per ordinary share (36 pence) (8 pence) (10 pence) (8 pence) (10 pence)
- ------------------------------------------------------------------------------------------------------
</TABLE>
Telewest regularly reviews estimated useful lives of its property and
equipment and the estimates in calculating the capitalized overheads which
relate to the construction of the cable network. With effect from January
1, 1996, Telewest has revised the estimated lives of certain assets as set
out in Note 3 to the consolidated financial statements and certain
estimates used in calculating capitalizable overheads. The impact of these
revisions was to increase the depreciation charge for 1996 from
(Pounds)110,223,000 to (Pounds)129,716,000 and to increase the basic and
diluted loss per ordinary share for the year by 2 pence, and to increase
the capitalization of overheads in 1996 from (Pounds)38,812,000 to
(Pounds)54,019,000 and to reduce the basic and diluted loss per share for
the year by 2 pence. The impact was principally accounted for in the fourth
quarter of 1996.
In 1997, the treatment of activation costs was reviewed. With effect from
January 1, 1997, activation labor was reclassified from "Cable and Ducting"
to "Electronics" to be consistent with the classification of activation
materials. The impact of this change was an additional depreciation charge
of (Pounds)10,359,000, with activation labor now depreciated over 8 years
rather than 20 years.
Finance expenses include foreign exchange gains and losses on the
retranslation or valuation of non sterling denominated financial
instruments using period end exchange rates and market valuations.
III-47
<PAGE>
SECTION ONE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST
US GAAP UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
III-48
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
3 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED
MARCH 31 MARCH 31 MARCH 31
1997 1998 1998
(Pounds)'000) (Pounds)'000) ($'000)
<S> <C> <C> <C>
TURNOVER
Cable television 38,101 44,180 74,068
Telephony -- residential 39,674 48,436 81,203
Telephony -- business 9,287 13,502 22,636
Other (including (Pounds)697 and
(Pounds)377 in 1998 and 1997,
respectively, from related
parties) 3,328 4,306 7,219
----------------------------------------
90,390 110,424 185,126
----------------------------------------
OPERATING COSTS AND EXPENSES
Programming (including
(Pounds)2,718 and (Pounds)3,248 in
1998 and 1997, respectively, to
related parties) (23,198) (25,257) (42,343)
Telephony (14,379) (14,201) (23,808)
Selling, general, and
administrative (including
(Pounds)219 and (Pounds)341 in
1998 and 1997, respectively, to
related parties) (45,529) (45,207) (75,790)
Depreciation (37,456) (46,724) (78,333)
Amortisation of goodwill (6,594) (6,599) (11,063)
----------------------------------------
(127,156) (137,988) (231,337)
----------------------------------------
OPERATING LOSS (36,766) (27,564) (46,211)
----------------------------------------
OTHER INCOME/(EXPENSE)
Interest income (including
(Pounds)578 and (Pounds)415 in
1998 and 1997, respectively, from
related parties) 2,362 1,126 1,888
Interest expense (30,314) (42,721) (71,622)
Foreign exchange gains/(losses),
net (24,127) 6,630 11,115
Share of net losses of affiliates (4,978) (6,704) (11,239)
Gain on disposal of assets 121 511 857
Minority interest in profits of
consolidated subsidiaries, net (117) (26) (44)
----------------------------------------
LOSS BEFORE INCOME TAXES (93,819) (68,748) (115,256)
----------------------------------------
Income tax credit/(expense) (64) 20 34
NET LOSS (93,883) (68,728) (115,222)
----------------------------------------
BASIC AND DILUTED LOSS PER ORDINARY
SHARE (PENCE) (0.10) (0.07) (0.12)
----------------------------------------
- -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements
III-49
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31, UNAUDITED UNAUDITED
1997 MARCH 31, 1998 MARCH 31, 1998
(Pounds)'000) (Pounds)'000) ($'000)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 29,582 43,875 73,556
Trade receivables (net of
allowance for doubtful
accounts of (Pounds)8,097 in
1998 and (Pounds)6,507 in
1997) 36,627 42,609 71,434
Other receivables 26,207 27,663 46,377
Prepaid expenses 7,625 10,148 17,013
Investments in affiliates,
accounted for under the
equity method, and related
receivables 59,707 52,327 87,726
Other investments, at cost 25,666 25,666 43,029
Property and equipment (less
accumulated depreciation of
(Pounds)528,846 in 1998 and
(Pounds)481,451 in 1997) 1,705,520 1,704,907 2,858,277
Goodwill (less accumulated
amortization of
(Pounds)70,895 in 1998 and
(Pounds)64,301 in 1997) 465,905 459,311 770,035
Other assets (less accumulated
amortization of
(Pounds)12,054 in 1998 and
(Pounds)10,140 in 1997) 56,513 48,808 81,827
---------------------------------------------
TOTAL ASSETS 2,413,352 2,415,314 4,049,274
---------------------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Accounts payable 26,710 33,355 55,920
Other liabilities 198,664 186,891 313,322
Debt 1,373,054 1,448,820 2,428,947
Capital lease obligations 75,534 75,560 126,676
---------------------------------------------
TOTAL LIABILITIES 1,673,962 1,744,626 2,924,865
---------------------------------------------
MINORITY INTERESTS 640 666 1,117
---------------------------------------------
SHAREHOLDERS' EQUITY
Convertible preference shares,
10 pence par value;
661,000,000 shares
authorized, and 496,066,708
shares issued and outstanding 49,607 49,607 83,166
Ordinary shares, 10 pence par
value; 2,010,000,000 shares
authorized, and 927,567,600
shares issued and outstanding 92,757 92,757 155,507
Additional paid-in capital 1,332,887 1,332,887 2,234,585
Accumulated deficit (734,560) (803,288) (1,346,712)
---------------------------------------------
740,691 671,963 1,126,546
Ordinary shares held in trust
for the Telewest Restricted
Share Scheme (1,941) (1,941) (3,254)
---------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 738,750 670,022 1,123,292
---------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 2,413,352 2,415,314 4,049,274
---------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
III-50
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
- -------------------------------------------------------------------------------
3 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED
MARCH 31, 1997 MARCH 31, 1998 MARCH 31, 1998
(Pounds)'000) (Pounds)'000) ($'000)
<S> <C> <C> <C>
CASH FLOWS BEFORE OPERATING
ACTIVITIES
Net loss (93,883) (68,728) (115,222)
Adjustments to reconcile net
loss to net cash provided
by/(used in) operating
activities :
Depreciation 37,456 46,724 78,333
Amortization of goodwill 6,594 6,594 11,055
Amortization of deferred
financing costs and issue
discount on senior discount
debentures 18,276 23,946 40,145
Unrealized (loss)/gain on
foreign currency translation 23,794 (6,625) (11,107)
Share of net losses of
affiliates 4,978 6,704 11,239
Gain on disposal of assets (121) (511) (857)
Minority interests in profits 117 26 44
Change in operating assets and
liabilities :
Change in receivables (11,553) (4,625) (7,754)
Change in prepaid expenses 167 (2,523) (4,230)
Change in accounts payable (15,034) 5,792 9,710
Change in other liabilities 7,976 (10,811) (18,125)
----------------------------------------------
NET CASH USED IN OPERATING
ACTIVITIES (21,233) (4,037) (6,769)
----------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Cash paid for property and
equipment (92,619) (49,345) (82,727)
Additional investments in and
loans to affiliates (8,505) (2,202) (3,692)
Proceeds from disposals of
assets 999 3,188 5,346
----------------------------------------------
NET CASH USED IN INVESTING
ACTIVITIES (100,125) (48,359) (81,073)
----------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash paid for credit facility
arrangement costs 0 (5,900) (9,891)
Proceeds from borrowings 150,000 75,000 125,737
Repayment of borrowings 0 (10) (18)
Capital element of finance
lease repayments (1,020) (2,401) (4,024)
----------------------------------------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 148,980 66,689 111,804
----------------------------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 27,622 14,293 23,962
Effect of exchange rate
changes on cash and cash
equivalents 64 -- --
----------------------------------------------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 79,116 29,582 49,594
----------------------------------------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 106,802 43,875 73,556
----------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
III-51
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
1. BASIS OF PREPARATION
The unaudited condensed consolidated financial statements of Telewest
Communications plc (the "Company") and its majority owned subsidiaries
(collectively, the "Telewest Group") have been prepared in accordance with
United States ("US") generally accepted accounting principles and the rules
and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in annual financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to those rules and
regulations.
The economic environment in which the Company operates is the United
Kingdom ("UK") and hence its reporting currency is Pounds Sterling
("(Pounds)"). Merely for convenience, the unaudited condensed consolidated
financial statements contain translations of certain Pounds Sterling
amounts into US Dollars at $1.6765 per (Pounds)1.00, the Noon Buying Rate
of the Federal Reserve Bank of New York on March 31, 1998. The presentation
of the US Dollar amounts should not be construed as a representation that
the Pounds Sterling amounts could be so converted into US Dollars at the
rate indicated or at any other rate.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and for the periods
ended March 31, 1997 and 1998 are unaudited; however, in the opinion of the
management, such statements include all adjustments (consisting only of
normal recurring accruals) necessary for a fair presentation of the results
of operations for the interim periods presented. The results of operations
for any interim period are not necessarily indicative of the results of the
full year. The unaudited condensed consolidated financial statements should
be read in conjunction with the audited consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 filed with the Securities and Exchange
Commission (the "1997 Annual Report").
3. NEW ACCOUNTING STANDARDS APPLICABLE TO THE COMPANY
EARNINGS PER SHARE
As noted in the 1997 Annual Report, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share",
effective December 31, 1997. This Statement required that all prior-period
earnings per share calculations including interim financial statements be
restated to conform with the provisions of this statement. Basic and
diluted loss per ordinary share is based on the weighted average number of
ordinary shares outstanding of 927,567,600 for the three month periods
ended March 31, 1998 and 1997.
COMPREHENSIVE INCOME
The Company adopted SFAS No. 130 "Reporting Comprehensive Income" with
effect from January 1, 1998. Reclassification of financial statements for
earlier periods for comparative purposes is required. SFAS No. 130
establishes standards for the reporting and presentation of comprehensive
income in financial statements. Comprehensive income encompasses all
changes in shareholders' equity except those arising from transactions with
owners. There is no difference between comprehensive loss and net loss for
the three month periods ended March 31, 1998 and 1997.
4. ACCOUNTING POLICIES--FINANCIAL INSTRUMENTS
The Company uses foreign currency option contracts which permit, but do not
require, the Company to exchange foreign currencies at a future date with
another party at a contracted
III-52
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
exchange rate. The Company also enters into combined foreign currency and
interest rate swap contracts ("Foreign Currency Swaps"). Such contracts are
used to hedge against adverse changes in foreign currency exchange rates
associated with certain obligations denominated in foreign currency.
The foreign currency option and the Foreign Currency Swaps are recorded on
the balance sheet in "other assets" or "other liabilities" at their fair
value at the reporting period, with changes in their fair value during the
reporting period being reported as part of the foreign exchange gain or
loss in the consolidated statement of operations. Such gains and losses are
offset against foreign exchange gains and losses on the obligations
denominated in foreign currencies which have been hedged.
Interest rate swap agreements which are used to manage interest rate risk
on the Company's borrowings are accounted for using the accruals method.
Net income or expense resulting from the differential between exchanging
floating and fixed rate interest payments is recorded on an accruals basis.
The Company (through a directly wholly owned subsidiary) entered into
certain delayed starting interest rate swap agreements in order to manage
interest rate risk on the Senior Secured Facility. The interest rate swaps
convert floating rate interest payable on drawdowns under the facility to
fixed interest rate payments in the range of 7.835% - 7.975%. The swap
agreements, which commenced in early 1997, have a five-year maturity and a
notional principal amount which adjusts upwards on a semi-annual basis to a
maximum of (Pounds)750 million. As at March 31, 1998, the aggregate
notional principal amount of the swaps was (Pounds)500 million, and the
total drawdown under the facility was (Pounds)567.5 million.
5. DEPRECIATION
In 1997, the treatment of activation costs was reviewed. With effect from
January 1, 1997, activation labour was reclassified from "Cable and
Ducting' to "Electronics' to be consistent with the classification of
activation materials, with activation labour now depreciated over 8 years
rather than 20 years. The effect of this revision was accounted for in the
second half of 1997, however, had the revision been accounted for with
effect from the beginning of the first quarter of 1997, depreciation
expense for the three months ended March 31, 1997 would have increased by
approximately (Pounds)2.6 million.
6. COMMITMENTS AND CONTINGENCIES
The Company is party to various legal proceedings in the ordinary course of
business which it does not believe will result, in aggregate, in a material
adverse effect on its financial position and its operating results.
7. SUBSEQUENT EVENTS
Following the announcement of the proposed acquisition by NTL Incorporated
("NTL") of Comcast UK Cable Partners Limited ("Comcast"), the Company
initiated the process governing the exercise of its pre-emption rights in
respect of Comcast's 27.45% interest in Birmingham Cable. In addition, the
Company intends to initiate the process governing the exercise of its pre-
emption rights in respect of Comcast's 50% interest in Cable London if
NTL's proposed acquisition of Comcast is completed. In the event the
Company decides to proceed with the acquisition of Comcast's interest in
Birmingham Cable and/or Cable London, additional financing would be
required. There can be no assurance that such funding will be available on
terms that are satisfactory to the Company.
III-53
<PAGE>
- --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
On April 15, 1998 it was announced that Telewest and General Cable had
agreed terms of a proposed merger to be achieved by way of a recommended
offer by Telewest for General Cable shares.
On April 24, 1998 SJ Davidson resigned as Chief Executive of the Company.
III-54
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO
UK GAAP FINANCIAL INFORMATION OF GENERAL CABLE (WITH RECONCILIATION
TO US GAAP)
- --------------------------------------------------------------------------------
III-55
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
III-56
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL INFORMATION
SECTION TWO US FINANCIAL INFORMATION
The following tables set forth selected consolidated financial information for
the five years ended 31 December 1997. These data have been extracted from
General Cable's Consolidated Financial Statements which have been audited by
Coopers & Lybrand, independent auditors, with respect to the five years ended
31 December 1997. This information should be read in connection with, and are
qualified in their entirety by reference to, General Cables's Consolidated
Financial Statements included elsewhere in this document. The General Cable
Group also has included below selected financial information for each of the
Systems because it believes that such information enhances the understanding of
the General Cable Group and the development of the Systems' operations.
Reference is made to the results of the individual Systems presented below, the
audited financial statements of Birmingham Cable included under "-- UK GAAP
Audited Consolidated Financial Statements of Birmingham Cable" and the
operating statistics set forth in "Part One -- Section Three -- Information on
General Cable -- The Systems -- System Operating Data".
The General Cable Consolidated Financial Statements have been prepared in
accordance with UK GAAP, which differs in significant respects from US GAAP.
Note 25 to General Cable's Consolidated Financial Statements provides a
description of the principal differences between UK GAAP and US GAAP, as they
relate to the General Cable Group, and a reconciliation to US GAAP of certain
items for the three years ended 31 December 1997. The terms revenues, income
and expenses used in the General Cable Selected Consolidated Financial
Information refer to turnover, profit and costs, respectively, in General
Cable's Consolidated Financial Statements.
III-57
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997(1)
(IN THOUSANDS, EXCEPT PER ORDINARY SHARE
AND PER ADS DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
AMOUNTS IN ACCORDANCE
WITH UK GAAP
Revenues (Pounds)16,926 (Pounds)21,119 (Pounds)30,695 (Pounds)55,733 (Pounds)111,848 $ 183,431
Operating loss (15,770) (17,486) (20,183) (26,240) (33,303) (54,617)
Net interest income
(expense) 275 (2,392) (989) (3,574) (19,000) (31,160)
Profit on deemed
disposal of subsidiary 12,475 1,559 -- -- -- --
Loss on ordinary
activities before
taxation (3,020) (18,319) (21,172) (29,814) (52,303) (85,777)
Re-organisation costs -- -- -- -- (36,648) (60,103)
Taxation 2,949 3,327 1,844 (1,058) 212 348
Income (loss) for the
financial year 2,662 (14,368) (18,135) (28,668) (83,177) (136,410)
Income (loss) per
Ordinary Share 2.9p (9.8)p (8.1)p (9.6)p (22.8)p (37.4)c
Income (loss) per ADS 14.5p (49.0)p (40.5)p (48.0)p (114.0)p (187.0)c
AMOUNTS IN ACCORDANCE
WITH US GAAP
Operating loss (10,626) (10,462) (7,838) (17,001) (55,607) (91,195)
Loss after taxation and
minority interests (814) (17,657) (17,843) (31,056) (64,210) (105,304)
Loss per Ordinary Share (0.9)p (12.0)p (7.9)p (10.4)p (17.6)p (28.9)c
Loss per ADS (4.5)p (60.0)p (39.5)p (52.0)p (87.9)p (144.2)c
OTHER DATA:
EBITDA (UK GAAP)(2) (10,967) (11,742) (11,069) (5,864) 7,329 12,020
EBITDA (US GAAP)(2) (5,447) (3,958) 947 (6,532) 7,620 12,497
Capital expenditure (26,787) (29,949) (63,854) (78,546) (128,569) (210,853)
CONSOLIDATED BALANCE
SHEET DATA
(at period-end date):
AMOUNTS IN ACCORDANCE
WITH UK GAAP
Tangible fixed assets 65,556 90,661 152,120 411,335 488,928 801,842
Investments 52,635 98,761 118,176 42,974 29,987 49,179
Net current assets
(liabilities) 26,659 8,064 (1,688) 105,674 161,204 264,375
Long-term borrowings (14,711) (84,586) (19,304) (235,944) (466,573) (765,180)
Net assets 113,883 103,196 240,218 317,476 202,268 331,720
AMOUNTS IN ACCORDANCE
WITH US GAAP
Total assets 178,879 268,674 360,981 798,676 982,937 1,612,017
Shareholders' equity 136,483 157,452 296,538 475,048 423,032 693,772
</TABLE>
- ------------
(1) The sterling amounts for the twelve-month period ended 31 December 1997
have been translated into US dollars at the Noon Buying Rate in effect on 31
December 1997 of (Pounds)1.00 = $1.64.
(2) "EBITDA" has been presented in accordance with both UK GAAP and US GAAP
and consists of operating loss before interest and taxes and excluding
depreciation and amortisation and has been calculated before profit on the
deemed disposal of a subsidiary. In calculating EBITDA under UK GAAP as set out
above, the share of losses of associated undertakings has been included for
Birmingham Cable and, until 6 August 1996, for Yorkshire Cable, in each case
without adjustment for interest, taxes, depreciation and amortisation. General
Cable believes that EBITDA is an indicator of operational cash flows before
capital expenditure and working capital movements. EBITDA should not be
construed as an alternative to operating loss (as determined in accordance with
UK GAAP and US GAAP), as an indicator of General Cable's operating performance,
as an alternative to loss before or after taxation (as determined in accordance
with UK GAAP and US GAAP) or as a measure of General Cable's liquidity, nor is
it necessarily directly comparable with similarly reported figures by other
companies.
III-58
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SELECTED SYSTEM FINANCIAL DATA
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
General Cable believes that the presentation of consolidated financial
information for each of Cable Corporation, Yorkshire Cable and Birmingham Cable
facilitates the understanding and assessment of General Cable's business. The
following selected consolidated financial information for the five years ended
31 December 1997 have been extracted from General Cable's financial records
(with respect to the Cable Corporation and Yorkshire Cable) and financial
statements audited by Deloitte & Touche (with respect to Birmingham Cable).
These data should be read in conjunction with, and are qualified in their
entirety by reference to, "-- Management's Discussion and Analysis of Financial
Condition and Results of Operations" and, with respect to Birmingham Cable, the
audited financial statements of Birmingham Cable included under "-- UK GAAP
Audited Consolidated Financial Statements of Birmingham Cable".
The System financial information set out below has been prepared in
accordance with UK GAAP, which differs in significant respects from US GAAP.
The System financial information of Birmingham Cable for the three years ended
31 December 1997 set out below has been prepared using the accounting policies
applied by General Cable. These accounting policies differ from those applied
by Birmingham Cable and its subsidiaries in preparing its UK and US statutory
financial statements, and Note 22 to the Birmingham Cable financial statements
provides a description of the principal differences. The accounting policies of
Birmingham Cable comply in all material respects with US GAAP.
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
-----------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997(1)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
THE CABLE CORPORATION LIMITED
(without deduction for interests owned by other
shareholders)
SYSTEM INCOME STATEMENT DATA:
AMOUNTS IN ACCORDANCE WITH UK GAAP
Revenues (Pounds)15,659 (Pounds)20,498 (Pounds)29,963 (Pounds)41,983 (Pounds)51,957 $ 85,209
Operating loss (7,370) (5,255) (6,523) (5,052) (5,307) (8,703)
Reorganisation costs -- -- -- -- (15,326) (25,135)
Investment write down -- -- -- -- (250) (410)
Net interest expense (802) (526) (4,097) (10,474) (15,566) (25,528)
Loss on ordinary
activities before
taxation (8,172) (3,498) (10,620) (15,526) (36,449) (59,776)
Taxation 2,512 3,167 3,507 2,155 2,771 4,544
Loss for the financial
year (5,660) (331) (7,113) (13,371) (33,678) (55,232)
AMOUNTS IN ACCORDANCE
WITH US GAAP
Operating loss (6,891) (4,613) (4,968) (4,104) (22,568) (37,012)
Loss for the financial
year (5,181) (1,709) (7,343) (9,100) (28,290) (46,396)
OTHER DATA:
EBITDA (UK GAAP)(2) (3,119) 450 2,543 8,256 12,100 19,844
EBITDA (US GAAP)(2) (2,944) 725 2,615 8,032 6,986 11,457
SYSTEM BALANCE SHEET
DATA (AT PERIOD-END
DATE):
AMOUNTS IN ACCORDANCE
WITH UK GAAP
Tangible fixed assets 65,481 90,524 152,171 187,943 209,735 343,965
Investments 3,187 25 25 25 25 41
Net current
assets/(liabilities) (9,601) (6,340) (57,114) 48,698 57,142 93,713
Long-term borrowings (14,711) (15,686) (33,672) (188,627) (252,541) (414,167)
Net assets 44,356 68,523 61,410 48,039 14,361 23,552
AMOUNTS IN ACCORDANCE
WITH US GAAP
Total assets 90,557 114,717 173,045 282,273 339,126 556,167
Shareholders' equity 50,563 75,635 68,292 62,698 34,408 56,429
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
See page III-61 for footnotes.
III-59
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SELECTED SYSTEM FINANCIAL DATA (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
-----------------------------------------------------------------------------------------
1993 1994 1995 1996 1997 1997(1)
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
THE YORKSHIRE CABLE GROUP LIMITED
(without deduction for interests owned by other
shareholders)
SYSTEM INCOME STATEMENT DATA:
AMOUNTS IN ACCORDANCE WITH UK GAAP
Revenues (Pounds) 2,233 (Pounds) 7,793 (Pounds)20,101 (Pounds)32,539 (Pounds)46,061 $ 75,540
Operating loss (7,403) (12,909) (15,012) (14,725) (12,013) (19,701)
Reorganisation costs -- -- -- -- (16,549) (27,140)
Net interest income
(expense) 1,008 718 446 (2,467) (11,903) (19,521)
Loss on ordinary
activities before
taxation (6,395) (12,191) (14,566) (17,192) (40,465) (66,363)
Taxation 971 1,800 595 (169) 80 131
Loss for the financial
year (5,424) (10,391) (13,971) (17,361) (40,385) (66,231)
AMOUNTS IN ACCORDANCE
WITH US GAAP
Operating loss (7,020) (11,982) (15,499) (15,384) (25,414) (41,679)
Loss after taxation (5,917) (9,852) (11,779) (14,707) (25,043) (41,071)
OTHER DATA:
EBITDA (UK GAAP) (2) (5,731) (8,549) (5,379) 736 9,622 15,470
EBITDA (US GAAP) (2) (5,212) (8,010) (5,501) 699 6,809 11,167
SYSTEM BALANCE SHEET DATA
(AT PERIOD-END DATE):
AMOUNTS IN ACCORDANCE WITH UK GAAP
Tangible fixed assets 37,177 101,980 156,947 223,420 275,070 451,115
Net current assets
(liabilities) 27,993 (5,560) (20,897) 36,923 87,904 144,163
Long-term borrowings (1,120) (11,071) (1,144) (129,710) (273,432) (448,428)
Net assets 63,193 83,832 133,788 129,927 89,542 146,849
AMOUNTS IN ACCORDANCE
WITH US GAAP
Total assets 84,146 127,737 181,118 342,042 418,802 686,835
Shareholders' equity 72,420 93,548 145,746 144,539 119,496 195,973
BIRMINGHAM CABLE CORPORATION LIMITED
(without deduction for interests owned by other
shareholders)
SYSTEM INCOME STATEMENT DATA:
AMOUNTS IN ACCORDANCE WITH UK GAAP
Revenues (Pounds)18,345 (Pounds)27,505 (Pounds)39,004 (Pounds)52,330 (Pounds)67,039 $ 109,944
Operating loss (10,468) (9,876) (9,890) (9,798) (13,827) (22,676)
Net interest income
(expense) (1,592) 381 (482) (5,882) (14,260) (23,386)
Loss on ordinary
activities before
taxation (12,060) (9,495) (10,372) (15,680) (28,087) (46,063)
Taxation -- -- (2,452) (2,802) (1,402) (2,299)
Loss after taxation (12,060) (9,495) (12,824) (18,482) (29,489) (48,362)
AMOUNTS IN ACCORDANCE
WITH US GAAP
Operating loss (7,864) (9,674) (11,345) (11,694) (15,770) (25,863)
Loss for the financial
year (8,967) (9,293) (14,279) (20,378) (31,431) (51,547)
OTHER DATA:
EBITDA (UK GAAP)(2) (4,781) (1,045) 3,729 8,121 10,207 16,739
EBITDA (US GAAP)(2) (2,217) 25 2,963 7,815 10,207 16,739
SYSTEM BALANCE SHEET DATA
(AT PERIOD-END DATE):
AMOUNTS IN ACCORDANCE WITH UK GAAP
Tangible fixed assets 98,316 137,589 180,160 225,027 242,302 397,375
Net current assets
(liabilities) (4,270) (4,554) 118,039 57,571 (12,997) (21,315)
Long-term borrowings (3,757) (5,120) (184,211) (187,090) (161,031) (264,091)
Net assets 89,057 126,813 113,988 95,508 66,019 108,271
AMOUNTS IN ACCORDANCE
WITH US GAAP
Total assets 119,018 102,167 329,284 326,319 265,109 434,779
Shareholders' equity 99,854 137,812 123,533 103,155 71,724 117,627
</TABLE>
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GENERAL CABLE
UK GAAP SELECTED CONSOLIDATED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SELECTED SYSTEM FINANCIAL DATA (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
- ------------
(1) The sterling amounts for the twelve-month period ended 31 December 1997
have been translated into US dollars at the Noon Buying Rate in effect on 31
December 1997 of (Pounds)1.00 = $1.64.
(2) "EBITDA" has been presented in accordance with both UK GAAP and US GAAP and
consists of operating loss before interest and taxes and excluding depreciation
and amortisation. General Cable believes that EBITDA is an indicator of
operational cash flows before capital expenditures and working capital
movements. EBITDA should not be construed as an alternative to operating loss
(as determined in accordance with UK GAAP and US GAAP), as an indicator of a
System's operating performance, as an alternative to loss before or after
taxation (as determined in accordance with UK GAAP and US GAAP) or as a measure
of a System's liquidity, nor is it necessarily directly comparable with
similarly reported figures by other companies.
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SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
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UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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SECTION TWO US FINANCIAL INFORMATION
The following discussion and analysis should be read in conjunction with the
General Cable Audited Consolidated Financial Statements included elsewhere in
this document, the Selected Systems Financial Data set out in "--UK GAAP
Selected Financial Information--Selected System Financial Data" and the
operating statistics set out in "Part I--Section Three--Information on General
Cable--The Systems--System Operating Data".
The General Cable Consolidated Financial Statements have been prepared in
accordance with UK GAAP, which differs in significant respects from US GAAP.
Note 25 to the General Cable Consolidated Financial Statements provides a
description of the principal differences between UK GAAP and US GAAP, as they
relate to the General Cable Group, and a reconciliation to US GAAP of certain
items for the three years ended 31 December 1997. The terms revenues, income
and expenses used herein refer to turnover, profit and costs, respectively, in
General Cable's Consolidated Financial Statements.
OVERVIEW
The following discussion and analysis contains certain statements relating to
the future results of General Cable (including certain projections and business
trends) that are, or may be deemed to be, "forward-looking" statements as
defined under the US Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of General Cable to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, but are not limited to the following: the
extent consumer preference develops for cable television over other methods of
providing in-home entertainment and for General Cable as a viable alternative
to BT and others as a provider of telephony service; the ability of General
Cable to penetrate markets and respond to changes or increases in competition
and adverse changes in government regulation; the extent to which customers
will subscribe to both cable television and telephony services in connection
with General Cable's repositioning of its business focus; the ability of
General Cable to effectively manage growth and expansion; the ability of
General Cable to construct its network in a cost-efficient and timely manner;
the ability of General Cable to raise additional financing if there is material
adverse change in General Cable's anticipated revenues or expenses or to
finance new initiatives; the extent programming is available at reasonable
cost; adverse changes in the price of telephony interconnection; and
disruptions in supply of services and equipment.
Until 1 January 1998, the General Cable Group was organised on the basis of
each System operating largely autonomously. In this configuration, General
Cable's principal functions were to provide strategic direction to the Western
London System and the Yorkshire System and to participate in the management of
their activities. The operating philosophy was based on decentralisation, with
each System responding to local conditions.
With effect from 1 January 1998, the General Cable Group was re-organised so
that the businesses of Cable Corporation, Yorkshire Cable and Imminus, and
certain functions undertaken by General Cable are operated through three
Divisions with a small central head office. See "Part I--Section Three--
Information on General Cable".
The UK cable communications industry is characterised by significant capital
expenditures and operating losses in the development periods of the networks.
This results in significant cash outflows. These cash outflows fund the
development of the administrative and selling infrastructure as well as the
capital expenditure of building the network. As the networks are built and
subscribers are added, sales
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UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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SECTION TWO US FINANCIAL INFORMATION
and marketing expenses, programming, interconnection and administration
expenses are incurred, and, to the extent that subscriber and interconnection
revenues are insufficient to cover such amounts, this would result in operating
losses and in net cash outflows. Following further development of the
networks and the addition of further subscribers and services, including
through anticipated improved penetrations, revenues are added with relatively
low additional costs, contributing significantly to operating results and cash
inflow.
A network's losses and cash outflows are expected to continue until a
significant proportion of the network has been completed and sufficient overall
penetrations of profitable services have been achieved. As a result of the
significant depreciation charges associated with network investment, it is
expected that a network will generate positive operating cash flows some time
before profitability is established.
As a matter of English law, General Cable and each of its subsidiaries can
only pay dividends to the extent of their accumulated realised profits less
their respective accumulated losses of earlier years. In addition, the terms of
the GCH and Birmingham Cable financings restrict the ability of GCH and
Birmingham Cable to pay dividends or make other payments to shareholders and
related companies. In addition, Yorkshire Cable and Cable Corporation lease
financings contain similar restrictions. See "-- The GCH Facility and Other
Financing Arrangements".
One measure of the stage of development of each of the Systems is the number
of premises passed, as set out in "Part I -- Section Three -- Information on
General Cable -- The Systems -- System Operating Data". Such information shows
that the Systems are at different stages of development and significant
construction of Yorkshire Cable's network remains to be completed. The
Yorkshire System is at an earlier stage of development, having built
approximately 56% of its network. The financing expected to be required to
complete these networks is described under "-- Liquidity and Capital
Resources".
GROUP STRUCTURE
The General Cable Group's consolidated results have been influenced
significantly by the changes in its shareholdings in Cable Corporation,
Yorkshire Cable, Birmingham Cable and Imminus. The nature of General Cable's
investments in Cable Corporation, Yorkshire Cable, Birmingham Cable and Imminus
were as set out below at each year-end. Under both US GAAP and UK GAAP, a
company classified as an "associate" is accounted for by the equity method.
III-64
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GENERAL CABLE
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
<TABLE>
<CAPTION>
YORKSHIRE
AS AT 31 DECEMBER, CABLE CORPORATION CABLE BIRMINGHAM CABLE IMMINUS
- ------------------ ------------------ ------------------- ------------------ -----------------
<S> <C> <C> <C> <C>
1997
Cumulative equity
invested by General
Cable.................. (Pounds)98,370,000 (Pounds)183,070,000 (Pounds)78,049,000 (Pounds)1,900,000
% equity capital
owned.................. 83.5% 100% 45% 100%
Accounting status....... Subsidiary Subsidiary Associate Subsidiary
1996
Cumulative equity
invested by General
Cable.................. (Pounds)98,370,000 (Pounds)183,070,000 (Pounds)78,049,000 N/A
% equity capital
owned.................. 83.5% 100% 45.0%
Accounting status....... Subsidiary Subsidiary Associate
1995
Cumulative equity
invested by General
Cable.................. (Pounds)98,370,000 (Pounds)86,544,000 78,040,000 N/A
% equity capital
owned.................. 83.5% 50.0% 45.0%
Accounting status....... Subsidiary Associate Associate
1994
Cumulative equity
invested by General
Cable.................. (Pounds)98,339,000 (Pounds)54,571,000 (Pounds)78,040,000 N/A
% equity capital
owned.................. 83.1% 50.0% 45.0%
Accounting status....... Subsidiary Associate Associate
</TABLE>
III-65
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GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
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SECTION TWO US FINANCIAL INFORMATION
In 1994, the temporary reduction in General Cable's ownership interest in
Cable Corporation from 69% to 66% (as described below) constituted a deemed
disposal under UK GAAP and led to an accounting profit of (Pounds)1.6 million
arising on consolidation, which is not distributable to shareholders. General
Cable does not expect similar amounts to arise in future periods.
On 12 January 1994, General Cable converted loans of (Pounds)20 million into
ordinary shares in Cable Corporation and increased its shareholding in Cable
Corporation's ordinary shares to 69% (the "Cable Corporation Conversion"). On
21 April 1994, Telewest subscribed for (Pounds)4.5 million of shares in Cable
Corporation, reducing General Cable's interest in Cable Corporation's ordinary
shares to 66%. Pursuant to offers made on 5 December 1994 to all of the other
shareholders in Cable Corporation (other than Telewest), General Cable acquired
all the ordinary shares and convertible preference shares in Cable Corporation
held by such other shareholders, increasing General Cable's shareholding in
Cable Corporation's ordinary shares to 83.1% (the "Cable Corporation Offers").
Pursuant to the Cable Corporation Offers, General Cable acquired (i) 32,960
Cable Corporation ordinary shares for an aggregate consideration of
(Pounds)181,280 paid in cash, (ii) 3,084,130 Cable Corporation ordinary shares
in consideration of the issue of 10,023,423 new ordinary shares (13 new
ordinary shares for every 4 Cable Corporation ordinary shares) and (iii)
1,899,266 Cable Corporation convertible preference shares in consideration of
the issue of 1,690,350 new ordinary shares (178 new ordinary shares for every
200 Cable Corporation convertible preference shares). On 12 January 1995,
General Cable acquired one special share in Cable Corporation from The Standard
Life Assurance Company ("SL") for a consideration of (Pounds)1. On 31 December
1995, General Cable's holding of 1,899,266 Cable Corporation convertible
preference shares of (Pounds)1 each was converted into 560,966 ordinary shares
of 25 pence each, thereby increasing the proportion of Cable Corporation
ordinary shares held by General Cable from 83.14% to 83.45%. See "Part I --
Section Three -- Information on General Cable -- Relationship Among Owners of
the Systems -- The Cable Corporation Limited".
On 11 April 1994, General Cable increased its shareholding in Birmingham
Cable to approximately 45% by subscribing for additional Birmingham Cable
ordinary shares for (Pounds)46.6 million and purchasing a portion of SL's
interest in Birmingham Cable for (Pounds)1.8 million (such purchase and
subscription, the "Birmingham Cable Transaction"). General Cable also purchased
ordinary shares in Birmingham Cable owned by Cable Corporation for (Pounds)5.4
million (a transaction that did not result in a net cash outflow from the
General Cable Group). At the same time, Telewest and Comcast jointly purchased
from SL the balance of its interest in Birmingham Cable. General Cable funded
its increased investment in Birmingham Cable through a loan of (Pounds)40
million from Robert Fleming & Co. Limited (which was subsequently repaid out of
the proceeds of a loan in the same amount from Vivendi) and existing cash
resources and funded the share purchase from Cable Corporation out of existing
cash resources.
On 30 December 1994, General Cable increased its shareholding in Yorkshire
Cable to 50% by acquiring half of Yorkshire Water plc's 9% interest in
Yorkshire Cable for approximately (Pounds)10.5 million, which was funded by the
issue of 4,860,698 new ordinary shares (the "Yorkshire Cable Transaction"), and
Singapore Telecom agreed to acquire the other half of Yorkshire Water's
interest in Yorkshire Cable for (Pounds)10.5 million in cash. On 6 August 1996,
General Cable acquired the remaining 50% of Yorkshire Cable that it did not own
from Singapore Telecom. The acquisition consisted of the purchase of a 25%
shareholding in Yorkshire Cable held directly by Singapore Telecom and the
whole of the share capital of GCH, formerly called STI (Yorkshire Cable)
Limited ("STIYC"), a company whose sole asset was a further 25% interest in
Yorkshire Cable. STIYC changed its name to General Cable Holdings Limited on 23
August 1996.
Prior to the acquisition on 6 August 1996, there was a reorganisation of the
share capital of Yorkshire Cable and STIYC. On 4 July 1996, the authorised
share capital of Yorkshire Cable was
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GENERAL CABLE
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OPERATIONS
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SECTION TWO US FINANCIAL INFORMATION
increased by 88,950,048 ordinary shares of US$0.01 each. These new ordinary
shares were then issued in equal parts to each of Singapore Telecom and General
Cable by way of a bonus issue. The existing ordinary shares of (Pounds)0.10
each held by Singapore Telecom and General Cable were reclassified as deferred
shares conditional upon the issue of any of the ordinary shares of US$0.01
each. The previously existing 44,475,024 ordinary shares of (Pounds)0.10 each
held by General Cable and Singapore Telecom were cancelled and extinguished.
Share warrants to bearer were issued to Singapore Telecom and General Cable in
respect of the new ordinary shares of US$0.01 each held by them, and the share
certificates in respect of the registered ordinary shares held by Singapore
Telecom and General Cable were cancelled.
Also on 4 July 1996 STIYC increased its authorised share capital by the
creation of 71,295,618 ordinary shares of US$1 each. The full amount of these
new General Cable shares of US$1 each were issued and credited as fully paid to
Singapore Telecom in consideration of the release of the loan of
(Pounds)50,408,266 from Singapore Telecom to STIYC which had funded STIYC's
investment in Yorkshire Cable. At the request of Singapore Telecom, STIYC
issued to it a share warrant to bearer in respect of the 71,295,618 new
ordinary shares of US$1 each held by Singapore Telecom. The share certificate
in respect of the registered ordinary shares was cancelled. The existing
ordinary shares of (Pounds)1 each were reclassified as Deferred Shares
conditional upon the issue of any of the ordinary shares of US$1.00 each. On
completion of the acquisition of Singapore Telecom's shareholding in Yorkshire
Cable by General Cable, existing warrants and options to subscribe for further
shares in Yorkshire Cable jointly held by Singapore Telecom and STIYC were
cancelled.
On 13 March 1997 General Cable acquired 100% of Filegale and its subsidiary
undertaking Imminus for total consideration of up to (Pounds)32,600,000,
including (Pounds)19,100,000 in cash and (Pounds)7,100,000 in bank guaranteed
loan notes and up to (Pounds)6,400,000 payable on the first and second
anniversaries of the acquisition. The guaranteed loan notes carry a coupon of
LIBOR minus 0.35%. The shareholdings acquired were the 166,110 issued "A"
ordinary shares of 10 pence each ("A Shares") and the 172,890 issued "B"
ordinary shares of 10 pence each ("B Shares").
On 13 March 1997 a resolution was passed to redesignate the issued A Shares
and B Shares together with 240,500 unissued A Shares as ordinary shares of 10
pence each. In addition to the 579,500 General Cable shares of 10 pence each,
172,890 "C" General Cable shares of 10 pence each ("C Shares") were created on
26 February 1997 and issued to a number of the directors of Imminus ("C
Shareholders"). These C Shares were to be purchased by General Cable in two
equal tranches at the request of the C Shareholders, subject to a number of
conditions. The C Shareholders could request purchase of their shares on or
after the first and second anniversaries of the acquisition. The consideration
for the C Shares was to be in the form of either cash or General Cable shares
as determined by the C Shareholders.
On 13 March 1998 General Cable purchased tranche one of the C Shares for
(Pounds)3,177,208 in cash. Following agreement between General Cable and the C
Shareholders, the purchase date for tranche two of the C Shares was amended to
be on or after 6 April 1998, subject to a 2% reduction in consideration if
payment was made between such date and 1 March 1999. Subsequent to this
agreement, the C Shares were purchased by General Cable on 15 and 21 April 1998
for (Pounds)2,987,598 and (Pounds)126,065, respectively, reflecting the 2%
reduction. Included in deferred consideration is an "additional" amount of
(Pounds)185,353 and (Pounds)7,821 paid on 15 and 21 April 1998, respectively.
The C Shares are now held by GCH.
III-67
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GENERAL CABLE
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OPERATIONS
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SECTION TWO US FINANCIAL INFORMATION
The amounts due on each of the first and second anniversaries of the
transaction had been settled by 21 April 1998 and, as at that date,
(Pounds)6,700,000 cash was held on deposit in order to satisfy the outstanding
consideration.
As part of the reorganisation of the General Cable Group, GCH has been
established as an intermediate holding company. On 31 December 1997, the
General Cable Group's interest in Yorkshire Cable, Cable Corporation and
Filegale was transferred to GCH for consideration of (Pounds)215,215,000,
(Pounds)98,368,000 and (Pounds)33,700,000, respectively. The General Cable
Group's interest in Birmingham Cable remains held directly by General Cable.
The considerations are represented in the form of undischarged inter-company
balances.
General Cable believes that a discussion of the results of the individual
Systems enhances the understanding of the General Cable Group and the
development of the Systems' operations. Cable Corporation and Yorkshire Cable,
from 6 August 1996, are the only Systems whose revenues are included in the
General Cable Group's 1996 financial results. The General Cable Group's 1997
results include revenue derived by Imminus only from the date of acquisition
(13 March 1997). Therefore, reference is made to the results of the individual
Systems presented in the Selected System Financial Data and the operating
statistics set out in the System Operating Data included elsewhere in this
document. In addition, because of the changes that have taken place in the
business of General Cable and the Systems, and which are continuing to take
place (most notably the rate of construction), historical financial and
operating data are of limited use in assessing the General Cable Group's and
the Systems' prospects and should be viewed in this light.
In preparing the Consolidated Financial Statements for the General Cable
Group, General Cable has included its share of the results of associated
companies in determining operating profits.
RECENT DEVELOPMENTS
In October 1997 General Cable announced a strategic repositioning of its
residential business, reorganisation of its business operations and refinancing
of its sources of funds. The announcement identified that General Cable
believed that it was supplying cable television at a loss due to the terms of
supply on which it could procure programming. The detail of the changes is set
out in "Part I--Section Three--Information on General Cable--Recent
Developments". The announcement identified that a new operating structure was
appropriate and that there would be costs associated with migration to this
structure. In addition, General Cable identified that it would be appropriate
to make a cautionary provision against the net book value of all analogue cable
television equipment to reflect the lack of profitability of that service.
The reorganisation has been effected and the refinancing put in place. The
General Cable Group is now operating under the revised strategy and it is
anticipated that the changes effected, combined with the curtailed residential
build, will lead to lower losses than would otherwise have been realised.
However, the General Cable Group will also achieve lower penetrations and hence
lower revenues and capital expenditures than were previously anticipated.
III-68
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GENERAL CABLE
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OPERATIONS
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SECTION TWO US FINANCIAL INFORMATION
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
GENERAL CABLE PLC
General Cable Group revenues increased 101% in 1997 to (Pounds)111,848,000
from (Pounds)55,733,000 in 1996 as a result of increased revenues in Cable
Corporation, the consolidation of a full year's revenues from Yorkshire Cable
and the inclusion of Imminus revenues from 13 March 1997, the date of its
acquisition. Revenues increased in Cable Corporation and Yorkshire Cable as a
result of expansion of both the business and residential customer bases.
The consolidated operating loss deepened from (Pounds)14,048,000 to
(Pounds)20,677,000 following the acquisition of Yorkshire Cable in 1996. The
additional loss included from Yorkshire Cable, in addition to higher
depreciation charges, outweighed the growth in earnings before interest, tax,
depreciation and amortisation ("EBITDA") and the contribution from the newly
acquired Imminus. The slightly higher share of associated undertakings' losses
resulted from higher interest and depreciation charges in Birmingham Cable. Net
interest charges of (Pounds)19,000,000 increased from (Pounds)3,574,000 in 1996
as a result of increased net debt.
An exceptional reorganisation charge of (Pounds)36,648,000 resulted from the
change in operating strategy announced in October 1997. This charge consisted
of an (Pounds)18,300,000 write down of analogue cable television equipment,
(Pounds)9,600,000 for the reorganisation and restructuring of the business,
(Pounds)1,500,000 relating to the disposal of properties and (Pounds)7,200,000
relating to the write off of deferred finance charges arising from the
arrangement of previous debt facilities.
The increase in Cable Corporation's loss resulted in an increase in the
losses attributable to the minority interest from (Pounds)2,204,000 to
(Pounds)5,562,000.
The overall net result was an increase in the loss for the financial year
from (Pounds)28,668,000 to (Pounds)83,177,000.
THE CABLE CORPORATION LIMITED
Cable Corporation's revenues increased 24% from (Pounds)41,983,000 in 1996 to
(Pounds)51,957,000 in 1997. Business telecommunications accounted for 38% of
total revenues and 50% of telephony revenues in 1997 compared to 39% and 51%,
respectively, in 1996. Residential telephony revenues increased from
(Pounds)15,800,000 in 1996 to (Pounds)19,314,000 in 1997. Television revenues
increased by 34% to (Pounds)13,145,000 in 1997.
Although the network expanded from 89% complete in 1996 to 94% complete in
1997, the number of cable television subscribers increased by 11% and the
number of residential telephony lines increased by 27%, resulting in net gains
of 4,724 and 13,224, respectively. The number of business lines increased 32%
compared to 1996.
Residential telephony penetration increased from 21% to 22% despite ongoing
competitor activity. As a result of continued price reductions, average annual
revenue per customer decreased to (Pounds)349 from (Pounds)362. Churn at 26%
was slightly higher than in 1996 but was in line with General Cable's
expectations. Gross margin at 75% improved in comparison to 1996 reflecting
continuing improvements in interconnect cost.
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OPERATIONS
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SECTION TWO US FINANCIAL INFORMATION
Business telecommunication revenues increased by 19% together with a slight
improvement in gross margin to 64%. As with residential telephony, improvements
in interconnect cost contributed to increased margins. 5,940 net new business
lines were installed in 1997 compared to 5,500 in 1996. Several new contracts
for data service installations contributed to this performance.
Cable television revenues increased as described above as a result of the
increase in the customer base. However, gross margins decreased to 42% from 51%
in 1996 as a result of cost increases from BSkyB which were offset in part by
price increases in the latter half of the year. These price increases
contributed to increased churn at 36% in 1997 as compared to 30% in 1996.
Penetration decreased from 19% in 1996 to 17% in 1997. The decision not to sell
cable television-only services to new customers from the fourth quarter of 1997
contributed to the reduced penetration.
Other operating expenses as a percentage of revenues decreased in comparison
to 1996 from 50% to 45%. This amounted to an increase of (Pounds)2,600,000
which, combined with an increase in the network depreciation charge from
(Pounds)11,108,000 to (Pounds)14,402,000, offset the increase in gross margin
resulting in an operating loss (Pounds)250,000 higher than in 1996. The fixed
asset additions of (Pounds)48,000,000 in 1997 led to the increased depreciation
charge and were in line with 1996 additions.
Cable Corporation's share of the reorganisation costs referred to above was
(Pounds)15,326,000 and this, together with an increased interest charge (up
(Pounds)5,100,000 compared to 1996), contributed to an increased loss for 1997
of (Pounds)33,678,000 compared to (Pounds)13,371,000 in 1996.
EBITDA was (Pounds)12,100,000 for 1997 compared to (Pounds)8,256,000 in 1996.
The level of EBITDA continued to form the basis for the availability of funding
under Cable Corporation's (Pounds)160,000,000 debt facility during 1997. The
facility was replaced by the GCH (Pounds)500,000,000 debt facility concluded on
31 December 1997. See "-- The GCH Facility and Other Financing Arrangements."
THE YORKSHIRE CABLE GROUP LIMITED
Yorkshire Cable's revenues increased 42% to (Pounds)46,100,000 in 1997 as a
result of increases in both the business and residential customer base.
Residential telephony revenue increased from (Pounds)16,300,000 in 1996 to
(Pounds)22,000,000 in 1997, business telecommunications revenue increased
(Pounds)5,400,000 in 1996 to (Pounds)9,600,000 in 1997 and cable television
revenue increased to (Pounds)14,500,000 in 1997 from (Pounds)10,800,000 in
1996. The network has now passed 493,000 homes (increasing the percentage built
from 40% in 1996 to 56% in 1997).
Residential telephony gross margins increased from 69% in 1996 to 84% in 1997
as a result of lower interconnect charges. The revenue increases described
above reflect an increase in the customer base of 21,000 lines. Churn was 24%
in 1997 compared to 22% in 1996, impacting on penetration which was down to 27%
from 30% in 1996.
Business telecommunications gross margins increased from 61% in 1996 to 75%
in 1997 also as a result of the lower interconnect charges. The number of
business lines in operation increased 70% to 21,000 in 1997. Several new
contracts for data service installation contributed to the performance.
Cable television gross margins decreased to 41% from 46% in 1996. Higher
programming charges from BSkyB were principally responsible for the decrease in
margins, although these were partially
offset by price increases in the fourth quarter. Penetration was adversely
affected by the decision not to sell cable television only services to new
customers in the fourth quarter and thus penetration decreased
from 25% in 1996 to 19% in 1997. High disconnections in the first quarter after
the expiry of the
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offer in the fourth quarter of 1996 to provide cable television service to
residential telephony customers for a limited period resulted in high churn in
1997 which increased to 43% from 28% in 1996.
Operating expenses (excluding depreciation) as a percentage of turnover
decreased to 48% in 1997 from 58% in 1996. The depreciation charge increased to
(Pounds)21,600,000, reflecting the additional network construction that took
place in 1997 which formed the largest part of the fixed asset additions of
(Pounds)83,400,000. The operating loss in 1997 was (Pounds)2,700,000 less than
in 1996.
Yorkshire Cable's share of the reorganisation costs was (Pounds)16,500,000,
which combined with a net interest charge of (Pounds)11,900,000 (compared to
the 1996 net charge of (Pounds)2,500,000), resulted in a loss for 1997 of
(Pounds)40,400,000 as compared to a 1996 loss of (Pounds)17,400,000.
The level of EBITDA formed the basis for borrowing under Yorkshire Cable's
credit facility of (Pounds)325,000,000 during 1997 and increased to
(Pounds)9,600,000 from under (Pounds)1,000,000 in 1996. The Yorkshire Cable
credit facility was replaced on 31 December 1997 by the GCH (Pounds)500,000,000
debt facility concluded on 31 December 1997.
BIRMINGHAM CABLE CORPORATION LIMITED
Birmingham Cable's revenues increased 28% from (Pounds)52,330,000 in 1996 to
(Pounds)67,039,000 in 1997 as a result of increase in the customer base.
Residential telephony revenue increased by 27% from (Pounds)24,066,000 in 1996
to (Pounds)30,483,000 in 1997, business telecommunications revenue increased by
35% from (Pounds)7,004,000 in 1996 to (Pounds)9,463,000 in 1997 and cable
television revenues increased 27% from (Pounds)21,260,000 in 1996 to
(Pounds)27,094,000 in 1997. 71,600 additional homes were passed during 1997
with the network reaching 95% of completion in 1997 compared to 87% in 1996.
Gross margin was 57% in 1997 as compared to 60% in 1996. Reductions in the
residential telephony gross margin from 79% in 1996 to 74% in 1997 as a result
of tariff reductions, and in the cable television gross margin from 37% in 1996
to 34% in 1997 as a result of increased product cost, and a higher pay to basic
ratio drove the overall decrease but were offset partially by an increase in
the business telecommunications gross margin from 68% in 1996 to 69% in 1997.
In business telecommunications, the number of lines connected increased 72%
from 11,300 in 1996 to 19,400 in 1997. Revenues per line decreased, however,
from (Pounds)744 to (Pounds)684. The number of lines connected includes 3,600
CENTREX exchange extensions for Birmingham City Council which dilute the amount
of revenue per line. Birmingham Cable was awarded the telephony contract by the
Birmingham City Council in February 1997. The contract is for a period of 7
years and initially covers up to 6,800 centres extensions over 94 locations in
the city. The revenues from the council during 1997 were in line with
expectations. Further take up of business lines under the contract is
continuing in 1998.
Administrative expenses excluding depreciation increased by (Pounds)4,354,000
in 1997 compared to 1996 primarily as a result of the increase in staff
numbers. Administrative expenses represented 42% of revenues in 1997 as
compared to 45% in 1996. The depreciation charge increased from
(Pounds)18,345,000 in 1996 to (Pounds)24,553,000 in 1997 as a result of further
fixed asset additions amounting to (Pounds)41,085,000.
The overall impact of the above factors was to increase the operating loss to
(Pounds)15,770,000 in 1997 from (Pounds)11,694,000 in 1996. The net interest
charge increased 142% from (Pounds)5,882,000 in 1996 to (Pounds)14,260,000 on
net debt, which increased from (Pounds)105,344,000 in 1996 to
(Pounds)160,462,000 in 1997. After
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a tax charge of (Pounds)1,401,000 as compared to (Pounds)2,802,000 in 1996, the
loss for 1997 was (Pounds)31,431,000, an increase of 54% on 1996.
IMMINUS LIMITED
The General Cable Group acquired Filegale and its subsidiary Imminus on 13
March 1997. During the period since acquisition, Imminus contributed
(Pounds)13,100,000 of turnover and (Pounds)2,300,000 of operating profit to the
General Cable Group's results. For the whole year Imminus' revenues were up 9%
to (Pounds)16,756,000 as compared to (Pounds)15,380,000 in 1996. Gross margin
increased 6% to (Pounds)7,753,000 from (Pounds)7,300,000 in 1996.
Administrative costs increased by (Pounds)800,000 to (Pounds)5,032,000 in 1997.
This increase included a rise of (Pounds)500,000 in the depreciation charge due
to the alignment of Imminus accounting policies with those of the General Cable
Group and an increase in staff numbers of 27% consequent on extension of
General Cable's range of services.
During 1997, Imminus arranged an (Pounds)18,000,000 loan facility, the
proceeds of which were loaned to General Cable, which resulted in an increase
in interest payable and receivable in 1997 as compared to 1996. GCH, the
immediate parent of Filegale, arranged a (Pounds)500,000,000 loan facility from
which it lent (Pounds)18,000,000 to Filegale to repay the original loan.
No dividend was paid during 1997, as compared to (Pounds)2,000,000 in 1996,
which resulted in a retained profit of (Pounds)2,327,000 as compared to
(Pounds)221,000 in 1996.
1996 COMPARED TO 1995
GENERAL CABLE PLC
The General Cable Group revenues increased 82% in 1996 to (Pounds)55,733,000
from (Pounds)30,695,000 in 1995 as a result of increased revenues in Cable
Corporation and the consolidation of Yorkshire Cable's revenues from 6 August
1996 following completion of the acquisition. The increase in revenues is due
to the increases in both the business and residential customer base. Network
build was 57% complete as at 31 December 1996 compared to 42% complete in 1995.
The General Cable Group's operating loss increased from (Pounds)20,183,000 in
1995 to (Pounds)26,240,000 in 1996 reflecting an increased operating loss in
Cable Corporation and Yorkshire Cable, off-setting an operating profit in
General Cable. The Birmingham Cable operating loss remained substantially the
same but, as described below, its loss before tax increased after increased
interest charges. These factors, combined with increases in General Cable's
ownership interest in Yorkshire Cable in 1996, led to increases in consolidated
losses.
Interest receivable on cash deposits increased from (Pounds)2,626,000 to
(Pounds)5,055,000. Interest payable increased from (Pounds)3,615,000 to
(Pounds)8,629,000 as a result of the increased level of debt.
The taxation credit decreased from (Pounds)1,844,000 in 1995 to a taxation
charge of (Pounds)1,058,000 in 1996.
Minority interests (which in 1996 primarily represented the share of the
losses in Cable Corporation attributable to other investors) increased from
(Pounds)1,193,000 in 1995 to (Pounds)2,204,000 in 1996, due to the increase in
Cable Corporation's losses.
As a result of the foregoing, the General Cable Group reported a loss of
(Pounds)28,668,000 in 1996 compared to a loss of (Pounds)18,135,000 in 1995.
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The acquisition of 50% of Yorkshire Cable's capital not owned by the General
Cable Group was completed on August 6 1996. In a linked transaction, General
Cable acquired the outstanding shareholder loans from the vendor, Singapore
Telecom. The acquisition was accompanied by an offering by General Cable of 111
million new General Cable shares (the "Yorkshire Cable offering"), which were
sold at 160 pence per share. The net proceeds of the Yorkshire Cable offering
were applied as follows: (Pounds)25 million for general working capital
requirements, (Pounds)20 million to repay Singapore Telecom's loans to
Yorkshire Cable and the balance to Singapore Telecom as part of the
consideration for the acquisition. An over-allotment option covering 3.1
million new ordinary shares was exercised, providing a further (Pounds)4.9
million in consideration to Singapore Telecom. The balance of the consideration
was satisfied by issuance of a further 33.4 million General Cable shares to
Singapore Telecom. Following the Yorkshire Cable offering Singapore Telecom
owned 9.2% of the issued share capital of General Cable, and Vivendi's holding
was reduced to 40%. On 20 February 1997 Singapore Telecom disposed of the
entirety of its holding in General Cable.
THE CABLE CORPORATION LIMITED
Cable Corporation's revenues increased by 40% from (Pounds)29,963,000 in 1995
to (Pounds)41,983,000 in 1996. As in previous years, the majority of the
increase came in telephony, which experienced a 43% increase from
(Pounds)22,488,000 in 1995 to (Pounds)32,168,000 in 1996, with business
telecommunications accounting for 51% of telephony revenues and 39% of total
revenues in 1996, compared to 54% and 41%, respectively, in 1995. Residential
telephony revenues increased from (Pounds)10,246,000 in 1995 to
(Pounds)15,800,000 in 1996. Television revenues increased by 31% from
(Pounds)7,475,000 to (Pounds)9,800,000.
Cable Corporation's increased revenues for the period are primarily a
function of the expansion of the network to 287,000 homes passed and the
increase in the number of business customers. In 1996, Cable Corporation gained
9,400 net new cable television customers, 10,600 net new residential telephone
customers and 5,500 net new business lines, which represented increases of 28%,
27% and 43%, respectively. As at 31 December 1996 network build was 89% built
compared to 67% in 1995.
Residential telephony penetration decreased to 21% from 22% primarily as a
result of the effect of BT's win back campaign. However, in the face of
continued and significant price reductions, revenue per subscriber increased by
2% to (Pounds)362 per annum. Gross margin improved significantly to 73%,
reflecting improvements in interconnection costs and increased line rentals as
well as the benefit of selling additional telephony features, in particular
voicemail, a remote answering message service.
The strong performance in business telecommunications continued with a 34%
increase in revenues, combined with a marked increase in gross margin, from 50%
to 63%. Lines connected increased by 43% to 18,300. These improvements have
been based on improving product range and better interconnection terms in
addition to extending the network.
Cable television penetration increased slightly to 19%. Revenue per
subscriber was maintained and churn reduced at both gross and net levels. The
General Cable Group's policy of packaging television and telephony offerings in
order to create additional value to the consumer was extended, with customers
to both services receiving a discount on their cable television bill. This
discounting, combined with product cost increases, led to a reduction in gross
margin percentages from 56% to 51%.
Other operating expenses increased to (Pounds)20,880,000 as compared to
(Pounds)15,201,000 in 1995 although, as a percentage of revenues, they were
broadly in line with 1995, declining from 51% in 1995 to 50% in 1996. Increases
in depreciation and other operating costs were more then offset by the
improvement in gross margin noted above, and the operating loss decreased from
(Pounds)6,523,000 in 1995 to (Pounds)5,052,000 in 1996.
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The depreciation charge in 1996 was (Pounds)13,308,000 compared to
(Pounds)9,066,000 in 1995, reflecting an increase in the level of fixed assets
resulting from continuing network construction. Additions to network fixed
assets were (Pounds)49,097,000 in 1996 compared to (Pounds)64,100,000 in 1995.
EBITDA is an important measure of Cable Corporation's results, because the
availability of funding under the Cable Corporation facility is based on the
level of EBITDA. EBITDA increased from (Pounds)2,543,000 in 1995 to
(Pounds)8,256,000 in 1996 as a result of the factors referred to above. Cable
Corporation was able to arrange a (Pounds)160,000,000 debt facility with
associated lease facilities of (Pounds)92,000,000, which it believes will be
sufficient to complete the network build on the basis of current plans.
Cable Corporation funded its activities throughout 1996 with proceeds from
the Cable Corporation facility. The interest charges recorded by Cable
Corporation (on a stand-alone basis) increased from (Pounds)4.3 million to
(Pounds)12.9 million as a result of the increased level of debt.
THE YORKSHIRE CABLE GROUP LIMITED
Yorkshire Cable's revenues increased from (Pounds)20,101,000 in 1995 to
(Pounds)32,539,000 in 1996, due to increases in both residential and business
customers. Residential telephony revenue increased by 54% from
(Pounds)10,588,000 in 1995 to (Pounds)16,300,000 in 1996, business
telecommunications revenue increased by 105% from (Pounds)2,638,000 in 1995 to
(Pounds)5,400,000 in 1996, and cable television revenue increased by 57% from
(Pounds)6,875,000 in 1995 to (Pounds)10,800,000 in 1996. During 1996 Yorkshire
Cable passed approximately 101,000 homes compared to 94,000 homes in 1995, with
the network 40% built at 31 December 1996 compared to 29% built in 1995.
Positive operating cash flow was established during the year, resulting in
net positive cash flow overall for the year. At the end of the period a credit
facility for (Pounds)325,000,000 was arranged with associated lease facilities
of (Pounds)206 million.
Business telecommunications revenues grew by 105% to (Pounds)5,400,000,
margins increased to 61% and lines connected grew by 102% to 12,300. Revenues
per line reflected price reductions and mix changes and decreased by 16% to
(Pounds)584 per annum.
During the fourth quarter of 1996, General Cable launched a promotion
directed at telephone only customers designed to encourage upgrade to dual
service subscription, recognising the minimal cost of installation and
acquisition. The product cost of the offer was recognised in the period to 31
January 1997 when the offer expired. Cable television penetration rose from 22%
at 30 September 1996 to 25% at 31 December 1996 primarily as a result of this
promotion. As expected, a significant percentage of these customers have since
disconnected and churn in the first quarter of 1997 has risen on cable
television as a result.
As with General Cable's other operating companies, gross margins fell in
Yorkshire Cable for cable television, from 52% to 46%. Residential telephony
gross margins increased from 64% to 69% on interconnect improvements.
As a result of the increase in subscriber numbers and revenues, net operating
expenses increased from (Pounds)18,768,000 in 1995 to (Pounds)19,528,000 in
1996. However, as a percentage of revenue they declined significantly,
reflecting the increased maturity of the business.
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The operating loss decreased from (Pounds)15,012,000 in 1995 to
(Pounds)14,725,000 in 1996 as a result of the above factors.
As a result of the extensive network build out, additions to network fixed
assets amounted to (Pounds)73,560,000 in 1996. Depreciation charges increased
from (Pounds)9,633,000 in 1995 to (Pounds)15,461,000 in 1996 reflecting the
increase in the asset base.
BIRMINGHAM CABLE CORPORATION LIMITED
Birmingham Cable's revenues increased by 34% from (Pounds)39,004,000 in 1995
to (Pounds)52,330,000 in 1996. Residential telephony revenue increased by 36%
from (Pounds)17,706,000 in 1995 to (Pounds)24,066,000 in 1996, business
telecommunications revenue increased 47% from (Pounds)4,767,000 in 1995 to
(Pounds)7,004,000 in 1996, and cable television revenue increased by 28% from
(Pounds)16,531,000 in 1995 to (Pounds)21,260,000 in 1996. During 1996,
Birmingham Cable passed approximately 104,000 homes compared to 62,000 homes in
1995, with the network some 87% complete in 1996 compared to 65% in 1995.
Gross margins increased from (Pounds)22,646,000 (or 58% of turnover) in 1995
to (Pounds)31,666,000 (or 60% of turnover) in 1996. This overall increase
reflects the increased gross margin on residential telephony from 70% to 79%,
due to increases in line rentals and reductions in usage tariffs; a gross
margin reduction on cable television from 46% to 36% due to the inability to
reduce product cost in the basic service and the higher pay to basic ratio.
In the business market, Birmingham Cable experienced a 53% increase in lines
connected and an overall increase in revenues per line from (Pounds)728 to
(Pounds)744 per annum.
In line with the continued development of Birmingham Cable, administrative
expenses increased by 32% from (Pounds)22,039,000 in 1995 to (Pounds)29,074,000
in 1996, primarily due to increases in the number of employees and other costs
associated with increased subscribers.
The impact of the foregoing factors was to decrease the operating loss from
(Pounds)9,890,000 in 1995 to (Pounds)9,798,000 in 1996.
Birmingham Cable's interest payable increased from (Pounds)25,388,000 in 1995
to (Pounds)33,562,000 in 1996, reflecting the drawing of the credit facility.
Interest receivable also increased from (Pounds)24,906,000 in 1995 to
(Pounds)27,680,000 in 1996. These significant increases are a result of the
cash flows associated with the funding mechanism for the Birmingham Cable
facility. Birmingham Cable incurred a related tax charge of (Pounds)2,802,000
compared to (Pounds)2,452,000 in 1995. The tax charge and net interest expense
represent the funding cost of the borrowings under the Birmingham Cable
facility.
Additions to network fixed assets were (Pounds)56,770,000 in 1996.
Depreciation charges overall increased from (Pounds)13,233,000 in 1995 to
(Pounds)18,345,000 in 1996, due in large part to the increase in the asset
base.
YEAR 2000
General Cable has recognised the importance of addressing the Year 2000 issue
by implementing a specific programme reporting to the Chief Operating Officer.
The intent is that the core internal systems (transmission networks and IT
systems) will be tested as fully Year 2000 compliant by the end of 1998. This
work will be followed up during 1999 with actions to ensure that the customer-
based equipment will also operate correctly at that time.
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General Cable has conducted work over the past six months understanding the
status of its various core elements. Plans and budgets have been generated for
the remedial work and testing to be undertaken during the second half of 1998.
These show the majority of the systems to be packaged, current and sourced from
reputable suppliers who themselves have provided Year 2000 strategies,
compliance statements and release plans.
Further work on the status of the major operational suppliers has to be
addressed and contingency plans in the event of their failure developed.
Specialist consultants are undertaking an external audit on the work
accomplished to date and provide a considered risk assessment of the overall
situation. Through 1998 they will continue to provide expertise on the Year
2000 issue and give assistance in the set-up and operation of a Year 2000
programme management office.
ENVIRONMENTAL POLICIES
General Cable recognises that it has an environmental duty of care which
extends to all aspects of the General Cable Group's activities in the
community. The General Cable Board considers that the businesses of the General
Cable Group have an inherently low impact on the environment, other than
potentially through construction of the networks. The General Cable Group and
its associates seek to minimise the impact of activities on the environment,
notably on trees, through the adoption of appropriate construction practices.
RISK MANAGEMENT
The General Cable Group is exposed to interest rate risk and, as a result,
changes in interest rates may affect liquidity.
In January 1997, the Securities and Exchange Commission adopted final rules
requiring companies to disclose additional quantitative and qualitative
information about the market risk of derivative and other financial instruments
and accounting policies for derivatives. Disclosure is required in financial
statements for periods ending after 15 June 1997.
The General Cable Group has entered into interest rate swap agreements which
are used to manage interest rate risk on the General Cable Group's borrowings.
These are accounted for using the accruals method. Net income or expense
resulting from the differential between exchanging floating and fixed rate
interest payments is recorded on an accruals basis.
RECENT PRONOUNCEMENTS
Set out below are new accounting standards applicable to General Cable:
COMPREHENSIVE INCOME
In June 1997 the Financial Accounting Standards Board ("FASB") issued SFAS
No. 130 "Reporting Comprehensive Income" which is effective for fiscal years
beginning after 15 December 1997. Reclassification of financial statements for
earlier periods for comparative purposes are required. It requires that all
items that are required to be recognized under accounting standards as
components of comprehensive income be reported in a financial statement that is
displayed with the same prominence as other financial statements. It requires
that an enterprise (a) classify items of other comprehensive income by their
nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the
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equity section of the statement of financial position. General Cable is
currently reviewing the likely impact on the classification of items included
in shareholders' equity.
PENSIONS AND OTHER POST-RETIREMENT BENEFITS
In February 1998, the FASB issued SFAS No. 132 "Employers' Disclosures about
Pensions and Other Post-Retirement Benefits". SFAS No. 132 revises disclosure
requirements about employers' pensions and other post-retirement benefit plans.
SFAS No. 132 is effective for fiscal years beginning after 15 December 1997.
General Cable has not yet determined the impact that SFAS No. 132 will have on
its pension and post-retirement benefit disclosures.
SEGMENT INFORMATION
In June 1997, the FASB issued SFAS No. 131 "Disclosure about Segments of an
Enterprise and Related Information" which is effective for fiscal years
beginning after 15 December 1997. In the initial year of application
comparative information for earlier years is restated. It requires that
companies disclose segment data based on how management makes decisions about
allocating resources to segments and measuring their performance. It also
requires entity-wide disclosures about the products and services an entity
provides, the material countries in which it holds assets and reports revenues,
and its major customers. General Cable is currently reviewing the likely impact
on the level of disclosures already provided in its consolidated financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
The Systems have required significant amounts of cash to fund the capital
expenditures necessary for the development of their networks and to fund
operating losses. The primary sources of such cash have been share issues to
members of the Vivendi Group totalling (Pounds)147,000,000, the initial public
offering, the Yorkshire Cable offering and syndicated loan facilities. At 31
December 1997, in excess of (Pounds)572,000,000 had been invested in the
Systems by their shareholders and (Pounds)400,000,000 has been drawn under
syndicated loans.
Positive operating cash flow was achieved in all the Systems by the first
half of 1996 and has subsequently grown significantly. Positive operating cash
flows are anticipated to provide an increasing contribution to future funding.
However, the need for additional cash to fund capital expenditure for the
continuing network build and development will remain for at least the next few
years. It is intended that third party loan facilities will satisfy these
additional funding requirements. The network build was 70% complete as at 31
December 1997 with future capital spending varying depending on the growth in
customer base.
Each of the Systems has arranged syndicated loan facilities. During 1995
Birmingham Cable arranged a (Pounds)175,000,000 senior debt facility and Cable
Corporation and Yorkshire Cable arranged senior facilities during 1996 for
(Pounds)160,000,000 and (Pounds)325,000,000, respectively. In the year ended 31
December 1997, Birmingham Cable drew (Pounds)40,000,000, Cable Corporation drew
(Pounds)41,000,000 and Yorkshire Cable drew (Pounds)102,000,000.
During 1997 Imminus arranged a (Pounds)18,000,000 senior debt facility. The
proceeds of this facility were loaned to General Cable to fund part of the cost
of acquiring Filegale.
As part of the strategic reorganisation of the General Cable Group, General
Cable's interests in Cable Corporation, Yorkshire Cable and Imminus were
transferred to GCH on 31 December 1997.
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GCH is a wholly owned subsidiary of General Cable and acts as an intermediate
holding company (see "-- Group Structure"). General Cable's interest in
Birmingham Cable continues to be held directly by General Cable.
In connection with the reorganisation, GCH arranged a (Pounds)500,000,000
syndicated credit facility. The purpose of this facility is to fund future
network construction, to prepay the credit facilities arranged by Cable
Corporation, Yorkshire Cable, and Imminus, and within certain limits, to repay
shareholder loans. Out of the proceeds of the first drawing under this
facility, on 31 December 1997, amounts were advanced by GCH to Cable
Corporation, Yorkshire Cable and Imminus to prepay amounts drawn under each of
their facilities. As at the date on which the facilities were prepaid they had
been drawn as follows: Cable Corporation--(Pounds)120,000,000, Yorkshire
Cable--(Pounds)117,000,000 and Imminus--(Pounds)18,000,000.
Under the terms of the GCH facility, there is a general restriction on the
ability of the obligors to the facility to make distributions to General Cable
in the form of dividends, payments of interest on subordinated shareholder
loans or the payment of management fees. The removal of these restrictions is
dependent upon the financial performance of GCH and its subsidiaries. Based on
current forecasts, General Cable does not consider that the restriction on
distributions as set out above will have a material affect on General Cable's
ability to meet its cash obligations.
The facility contains a provision for the repayment of an element of the
loans advanced to Cable Corporation and Yorkshire Cable by General Cable.
As at 31 December 1997, (Pounds)260,000,000 had been drawn under the GCH
facility. During 1998, it is anticipated that Cable Corporation, Yorkshire
Cable and Imminus will be funded in part through further drawings under the GCH
facility.
During 1995, General Cable arranged a facility with Vivendi pursuant to which
Vivendi will provide loans of up to (Pounds)32,000,000 in the aggregate. In 1996
the maturity of this facility was extended. Repayment of any drawings under the
facility with Vivendi is to be made in semi-annual instalments of
(Pounds)5,000,000 commencing on 19 April 1998 or, in the case of the last
instalment, the then outstanding amount the facility. The size of the facility
will be reduced by (Pounds)5,000,000 every six months commencing on 19 April
1998 irrespective of whether any amounts have been drawn thereunder. In 1997,
General Cable drew (Pounds)17,000,000 under the facility with Vivendi, which has
now been repaid. As at 31 December 1997 no amounts were outstanding under this
facility. Since 31 December 1997, (Pounds)4,000,000 has been drawn. Of this
amount, (Pounds)2,840,000 has been advanced by General Cable to Birmingham Cable
by way of a subordinated shareholder loan.
The Cable Corporation and Yorkshire Cable senior debt facilities entered into
during 1996 were accompanied by sale and lease back facilities arranged with a
number of lessors. These facilities involved a sale and leaseback of existing
fixed assets equipment and ongoing lease facilities. Additional security is
provided to the lessors in the form of letters of credit issued by a number of
banks.
As at 31 December 1997, (Pounds)74,872,000 had been drawn under the Cable
Corporation finance lease facilities and (Pounds)104,552,000 under the
Yorkshire Cable leasing facilities.
In February 1995, Birmingham Cable entered into a (Pounds)175,000,000 senior
debt facility to finance the remaining Birmingham Cable network build. Prior to
the arrangement of the facility, funding had been provided by the shareholders.
In March 1997, a number of the covenants associated with this
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
facility were altered to reflect changes in the operating performance of
Birmingham Cable and the maturity of the loan was extended to 31 December 2005.
In addition to amounts drawn under the facility, additional funding totalling
(Pounds)13,300,000 has been provided by the shareholders of Birmingham Cable in
the form of subordinated loans.
In connection with Birmingham Cable's facility, Birmingham Cable Finance
Limited, a wholly owned indirect subsidiary of Birmingham Cable, raised
(Pounds)175,000,000 through the issue of fixed rate cumulative redeemable
preference shares to Barclays Bank PLC. Following changes in tax legislation
during 1997, these preference shares have been redeemed by Birmingham Cable
following Barclays Bank PLC's exercise of their put option. Consequently the
(Pounds)175,000,000 revolving credit facility has converted to a syndicated
bank term loan supported by bank syndication.
THE GCH FACILITY AND OTHER FINANCING ARRANGEMENTS
GENERAL CABLE HOLDINGS LIMITED FINANCING ARRANGEMENTS
On 31 December 1997, GCH entered into a syndicated facility agreement (the
"GCH Facility Agreement") arranged by Banque Paribas, CIBC Wood Gundy PLC,
NatWest Markets, a division of National Westminster Bank Plc, and The Toronto-
Dominion Bank pursuant to which a syndicate of banks agreed, upon and subject
to the terms and conditions of the GCH Facility Agreement, to make loan
facilities available to GCH in two tranches in an aggregate principal amount of
up to (Pounds)500,000,000. Advances under tranche A are available on a
revolving basis until 31 March 2000. Advances under tranche B are available on
a revolving basis until 30 June 2002, and thereafter on an agreed amortising
term basis until 30 June 2007. Interest on advances under both tranches is
payable at a rate calculated by reference to sterling LIBOR plus associated
costs and a margin determined in accordance with the terms of the GCH Facility
Agreement.
In connection with its interest liabilities under the GCH Facility Agreement,
GCH is obliged to maintain interest-rate hedging in its own name or in the name
of Yorkshire Cable or Cable Corporation. Yorkshire Cable has entered into
hedging arrangements with National Westminster Bank Plc and The Toronto-
Dominion Bank in the form of accreting interest rate swaps which run until
December 2001. Cable Corporation has entered into hedging arrangements with
National Westminster Bank Plc in the form of an interest rate cap which runs
until December 1999. GCH is also obliged to continue, and to ensure that
Yorkshire Cable, Cable Corporation and Imminus continue, with the interest
exposure management policies specified in the GCH Facility Agreement.
The GCH Facility Agreement contains various financial and other covenants on
the part of GCH and its subsidiaries, including compliance with certain
leverage, interest cover, operating cashflow and debt service cover ratios and
the maintenance of a minimum amount of contributed shareholder funds. It also
contains various events of default, the occurrence of which would entitle the
syndicate banks to refuse to make further advances available under the facility
and to accelerate repayment of advances already outstanding. In certain
circumstances the syndicated facility agreement permits (but does not require)
breaches of certain covenants to be remedied by the shareholder of GCH by the
provision of subordinated debt to GCH and/or the subscription for equity share
capital in GCH.
One of these events of default is if, inter alia, Vivendi ceases to own
directly or indirectly at least 20% of the issued ordinary share capital of
General Cable. GCH has entered into an amendment letter, dated 8 April 1998,
with the other parties to the GCH Facility Agreement, under which the events of
default will be amended after the Offer is declared unconditional in all
respects. Pursuant to such
III-79
<PAGE>
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GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
amendment, an event of default would occur if, inter alia, Telewest does not
maintain directly or indirectly its holding in General Cable or TCI and
MediaOne do not maintain directly or indirectly a certain level of voting and
economic interest in Telewest.
The obligations of GCH under the GCH Facility Agreement are guaranteed by
each of Yorkshire Cable, Cable Corporation, Filegale and certain subsidiary
undertakings of GCH (collectively, the "Original Guarantors"). The obligations
of GCH and the Original Guarantors under the GCH Facility Agreement are secured
by a debenture creating fixed and floating charges over the assets of each of
the companies and by a charge over General Cable's shares in GCH.
In connection with the GCH Facility Agreement and the finance leasing
arrangements entered into by Cable Corporation and Yorkshire Cable, GCH, the
Original Guarantors, Banque Paribas, CIBC Wood Gundy PLC, National Westminster
Bank Plc, The Toronto-Dominion Bank, NatWest Specialist Finance Limited, Robert
Fleming Leasing (Number 4) Limited, Lombard Commercial Limited, Dexia Municipal
Bank plc, Credit Agricole Indosuez and Societe Generale have entered into an
intercreditor agreement, dated 31 December 1997 (the "Intercreditor
Agreement"), which regulates the priority of the various security interests
created by GCH and the Original Guarantors and subordinates certain
indebtedness which is now or may from time to time be owing by GCH to General
Cable.
VIVENDI FACILITY
General Cable has entered into a credit facility with Vivendi (the "Vivendi
Facility") pursuant to which Vivendi will provide loans of up to
(Pounds)32,000,000 in the aggregate. Under the terms of the Vivendi Facility,
drawings are unsecured and will bear interest at a rate per annum equal to
three-month sterling LIBOR plus a margin of 1.25% per annum. Under the terms,
repayment of the loans is to be made in semi-annual instalments of
(Pounds)5,000,000 commencing on 19 April 1998 or, in the case of the last
instalment, the then outstanding amount of the Vivendi Facility. The size of
the facility will be reduced by (Pounds)5,000,000 every six months commencing
on 19 April 1998 irrespective of whether any amounts have been drawn
thereunder.
CABLE CORPORATION FINANCING ARRANGEMENTS
On 26 February 1996, Cable Corporation entered into a syndicated facility
agreement (the "Cable Corporation Facility Agreement") arranged by NatWest
Markets pursuant to which a syndicate of banks agreed, upon and subject to the
terms and conditions of the Cable Corporation Facility Agreement, to make loan
facilities available to Cable Corporation in two tranches in an aggregate
principal amount of up to (Pounds)160,000,000. This facility was refinanced
following the arrangement of the GCH facility on 31 December 1997 as set out
above. Amounts drawn under the Cable Corporation Facility at this date were
prepaid and amounted to (Pounds)120,000,000.
Also on 26 February 1996, Cable Corporation, Windsor Television Limited
("WTL"), and Middlesex Cable Limited ("MCL") entered into certain finance lease
arrangements with NatWest Specialist Finance Limited ("NWSFL"), a subsidiary of
National Westminster Bank Plc. The operation of these finance lease
arrangements has not been altered as a result of the refinancing of the Cable
Corporation facility. Under the terms of these arrangements and subject to the
terms and conditions of an agreement to acquire between WTL, MCL and NWSFL, WTL
and/or MCL are entitled from time to time to sell, and NWSFL will purchase,
equipment which NWSFL will then lease to Cable Corporation upon and subject to
the terms and conditions of two finance lease agreements entered into between
Cable Corporation and NWSFL. The maximum amount of equipment that may be the
subject of such sales is equipment having a purchase price of up to
(Pounds)92,000,000. The equipment that Cable
III-80
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
Corporation has taken or will take on lease will be subleased by it to WTL or
MCL, on the terms of subleases between Cable Corporation and each of these two
companies. There is a general cross default with, inter alia, the GCH Facility
Agreement, and certain of the covenants in the GCH Facility Agreement are
repeated separately.
The obligations of Cable Corporation under the finance lease agreements
entered into with NWSFL are guaranteed by each of WTL, MCL and The Cable
Corporation Equipment Limited ("TCCEL") and those obligations and the guarantee
obligations are secured by debentures creating fixed and floating charges over
the assets of Cable Corporation, WTL, MCL and TCCEL.
Under the terms of a lease security agreement entered into by Cable
Corporation and NWSFL, Cable Corporation has agreed that, in addition to the
guarantees and security described above, it will ensure that at all times NWSFL
has the benefit of certain other security for Cable Corporation's obligations
under the finance lease agreements including (i) a letter of credit from
Societe Generale in an amount (which may increase or decrease from time to
time) determined in accordance with the provisions of the lease security
agreement and (ii) an assignment by way of security of Cable Corporation's
rights in relation to monies that may from time to time be credited to a
deposit account in Cable Corporation's name with National Westminster Bank Plc
in accordance with the requirements of that lease security agreement.
Pursuant to its obligations under the lease security agreement described in
the preceding paragraph, on 26 February 1996, Cable Corporation entered into a
facility agreement with Societe Generale (the "Societe Generale Facility
Agreement") pursuant to which, inter alia, Societe Generale agreed to issue a
letter of credit for a principal amount of up to a maximum of
(Pounds)120,000,000 (the "Letter of Credit") to NWSFL and Cable Corporation
agreed to indemnify Societe Generale in respect of any payments made under the
Letter of Credit and, inter alia, any losses or liabilities suffered or incurred
by Societe Generale under or in connection with the Letter of Credit. That
indemnity obligation and other amounts owing from Cable Corporation to Societe
Generale under the Societe Generale Facility Agreement are secured, inter alia,
pursuant to a security deposit agreement creating security over a cash deposit
made by Cable Corporation with Societe Generale, which deposit will from time to
time be increased each time Cable Corporation requests an increase in the amount
of the Letter of Credit. General Cable has also entered into certain indemnity
and security arrangements in favour of Societe Generale in relation to this
facility.
In connection with finance leasing arrangements set out above Cable
Corporation entered into the Intercreditor Agreement.
YORKSHIRE FINANCING ARRANGEMENTS
On 24 December 1996, Yorkshire Cable entered into an underwritten loan
facility agreement (the "Yorkshire Cable Facility Agreement") arranged by
NatWest Markets and Chase Investment Bank Limited. This facility was syndicated
in early 1997 and pursuant to this facility a syndicate of banks agreed, upon
and subject to the terms and conditions of the Yorkshire Cable Facility
Agreement, to make loan facilities available to Yorkshire Cable in two tranches
in an aggregate principal amount of up to (Pounds)325,000,000.
This facility was refinanced following the arrangement of the GCH facility on
31 December 1997 as set out above. Amounts drawn under the Yorkshire Cable
facility at this date were prepaid and amounted to (Pounds)117,000,000.
III-81
<PAGE>
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GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
Also on 24 December 1996, Yorkshire Cable and a number of its subsidiaries
entered into certain finance lease arrangements as follows:
Yorkshire Cable, Barnsley Cable Communications Limited, Doncaster Cable
Communications Limited ("DCC"), Halifax Cable Communications Limited
("HCC") and Wakefield Cable Communications Limited ("WCC") entered into
certain finance lease arrangements with NWSFL.
Yorkshire Cable and Sheffield Cable Communications Limited ("SCC"),
entered into certain finance lease arrangements with Lombard Commercial
Limited ("LCL"), a subsidiary of Lombard North Central PLC.
Yorkshire Cable and, Yorkshire Cable Communications Limited ("YCC")
entered into certain finance lease arrangements with Robert Fleming Leasing
(Number 4) Limited ("RFL"), a subsidiary of Robert Fleming & Co Limited.
For the purposes of the description of the facilities below, the subsidiaries
of Yorkshire Cable set out above are referred to as the "sub-lessees" and
NWSFL, LCL and RFL are referred to as the "lessors."
The operation of these finance lease arrangements has not been altered as a
result of the refinancing of the Yorkshire Cable facility.
Under the terms of these arrangements and subject to the terms and conditions
of the agreements to acquire between the sub-lessees and the lessors, the sub-
lessees are entitled from time to time to sell, and the lessors will purchase,
equipment which the lessors will then lease to Yorkshire Cable upon and subject
to the terms and conditions of two finance lease agreements entered into
between Yorkshire Cable and each of the lessors.
The maximum amount of equipment that may be the subject of such sales is
equipment having a purchase price of up to (Pounds)206,000,000. The equipment
that Yorkshire Cable has taken or will take on lease will be subleased by it to
the sub-lessees, on the terms of subleases between Yorkshire Cable and each of
the sublessees. There is a general cross default with, inter alia, the GCH
Facility Agreement and certain of the covenants in the GCH Facility Agreement
are repeated separately.
The obligations of Yorkshire Cable under the finance lease agreements entered
into with the lessors are guaranteed by each of Barnsley Cable Communications
Limited, DCC, HCC, WCC, SCC, YCC, Bradford Cable Communications Limited,
Eastern Derbyshire Cable Communications Limited, Rotherham Cable Communications
Limited, Yorkshire Cable Finance Limited, Yorkshire Cable Limited and Yorkshire
Cable Telecom Limited and those obligations and the guarantee obligations are
secured by debentures creating fixed and floating charges over the assets of
these companies together with those of Yorkshire Cable.
Under the terms of lease security agreements entered into by Yorkshire Cable
and each of the lessors, Yorkshire Cable has agreed that, in addition to the
guarantees and security described above, it will ensure that at all times the
lessors have the benefit of certain other security for Yorkshire Cable's
obligations under the finance lease agreements including (i) one or more
letters of credit in an amount (which may increase or decrease from time to
time) determined in accordance with the provisions of the relevant lease
security agreement and (ii) an assignment by way of security of Yorkshire
Cable's rights in relation to monies which may from time to time be credited to
a deposit account in Yorkshire Cable's name with National Westminster Bank Plc
in accordance with the requirements of the relevant lease security agreement.
III-82
<PAGE>
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GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
Pursuant to its obligations under the lease security agreement described in
the preceding paragraph, on 24 December 1996, Yorkshire Cable entered into
facility agreements with Banque Paribas (the "Banque Paribas Facility
Agreements") pursuant to which, inter alia, Banque Paribas agreed to issue
letters of credit for an aggregate principal amount of up to a maximum of
(Pounds)45,000,000 (the "Banque Paribas Letters of Credit") to NWSFL, LCL and
RFL and Yorkshire Cable agreed to indemnify Banque Paribas in respect of any
payments made under the Banque Paribas Letters of Credit and, inter alia, any
losses or liabilities suffered or incurred by Banque Paribas under or in
connection with the Banque Paribas Letters of Credit. Since the time the Banque
Paribas Facility Agreements were entered into, the facility agreement entered
into by Banque Paribas pursuant to which it agreed to issue letters of credit
to LCL has been cancelled and the other Banque Paribas Facility Agreements were
amended to provide, inter alia, that the maximum amount of letters of credit
available under the Banque Paribas Facility Agreements is approximately
(Pounds)76,200,000. The indemnity obligation and other amounts owed to Banque
Paribas under each of the Banque Paribas Facility Agreements are secured, inter
alia, pursuant to separate security deposit agreements creating security over
cash deposits made by Yorkshire Cable with Banque Paribas, which deposits will
from time to time be increased each time Yorkshire Cable requests an increase
in the amount of the relevant Banque Paribas Letter of Credit. General Cable
has also entered into certain indemnity and security arrangements in favour of
Banque Paribas in relation to these facilities.
In addition to the Banque Paribas Facility Agreement, letter of credit
facilities were arranged with Credit Agricole Indosuez (the "Credit Agricole
Facility Agreement") on 24 June 1997 and Dexia Municipal Bank plc (the "Dexia
Municipal Facility Agreement") on 30 June 1997 for principal amounts of up to a
maximum of (Pounds)100,000,000 and (Pounds)55,000,000, respectively. The
security and indemnity arrangements relating to the Credit Agricole and Dexia
Municipal Facility Agreements are the same as those relating to the Banque
Paribas Facility Agreements as set out above.
In connection with finance leasing arrangements set out above Yorkshire Cable
entered into the Intercreditor Agreement.
BIRMINGHAM FINANCING ARRANGEMENTS
Birmingham Cable Finance Limited, a company incorporated in Jersey ("BCF")
and a wholly owned subsidiary of Birmingham Cable Limited ("BCL"), which is a
subsidiary of Birmingham Cable, raised (Pounds)175,000,000 through the issue in
February 1995 of fixed rate cumulative redeemable preference shares (the
"Preference Shares") to Barclays Bank PLC ("Barclays Bank"). Barclays Bank
exercised its option to require Birmingham Cable to purchase all of the
Preference Shares during 1997.
The Preference Shares were redeemed in July 1997 pursuant to a syndicated
facility agreement arranged by The Bank of New York, Canadian Imperial Bank of
Commerce and Chase Manhattan, with BCL as borrower (the "Birmingham Cable
Facility Agreement"). A guarantee had been cash collateralised by a deposit by
BCL equal to the proceeds of the Preference Share issue (which BCF had advanced
to BCL by way of intercompany loan). The syndicated facility may be utilised by
way of revolving cash advances in the period up to 31 December 1999. All
advances drawn under the revolving facility including any advance made to fund
the redemption of the Preference Shares in July 1997 will on 31 March 2000 be
converted to a term loan which will then be repayable in accordance with an
agreed repayment schedule, with a final repayment on 31 December 2004. In March
1997 a number of the covenants associated with this facility were altered to
reflect changes in the operating performance of Birmingham Cable and the
maturity of the loan was extended to 31 December 2005.
Interest on advances is payable at a rate calculated by reference to sterling
LIBOR plus associated costs and a margin determined in accordance with the
terms of the Birmingham Cable Facility Agreement.
III-83
<PAGE>
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GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
The Birmingham Cable Facility Agreement places various financial covenants on
Birmingham Cable and its subsidiaries, including compliance with minimum cash
flow requirements, minimum number of homes and businesses passed, maximum
levels of bank borrowings, maximum leverage ratios, minimum interest cover
ratios and minimum pro forma debt service levels. In certain circumstances the
Birmingham Cable Facility Agreement permits (but does not require) breaches of
certain covenants to be remedied by the shareholders of Birmingham Cable (i.e.,
Comcast, General Cable and Telewest) by the provision of subordinated debt to
BCL and/or the subscription for equity share capital in Birmingham Cable.
Security for the syndicated facility has been provided in the form of a
guarantee and debenture from Birmingham Cable, BCL, BCF and certain other
subsidiaries of Birmingham Cable.
Pursuant to the Birmingham Cable Facility Agreement, payments or
distributions to the shareholders of Birmingham Cable, including payments of
management fees, dividends, interest and principal on loans to Birmingham Cable
from its shareholders, are restricted based on certain conditions relating to
the financial performance of Birmingham Cable and its subsidiaries.
In accordance with the provisions of the Birmingham Cable financing
arrangements described above, on 15 February 1995 BCL entered into a five-year
interest rate swap agreement with The Bank of New York, Canadian Imperial Bank
of Commerce and Chase Manhattan International. Under these arrangements BCL
paid fixed rate interest of 9.2% and received floating rate interest 6-month
LIBOR. On 16 March 1998 these swaps were cancelled by BCL and replaced by swaps
with the same maturity date of February 2000.
TAXATION
In respect of the year ended 31 December 1995, General Cable, the Western
London System and the Yorkshire System were able to relieve tax losses against
profits of other members of the GUHL group only until the date of the initial
public offering on 19 April 1995, as thereafter GUHL's interest in General
Cable fell below the threshold for tax grouping. Following the initial public
offering, relief for the trading losses of General Cable, the Western London
System and the Yorkshire System is obtained by carry forward against future
profits arising from the same trade in the statutory entities concerned, or by
surrender between General Cable, the Western London System, the Yorkshire
System and Imminus.
Losses can only be surrendered to the extent that capacity to absorb these
losses exists elsewhere in the relevant group. Where excess losses exist in
General Cable, Imminus, General Telecommunications Limited or in the Systems,
consideration will be given to the relative merits of deferring tax
depreciation, so as to maximise the benefit of available tax losses.
As a result of the loss relief arrangements, General Cable, the Western
London System and the Yorkshire System have estimated that relief for tax
losses, the benefit of which has been accounted for in the loss for the
relevant year of General Cable, are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
((Pounds)000) ((Pounds)000) ((Pounds)000)
------------- ------------- -------------
<S> <C> <C> <C>
Tax credit/(charge).................. 1,844 (1,058) 212
</TABLE>
In respect of the year ended 31 December 1995, GUHL has estimated that there
is capacity to utilise sufficient tax losses of the General Cable, the Western
London System and the Yorkshire System to enable a payment by GUHL for group
relief of (Pounds)3,510,000 to be made in respect of the period prior
III-84
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GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
to the initial public offering. However, there is no legal obligation for this
payment to be made. The tax credit shown in the table is lower than the group
relief payment due from GUHL due to the tax charge in Birmingham Cable. Tax
charges arose in the Birmingham System and the Yorkshire System through the
operation of the preference share structures. The charges represent Advance
Corporation Tax ("ACT") on the dividends payable which are, in the opinion of
General Cable, unlikely to be recovered by offset against a mainstream
corporation tax liability in the foreseeable future. In respect of the year
ended 31 December 1996, relief for the trading profits of General Cable were
relieved by losses surrendered by the Western London System. The excess losses
are carried forward for offset against future trading profits of the Western
London System and the Yorkshire System.
In respect of the years ended 31 December 1996 and 1997, tax charges arose in
the Birmingham System and in respect of the year ended 31 December 1996 in the
Yorkshire System through the operation of the preference share structures. The
charges represent ACT on the dividends payable which are, in the opinion of
General Cable, unlikely to be recovered by offset against a mainstream
corporation tax liability in the foreseeable future. No further charges will
arise due to the redemption of the preference shares.
In respect of the year ended 31 December 1997, the trading profits of General
Cable and of Imminus from the date of acquisition on 13 March 1997 were
relieved by losses surrendered by the Western London System. The excess losses
are carried forward for offset against future trading profits of the Western
London System and the Yorkshire System. A tax charge arose in Imminus in
respect of the profits of the period prior to acquisition.
US GAAP
The reconciliation to US GAAP is described in detail in Note 25 to General
Cable's Consolidated Financial Statements and in a similar note to the
financial statements of Birmingham Cable. The major differences between UK GAAP
and US GAAP concern cable communications industry accounting, expense
recognition in 1997 and accounting for goodwill.
General Cable believes that it is common industry practice for UK cable
operators to apply the principles of US GAAP with respect to cable
communications industry accounting in preparing their UK financial statements.
However, General Cable has decided not to adopt this accounting policy. As
explained below, the effect of applying these US GAAP principles is generally
to reduce the reported operating losses in the early stages of a System's
development.
US accounting standards recognise that the development period of a cable
communications operation does not conform to an annual accounting cycle. Thus,
US GAAP requires deferral of costs and depreciation in order to achieve a
better match between costs and revenues. In the early years of development of
franchises, certain network development costs are capitalised and a portion of
depreciation is deferred. As the franchises mature and revenue is earned in the
identified segments, an increasing proportion of network development costs are
expensed under US GAAP accounting. General Cable has not adjusted its UK
financial statements for these items. The impact of this difference is to
increase UK GAAP losses in the developmental years and to reduce the level of
assets capitalised. When the networks are completed, the UK GAAP financial
statements will bear a correspondingly lower depreciation charge.
III-85
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
III-86
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GENERAL CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILATION OF NET
INCOME AND SHAREHOLDER'S EQUITY TO US GAAP
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
GENERAL CABLE PLC AND SUBSIDIARIES
Independent Auditors' Report.......................................... III-88
Consolidated Profit and Loss Accounts and Reconciliation of Movements
in Shareholders' Funds for the years ended December 31, 1997, 1996,
1995................................................................. III-89
Consolidated Balance Sheets at December 31, 1997, 1996................ III-90
Consolidated Statements of Cash Flows for the years ended December 31,
1997,
1996, 1995........................................................... III-91
Notes to the Consolidated Financial Statements........................ III-95
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
Independent Auditors' Report.......................................... III-124
Consolidated Profit and Loss Accounts and Reconciliation of Movements
in Shareholders' Funds for the years ended December 31, 1997, 1996
and 1995............................................................. III-125
Consolidated Balance Sheets at December 31, 1997, 1996 and 1995....... III-126
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996
and 1995............................................................. III-127
Notes to the Consolidated Financial Statements........................ III-128
</TABLE>
III-87
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GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
To the Board of Directors and Shareholders of General Cable PLC
We have audited the accompanying consolidated balance sheets of General Cable
PLC ("the Company") and its subsidiaries (together "the Group") at 31 December
1995, 1996 and 1997, and the related consolidated profit and loss accounts,
reconciliation's of movements in shareholders' funds and cashflows for each of
the three years in the period ended 31 December 1997 set out on pages III-89 to
III-122. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on those
financial statements.
We conducted our audits in accordance with generally accepted auditing
standards in the United Kingdom which are substantially the same as auditing
standards generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe our audits
provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of the Group at 31 December 1995, 1996 and 1997 and the results of its
operations and cashflows for each of the three years in the period ended 31
December 1997 in conformity with generally accepted accounting principles in
the United Kingdom.
The consolidated financial statements were prepared in accordance with the
accounting policies set out in note 1 and comply with generally accepted
accounting principles in the United Kingdom which differ in certain respects
from United States generally accepted accounting principles as set out in note
25.
COOPERS & LYBRAND
Chartered Accountants
London
England
15 June 1998
III-88
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1996 1997
NOTES (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Turnover--continuing
operations 3 30,695 42,664 98,238
--acquisitions -- 13,069 13,610
------------------------------------------
30,695 55,733 111,848
Operating Costs (38,934) (69,781) (132,525)
------------------------------------------
Operating loss--continuing
operations (8,239) (8,135) (22,960)
--acquisitions -- (5,913) 2,283
------------------------------------------
(8,239) (14,048) (20,677)
Share of losses of
associated undertakings (11,944) (12,192) (12,626)
Reorganisation costs 6 -- -- (36,648)
Interest receivable and
similar income 7a 2,626 5,055 17,707
Interest payable and
similar charges 7b (3,615) (8,629) (36,707)
------------------------------------------
Loss on ordinary activities
before taxation 8 (21,172) (29,814) (88,951)
Taxation 9 1,844 (1,058) 212
------------------------------------------
Loss on ordinary activities
after taxation (19,328) (30,872) (88,739)
Minority interests 1,193 2,204 5,562
------------------------------------------
Loss for the financial year 10 (18,135) (28,668) (83,177)
------------------------------------------
LOSS PER SHARE 11 (8.1)p (9.6)p (22.8)p
------------------------------------------
</TABLE>
The loss for each financial year includes all recognized gains and losses.
There is no difference between the loss on ordinary activities before
taxation and the loss for the financial year and their historical cost
equivalents.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
- -------------------------------------------------------------------------
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Loss for the financial year (18,135) (28,668) (83,177)
Capital contribution by parent
undertaking 691 30 --
New share capital subscribed 154,572 209,725 --
Expenses of share issue -- -- 303
Goodwill written off (106) (103,829) (32,334)
----------------------------------------
137,022 77,258 (115,208)
Opening shareholders' funds 103,196 240,218 317,476
----------------------------------------
Closing shareholders' funds 240,218 317,476 202,268
----------------------------------------
</TABLE>
III-89
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1996 1997
NOTES (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 12 411,335 488,928
Investments 13
Associated undertakings 42,930 29,675
Other investments 44 312
--------------------------
454,309 518,915
--------------------------
CURRENT ASSETS
Stocks -- --
Debtors: amounts falling due after more
than one year 14 348 72
Debtors: amounts falling due within one
year 14 18,808 36,162
Secured cash deposit restricted for more
than one year 15 136,763 179,424
Cash at bank and in hand 28,765 21,664
--------------------------
184,684 237,322
--------------------------
CREDITORS: amounts falling due within one
year 15 (79,010) (76,118)
--------------------------
NET CURRENT ASSETS/(LIABILITIES) 105,674 161,204
--------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 559,983 680,119
--------------------------
CREDITORS: amounts falling due after more
than one year 16 (235,944) (466,573)
Provisions for liabilities and charges 17 & 6 -- (10,277)
Minority interests--equity (6,563) (1,001)
--non equity -- --
--------------------------
NET ASSETS 317,476 202,268
--------------------------
CAPITAL AND RESERVES
Called-up share capital 18 365,092 365,092
Share premium 20 94,614 94,917
Profit and loss account 20 (142,230) (257,741)
--------------------------
EQUITY SHAREHOLDERS' FUNDS 317,476 202,268
--------------------------
</TABLE>
III-90
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
1995 1996 1997
NOTES (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
NET CASH INFLOW FROM
OPERATING ACTIVITIES (a) 4,244 14,732 11,577
EXCEPTIONAL
REORGANISATION -- -- (835)
----------------------------------------
NET CASH INFLOW FROM
OPERATING ACTIVITIES
(POST EXCEPTIONALS) 4,244 14,732 10,742
----------------------------------------
RETURNS ON INVESTMENTS
AND SERVICING OF
FINANCE
Interest received 2,507 4,256 22,948
Interest paid (4,098) (4,485) (36,413)
----------------------------------------
NET CASH OUTFLOW FROM
RETURNS ON INVESTMENTS
AND SERVICING OF
FINANCE (1,591) (229) (13,465)
----------------------------------------
TAXATION
Group relief received 2,344 3,100 2,305
ACT paid -- (85) (318)
----------------------------------------
TAX PAID 2,344 3,015 1,987
----------------------------------------
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT
Purchase of tangible
fixed assets (63,854) (78,546) (128,569)
Sales of tangible fixed
assets 61 201 405
Purchase of interest in
associated undertakings (31,973) (6,759) --
Purchase of other fixed
asset investments (50) -- (332)
Loans made to others (50) -- --
NET CASH OUTFLOW FROM
CAPITAL EXPENDITURE AND
FINANCIAL INVESTMENT (95,866) (85,104) (128,496)
ACQUISITIONS AND
DISPOSALS
Cash acquired with
subsidiary -- 878 3,339
Acquisition costs -- (2,503) (33,700)
----------------------------------------
NET CASH FLOW FROM
ACQUISITIONS AND
DISPOSALS -- (1,625) (30,361)
----------------------------------------
NET CASH OUTFLOW BEFORE
MANAGEMENT OF LIQUID
RESOURCES AND FINANCING (90,869) (69,211) (159,593)
----------------------------------------
MANAGEMENT OF LIQUID
RESOURCES
Cash on short term
deposit (13,300) 30,402 (12,770)
----------------------------------------
NET CASH
(OUTFLOW)/INFLOW FROM
MANAGEMENT OF LIQUID
RESOURCES (13,300) 30,402 (12,770)
----------------------------------------
FINANCING
Issue of ordinary shares 171,012 43,460 --
Costs of ordinary share
issue (14,890) (2,490) (212)
Capital contribution 1,455 722 --
Minority interest
funding 10 -- --
New secured loans -- 99,000 437,839
Loans to Associates -- (38,862) (3,150)
Other loans received 34,732 -- --
Proceeds received from
finance leases -- 131,599 50,359
Repayment of secured
loans -- (22,165) (273,001)
Placement of restricted
cash deposit -- (136,763) (42,660)
Financing costs -- (8,620) (983)
Repayment of loans (94,000) -- --
Payment of principal
under finance leases (84) (761) (15,700)
----------------------------------------
NET CASH INFLOW FROM
FINANCING 98,235 65,120 152,492
----------------------------------------
(DECREASE)/INCREASE IN
CASH IN THE PERIOD (b) (5,934) 26,311 (19,871)
------------------------------------
</TABLE>
III-91
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
NOTE TO THE STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
(Decrease)/increase in cash in the
period (5,934) 26,311 (19,871)
Cash flow from decrease in liquid
resources 13,300 (30,402) 12,770
Cash outflow from increase in
restricted cash deposit -- 136,763 42,660
Cash inflow from increase in net
debt and leasing 59,268 (199,054) (208,251)
Change in net debt resulting from
cash flows 66,634 (66,382) (172,692)
Non cash movement in debt -- (777) --
New finance leases (4,998) (3,132) (9,302)
Liquid resources acquired with
subsidiary -- 13,502 --
Debt and leasing acquired with
subsidiary -- (12,884) --
----------------------------------------
MOVEMENT IN NET DEBT IN THE PERIOD 61,636 (69,673) (181,994)
NET DEBT AT 1 JANUARY (73,624) (11,988) (81,661)
----------------------------------------
NET DEBT AT 31 DECEMBER (11,988) (81,661) (263,655)
----------------------------------------
(A) RECONCILIATION OF OPERATING LOSS TO NET CASH FLOW FROM
OPERATING ACTIVITIES BEFORE EXCEPTIONALS
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Operating loss (8,239) (14,048) (20,677)
Depreciation of tangible fixed
assets 9,114 20,376 40,632
(Loss)/profit on sale of tangible
fixed assets (21) 199 66
Decrease in stocks 2 -- --
Increase in trade debtors (1,840) (3,108) (8,352)
(Increase)/decrease in other debtors (1,654) 943 2,245
Increase/(decrease) in trade
creditors 4,521 (3,509) (1,894)
Increase in other creditors 2,261 13,879 (443)
Provision against loan 100 -- --
----------------------------------------
Net cash inflow from operating
activities 4,244 14,732 11,577
----------------------------------------
</TABLE>
III-92
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
NOTE TO THE STATEMENT OF CASH FLOWS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER 1997
------------------------------------------------------
OTHER
NONCASH
31/12/96 CASH FLOW MOVEMENTS 31/12/97
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
(B)ANALYSIS OF NET DEBT
NET CASH
Cash at bank and in hand 28,765 (7,101) -- 21,664
Less deposits treated as
liquid resources (350) (12,770) -- (13,120)
------------------------------------------------------
28,415 (19,871) -- 8,544
LIQUID RESOURCES
Deposits included in
cash 350 12,770 -- 13,120
------------------------------------------------------
350 12,770 -- 13,120
RESTRICTED CASH
Placement of restricted
cash deposit 136,763 42,660 -- 179,423
------------------------------------------------------
136,763 42,660 -- 179,423
DEBT
Debt (103,556) (172,687) -- (276,243)
Finance Leases (143,633) (35,564) (9,302) (188,499)
------------------------------------------------------
(247,189) (208,251) (9,302) (464,742)
------------------------------------------------------
NET DEBT (81,661) (172,692) (9,302) (263,655)
------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER 1996
--------------------------------------------------------------------
ACQUISITION
(EXCLUDING OTHER
CASH AND NONCASH
31/12/95 CASH FLOW OVERDRAFTS) MOVEMENTS 31/12/96
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
(B)ANALYSIS OF NET DEBT
NET CASH
Cash at bank and in hand 19,354 9,411 -- -- 28,765
Less deposits treated as
liquid resources (17,250) 16,900 -- -- (350)
--------------------------------------------------------------------
2,104 26,311 -- -- 28,415
LIQUID RESOURCES
Deposits included in
cash 17,250 (30,402) 13,502 -- 350
--------------------------------------------------------------------
17,250 (30,402) 13,502 -- 350
RESTRICTED CASH
Placement of restricted
cash deposit -- 136,763 -- -- 136,763
--------------------------------------------------------------------
-- 136,763 -- -- 136,763
DEBT
Debt (23,132) (68,613) (11,034) (777) (103,556)
Finance Leases (8,210) (130,441) (1,850) (3,132) (143,633)
--------------------------------------------------------------------
(31,342) (199,054) (12,884) (3,909) (247,189)
--------------------------------------------------------------------
NET DEBT (11,988) (66,382) 618 (3,909) (81,661)
--------------------------------------------------------------------
</TABLE>
III-93
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)
NOTE TO THE STATEMENT OF CASH FLOWS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER 1995
------------------------------------------------------
OTHER
NONCASH
31/12/94 CASH FLOW MOVEMENTS 31/12/95
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
(B)ANALYSIS OF NET DEBT
NET CASH
Cash at bank and in hand 11,988 7,366 -- 19,354
Less deposits treated as
liquid resources (3,950) (13,300) -- (17,250)
------------------------------------------------------
8,038 (5,934) -- 2,104
LIQUID RESOURCES
Deposits included in
cash 3,950 13,300 -- 17,250
------------------------------------------------------
3,950 13,300 -- 17,250
RESTRICTED CASH
Placement of restricted
cash deposit -- -- -- --
------------------------------------------------------
-- -- -- --
DEBT
Debt (82,400) 59,268 -- (23,132)
Finance Leases (3,212) -- (4,998) (8,210)
------------------------------------------------------
(85,612) 59,268 (4,998) (31,342)
------------------------------------------------------
NET DEBT (73,624) 66,634 (4,998) (11,988)
------------------------------------------------------
</TABLE>
(C)ACQUISITION OF IMMINUS LIMITED AND ITS PARENT COMPANY FILEGALE LIMITED
On 13 March 1997 the Company acquired 100% of the share capital of Filegale
Ltd and its subsidiary Imminus Ltd. The fair value of Filegale's identifiable
net assets at the date of acquisition are shown in Note 2d. Filegale
contributed (Pounds)1.4 million to the Group's net operating cash flows, paid
(Pounds)0.3 million in respect of tax and used (Pounds)3.2 million for capital
expenditure and financial investment.
(D)RECONCILIATION OF OPERATING PROFIT TO OPERATING CASHFLOW
<TABLE>
<CAPTION>
CONTINUING ACQUIRED TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
OPERATING LOSS (22,959) 2,282 (20,677)
Depreciation 39,218 1,414 40,632
Loss on sale of fixed assets 63 3 66
Increase in trade debtors (7,924) (428) (8,352)
Decrease/(increase) in other debtors 4,035 (1,790) 2,245
(Decrease)/increase in trade
creditors (2,805) 911 (1,894)
Increase in other creditors 504 (947) (443)
-------
NET CASH INFLOW FROM CONTINUING
ACTIVITIES 10,132 -- 10,132
------
NET CASH INFLOW FROM ACQUIRED
ACTIVITIES 1,445 1,445
-------
NET CASH INFLOW FROM OPERATING
ACTIVITIES 11,577
</TABLE>
(E)MAJOR NON-CASH TRANSACTIONS
During the year the group entered in finance lease arrangements in respect of
equipment with a capital value at the inception of the lease of
(Pounds)59,504,000 (1996: (Pounds)162,000,000). The consideration for the
acquisition of Imminus Limited and Filegale Limited comprised bank guaranteed
loan notes. Further details of the acquisition are set out in Note c and Note
2d.
III-94
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
1.PRINCIPAL ACCOUNTING POLICIES
These financial statements have been prepared in accordance with Accounting
Standards currently applicable in the United Kingdom ("UK GAAP"). A summary
of the more important Group accounting policies, which have been applied
consistently by all group and associated companies, is set out below.
BASIS OF ACCOUNTING
These financial statements have been prepared under the historical cost
basis of accounting.
CHANGES IN PRESENTATION OF FINANCIAL INFORMATION
An alternative presentation of the Group Profit and Loss Account (page III-
89) has been adopted. In the opinion of the Directors this format provides
comparability with other companies in the telecommunications sector. The
comparative figures have been restated accordingly.
FRS 1 "Cash flow statements' has been revised in 1996 to change the format
for reporting cash flow. The revised format has been adopted in preparing
these financial statements. The comparative figures have been restated
accordingly.
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts of the parent
company and its subsidiaries for the five financial years ended 31 December
1997. The subsidiaries and associated undertakings prepare their accounts
to coincide with the year end of the parent for consolidation purposes,
apart from Cable Finance Limited, a subsidiary of the Company, which
prepares financial statements for the period to 31 March and summary
financial statements have been prepared for the period ended 31 December
1996 and 31 December 1997.
The results of companies or businesses acquired or disposed of during the
period are dealt with from the effective date when control was acquired or
up to the effective date of loss of control.
On acquisition of a subsidiary, all of the subsidiary's assets and
liabilities that exist at the date of acquisition are recorded at their
fair values reflecting their conditions at that date. All changes to those
assets and liabilities, and the resulting gains or losses that arise after
the Group has gained control of the subsidiary are charged to the post
acquisition profit and loss account. A separate profit and loss account
dealing with the results of the Company only has been presented in
accordance with the Companies Act 1985.
ASSOCIATED UNDERTAKINGS
The Group's share of profits less losses of associated undertakings is
included in the consolidated profit and loss account and the Group's share
of their net assets is included in the consolidated balance sheet.
Where necessary the financial statements of associated undertakings are
adjusted so that their accounting policies are consistent with those of the
Group. Adjustments have been made to the financial statements of BCC, the
accounting policies of which comply, in all material respects, with US
GAAP, in particular, Statement of Financial Accounting No. 51 dealing with
the cable television industry. The Group's accounting policies differ from
those used by BCC with respect to the capitalization of interest in
connection with network build, the capitalization of pre-operating expenses
and the depreciation of network assets.
III-95
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
TANGIBLE FIXED ASSETS
Cost of fixed assets represents acquisition cost, including any incidental
costs of acquisition. Materials, labor and other costs directly
attributable to the construction of the cable network are included in fixed
assets.
Depreciation is provided on all tangible fixed assets at rates calculated
to write off the cost or valuation, less estimated residual value, of each
asset in equal installments over their estimated useful lives as follows:
<TABLE>
<S> <C>
Leasehold premises 50 years
Cables and ducting 40 years
Electronic equipment 2-10 years
Motor vehicles 4 years
Office equipment 3-10 years
Tools and test equipment 3 years
</TABLE>
Freehold land and assets in the course of construction are not depreciated.
FINANCE AND OPERATING LEASES
Rentals payable under operating leases are charged to the profit and loss
account as they fall due.
Assets acquired under finance leases and hire purchase agreements are
capitalized and the capital element of lease rentals is included in
creditors.
Assets held under finance leases are appreciated over the shorter of the
lease terms and the usefulness of equivalent owned assets.
TURNOVER
Turnover comprises the value of sales (excluding VAT) of goods and services
in the normal course of business.
TAXATION
Corporation tax payable is provided on taxable profits at the current rate.
Deferred tax (which arises from differences in the timing of recognition of
items, principally depreciation and interest, in the financial statements
and by the tax authorities) has been calculated using the liability method.
Deferred tax is provided on the timing differences, likely to reverse, at
the rates of tax anticipated to be in force at the time of reversal.
Deferred tax is not provided on timing differences which, in the opinion of
directors, will probably not reverse in the foreseeable future.
PENSION COSTS
The Group operates a number of defined contribution pension schemes and
participates in a defined benefit scheme administered by an associated
company. The assets of these schemes are held separately to those of the
Group in independently administered funds. The pension costs charge
represents contributions payable by the Group in the year.
III-96
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
GOODWILL
Goodwill arising on acquisition is written off against reserves in the
period of acquisition.
ASSOCIATED UNDERTAKINGS
The Group's share of profits less losses of associated undertakings is
included in the consolidated profit and loss account, and the Group's share
of their net assets is included in the consolidated balance sheet.
The financial statements of associated undertakings are adjusted so that
their accounting policies are consistent with those of the Group.
FOREIGN CURRENCIES
Transactions denominated in foreign currencies are translated at the rate
ruling at the time of the transaction. All monetary assets and liabilities
are subsequently translated at the year end rate or the hedged forward
rate. Differences arising on translation are taken to the profit and loss
account in the year in which they arise.
2.BUSINESS
(A) THE COMPANY
The Company was incorporated on 7 April 1989 under the name Truetry
Limited. Its name was changed to General Cable Limited on 6 November 1989.
The Company re-registered as a public limited company on 8 April 1994.
The Company carries on business as a holding company, acquiring long term
investment interests in the United Kingdom cable communications industry
through subsidiary and associated undertakings which develop, own and
operate integrated broadband telecommunications networks in the United
Kingdom delivering voice, data and entertainment services. During the
period covered by these financial statements the Company has reorganized
its investment interests in such a way that, at 31 December in each of the
years 1993 to 1997 the Group held investments in three operating groupings,
The Cable Corporation Limited ("TCC"), The Yorkshire Cable Group Limited
("YCG") and Birmingham Cable Corporation Limited ("BCC") and in 1997 in
Filegale as follows:
<TABLE>
<CAPTION>
TCC YCG BCC FILEGALE
-------------------- -------------------- -------------------- --------------------
CUMULATIVE EQUITY CUMULATIVE EQUITY CUMULATIVE EQUITY CUMULATIVE EQUITY
EQUITY CAPITAL EQUITY CAPITAL EQUITY CAPITAL EQUITY CAPITAL
INVESTED HELD INVESTED HELD INVESTED HELD INVESTED HELD
(Pounds)'000 % (Pounds)'000 % (Pounds)'000 % (Pounds)'000 %
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1997 98,370 83.5 265,558 100.0 78,049 45.0 33,700 100.0
1996 98,370 83.5 265,558 100.0 78,049 45.0 -- --
1995 98,370 83.5 86,544 50.0 78,040 45.0 -- --
1994 98,339 83.1 54,571 50.0 78,040 45.0 -- --
1993 54,545 62.5 29,835 45.5 30,073 26.8 -- --
</TABLE>
III-97
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
(B) THE CABLE CORPORATION LIMITED
In December 1989, the Company acquired a 14.1% interest in the voting share
capital of TCC. By 31 December 1990 this interest had increased to 20.2%
through further subscription for new shares. In the period from 1 January
1991 to 31 December 1995 the Company acquired further ordinary shares in
TCC through subscription for new shares, purchases from other shareholders
and conversion of loans and preference shares. During 1994, further share
issues to third parties resulted in a deemed disposal under FRS2:
Accounting for subsidiary undertakings and gave rise to a profit of
(Pounds)1,559,000 on consolidation. By 31 December 1997 the Company's
interest in the voting share capital of TCC had risen to 83.5%.
In the period covered by these financial statements TCC has been treated as
a subsidiary. Although the Company owned less than 50% of the voting share
capital of TCC, in the period from 1 January 1991 to 28 June 1992, in the
opinion of the directors, it was able to exercise dominant influence. From
29 June 1992, the Company's interest in TCC has been more than 50% of the
voting share capital.
(C) THE YORKSHIRE CABLE GROUP LIMITED
On 6 April 1990, Yorkshire Cable Communications Limited was formed as a
wholly owned subsidiary of the Company. In June 1992, a wholly owned
subsidiary, Bradford Cable Communications Limited, was formed as an
intermediate holding company of Yorkshire Cable Communications Limited. In
August 1992, the Company's interest in the share capital of Bradford Cable
Communications Limited was reduced to 80% through the issue of shares to a
third party.
On 14 August 1992 the Company acquired the entire issued share capital of
Sheffield Cable Communications Limited.
YCG was incorporated on 22 January 1993 as a wholly owned subsidiary of the
Company. In the period from incorporation to 1 August 1993 YCG acquired
100% interests in a number of companies owning franchise rights to develop
cable communications networks in Yorkshire but which had not commenced
operations. On 8 June 1993 YCG acquired the Company's interest in Bradford
Cable Communications Limited and Sheffield Cable Communications Limited.
YCG and its subsidiaries are defined as "the YCG group".
On 2 August 1993, YCG acquired the remaining 20% interest in Bradford Cable
Communications Limited and, on the same date, the Company reduced its
interest in YCG to 45.5% as a result of share issues by YCG to two third
parties. As a result of these share issues the Group's investment in YCG
was transferred in the financial statements from subsidiary to associated
undertakings and the Group's attributable net assets increased. This
constitutes a deemed disposal under FRS2: Accounting for subsidiary
undertakings and has on consolidation given rise to a profit of
(Pounds)12,475,000 which is included in the 1993 profit and loss account.
This profit did not result in an equivalent cash flow to the Company.
The Company entered into arrangements with the other shareholders in YCG,
whereby on 30 December 1994, it acquired additional shares to increase its
holding in YCG from 45.5% to 50%. During 1995 the Company increased its
level of investment in YCG by an amount of (Pounds)31,973,000. The
Company's overall interest in YCG remained at 50%.
III-98
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
On 6 August 1996 the Company acquired the remaining 50% of YCG that it did
now own for consideration comprising the issue of 84,458,000 ordinary
shares, par value (Pounds)1 per share, of General Cable PLC. The
acquisition comprised the purchase of a 25% shareholding in YCG held
directly from STI and the whole of the share capital of General Cable
Holdings Limited, formerly called STI (Yorkshire Cable) Limited, a company
whose sole asset was a further 25% interest in YCG. The fair value of the
total consideration, including fees and costs of approximately (Pounds)2.5
million, associated with the acquisition, amounted to (Pounds)172 million.
The Company has taken advantage of merger relief in accordance with Section
130 of the Companies Act 1985 not to record any premium of the shares
issued and the difference between the fair value of the shares issued and
their nominal value has been taken to merger reserve.
In these financial statements Yorkshire Cable Communications Limited,
Bradford Cable Communications Limited, Sheffield Cable Communications
Limited and YCG have been treated as subsidiary undertakings in the
consolidated financial statements from their date of acquisition up to 1
August 1993. From 2 August 1993 the YCG group has been treated as an
associated undertaking and from 6 August 1996 as a subsidiary undertaking.
(D) FILEGALE LTD
On 13 March the Company acquired 100% of Filegale Ltd and its subsidiary
undertaking Imminus Ltd for a fair value total consideration, including
fees and costs associated with the acquisition of approximately (Pounds)0.7
million, of (Pounds)33.7 million. In accordance with the sale and purchase
agreement (Pounds)7.1 million of the consideration has been provided in the
form of bank guarantee loan notes and up to a further (Pounds)6.4 million
will be payable on the first and second anniversaries of the acquisition.
Payment of the deferred consideration is dependant upon certain conditions
being met. The form of the deferred consideration is cash, bank guarantee
loan notes or General Cable PLC ordinary shares to be issued at the price
of (Pounds)1.90 after twelve months and (Pounds)1.95 after 24 months at the
option of the vendors. Subsequent to the year-end agreement has been
reached between the Company and the shareholders of Filegale Ltd to settle
the outstanding deferred consideration in advance of the terms of the sale
and purchase agreement. At 31 December 1997 (Pounds)13.1 million cash was
held in deposit in order to satisfy the outstanding consideration. The
guaranteed loan notes carry a coupon of six month LIBOR minus 0.35%.
The fair value of the operating assets at the date of acquisition of
Filegale were:
<TABLE>
<S> <C> <C> <C>
BOOK VALUE REVALUATION FAIR VALUE
(Pounds)000'S (Pounds)000'S (Pounds)000'S
Tangible Fixed Assets 3,073 -- 3,073
Intangible Fixed Assets --
capitalized goodwill 1,274 (1,274) --
Current assets/(liabilities)
Debtors 2,448 -- 2,448
Cash 3,339 -- 3,339
Creditors (7,430) -- (7,430)
-------------------------------------------
2,704 (1,274) 1,430
-------------------------------------------
100% thereof 1,430
Consideration satisfied as
above 33,701
-------------------------------------------
Goodwill (32,271)
-------------------------------------------
</TABLE>
III-99
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
The summarized profit and loss account for Imminus for the period from 1
January 1997, the beginning of the subsidiary's financial year, to the date
of acquisition is as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
12 MARCH 1997
(Pounds)'000
<S> <C>
Turnover 3,146
Operating Profit 536
Profit on ordinary activities before taxation 349
Tax on ordinary activities (148)
Profit on ordinary activities after taxation 201
</TABLE>
There were no recognized gains or losses in the period other than those
included in the profit and loss account and therefore no separate statement
of total recognized gains and losses has been presented.
In the opinion of the directors the book value of the net assets represents
their fair value except for capitalized goodwill in Filegale Limited which
has been written off to goodwill in order to align accounting policies with
the Group.
The purchase has been accounted for as an acquisition and included in the
consolidated balance sheet at the year end. The goodwill of (Pounds)32.3
million has been written off against the profit and loss reserve. For the
period since acquisition revenue of (Pounds)13.6 million and operating
profit of (Pounds)2.3 million are included with the consolidated profit and
loss account as acquisitions.
The following proforma information is prepared on the basis that the
acquisition occurred on 1 January 1997. Prior year comparatives have been
prepared on the basis that the acquisition occurred on 1 January 1996.
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
Turnover -- Continuing operations 55,733 97,238
-- Acquisitions 15,380 16,756
Operating loss -- Continuing operations (14,048) (22,960)
-- Acquisitions 3,100 2,819
Loss on ordinary activities before extraordinary
items (28,447) (82,976)
Loss for the financial year (28,447) (82,976)
Loss per ordinary share (9.5p) (22.7p)
</TABLE>
(E) BIRMINGHAM CABLE CORPORATION LIMITED
In December 1989, the Company acquired 16.6% of the ordinary share capital
of BCC. In the period from acquisition to 31 December 1991, as a result of
subscription for new shares by the Group and third parties, the Group's
interest had fallen to 11.0%. In the year ended 31 December 1992 the Group
subscribed for new shares in BCC and its interest increased to 24.7%. In
the year ended 31 December 1994, as a result of a reorganisation of the
Group's holdings and further share subscriptions by the Company and third
parties, the Company's interest had increased to 45%. The Group's holding
in BCC remains at 45% as at 31 December 1997.
III-100
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
In these financial statements BCC has been treated as a trade investment in
the period from acquisition to 2 June 1992, when the Group's interest
increased to 24.7%. From 3 June 1992 to 31 December 1997 BCC has been
treated as an associated undertaking.
3.TURNOVER
<TABLE>
<S> <C> <C> <C>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
Telephone 22,488 40,894 84,059
Television 7,475 14,158 27,569
Other 732 681 220
--------------------------------------
30,695 55,733 111,848
--------------------------------------
</TABLE>
All of the Group's turnover arose in the United Kingdom. No turnover is
included in respect of associated companies.
The acquisition of Imminus during the year had the effect of increasing
turnover for telephony by (Pounds)13.6 million.
4.OPERATING COSTS
<TABLE>
<S> <C> <C> <C>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
Programming expenses 3,321 7,160 16,119
Telephony expenses 10,293 13,141 17,755
Selling, general and administrative
costs 16,206 29,104 58,019
Depreciation and amortization 9,164 20,376 40,632
--------------------------------------
38,984 69,781 132,525
--------------------------------------
</TABLE>
5.EMPLOYEE INFORMATION
The average weekly number of persons (including executive directors)
employed by the Group during the year was:
<TABLE>
<S> <C> <C> <C>
1995 1996 1997
NUMBER NUMBER NUMBER
BY ACTIVITY:
Sales 105 210 453
Engineering 140 302 559
Administration 110 175 312
--------------------
355 687 1,324
--------------------
</TABLE>
III-101
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
<TABLE>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
STAFF COSTS:
Wages and salaries 8,358 15,436 30,115
Social security 781 1,497 2,786
Pension costs 176 448 1,059
--------------------------------------
9,315 17,381 33,960
--------------------------------------
</TABLE>
Directors' emoluments for the three years ended 31 December 1995, 1996 and
1997 amounted to (Pounds)508,000, (Pounds)600,000 and (Pounds)813,000
respectively. The 1995 figure includes (Pounds)70,000 in respect of
compensation for loss of office. During the period, certain directors of
the Company were employed by Compagnie Generale des Eaux S.A., the ultimate
parent undertaking. These directors received no remuneration in respect of
services provided to the Company.
6. EXCEPTIONAL ITEM -- FUNDAMENTAL REORGANISATION
In October 1997 the Group announced a fundamental reorganisation of its
business and a change in operating strategy to maximize the benefit of its
strength in business and residential telecommunications. As a result total
related charges of (Pounds)36.6 million are recorded as exceptional item in
1997. The charge comprises (Pounds)18.3 million for the write down of
certain categories of analogue cable television equipment consistent with
the strategy referred to above, (Pounds)9.6 million for the reorganisation
and restructuring of the businesses and (Pounds)1.5 million relating to the
disposal of properties. The arrangement of a new debt facility referred to
in Note 15 entailed a writedown of capitalized finance charges of
(Pounds)7.2 million relating to the previous debt facilities.
A provision of (Pounds)10.3 million relating to the above is carried at 31
December 1997.
7. INTEREST
<TABLE>
<S> <C> <C> <C>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
(a) Interest receivable and similar
income
Associated undertakings -- 995 225
Other: on deposit at banks 2,626 4,060 17,482
--------------------------------------
2,626 5,055 17,707
--------------------------------------
</TABLE>
<TABLE>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
(b) Interest payable and similar
charges
On bank loans, overdrafts and other
loans repayable after 5 years...... -- 31 180
Repayable within 5 years not by
installment........................ 1,902 4,941 25,432
Finance leases and hire purchases
contracts.......................... 416 3,251 11,095
Former parent and fellow subsidiary
undertakings....................... 1,297 105 --
Preference shares................... -- 301 --
--------------------------------------
3,615 8,629 36,707
--------------------------------------
</TABLE>
III-102
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
8.LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION
Loss on ordinary activities before taxation is stated after
charging/(crediting):
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Depreciation for the year:
Tangible owned fixed assets 8,573 14,484 37,308
Tangible fixed assets held under
finance leases 536 5,887 21,700
Auditors' remuneration 94 176 201
Auditors' non-audit remuneration
-- (Charged to share premium
account in 1997:
(Pounds)59,000; 1996:
(Pounds)207,000; 1995:
(Pounds)634,000) -- -- --
-- (Charged to cost of
investment in 1997:
(Pounds)8,000;
1996: (Pounds)207,000; 1995:
(Pounds)207,000) -- -- --
-- (Financing costs capitalised
in accordance with FRS4 in
1997: (Pounds)80,000; 1996:
(Pounds)128,000; 1995: nil) -- -- --
-- Other 117 103 92
Hire of plant and machinery--
operating leases 172 117 269
Hire of other assets--operating
leases 824 1,964 4,949
Loss on disposal of fixed assets 21 199 66
Provision for bad and doubtful
debts 725 1,132 2,506
Management charges from CGE 272 267 282
Management fees received from
associated undertakings (731) (597) (220)
</TABLE>
During the year ended 31 December 1995 an amount of (Pounds)16,442,000 was
written off against the Share Premium Account arising on the flotation in
April 1995.
9. TAXATION
<TABLE>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
UK Corporation tax at 31.5%
(1996: 33%)
Group relief receivable 3,129 -- 842
Tax of associated undertakings (805) (1,309) (630)
Deferred taxation (480) 319 --
Irrecoverable Advance Corporation
Tax -- (68) --
----------------------------------------
1,844 (1,058) 212
----------------------------------------
The Group has accumulated tax
losses available for offset
against future trading profits
amounting to not less than 67,500 156,000 186,300
----------------------------------------
Associated companies have
accumulated tax losses available
for offset against their future
trading profits amounting to not
less than 56,800 9,750 10,300
----------------------------------------
</TABLE>
Under current UK tax legislation these tax losses can be carried forward
indefinitely and set off against future profits arising from the same
trade.
III-103
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
The Company was a subsidiary (for group relief purposes) of General
Utilities Holdings Limited ("GUHL") until April 1995. Members of this group
were to relieve their taxable losses by surrendering them to other group
companies where capacity to utilize those losses exists. There is an
agreement between members of this group that such losses will be paid for
by the recipient company. Where there is a reasonable certainty that
taxable losses can be relieved the group relief receivable is included in
the taxation charge or credit for the period.
As a consequence of the flotation in April 1995 and the consequent dilution
of GUHL's interest in the Group, such group relief has not been available
since 19 April 1995 between Group companies and the rest of the GUHL group.
10. LOSS FOR THE FINANCIAL YEAR
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
The profit/(loss) for the
financial year is made up as
follows:
Dealt with in the accounts of
the Company 668 3,115 (9,809)
Retained by subsidiary
undertakings (6,054) (18,282) (60,113)
Retained by associated
undertakings (12,749) (13,501) (13,255)
Arising on deemed disposal of
subsidiary undertakings -- -- --
----------------------------------------
(18,135) (28,668) (83,177)
----------------------------------------
</TABLE>
11. LOSS PER SHARE
The calculation of loss per share has been based on: (a) the loss for the
financial year and (b) the weighted average number of shares in issue
during the year.
<TABLE>
<CAPTION>
1995 1996 1997
NUMBER NUMBER NUMBER
<S> <C> <C> <C>
The weighted average number of shares
in
issue was 224,766,000 298,244,000 365,092,000
---------------------------------------
</TABLE>
III-104
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
12.TANGIBLE FIXED ASSETS
<TABLE>
FREEHOLD LONG
LAND AND LEASEHOLD PLANT AND FIXTURES
BUILDINGS PROPERTIES EQUIPMENT AND FITTINGS TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C>
COST
At 1 January 1996 3,777 -- 169,330 7,777 180,884
Reclassifications -- -- (208) 208 --
In respect of new
subsidiary 8,823 3,328 196,110 10,266 218,527
Additions 319 39 78,912 6,083 85,353
Disposals (293) -- -- (217) (510)
At 1 January 1997 12,626 3,367 444,144 24,117 484,254
Reclassifications -- -- (38) 38 --
In respect of new
subsidiary -- 30 2,986 57 3,073
Additions 934 545 118,359 14,219 134,057
Disposals -- -- (87) (868) (955)
-------------------------------------------------------------------
At 31 December 1997 13,560 3,942 565,364 37,563 620,429
-------------------------------------------------------------------
DEPRECIATION
At 1 January 1996 -- -- 25,703 3,061 28,764
Reclassifications -- -- (93) 93 --
In respect of new
subsidiary 401 145 19,609 3,734 23,889
Charge for year 55 25 17,347 2,949 20,376
Written back on disposal (74) -- -- (36) (110)
At 1 January 1997 382 170 62,566 9,801 72,919
Reclassifications -- -- (23) 23 --
Charge for year 156 69 33,915 6,492 40,632
Charge for year--
exceptional -- -- 18,387 -- 18,387
Written back on disposal -- -- (60) (377) (437)
-------------------------------------------------------------------
At 31 December 1997 538 239 114,785 15,939 131,501
-------------------------------------------------------------------
NET BOOK VALUE
At 31 December 1997 13,022 3,703 450,579 21,624 488,928
-------------------------------------------------------------------
At 31 December 1996 12,244 3,197 381,578 14,316 411,335
-------------------------------------------------------------------
</TABLE>
The ability of the Group to recover its investment in fixed assets is
dependent upon the continued successful development of the cable
communications businesses.
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
The net book value of assets held
under finance leases by the Group
was 7,441 130,799 153,356
--------------------------------------
</TABLE>
III-105
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
13.INVESTMENTS
(a) The financial information relating to the Company's subsidiaries is
consolidated in these financial statements for those periods in which they
were treated as subsidiaries and goodwill arising on consolidation is
written off.
The movement in the Group's investment in associated undertakings and other
investments is shown below:
<TABLE>
ASSOCIATED OTHER
UNDERTAKINGS INVESTMENTS TOTAL
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
At 1 January 1996 118,132 44 118,176
Transfer to subsidiary
undertaking arising as a
result of YCG moving from
associated to subsidiary
undertaking (61,701) -- (61,701)
Share of results of associated
undertakings (13,501) -- (13,501)
------------------------------------------
At 1 January 1997 42,930 44 42,974
Additions -- 268 268
Share of results of associated
undertakings (13,255) -- (13,255)
------------------------------------------
At 31 December 1997 29,675 312 29,987
------------------------------------------
</TABLE>
The Company's investments in the Cable Corporation, The Yorkshire Cable
Group and Filegale Ltd were transferred at book value to General Cable
Holdings Ltd, a subsidiary undertaking, on 31 December 1997. Consideration
was financed in the form of an intercompany loan.
ANALYSIS OF SHARE OF PRE-TAX LOSSES OF ASSOCIATED UNDERTAKINGS
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)0'000 (Pounds)0'000
<S> <C> <C> <C>
Birmingham Cable Corporation
Limited (4,662) (8,307) (12,626)
The Yorkshire Cable Group
Limited (7,282) (3,885) --
------------------------------------------
Per consolidated financial
statements (11,944) (12,192) (12,626)
------------------------------------------
</TABLE>
ANALYSIS OF INVESTMENTS IN ASSOCIATED UNDERTAKINGS
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Birmingham Cable
Corporation Limited 51,238 42,930 29,675
The Yorkshire Cable
Group Limited 66,894 -- --
--------------------------------------
Per consolidated
financial statements 118,132 42,930 29,675
--------------------------------------
</TABLE>
III-106
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
b) The Company owns indirectly 100% of the ordinary share capital of the
following principal subsidiary undertakings unless otherwise stated. The
subsidiary companies are incorporated in England and Wales and are all
included in the consolidated financial statements. All have issued shares
of (Pounds)1 unless otherwise stated.
<TABLE>
<C> <S> <C>
SUBSIDIARY TOTAL ISSUED SHARES GROUP %
The Cable Corporation Limited 18,225,389 Ordinary shares of 25p 82.55
1,000,000 B Ordinary shares of 100.0
(Pounds)6.50
2 Special shares of 25p 100.0
Overall 83.45
</TABLE>
<TABLE>
<S> <C>
* Windsor Television Limited Barnsley Cable Communications Limited
* The Cable Corporation Equipment Limited Yorkshire Cable Finance Limited
* Middlesex Cable Limited Doncaster Cable Communications Limited
* Cable Alarms Limited Rotherham Cable Communications Limited
* Windsor Alarms Limited Halifax Cable Communications Limited
* European Business Network Limited Sheffield Cable Communications Limited
* Chariot Collection Services Limited Wakefield Cable Communications Limited
** The Yorkshire Cable Group Limited Mayfair Way Management Limited
Yorkshire Cable Communications Limited Filegale Limited
Bradford Cable Communications Limited Fastrak Limited
Yorkshire Cable Telecom Limited Imminus (Ireland) Limited
Yorkshire Cable Limited
Yorkshire Cable Properties Limited Imminus Limited
General Telecommunications Limited General Cable Group Limited (Ord. 10p)
</TABLE>
------------
*100% owned by the Cable Corporation
**88,950,048 ordinary shares of 10p, 88,950,048 ordinary shares of US$0.01,
88,950,048 deferred shares of 10p
The following subsidiary companies are all owned directly by General Cable
PLC (100% unless otherwise stated):
<TABLE>
<S> <C>
General Cable Communications Limited General Telecommunications International Limited
Middlesex Cable Telecom Limited General Cable Programming Limited
(Ord 10p)
Sheffield Cable Telecom Limited General Cable Programming 1 Limited
Windsor Cable Telecom Limited General Cable Investments Limited
General Communications International Cable Finance Limited (50.0025% holding)
Limited (Jersey) (Ord 50p 2 pref (Pounds)1)
Applied Communications Solutions Limited General Communications Corporation
Limited
General Cable Holdings Limited General Media Communications Limited
</TABLE>
III-107
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
The Company holds the following interest in Birmingham Cable Corporation
Limited, an associated undertaking:
<TABLE>
<CAPTION>
PROPORTION OF NOMINAL
VALUE OF SHARES
COUNTRY OF HELD BY THE
INCORPORATION -------------------------
AND OPERATION TOTAL ISSUED SHARES COMPANY % GROUP %
<S> <C> <C> <C>
England and Wales 51,073,486 Ordinary shares of (Pounds)1 44.95 44.95
</TABLE>
Held by Birmingham Cable Corporation Limited (100% unless otherwise stated):
<TABLE>
<S> <C>
Birmingham Cable Limited Network 21 Limited
Birmingham Cable Finance Limited
(Jersey) Central Cable Communications Limited
West Midlands Credit Limited Central Cable Holdings Limited
Cablephone Limited Central Cable Sales Limited (50%)
Central Cable Limited Century 21 Cable Communications Limited
</TABLE>
14. DEBTORS
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Amounts falling due within one year
Amounts owed by former parent and
fellow subsidiary undertakings 703 8 --
Amounts owed by associated
undertakings 383 495 4,059
Trade debtors 6,362 16,464 29,045
Provision for bad and doubtful
debts (1,140) (2,959) (5,401)
Other debtors 260 2,579 2,211
VAT recoverable 1,447 -- 2,220
Group relief receivable 3,215 115 --
Prepayments and accrued income 1,580 2,106 4,028
----------------------------------------
12,810 18,808 36,162
Amounts falling due after more
than one year
Other debtors 482 348 72
----------------------------------------
13,292 19,156 36,234
----------------------------------------
</TABLE>
15. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Other loans 12,000 538 538
Trade creditors 14,948 33,093 30,825
Other taxation and social security
payable 359 914 3,481
Retentions on civil contracts -- -- 2,591
Obligations under finance leases 38 11,801 13,967
Other creditors 1,841 18,835 2,624
Accruals and deferred income 5,148 13,829 22,092
--------------------------------------
34,334 79,010 76,118
--------------------------------------
</TABLE>
III-108
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
Other loans at 31 December 1997 comprise the following:
On 31 December 1997 the Group completed a (Pounds)500,000,000 underwritten
loan facility.
Proceeds from the first drawing under this loan facility were advanced to
TCC, YCG and Imminus in order to prepay the loan facilities previously
arranged by these companies. As at the date of these prepayments the loan
facilities had been drawn as follows: TCC: (Pounds)120,000,000, YCG:
(Pounds)117,000,000 and Imminus: (Pounds)18,000,000.
As at 31 December 1997 (Pounds)260,000,000 had been drawn down under the
General Cable Holdings Ltd loan facility. The purpose of the facility is to
finance the construction of the networks in the franchise areas, to repay
existing loan facilities, and within certain limits, to repay shareholder
loans.
The facilities are made available as a function of the achievement of
certain minimum levels of operating cashflow. Repayment of amounts drawn
under the facility commence on 31 March 2003. Final repayment is due by 30
June 2007. Interest payable on amounts drawn is dependent upon the
classification of borrowings within the terms of the facility and the
relationship between borrowings and operating cashflow and is based on
LIBOR plus a margin.
In association with the syndicated loan facilities arranged by TCC (1996)
and YCG (1997) the companies entered into finance lease facilities totaling
(Pounds)92,000,000 and (Pounds)206,000,000 respectively.
Under the terms of the (Pounds)500,000,000 loan facility General Cable
Holdings Ltd and its subsidiaries (excluding those which are dormant) act
as guarantors. Security is provided under the finance agreements to the
syndicate banks and other banks providing finance under the lease
arrangements through fixed and floating charges over all the assets of the
Group.
The loan facility includes various restrictive covenants and events of
default. Generally events of default cause the borrowing under the facility
to become repayable on demand. In the event that security provided to the
lessors under TCC's and YCG's leasing arrangements is inadequate, the
Company has the ability to provide acceptable additional security. If such
additional security is not provided, this constitutes an event of default
under the leases. The leasing arrangements may be terminated at either of
the parties' option.
Most network assets with an estimated life of under 10 years are financed
under the finance lease facilities. Loan security is provided by a charge
over the cash realized in connection with the assets financed under the
lease. The lessors have security and protections which include guarantees
and cash backed security of the respective groups' obligations. Total cash
restricted as to use by providing backing for security to the lessors
amounted to (Pounds)179,424,000 at 31 December 1997, which has been
classified as secured cash deposits restricted for more than one year.
There were no outstanding guarantees.
III-109
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
16.CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Bank loans and overdraft -- 86,436 255,000
Other loans 11,132 16,582 20,705
Obligations under finance leases 8,172 131,832 174,533
Retentions on civil contracts -- 706 738
Accruals and deferred income -- 388 15,597
--------------------------------------
19,304 235,944 466,573
--------------------------------------
</TABLE>
Further details of borrowings are included in Note 15.
Other loans include (Pounds)100,000,000 6.0568% preference shares, issued
by a subsidiary and guaranteed by the Company, which have been included
within creditors in the consolidated financial statements in accordance
with FRS 4. (Pounds)90,000,000 has been deposited with the parent company
of the preference shareholder (an authorized banking institution) which
has, in these financial statements, been set against the guaranteed
preference shares under a legal right of offset in accordance with FRS 5.
Interest receivable on the deposit has also been set against the dividend
payable on the preference shares in the profit and loss account.
Other loans also comprise a loan from Telewest Communications plc of
(Pounds)6,000,000 (1996: (Pounds)6,000,000) to The Cable Corporation Ltd,
which bears interest at 1% above LIBOR, is unsecured and has no fixed
repayment term. The Company has a stand by facility of (Pounds)32,000,000
made available by CGE until 19 April 1998 after which time it amortizes
until 19 April 2001. At 31 December 1997 no monies had been drawn.
An analysis of the maturity of bank and other loans is as follows:
BORROWINGS
Loans are repayable (all in installments) as follows:
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Within one year 12,000 538 538
Between one and two years 500 38 38
Between two and five years 10,632 24,718 114
More than five years -- 78,262 275,553
-----------------------------------
23,132 103,556 276,243
-----------------------------------
</TABLE>
III-110
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
LEASES
The minimum future lease payments to which the Group is committed under
finance leases are as follows:
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
In one year or less 38 11,801 13,967
Between one and two years 250 11,493 16,218
Between two and five years 3,107 44,203 56,975
Over five years 4,815 76,136 101,340
-----------------------------------
8,210 143,633 188,500
-----------------------------------
</TABLE>
The Group had annual commitments under non-cancelable operating leases as
follows:
<TABLE>
1995 1996 1997
------------------------- ------------------------- -------------------------
LAND AND LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER BUILDINGS OTHER
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C> <C> <C>
Expiring within one year 111 134 184 355 165 203
Expiring between one and
two years inclusive 86 -- 154 -- 156 246
Expiring between two and
five years inclusive 158 1,625 304 544 172 193
Expiring over five years -- -- 636 -- 1,204 --
-----------------------------------------------------------------------------
355 1,759 1,278 899 1,697 642
-----------------------------------------------------------------------------
</TABLE>
17. PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Deferred taxation 319 -- --
--------------------------------------
</TABLE>
18. SHARE CAPITAL
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Ordinary shares of (Pounds)1 each
Authorized 500,000 500,000 500,000
--------------------------------------
Issued and fully paid 253,374 365,092 365,092
--------------------------------------
</TABLE>
<TABLE>
<CAPTION>
1995 1996 1997
NUMBER NUMBER NUMBER
<S> <C> <C> <C>
The shares issued during the year were 90,014,000 111,718,000 --
--------------------------------------
</TABLE>
III-111
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
On 27 April 1995 the Company's shares were listed on the London Stock
Exchange and American Depositary Shares (each representing five ordinary
shares) were listed on NASDAQ in New York. 90,000,000 shares of (Pounds)1
each were issued at (Pounds)1.90 per share. 14,000 shares were also issued
in the year following the exercise of options.
On 6 August 1996, 84,458,000 Ordinary Shares of (Pounds)1 each were issued
at 201p per share as consideration to acquire YCG. In addition, 26,999,949
shares were issued for cash at a premium of 60p per share. 260,000 shares
were also issued in the year on the exercise of options issued under the
unapproved share option scheme at (Pounds)1 per share.
19.EXECUTIVE SHARE OPTIONS SCHEMES
On 24 March 1994 the Company adopted two executive share options schemes:
the Approved Share Option Scheme (Inland Revenue approved) (the "Approved
Scheme') and the Unapproved Share Option Scheme (the "1994 Unapproved
Scheme') both in substantially the same form, except as set out below.
On 23 April 1996 the Company adopted the 1996 Unapproved Share Option
Scheme (the "1996 Unapproved Scheme') in substantially the same form as the
Approved Share Option Scheme.
The schemes are controlled by the Remuneration Committee ("the Committee)
wholly consisting of Non-Executive Directors.
THE "APPROVED SCHEME' AND THE "1996 UNAPPROVED SCHEME'
All employees and directors of the Group nominated by the Committee are
eligible to participate if they:
(1) are required to devote substantially all of their working time to
Group business,
(2) are not expected to retire within two years from date of grant.
Options granted are exercisable within a period of three to ten years,
Approved Scheme, or three to seven years, 1996 Unapproved Scheme, from the
date of grant and entitle the recipient to acquire Ordinary Shares in the
Company at a price determined at the time the options were granted by the
Committee. The price of the option is not less than the average of the mid-
market value of a General Cable PLC Ordinary Share over the five trading
days immediately preceding the date of grant, or, if the Committee so
decides, the value on the trading day prior to the date of grant (or the
nominal value if greater).
The options may only be exercised if, in respect of the last three annual
accounting periods ended prior to the proposed date of exercise of the
option, General Cable PLC has, on the equity basis, exceeded the industry
average in respect of both total revenue per home live and equivalent TV
penetration as certified by the Committee.
The grant of options to any participant is limited so that the aggregate
price payable on the exercise of all options does not exceed four times the
participant's annual remuneration. Options are normally only exercisable
after three years from the date of grant by a participant who remains an
executive director or employee. Options may, however, be exercised earlier
in special circumstances such as death, disability, injury, redundancy or
retirement or the employing company ceasing to be a member of the Group or
at the discretion of the Committee for any other reason.
III-112
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
THE "APPROVED SCHEME'
557,999 (1996: 356,753; 1995: 544,750) options were granted during the year
and options over 1,339,469 (1996: 806,566; 1995: 544,750) shares were
outstanding as at 31 December 1997.
<TABLE>
<CAPTION>
NUMBER PRICE EXERCISABLE BETWEEN
<S> <C> <C> <C> <C>
The outstanding options are
exercisable as follows:
476,664 (Pounds)1.91 14 Nov 1998 14 Nov 2005
289,881 (Pounds)1.63 14 Aug 1999 14 Aug 2006
14,925 (Pounds)2.01 26 Nov 1999 26 Nov 2006
86,448 (Pounds)1.965 14 Mar 2000 14 Mar 2007
123,176 (Pounds)1.59 24 Jun 2000 24 Jun 2007
348,375 (Pounds)1.00 05 Dec 2000 05 Dec 2007
</TABLE>
No options were exercised during the year.
THE "1996 UNAPPROVED SCHEME'
2,959,596 (1996: 376,726; 1995: nil) options were granted during the year
and options over 3,330,512 (1996: 371,329; 1995; nil) shares were
outstanding as at 31 December 1997.
<TABLE>
<CAPTION>
NUMBER PRICE EXERCISABLE BETWEEN
<S> <C> <C> <C> <C>
The outstanding options are exercisable as
follows:
306,239 (Pounds)1.63 14 Aug 1999 13 Aug 2003
64,677 (Pounds)2.01 26 Nov 1999 25 Nov 2003
790,355 (Pounds)1.965 14 Mar 2000 14 Mar 2007
19,081 (Pounds)1.59 24 Jun 2000 24 Jun 2007
2,150,160 (Pounds)1.00 05 Dec 2000 05 Dec 2007
</TABLE>
No options were exercised during the year.
THE "1994 UNAPPROVED SCHEME'
Other than set out below, the terms of the Approved scheme apply to the
1994 Unapproved Scheme.
Options granted are exercisable within a period of seven years less seven
days from the date of grant and entitle the recipient to acquire Ordinary
Shares in the Company at a price determined at the time the options were
granted by the Committee. The price of the option is not less than the mid-
market value of a General Cable PLC Ordinary Share on the trading day
immediately preceding the date of grant, or the nominal value if greater.
No options were granted during the year (1996: nil; 1995: nil) and options
over 1,001,000 shares were outstanding as at 31 December 1997 (1996:
1,001,000; 1995: 1,311,000).
The outstanding options are exercisable up to 18 April 2001 at (Pounds)1
per share. No options were exercised during the year.
III-113
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
20.RESERVES
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Profit and loss account:
At 1 January (77,516) (95,066) (142,230)
Retained loss (18,135) (28,668) (83,177)
Capital contribution from parent
undertaking 691 30 --
Goodwill written off (106) (18,526) (32,334)
------------------------------------
At 31 December (95,066) (142,230) (257,741)
------------------------------------
Share premium:
At 1 January 17,352 81,910 94,614
Share issue in year 81,000 16,200 --
Release of provision for expense
of share issue -- -- 303
Flotation costs written off (16,442) (3,496) --
------------------------------------
At 31 December 81,910 94,614 94,917
------------------------------------
Merger Reserve
At 1 January -- -- --
Share issue in year -- 85,302 --
Goodwill written off -- (85,302) --
------------------------------------
At 31 December -- -- --
------------------------------------
</TABLE>
The merger reserve in the Group was created on the issue of shares in the
Company to acquire YCG. The Company has recorded the shares issued and the
investment in YCG at fair value with the premium being credited to a merger
reserve.
The cumulative amount of goodwill charged to reserves as at 31 December
1997 in respect of acquisitions amounted to (Pounds)194,324,000 (1996:
(Pounds)161,990,000, 1995: (Pounds)58,162,000).
21. PENSION COMMITMENTS
Certain Group employees participate in a defined contribution pension
scheme. The assets of the scheme are held separately from those of the
Group in an independently administered fund. The pension costs charge
represents contributions payable by the Group to the fund and amounted to
(Pounds)944,000 (1996: (Pounds)382,000, 1995: (Pounds)142,810).
Contributions payable at the year end amounted to (Pounds)8,000 (1996
(Pounds)nil, 1995 (Pounds)nil).
Certain employees of the Company were until 31 December 1997 members of the
Energy and Technical Services PLC (ETS) (a subsidiary of CGE) pension
scheme which is of the defined benefit type with assets held in a separate
trustee administered fund.
The pension cost relating to the scheme is assessed in accordance with the
advice of an independent qualified actuary using the projected unit method.
The latest actuarial valuation of the scheme was at 1 April 1996. The
assumptions that have the most significant effect on the valuation are
those relating to the rate of return on investments, rate of increase in
earnings and
III-114
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
the rate of increase in pension. It is assumed that the investment return
would be 9% per annum, earnings increases would be 7% per annum and that
pension increases would increase at the rate of 4% per annum.
At the date of the latest actuarial valuation, the market value of the
assets of the scheme was (Pounds)32,160,000 and the actuarial value of the
assets was sufficient to cover 102% of the benefits which had accrued to
members, after allowing for expected future increases in earnings.
There were no provisions or prepayments in respect of pension contributions
at 31 December 1997, 1996 or 1995.
On 1 January 1998 the General Cable Group Personal Pension Plan was
established. This is a defined contribution scheme, the assets of which are
held in an independently administered fund. Former members of the ETS
scheme have transferred to the new group scheme with effect from 1 January
1998 in addition to certain other group employees.
22. CONTINGENT LIABILITIES
The Company provided surety for leasing obligations of (Pounds)1,308,000
(1996: (Pounds)1,308,000, 1995: (Pounds)1,308,000) of TCC.
23. CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Capital expenditure which has been
contracted for but not provided
for in the financial statements 24,306 21,978 11,078
</TABLE>
24. RELATED PARTY TRANSACTIONS
YCG
In August 1993 the Company entered into a support agreement with YCG under
which the Company provides management advice and support to YCG for which
it is entitled to an annual fee of 1% of YCG's gross revenues, subject to a
minimum of (Pounds)500,000. In the period ended 6 August 1996, the Company
received (Pounds)424,000 (1995: (Pounds)500,000) under this agreement.
BCC
In April 1994 the Company entered into a support agreement with BCC under
which the Company provides financial and management advice to BCC for which
it is entitled to an annual fee representing a percentage of the
consolidated gross revenue of BCC and its subsidiaries. In the year ended
31 December 1997, the Company received (Pounds)220,000 (1996:
(Pounds)173,000) under this agreement. There was an outstanding balance of
(Pounds)627,893 (1996: (Pounds)495,000) at the year end.
During 1997 a loan of (Pounds)3,150,000 was made to BCC which was
outstanding at 31 December 1997. A further loan of (Pounds)3,150,000 was
made by the Company on 16 March 1998.
CGE
In March 1995, the Company entered into a Relationship Agreement with CGE
which provides for a geographical restriction on the fixed
telecommunications network interests of CGE and the undertakings which it
controls, to restrict CGE from carrying on specific activities in the
United
III-115
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
Kingdom. The restrictions apply so long as CGE owns 20% or more of the
voting rights of the Company.
The Relationship Agreement also provides that CGE will provide the Company
with strategic advice and guidance in the management of the Company,
assistance in the analysis of business plans, development projects and
their financial implications and specific assistance in negotiations on
telecommunications matters, for which the Company will pay CGE an annual
fee of (Pounds)260,000 (indexed-linked to the UK retail price index). In
the year ended 31 December 1997, the Company paid (Pounds)282,000
(1996:(Pounds)267,525) under this agreement. There was no outstanding
balance at the year end.
GENERAL UTILITIES
The Company holds a lease of its principal place of business from General
Utilities PLC (a subsidiary of CGE) of 37 Old Queen Street, London SW1 for
a term of 15 years which commenced on 10 June 1994. The Company is not
entitled to assign the lease or sublet the property, but the lease is
excluded by an order of the Court from the security of tenure generally
afforded to business tenants by statute and both General Utilities PLC and
the Company are entitled to terminate the lease at the expiration of each
five years of the term. In the year ended 31 December 1997 the Company paid
rental and service charges of (Pounds)128,407 (1996: (Pounds)128,049) and
there was no outstanding balance at the year end.
25. US GAAP SUMMARY FINANCIAL INFORMATION
The Group prepares its accounts in accordance with generally accepted
accounting principles (GAAP) applicable in the UK which differ in certain
significant respects from those applicable in the US. The principal
differences between the information prepared on the basis of US GAAP and
the Group's normal accounting policies are to defer network development
expenditure, to capitalise interest costs and to capitalise and amortise
goodwill. These differences, which have a significant effect on net income
and the composition of shareholders' equity, are described below and are
shown in the summary financial statements which follow.
CABLE COMMUNICATIONS INDUSTRY ACCOUNTING
In accordance with the requirements of US GAAP generally, and SFAS 51
("Financial Reporting by Cable Television Companies") specifically, the
directors have identified three stages of the development of each portion
of a franchise for the purpose of determining the accounting treatment in
respect of network development expenditure and related depreciation. The
three stages of development of each franchise portion are defined as
follows:
. development stage: the period from inception to the date of receipt
of the first subscriber revenue;
. prematurity stage: the period from the date of receipt of the first
subscriber revenue to the date of completion of the major phase of
construction; and
. mature stage: the period from completion of the major phase of
construction.
NETWORK DEVELOPMENT EXPENDITURE
During the development and prematurity stages, materials, labour and
construction overheads are capitalised within the cost of the asset
concerned. Other expenditure directly attributable to the
III-116
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
construction of the network is also capitalised under US GAAP. Marketing
and customer service expenditure and other period costs are charged to the
profit and loss account as incurred.
DEPRECIATION
Depreciation of network development expenditure is treated as follows:
. development stage: no depreciation is charged in respect of network
development expenditure in respect of franchise portions in the
development stage;
. prematurity stage: in accordance with SFAS 51, depreciation expense
of network development expenditure is determined by abating, on the
basis of subscriber numbers, the depreciation expected on completion
of the prematurity stage; and
. mature stage: a full period's depreciation is charged at rates
calculated to write off the cost, less estimated residual value, of
such assets in equal installments over their estimated useful life.
INTEREST CAPITALISATION
Interest relating to network system assets in the course of construction is
included in the cost of the asset concerned.
GOODWILL
Under US GAAP goodwill is capitalised in the balance sheet and written off
to income over its estimated useful life of 40 years.
DEFERRED TAXATION
Under US GAAP, in accordance with SFAS 109 ("Accounting for Income Taxes")
full provision is made for all temporary differences. Deferred tax assets
are recognised for temporary differences and tax losses, reduced by a
valuation allowance if it is considered in the opinion of the directors
more likely than not that some portion or all of the benefit will not be
recognised.
EXPENSE RECOGNITION
Under US GAAP, in accordance with SFAS 5 and EITF 94-3, no accrual of
expenses is recognised before the events giving rise to a liability have
occurred.
DERIVATIVES AND OTHER FINANCIAL INSTRUMENTS
In January 1997, the Securities and Exchange Commission adopted final rules
requiring companies to disclose additional quantitative and qualitative
information about the market risk of derivative and other financial
instruments and accounting policies for derivatives. Disclosure is required
in financial statements for periods ending after 15 June 1997.
The Group has entered into interest rate swap agreements which are used to
manage interest rate risk on the Group's borrowings. These are accounted
for using the accruals method. Net income or expense resulting from the
differential between exchanging floating and fixed rate interest payments
is recorded on an accruals basis.
III-117
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
SHARE BASED COMPENSATION
SFAS 123 encourages, but does not require, companies to record compensation
cost for share based employee compensation plans at fair value. The Group
has continued to account for share-based compensation using the intrinsic
value method prescribed in Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations.
Accordingly, compensation cost for share options is measured as the excess,
if any, of the quoted market price of the Company's shares at the date of
the grant over the amount an employee must pay to acquire the shares. Had
the Group accounted for share based compensation under SFAS 123
compensation cost recognized in the income statement for the year ended 31
December 1997 would be (Pounds)0.6 million and the revised loss per share
would have been 17.8p.
The fair value of each option grant was estimated on the date of grant
using the Black-Scholes option-pricing model using a weighted-average risk-
free interest rate based on the estimated gilt rates on the date of grant
with a maturity equal to the expected life of the option, and an expected
volatility of 40 per cent. The Company does not expect to pay dividends on
its ordinary shares at any time during the expected life of the option.
<TABLE>
<CAPTION>
1997 1996 1995
<S> <C> <C> <C>
1996 UNAPPROVED SCHEME
Weighted average fair value of options granted during the
year 58.5p 78.0p --
-----------------
APPROVED SCHEME
Weighted average fair value of options granted during the
year 59.3p 75.8p 87.0p
-----------------
</TABLE>
RECENT PRONOUNCEMENTS
EARNINGS PER SHARE--In February 1997, the FASB issued SFAS No. 128
"Earnings Per Share', which is effective for financial statements issued
for periods ending after 15 December 1997. The new standard requires
changes in the computation, presentation and disclosure requirements for
earnings per share calculated under US GAAP. The Company has adopted the
new standard.
ENVIRONMENTAL REMEDIATION LIABILITIES--In October 1995, The American
Institute of Certified Public Accountants issued Statement of Position
(SOP) 96-1, "Environmental Remediation Liabilities', which is effective for
financial statements issued for periods beginning after 15 December 1996.
This standard gives authoritative guidance on specific accounting issues
that are present in the recognition, measurement and disclosure of
environmental remediation liabilities under US GAAP. Application of the SOP
has not had a material effect on the reported financial position, results
of operations or cash flows of the Company.
III-118
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
US GAAP SUMMARY FINANCIAL INFORMATION
<TABLE>
<CAPTION>
1995 1996 1997
RECONCILIATION WITH UK GAAP FINANCIAL STATEMENTS (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
OPERATING LOSS IN ACCORDANCE WITH UK GAAP (20,183) (26,240) (33,303)
US GAAP adjustments:
Amortization of goodwill (1,154) (3,636) (4,444)
Cable communications industry accounting 1,555 683 149
Share of losses of related parties 11,944 12,192 12,626
Reorganisation costs in accordance with UK GAAP -- -- (36,648)
US GAAP adjustments to reorganisation costs -- -- 6,013
----------------------------------------
OPERATING LOSS IN ACCORDANCE WITH US GAAP (7,838) (17,001) (55,607)
----------------------------------------
Share of losses of related parties (11,912) (12,372) (12,868)
----------------------------------------
Net interest in accordance with UK GAAP (989) (3,574) (19,000)
Interest capitalized -- 1,168 19,074
----------------------------------------
Net interest in accordance with US GAAP (989) (2,406) 74
----------------------------------------
LOSS BEFORE TAX IN ACCORDANCE WITH US GAAP (20,739) (31,779) (68,401)
----------------------------------------
Income tax benefit 1,844 1,058 212
US GAAP adjustment 409 284 (434)
----------------------------------------
Taxation in accordance with US GAAP 2,253 (774) (222)
----------------------------------------
Minority interests in accordance with UK GAAP 1,193 2,204 5,562
Minority share of US GAAP adjustments (550) (707) (1,149)
----------------------------------------
Minority interests in accordance with US GAAP 594 1,497 4,413
----------------------------------------
NET LOSS IN ACCORDANCE WITH US GAAP (17,843) (31,056) (64,210)
----------------------------------------
BASIC AND DILUTED LOSS PER SHARE IN ACCORDANCE
WITH US GAAP (7.9)p (10.4)p (17.6)p
----------------------------------------
</TABLE>
III-119
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
The number of shares used to calculate loss per share under US GAAP
corresponds with the number of shares used under UK GAAP as stated in note
11. Share options as described in note 19 have not been included in the
loss per share computation as such inclusion would have an anti-dilutive
effect in each of the years.
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
RECONCILIATION WITH UK GAAP
FINANCIAL STATEMENTS
Shareholders' equity in accordance
with UK GAAP 240,218 317,476 202,268
Goodwill 42,844 138,476 166,365
Cable communications industry
accounting
-- Property, plant and equipment,
net 9,290 17,759 47,843
-- Securities of related parties 5,905 3,447 2,566
-- Minority interests (1,719) (2,426) (3,578)
Accounting for provisions -- -- 7,057
Accounting for deferred tax -- 316 511
-----------------------------------
Shareholders' equity in accordance
with US GAAP 296,538 475,048 423,032
-----------------------------------
</TABLE>
ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
SEGMENTAL ANALYSIS
No segmental analysis of assets is given as the Group's network serves each
of its business segments.
TAXATION
A reconciliation of the difference between the taxation credit/(debit) at
the UK statutory rates and the Group's actual taxation credit/(debit) is as
follows:
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Expected tax credit at UK
statutory rates 6,987 9,839 28,019
Less: effect of accounting losses
not recognized for tax purposes (6,987) (9,839) (28,019)
Add: group relief receivable and
other items 1,844 (1,058) (212)
----------------------------------------
Taxation in accordance with UK
GAAP 1,844 (1,058) 212
----------------------------------------
</TABLE>
III-120
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
INTANGIBLE FIXED ASSETS
Under US GAAP, goodwill is capitalised and written off to income over its
estimated useful life of 40 years. The movements on goodwill are as
follows:
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
At 1 January 44,607 42,844 138,476
Capitalised during year 136 99,268 32,333
Amortised during year (1,154) (3,636) (4,444)
Other movements (745) -- --
----------------------------------------
At 31 December 42,844 138,476 166,365
----------------------------------------
</TABLE>
DEFERRED TAX
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds),000 (Pounds)'000
<S> <C> <C> <C>
Excess of tax allowances over
depreciation 16,855 47,322 33,581
Short term timing differences (863) (58) (360)
Tax effect of losses carried
forward (22,275) (45,640) (43,394)
Valuation allowance 6,602 -- 10,173
----------------------------------------
Deferred tax per financial
statements in accordance with UK
GAAP (319) 1,624 --
----------------------------------------
</TABLE>
A valuation allowance has been applied to the deferred tax asset as the
realisation of the asset in the foreseeable future is uncertain.
LOANS
In the opinion of the directors the fair value of the loans disclosed in
notes 15 and 16 corresponds with the historical cost as the loans are not
actively traded and were negotiated at rates of interest which vary with
market rates.
LEASE OBLIGATIONS
Future minimum lease payments including interest are as follows:
<TABLE>
<CAPTION>
AS AT DECEMBER 31, 1997
-------------------------
CAPITAL OPERATING
LEASES LEASES
(Pounds)'000 (Pounds)'000
<S> <C> <C>
1998 28,387 648
1999 28,560 431
2000 27,025 395
2001 29,667 541
2002 and thereafter 147,371 852
-------------------------
Minimum lease payment 261,010 2,867
-----
Less: amounts representing interest 72,510
-------
188,500
-------
</TABLE>
III-121
<PAGE>
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
The obligations under capital leases represent the total present value of
future minimum lease payments discounted at the interest rates inherent in
each lease.
CASHFLOWS
Under UK GAAP returns on investments and servicing of finance and taxation
are shown as a separate activity in the consolidated statements of
cashflows. Under US GAAP these amounts would be included in cashflows from
operating activities.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of the
financial statements and reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
FINANCIAL INSTRUMENTS
With the exception of the interest rate swaps (see above), the Group has
not used derivative financial instruments during the three years ended 31
December 1997. In addition the Group has no off balance sheet risk of
accounting loss nor does it believe it is exposed to any material
concentrations of credit risk.
The following table summarizes the fair value of the interest rate swap
agreements. The estimated fair values of these agreements are based on
quotations received from independent, third party financial institutions
and represent the net amount receivable or payable to terminate the
position, taking into consideration market rates and counterparty credit
risk.
<TABLE>
AT 31 DECEMBER 1997 AT 31 DECEMBER 1996
--------------------------- ---------------------------
CARRYING CARRYING
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Interest Rate Swap
Agreements -- 6,910 -- 272
-------------------------------------------------------
</TABLE>
The estimated fair values of these agreements are based on quotations
received from independent, third party financial institutions and represent
the net amount receivable or payable to terminate the position, taking into
consideration market rates and counterparty credit risk.
III-122
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF BIRMINGHAM CABLE WITH A
RECONCILIATION OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- --------------------------------------------------------------------------------
III-123
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
To the Board of Directors and Shareholders of Birmingham Cable Corporation
Limited
We have examined the accompanying audited consolidated balance sheets of
Birmingham Cable Corporation Limited ("BCC") (a United Kingdom corporation in
the prematurity stage) and subsidiaries (together "the BCC Group") as of
December 31, 1995, 1996 and 1997, and the related consolidated profit and loss
accounts, reconciliations of movements in shareholders' funds and cash flows
for each of the three years in the period ended December 31, 1997 set out on
pages III-125 to III-143. These financial statements are the responsibility of
BCC's management. Our responsibility is to express an opinion on these
financial statements based on the audits performed.
The audits were conducted in accordance with generally accepted auditing
standards in the United Kingdom, which are substantially the same as auditing
standards generally accepted in the United States. Those standards require that
audits are planned and performed to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that the
audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of BCC and
subsidiaries as of December 31, 1995, 1996 and 1997, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997 in conformity with generally accepted accounting principles
in the United Kingdom.
The consolidated financial statements were prepared in accordance with the
accounting policies set out in note 1 and comply with those applied by General
Cable PLC ("General Cable") which differ in certain material respects from
United States generally accepted accounting principles as set out in note 22.
DELOITTE & TOUCHE
Chartered Accountants
Birmingham
England
15 June 1998
III-124
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
NOTES 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Turnover 2 39,004 52,330 67,039
Costs of sales (26,855) (33,054) (50,750)
----------------------------------------
Gross profit 12,149 19,276 16,289
Administrative expenses (22,039) (29,074) (30,116)
----------------------------------------
Operating loss (9,890) (9,798) (13,827)
Interest receivable and
similar income 4 24,906 27,680 19,776
Interest payable and similar
charges 5 (25,388) (33,561) (34,036)
----------------------------------------
Loss on ordinary activities
before taxation 6 (10,372) (15,679) (28,087)
Tax on loss on ordinary
activities 7 (2,452) (2,802) (1,402)
----------------------------------------
Loss on ordinary activities
after taxation, being loss
for the financial year (12,824) (18,481) (29,489)
Retained loss, beginning of
year (36,659) (49,483) (67,964)
----------------------------------------
Retained loss, end of year (49,483) (67,964) (97,453)
----------------------------------------
</TABLE>
The loss for each financial year includes all recognized gains and losses.
There is no difference between the loss on ordinary activities before and after
taxation for each financial year, and their historical cost equivalents.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Loss for the financial year (12,824) (18,481) (29,489)
Opening shareholders' funds 126,813 113,989 95,508
----------------------------------------
Closing shareholders' funds 113,989 95,508 66,019
----------------------------------------
</TABLE>
III-125
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AS AT 31 DECEMBER
----------------------------------------
1995 1996 1997
NOTES (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets 8 177,591 222,896 240,389
Intangible assets 9 2,570 2,131 1,913
----------------------------------------
180,161 225,027 242,302
CURRENT ASSETS
Debtors: amounts falling due
within one year 11 70,056 63,955 14,849
Debtors: amounts falling due
after more than one year 11 63,000 22,000 --
Cash at bank and in hand 6,523 7,690 2,254
----------------------------------------
139,579 93,645 17,103
CREDITORS: amounts falling due
within one year 12 (21,540) (36,074) (27,972)
----------------------------------------
Net current
(liabilities)/assets 118,039 57,571 (10,869)
----------------------------------------
Total assets less current
liabilities 298,200 282,598 231,433
Creditors: amounts falling due
after more than one year
Guaranteed redeemable
preference shares in
subsidiaries 13 (174,420) (174,561) --
Other creditors 14 (9,791) (12,529) (165,414)
----------------------------------------
NET ASSETS 113,989 95,508 66,019
----------------------------------------
Capital and reserves
Called-up share capital 15 51,073 51,073 51,073
Share premium account 16 112,399 112,399 112,399
Profit and loss account (49,483) (67,964) (97,453)
----------------------------------------
TOTAL CAPITAL EMPLOYED 113,989 95,508 66,019
----------------------------------------
</TABLE>
III-126
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
NOTES 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES 18a (466) 22,906 6,071
----------------------------------------
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 24,906 28,498 26,559
Interest paid (14,951) (18,822) (30,200)
Interest paid on finance
leases (627) (1,185) (1,341)
Dividends paid on preference
shares (9,810) (11,206) (11,206)
----------------------------------------
NET CASH INFLOW/(OUTFLOW) FROM
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (482) (2,715) (16,188)
----------------------------------------
TAXATION
Advance corporation tax paid
on preference shares (2,452) (2,802) (2,802)
----------------------------------------
TAX PAID (2,452) (2,802) (2,802)
----------------------------------------
INVESTING ACTIVITIES
Draw down of junior
subordinated debt -- -- 7,000
Cash on restricted long term
deposit (120,000) 45,000 75,000
Purchase of intangible fixed
assets (2,977) (991) (562)
Purchase of tangible fixed
assets (49,299) (56,898) (37,022)
Sale of tangible fixed assets 1,424 291 382
----------------------------------------
NET CASH OUTFLOW FROM
INVESTING ACTIVITIES (170,852) (12,598) 44,798
----------------------------------------
NET CASH (OUTFLOW)/INFLOW
BEFORE FINANCING (174,252) 4,791 31,879
----------------------------------------
FINANCING
Payment of principal under
finance leases (220) (1,162) (2,315)
Draw down of bank loan -- -- 140,000
Long term debt 174,420 -- (175,000)
----------------------------------------
NET CASH INFLOW FROM FINANCING 18b 174,200 (1,162) (37,315)
----------------------------------------
INCREASE/(DECREASE) IN CASH
AND CASH EQUIVALENTS 18c (52) 3,629 (5,436)
----------------------------------------
</TABLE>
III-127
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
1. ACCOUNTING POLICIES
A summary of the principal accounting policies, all of which have been
applied consistently in preparing the financial information presented in
this report, is set out below.
BASIS OF ACCOUNTING
The accounts have been prepared under the historical cost convention and in
accordance with applicable accounting standards.
As stated in note 8 of this report, the ability of the BCC Group to recover
its investment in fixed assets is dependent upon the continued successful
development of the cable communications businesses. In particular, the
provisions of Statement of Financial Accounting Standard No 121 "Accounting
for the impairment of Long-Lived Assets and for Long-Lived Assets to be
disposed of" and concluded that no material adjustment to the financial
statements is required.
BASIS OF CONSOLIDATION
The BCC Group accounts consolidate the accounts of BCC and its subsidiary
undertakings.
TANGIBLE FIXED ASSETS
Tangible fixed assets are shown at original historic cost less accumulated
depreciation. Own labour, including attributable overheads, is capitalized
at cost in respect of network construction.
Depreciation is provided on all tangible fixed assets at rates calculated
to write-off the cost, less estimated residual value, of each asset over
its estimated useful life as follows:
<TABLE>
----------------------------------------------------------------------
<S> <C>
Network
Civils 40 years straight-line
Fiber 15 years straight-line
Construction management 15 years straight-line
Other
Subscriber related equipment 6-10 years straight-line
Freehold buildings 40 years straight-line
Short leasehold over the unexpired period of the lease
Plant and machinery 5-15 years straight-line
Computers 4 years straight-line
----------------------------------------------------------------------
</TABLE>
INTANGIBLE FIXED ASSETS
The group has deferred costs attributable to the arrangement of the funding
referred to in note 13. These costs which are classified within intangible
fixed assets are amortized over the period in which the funding is in
place.
TAXATION
Corporation tax payable is provided on taxable profits at the current rate.
Deferred taxation is provided under the liability method and provision is
made for all timing differences which are expected to reverse at the rate
of tax expected to be in force at the time of reversal.
III-128
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
TURNOVER
Turnover comprises the value of sales (excluding VAT) of services in the
normal course of business.
PENSIONS
The BCC Group contributes to individual pension plans on a defined
contribution basis in respect of a number of its full-time employees,
whereby payments are made to insurance companies independent from the
finances of the BCC Group. Contributions are charged against profits as and
when incurred.
LEASES
The BCC Group enters into finance leases and operating leases.
Assets held under finance leases are initially reported at the fair value
of the asset with an equivalent liability categorized under creditors due
within or after one year as appropriate. The asset is depreciated over the
shorter of the lease term and its useful economic life. Finance charges are
allocated to accounting periods over the period of the lease to produce a
constant rate of charge on the outstanding balance. Rentals are apportioned
between finance charges and reduction of the liability, and allocated to
cost of sales and other operating administrative expenses as appropriate.
Rentals under operating leases are charged on a straight-line basis over
the lease term, even if the payments are not made on such a basis.
FINANCE COSTS
Finance costs of debt and non-equity shares are recognized in the profit
and loss account over the term of the investment at a constant rate on the
carrying amount.
DEBT
Debt is initially stated at the amount of the net proceeds after deduction
of issue costs. The carrying amount is recovered by the finance cost in
respect of the accounting period and reduced by payments made in the
period.
III-129
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
2. TURNOVER
Contributions to BCC Group turnover, cost of sales and gross profit, which
were derived solely from its principal activities in the United Kingdom,
were as follows:
<TABLE>
-----------------------------------------------------------------------------
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
TURNOVER
Television 16,531 21,260 27,093
Residential telephony 17,706 24,066 30,483
Business telephony
--line usage 3,064 4,420 6,066
--line rental and other
services 1,703 2,584 3,397
----------------------------------------
39,004 52,330 67,039
----------------------------------------
COST OF SALES
Television 8,916 13,434 18,081
Residential telephony 5,228 4,980 7,916
Business telephony
--line usage 1,860 1,969 2,613
--line rental and other
services 354 281 332
Network depreciation 10,497 12,390 21,808
----------------------------------------
26,855 33,054 50,750
----------------------------------------
GROSS PROFIT
Television....................... 7,615 7,826 9,012
Residential telephony............ 12,478 19,086 22,567
Business telephony
--line usage................... 1,204 2,451 3,453
--line rental and other
services...................... 1,349 2,303 3,064
----------------------------------------
Gross margin..................... 22,646 31,666 38,096
Network depreciation............. (10,497) (12,390) (21,808)
----------------------------------------
12,149 19,276 16,289
----------------------------------------
-----------------------------------------------------------------------------
</TABLE>
III-130
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
3. EMPLOYEE INFORMATION
The average weekly number of persons (including executive directors)
employed by the BCC Group during the year was:
<TABLE>
--------------------------------------------------------------
<CAPTION>
1995 1996 1997
NUMBER NUMBER NUMBER
<S> <C> <C> <C>
BY ACTIVITY:
Administration 192 212 242
Sales 143 169 197
Construction 70 69 61
Operations 166 189 178
--------------------------------------
571 639 678
--------------------------------------
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------
<S> <C> <C> <C>
STAFF COSTS:
Wages and salaries 11,006 12,799 13,791
Social security costs 1,227 1,461 1,713
Other pension costs 229 287 411
--------------------------------------
12,462 14,547 15,915
--------------------------------------
--------------------------------------------------------------
</TABLE>
4. INTEREST RECEIVABLE AND SIMILAR INCOME
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Bank interest receivable 9,045 6,635 2,496
Interest on interest rate swaps 15,861 21,045 17,280
--------------------------------------
24,906 27,680 19,776
--------------------------------------
</TABLE>
------------------------------------------------------------------------
5. INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------
<S> <C> <C> <C>
On bank loans and overdrafts:
--repayable within five years, not
by instalments 9 -- --
On all other loans 1,095 1,867 7,275
On finance leases 627 1,185 1,341
Other similar charges -- -- 1,152
Convertible debt 9,810 11,347 5,603
Interest rate swaps 13,847 19,162 18,665
--------------------------------------
25,388 33,561 34,036
--------------------------------------
</TABLE>
---------------------------------------------------------------------------
III-131
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
6. LOSS ON ORDINARY ACTIVITIES BEFORE AND AFTER TAXATION
Loss on ordinary activities before and after taxation is stated after
charging:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Depreciation for the year
--Tangible owned fixed assets 11,387 15,348 21,034
--Tangible fixed assets held under
finance leases 1,038 1,740 2,223
--Intangible fixed assets 407 708 780
Directors' remuneration 59 59 59
Auditors' remuneration 37 37 37
Auditors' non audit remuneration 11 6 11
Hire of plant and machinery--
operating leases 843 269 17
Hire of other assets--operating
leases 104 158 152
-----------------------------------------------------------------------------
</TABLE>
7. TAXATION
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Irrecoverable ACT 2,452 2,802 1,402
- --------------------------------------------------------------------------------
</TABLE>
The irrecoverable ACT arises on the dividend payment on the preference
shares issued by Birmingham Cable Finance Limited.
The BCC Group has estimated accumulated gross tax losses available for
offset against future trading profits of not less than (Pounds)10,300,000
(1996--(Pounds)9,750,000, 1995--(Pounds)8,800,000).
8. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
NETWORK FIXED ASSETS
Net book value at 1 January 123,715 158,737 202,600
--Additions at cost 46,966 56,828 37,149
--Depreciation charge for year (10,497) (12,857) (21,808)
--Net book value of disposals (1,447) (108) (123)
----------------------------------------
Net book value at 31 December 158,737 202,600 217,818
NET BOOK VALUE OF OTHER FIXED
ASSETS 18,854 20,296 22,571
----------------------------------------
FIXED ASSETS PER FINANCIAL
STATEMENTS 177,591 222,896 240,389
----------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The net book value of assets held under finance leases included in plant
and machinery and network amounted to (Pounds)13,212,000, (1996--
(Pounds)11,322,000, 1995--(Pounds)8,072,000).
Land amounting to (Pounds)1,229,000 (1996--(Pounds)1,229,000, 1995--
(Pounds)1,229,000) has not been depreciated.
III-132
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
The ability of the BCC Group to recover its investment in fixed assets is
dependent upon the continued successful development of the cable
communications businesses.
9. INTANGIBLE FIXED ASSETS
The movement in intangible fixed assets, which comprises deferred
development expenditure and funding costs, was as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Net book value at 1 January -- 2,570 2,131
--Additions at cost 2,977 269 562
--Amortization charge for the
year (407) (708) (780)
----------------------------------------
Net book value at 31 December 2,570 2,131 1,913
----------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
10. INVESTMENTS
BCC owns the entire issued ordinary share capital of the following
subsidiary undertakings, all of which are registered in England and Wales,
except for Birmingham Cable Finance Limited which is registered in Jersey.
<TABLE>
<CAPTION>
PRINCIPAL ACTIVITY ISSUED CAPITAL
<S> <C> <C>
Birmingham Cable Limited Holder of the franchise to construct 2 ordinary shares of (Pounds)1 each
and operate a cable television and
telecommunications network in
Birmingham and Solihull
Network 21 Limited Dormant 2 ordinary shares of (Pounds)1 each
Cablephone Limited Dormant 2 ordinary shares of (Pounds)1 each
Century 21 Cable
Communications Limited Dormant 2 ordinary shares of (Pounds)1 each
West Midlands Credit
Limited Credit Management 2 ordinary shares of (Pounds)1 each
Central Cable Holdings
Limited Dormant 2 ordinary shares of (Pounds)1 each
Central Cable
Communications Limited Dormant 2 ordinary shares of (Pounds)1 each
Central Cable Limited Dormant 2 ordinary shares of (Pounds)1 each
Birmingham Cable Finance
Limited Group Funding 2 ordinary shares of (Pounds)1 each
---------------------------------------------------------------------------------------------------
</TABLE>
The Company also owns 50% of the (Pounds)2 ordinary share capital of
Central Cable Sales Limited a joint venture with Midland Cable Limited. The
Company sells advertising space on the group's television network.
The shares in all companies were acquired at par.
III-133
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
11. DEBTORS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds),000 (Pounds),000
<S> <C> <C> <C>
AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade debtors 6,537 8,018 10,982
Cash held on deposit 57,000 53,000 --
VAT 1,502 295 267
Other debtors 357 470 467
Prepayments and accrued income 4,660 2,172 3,133
--------------------------------------
70,056 63,955 14,849
--------------------------------------
AMOUNTS FALLING DUE AFTER MORE THAN
ONE YEAR
Cash held on deposit 63,000 22,000 --
--------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The cash is held on deposit as part of the loan arrangements described in
note 13. There are restrictions imposed on the Company as to the amount
that is available to be drawn down.
The movement in the bad debt provision may be analyzed as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Provision at 1 January 2,685 3,382 3,810
Bad debt charge for the year 1,068 435 2,120
Debts written-off in the year (371) (7) --
----------------------------------------
Provision at 31 December 3,382 3,810 5,930
----------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
12. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Obligations under finance leases 814 1,849 1,685
Bank loans and overdrafts 2,462 -- --
Payments received on account 2,815 3,456 5,095
Trade creditors 3,489 10,169 7,391
Other creditors
--social security and PAYE 383 389 390
--other creditors -- -- --
Accruals and deferred income 11,577 20,211 13,411
--------------------------------------
21,540 36,074 27,972
--------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
At 31 December 1997 the above creditors, with the exception of obligations
under finance leases, were non-interest bearing.
III-134
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
13. GUARANTEED REDEEMABLE PREFERENCE SHARES
On 15 February 1995 Birmingham Cable Finance Limited ("BCFL") a subsidiary
of Birmingham Cable Limited ("BCL") incorporated in Jersey issued 175,000
guaranteed cumulative (Pounds)1 redeemable 5 years preference shares for a
paid up value of (Pounds)175,000,000 giving rise to a share premium of
(Pounds)174,825,000. The preference shareholder had an option to require
Birmingham Cable Corporation Limited ("BCCL") to purchase its shareholding.
This option was guaranteed by a syndicate of 15 banks led by Bank of New
York, Canadian Imperial Bank of Commerce and Chase Manhattan International.
The preference shares attracted a dividend calculated at the rate of
6403.6354%.
The preference shares were redeemable or could be sold by means of a put
option in the event of changes in the law, payment default by the Group, or
after 5 years. On 16 July 1997, following changes to tax laws Barclays Bank
PLC exercised its option to require BCCL to purchase its shareholding of
preference shares.
In line with the provisions of the bank finance agreement, the
(Pounds)175,000,000 revolving credit facility has converted to a term loan
supported by bank syndication. The interest rates on the term loan are
LIBOR plus 0.625% to 2.25%. The terms of the loan facility were also
amended in the year to extend the maturity of the loan to 31 December 2005.
On 15 February 1995 BCL entered into a 5 year interest rate swap agreement
with Bank of New York, Canadian Imperial Bank of Commerce and Chase
Manhattan International for (Pounds)45,714,286, (Pounds)45,714,286 and
(Pounds)68,371,428 respectively. Under the agreements BCL pays fixed rate
interest at 9.2% and receives floating rate interest at 6 month LIBOR.
The Swaps with Bank of New York, Canadian Imperial Bank of Commerce and
Chase Manhattan International are based on the following total accretion
schedule, split in relation to the agreements 2:2:3.
<TABLE>
----------------------------------------------
<S> <C>
16 February 1995 (Pounds)24m
3 July 1995 (Pounds)47m
2 January 1996 (Pounds)75m
1 July 1996 (Pounds)106m
2 January 1997 (Pounds)130m
1 July 1997 (Pounds)149m
2 January 1998--1 February 2000 (Pounds)160m
----------------------------------------------
</TABLE>
III-135
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
14 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Obligations under finance leases 8,784 11,624 13,539
Bank Loan -- -- 140,000
Contract retentions 342 335 --
Junior subordinated debt -- -- 7,492
Other creditors 665 570 4,383
--------------------------------------
9,791 12,529 165,414
--------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
LEASES
The minimum future lease payments to which the BCC Group is committed under
finance leases are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
In one year or less 1,533 2,937 2,699
Between one and two years 1,738 2,503 2,801
Between two and five years 5,446 6,551 6,797
Over five years 3,970 5,184 7,710
----------------------------------------
12,687 17,175 20,007
Finance charges (3,089) (3,701) (4,783)
----------------------------------------
Net obligation 9,598 13,474 15,224
----------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The interest rates payable on the finance leases at 31 December 1997 were
in the range 7% to 10%. No other obligations bear interest.
The BCC Group had annual commitments under non-cancellable operating leases
as follows:
<TABLE>
------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995 1996 1997
------------------------- ------------------------- -------------------------
PLANT AND LAND AND PLANT AND LAND AND PLANT AND LAND AND
MACHINERY BUILDINGS MACHINERY BUILDINGS MACHINERY BUILDINGS
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
Operating leases which
expire:
--within 1 year 170 -- -- -- -- --
--within 2-5 years 313 -- 80 -- 8 65
--after 5 years -- 123 -- 141 -- 83
-----------------------------------------------------------------------------
483 123 80 141 8 148
-----------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
</TABLE>
III-136
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
15 SHARE CAPITAL
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Authorized:
60,000,000 (1996--60,000,000, 1995--
60,000,000) (Pounds)1 ordinary
shares 60,000 60,000 60,000
--------------------------------------
Allotted, called-up and paid-up:
51,073,486 (1996--51,073,486, 1995--
51,073,483) (Pounds)1 ordinary
shares 51,073 51,073 51,073
--------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
16 SHARE PREMIUM ACCOUNT
The movement on the share premium account was as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Beginning of year 112,399 112,399 112,399
Premium on allotments -- -- --
Issue costs written off -- -- --
--------------------------------------
End of year 112,399 112,399 112,399
--------------------------------------
- ------------------------------------------------------------------------
</TABLE>
Included within the premium on allotments received during the year is
(Pounds)nil relating to the issue of shares in prior periods (1996:
(Pounds)nil, 1995: (Pounds)nil).
17PENSION COMMITMENTS
The BCC Group contributes to individual pension plans on a defined
contribution basis in respect of a number of its full-time employees,
whereby payments are made to insurance companies independent from the
finances of the BCC Group. Contributions, none of which were outstanding at
the year end, are charged against profits as and when incurred. Pension
costs for the three years ended 31 December 1995, 1996 and 1997 were
(Pounds)229,000, (Pounds)287,000 and (Pounds)411,000.
18 CASH FLOW STATEMENT
(A) RECONCILIATION OF OPERATING LOSS TO NET CASH (OUTFLOW)/INFLOW FROM
OPERATING ACTIVITIES:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Operating loss (9,890) (9,798) (13,827)
Depreciation of tangible fixed
assets 12,425 17,088 23,257
Amortization of intangible fixed
assets 407 708 780
(Profit) loss on sale of tangible
fixed assets 23 31 (44)
Increase in debtors (3,590) 2,101 (3,894)
Increase in creditors 159 12,776 (201)
----------------------------------------
Net cash (outflow)/inflow from
operating activities (466) 22,906 6,071
----------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
III-137
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
(B) ANALYSIS OF CHANGES IN FINANCING
<TABLE>
- ---------------------------------------------------------------------------------
SHARE
FINANCE CAPITAL
LEASE (INCLUDING SHORT TERM LONG TERM
OBLIGATIONS PREMIUM) DEBT DEBT
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
Balance at 31 December
1994 5,243 163,472 -- --
Net cash
(outflow)/inflow from
financing (220) -- -- 174,420
Inception of finance
lease contracts 4,575 -- -- --
----------------------------------------------------
Balance at 31 December
1995 9,598 163,472 -- 174,420
Net Cash
(outflow)/inflow from
financing (1,162) -- -- --
Non cash movement -- -- -- 141
Inception of finance
lease contracts 5,037 -- -- --
----------------------------------------------------
Balance at 31 December
1996 13,473 163,472 -- 174,561
Net Cash
(outflow)/inflow from
financing (2,315) -- -- (28,000)
Non cash movement -- -- -- 931
Redemption of preference
shares -- -- -- --
Inception of finance
lease contracts 4,066 -- -- --
----------------------------------------------------
Balance at 31 December
1997 15,224 163,472 -- 147,492
----------------------------------------------------
--------------------------------------------------------------------------------
</TABLE>
(C) ANALYSIS OF CHANGES IN CASH AND CASH EQUIVALENTS DURING THE YEAR
<TABLE>
<CAPTION>
- ----------------------------------------------
CASH AT
BANK AND
IN HAND
(Pounds)'000
<S> <C>
Balance at 31 December 1994 4,113
Net cash (outflow) (52)
------
Balance at 31 December 1995 4,061
------
Net Cash Inflow 3,629
------
Balance at 31 December 1996 7,690
------
Net Cash Inflow (5,436)
------
Balance at 31 December 1997 2,254
------
-------------------------------------------
</TABLE>
19CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Authorized but not contracted for -- -- --
Contracted for but not provided for 15,709 6,810 1,486
--------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
III-138
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
20 RELATED PARTY TRANSACTION
CONTROL
The group is controlled jointly by three entities, none of which has
dominant influence on the company. Those companies together with their
ultimate controlling entities are:
<TABLE>
<CAPTION>
-------------------------------------------------------------------
COMPANY ULTIMATE CONTROLLING PARTY
<S> <C>
Comcast UK Consulting Inc Comcast Corporation Inc
Telewest Communications Group Limited Telewest Communications plc
General Cable PLC
-------------------------------------------------------------------
</TABLE>
TRANSACTIONS
The group has a consultancy agreement with Comcast UK Consulting Inc. (a
subsidiary undertaking of Comcast UK Cable Partners Limited). Charges under
this agreement amounted to (Pounds)657,000 (1996 -- (Pounds)574,000;
1995 -- (Pounds)428,000) for the year.
The group has a consultancy agreement with Telewest Cable Communications
Group. Charges made under this agreement amounted to (Pounds)657,000
(1996 -- (Pounds)574,000; 1995 -- (Pounds)428,000) for the year.
The group has a consultancy agreement with General Cable Limited. Charges
made under this agreement amounted to (Pounds)195,000 (1996 --
(Pounds)178,000; 1995 -- (Pounds)214,000).
The group is party to a cost sharing agreement with other franchises to
fund the running of the Network Service Centre ("NSC") which provides
switch management and interconnect access administration. The NSC is under
the management of Telewest and charges made under this agreement amounted
to (Pounds)711,000 (1996 -- (Pounds)814,000; 1995 -- (Pounds)680,000).
The group has a telephony interconnect agreement with Telewest, whereby
certain telephony traffic is routed via Telewest. The charges made under
this agreement amounted to (Pounds)1,151,000 (1996 --(Pounds)109,000).
The company had an interest in a joint venture, Central Cable Sales Limited
which sold advertising space on the company's and another franchise's
network. On 22 October 1997 the activities of the joint venture were
transferred to City Television Networks. During 1997 the company provided
funding to Central Cable Sales Limited of (Pounds)Nil (1996 --
(Pounds)62,000). The company performs much of the administration for
Central Cable Sales Limited and during 1997 recharged costs of
(Pounds)544,000 (1996 -- (Pounds)477,000) which were incurred on its
behalf. The company also charged (Pounds)51,000 (1996 -- (Pounds)58,000)
for the use of equipment and (Pounds)32,000 (1996 -- (Pounds)23,000) for
the use of staff and other facilities to Central Cable Sales Limited.
At 31 December 1997, the group was owed (Pounds)467,000 (1996 --
(Pounds)470,000) by Central Cable Sales Limited, (Pounds)2,111,000
(1996 -- (Pounds)1,116,000) was owed to Comcast, (Pounds)2,641,000 (1996 --
(Pounds)2,066,000) to Telewest and (Pounds)531,000 (1996 --
(Pounds)400,000) to General Cable.
III-139
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
21 POST BALANCE SHEET EVENT
Capital calls on the shareholders for junior subordinated debt were made in
the sum of (Pounds)6,300,000 in 1998. This was paid on 10 March 1998.
22 RECONCILIATION OF ACCOUNTING POLICIES
The above financial statements have been prepared using the accounting
policies applied by General Cable PLC ("General Cable"). These accounting
policies differ from those applied by the BCC Group in preparing its UK and
US statutory financial statements whose accounting policies comply, in all
material respects, with US GAAP, in particular Statement of Financial
Accounting Standards No. 51 -- "Financial Reporting by Cable Television
Companies".
The BCC Group's accounting policies principally differ from those used by
General Cable with respect to:
. Capitalization of interest with respect to network build Interest costs
incurred by the BCC Group with respect to network in the course of
construction are capitalized during the prematurity and development periods
and classified as intangible fixed assets.
The development period is defined as the period from inception to the
date upon which the first subscriber revenue is earned in each build
area (the franchise has been divided into seven discrete build areas
each with its own prematurity period).
The prematurity period is defined as the period commencing from the
date upon which the first subscriber revenue is earned in a build area
and terminating on the date upon which it is expected that full target
penetration in that build area will have been achieved.
Under General Cable accounting policies these interest costs are
expensed to the profit and loss account in the year in which they are
incurred.
. Capitalization of pre-operating expenses
All costs incurred by the BCC Group before the start of the first
prematurity period have been capitalized and classified as intangible
fixed assets.
During the prematurity periods costs incurred in anticipation of
servicing a fully operational system and that will not vary
significantly regardless of the number of subscribers are treated by
the BCC Group as eligible for partial capitalization.
During the prematurity periods the portion of the costs that relate to
the current operations of the BCC Group is expensed and the balance is
capitalized. The BCC Group calculates expenses eligible for
capitalization by applying a fraction to eligible costs; being the
number of build areas which have not entered prematurity as a
proportion of the total number of build areas in the franchise.
Capitalized intangible fixed assets (by build area) are amortized on a
straight line basis over the remaining life of the franchise (which
expires in 2012), commencing with the date upon which the first
subscriber revenue is earned in each build area.
Under General Cable accounting policies these costs are expensed to the
profit and loss account in the year in which they are incurred.
III-140
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
. Depreciation of network assets -- civils, fiber and construction
management
Under the BCC Group's accounting policies during each prematurity
period the depreciation charge relevant to network assets is calculated
by applying a factor to the estimated depreciation charge with respect
to relevant assets by build area expected at the end of the prematurity
period. The factor applied is the percentage of average, actual or
estimated subscribers, whichever is greater, of the total number of
subscribers expected at the end of the prematurity period.
Under General Cable accounting policies depreciation is charged in
accordance with the relevant asset lives commencing on acquisition of
the asset.
The financial statements of the BCC Group for the three years ended 31
December 1997 may be adjusted for material differences between the
accounting policies applied by General Cable and those applied by the BCC
Group as follows:
<TABLE>
<CAPTION>
RECONCILIATIONS
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Operating loss in accordance
with General Cable accounting
policies (9,890) (9,798) (13,827)
Intangible assets (647) (680) (647)
Depreciation of network assets (808) (1,257) (1,296)
----------------------------------------
Operating loss in accordance
with BCC Group accounting
policies (11,345) (11,735) (15,770)
----------------------------------------
Net interest in accordance with
General Cable accounting
policies (482) (5,841) (14,260)
Capitalized interest -- -- --
----------------------------------------
Net interest in accordance with
BCC Group accounting policies (482) (5,841) (14,260)
----------------------------------------
Loss before tax in accordance
with BCC Group accounting
policies (11,827) (17,576) (30,030)
----------------------------------------
Taxation (2,452) (2,802) (1,401)
----------------------------------------
Loss after tax in accordance
with BCC Group accounting
policies (14,279) (20,378) (31,431)
----------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
RECONCILIATION WITH GENERAL CABLE ACCOUNTING POLICIES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Shareholders' equity in
accordance with BCC Group
accounting policies 123,533 103,155 71,724
Intangible assets (10,328) (8,375) (9,707)
Capitalized interest (434) (489) (489)
SFAS 51 Depreciation of network
assets 1,218 1,257 4,491
----------------------------------------
Shareholders' equity in
accordance with General Cable
accounting policies 113,989 95,548 66,019
----------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
III-141
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
ADDITIONAL DISCLOSURES REQUIRED UNDER US GAAP
SEGMENTAL ANALYSIS
No segmental analysis of assets is given as the BCC Group's network serves
each of its business segments.
PENSIONS AND OTHER POST EMPLOYMENT BENEFITS
The BCC Group operates a defined contribution pension scheme. The pension
expense for the years ended 31 December, 1997, 1996 and 1995 was
(Pounds)411,000, (Pounds)229,000 and (Pounds)227,000 respectively. The BCC
Group has adopted SFAS No 112, "Employers' Accounting for Postemployment
Benefits Other than Pensions". The effect of the adoption of SFAS No 112 on
the results of operations and financial position was not material.
TAXATION
The adoption of SFAS No 109 "Accounting for Income Taxes" has had no impact
on the results of operations and financial position for the current year.
The BCC Group has a deferred tax asset arising from the carry forward of
operating losses. However a valuation allowance has been created to fully
provide for the deferred tax asset as the realisation of the asset is
uncertain.
A reconciliation of the expected tax credit at the statutory rates to the
actual tax position is as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Expected tax credit at UK
statutory rates 3,423 5,174 8,848
Adjustment to tax basis of
accounting (3,423) (5,174) (8,848)
----------------------------------------
-- -- --
Advance Corporation Tax written-
off (2,452) (2,802) (1,402)
----------------------------------------
Tax charge per UK GAAP (2,452) (2,802) (1,402)
----------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
The losses may be carried forward indefinitely for offset against future
trading profits.
The Advance Corporation Tax which has been written off in the period may be
carried forward indefinitely to be offset against tax on future profits.
DEFERRED TAX
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Tax effect of losses carried
forward 2,900 3,218 3,221
Difference between book and tax
basis of property 2,358 6,442 7,880
Short term timing differences 3,942 120 33
Valuation allowance (9,200) (9,780) (11,134)
----------------------------------------
-- -- --
----------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
III-142
<PAGE>
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
SECTION TWO US FINANCIAL INFORMATION
LEASE OBLIGATIONS
Future minimum lease payments including interest are as follows:
<TABLE>
-----------------------------------------------------------------
AS AT DECEMBER 31, 1997
---------------------------
CAPITAL LEASES OPERATING
(IN (Pounds)'000) LEASES
<S> <C> <C>
1998 2,699 156
1999 2,801 156
2000 2,778 156
2001 2,300 156
2002 1,719 156
Thereafter 7,710 1,390
---------------------------
Minimum lease payment 20,007 2,170
Less: amounts representing interest 4,783 --
---------------------------
15,224 2,170
---------------------------
-----------------------------------------------------------------
</TABLE>
The obligations under capital leases represent the total present value of
future minimum lease payments discounted at the interest rates inherent in
each lease.
CASHFLOWS
Under UK GAAP returns on investments and servicing of finance and taxation
are shown as a separate activity in the consolidated statements of
cashflows. Under US GAAP these amounts would be included in cashflows from
operating activities.
III-143
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED31 MARCH 1998
- --------------------------------------------------------------------------------
III-144
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
Set out below and concluding on page III-155 is an extract from the text of
General Cable's unaudited results for the three months ended 31 March 1998,
which were announced on 17 June 1998:
"HIGHLIGHTS"
Compared to the three months ended 31 March 1997:
. Equity revenues up 24% to (Pounds)38,074,000 including acquisitions
. Equity operating cashflow increased to (Pounds)8,974,000 (1997
(Pounds)3,933,000). Consolidated operating cashflow increased to
(Pounds)7,627,000 (1997 (Pounds)2,649,000)
. 168,000 residential telephone lines (up 22%), 113,000 cable television
customers (up 2%) and 48,500 business exchange lines connected (up 45%)
Commenting on the results, Sir Anthony Cleaver, Chairman, General Cable PLC,
said:
"I am pleased to report another period of growth in both turnover and
operating cashflow. Results are in line with our expectations and growth in the
business is leading to the improvement in operating losses which is now our
main objective.
The business is well placed to benefit from consolidation of our industry and
a further announcement regarding progress of the proposed merger with Telewest
Communications plc will be made in due course."
III-145
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
CHAIRMAN'S STATEMENT FOR THE THREE MONTHS ENDED 31 MARCH 1998
"I am pleased to report our results for the quarter which are in line with
our expectations.
On 13 March 1997, the Group acquired Imminus Limited, a Managed Data Network
Service Company. The consolidated results include a full contribution from this
date. The equity results of the Group are stated on the basis that this
acquisition took place on 1 January 1997.
In 1997, we announced a change in our operating strategy, to emphasise supply
of cable television in those circumstances where the Group could be profitable.
This involves supplying cable television predominantly to customers who also
take residential telephony. Our objective in making this change was to
eliminate the losses that we had been incurring through supplying cable
television on the previous basis. In so doing, we recognised that we would
initially experience a fall in the rate of customer acquisition in television
services, and this has happened.
Birmingham Cable Corporation ("BCC"), our associated company in which the
Group holds 45%, had a satisfactory quarter, growing operating cashflow to
(Pounds)4,197,000 from (Pounds)1,939,000 in 1997.
FINANCIAL RESULTS
Consolidated revenues increased by 42% compared with the quarter ended 31
March 1997, reaching (Pounds)31,987,000. On this basis, the Group derived 40%
of revenues from business telecommunications, 37% from residential telephony
and 23% from cable television.
Margins in business telecoms reflected the mix of business achieved in the
quarter. The residential telephony margin fell slightly to 75% reflecting
pricing and interconnect cost of sale changes. The long decline in cable
television margins was reversed, reflecting significant price increases in the
last quarter of the year, in accordance with our revised operating strategy.
Equity operating cashflow improved significantly to (Pounds)8,974,000 from
(Pounds)3,933,000 in 1997, and on a consolidated basis to (Pounds)7,627,000
from (Pounds)2,649,000 in 1997.
As expected, the consolidated operating loss improved from (Pounds)6,196,000
to (Pounds)3,090,000. This reflects the growth in operating cashflow and the
acquisition of Imminus outweighing increased depreciation charges in the Group.
The share of losses of associated companies increased from (Pounds)2,725,000
to (Pounds)5,366,000 on the growth in operating cashflow in the year offset by
increased depreciation and interest charges in BCC.
The consolidated net interest charge increased following increases in
borrowings to fund network build and new customer connections. The Group is
expected to fund network expansion and new customer connections and services
during 1998 through increasing borrowings and this will lead to higher interest
charges.
Including minority interests and taxation, the overall loss for the period
was (Pounds)11,421,000 compared with (Pounds)11,561,000.
As previously stated, the franchise build was substantially complete in TCC
and BCC by the end of 1997. In YCG, the franchise build continues, but at a
much slower rate than previously.
III-146
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
OPERATING RESULTS
RESIDENTIAL SERVICES
Network reach extended from 56% built out at 31 March 1997 to 67% at 31 March
1998, excluding BCC. 29% of homes that we have marketed take a service from us
and 46% of customers take both services.
Total homes taking a service from the Group have increased by 16% from
166,000 at 31 March 1997 to 192,000 at 31 March 1998. The Group now serves a
total of 168,000 residential telephony subscribers and 113,000 cable television
customers. In addition BCC has connected 158,000 customers to either or both
services, up 10% on 1997.
As expected, overall net churn improved in television compared to the three
months ended 31 March 1997. Churn rose slightly in residential telephony to
18%.
TELEPHONY
Lines connected have increased by 23% to 167,700. Penetration was maintained
at 25% due to the slowdown in acquisition of dual customers resulting from
cable television price increases in the final quarter of 1997.
Despite ongoing price reductions throughout the market, overall revenues per
customer exceeded our expectations and were up by 3% at (Pounds)282 per annum
compared to the three months ended 31 March 1997. Further price reductions are
expected in 1998.
CABLE TELEVISION
Cable television penetration fell to 17%. The rate of customer acquisition
has slowed following the price rises for premium channels imposed in the final
quarter of 1997 and consequently penetration has, as expected, fallen. It is
anticipated that this trend will continue throughout 1998.
Our offer has continued to evolve, and during March we participated in the
launch of Front Row, a pay per view service operated by a joint venture of
which General Cable is a shareholder. Initial take up has been encouraging,
particularly in areas where impulse ordering is available. Further developments
in the product offering are anticipated for later in 1998.
Overall revenues per customer improved by some 11% to (Pounds)252 per annum
on price increases. The pay to basic ratio, the number of pay channels taken
divided by the number of basic subscribers, held at 129%.
BUSINESS TELECOMMUNICATIONS
General Telecom had another strong quarter, with lines connected up 45% on 31
March 1997 to 48,500. In addition, the managed data network business performed
satisfactorily.
Tariff reductions continued again throughout 1997 and further reductions for
basic voice telephony service are anticipated for 1998. However, exchange line
and other service growth, led to contribution ahead at (Pounds)5,100,000,
compared to (Pounds)4,230,000, excluding Imminus.
III-147
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
NETWORKS
1998 is intended to be a year in which network extension is slowed, having
obtained the assent from Oftel regarding the relaxation in our build milestone
commitments. Instead, investment will be focused on extending our networks'
capabilities, including implementation of digital television technology.
We anticipate being able to place orders with our equipment suppliers for
digital television technology in the near future, consistent with our aim of
being able to offer the advantages of digital television as soon as possible.
BIRMINGHAM
BCC, which is not managed by the Group, grew all areas of its business.
Network extension was substantially complete by the end of the year. Reported
penetrations have been increased by a reduction in homes recorded as passed and
marketed of 15,000 homes, following an audit of the relevant database.
The company instituted a policy of encouraging further take up of dual
services through changing its discount to residential customers of both
services from the television to the telephony service in the later part of
1997. This has distorted the reported results of the television and telephony
services. Cable television penetration fell to 28% from 30% on price rises,
although residential telephony penetration improved to 31% from 28%. Revenues
and margins per subscriber were satisfactory
Business services developed satisfactorily, with exchange lines connected up
from 12,200 to 20,900.
Financial results progressed, with turnover 22% ahead at (Pounds)18,779,000
and operating cashflow ahead 116% at (Pounds)4,197,000. The Group's share of
losses grew from (Pounds)2,725,000 to (Pounds)5,366,000 on higher interest and
depreciation charges.
CONCLUSION
The operating results in 1998 are in line with our expectations and provide
us with confidence that we will achieve our objectives of rapidly reducing
accounting losses and establishing sustainable profitability.
On 15 April 1998 we announced that the terms of a proposed merger between the
Group and Telewest Communications plc had been agreed, with documents expected
to be posted before the end of June. Significant further progress towards
completion of that merger has been made and a further announcement will be made
in due course."
Sir Anthony Cleaver
Chairman
17 June 1998
III-148
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
PROFIT AND LOSS ACCOUNT FOR THE PERIOD ENDED 31 MARCH 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
3 MONTHS ENDED 3 MONTHS ENDED 31 DECEMBER
31 MARCH 1998 31 MARCH 1997 1997
UNAUDITED UNAUDITED AUDITED
(Pounds)'000'S (Pounds)'000'S (Pounds)'000'S
<S> <C> <C> <C>
TURNOVER
Continuing operations 31,987 21,790 98,238
Acquisition -- 755 13,610
----------------------------------------------
31,987 22,545 111,848
Operating costs (35,077) (28,741) (132,525)
----------------------------------------------
OPERATING (LOSS)/ PROFIT
Continuing operations (3,090) (6,291) (22,960)
Acquisition -- 95 2,283
----------------------------------------------
(3,090) (6,196) (20,677)
Share of losses of associated
undertakings (5,366) (2,725) (12,626)
Reorganisation costs -- -- (36,648)
Interest receivable and
similar income 8,411 3,527 17,707
Interest payable and similar
charges (12,191) (6,472) (36,707)
----------------------------------------------
Loss on ordinary activities
before taxation (12,236) (11,866) (88,951)
Taxation -- (315) 212
----------------------------------------------
Loss on ordinary activities
after taxation (12,236) (12,181) (88,739)
Minority interest--equity 815 620 5,562
----------------------------------------------
Loss for the period (11,421) (11,561) (83,177)
----------------------------------------------
LOSS PER ORDINARY SHARE (3.2p) (3.2p) (22.8p)
</TABLE>
III-149
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
BALANCE SHEET AT 31 MARCH 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
31 MARCH 31 MARCH 31 DECEMBER
1998 1997 1997
UNAUDITED UNAUDITED AUDITED
(Pounds)'000'S (Pounds)'000'S (Pounds)'000'S
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 494,756 438,176 488,928
Investments
Associated undertakings 24,310 39,891 29,675
Subsidiary undertakings -- -- --
Other investments 213 193 312
----------------------------------------------
519,279 478,260 518,915
----------------------------------------------
CURRENT ASSETS
Stocks -- 463 --
Debtors: amounts falling due
after more than one year 72 1,505 72
Debtors: amounts falling due
within one year 32,293 27,511 36,162
Secured cash deposit
restricted for more than one
year 186,379 150,516 179,424
Cash at bank and in hand 24,881 30,514 21,664
----------------------------------------------
243,625 210,509 237,322
----------------------------------------------
CREDITORS: amounts falling
due within one year (76,296) (97,517) (76,118)
NET CURRENT ASSETS 167,329 112,992 161,204
----------------------------------------------
TOTAL ASSETS LESS CURRENT
LIABILITIES 686,608 591,252 680,119
CREDITORS: amounts falling
due after more than one year (485,815) (310,652) (466,573)
Provisions for liabilities
and charges (9,762) -- (10,277)
Minority interests--equity (184) (5,943) (1,001)
----------------------------------------------
NET ASSETS 190,847 274,657 202,268
----------------------------------------------
</TABLE>
III-150
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
OPERATING STATISTICS--GROUP BASIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED YEAR ENDED
31 MARCH 31 MARCH 31 DECEMBER
1998 1997 1997
<S> <C> <C> <C>
Percentage built 67% 56% 66%
Annualised average revenue per
home live (Pounds)184 (Pounds)154 (Pounds)185
Penetration of homes taking a
service (homes marketed) 29% 31% 29%
Operating cashflow (consolidated) (Pounds)7,627 (Pounds)2,649 (Pounds)19,955
CABLE TV
Homes live 702,300 586,082 687,400
Subscribers 113,200 110,800 116,800
Penetration (of homes marketed) 17% 20% 18%
Annualised average revenue per
customer (Pounds)252 (Pounds)227 (Pounds)244
Gross churn 40% 52% 40%
Net churn 34% 45% 33%
Pay-to-basic ratio 129% 130% 143%
RESIDENTIAL TELEPHONY
Homes live 704,800 586,100 689,600
Subscribers 167,700 137,200 163,500
Penetration (of homes marketed) 25% 25% 25%
Annualised average revenue per
customer (Pounds)282 (Pounds)274 (Pounds)284
Gross churn 26% 25% 25%
Net churn 18% 16% 16%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 48,500 33,500 45,300
Annualised average revenue per
BEL (including Imminus) (Pounds)1,116 (Pounds)1,271 (Pounds)1,211
TURNOVER (000'S)
Business telecommunications
(including Imminus) (Pounds)13,023 (Pounds)10,158 (Pounds)45,915
Residential telephony (Pounds)11,712 (Pounds)9,109 (Pounds)41,340
Cable television (Pounds)7,252 (Pounds)6,316 (Pounds)27,569
GROSS MARGIN (000'S)
Business telecommunications
(including Imminus) (Pounds)7,440 (Pounds)6,311 (Pounds)27,488
Residential telephony (Pounds)8,811 (Pounds)7,008 (Pounds)33,011
Cable television (Pounds)3,343 (Pounds)2,392 (Pounds)11,450
GROSS MARGIN (%)
Business telecommunications
(including Imminus) 57% 62% 60%
Residential telephony 75% 77% 80%
Cable television 46% 38% 42%
</TABLE>
The aggregate figures represent 100% of the item concerned for the whole
period for TCC, YCG, Imminus and General Cable unless stated otherwise.
III-151
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
OPERATING STATISTICS--EQUITY BASIS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED YEAR ENDED
31 MARCH 31 MARCH 31 DECEMBER
1998 1997 1997
<S> <C> <C> <C>
Percentage built 71% 60% 70%
Annualised average revenue per
home live (Pounds)179 (Pounds)176 (Pounds)180
Turnover ((Pounds)'000) (Pounds)38,074 (Pounds)30,547 (Pounds)136,589
Operating cashflow
((Pounds)'000) (Pounds)8,974 (Pounds)3,933 (Pounds)24,479
Penetration of homes taking a
service (homes marketed) 31% 32% 31%
CABLE TV
Homes live 852,200 717,900 841,200
Subscribers 158,700 154,600 161,700
Penetration (of homes marketed) 20% 23% 20%
Annualised average revenue per
customer (Pounds)255 (Pounds)224 (Pounds)239
Gross churn 38% 46% 39%
Net churn 33% 40% 34%
Pay-to-basic ratio 131% 133% 150%
RESIDENTIAL TELEPHONY
Homes live 852,200 717,900 841,200
Subscribers 214,000 177,800 208,700
Penetration (of homes marketed) 26% 26% 26%
Annualised average revenue per
customer (Pounds)271 (Pounds)268 (Pounds)276
Gross churn 25% 25% 26%
Net churn 18% 18% 19%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 53,800 35,800 49,900
Annualised average revenue per
BEL (Pounds)1,045 (Pounds)1,037 (Pounds)1,154
TURNOVER (000'S)
Business telecommunications (Pounds)13,502 (Pounds)10,297 (Pounds)46,948
Residential telephony (Pounds)14,345 (Pounds)11,585 (Pounds)51,871
Cable television (Pounds)10,227 (Pounds)8,665 (Pounds)37,592
GROSS MARGIN
Business telecommunications 59% 62% 60%
Residential telephony 74% 76% 79%
Cable television 46% 35% 39%
</TABLE>
III-152
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
OPERATING STATISTICS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED QUARTER ENDED YEAR ENDED
31 MARCH 31 MARCH 31 DECEMBER
1998 1997 1997
<S> <C> <C> <C>
Percentage built 95% 90% 95%
Annualised average revenue per
home live (Pounds)170 (Pounds)161 (Pounds)164
Turnover ((Pounds)'000) (Pounds)18,779 (Pounds)15,351 (Pounds)67,039
Operating cashflow ((Pounds)'000) (Pounds)4,197 (Pounds)1,939 (Pounds)10,604
Penetration of homes taking a
service (homes marketed) 38% 37% 36%
CABLE TV
Homes marketed 414,700 385,200 429,638
Homes live 436,400 386,700 444,100
Subscribers 117,700 113,800 117,000
Penetration (of homes marketed) 28% 30% 27%
Annualised average revenue per
customer (Pounds)268 (Pounds)224 (Pounds)235
Gross churn 33% 31% 38%
Net churn 31% 28% 35%
Pay-to-basic ratio 144% 146% 173%
RESIDENTIAL TELEPHONY
Homes marketed 414,700 385,200 429,638
Homes live 436,400 386,700 444,100
Subscribers 126,600 109,200 123,400
Penetration (of homes marketed) 31% 28% 29%
Annualised average revenue per
customer (Pounds)251 (Pounds)264 (Pounds)265
Gross churn 22% 27% 30%
Net churn 20% 25% 28%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 20,900 12,200 19,400
Annualised average revenue per
BEL (Pounds)606 (Pounds)673 (Pounds)684
TURNOVER ((Pounds)'000)
Business telecommunications (Pounds)3,048 (Pounds)1,988 (Pounds)9,463
Residential telephony (Pounds)7,864 (Pounds)7,055 (Pounds)30,483
Cable television (Pounds)7,867 (Pounds)6,308 (Pounds)27,094
GROSS MARGIN
Business telecommunications 70% 65% 69%
Residential telephony 70% 73% 74%
Cable television 46% 30% 34%
</TABLE>
III-153
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
OPERATING STATISTICS--ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QUARTER ENDED YEAR ENDED
31 MARCH 31 DECEMBER
1998 1997
<S> <C> <C>
THE CABLE CORPORATION LTD
Percentage built 95% 94%
CABLE TV
Homes marketed 281,065 276,761
Subscribers 45,482 47,652
Penetration (of homes marketed) 16% 17%
Annualised average revenue per customer (Pounds)295 (Pounds)284
Gross churn 47% 36%
Pay-to-basic ratio 181% 186%
RESIDENTIAL TELEPHONY
Homes marketed 283,602 278,883
Subscribers 64,130 62,458
Penetration (of homes marketed) 23% 22%
Annualised average revenue per customer (Pounds)345 (Pounds)349
Gross churn 29% 26%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 25,100 24,230
Annualised average revenue per BEL (Pounds)880 (Pounds)932
YORKSHIRE CABLE GROUP LTD
Percentage built 57% 56%
CABLE TV
Homes marketed 385,753 372,553
Subscribers 67,714 69,154
Penetration (of homes marketed) 18% 19%
Annualised average revenue per customer (Pounds)223 (Pounds)216
Gross churn 36% 43%
Pay-to-basic ratio 94% 113%
RESIDENTIAL TELEPHONY
Homes marketed 385,753 372,553
Subscribers 103,547 101,039
Penetration (of homes marketed) 27% 27%
Annualised average revenue per customer (Pounds)243 (Pounds)244
Gross churn 25% 24%
BUSINESS TELECOMMUNICATIONS
Business exchange lines ("BEL") 23,370 21,031
Annualised average revenue per BEL (Pounds)543 (Pounds)567
</TABLE>
III-154
<PAGE>
SECTION TWO US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- --------------------------------------------------------------------------------
RECONCILIATION OF ACCOUNTING INFORMATION FROM UK GAAP TO US GAAP
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
QTR ENDED YEAR ENDED
31 MARCH 31 DECEMBER
1998 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
OPERATING LOSS IN ACCORDANCE WITH UK GAAP (3,090) (20,677)
US GAAP ADJUSTMENTS:
Amortisation of goodwill (1,111) (4,444)
CABLE COMMUNICATIONS INDUSTRY ACCOUNTING:
Network depreciation adjustment (1,330) 369
Selling, general and administrative expenses
capitalised 35 (218)
Share of Associate (5,541) (12,868)
--------------------------
Operating loss in accordance with US GAAP (11,037) (37,838)
Reorganisation costs in accordance with UK GAAP 0 (36,648)
US GAAP adjustment 0 6,013
Reorganisation costs in accordance with US GAAP 0 (30,635)
Net interest in accordance with UK GAAP (3,780) (19,000)
Interest capitalised 5,645 19,074
Net interest in accordance with US GAAP 1,865 74
--------------------------
Loss before tax in accordance with US GAAP (9,172) (68,399)
Income tax credit (1) 212
US GAAP adjustment 154 (434)
Taxation in accordance with US GAAP 153 (222)
Minority interests in accordance with UK GAAP 815 5,562
Minority share of US GAAP adjustments (296) (1,149)
Minority interests in accordance with US GAAP 519 4,413
--------------------------
NET PROFIT/(LOSS) IN ACCORDANCE WITH US GAAP (8,500) (64,208)
--------------------------
Shareholders' equity in accordance with UK GAAP 190,847 202,268
Goodwill 165,225 166,365
CABLE COMMUNICATIONS INDUSTRY ACCOUNTING:
Property, plant and equipment, other 52,392 47,843
Securities of related parties 2,390 2,566
Minority interests (3,874) (3,578)
Accounting for provisions 6,895 7,057
Accounting for deferred tax 665 511
--------------------------
SHAREHOLDERS' EQUITY IN ACCORDANCE WITH US GAAP (Pounds)414,540 423,032
--------------------------
</TABLE>
III-155
<PAGE>
SECTION THREE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION, CAPITALIZATION AND
COMPARATIVE PER SHARE INFORMATION OF THE COMBINED GROUP
- --------------------------------------------------------------------------------
III-156
<PAGE>
SECTION THREE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
III-157
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
INTRODUCTORY NOTE
The unaudited pro forma financial information prepared under US GAAP, reflects
the following proposed transactions (the "Proposed Transactions"):
. the acquisition of General Cable by Telewest, accounted for as a purchase
with the assets and liabilities recorded at their book values;
. the Pre-emptive Issue of ordinary shares by Telewest; and
. the conversion of Telewest Convertible Preference shares.
The unaudited statement of operations for the year ended December 31, 1997 and
the three months ended March 31, 1998 presents the pro forma results as if all
of the above Proposed Transactions had taken place on January 1, 1997. The
unaudited pro forma balance sheet as at March 31, 1998 is presented as if all
of the above Proposed Transactions had taken place on March 31, 1998.
The unaudited pro forma information has been prepared from the audited
financial statements for the year ended December 31, 1997 and unaudited
financial statements for the three month period ended March 31, 1998 of
Telewest and General Cable disclosed elsewhere in this document. Information in
respect of General Cable includes certain reclassifications in order to conform
its historic financial information with the Company's presentation and to
reflect US GAAP adjustments as set out in General Cable's US GAAP
reconciliation.
The following unaudited pro forma financial information is provided for
illustrative purposes in conformity with the requirements of the US Securities
and Exchange Commission and does not purport to represent what the Combined
Group's results of operations and financial position actually would have been
if such Proposed Transactions in fact had occurred on such dates, or to project
the Combined Group's results of operations for any future period. Other than
the adjustments described under Notes to Unaudited Pro Forma Financial
Information, no adjustments have been made to conform the accounting policies
of General Cable to those of Telewest.
The unaudited condensed pro forma combined financial statements do not give
effect to certain restructuring and rationalization costs expected to be
incurred following the Merger. The management of the Company presently is
considering the nature and extent of the charges to be so incurred. Such costs
presently cannot be reasonably predicted in a manner sufficient to quantify the
amount and timing of such charges under US GAAP. Upon final determination, a
substantial charge or charges will be recorded during 1998 and/or 1999 and be
reflected in the Company's statement of earnings as a non-recurring charge or
charges to operations in accordance with US GAAP. The actual payments to
implement the restructuring and rationalization are expected to be made over a
two to three year period. In addition, although the Company expects to realize
cost reductions from the Merger and the restructuring and rationalization, no
effect has been given in the Company's unaudited condensed pro forma combined
financial statements to any such benefits.
The purchase accounting adjustments included in the accompanying pro forma
combined financial information reflect estimates made by Telewest and
assumptions which it believes to be reasonable. The allocations of the proposed
purchase consideration for General Cable are subject to final determination
and, accordingly, the amounts reflected below are likely to differ from the
amounts which will be reflected when the final purchase costs allocations are
made.
This unaudited pro forma financial information should be read in conjunction
with, and is qualified in its entirety by reference to, the historical
financial statements and accompanying notes and the supplementary information,
in each case of Telewest and General Cable, included under "Part I--General
Information" and "Part III--US Financial Information relating to Telewest
Communications plc and General Cable PLC".
III-158
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
US GAAP UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
------------------------------------------------------------------------
GENERAL PRO FORMA PRO FORMA PRO FORMA
TELEWEST CABLE ADJUSTMENTS COMBINED COMBINED
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 $'000
<S> <C> <C> <C> <C> <C>
REVENUE
Cable television 159,918 27,569 -- 187,487 314,322
Telephony--residential 166,645 41,340 -- 207,985 348,687
Telephony--business 43,882 42,719 -- 86,601 145,186
Other 16,053 220 -- 16,273 27,282
------------------------------------------------------------------------
386,498 111,848 -- 498,346 835,477
------------------------------------------------------------------------
OPERATING COSTS AND
EXPENSES
Programming (93,441) (16,119) -- (109,560) (183,677)
Telephony (50,145) (17,755) -- (67,900) (113,834)
Selling, General and
Administrative (193,335) (58,239) -- (251,574) (421,764)
Depreciation (177,341) (40,263) (4,600)(d) (222,204) (372,525)
Amortization of goodwill (26,395) (4,444) (35,337)(c) (66,176) (110,944)
Reorganization costs -- (30,635) -- (30,635) (51,360)
------------------------------------------------------------------------
(540,657) (167,455) (39,937) (748,049) (1,254,104)
------------------------------------------------------------------------
OPERATING LOSS (154,159) (55,607) (39,937) (249,703) (418,627)
OTHER INCOME/EXPENSE
Interest income 7,959 17,705 -- 25,664 43,026
Interest expense (141,721) (17,381) -- (159,102) (266,735)
Foreign exchange losses
(net) (23,544) -- -- (23,544) (39,472)
Share of net losses of
affiliates (21,696) (12,868) -- (34,564) (57,946)
Gain/(loss) on disposal
of assets 1,139 -- -- 1,139 1,909
Minority interests in
profits of consolidated
subsidiaries, net (293) -- -- (293) (491)
Other -- (250) -- (250) (419)
------------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (332,315) (68,401) (39,937) (440,653) (738,755)
Income tax expense (137) (222) -- (359) (602)
------------------------------------------------------------------------
NET LOSS (332,452) (68,623) (39,937) (441,012) (739,357)
Minority interest -- 4,413 (4,413)(a) -- --
------------------------------------------------------------------------
LOSS FOR FINANCIAL YEAR (332,452) (64,210) (44,350) (441,012) (739,357)
------------------------------------------------------------------------
Weighted average number
of ordinary shares
outstanding ('000) 927,568 365,092 2,138,481 2,138,481
------------------------------------------------------------------------
BASIC AND DILUTED LOSS
PER SHARE (35.8)p (17.6)p (20.6)p (34.6)c
------------------------------------------------------------------------
</TABLE>
Note: For convenience the financial statements are translated into US$ at
$1.6765 per (Pounds)1.00, the Noon Buying Rate of the Federal Reserve Bank of
New York on March 31, 1998.
See accompanying notes to the unaudited pro forma financial information.
III-159
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
US GAAP UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
-----------------------------------------------------------------------
GENERAL PRO FORM PRO FORMA PRO FORMA
TELEWEST CABLE ADJUSTMENTS COMBINED COMBINED
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 $'000
<S> <C> <C> <C> <C> <C>
REVENUE
Cable television 44,180 7,252 -- 51,432 86,226
Telephony--residential 48,436 11,712 -- 60,148 100,838
Telephony--business 13,502 12,945 -- 26,447 44,338
Other 4,306 78 -- 4,384 7,350
-----------------------------------------------------------------------
110,424 31,987 -- 142,411 238,752
-----------------------------------------------------------------------
OPERATING COSTS AND
EXPENSES
Programming (25,257) (3,909) -- (29,166) (48,897)
Telephony (14,201) (6,211) -- (20,412) (34,221)
Selling, General and
Administrative (45,207) (14,550) -- (59,757) (100,182)
Depreciation (46,724) (11,702) (1,150)(d) (59,576) (99,879)
Amortization of goodwill (6,599) (1,111) (8,834)(c) (16,544) (27,736)
-----------------------------------------------------------------------
(137,988) (37,483) (9,984) (185,455) (310,915)
-----------------------------------------------------------------------
OPERATING LOSS (27,564) (5,496) (9,984) (43,044) (72,163)
OTHER INCOME/EXPENSE
Interest income 1,126 8,491 -- 9,617 16,123
Interest expense (42,721) (6,626) -- (49,347) (82,730)
Loss on disposal of
interest rate swaps 6,630 -- -- 6,630 11,115
Share of net losses of
affiliates (6,704) (5,541) -- (12,245) (20,529)
Gain/(loss) on disposal
of assets 511 -- -- 511 857
Minority interests in
profits of consolidated
subsidiaries, net (26) -- -- (26) (44)
-----------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (68,748) (9,172) (9,984) (87,904) (147,371)
Income tax expense 20 153 -- 173 290
-----------------------------------------------------------------------
NET LOSS (68,728) (9,019) (9,984) (87,731) (147,081)
Minority interest -- 519 (519)(a) --
-----------------------------------------------------------------------
LOSS FOR FINANCIAL
PERIOD (68,728) (8,500) (10,503) (87,731) (147,081)
-----------------------------------------------------------------------
Weighted average number
of ordinary shares
outstanding ('000) 927,568 365,092 -- 2,138,481 2,138,481
-----------------------------------------------------------------------
BASIC AND DILUTED LOSS
PER SHARE (7.4)p (2.3)p -- (4.1)p (6.9)c
-----------------------------------------------------------------------
</TABLE>
Note: For convenience the financial statements are translated into US$ at
$1.6765 per (Pounds)1.00, the Noon Buying Rate of the Federal Reserve Bank of
New York on March 31, 1998.
See accompanying notes to the unaudited pro forma financial information.
III-160
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
US GAAP UNAUDITED PRO FORMA BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AT MARCH 31, 1998
-------------------------------------------------------------------------
PRO FORMA PRO FORMA PRO FORMA
TELEWEST GENERAL CABLE ADJUSTMENTS COMBINED COMBINED
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000 $'000
<S> <C> <C> <C> <C> <C>
ASSETS
Cash and cash
equivalents 43,875 211,260 -- 255,135 427,734
Receivables and
prepaid
expenses 80,420 37,240 -- 117,660 197,257
Investments 77,993 26,922 (25,666)(a) 79,249 132,861
Property and
equipment 1,704,907 555,729 (21,150)(a) 2,239,486 3,754,498
Goodwill 459,311 165,225 617,867 (a) 1,242,403 2,082,889
Other assets 48,808 -- -- 48,808 81,826
-------------------------------------------------------------------------
TOTAL ASSETS 2,415,314 996,376 571,051 3,982,741 6,677,065
-------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Other
liabilities 220,246 94,222 26,386 (a)(e) 340,854 571,441
Debt 1,524,380 483,556 -- 2,007,936 3,366,305
-------------------------------------------------------------------------
TOTAL
LIABILITIES 1,744,626 577,778 26,386 2,348,790 3,937,746
-------------------------------------------------------------------------
MINORITY
INTERESTS 666 4,058 (4,058)(a) 666 1,117
-------------------------------------------------------------------------
SHAREHOLDERS'
EQUITY
Convertible
preference
shares 49,607 -- (49,607)(b) -- --
Ordinary shares 92,757 365,092 (365,092)(a)
49,607 (b)
45,418 (a)
26,066 (a) 213,848 358,516
Additional paid
in capital 1,332,887 94,917 (94,917)(a)
676,730 (a)
215,049 (a) 2,224,666 3,729,652
Accumulated
deficit (803,288) (45,469) 45,469 (a) (803,288) (1,346,712)
-------------------------------------------------------------------------
671,963 414,540 548,723 1,635,226 2,741,456
Ordinary shares
held in trust
for the
Telewest
Restricted
Share Scheme (1,941) -- -- (1,941) (3,254)
-------------------------------------------------------------------------
670,022 414,540 548,723 1,633,285 2,738,202
Commitments and
contingencies -- -- -- -- --
-------------------------------------------------------------------------
TOTAL
LIABILITIES AND
SHAREHOLDERS'
EQUITY 2,415,314 996,376 571,051 3,982,741 6,677,065
-------------------------------------------------------------------------
</TABLE>
Note: For convenience the financial statements are translated into US$ at
$1.6765 per (Pounds)1.00, the Noon Buying Rate of the Federal Reserve Bank of
New York on March 31, 1998.
See accompanying notes to the unaudited pro forma financial information.
III-161
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
a) Pro forma adjustments have been made to reflect the acquisition of the
entire share capital of General Cable. The proposed consideration for the
acquisition is satisfied by the issuance of approximately 454 million Telewest
shares (assuming General Cable options are cancelled for cash) and
approximately (Pounds)240 million in cash to be raised through a Pre-emptive
Issue of approximately 261 million Telewest shares of 10p, valuing General
Cable at (Pounds)960 million (based on the middle market quotation of
(Pounds)1.59 per Telewest share on June 24, 1998, the latest practicable date
prior to the publication of this document, derived from the Daily Official
List).
The following represents the preliminary allocation of the excess of purchase
price over the historical net book value of the acquired net assets of General
Cable. The fair value of the acquired net assets is approximately (Pounds)20
million less than the book value
<TABLE>
<CAPTION>
(Pounds)000
<S> <C>
Acquired net assets at book value (March 31,1998) 414,540
Elimination of Telewest investment in TCC (25,666)
Elimination of General Cable minority interest in TCC 4,058
Elimination of balance due from TCC to Telewest 6,000
Adjustment to record General Cable property and equipment at fair
value (21,150)
Goodwill and intangibles 617,867
-------
995,649
=======
</TABLE>
b) Represents the conversion of Telewest Convertible Preference shares into
approximately 496 million Telewest shares assuming all shares are converted.
Depending on, among other things, the number of new Telewest shares acquired by
Telewest shareholders other than the TINTA Affiliate, the MediaOne Affiliates
and the Cox Affiliate pursuant to the Pre-emptive Issue, some Telewest
Convertible Preference shares may remain in issue following completion of the
Merger.
c) Represents amortization of the estimated excess purchase price over the
estimated net book values of the acquired net assets of General Cable
(allocated to goodwill and intangibles), over 20 years.
d) Represents increase in depreciation of property and equipment based on
Telewest useful lives offset by the decrease in depreciation related to the
adjustment to record property and equipment at fair value.
e) Represents the estimated cost of the transaction including the cash
cancellation of the General Cable options.
f) The pro forma combined loss per share is based on the 2,138,481,000 shares
outstanding assuming consummation of the Proposed Transactions.
g) Items which have not been adjusted for in the unaudited pro forma combined
financial information include:
. the effects of trading of either Telewest or General Cable since March
31, 1998;
. any costs of integration and rationalization of the two businesses, as
no reliable estimate of the totality of such costs can currently be made;
and
. the expected benefits of the Combined Group's organization and
financial management, synergies and elimination of duplicate efforts.
III-162
<PAGE>
SECTION THREE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA CAPITALIZATION
- --------------------------------------------------------------------------------
III-163
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA CAPITALIZATION
- --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
The following table sets forth as of March 31, 1998: (i) the historical
capitalization of Telewest and General Cable and (ii) the pro forma
capitalization of the Combined Group after giving effect to the proposed
transactions.
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA
TELEWEST GENERAL CABLE COMBINED GROUP
MARCH 31, 1998 MARCH 31, 1998 MARCH 31, 1998
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
Debt
Bank debt and debentures 1,448,820 280,000 1,728,820
Other debt 75,560 203,556 279,116
----------------------------------------------
Total debt 1,524,380 483,556 2,007,936
Minority interests 666 4,058 666
Shareholders' equity
Convertible preference shares 49,607 -- --
Ordinary shares 92,757 365,092 213,848
Additional paid in capital(1) 1,330,946 94,917 2,224,666
Accumulated deficit (803,288) (45,469) (803,288)
----------------------------------------------
Total capitalization 2,195,068 902,154 3,643,828
----------------------------------------------
</TABLE>
- ------------
(1) Telewest and the Combined Group additional paid in capital is shown net of
(Pounds)1.941 million in respect of Telewest shares held in trust for the
restricted share scheme.
III-164
<PAGE>
SECTION THREE US FINANCIAL INFORMATION
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA COMPARATIVE PER SHARE INFORMATION
- --------------------------------------------------------------------------------
III-165
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA COMPARATIVE PER SHARE INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
The following unaudited pro forma financial information reflects certain
comparative per share information relating to (i) unaudited loss from
continuing operations per Telewest share and book value per aggregate Telewest
share and Telewest Convertible Preference share on a historical basis for
Telewest, (ii) unaudited loss from continuing operations per General Cable
share and book value per General Cable share on a historical basis for General
Cable, (iii) unaudited pro forma loss from continuing operations per share of
the Combined Group and unaudited pro forma book value per share of the Combined
Group, assuming completion of the merger for the periods indicated and (iv)
unaudited pro forma loss per General Cable share and book value per General
Cable share on a pro forma equivalent basis. No dividends were paid by Telewest
during any of the periods presented. The information presented herein should be
read in conjunction with the selected historical financial information of
Telewest and General Cable and the unaudited selected pro forma financial
information of the Combined Group appearing elsewhere in this Part III.
III-166
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA COMPARATIVE PER SHARE INFORMATION
- --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
<TABLE>
<CAPTION>
AT OR FOR THREE
MONTHS ENDED AT OR FOR YEAR ENDED
MARCH 31, DECEMBER 31,
---------------------- ----------------------
1998(A) 1998 1997(A) 1997
<S> <C> <C> <C> <C>
HISTORICAL
Telewest (per Telewest
Ordinary Share)(b)
Loss from continuing
operations $(0.12) (Pounds)(0.07) $(0.60) (Pounds)(0.36)
Book value 0.79 0.47 0.87 0.52
General Cable (per General
Cable Ordinary Share)(c)
Loss from continuing
operations (0.03) (0.02) (0.30) (0.18)
Book value 1.91 1.14 1.93 1.15
PRO FORMA
Enlarged Group(d)
Loss from continuing
operations (0.07) (0.04) (0.34) (0.20)
Book value 1.18 0.70 -- --
General Cable (pro forma
equivalent per share)(e)
Loss from continuing
operations (0.09) (0.05) (0.42) (0.25)
Book value 1.47 0.87 -- --
General Cable pro forma
equivalent per ADS data(f)
Loss from continuing
operations (0.44) (0.25) (2.11) (1.24)
Book value 7.33 4.35 -- --
</TABLE>
- ------------
(a) For convenience purposes, the dollar figures presented above were converted
at the Noon Buying Rate of the Federal Reserve Bank of New York on March 31,
1998 of $1.6765 per (Pounds)1.00.
(b) Historical loss from continuing operations per share amounts at December
31, 1997 andMarch 31, 1998 are based on the weighted average of Telewest shares
outstanding of 927,567,600. Historical book value per share amounts are based
on the aggregate weighted average Ordinary Shares and the 496,066,708 Telewest
Convertible Preference shares.
(c) The historical per share amounts for General Cable have been calculated
based on 365,092,000 shares deemed outstanding for the entire year.
(d) The Combined Group pro forma book value per share amounts are based on the
aggregate of 2,138,481,211 Telewest shares assuming all Telewest Convertible
Preference shares are converted into Telewest shares and the Pre-emptive Issue
is completed.
(e) General Cable pro forma equivalent per share amounts represent the pro
forma per share amounts for the Combined Group multiplied by 1.243, which is
the number of Telewest shares being offered in exchange for the General Cable
shares on the Offer.
(f) Each General Cable ADS represents five General Cable shares.
III-167
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP DILUTION
- --------------------------------------------------------------------------------
SECTION FOUR US FINANCIAL INFORMATION
III-168
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP US GAAP DILUTION
- --------------------------------------------------------------------------------
SECTION FOUR US FINANCIAL INFORMATION
The difference between the 92.5 pence (i.e., .925 pounds sterling) offering
price per Telewest share in the Pre-emptive Issue and the pro forma net
tangible book value per Telewest share following the consummation of the Pre-
emptive Issue and the Offer constitutes the dilution to the purchasers of
Telewest shares in the Pre-emptive Issue. Net tangible book value per share is
determined by dividing the net tangible book value of Telewest (total tangible
assets less total liabilities) by the number of outstanding Telewest shares and
Telewest Convertible Preference shares.
At March 31, 1998, the pro forma net tangible book value of Telewest was
approximately (Pounds)211,377,000 or (Pounds)0.148 per share, before giving
effect to the consummation of the Pre-emptive Issue and the Offer. Without
taking into account any changes in net tangible book value attributable to
operations after March 31, 1998, but after giving effect to the consummation of
the Pre-emptive Issue (including the application of the net proceeds thereof as
described herein) and the Offer, the pro forma net tangible book value of
Telewest as of March 31, 1998 would have been approximately (Pounds)391,548,000
or (Pounds)0.183 per share. This represents an immediate dilution of
(Pounds)0.742 per share to purchasers of Telewest shares in the Pre-emptive
Issue (80.2% of the 92.5 pence offering price per Telewest share). The
following table illustrates this dilution, on a per share basis:
<TABLE>
<S> <C> <C>
Offering price per Telewest share (Pounds)0.925
Net tangible book value as of March 31,
1998 (Pounds)0.148(a)
Decrease in pro forma net tangible book
value
after giving effect to Offer (0.084)
Increase in net tangible book value
attributable
to purchasers in the Pre-emptive Issue 0.119(b)
Pro forma net tangible book value after
the
Pre-emptive Issue and Offer 0.183(c)
-------------
Total dilution to purchasers in Pre-
emptive Issue (Pounds)0.742
=============
</TABLE>
- ------------
(a) The net tangible book value per share as of March 31, 1998 was
calculated based on the 1,423,634,308 Telewest shares in issue prior to
consummation of the Pre-emptive Issue and the Offer, which were
comprised of 927,567,600 Telewest shares and 496,066,708 Telewest
Convertible Preference shares, as set out in the unaudited consolidated
financial statements for the quarter ended March 31, 1998.
(b) The increase in net tangible book value attributable to purchasers in
the Pre-emptive Issue has been calculated based on the issuance of
260,665,436 new Telewest shares at a price of 92.5 pence per share as
set out elsewhere in this document.
(c) The pro forma net tangible book value per share after consummation of
the Pre-emptive Issue and the Offer was calculated based on
2,138,481,211 Telewest shares assumed to be in issue, which were
comprised of the 927,567,600 Telewest shares referenced in note (a)
above and the number of new Telewest shares to be issued in relation to
the Conversion of all Telewest Convertible Preference shares
(496,066,708 shares), the exchange for all General Cable shares in the
Offer (454,181,467 shares) and all shares subject to the Pre-emptive
Issue (260,665,436 shares) as set out elsewhere in this document.
The pro forma net tangible book values set forth in the preceding table have
been derived from the US GAAP Unaudited Pro Forma Financial Information set out
elsewhere in this document.
III-169
<PAGE>
- --------------------------------------------------------------------------------
THE COMBINED GROUP US GAAP DILUTION
- --------------------------------------------------------------------------------
SECTION FOUR US FINANCIAL INFORMATION
The following table summarizes, as of March 31, 1998, the total number of
Telewest shares and Telewest Convertible Preference shares purchased from
Telewest, the aggregate consideration paid and the average price per share paid
by the existing holders of Telewest shares and Telewest Convertible Preference
shares, the holders of General Cable shares and the purchasers in the Pre-
emptive Issue.
<TABLE>
<CAPTION>
AVERAGE
TOTAL PRICE
SHARES PURCHASED CONSIDERATION PER
NUMBER PERCENT AMOUNT PERCENT SHARE
(Pounds)'000
<S> <C> <C> <C> <C> <C>
Existing holders 1,423,634,308 67% (Pounds)1,475,251 55% (Pounds)1.040
General Cable holders 454,181,467 21% 959,653 36% 2.110
Purchasers in Pre-
emptive Issue 260,665,436 12% 241,116 9% 0.925
------------- ---- ----------------- ---- -------------
Total 2,138,481,211 100% (Pounds)2,676,020 100% (Pounds) 1.25
============= ==== ================= ==== =============
</TABLE>
For purposes of the foregoing calculations, it was assumed that General Cable
options were cancelled in exchange for cash as part of the Offer. In addition,
the foregoing tables exclude shares issuable pursuant to Telewest Share
schemes. Details of the Telewest Share schemes are set out elsewhere in this
document.
III-170
<PAGE>
- --------------------------------------------------------------------------------
SECTION FOUR
EXPERTS
- --------------------------------------------------------------------------------
SECTION FOUR EXPERTS
III-171
<PAGE>
- --------------------------------------------------------------------------------
EXPERTS
- --------------------------------------------------------------------------------
SECTION FOUR EXPERTS
(a) The consolidated balance sheets of Telewest and its subsidiaries as at 31
December 1997 and 1996, and the related consolidated statements of operations,
shareholders' equity and cash flows for each of the years in the three-year
period ended 31 December 1997 included elsewhere in this document have been
included herein in reliance on the report of KPMG Audit Plc, Chartered
Accountants and Registered Auditors included elsewhere in this document, given
on the authority of that firm as experts in accounting and auditing.
(b) The consolidated balance sheets of General Cable and its subsidiaries as
at 31 December 1997 and 1996, and the related consolidated profit and loss
accounts, reconciliations of movements in shareholders' funds and cash flows
for each of the three years in the period ended 31 December 1997 included
elsewhere in this document, have been included herein in reliance on the report
of Coopers & Lybrand, Chartered Accountants, given on the authority of that
firm as experts in accounting and auditing.
(c) The consolidated balance sheets of Birmingham Cable and its subsidiaries
as at 31 December 1997, 1996 and 1995, and the related consolidated profit and
loss accounts, reconciliations of movements in shareholders' funds and cash
flows for each of the three years in the period ended 31 December 1997 included
elsewhere in this document, have been included herein in reliance on the report
of Deloitte & Touche, Chartered Accountants, given on the authority of that
firm as experts in accounting and auditing.
III-172
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The following indemnification provisions are applicable to the officers and
directors of Telewest Communications plc (the "Company") and certain other
parties.
The Memorandum and Articles of Association of the Company provide:
1. Subject to the provisions of English law applicable to companies, but
without prejudice to an indemnity to which he may otherwise be entitled, every
officer of the Company shall be indemnified out of the assets of the Company
against all costs, charges, losses and liabilities incurred by him in the
execution of his duties or the exercise of his powers, authorities and
discretions including (without prejudice to the generality of the foregoing) a
liability incurred:
(a) defending proceedings (whether civil or criminal) in which judgment
is given in his favor or in which he is acquitted, or which are otherwise
disposed of without a finding or admission of material breach of duty on
his part, or
(b) in connection with any application in which relief is granted to him
by the court from liability for negligence, default, breach of duty or
breach of trust in relation to the affairs of the Company.
2. The Board may exercise all the powers of the Company to purchase and
maintain insurance for the benefit of a person who is an officer or employee,
or former officer or employee, of the Company or of a company which is a
subsidiary of the Company or in which the Company has an interest (whether
direct or indirect), or who is or was the trustee of a retirement benefits
scheme or another trust in which an officer or employee or former officer or
employee is or has been interested, indemnifying him against liability for
negligence, default, breach of duty or breach of trust or other liability
which may lawfully be insured against by the Company.
Section 310 of the Companies Act 1985, as amended (the "Companies Act"),
provides:
"(1) This section applies to any provision, whether contained in a company's
articles or in any contract with the company or otherwise, for
exempting any officer of the company or any person (whether an officer
or not) employed by the company as auditor from, or indemnifying him
against, any liability which by virtue of any rule of law would
otherwise attach to him in respect of any negligence, default, breach
of duty or breach of trust of which he may be guilty in relation to the
company.
(2) Except as provided by the following subsection, any such provision is
void.
(3) This section does not prevent a company:
(a) from purchasing and maintaining for any such of officer or auditor
insurance against any such liability, or
(b) from indemnifying any such officer or auditor against any liability
incurred by him:
(i) in defending any proceedings (whether civil or criminal) in
which judgment is given in his favour or he is acquitted, or
(ii) in connection with any application under section 144(3) or (4)
(acquisition of shares by innocent nominee) or section 727
(general power to grant relief in case of honest and reasonable
conduct) in which relief is granted to him by the court."
Section 727 of the Companies Act provides:
"(1) If in any proceedings for negligence, default, breach of duty or breach
of trust against an officer of a company or a person employed by a
company as auditor (whether he is or is not an officer of the company)
it appears to the court hearing the case that that officer or person is
or may be liable in
II-1
<PAGE>
respect of negligence, default, breach of duty or breach of trust, but
that he has acted honestly and reasonably, and that having regard to all
the circumstances of the case (including those connected with his
appointment) he ought fairly to be excused for the negligence, default,
breach of duty or breach of trust, that court may relieve him, either
wholly or partly, from his liability on such terms as it thinks fit.
(2) If any such officer or person as above-mentioned has reason to
apprehend that any claim will or might be made against him in respect
of any negligence, default, breach of duty or breach of trust, he may
apply to the court for relief; and the court on the application has the
same power to relieve him as under this section it would have had if it
had been a court before which proceedings against the person for
negligence, default, breach of duty or breach of trust had been
brought.
(3) Where a case to which subsection (1) applies is being tried by a judge
with a jury, the judge, after hearing the evidence, may, if he is
satisfied that the defendant or defender ought in pursuance of that
subsection to be relieved either in whole or in part from the liability
sought to be enforced against him, withdraw the case in whole or in
part from the jury and forthwith direct judgment to be entered for the
defendant or defender on such terms as to costs or otherwise as the
judge may think proper."
The officers and directors of the Company are covered by insurance policies
indemnifying against certain liabilities, including liabilities arising under
the Securities Act of 1933, as amended, which might be incurred by them in
such capacities and against which they may not be indemnified by the Company.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
All capitalized terms used but not otherwise defined herein shall have the
meanings ascribed thereto under "Definitions" commencing on page I-4 of the
Disclosure Document.
a.Exhibits
<TABLE>
<S> <C>
2.1 Agreement Relating to the Merger of General Cable and the Company, dated March 29,
1998, among the Company, General Cable, Compagnie Generale des Eaux S.A. and GUHL.*
3.1 Memorandum of Association of the Company. (Incorporated by reference to the Company's
Registration
Statement on Form 8-B, filed with the Securities and Exchange Commission on September
22, 1995, as amended).
3.2 Articles of Association of the Company. (Incorporated by reference to the Company's
Registration Statement on Form 8-B, filed with the Securities and Exchange Commission
on September 22, 1995, as amended).
3.3 Form of Amended and Restated Articles of Association of the Company. (1)
4.1 Amended and Restated Deposit Agreement, dated as of November 30, 1994 (as amended as
of
October 2, 1995), among the Company, The Bank of New York, as Depositary, and the
holders from time to time of American Depositary Receipts issued thereunder.
(Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 1, 1996).
4.2 Form of American Depositary Receipt (included in Exhibit 4.1).
4.3 Senior Debenture Indenture, dated as of October 3, 1995, between the Company and The
Bank of New York, as Trustee. (Incorporated by reference to the Company's 1995 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on April 1,
1996).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
4.4 Senior Discount Debenture Indenture, dated as of October 3, 1995, between the Company
and The Bank of New York, as Trustee. (Incorporated by reference to the Company's
1995 Annual Report on Form
10-K filed with the Securities and Exchange Commission on April 1, 1996).
4.5 Form of Senior Debenture (included in Exhibit 4.3).
4.6 Form of Senior Discount Debenture (included in Exhibit 4.4).
4.7 Deposit Agreement, dated as of October 3, 1995, between the Company and The Bank of
New York, as Book-Entry Depositary. (Incorporated by reference to the Company's 1995
Annual Report on Form 10-K filed with the Securities and Exchange Commission on April
1, 1996).
Note: No other long-term debt instrument issued by the Company exceeds 10% of the
consolidated total assets of the Company and its subsidiaries. In accordance with
paragraph 4(iii) of Item 601 of Regulation S-K, the Company will furnish to the
Commission upon request copies of long-term debt instruments and related
agreements.
5.1 Opinion of Freshfields, Counsel to Telewest, as to the validity of the Telewest
shares. (1)
10.1 Relationship Agreement, dated as of November 22, 1994, by and among Old Telewest,
certain subsidiaries of TCI, and certain subsidiaries of MediaOne as superseded by
Exhibit 10.55. (Incorporated by reference to Old Telewest's 1994 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 31, 1995).
10.2 Shareholders Agreement, entered into as of November 22, 1994, between certain
subsidiaries of TCI and certain subsidiaries of MediaOne. (Incorporated by reference
to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995).
10.3 Registration Rights Agreement, dated October 3, 1995, among the Company, the TINTA
Affiliate, the MediaOne Affiliates, the SBC Affiliates and the Cox Affiliate.
(Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 1, 1996).
10.4 Co-Operation Agreement, dated October 3, 1995, between the SBC Affiliates and the Cox
Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-
K filed with the Securities and Exchange Commission on April 1, 1996).
10.5 Share Dealing Agreement, dated October 3, 1995, among the TCI Affiliate, the MediaOne
Affiliates, the Company and the SBC Affiliates. (Incorporated by reference to the
Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996).
10.6 Tax Deed, dated November 22, 1994, between TCI International Holdings, Inc., U S WEST
Holdings and Old Telewest. (Incorporated by reference to Old Telewest's 1994 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 31,
1995).
10.7 Trademark License Agreement, effective as of November 22, 1994, between Old Telewest
and U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 31, 1995).
10.8 Tradename Agreement, effective as of November 22, 1994, between Old Telewest, TCI and
TCI/U S WEST Cable Communications Group ("TUCCI"). (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
</TABLE>
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10.9 Tax Deed, dated October 3, 1995, among the Company, the SBC Affiliates and the Cox
Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-
K filed with the Securities and Exchange Commission on April 1, 1996).
10.10 Consultant Agreement for Operational Assistance, dated July 17, 1992, among
Birmingham Cable, Birmingham Cable Limited ("BCL") and Telewest Communications Group
Limited ("Telewest CGL"). (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April 29,
1994, as amended (Registration No. 33-78398)).
10.11 Supplemental Agreement, dated April 8, 1994, relating to the Consultant Agreement
referred to in Exhibit 10.10 (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange Commission
on April 29, 1994, as amended (Registration No. 33-78398)).
10.12 Management Agreement, dated April 25, 1990, among Birmingham Cable, BCL, U S WEST
Holdings and Comcast Cablevision of Birmingham Inc. (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.13 Assignment and Amendment Agreement, dated August 5, 1992, relating to the Management
Agreement referred to in Exhibit 10.12 (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange Commission
on April 29, 1994, as amended (Registration
No. 33-78398)).
10.14 Consultant Agreement, dated August 16, 1989, between Cable London and U S WEST Cable
Communications Limited. (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April 29,
1994, as amended (Registration
No. 33-78398)).
10.15 Consultant Agreement for Technical Assistance, dated July 15, 1992, among Cable
Corporation, Windsor Television Limited, Middlesex Cable Limited and Telewest CGL.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.16 Cable Affiliation Agreement, dated December 14, 1993, between Cable Programme
Partners--Limited Partnership, Telewest CGL and other parties signatory thereto.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.17 Agreement, dated October 1, 1993, among Alan Stewart MacDonald Robinson, Jack Forrest
Gill, Raman Subba Row Limited and TUCCI. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange Commission
on April 29, 1994, as amended (Registration No. 33-78398)).
10.18 Co-ownership Agreement, dated March 12, 1990, between U S WEST Holdings and Comcast
Cablevision of Birmingham, Inc. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange Commission
on April 29, 1994, as amended (Registration No. 33-78398)).
10.19 Letter, dated April 29, 1992, relating to the Co-ownership Agreement referred to in
Exhibit 10.18. (Incorporated by reference to Old Telewest's Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as
amended (Registration No. 33-78398)).
</TABLE>
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10.20 Letter, dated November 27, 1992, relating to the Co-ownership Agreement referred to
in Exhibit 10.18. (Incorporated by reference to Old Telewest's Registration Statement
on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as
amended (Registration No. 33-78398)).
10.21 Agreement to License and Provide Consulting Services, effective as of November 22,
1994, between Old Telewest and an affiliate of MediaOne. (Incorporated by reference
to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995).
10.22 Agreement, dated December 4, 1987, between United Cable Television Corporation on
behalf of itself and United Artists Communications, Inc. and Trans-Global (U.K.)
Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form
S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.23 Agreement to License and Provide Consulting Services, effective as of November 22,
1994, between Old Telewest and TCI. (Incorporated by reference to Old Telewest's 1994
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
31, 1995).
10.24 Novation Agreement relating to Birmingham Cable, dated November 21, 1994, among
General Cable, TUCCI, U S WEST Holding and other parties signatory thereto.
(Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1995).
10.25 Subscription and Shareholders Agreement, dated January 30, 1995, among Videotron
Corporation Limited, United Artists Communications (London South) Limited, Cable
London, Elt Acquisition Company Limited, Nynex CableComms Limited, Cable Corporation,
London Interconnect Limited, Independent Cable Sales Limited and London Interconnect
PPV Limited. (Incorporated by reference to the Company's Registration Statement on
Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as
amended).
10.26 Form of BT Interconnect Agreement, a copy of which was executed by BT and various of
the Company's affiliated entities. (Incorporated by reference to the Company's 1997
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
31, 1997)
10.27 Interconnection Agreement, dated July 15, 1994, between Mercury Communications
Limited ("Mercury") and United Artists Communications (Scotland) Limited.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)). (2)
10.28 Mercury Marketing and Operations Agreement, dated August 10, 1993, between Telewest
CGL and Mercury. (Incorporated by reference to Old Telewest's Registration Statement
on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as
amended (Registration No. 33-78398)). (2)
10.29 Letter Agreement, dated August 23, 1995, between SBCC and Mercury. (Incorporated by
reference to the Company's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on September 22, 1995, as amended). (3)
10.30 Programming Agreement, dated June 30, 1995, among British Sky Broadcasting Limited,
British Sky Broadcasting Group plc and Old Telewest. (Incorporated by reference to
Old Telewest's Quarterly Report on Form 10-Q for the six months ended June 30, 1995).
(3)
10.31 General Purchasing Agreement, dated March 1, 1993, among Telewest CGL, various
entities related to Telewest CGL, and Northern Telecom Europe Limited (the "General
Purchasing Agreement") (Incorporated by reference to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 filed with the
Securities and Exchange Commission on June 19, 1998). (2)
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10.32 Purchase Agreement, dated August 27, 1993, between Southwestern Bell International
Holdings and GPT Limited. (Incorporated by reference to the Company's Registration
Statement on Form 8-B filed with the Securities and Exchange Commission on September
22, 1995, as amended).
10.33 Network Services Center Agreement, dated May 16, 1994, among Telewest CGL, Birmingham
Cable, Cable London, and certain other signatories thereto. (Incorporated by
reference to Old Telewest's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on April 29, 1994, as amended (Registration No.
33-78398)).
10.34 The Old Telewest Restricted Share Scheme. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.35 The Telewest 1995 Restricted Share Scheme. (Incorporated by reference to the
Company's Registration Statement on Form 8-B filed with the Securities and Exchange
Commission on September 22, 1995, as amended).
10.36 The Old Telewest Sharesave Scheme. (Incorporated by reference to Old Telewest's 1994
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
31, 1995).
10.37 The Telewest 1995 Sharesave Scheme. (Incorporated by reference to the Company's
Registration Statement on Form 8-B filed with the Securities and Exchange Commission
on September 22, 1995, as amended).
10.38 The Old Telewest Executive Share Option Scheme No. 1. (Incorporated by reference to
Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.39 The Telewest 1995 Executive Share Option Scheme No. 1. (Incorporated by reference to
the Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on
September 22, 1995, as amended).
10.40 The Old Telewest Executive Share Option Scheme No. 2. (Incorporated by reference to
Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.41 The Telewest 1995 Executive Share Option Scheme No. 2. (Incorporated by reference to
the Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on
September 22, 1995, as amended).
10.42 The Old Telewest Share Participation Scheme. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.43 The Telewest 1995 Share Participation Scheme. (Incorporated by reference to the
Company's Registration Statement on Form 8-B filed with the Securities and Exchange
Commission on
September 22, 1995, as amended).
10.44 Non-Executive Directors Appointment Letter, dated August 1, 1995 between the Company
and Anthony W.P. Stenham. (Incorporated by reference to the Company's 1996 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 28,
1997).
10.45 Non-Executive Directors Appointment Letter, dated August 1, 1995, between the Company
and Lord Griffiths of Fforestfach. (Incorporated by reference to the Company's 1996
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
28, 1997).
</TABLE>
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10.46 Loan Agreement, by and among Telewest Communications Networks Limited, as borrower,
The Bank of New York, CIBC Wood Gundy plc, Chase Investment Bank Limited, NatWest
Markets and The Toronto-Dominion Bank, as arrangers, and CIBC Wood Gundy plc, as
agent and security trustee, dated as of May 22, 1996, as amended pursuant to
amendments dated as of May 31, 1996, August 2, 1996, September 11, 1996 and
March 27, 1998. (Incorporated by reference to Telewest's Quarterly Report on
Form 10-Q for the period ended March 31, 1998 filed with the Securities and
Exchange Commission on April 15, 1998).
10.47 Amendments number 1 through 9 to the General Purchasing Agreement referred to in
Exhibit 10.31 (Incorporated by reference to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 filed with the Securities
and Exchange Commission on June 19, 1998). (3)
10.48 Employment Agreement, dated August 7, 1997, between Charles Burdick and Telewest CGL
(Incorporated by reference to Telewest"s Annual Report on Form 10-K for the period
ended December 31, 1997 filed with the Securities and Exchange Commission on March
31, 1998).
10.49 Loan Agreement, by and among Telewest Communications Networks Limited, as borrower,
The Bank of New York, CIBC Wood Gundy plc, Chase Manhattan plc, Greenwich NatWest and
The Toronto-Dominion Bank, as arrangers, and The Toronto-Dominion Bank, as agent and
security trustee, dated as of March 27, 1998. (Incorporated by reference to
Telewest"s Quarterly Report on Form 10-Q for the period ended March 31, 1998 filed
with the Securities and Exchange Commission on April 15, 1998).
10.50 Letter, dated as of April 24, 1998, between Stephen Davidson and Telewest CGL
(Incorporated by reference to Telewest"s Quarterly Report on Form 10-Q for the period
ended March 31, 1998 filed with the Securities and Exchange Commission on April 15,
1998).
10.51 Subscription Agreement, dated April 15, 1998, by and among TINTA, U S West, Cox and
the Company. (Incorporated by reference to the Company's Schedule 13D filed with the
Securities and Exchange Commission on April 20, 1998).
10.52 Letter, dated April 15, 1998, from the Company to General Cable PLC. (Incorporated by
reference to the Company's Schedule 13D filed with the Securities and Exchange
Commission on April 20, 1998).
10.53 Letter, dated April 15, 1998, from CGE and General Utilities to the Company.
(Incorporated by reference to the Company's Schedule 13D filed with the Securities
and Exchange Commission on April 20, 1998).
10.54 Letter, dated April 15, 1998, from TCI, U S WEST, Cox and SBC to the Company.
(Incorporated by reference to the Company's Schedule 13D filed with the Securities
and Exchange Commission on April 20, 1998).
10.55 Form of Amended and Restated Relationship Agreement, dated as of July . , 1998, by
and among the Company, the MediaOne Affiliates, TINTA, the TINTA Affiliate, Cox, the
Cox Affiliate, SBC International, Inc. and the SBC Affiliate. (1)
10.56 Form of Amendment No. 1 to the Registration Rights Agreement, dated July . , 1998,
by and among the Company, the TINTA Affiliate, the MediaOne Affiliates, the SBC
Affiliate, Southwestern Bell International Holdings (UK-2) Corporation, the Cox
Affiliate, GUHL and Vivendi. (1)
21 List of Subsidiaries of the Company. (Incorporated by reference to the Company's 1996
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
28, 1997).
23.1 Consent of KPMG Audit Plc. (1)
23.2 Consent of Coopers and Lybrand. (1)
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23.3 Consent of Robson Rhodes. (1)
23.4 Consent of Deloitte & Touche. (1)
23.5 Consents of Proposed Directors (Messrs. William Anthony Rice and Michel Jean Charles
Villaneau). (1)
23.6 Consent of J. Henry Schroder & Co. Limited. (1)
23.7 Consent of BT Wolfensohn. (1)
24.1 Powers of Attorney (included on signature pages to initial filing of Registration
Statement).
99.1 Form of Letter of Transmittal. (1)
99.2 Form of Notice of Guaranteed Delivery. (1)
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees. (1)
99.4 Form of Letter to Clients. (1)
99.5 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-
9. (1)
99.6 Form of Acceptance, Authority and Election. (1)
</TABLE>
- --------
* Previously filed.
(1) Filed herewith.
(2) Portions of this agreement have been accorded confidential treatment by
the Securities and Exchange Commission pursuant to Rule 406 of the
Securities Act of 1933, as amended.
(3) Portions of this agreement have been accorded confidential treatment by
the Securities and Exchange Commission pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934, as amended.
b. Financial Statement Schedules. None.
c. Item 4(b) Reports. None.
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Offer to
Purchase/Prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form S-4,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the Registration Statement through the date of responding to the
request.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Securities Act"), each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be
a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
undersigned registrant pursuant to the Memorandum and Articles of Association
of the undersigned registrant or any of the statutory provisions described in
Item 20 above, or otherwise, the undersigned registrant has been advised that
in the opinion of the Commission such
II-8
<PAGE>
indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in a successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 per cent change in
the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of
the offering.
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<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL OF THE
REQUIREMENTS FOR FILING ON FORM S-4 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN LONDON, ENGLAND, ON JUNE 29 , 1998.
TELEWEST COMMUNICATIONS PLC
By: /s/ Charles Burdick
---------------------------------
Name: CHARLES BURDICK
Title: GROUP FINANCE DIRECTOR
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED, THIS
REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND ON THE DATES INDICATED:
SIGNATURE TITLE DATE
* Director June 29, 1998
- -------------------------------------
A. GARY AMES
* Director June 29, 1998
- -------------------------------------
LORD BORRIE
* Director June 29, 1998
- -------------------------------------
STEPHEN M. BRETT
* Director June 29, 1998
- -------------------------------------
DAVID EVANS
Director June 29, 1998
- -------------------------------------
JAMES O. ROBBINS
* Director June 29, 1998
- -------------------------------------
ROBERT SHANER
* Director June 29, 1998
- -------------------------------------
ANTHONY W.P. STENHAM
* Director and Acting June 29, 1998
- ------------------------------------- Chief Executive
DAVID VAN VALKENBURG Officer (Principal
Executive Officer)
/s/ Charles Burdick Director and Group June 29, 1998
- ------------------------------------- Finance Director
CHARLES BURDICK (Principal
Financial and
Accounting Officer)
II-10
<PAGE>
Authorized Representative in the
United States:
By: /s/ David Evans June 29, 1998
---------------------------------
DAVID EVANS
*By: /s/ Charles Burdick June 29, 1998
--------------------------------
ATTORNEY-IN-FACT
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EXHIBIT INDEX
All capitalized terms used but not otherwise defined herein shall have the
meanings ascribed thereto under "Definitions" commencing on page I-4 of the
Disclosure Document.
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2.1 Agreement Relating to the Merger of General Cable and the Company, dated March 29,
1998, among the Company, General Cable, Compagnie Generale des Eaux S.A. and GUHL.*
3.1 Memorandum of Association of the Company. (Incorporated by reference to the Company's
Registration
Statement on Form 8-B, filed with the Securities and Exchange Commission on September
22, 1995, as amended).
3.2 Articles of Association of the Company. (Incorporated by reference to the Company's
Registration Statement on Form 8-B, filed with the Securities and Exchange Commission
on September 22, 1995, as amended).
3.3 Form of Amended and Restated Articles of Association of the Company. (1)
4.1 Amended and Restated Deposit Agreement, dated as of November 30, 1994 (as amended as
of
October 2, 1995), among the Company, The Bank of New York, as Depositary, and the
holders from time to time of American Depositary Receipts issued thereunder.
(Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 1, 1996).
4.2 Form of American Depositary Receipt (included in Exhibit 4.1).
4.3 Senior Debenture Indenture, dated as of October 3, 1995, between the Company and The
Bank of New York, as Trustee. (Incorporated by reference to the Company's 1995 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on April 1,
1996).
4.4 Senior Discount Debenture Indenture, dated as of October 3, 1995, between the Company
and The Bank of New York, as Trustee. (Incorporated by reference to the Company's
1995 Annual Report on Form
10-K filed with the Securities and Exchange Commission on April 1, 1996).
4.5 Form of Senior Debenture (included in Exhibit 4.3).
4.6 Form of Senior Discount Debenture (included in Exhibit 4.4).
4.7 Deposit Agreement, dated as of October 3, 1995, between the Company and The Bank of
New York, as Book-Entry Depositary. (Incorporated by reference to the Company's 1995
Annual Report on Form 10-K filed with the Securities and Exchange Commission on April
1, 1996).
Note: No other long-term debt instrument issued by the Company exceeds 10% of the
consolidated total assets of the Company and its subsidiaries. In accordance with
paragraph 4(iii) of Item 601 of Regulation S-K, the Company will furnish to the
Commission upon request copies of long-term instruments and related agreements.
5.1 Opinion of Freshfields, Counsel to Telewest, as to the validity of the Telewest
shares. (1)
10.1 Relationship Agreement, dated as of November 22, 1994, by and among Old Telewest,
certain subsidiaries of TCI, and certain subsidiaries of MediaOne as superseded by
Exhibit 10.55. (Incorporated by reference to Old Telewest's 1994 Annual Report on
Form 10-K filed with the Securities and Exchange Commission on March 31, 1995).
10.2 Shareholders Agreement, entered into as of November 22, 1994, between certain
subsidiaries of TCI and certain subsidiaries of MediaOne. (Incorporated by reference
to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995).
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10.3 Registration Rights Agreement, dated October 3, 1995, among the Company, the TINTA
Affiliate, the MediaOne Affiliates, the SBC Affiliates and the Cox Affiliate.
(Incorporated by reference to the Company's 1995 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on April 1, 1996).
10.4 Co-Operation Agreement, dated October 3, 1995, between the SBC Affiliates and the Cox
Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-
K filed with the Securities and Exchange Commission on April 1, 1996).
10.5 Share Dealing Agreement, dated October 3, 1995, among the TCI Affiliate, the MediaOne
Affiliates, the Company and the SBC Affiliates. (Incorporated by reference to the
Company's 1995 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on April 1, 1996).
10.6 Tax Deed, dated November 22, 1994, between TCI International Holdings, Inc., U S WEST
Holdings and Old Telewest. (Incorporated by reference to Old Telewest's 1994 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 31,
1995).
10.7 Trademark License Agreement, effective as of November 22, 1994, between Old Telewest
and U S WEST. (Incorporated by reference to Old Telewest's 1994 Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 31, 1995).
10.8 Tradename Agreement, effective as of November 22, 1994, between Old Telewest, TCI and
TCI/U S WEST Cable Communications Group ("TUCCI"). (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.9 Tax Deed, dated October 3, 1995, among the Company, the SBC Affiliates and the Cox
Affiliate. (Incorporated by reference to the Company's 1995 Annual Report on Form 10-
K filed with the Securities and Exchange Commission on April 1, 1996).
10.10 Consultant Agreement for Operational Assistance, dated July 17, 1992, among
Birmingham Cable, Birmingham Cable Limited ("BCL") and Telewest Communications Group
Limited ("Telewest CGL"). (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April 29,
1994, as amended (Registration No. 33-78398)).
10.11 Supplemental Agreement, dated April 8, 1994, relating to the Consultant Agreement
referred to in Exhibit 10.10 (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange Commission
on April 29, 1994, as amended (Registration No. 33-78398)).
10.12 Management Agreement, dated April 25, 1990, among Birmingham Cable, BCL, U S WEST
Holdings and Comcast Cablevision of Birmingham Inc. (Incorporated by reference to Old
Telewest's Registration Statement on Form S-1 filed with the Securities and Exchange
Commission on April 29, 1994, as amended (Registration No. 33-78398)).
10.13 Assignment and Amendment Agreement, dated August 5, 1992, relating to the Management
Agreement referred to in Exhibit 10.12 (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange Commission
on April 29, 1994, as amended (Registration
No. 33-78398)).
10.14 Consultant Agreement, dated August 16, 1989, between Cable London and U S WEST Cable
Communications Limited. (Incorporated by reference to Old Telewest's Registration
Statement on Form S-1 filed with the Securities and Exchange Commission on April 29,
1994, as amended (Registration
No. 33-78398)).
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10.15 Consultant Agreement for Technical Assistance, dated July 15, 1992, among Cable
Corporation, Windsor Television Limited, Middlesex Cable Limited and Telewest CGL.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.16 Cable Affiliation Agreement, dated December 14, 1993, between Cable Programme
Partners--Limited Partnership, Telewest CGL and other parties signatory thereto.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.17 Agreement, dated October 1, 1993, among Alan Stewart MacDonald Robinson, Jack Forrest
Gill, Raman Subba Row Limited and TUCCI. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange Commission
on April 29, 1994, as amended (Registration No. 33-78398)).
10.18 Co-ownership Agreement, dated March 12, 1990, between U S WEST Holdings and Comcast
Cablevision of Birmingham, Inc. (Incorporated by reference to Old Telewest's
Registration Statement on Form S-1 filed with the Securities and Exchange Commission
on April 29, 1994, as amended (Registration No. 33-78398)).
10.19 Letter, dated April 29, 1992, relating to the Co-ownership Agreement referred to in
Exhibit 10.18. (Incorporated by reference to Old Telewest's Registration Statement on
Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as
amended (Registration No. 33-78398)).
10.20 Letter, dated November 27, 1992, relating to the Co-ownership Agreement referred to
in Exhibit 10.18. (Incorporated by reference to Old Telewest's Registration Statement
on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as
amended (Registration No. 33-78398)).
10.21 Agreement to License and Provide Consulting Services, effective as of November 22,
1994, between Old Telewest and an affiliate of MediaOne. (Incorporated by reference
to Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1995).
10.22 Agreement, dated December 4, 1987, between United Cable Television Corporation on
behalf of itself and United Artists Communications, Inc. and Trans-Global (U.K.)
Limited. (Incorporated by reference to Old Telewest's Registration Statement on Form
S-1 filed with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)).
10.23 Agreement to License and Provide Consulting Services, effective as of November 22,
1994, between Old Telewest and TCI. (Incorporated by reference to Old Telewest's 1994
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
31, 1995).
10.24 Novation Agreement relating to Birmingham Cable, dated November 21, 1994, among
General Cable, TUCCI, U S WEST Holding and other parties signatory thereto.
(Incorporated by reference to Old Telewest's 1994 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1995).
10.25 Subscription and Shareholders Agreement, dated January 30, 1995, among Videotron
Corporation Limited, United Artists Communications (London South) Limited, Cable
London, Elt Acquisition Company Limited, Nynex CableComms Limited, Cable Corporation,
London Interconnect Limited, Independent Cable Sales Limited and London Interconnect
PPV Limited. (Incorporated by reference to the Company's Registration Statement on
Form 8-B filed with the Securities and Exchange Commission on September 22, 1995, as
amended).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.26 Form of BT Interconnect Agreement, a copy of which was executed by BT and various of
the Company's affiliated entities. (Incorporated by reference to the Company's 1997
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
31, 1997)
10.27 Interconnection Agreement, dated July 15, 1994, between Mercury Communications
Limited ("Mercury") and United Artists Communications (Scotland) Limited.
(Incorporated by reference to Old Telewest's Registration Statement on Form S-1 filed
with the Securities and Exchange Commission on April 29, 1994, as amended
(Registration No. 33-78398)). (2)
10.28 Mercury Marketing and Operations Agreement, dated August 10, 1993, between Telewest
CGL and Mercury. (Incorporated by reference to Old Telewest's Registration Statement
on Form S-1 filed with the Securities and Exchange Commission on April 29, 1994, as
amended (Registration No. 33-78398)). (2)
10.29 Letter Agreement, dated August 23, 1995, between SBCC and Mercury. (Incorporated by
reference to the Company's Registration Statement on Form 8-B filed with the
Securities and Exchange Commission on September 22, 1995, as amended). (3)
10.30 Programming Agreement, dated June 30, 1995, among British Sky Broadcasting Limited,
British Sky Broadcasting Group plc and Old Telewest. (Incorporated by reference to
Old Telewest's Quarterly Report on Form 10-Q for the six months ended June 30, 1995).
(3)
10.31 General Purchasing Agreement, dated March 1, 1993, among Telewest CGL, various
entities related to Telewest CGL, and Northern Telecom Europe Limited (the "General
Purchasing Agreement") (Incorporated by reference to Amendment No. 1 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1997 filed with the
Securities and Exchange Commission on June 19, 1998). (2)
10.32 Purchase Agreement, dated August 27, 1993, between Southwestern Bell International
Holdings and GPT Limited. (Incorporated by reference to the Company's Registration
Statement on Form 8-B filed with the Securities and Exchange Commission on September
22, 1995, as amended).
10.33 Network Services Center Agreement, dated May 16, 1994, among Telewest CGL, Birmingham
Cable, Cable London, and certain other signatories thereto. (Incorporated by
reference to Old Telewest's Registration Statement on Form S-1 filed with the
Securities and Exchange Commission on April 29, 1994, as amended (Registration No.
33-78398)).
10.34 The Old Telewest Restricted Share Scheme. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.35 The Telewest 1995 Restricted Share Scheme. (Incorporated by reference to the
Company's Registration Statement on Form 8-B filed with the Securities and Exchange
Commission on September 22, 1995, as amended).
10.36 The Old Telewest Sharesave Scheme. (Incorporated by reference to Old Telewest's 1994
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
31, 1995).
10.37 The Telewest 1995 Sharesave Scheme. (Incorporated by reference to the Company's
Registration Statement on Form 8-B filed with the Securities and Exchange Commission
on September 22, 1995, as amended).
10.38 The Old Telewest Executive Share Option Scheme No. 1. (Incorporated by reference to
Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.39 The Telewest 1995 Executive Share Option Scheme No. 1. (Incorporated by reference to
the Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on
September 22, 1995, as amended).
10.40 The Old Telewest Executive Share Option Scheme No. 2. (Incorporated by reference to
Old Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.41 The Telewest 1995 Executive Share Option Scheme No. 2. (Incorporated by reference to
the Company's Registration Statement on Form 8-B filed with the Securities and
Exchange Commission on
September 22, 1995, as amended).
10.42 The Old Telewest Share Participation Scheme. (Incorporated by reference to Old
Telewest's 1994 Annual Report on Form 10-K filed with the Securities and Exchange
Commission on March 31, 1995).
10.43 The Telewest 1995 Share Participation Scheme. (Incorporated by reference to the
Company's Registration Statement on Form 8-B filed with the Securities and Exchange
Commission on
September 22, 1995, as amended).
10.44 Non-Executive Directors Appointment Letter, dated August 1, 1995 between the Company
and Anthony W.P. Stenham. (Incorporated by reference to the Company's 1996 Annual
Report on Form 10-K filed with the Securities and Exchange Commission on March 28,
1997).
10.45 Non-Executive Directors Appointment Letter, dated August 1, 1995, between the Company
and Lord Griffiths of Fforestfach. (Incorporated by reference to the Company's 1996
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
28, 1997).
10.46 Loan Agreement, by and among Telewest Communications Networks Limited, as borrower,
The Bank of New York, CIBC Wood Gundy plc, Chase Investment Bank Limited, NatWest
Markets and The Toronto-Dominion Bank, as arrangers, and CIBC Wood Gundy plc, as
agent and security trustee, dated as of
May 22, 1996, as amended pursuant to amendments dated as of May 31, 1996, August 2,
1996, September 11, 1996 and March 27, 1998. (Incorporated by reference to Telewest's
Quarterly Report on Form 10-Q for the period ended March 31, 1998 filed with the
Securities and Exchange Commission on April 15, 1998).
10.47 Amendments number 1 through 9 to the General Purchasing Agreement referred to in
Exhibit 10.31 (Incorporated by reference to Amendment No. 1 to the Company's Annual
Report on Form 10-K for the year ended December 31, 1997 filed with the Securities
and Exchange Commission on June 19, 1998). (3)
10.48 Employment Agreement, dated August 7, 1997, between Charles Burdick and Telewest CGL
(Incorporated by reference to Telewest"s Annual Report on Form 10-K for the period
ended December 31, 1997 filed with the Securities and Exchange Commission on March
31, 1998).
10.49 Loan Agreement, by and among Telewest Communications Networks Limited, as borrower,
The Bank of New York, CIBC Wood Gundy plc, Chase Manhattan plc, Greenwich NatWest and
The Toronto-Dominion Bank, as arrangers, and The Toronto-Dominion Bank, as agent and
security trustee, dated as of March 27, 1998. (Incorporated by reference to
Telewest"s Quarterly Report on Form 10-Q for the period ended March 31, 1998 filed
with the Securities and Exchange Commission on April 15, 1998).
10.50 Letter, dated as of April 24, 1998, between Stephen Davidson and Telewest CGL
(Incorporated by reference to Telewest"s Quarterly Report on Form 10-Q for the period
ended March 31, 1998 filed with the Securities and Exchange Commission on April 15,
1998).
10.51 Subscription Agreement, dated April 15, 1998, by and among TINTA, U S West, Cox and
the Company. (Incorporated by reference to the Company's Schedule 13D filed with the
Securities and Exchange Commission on April 20, 1998).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
10.52 Letter, dated April 15, 1998, from the Company to General Cable PLC. (Incorporated by
reference to the Company's Schedule 13D filed with the Securities and Exchange
Commission on April 20, 1998).
10.53 Letter, dated April 15, 1998, from CGE and General Utilities to the Company.
(Incorporated by reference to the Company's Schedule 13D filed with the Securities
and Exchange Commission on April 20, 1998).
10.54 Letter, dated April 15, 1998, from TCI, U S WEST, Cox and SBC to the Company.
(Incorporated by reference to the Company's Schedule 13D filed with the Securities
and Exchange Commission on
April 20, 1998).
10.55 Form of Amended and Restated Relationship Agreement, dated as of July . , 1998, by
and among the Company, the MediaOne Affiliates, TINTA, the TINTA Affiliate, Cox, the
Cox Affiliate, SBC International, Inc. and the SBC Affiliate. (1)
10.56 Form of Amendment No. 1 to the Registration Rights Agreement, dated July . , 1998,
by and among the Company, the TINTA Affiliate, the MediaOne Affiliates, the SBC
Affiliate, Southwestern Bell International Holdings (UK-2) Corporation, the Cox
Affiliate, GUHL and Vivendi. (1)
21 List of Subsidiaries of the Company. (Incorporated by reference to the Company's 1996
Annual Report on Form 10-K filed with the Securities and Exchange Commission on March
28, 1997).
23.1 Consent of KPMG Audit Plc. (1)
23.2 Consent of Coopers and Lybrand. (1)
23.3 Consent of Robson Rhodes. (1)
23.4 Consent of Deloitte & Touche. (1)
23.5 Consents of Proposed Directors (Messrs. William Anthony Rice and Michel Jean Charles
Villaneau). (1)
23.6 Consent of J. Henry Schroder & Co. Limited. (1)
23.7 Consent of BT Wolfensohn. (1)
24.1 Powers of Attorney (included on signature pages to initial filing of Registration
Statement).
99.1 Form of Letter of Transmittal. (1)
99.2 Form of Notice of Guaranteed Delivery. (1)
99.3 Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees. (1)
99.4 Form of Letter to Clients. (1)
99.5 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-
9. (1)
99.6 Form of Acceptance, Authority and Election. (1)
</TABLE>
- --------
* Previously filed.
(1) Filed herewith.
(2) Portions of this agreement have been accorded confidential treatment by
the Securities and Exchange Commission pursuant to Rule 406 of the
Securities Act of 1933, as amended.
(3) Portions of this agreement have been accorded confidential treatment by
the Securities and Exchange Commission pursuant to Rule 24b-2 of the
Securities Exchange Act of 1934, as amended.
<PAGE>
EXHIBIT 3.3
AGREED FORM
--------------------------------------------
ARTICLES OF ASSOCIATION
of
TELEWEST COMMUNICATIONS plc/1/
(Adopted by special resolution
passed on [_____] 1998)
--------------------------------------------
Preliminary
Interpretation
1.1 In the articles:
Act means, unless the context otherwise requires, the Companies Act 1985,
including any statutory modification or re-enactment for the time being in
force;
Acts means the Companies Acts 1985 and 1989 and all statutes and subordinate
legislation for the time being in force concerning companies so far as they
apply to the Company;
Approved Depositary means a custodian or other person (or a nominee for such
custodian or other person) appointed under contractual arrangements with the
Company or other arrangements approved by the board whereby such custodian or
other person or nominee holds or is interested in shares of the Company or
rights or interests in shares of the Company and issues securities or other
documents of title or otherwise evidencing the entitlement of the holder thereof
to or to receive such shares, rights or interests, provided and to the extent
that such arrangements have been approved by the board for the purposes of the
articles and shall include, where approved by the board, the trustees (acting in
their capacity as such) of any employees' share scheme established by the
Company or any other scheme or arrangements principally for the benefit of
employees of the Company and/or its subsidiaries which have been approved by the
Company in general meeting;
articles means these articles of association as amended from time to time;
- --------------------------------------------------------------------------------
/1/ The Company was incorporated as a public company limited by shares with the
name Amberfrost plc on 20 January 1994. Its name was changed to TeleWest
plc on 7 June 1995 pursuant to a special resolution passed on 7 June 1995,
and to Telewest Communications plc on 16 May 1996 pursuant to a special
resolution passed on 16 May 1996.
<PAGE>
auditors means the auditors of the Company;
board means the board of directors of the Company or the directors present or
deemed to be present at a duly convened meeting of the directors at which a
quorum is present;
business day means a day (not being a Saturday or Sunday) on which clearing
banks are open for business in London;
clear days means, in relation to a period of notice, that period excluding the
day when the notice is given or deemed to be given and the day for which it is
given or on which it is to take effect;
company includes any body corporate (not being a corporation sole) or
association of persons, whether or not a company within the meaning of the Act;
Cox means Cox Communications, Inc., a corporation incorporated under the laws of
the state of Delaware, U.S.A.
convertible preference shares means convertible preference shares in the capital
of the Company;
Cox Designated Director means the director who may be appointed from time to
time by a member of the Cox Group pursuant to article 72.4 provided that a Cox
Designated Director shall automatically cease so to be upon the Cox Group
ceasing to have the power to appoint a director pursuant to article 72.4:
Cox Group means at any time Cox, its holding companies, and/or its subsidiary
undertakings and/or any subsidiary undertakings of its holding companies for the
time being and a member of the Cox Group shall mean any registered holder of
shares beneficially owned by a person within such group. TW Holdings shall be
deemed to be a member of the Cox Group but only to the extent of the Pro Rata
Shares of the Cox Group. Wherever the articles require or permit the
calculation of a number or percentage of Shares held by the Cox Group such
number or percentage shall include the Pro Rata Shares of the Cox Group;
Dilutive Issue means any issue of Shares or other securities (including
securities convertible into or exchangeable for Shares or other securities
carrying the right to vote at general meetings of the Company's Shareholders) in
the capital of the Company in respect of which the TINTA Group or the MediaOne
Group or the SBC Group or the Cox Group or the Vivendi Group (as relevant) was
not entitled by the terms of such issue to participate on a pro-rata basis;
director means, unless the context otherwise requires, a director of the
Company;
dividend includes bonus;
Page 2
<PAGE>
entitled by transmission means, in relation to a share, entitled as a
consequence of the death or bankruptcy of a member or of another event giving
rise to a transmission of entitlement by operation of law;
executed includes, in relation to a document, execution under hand or under seal
or by another method permitted by law;
holder means, in relation to a share, the member whose name is entered in the
register as the holder of that share;
Independent Director means any director who is not designated by the MediaOne
Group or the TINTA Group in accordance with article 72 and is not a partner,
officer, employee of, or an individual having a material consultancy with, the
TINTA Group or the MediaOne Group;
Lesser Qualifying Interest means:
(a) 7.5% or more of the ordinary shares in issue for the time being; or
(b) following any Dilutive Issue, 5% or more of the ordinary shares in issue
for the time being provided immediately prior to such Dilutive Issue the
TINTA Group or the MediaOne Group or the SBC Group or the Cox Group or the
Vivendi Group (as relevant) held 7.5% or more of the ordinary shares in
issue for the time being;
For the foregoing purposes the percentage of ordinary shares held shall be
calculated on the assumption that all convertible preference shares then in
issue have been converted into ordinary shares and all ordinary shares issued
after the date of adoption of these articles pursuant or for the purposes of
share options shall be ignored;
London Stock Exchange means the International Stock Exchange of the United
Kingdom and the Republic of Ireland Limited;
MediaOne means MediaOne Group, Inc., formerly US WEST Inc., a corporation
incorporated under the laws of the State of Colorado, USA;
MediaOne Designated Director means any director who may be appointed from time
to time by a member of the MediaOne Group pursuant to article 72.2 provided that
a MediaOne Designated Director shall automatically cease so to be in the
following circumstances:
(a) upon members of the MediaOne Group ceasing to hold a Qualifying Interest
and to have the right to appoint two directors pursuant to article 72, but
retaining a Lesser Qualifying Interest and the right to appoint one
director, the MediaOne Designated Director last appointed to the board
shall cease so to be; and
Page 3
<PAGE>
(b) upon members of the MediaOne Group ceasing to hold a Qualifying Interest or
a Lesser Qualifying Interest and to have the right to appoint a director or
two directors pursuant to article 72, all MediaOne Designated Directors
shall cease so to be;
MediaOne Group means at any time MediaOne and/or MediaOne International and/or
either of their holding companies, and/or either of their subsidiary
undertakings and/or any subsidiary undertakings of either of their holding
companies for the time being, and a member of the MediaOne Group shall mean any
registered holder of shares beneficially owned by a person within such group,
provided always that (save in respect of TW Holdings) no person or group of
undertakings within the MediaOne Group shall also be within the TINTA Group. TW
Holdings shall be deemed to be a member of the MediaOne Group but only to the
extent of the number of Pro Rata Shares of the MediaOne Group. Wherever the
articles require or permit the calculation of a number or percentage of Shares
held by the MediaOne Group such number or percentage shall include the Pro Rata
Shares of the MediaOne Group;
MediaOne International means MediaOne International Holdings, Inc., formerly US
WEST International Holdings, Inc., a corporation incorporated under the laws of
the State of Delaware;
member means, unless the context otherwise requires, a member of the Company;
office means the registered office of the Company;
ordinary shares means ordinary shares in the capital of the Company;
paid, paid up and paid-up include credited as paid or paid up;
Pro Rata Shares means, with respect to any Shareholder Group at any time, the
number of ordinary shares held by TW Holdings attributable to such Shareholder
Group being (a) in the case of the MediaOne Group and the TINTA Group, the
product rounded to the nearest whole number of (x) the sum of the number of
ordinary shares held by TW Holdings less the number of such shares in which the
Cox Group have a beneficial interest as of such time, multiplied by (y) the
aggregate percentage ownership interest in TW Holdings, expressed as a decimal,
held by members of such Shareholder Group as of such date and (b) in the case of
the Cox Group, the ordinary shares held by TW Holdings in which it has a
beneficial interest;
Qualifying Interest means:
(a) 15% or more of the ordinary shares in issue for the time being; or
(b) following any Dilutive Issue, 12.5% or more of the ordinary shares in issue
for the time being provided that immediately prior to such Dilutive Issue
the TINTA Group or the MediaOne Group (as relevant) held 15% or more of the
ordinary shares in issue for the time being;
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<PAGE>
For the foregoing purposes the percentage of ordinary shares held shall be
calculated on the assumption that all convertible preference shares then in
issue have been converted into ordinary shares and all ordinary shares issued
after the date of adoption of these articles pursuant to or for the purposes of
share options shall be ignored;
recognised person means a recognised clearing house or a nominee of a recognised
clearing house or of a recognised investment exchange which is designated for
the purposes of section 185(4) of the Act;
register means, unless the context otherwise requires, the register of members
kept pursuant to section 352 of the Act;
Relationship Agreement means the amended and restated agreement between the
Company and members of the MediaOne Group, the TINTA Group, the Cox Group and
the SBC Group dated as of 15 April 1998 which affects, inter alia, the rights of
the holders of convertible preference shares to convert such shares;
SBC means SBC Communications Inc., a corporation incorporated under the laws of
Delaware;
SBC Designated Director means the director who may be appointed from time to
time by a member of the SBC Group pursuant to article 72.3 provided that a SBC
Designated Director shall automatically cease so to be upon the SBC Group
ceasing to have the power to appoint a director pursuant to article 72.3;
SBC Group means at any time SBC, its holding companies, and/or its subsidiary
undertakings and/or any subsidiary undertakings of its holding companies for the
time being and a member of the SBC Group shall mean any registered holder of
shares beneficially owned by a person within such group;
seal means, unless the context otherwise requires, the common seal of the
Company or any official or securities seal that the Company may have or may be
permitted to have under the Acts;
secretary means the secretary of the Company and includes any assistant or
deputy secretary and a person appointed by the board to perform the duties of
the secretary;
Shareholder Group means any of the Vivendi Group, the Cox Group, the SBC Group,
the TINTA Group or the MediaOne Group;
Shares means ordinary shares and/or convertible preference shares;
TCI means Tele-Communications, Inc., a corporation incorporated under the laws
of the State of Colorado, USA;
TINTA means Tele-Communications International, Inc., a corporation incorporated
under the laws of the State of Delaware, USA;
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<PAGE>
TINTA Designated Director means any director who may be appointed from time to
time by a member of the TINTA Group pursuant to article 72.1 provided that a
TINTA Designated Director shall automatically cease so to be in the following
circumstances:
(a) upon members of the TINTA Group ceasing to hold a Qualifying Interest and
the right to appoint two directors pursuant to article 72, but retaining a
Lesser Qualifying Interest and the right to appoint one director, the TINTA
Designated Director last appointed to the board shall cease so to be;
(b) upon members of the TINTA Group ceasing to hold a Qualifying Interest or a
Lesser Qualifying Interest and to have the right to appoint a director or
two directors pursuant to article 72, all TINTA Designated Directors shall
cease so to be;
TINTA Group means at any time TCI and/or TINTA and/or either of their holding
companies, and/or either of their subsidiary undertakings and/or any subsidiary
undertakings of either of their holding companies for the time being, and a
member of the TINTA Group shall mean any registered holder of shares
beneficially owned by a person within such group, provided always that (save in
respect of TW Holdings) no person or group of undertakings within the TINTA
Group shall also be within the MediaOne Group. TW Holdings shall be deemed to
be a member of the TINTA Group but only to the extent of the number of Pro Rata
Shares of TINTA Group. Wherever the articles require or permit the calculation
of a number or percentage of Shares held by the TINTA Group such number or
percentage shall include the Pro Rata Shares of the TINTA Group;
TW Holdings means TW Holdings, L.L.C., a Colorado limited liability company;
Vivendi means Vivendi S.A. formerly Compagnie Generale des Eaux, a company
incorporated in France whose principal office is at 52 rue d'Anjou, Paris 75008,
France;
Vivendi Designated Director means the director who may be appointed from time to
time by a member of the Vivendi Group pursuant to article 72.5 provided that a
Vivendi Designated Director shall automatically cease so to be upon the Vivendi
Group ceasing to have the power to appoint a director pursuant to article 72.5;
and
Vivendi Group means at any time Vivendi, its holding companies, and/or its
subsidiary undertakings and/or any subsidiary undertakings of its holding
companies for the time being and a member of the Vivendi Group shall mean any
registered holder of shares beneficially owned by a person within such group.
1.2 Words and expressions contained in the articles which are not defined in
article 1.1 have, unless the contrary is indicated, the same meaning as in the
Act,
Page 6
<PAGE>
but excluding any statutory modification to the Act not in force at the date of
adoption of the articles.
1.3 Where an ordinary resolution of the Company is expressed to be required for
any purpose, a special or extraordinary resolution is also effective for that
purpose, and where an extraordinary resolution is expressed to be required for
any purpose, a special resolution is also effective for that purpose.
1.4 The headings in the articles do not affect the interpretation of the
articles.
Table A not to apply
2. No regulations contained in any statute or subordinate legislation,
including the regulations contained in Table A in the schedule to the Companies
(Tables A to F) Regulations 1985 (as amended), apply as the regulations or
articles of association of the Company.
Authorised Capital
3. The authorised share capital of the Company at the date of adoption of the
articles is (Pounds)[_____ ] divided into [_____ ] ordinary shares of 10p each
and [_____ ] convertible preference shares of 10p each.
Convertible preference shares
Income
4.1 The convertible preference shares shall confer upon the holders thereof the
right, subject to the provisions of the Act and of the articles, to receive out
of the profits of the Company available for distribution and resolved to be
distributed a dividend (the convertible dividend) of such amount per share as is
declared and paid from time to time in relation to each ordinary share, subject
to the convertible dividend to be paid at any one time not exceeding 20p per
share (net of any associated tax credit). Subject thereto, the rights of the
holders of the convertible preference shares to receive the convertible dividend
shall rank pari passu in all respects with the rights of the holders of the
ordinary shares in relation to dividends. The convertible dividend shall be
paid according to the amounts paid up or credited as paid up on the convertible
preference shares in respect of which the convertible dividend is to be paid.
The convertible dividend shall be payable at the same time as the corresponding
dividend payable in relation to the ordinary shares and it shall be paid to the
holders of the convertible preference shares on the same date by reference to
which the corresponding dividend on the ordinary shares is payable. Subject to
the foregoing, the convertible preference shares shall not confer upon the
holders any further right to participate in the profits of the Company available
for distribution.
Page 7
<PAGE>
Capital
4.2 In the event of a winding up of the Company or other return of capital
(except on conversion or purchase of the convertible preference shares) the
assets of the Company available for distribution among the members shall be
applied in the following manner and order of priority:
(a) firstly, in paying to the holders of the convertible preference shares
(other than any convertible preference shares in respect of which the right
of election referred to in article 4.15(b) shall have been duly exercised
(liquidation elected shares)) a sum equal to the capital paid up or
credited as paid up on the convertible preference shares held by them
respectively; and
(b) secondly, in paying any surplus to the holders of the ordinary shares and
the liquidation elected shares pari passu and rateably the amount paid up
or credited as paid up on such shares held by them respectively.
4.3 Subject to the foregoing, the convertible preference shares shall not
confer upon the holders any further right to participate in the assets of the
Company available for distribution among the members.
Purchase
4.4 Subject to the provisions of the Act and of the articles, the Company may
at any time purchase convertible preference shares (a) in the market, (b) by
tender (available to all holders of convertible preference shares alike) or (c)
by private treaty, in each case at a price (exclusive of expenses) which shall
not exceed, if the convertible preference shares are then listed on the London
Stock Exchange:
(a) the average of the middle market quotations for the convertible preference
shares (based on the Daily Official List of the London Stock Exchange)
during the period of ten business days immediately prior to the date of
such purchase; or
(b) in the case of a purchase on the London Stock Exchange, at the market price
thereof (provided that such market price is not more than 5 per cent. above
such average);
and, if not then listed on the London Stock Exchange, 110 per cent. of the
nominal amount of the convertible preference shares.
Conversion
4.5 The provisions of articles 4.6 to 4.16 and 4.25 below are subject to the
terms of the Relationship Agreement which governs and overrides in a number of
respects the terms on which the convertible preference shares shall be
converted. The Company shall have the discretion to agree with the parties to
the Relationship Agreement for the time being to any revision, amendment,
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modification or termination of the provisions of the Relationship Agreement and
as regards the parties to the Relationship Agreement from time to time the
provisions of articles 4.6 to 4.16 and 4.25 shall be subject to the terms of the
Relationship Agreement as so revised, amended or modified.
4.6 Subject as hereinafter provided, each holder of convertible preference
shares shall be entitled at the time and in the manner set out in this article 4
to convert all or any of his convertible preference shares into fully paid
ordinary shares on the basis (subject to adjustment under article 4.13) of one
ordinary share for every one convertible preference share (the conversion rate).
4.7 Subject to the terms of the Relationship Agreement, for so long as the
ordinary shares are listed on the London Stock Exchange, a holder of any
convertible preference shares shall not be entitled to convert any of his
convertible preference shares into ordinary shares pursuant to this article 4 to
the extent that, immediately following such conversion, the percentage of the
issued ordinary share capital of the Company held by members of the public (as
defined by the Listing Rules of the London Stock Exchange) would fall below 25
per cent. Subject to the terms of the Relationship Agreement, where two or more
holders of convertible preference shares wish to effect such a conversion on the
same conversion date (as defined in article 4.8 below), the number of such
convertible preference shares to be converted shall be aggregated for the
purposes of determining whether the percentage of the issued ordinary share
capital held by members of the public (as defined by the Listing Rules of the
London Stock Exchange) would fall below 25 per cent. following the conversion of
all such shares, and if it would, the shares which may be so converted shall be
allocated pro rata according to the number of the shares originally sought to be
converted amongst the holders of such convertible preference shares. Subject to
the terms of the Relationship Agreement, the directors shall have absolute
discretion to determine whether ordinary shares are held by members of the
public (as defined by the Listing Rules of the London Stock Exchange) for the
purposes of this article 4.7 having due regard to the Listing Rules of the
London Stock Exchange.
4.8 Subject to the terms of the Relationship Agreement, the right to convert
shall be exercisable at any time by completing a notice of conversion in such
form as may from time to time be prescribed by the directors (a conversion
notice) and delivering the same to the registrars for the time being of the
Company (the registrars) together with such other evidence, if any, as the
directors may reasonably require to prove the title of the person exercising
such right. Subject to the terms of the Relationship Agreement, the date on
which the conversion notice is received by the registrars shall be the
conversion date. A conversion notice, once given, may not be withdrawn without
the consent in writing of the Company.
4.9 The ordinary shares arising on such conversion shall be credited as fully
paid and rank pari passu in all respects with the ordinary shares then in issue
and shall entitle the holder to all dividends and (unless any adjustment shall
have been made under article 4.14 in respect thereof) other distributions
payable on the ordinary shares after the conversion date. Any convertible
dividend due but not
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paid on the relevant conversion date shall continue to be payable to the holder
of the relevant convertible preference shares converted.
4.10 Within 28 days after the relevant conversion date, the Company shall
forward to each holder, free of charge, the definitive certificate for the
appropriate amount of fully paid ordinary shares and a new certificate for any
unconverted convertible preference shares comprised in the certificate
surrendered by him and, if appropriate, a cheque in respect of any fractional
entitlement. In the meantime, transfers will be certified against the register.
4.11 The Company shall use all reasonable efforts to ensure that all the
ordinary shares arising from conversion are admitted to the Official List by the
London Stock Exchange.
4.12 Conversion of such convertible preference shares from time to time may be
effected in such manner as the directors shall from time to time determine
(subject to the provisions of the Act and of the articles) and, without
prejudice to the generality of the foregoing, may be effected by means of
consolidation and sub-division, in which case the requisite consolidation and
sub-division shall be effected pursuant to the authority given by the passing of
the resolution to create the convertible preference shares by consolidating into
one share all the convertible preference shares at the relevant conversion date
held by any holder or joint holders which are the subject of the relevant
conversion notice and sub-dividing such consolidated shares into shares of 10p
each (or such other nominal amount as may be appropriate as a result of any
consolidation and sub-division of ordinary shares), of which one share for each
10p nominal amount of the consolidated shares (or such other number of shares as
may be appropriate as a result of any adjustment pursuant to article 4.14) shall
be ordinary shares (and so in proportion for any other nominal amount of the
consolidated shares, fractional entitlements being disregarded) and the balance
of such shares (including any fractions) shall be non-voting deferred shares
having the rights set out in article 4.13.
4.13 In the case of a conversion effected by means of consolidation and sub-
division as provided in article 4.12, the non-voting deferred shares arising as
a result thereof shall, on a return of assets in a winding up, entitle the
holder only to the repayment of 1p in respect of his entire holding thereof and
shall not entitle the holder to the payment of any dividend nor to receive
notice of or attend or vote at any general meeting of the Company. Such
conversion shall be deemed to confer irrevocable authority on the Company, at
any time thereafter, to appoint any person to execute on behalf of the holders
of such shares a transfer thereof, and/or an agreement to transfer the same, to
such person as the Company may determine as custodian thereof and/or purchase
the same (in accordance with the provisions of English law and the articles) in
any such case for not more than 1p for all the said shares without obtaining the
sanction of the holder or holders thereof and, pending such transfer and/or
purchase, to retain the certificate for such shares. Subject to the terms of
the Relationship Agreement, any allotment of ordinary shares pursuant to this
article 4 shall be made not later than 14 days after the relevant conversion
date.
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4.14 Upon any consolidation and/or sub-division of ordinary shares, the
conversion rate shall be adjusted by an amount which in the opinion of the
Company's auditors is fair and reasonable to maintain the rights to convert.
Holders of convertible preference shares shall be notified within 28 days of any
change in the basis of conversion.
4.15 So long as any convertible preference shares remain capable of being
converted into ordinary shares then:
(a) if the Company makes any pre-emptive offer to holders of its ordinary
shares, or of any other shares or securities, or if any other offer or
invitation (not being an offer falling within article 4.15(c)) is made or
extended to the holders of the ordinary shares, the Company shall, so far
as it is able, procure that a like offer or invitation is made or extended
(which could be a like offer of further convertible preference shares as
opposed to further ordinary shares) at the same time to each holder of
convertible preference shares as if his conversion rights had (subject to
article 4.7) been exercisable and exercised in full and as if the
conversion date for such conversion had been immediately prior to the
record date for such offer or invitation at the conversion rate then
applicable;
(b) if a resolution for voluntary winding-up of the Company is passed or a
winding-up order is made by the court in relation to the Company, the
Company shall forthwith give notice thereof in writing to all holders of
convertible preference shares, and each such holder of convertible
preference shares shall be entitled within 42 days after the date of the
resolution for voluntary winding-up of the Company or (as the case may be)
after the date of the winding-up order, by notice in writing to the Company
to elect to be treated as if his conversion rights had been exercisable and
had been exercised in full prior to such date (for which purposes the
provisions of article 4.7 will not apply) and as if the conversion date for
such conversion had been immediately prior to such date, and, in that
event, he shall be entitled to be paid in satisfaction of the amount due in
respect of such of his convertible preference shares as are to be treated
as converted a sum equal to the amount to which he would have become
entitled in such liquidation if he had been the holder of the ordinary
shares to which he would have become entitled by virtue of such conversion.
At the expiration of the said period of 42 days, any outstanding
convertible preference shares shall cease to be capable of conversion; and
(c) if an offer is made to the holders of ordinary shares or all such
shareholders other than the offeror and/or any associate of the offeror (as
defined in section 430E of the Act) to acquire the whole or any part of the
issued ordinary shares or if any person proposes a scheme of arrangement
with regard to such acquisition and the Company becomes aware (in either
case) that the right to cast more than 50 per cent. of the votes which may
ordinarily be cast on a poll at a general meeting of the
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Company has or will become vested in the offeror and/or such associates as
aforesaid, the Company shall give written notice thereof (which shall
include notice of all or any prior adjustments to the rate of conversion
made pursuant hereto) to all holders of convertible preference shares
within 28 days of it becoming so aware and each such holder shall be
entitled within the period of 42 days from the date of such notice to
convert any or all of his convertible preference shares into fully paid
ordinary shares on the basis and in the manner specified above except that
the conversion date in respect of any particular convertible preference
share shall be the day on which the Company shall have received a duly
completed conversion notice in relation to that share as adjusted, if
appropriate, hereunder and that the provisions of article 4.7 will not
apply.
4.16 If any fractions of ordinary shares shall arise on conversion of
convertible preference shares, the shares representing fractions may be dealt
with by the directors, on behalf of the holders thereof, as they think fit, but,
in particular, the shares representing fractions may (if arrangements can be so
made) be sold at the best price reasonably obtainable and the net proceeds of
sale distributed pro rata among the persons entitled thereto unless such net
proceeds amount to less than (Pounds)3 in respect of any one holding in which
case they will not be so distributed but will be retained for the benefit of the
Company. For the purpose of implementing the provisions of this article 4.16,
the directors may appoint a person to execute transfers or renunciations on
behalf of persons entitled to any such fractions and generally may make all
arrangements which appear to the directors necessary or appropriate for the
settlement and disposal of fractional entitlements.
Voting
4.17 The convertible preference shares shall confer on the holders the right to
receive notice of and to attend all general meetings of the Company but shall
only confer the right to speak or vote at any such meeting if the business of
the meeting includes the consideration of a resolution for winding up the
Company or any resolution modifying, varying or abrogating any of the rights or
privileges attaching to the convertible preference shares (in either of which
cases such holders shall be entitled to vote only on such resolution).
4.18 Upon any resolution upon which the holders of the convertible preference
shares are entitled to vote, each such holder present in person shall, on a show
of hands, have one vote and, on a poll, each such holder present in person or by
its duly appointed representative or by proxy shall have one vote in respect of
each ordinary share which the convertible preference share(s) registered in the
name of such holder would have been converted into had conversion taken place at
the conversion rate prevailing immediately prior to the date of the notice
convening the general meeting at which the resolution is proposed and subject to
the provisions of article 4.7 not applying to any such deemed conversions.
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Restrictions
4.19.1 So long as any convertible preference shares remain capable of being
converted into ordinary shares the following provisions shall apply, unless the
Company shall have obtained the consent (the right to give or withhold such
consent being a class right attaching to the convertible preference shares) in
writing of the holder or holders of three-fourths in nominal value of the
convertible preference shares then in issue or the sanction of an extraordinary
resolution passed at a separate meeting of the holders of the convertible
preference shares then in issue validly held in accordance with the provisions
of the articles:
4.19.2 The Company shall not:
(a) capitalise profits or reserves except by way of capitalisation issue made
available only to the holders of ordinary shares in the form of fully paid
ordinary shares and to the holders of convertible preference shares in the
form of fully paid convertible preference shares (and, if there shall be
outstanding pursuant to article 4.19.3 any equity share capital of a class
other than ordinary shares, to holders of share capital of that class in
the form of fully paid equity share capital of that class or of fully paid
ordinary shares); or
(b) make an offer or extend an invitation to the holders of ordinary shares or
allot any shares in pursuance of a capitalisation issue without also making
the offer or extending the invitation to the holders of any convertible
preference shares who have, on or prior to the date of the making of the
offer or extension of the invitation, delivered a conversion notice to the
registrars (provided such notice is not then withdrawn); or
(c) modify, vary or abrogate the rights attaching to the ordinary shares or any
other class of shares.
4.19.3 The Company shall not permit any equity share capital (as defined in the
Act) to be in issue which is not in all respects uniform with a class of shares
of the Company in issue or authorised to be issued on the date of adoption of
the articles save:
(a) as to the date from which the equity share capital shall rank for dividend;
or
(b) for equity share capital issued in connection with or pursuant to any
employees' share scheme (as defined in the Act); or
(c) for equity share capital which has attached thereto rights as to dividend,
capital and voting which are in no respect more favourable than those
attached to a class of shares of the Company in issue or authorised to be
issued on the date of adoption of the articles; or
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(d) for equity share capital issued pursuant to an offer or invitation which
is made or extended to the holders of convertible preference shares
(pursuant to article 4.15(a)); or
(e) for shares which are only comprised in the Company's equity share
capital because as regards capital such shares carry a right to
participate beyond a specified amount in a distribution made while such
shares remain capable of conversion into ordinary shares by the holders
thereof as if the same had been converted.
4.19.4 No resolution shall be passed for reducing the share capital of the
Company (without its replacement by similar issued share capital of the Company)
or any uncalled liability thereon or the amount, if any, for the time being
standing to the credit of any share premium account or capital redemption
reserve in any manner for which the confirmation of the court would be required
pursuant to the Act.
4.19.5 The Company shall not do any act or thing resulting in an adjustment of
the conversion rate if in consequence such rate would involve the issue of
ordinary shares at a discount.
4.19.6 The Company shall not change its accounting reference date unless it
shall also make such consequential changes (if any) in the dividend and
conversion rights attaching to the convertible preference shares as the
directors, in their absolute discretion, may think fair and reasonable to avoid
prejudicing such rights; the Company shall forthwith give written notice of any
such changes to the holders of the convertible preference shares.
Obligations
4.209 The Company shall procure that at all times there shall be sufficient
unissued ordinary share capital available for the purposes of effecting
conversion of all outstanding convertible preference shares.
4.210 The Company shall send to each holder of convertible preference shares a
copy of every document despatched to the holders of ordinary shares
contemporaneously with such despatch.
Issue of further shares
4.22 No further share capital of the Company ranking as regards participation
in the profits or assets of the Company in priority to the convertible
preference shares shall be created or issued without the consent in writing of
the holder or holders of three-fourths in nominal value of the convertible
preference shares then in issue or the sanction of an extraordinary resolution
passed at a separate meeting of the holders of the convertible preference shares
then in issue validly held in accordance with the provisions of the articles.
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4.23 Subject to the provisions of article 4.18, the Company may from time to
time create and issue further shares ranking as regards participation in the
profits and assets of the Company pari passu with the convertible preference
shares and so that any such further shares may either carry as regards
participation in the profits and assets of the Company, rights and restrictions
identical in all respects with the convertible preference shares or rights and
restrictions differing therefrom (provided they are not more favourable) in any
respect including, but without prejudice to the generality of the foregoing, (a)
as to the rate or amount of dividend payable thereon, (b) as to the date from
which they shall rank for dividend and/or the dates for payment of dividend
thereon, (c) as to the amount of any premium on a return of assets (whether on a
winding-up of the Company or otherwise), (d) as to redemption or (e) as to the
rate of conversion into ordinary shares.
Fully paid shares
4.24 No convertible preference shares shall be issued otherwise than fully paid
or credited as fully paid.
General
4.25 Subject to the terms of the Relationship Agreement, if any date specified
for the conversion of any convertible preference shares pursuant to this article
4 would otherwise fall on a day which is not a business day, such date shall be
the next following business day.
4.26 The quorum for any meeting of the holders of the convertible preference
shares shall be two holders of convertible preference shares present in person
or by proxy.
Share Capital
Allotment
5.1 Subject to the Acts and relevant authority of the Company in general
meeting required by the Acts, the board has general and unconditional authority
to allot (with or without conferring rights of renunciation), grant options
over, offer or otherwise deal with or dispose of unissued shares (whether
forming part of the original or any increased capital), or rights to subscribe
for or convert any security into shares, to such persons, at such times and on
such terms and conditions as the board may decide but no share may be issued at
a discount.
5.2 The board may at any time after the allotment of a share but before a
person has been entered in the register as the holder of the share recognise a
renunciation of the share by the allottee in favour of another person and may
grant to an allottee a right to effect a renunciation on the terms and
conditions the board thinks fit.
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Power to attach rights
6. Subject to the Acts and to the rights attached to existing shares, new
shares may be allotted or issued with or have attached to them such special
rights or restrictions as the Company may by ordinary resolution decide, or, if
no resolution is passed, as the board may decide.
Redeemable shares
7. Subject to the Acts and to the rights attached to existing shares, shares
may be issued on terms that they are to be redeemed or, at the option of the
Company or the holder, are liable to be redeemed.
Variation of rights
8.1 Subject to the Acts, the rights attached to a class of shares may be varied
whether or not the Company is being wound up (i) in such manner (if any) as may
be provided by those rights, or (ii) in the absence of any such provision,
either with the consent in writing of the holders of at least three-fourths of
the nominal amount of the issued shares of that class or with the sanction of an
extraordinary resolution passed at a separate meeting of the holders of the
issued shares of that class validly held in accordance with the articles, but
not otherwise.
8.2 The rights attached to a class of shares are not, unless otherwise
expressly provided in the rights attaching to those shares, deemed to be varied
by the creation or issue of further shares ranking pari passu with or subsequent
to them or by the purchase or redemption by the Company of its own shares in
accordance with the Acts and article 39.
Commission
9. The Company may exercise all powers conferred or permitted by the Acts of
paying commission or brokerage. Subject to the Acts, commission or brokerage
may be satisfied by the payment of cash or the allotment of fully- or partly-
paid shares or the grant of an option to call for an allotment of shares or by
any combination of these methods.
Trusts not recognised
10. Except as ordered by a court of competent jurisdiction or as required by
law, the Company shall not recognise a person as holding a share on trust and is
not bound by or otherwise compelled to recognise (even if it has notice of it)
an equitable, contingent, future, partial or other claim to or interest in a
share other than an absolute right in the holder to the whole of the share.
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Share Certificates
Right to certificate
11.1 Subject to the Acts and the requirements of the London Stock Exchange, a
person (except a recognised person in respect of whom the Company is not
required by law to complete and have ready for delivery a certificate) on
becoming the holder of a share is entitled, unless the terms of issue of the
shares provide otherwise, without charge, to one certificate for all the shares
of a class registered in his name or, in the case of shares of more than one
class being registered in his name, to a separate certificate for each class of
shares.
11.2 Where a member (other than a recognised person) transfers part of his
shares comprised in a certificate he is entitled, without charge, to one
certificate for the balance of shares retained by him.
11.3 The Company is not bound to issue more than one certificate for shares
held jointly by two or more persons and delivery of a certificate to one joint
holder is sufficient delivery to all joint holders.
11.4 A certificate shall specify the number and class and the distinguishing
numbers (if any) of the shares in respect of which it is issued and the amount
paid up on the shares. It shall be issued under a seal, which may be affixed to
or printed on it, or in such other manner as the board may approve, having
regard to the terms of issue and the requirements of the London Stock Exchange.
Replacement certificates
12.1 Where a member holds two or more certificates for shares of one class, the
board may at his request, on surrender of the original certificates and without
charge, cancel the certificates and issue a single replacement certificate.
12.2 At the request of a member, the board may cancel a certificate and issue
two or more in its place (representing shares in such proportions as the member
may specify), on surrender of the original certificate and on payment of such
reasonable sum as the board may decide.
12.3 Where a certificate is worn out, defaced, lost or destroyed, the board may
cancel it and issue a replacement certificate on such terms as to provision of
evidence and indemnity (with or without security) and to payment of any
exceptional out-of-pocket expenses incurred by the Company in the investigation
of that evidence and the preparation of that indemnity and security as the board
may decide, and on surrender of the original certificate (where it is worn out
or defaced).
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Lien
Company's lien on shares not fully paid
13.1 The Company has a first and paramount lien on every share (other than a
fully-paid share) registered in the name of a member (whether solely or jointly
with another person) for an amount payable in respect of the share, whether the
due date for payment has arrived or not. The lien applies to all dividends from
time to time declared or other amounts payable in respect of the share.
13.2 The board may either generally or in a particular case declare a share to
be wholly or partly exempt from the provisions of this article 13. Unless
otherwise agreed with the transferee, the registration of a transfer of a share
operates as a waiver of the Company's lien (if any) on that share.
Enforcement of lien by sale
14.1 For the purpose of enforcing the lien, the board may sell shares subject
to the lien in such manner as it may decide, if the due date for payment of the
relevant amounts has arrived and payment is not made within 14 clear days after
the service of a notice in writing (stating, and demanding payment of, the
amounts and giving notice of the intention to sell in default of payment) on the
member concerned (or to a person entitled by transmission to the shares).
14.2 To give effect to a sale, the board may authorise a person to execute an
instrument of transfer of shares in the name and on behalf of the holder of or
the person entitled by transmission to the shares to the purchaser or his
nominee. The purchaser is not bound to see to the application of the purchase
money and the title of the transferee is not affected by an irregularity in or
invalidity of the proceedings connected with the sale.
Application of proceeds of sale
15. The net proceeds of a sale effected under article 14, after payment of the
costs of the sale, shall be applied by the Company in or towards satisfaction of
the amount in respect of which the lien exists. Any residue shall (on surrender
to the Company for cancellation of the certificate for the shares sold, or the
provision of an indemnity (with or without security) as to any lost or destroyed
certificate required by the board and subject to a like lien for amounts not
presently payable as existed on the shares before the sale) be paid to the
member or a person entitled by transmission to the shares immediately before the
sale.
Calls on Shares
Calls
16. Subject to the terms of issue, the board may make calls on members in
respect of amounts unpaid on the shares or a class of shares held by them
respectively (whether in respect of nominal value or a premium) and not payable
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on a date fixed by or in accordance with the terms of issue. Each member shall
(on receiving at least 14 clear days' notice specifying when and where payment
is to be made) pay to the Company the amount called as required by the notice.
A call may be made payable by instalments and may, at any time before receipt by
the Company of an amount due, be revoked or postponed in whole or in part as the
board may decide. A call is deemed made at the time when the resolution of the
board authorising it is passed. A person on whom a call is made remains liable
to pay the amount called despite the subsequent transfer of the share in respect
of which the call is made. The joint holders of a share are jointly and
severally liable for payment of a call in respect of that share.
Power to differentiate
17. The board may make arrangements on the allotment or issue of shares for a
difference between the allottees or holders in the amounts and times of payment
of a call on their shares.
Interest on calls
18. If the whole of the amount called is not paid on or before the date fixed
for payment, the person by whom it is payable shall pay interest on the unpaid
amount at such rate as may be fixed by the terms of allotment of the share or,
if no rate is fixed, at such rate (not exceeding, without the sanction of the
Company given by ordinary resolution, 20 per cent. per annum) as the board may
decide, from and including the date fixed for payment until but excluding the
date of actual payment and all costs, charges and expenses incurred by the
Company by reason of the non-payment. The board may waive payment of the
interest in whole or in part.
Payment in advance
19. The board may, if it thinks fit, receive from a member all or part of the
amounts uncalled and unpaid on shares held by him. A payment in advance of
calls extinguishes to the extent of the payment the liability of the member on
the shares in respect of which it is made. The Company may pay interest on the
amount paid in advance, or on so much of it as from time to time exceeds the
amount called on the shares in respect of which the payment in advance has been
made, at such rate (not exceeding, without the sanction of the Company given by
ordinary resolution, 20 per cent. per annum) as the board may decide.
Amounts due on allotment treated as calls
20. An amount which becomes payable in respect of a share on allotment or on a
date fixed pursuant to the terms of allotment (whether in respect of nominal
value or a premium) or as an instalment of a call is deemed to be a call. In
case of non-payment, the provisions of the articles as to payment of interest
and costs, charges and expenses, forfeiture or otherwise apply as if that amount
has become payable by virtue of a call.
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Forfeiture
Notice if call not paid
21. If a member fails to pay the whole of a call or an instalment of a call on
or before the date fixed for payment, the board may serve notice on the member
or on a person entitled by transmission to the share in respect of which the
call was made demanding payment, on a date not less than 14 clear days from the
date of the notice, of the amount of the call outstanding and any interest that
may have accrued on it and all costs, charges and expenses incurred by the
Company by reason of the non-payment. The notice shall state (i) the place
where payment is to be made, and (ii) that if the notice is not complied with
the share in respect of which the call was made will be liable to be forfeited.
Forfeiture for non-compliance
22. If the notice referred to in article 21 is not complied with, a share in
respect of which it is given may, at any time before payment required by the
notice has been made, be forfeited by a resolution of the board. The forfeiture
includes all dividends declared or other amounts payable in respect of the
forfeited share and not paid before the forfeiture.
Notice after forfeiture
23. When a share has been forfeited, the Company shall serve notice of the
forfeiture on the person who was before forfeiture the holder of the share or
the person entitled by transmission to the share but no forfeiture is
invalidated by an omission to give notice. An entry of the fact and date of
forfeiture shall be made in the register.
Disposal of forfeited shares
24.1 Until cancelled in accordance with the Acts, a forfeited share and all
rights attaching to it are deemed to be the property of the Company and may be
sold, re-allotted or otherwise disposed of either to the person who was before
the forfeiture the holder or to another person, on such terms and in such manner
as the board may decide. Where for this purpose a forfeited share is to be
transferred, the board may authorise a person to execute an instrument of
transfer of the share to the transferee. The Company may receive the
consideration (if any) for the share on its disposal and may register the
transferee as the holder of the share.
24.2 The board may before a forfeited share has been cancelled, sold, re-
allotted or otherwise disposed of annul the forfeiture on such conditions as it
thinks fit.
24.3 A statutory declaration by a director or the secretary that a share has
been forfeited on the date stated in the declaration is conclusive evidence of
the facts stated in the declaration against all persons claiming to be entitled
to the share. The declaration (subject if necessary to the execution of an
instrument of transfer) constitutes good title to the share and the person to
whom the share is disposed of
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is not bound to see to the application of the consideration (if any). His title
to the share is not affected by an irregularity in or invalidity of the
proceedings connected with the forfeiture or disposal.
Arrears to be paid notwithstanding forfeiture
25. A person whose share has been forfeited ceases on forfeiture to be a member
in respect of it and shall surrender to the Company for cancellation the
certificate for the forfeited share or shares. He remains liable to pay, and
shall immediately pay to the Company, all calls, interest, costs, charges and
expenses owing in respect of the share at the time of forfeiture, with interest,
from the time of forfeiture until payment, at such rate as may be fixed by the
terms of allotment of the share or, if no rate is fixed, at the rate (not
exceeding, without the sanction of the Company given by ordinary resolution, 20
per cent. per annum) as the board may decide. The board may if it thinks fit
enforce payment without allowance for the value of the share at the time of
forfeiture or for consideration received on disposal.
Surrender
26. The board may accept the surrender of a share liable to be forfeited and in
that case references in the articles to forfeiture include surrender.
Untraced Shareholders
Power of sale
27.1 The Company is entitled to sell a share if:
(a) during a period of not less than 12 years before the date of publication
of the advertisements referred to in article 27.1(c) (or, if published on
two different dates, the first date) (the relevant period) the Company has
paid at least three cash dividends (whether interim or final);
(b) throughout the relevant period no cheque, order or warrant sent by the
Company by post in a pre-paid envelope addressed to the holder of the
share, or to the person entitled by transmission to the share, at his
address on the register or other last-known address given by the member or
other person has been cashed, and no communication has been received by
the Company from the member or person entitled by transmission (in his
capacity as member or person entitled by transmission);
(c) on expiry of the relevant period the Company has given notice of its
intention to sell the share by advertisement in a leading daily newspaper
and in a newspaper circulating in the area of the address referred to in
article 27.1(b);
(d) the Company has not during a further period of three months after the date
of the advertisements referred to in article 27.1(c) (or the later
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advertisement if the advertisements are published on different dates) and
before the exercise of the power of sale received a communication from the
member or person entitled by transmission (in his capacity as member or
person entitled by transmission); and
(e) the Company has first given notice in writing to the London Stock Exchange
of its intention to sell the share.
27.2 In addition to the power of sale conferred by article 27.1, if during the
relevant period or a further period ending on the date when all the requirements
of article 27.1(a) to (e) have been satisfied an additional share has been
issued in right of that held at the beginning of, or previously so issued
during, those periods and all the requirements of article 27.1(a) to (e) have
been satisfied in respect of the additional share, the Company is entitled to
sell the additional share.
27.3 To give effect to a sale pursuant to article 27.1 or 27.2, the board may
authorise a person to execute an instrument of transfer of the share in the name
and on behalf of the holder of, or the person entitled by transmission to, the
share to the purchaser or his nominee. The purchaser is not bound to see to the
application of the purchase money and the title of the transferee is not
affected by an irregularity or invalidity in the proceedings connected with the
sale of the share.
Application of proceeds of sale
28. The Company shall account to the member or other person entitled by
transmission to the share for the net proceeds of sale by carrying all amounts
received on sale to a separate account. The Company is deemed to be a debtor
and not a trustee in respect of those amounts for the member or other person.
Amounts carried to the separate account may either be employed in the business
of the Company or invested as the board may think fit. No interest is payable
on those amounts and the Company is not required to account for money earned on
them.
Transfer of Shares
Form of transfer
29. A member may transfer all or any of his shares by instrument of transfer in
writing in any usual form or in another form approved by the board, and the
instrument shall be executed by or on behalf of the transferor and (in the case
of a transfer of a share which is not fully paid) by or on behalf of the
transferee. The transferor is deemed to remain the holder of the share until
the name of the transferee is entered in the register in respect of it.
Right to refuse registration
30.1 Subject to articles 68 and 69, the board may, in its absolute discretion
and (except where the reason (or one of the reasons) for refusal is that the
transfer will
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give rise to a Notifiable Situation within the meaning of article
69.1, in which circumstances notice shall be given to the transferor containing
a statement of the kind described in article 69.4) without giving a reason,
refuse to register the transfer of a share or renunciation of a renounceable
letter of allotment unless all of the following conditions are satisfied:
(a) it is in respect of a share on which the Company has no lien;
(b) it is in respect of only one class of shares;
(c) it is in favour of a single transferee or renouncee or not more than four
joint transferees or renouncees;
(d) it is duly stamped (if required);
(e) it is delivered for registration to the office or such other place as the
board may decide, accompanied by the certificate for the shares to which it
relates (except in the case of a transfer by a recognised person where a
certificate has not been issued, or in the case of a renunciation) and such
other evidence as the board may reasonably require to prove the title of
the transferor or person renouncing and the due execution by him of the
transfer or renunciation or, if the transfer or renunciation is executed by
some other person on his behalf, the authority of that person to do so;
(f) it is not a transfer which is not to be registered pursuant to article
68.1(b)(ii)(B);
(g) it will not give rise to a Notifiable Situation within the meaning of
article 69.1; and
(h) a Disposal Notice within the meaning of article 69.6 has not been served in
respect of that share or has been served but has been withdrawn (unless the
transfer in question is to complete a Required Disposal of that share
within the meaning of article 69.1).
30.2 The board may, in its absolute discretion and without giving any reason,
refuse to register the transfer of a share which is not fully paid, provided
that the refusal does not prevent dealings in shares in the Company from taking
place on an open and proper basis.
30.3 If the board refuses to register the transfer of a share it shall, within
two months after the date on which the transfer was lodged with the Company,
send notice of the refusal to the transferee. An instrument of transfer which
the board refuses to register shall (except in the case of suspected fraud) be
returned to the person depositing it. All instruments of transfer which are
registered may, subject to article 142, be retained by the Company.
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Fees on registration
31. No fee may be charged by the Company for registering the transfer of a
share or the renunciation of a renounceable letter of allotment or other
document relating to or affecting the title to a share or the right to transfer
it or for making any other entry in the register.
Suspension of registration and closing of register
32. The registration of transfers may be suspended at such times and for such
period (not exceeding 30 days in any year) as the board may decide and either
generally or in respect of a particular class of shares.
Transmission of Shares
On death
33.1 The Company may recognise only the personal representatives of a deceased
member as having title to a share held by that member alone or to which he alone
was entitled. In the case of a share held jointly by more than one person, the
Company may recognise only the survivor or survivors as being entitled to it.
33.2 Nothing in the articles releases the estate of a deceased member from
liability in respect of a share which has been solely or jointly held by him.
Election of person entitled by transmission
34.1 A person becoming entitled by transmission to a share may, on production
of any evidence the board may require, elect either to be registered as a member
or to have a person nominated by him registered as a member.
34.2 If he elects to be registered himself, he shall give notice to the Company
to that effect. If he elects to have another person registered, he shall
execute an instrument of transfer of the share to that person. All the
provisions of the articles relating to the transfer of shares apply to the
notice or instrument of transfer (as the case may be) as if it were an
instrument of transfer executed by the member and his death, bankruptcy or other
event giving rise to a transmission of entitlement had not occurred.
34.3 The board may give notice requiring a person to make the election referred
to in article 34.1. If that notice is not complied with within 60 days, the
board may withhold payment of all dividends and other amounts payable in respect
of the share until notice of election has been made.
Rights on transmission
35. Where a person becomes entitled by transmission to a share, the rights of
the holder in relation to that share cease. The person entitled by transmission
may, however, give a good discharge for dividends and other amounts payable in
respect of the share and, subject to articles 34 and 125, has the rights to
which he would
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be entitled if he were the holder of the share. The person entitled by
transmission is not, however, before he is registered as the holder of the
share, entitled in respect of it to receive notice of or exercise rights
conferred by membership in relation to meetings of the Company or a separate
meeting of the holders of a class of shares.
Alteration of Share Capital
Increase, consolidation, sub-division and cancellation
36. The Company may by ordinary resolution:
(a) increase its share capital by a sum to be divided into shares of an amount
prescribed by the resolution;
(b) consolidate and divide all or any of its share capital into shares of a
larger amount than its existing shares;
(c) subject to the Acts, sub-divide all or any of its shares into shares of a
smaller amount and may by the resolution decide that the shares resulting
from the sub-division have amongst themselves a preference or other
advantage or be subject to a restriction; and
(d) cancel shares which, at the date of the passing of the resolution, have not
been taken or agreed to be taken by a person and diminish the amount of its
share capital by the amount of the shares so cancelled.
Fractions
37. If, as the result of consolidation and division or sub-division of shares,
members become entitled to fractions of a share, the board may on behalf of the
members deal with the fractions as it thinks fit. In particular, the board may:
(a) sell fractions of a share to a person (including, subject to the Acts, to
the Company) for the best price reasonably obtainable and distribute the
net proceeds of sale in due proportion amongst the persons entitled (except
that if the amount due to a person is less than (Pounds)3, or such other
sum as the board may decide, the sum may be retained for the benefit of the
Company). To give effect to a sale the board may authorise a person to
execute an instrument of transfer of shares to the purchaser or his nominee
and may cause the name of the purchaser or his nominee to be entered in the
register as the holder of the shares. The purchaser is not bound to see to
the application of the purchase money and the title of the transferee to
the shares is not affected by an irregularity or invalidity in the
proceedings connected with the sale; or
(b) subject to the Acts, issue to a member credited as fully paid by way of
capitalisation the minimum number of shares required to round up his
holding of shares to a number which, following consolidation and division
or sub-division, leaves a whole number of shares (such issue
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being deemed to have been effected immediately before consolidation or sub-
division, as the case may be). The amount required to pay up those shares
may be capitalised as the board thinks fit out of amounts standing to the
credit of reserves (including a share premium account, capital redemption
reserve and profit and loss account), whether or not available for
distribution, and applied in paying up in full the appropriate number of
shares. A resolution of the board capitalising part of the reserves has the
same effect as if the capitalisation had been declared by ordinary
resolution of the Company pursuant to article 132. In relation to the
capitalisation the board may exercise all the powers conferred on it by
article 132 without an ordinary resolution of the Company.
Reduction of capital
38. Subject to the Acts and to the rights attached to existing shares, the
Company may by special resolution reduce its share capital, capital redemption
reserve, share premium account or other undistributable reserve in any way.
Purchase of own shares
39. Subject to the Acts, the Company may purchase shares of any class
(including redeemable shares) in its own capital in any way. If at the date
proposed for approval of the proposed purchase there are in issue shares of a
class entitling the holders to convert into shares of another class, no purchase
may take place unless either:
(a) it has been sanctioned by an extraordinary resolution passed at a separate
meeting (or meetings if there are two or more classes) of the holders of
that class of convertible shares; or
(b) the terms of issue of such convertible shares include provisions permitting
the Company to purchase its own shares.
General Meetings
Annual general meeting
40. The Company shall hold annual general meetings, which shall be convened by
the board, in accordance with the Acts.
Extraordinary general meeting
41. All general meetings of the Company other than annual general meetings are
called extraordinary general meetings.
Convening of extraordinary general meetings
42. The board may convene an extraordinary general meeting whenever it thinks
fit. The board must convene an extraordinary general meeting immediately on
receipt of a requisition from members in accordance with the Acts and in
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default a meeting may be convened by requisitionists as provided in the Acts. At
a meeting convened on a requisition or by requisitionists no business may be
transacted except that stated by the requisition or proposed by the board. An
extraordinary general meeting may also be convened in accordance with article
95.
Length and form of notice
43.1 An annual general meeting and an extraordinary general meeting called for
the passing of a special resolution shall be called by not less than 21 clear
days' notice. All other extraordinary general meetings shall be called by not
less than 14 clear days' notice.
43.2 Subject to the Acts, and although called by shorter notice than that
specified in article 43.1, a general meeting is deemed to have been duly called
if it is so agreed:
(a) in the case of an annual general meeting, by all the members entitled to
attend and vote at the meeting; and
(b) in the case of another meeting, by a majority in number of the members
having a right to attend and vote at the meeting, being a majority together
holding not less than 95 per cent. in nominal value of the shares giving
that right.
43.3 The notice of meeting shall specify:
(a) whether the meeting is an annual general meeting or an extraordinary
general meeting;
(b) the place, the date and the time of the meeting;
(c) in the case of special business, the general nature of that business;
(d) if the meeting is convened to consider a special or an extraordinary
resolution, the intention to propose the resolution as such; and
(e) with reasonable prominence, that a member entitled to attend and vote may
appoint one or more proxies to attend and, on a poll, vote instead of him
and that a proxy need not also be a member.
43.4 The notice of meeting shall be given to the members (other than any who,
under the provisions of the articles or the terms of issue of shares, are not
entitled to receive notice), to the directors and to the auditors.
Omission to send notice
44. The accidental omission to send a notice of meeting or, in cases where it
is sent out with the notice, an instrument of proxy to, or the non-receipt of
either by,
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a person entitled to receive it does not invalidate the proceedings at a general
meeting.
Special business
45. All business transacted at a general meeting is deemed special except the
following business at an annual general meeting:
(a) the receipt and consideration of the annual accounts, the directors' report
and auditors' report on those accounts;
(b) the appointment of directors and other officers in place of those retiring
by rotation or otherwise ceasing to hold office;
(c) the declaration of dividends;
(d) the appointment of the auditors (when special notice of the resolution for
appointment is not required by the Acts) and the fixing, or determination
of the manner of the fixing, of their remuneration; and
(e) the renewal of the authorities of the Company in general meeting required
by the Acts and the articles in relation to the allotment of shares.
Proceedings at General Meetings
Quorum
46.1 No business may be transacted at a general meeting unless a quorum is
present at the start of the meeting. The absence of a quorum does not prevent
the appointment of a chairman in accordance with the articles, which is not
treated as part of the business of the meeting.
46.2 The quorum for a general meeting is for all purposes two members present
in person or by proxy and entitled to vote.
Procedure if quorum not present
47.1 If a quorum is not present within five minutes (or such longer period as
the chairman in his absolute discretion may decide) from the time fixed for the
start of the meeting or if during the meeting a quorum ceases to be present, the
meeting, if convened by or on the requisition of members, is dissolved. In any
other case it stands adjourned to such time (being not less than 14 days nor
more than 28 days later) and place as the chairman (or, in default, the board)
decides.
47.2 At an adjourned meeting the quorum is two members present in person or by
proxy and entitled to vote. If a quorum is not present within five minutes (or
such longer period as the chairman in his absolute discretion may decide) from
the time fixed for the start of the meeting or if during the meeting a quorum
ceases to be present, the adjourned meeting is dissolved.
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47.3 The Company shall give not less than seven clear days' notice of any
meeting adjourned for the lack of a quorum and the notice shall state the quorum
requirement.
Chairman
48. The chairman (if any) of the board or, in his absence, the deputy chairman
(if any) shall preside as chairman at a general meeting. If there is no chairman
or deputy chairman, or if at a meeting neither is present within five minutes
after the time fixed for the start of the meeting, or neither is willing to act,
the directors present shall select one of their number to be chairman. If only
one director is present and willing to act, he shall be chairman. In default,
the members present in person and entitled to vote shall choose one of their
number to be chairman.
Director's right to attend and speak
49. A director is entitled to attend and speak at a general meeting and at a
separate meeting of the holders of a class of shares or debentures whether or
not he is a member.
Power to adjourn
50.1 The chairman may, with the consent of a meeting at which a quorum is
present (and shall, if so directed by the meeting) adjourn a meeting from time
to time and from place to place or for an indefinite period.
50.2 Without prejudice to any other power which he may have under the
provisions of the articles or at common law, the chairman may, without the
consent of the meeting, interrupt or adjourn a meeting from time to time and
from place to place or for an indefinite period if he decides that it has become
necessary to do so in order to (i) secure the proper and orderly conduct of the
meeting, or (ii) give all persons entitled to do so a reasonable opportunity of
speaking and voting at the meeting, or (iii) ensure that the business of the
meeting is properly disposed of.
Notice of adjourned meeting
51. Without prejudice to article 47.3, whenever a meeting is adjourned for 28
days or more or for an indefinite period, at least seven clear days' notice
specifying the place, date and time of the adjourned meeting and the general
nature of the business to be transacted shall be given to the members (other
than any who, under the provisions of the articles or the terms of issue of the
shares, are not entitled to receive notice), the directors and the auditors.
Except in these circumstances, and subject to article 47.3, it is not necessary
to give notice of an adjourned meeting or of the business to be transacted at
the adjourned meeting.
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Business at adjourned meeting
52. No business may be transacted at an adjourned meeting other than the
business which might properly have been transacted at the meeting from which the
adjournment took place.
Accommodation of members at meeting
53. If it appears to the chairman that the meeting place specified in the
notice convening the meeting is inadequate to accommodate all members entitled
and wishing to attend, the meeting is duly constituted and its proceedings valid
if the chairman is satisfied that adequate facilities are available to ensure
that a member who is unable to be accommodated is able to (i) participate in the
business for which the meeting has been convened, and (ii) hear and see all
persons present who speak (whether by the use of microphones, loud-speakers,
audio-visual communications equipment or otherwise), whether in the meeting
place or elsewhere, and (iii) be heard and seen by all other persons present in
the same way.
Security
54. The board may make any arrangement and impose any restriction it considers
appropriate to ensure the security of a meeting including, without limitation,
the searching of a person attending the meeting and the restriction of the items
of personal property that may be taken into the meeting place. The board is
entitled to refuse entry to a meeting to a person who refuses to comply with
these arrangements or restrictions.
Voting
Method of voting
55.1 At a general meeting, a resolution put to the vote of the meeting is
decided by a show of hands unless (before or on the declaration of the result of
the show of hands) a poll is duly demanded.
55.2 Subject to the Acts, a poll may be demanded on any question by:
(a) the chairman of the meeting;
(b) not less than five members present in person or by proxy and entitled to
vote;
(c) a member or members present in person or by proxy representing in aggregate
not less than one-tenth of the total voting rights of all the members
having the right to vote at the meeting; or
(d) a member or members present in person or by proxy holding shares conferring
a right to vote at the meeting, being shares on which an aggregate sum has
been paid up equal to not less than one-tenth of the total sum paid up on
all the shares conferring that right.
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55.3 A demand by a proxy is deemed to be a demand by the member appointing the
proxy.
55.4 Unless a poll is demanded and the demand is not withdrawn, a declaration
by the chairman that the resolution has been carried, or carried by a particular
majority, or lost or not carried by a particular majority, and an entry to that
effect in the book containing the minutes of proceedings, is conclusive evidence
of the fact without proof of the number or proportion of the votes recorded in
favour of or against the resolution.
Procedure on a poll
56.1 If a poll is properly demanded, it shall be taken in such manner as the
chairman directs. He may appoint scrutineers, who need not be members, and may
fix a time and place for declaring the result of the poll. The result of the
poll is deemed to be the resolution of the meeting at which the poll is
demanded.
56.2 A poll demanded on the election of a chairman or on any question of
adjournment shall be taken at the meeting and without adjournment. A poll
demanded on another question shall be taken at such time and place as the
chairman decides, either at once or after an interval or adjournment (but not
more than 30 clear days after the date of the demand).
56.3 No notice need be given of a poll not taken immediately if the time and
place at which it is to be taken are announced at the meeting at which it is
demanded. In any other case at least seven clear days' notice shall be given
specifying the time and place at which the poll is to be taken.
56.4 The demand for a poll may be withdrawn but only with the consent of the
chairman. A demand withdrawn in this way validates the result of a show of
hands declared before the demand is made. In the case of a poll demanded before
the declaration of the result of a show of hands, the meeting shall continue as
if the demand has not been made.
56.5 The demand for a poll (other than on the election of the chairman or on a
question of adjournment) does not prevent the meeting continuing for the
transaction of business other than the question on which a poll has been
demanded.
56.6 On a poll, votes may be given in person or by proxy and a member entitled
to more than one vote need not, if he votes, use all his votes or cast all the
votes he uses in the same way.
Votes of members
57.1 Subject to article 72 and to special terms as to voting on which shares
have been issued, or a suspension or abrogation of voting rights pursuant to the
articles, at a general meeting every member present in person has on a show of
hands one
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vote and every member present in person or by proxy has on a poll one vote for
every ordinary share of which he is the holder.
57.2 In the case of joint holders of a share, the vote of the senior who
tenders a vote, whether in person or by proxy, shall be accepted to the
exclusion of the votes of the other joint holders, and seniority is determined
by the order in which the names of the holders stand in the register.
57.3 A member in respect of whom an order has been made by a court or official
having jurisdiction (whether in the United Kingdom or elsewhere) that he is or
may be suffering from mental disorder or is otherwise incapable of running his
affairs may vote, whether on a show of hands or on a poll, by his guardian,
receiver, curator bonis or other person authorised for that purpose and
appointed by the court. A guardian, receiver, curator bonis or other person
may, on a poll, vote by proxy if evidence (to the satisfaction of the board) of
the authority of the person claiming to exercise the right to vote is deposited
at the office (or at another place specified in accordance with the articles for
the deposit of instruments of proxy) within the time limits prescribed by the
articles for the deposit of instruments of proxy for use at the meeting,
adjourned meeting or poll at which the right to vote is to be exercised.
No casting vote
58. In the case of an equality of votes the chairman shall not have, whether
on a show of hands or on a poll, a casting vote in addition to a vote to which
he is entitled as a member.
Restriction on voting rights for unpaid calls etc.
59. Unless the board otherwise decides, no member is entitled in respect of a
share held by him to be present or to vote, either in person or by proxy, at a
general meeting or at a separate meeting of the holders of a class of shares or
on a poll, or to exercise other rights conferred by membership in relation to
the meeting or poll, if a call or other amount due and payable in respect of the
share is unpaid. This restriction ceases on payment of the amount outstanding
and all costs, charges and expenses incurred by the Company by reason of the
non-payment.
Voting by proxy
60.1 An instrument appointing a proxy shall be in writing in any usual form
(or in another form approved by the board) executed by the appointor or his duly
constituted attorney or, if the appointor is a company, under its seal or under
the hand of its duly authorised officer or attorney or other person authorised
to sign.
60.2 An instrument of proxy is deemed (unless the contrary is stated in it) to
confer authority to demand or join in demanding a poll and to vote on a
resolution or amendment of a resolution put to, or other business which may
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properly come before, the meeting or meetings for which it is given, as the
proxy thinks fit.
60.3 A proxy need not be a member.
60.4 A member may appoint more than one proxy to attend on the same occasion.
When two or more valid but differing instruments of proxy are delivered for the
same share for use at the same meeting, the one which is last validly delivered
(regardless of its date or the date of its execution) shall be treated as
replacing and revoking the other or others as regards that share.
60.5 Deposit of an instrument of proxy does not prevent a member attending and
voting in person at the meeting or an adjournment of the meeting or on a poll.
60.6 An instrument of proxy is (unless the contrary is stated in it) valid for
an adjournment of the meeting as well as for the meeting or meetings to which it
relates. An instrument of proxy is valid for 12 months from the date of
execution.
60.7 Subject to the Acts, the Company may send an instrument of proxy to all
or none of the persons entitled to receive notice of and to vote at a meeting.
If sent the instrument shall provide for two-way voting (without prejudice to a
right to abstain) on all resolutions set out in the notice of meeting.
Deposit of proxy
61.1 An instrument of proxy, and (if required by the board) a power of
attorney or other authority under which it is executed or a copy of it
notarially certified or certified in some other way approved by the board, shall
be:
(a) deposited at the office, or another place in the United Kingdom specified
in the notice convening the meeting or in an instrument of proxy or other
accompanying document sent by the Company in relation to the meeting, not
less than 48 hours before the time for holding the meeting or adjourned
meeting or the taking of a poll at which the person named in the
instrument proposes to vote;
(b) in the case of a meeting adjourned for less than 28 days but more than 48
hours or in the case of a poll taken more than 48 hours after it is
demanded, deposited as required by article 61.1(a) not less than 24 hours
before the time appointed for the holding of the adjourned meeting or the
taking of the poll; or
(c) in the case of a meeting adjourned for less than 48 hours or in the case
of a poll not taken immediately but taken not more than 48 hours after it
was demanded, delivered at the adjourned meeting or at the meeting at
which the poll was demanded to the chairman or to the secretary or to a
director.
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61.2 An instrument of proxy not deposited or delivered in accordance with
article 61.1 is invalid.
When votes by proxy valid though authority revoked
62. A vote given or poll demanded by a proxy or authorised representative of
a company is valid despite termination of his authority unless notice of
termination is received by the Company at the office (or other place specified
for depositing the instrument of proxy) at least one hour before the time for
holding the meeting or adjourned meeting at which the vote is given or (in the
case of a poll taken otherwise than at or on the same day as the meeting or
adjourned meeting) the time appointed for the taking of the poll at which the
vote is cast.
Miscellaneous
Corporate Representative
63. A company which is a member may, by resolution of its directors or other
governing body, authorise a person (or, if such company is an Approved
Depositary acting in its capacity as such, persons) to act as its representative
(or, as the case may be, representatives) at a meeting or at a separate meeting,
or at all meetings or separate meetings, of the holders of a class of shares
(each a representative). A representative is entitled to exercise on behalf of
the company (in respect of that part of the company's holding of shares to which
the authorisation relates) those powers that the company could exercise if it
were an individual member. The company is for the purposes of the articles
deemed to be present in person at a meeting if a representative is present. All
references to attendance and voting in person shall be construed accordingly. A
director, the secretary or other person authorised for the purpose by the
secretary may require a representative to produce a certified copy of the
resolution of authorisation before permitting him to exercise his powers.
Objections to and error in voting
64. No objection may be made to the qualification of a voter or to the
counting of, or failure to count, a vote, except at the meeting or adjourned
meeting at which the vote objected to is tendered or at which the error occurs.
An objection properly made shall be referred to the chairman and only
invalidates the result of the voting if, in the opinion of the chairman, it is
of sufficient magnitude to affect the decision of the meeting. The decision of
the chairman is conclusive and binding on all concerned.
Amendments to resolutions
65. If an amendment proposed to a resolution under consideration is ruled out
of order by the chairman the proceedings on the substantive resolution are not
invalidated by an error in his ruling.
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Members' written resolutions
66. A resolution in writing executed by or on behalf of each member who would
have been entitled to vote upon it if it had been proposed at a general meeting
at which he was present is as effective as if it had been passed at a general
meeting duly convened and held. The resolution in writing may consist of
several instruments in the same form each duly executed by or on behalf of one
or more members. If the resolution in writing is described as a special
resolution or as an extraordinary resolution, it has effect accordingly.
Class meetings
67. A separate meeting for the holders of a class of shares shall be convened
and conducted as nearly as possible in the same way as an extraordinary general
meeting, except that:
(a) no member, other than a director, is entitled to notice of it or to
attend unless he is a holder of shares of that class;
(b) no vote may be given except in respect of a share of that class;
(c) the quorum at the meeting is two persons present in person holding or
representing by proxy at least one-third in nominal value of the issued
shares of that class;
(d) the quorum at an adjourned meeting is two persons holding shares of that
class who are present in person or by proxy; and
(e) a poll may be demanded in writing by a member present in person or by
proxy and entitled to vote at the meeting and on a poll each member has
one vote for every share of that class of which he is the holder.
Failure to disclose interests in shares
68.1 Subject to article 68.5, where notice is served by the Company under
section 212 of the Act (a section 212 notice) on a member, or another person
appearing to be interested in shares held by that member, and the member or
other person has failed in relation to any shares (the default shares, which
expression includes any shares issued after the date of the section 212 notice
in right of those shares) to give the Company the information required within
the prescribed period from the date of the section 212 notice, the following
sanctions apply, unless the board otherwise decides:
(a) the member is not entitled in respect of the default shares to be present
or to vote (either in person or by proxy) at a general meeting or at a
separate meeting of the holders of a class of shares or on a poll, or to
exercise other rights conferred by membership in relation to the meeting
or poll; and
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(b) where the default shares represent at least 0.25 per cent. in nominal
value of the issued shares of their class:
(i) a dividend (or any part of a dividend) or other amount payable
in respect of the default shares shall be withheld by the
Company, which has no obligation to pay interest on it, and the
member is not entitled to elect, pursuant to article 132, to
receive shares instead of a dividend; and
(ii) no transfer of any of the default shares shall be registered
unless the transfer is an excepted transfer or:
(A) the member is not himself in default in supplying the
information required; and
(B) the member proves to the satisfaction of the board that
no person in default in supplying the information
required is interested in any of the shares the subject
of the transfer.
68.2 The sanctions under article 68.1 shall cease to apply seven days after
the earlier of:
(a) receipt by the Company of notice of an excepted transfer, but only in
relation to the shares transferred; and
(b) receipt by the Company, in a form satisfactory to the board, of all the
information required by the section 212 notice.
68.3 Where, on the basis of information obtained from a member in respect of a
share held by him, the Company issues a section 212 notice to another person, it
shall at the same time send a copy of the section 212 notice to the member, but
the accidental omission to do so, or the non-receipt by the member of the copy,
does not invalidate or otherwise affect the application of article 68.1.
68.4 For the purposes of this article 68:
(a) a person, other than the member holding a share, is treated as appearing
to be interested in that share if the member has informed the Company
that the person is or may be interested, or if the Company (after taking
account of information obtained from the member or, pursuant to a section
212 notice, from anyone else) knows or has reasonable cause to believe
that the person is or may be so interested;
(b) interested is construed as it is for the purpose of section 212 of the
Act;
(c) reference to a person having failed to give the Company the information
required by a section 212 notice, or being in default in supplying such
information, includes (a) reference to his having failed or refused to
give all or any part of it, and (b) reference to his having given
information
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which he knows to be false in a material particular or having recklessly
given information which is false in a material particular;
(d) the prescribed period means 14 days;
(e) an excepted transfer means, in relation to shares held by a member:
(i) a transfer pursuant to acceptance of a takeover offer for the
Company (within the meaning of section 428(1) of the Act); or
(ii) a transfer in consequence of a sale made through a recognised
investment exchange (as defined in the Financial Services Act
1986) or another stock exchange outside the United Kingdom on
which shares in the capital of the Company are normally traded;
or
(iii) a transfer which is shown to the satisfaction of the board to
be made in consequence of a sale of the whole of the beneficial
interest in the shares to a person who is unconnected with the
member and with any other person appearing to be interested in
the shares.
68.5(a)Where any person appearing to be interested in shares has been duly
served with a section 212 notice and the shares in which he appears to be
interested are held by an Approved Depositary, the provisions of article
68.1 shall be treated as applying only to those shares held by the
Approved Depositary in which such person appears to be interested and not
(insofar as such person's apparent interest is concerned) to any other
shares held by the Approved Depositary.
(b) Subject to article 68.5(a), where the member on which a section 212
notice is duly served is an Approved Depositary acting in its capacity as
such, the obligations of the Approved Depositary as a member shall be
limited to disclosing to the Company such information relating to any
person appearing to be interested in the shares held by it as has been
recorded by it pursuant to the arrangements entered into by the Company
or approved by the board pursuant to which it was appointed as an
Approved Depositary.
68.6 The provisions of this article are in addition and without prejudice to
the provisions of the Acts.
Protection of licences under the Broadcasting Act 1990 and the
Telecommunications Act 1984
69.1 In this article 69:
(a) Licence means any licence under the Broadcasting Act 1990 and/or the
Telecommunications Act 1984 (and any statutory modifications or re-
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enactments of the same together with all orders made thereunder for the
time being in force) awarded or granted to the Company or any of its
subsidiary undertakings (as the case may be) and any other licence or
permit used or intended to be used which in any case is material to its
business, granted by any other authority or body or any governmental
department under any other legislation or regulations in force for the
time being in any jurisdiction;
(b) Notifiable Situation means circumstances in which the holding of shares
of any class of any member when either taken alone or when taken together
with the holding of shares by one or more other members is or may be, in
the reasonable opinion of the board, prejudicial to:
(i) the grant of any Licence or the renewal or extension of any
Licence for which an application is or is intended to be made;
or
(ii) the continued holding of any Licence;
(c) Relevant Person means any member whose holding of shares in the Company
when either taken alone or when taken together with the holding of shares
by one or more other members gives rise to a Notifiable Situation;
(d) Relevant Shares means the shares of a Relevant Person which are, or which
in the reasonable opinion of the board may be, causing a Notifiable
Situation to occur in relation to that Relevant Person; and
(e) Required Disposal means a disposal or disposals of such a number of
Relevant Shares as will cause, or which in the reasonable opinion of the
board will cause, a Relevant Person to cease to be a Relevant Person and
will not cause any other person to be a Relevant Person and/or the
holding of shares by a Relevant Person to cease to give rise to a
Notifiable Situation, not being a disposal to another Relevant Person.
69.2 The board may at any time by notice require from a member such
information (to the extent that information is required in relation to a person
other than such member, so far as such information lies within the knowledge of
such member) supported by a declaration and by such other evidence (if any) in
support as the board may require, for the purposes of determining whether such
member or any person who has an interest in shares held by such member or an
associate of any such member or person or any person in which any such member or
person is a participant with more than a five per cent. interest has an interest
in any shares of the Company which, in the reasonable opinion of the board, may
be relevant to the determination of whether a Notifiable Situation exists in
relation to such member or person and the member or person shall supply the
information and evidence so specified to the board as soon as reasonably
practicable but, in any event, within seven days of receipt of such notice. If
such information and evidence is not furnished within the time prescribed by the
notice or the
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information and evidence provided is, in the opinion of the board,
unsatisfactory for the purposes of so determining, the board may serve on such
member a further notice calling upon him, within seven days after the service of
such further notice, to furnish the board with such information and evidence or
further information and evidence as shall (in their opinion) enable them to so
determine.
69.3 The board may, following such consultation with and the provision of such
information to the Independent Television Commission, the Department of Trade
and Industry, the Office of Telecommunications and/or such other authorities as
the board considers appropriate, notify any member that his holding of Relevant
Shares gives rise to a Notifiable Situation.
69.4 Any notice served pursuant to article 69.3 shall contain a statement by
the board of the reasons for the giving of such notice and include any
communication from the relevant authorities in support of those reasons. The
notice shall set out the restrictions that may apply in relation to the Relevant
Shares of the member on whom such notice is served as referred to in article
69.5.
69.5 If on the expiry of 14 days after service of notice pursuant to articles
69.2 or 69.3, the member upon whom the notice has been served shall have failed
to supply the required information or the Notifiable Situation still remains, as
the case may be, the board may treat such number of the Relevant Shares held by
such member as may be necessary to end the Notifiable Situation as non-voting
shares, by removal of the right to vote, but all other rights attaching to the
Relevant Shares (in particular the right to receive dividends and receive notice
of and attend all general meetings of the Company) shall not be affected.
69.6 If, following action taken by the board pursuant to article 69.5, a
Notifiable Situation nevertheless still remains, the board may serve a written
notice (a Disposal Notice) on the member concerned calling for a Required
Disposal of the Relevant Shares of such member or of such lesser number of
Relevant Shares as shall be specified in the said notice, to be made within such
period as the board considers reasonable. Where the member concerned is a member
of the TINTA Group or the MediaOne Group or the SBC Group or the Cox Group or
the Vivendi Group, a copy of the Disposal Notice shall be served also on a
member of each of the other groups. The board may extend the period in which a
Disposal Notice is required to be complied with and may withdraw a Disposal
Notice (whether before or after the expiration of the period referred to) in
their absolute discretion if it appears to it that a Notifiable Situation has
ceased to exist in relation to the Relevant Shares concerned. After the giving
of a Disposal Notice, and save for the purpose of a Required Disposal under this
article 69.6 or article 69.7, no transfer of any of the Relevant Shares
concerned may be registered until either the Disposal Notice is withdrawn or a
Required Disposal has been made to the satisfaction of the board and registered.
Where more than one holder (treating joint holders as a single holder) is
required to dispose of shares pursuant to a Disposal Notice, the said Notice
shall specify the number of shares to be disposed of by each such holder (which
shall be in the discretion of the directors and need not be pro rata amongst the
members being called upon to dispose of shares).
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69.7 If a Disposal Notice given under article 69.6 has not been complied with
in all respects to the satisfaction of the board by the end of the period (as
extended if applicable) specified in the Disposal Notice and has not been
withdrawn, the board shall, so far as it is able, within thirty days, make a
Required Disposal (or procure that a Required Disposal is made) of the Relevant
Shares concerned and shall give notice of the disposal to those persons on whom
the Disposal Notice is served. The holder(s) of the shares duly disposed of
shall be deemed irrevocably and unconditionally to have authorised the board to
make such Required Disposal. The manner, timing and terms of any such Required
Disposal made or sought to be made by the board (including, but not limited to
the price or prices at which the same is made and the extent to which assurance
is obtained that no transferee would become a Relevant Person) shall be such as
the board determine (provided that the board shall use its reasonable efforts to
obtain the best price reasonably obtainable in the circumstances), based on
advice from bankers, brokers, or other persons as the board considers
appropriate consulted by it for the purpose, to be reasonably practicable having
regard to all the circumstances, including, but not limited to, the number of
shares to be disposed of and the requirement that the disposal be made within
thirty days from expiry of the Disposal Notice; and the board shall not be
liable, and any such persons giving any such advice to the board shall not be
liable, to any person (whether or not a Relevant Person) for any of the
consequences of reliance on such advice (including, without limitation, for
failing to obtain the best price reasonably obtainable in the circumstances
provided the board acted in good faith throughout the relevant period), provided
always that, where the registered holder(s) of the Relevant Shares concerned is
a member of the TINTA Group or the MediaOne Group or the SBC Group or the Cox
Group or the Vivendi Group, the board shall use its reasonable endeavours to
give the members of each of the other such groups the first right to purchase
such Relevant Shares (subject to such member itself not being a Relevant Person
or to such purchase itself not giving rise to a Notifiable Situation) in
accordance with such arrangements as may then be in place between the members of
the TINTA Group and the MediaOne Group or the SBC Group or the Cox Group or the
Vivendi Group in relation to their holdings of shares of the Company and as may
have been notified to the Company by any member of the TINTA Group and/or the
MediaOne Group or the SBC Group or the Cox Group or the Vivendi Group and the
preceding provisions of this article 69.7 shall be amended accordingly to take
account of such arrangements but so that the board shall not be liable to any
member of the TINTA Group or of the MediaOne Group or the SBC Group or the Cox
Group or the Vivendi Group for failing to ensure that any such arrangements are
complied with fully or at all.
69.8 For the purpose of effecting any Required Disposal, the board may
authorise in writing any officer or employee of the Company to execute any
necessary transfer on behalf of any holder and may enter the name of the
transferee in the register in respect of the transferred shares notwithstanding
the absence of any share certificate and may issue a new certificate to the
transferee and an instrument of transfer executed by such person shall be as
effective as if it
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had been executed by the holder of the transferred shares and the title of the
transferee shall not be affected by any irregularity or invalidity in the
proceedings relating thereto. The net proceeds of the disposal shall be received
by the Company whose receipt shall be a good discharge for the purchase money,
and shall be paid (without any interest being payable in respect of it and after
deduction of any expenses incurred by the Company in the sale) to the former
holder (or in the case of joint holders, the first of them named in the
register) together with, if appropriate a new certificate in respect of the
balance of the Relevant Shares to which he is entitled upon surrender by him or
on his behalf of any certificate in respect of the Relevant Shares sold and
formerly held by him.
69.9 A holder of a Relevant Share on whom a Disposal Notice has been given
under (and complying with) article 69.6 shall not in respect of that share be
entitled, until such time as the Disposal Notice has been complied with to the
satisfaction of the board or withdrawn, to receive notice of or to attend or
vote at any general meeting of the Company or meeting of the holders of any
class of share capital, or to exercise any other right conferred by membership
in relation to any such meeting; and the rights to attend (whether in person or
by representative or proxy), to speak and to demand and vote on a poll which
would have attached to the Relevant Share had it not been a Relevant Share shall
vest in the chairman of any such meeting. The manner in which the chairman
exercises or refrains from exercising any such rights shall be entirely at his
discretion. The chairman of any such meeting shall be informed by the board of
any share becoming or being deemed to be a Relevant Share.
69.10 Save as otherwise provided in this article 69.10, the provisions of the
articles applying to the giving of notice of meetings to members shall apply to
the giving to a member of any notice required by this article 69. Any notice
required by this article 69 to be given to a member (or in the case of joint
holders, who is the person first named in the register) whose registered address
is not within the United Kingdom and who has not given to the Company an address
within the United Kingdom at which notices may be given to him, shall be deemed
validly served if it is sent through the post in a prepaid envelope addressed to
that person at the address (or if more than one, at one of the addresses) if
any, at which the board believes him to be resident or carrying on business or
to his last known address as shown on the register. The notice shall in such a
case be deemed to have been given on the day following that on which the
envelope containing the same is posted, unless it was sent by second class post
or there is only one class of post, in which case it shall be deemed to have
been given on the day next but one after it was posted, Proof that the envelope
was properly addressed prepaid and posted shall be conclusive evidence that the
notice was given.
69.11 Any resolution or determination of, or decision or exercise of any
discretion or power by, the board or any director or by the chairman of any
meeting under or pursuant to the provisions of this article 69 (including,
without prejudice to the generality of the foregoing, as to what constitutes
reasonable enquiry or as to the manner, timing and terms of any Required
Disposal made by the board under article 69.7) shall be final and conclusive;
and any disposal or
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transfer made, or other thing done, by or on behalf of, or on the authority of,
the board or any director pursuant to the foregoing provisions of this article
69 shall be conclusive and binding on all persons concerned and shall not be
open to challenge, whether as to its validity or otherwise on any ground
whatsoever. The board shall not be required to give any reasons for any
decision, determination or declaration taken or made in accordance with this
article 69. The fact that the board has assumed that a Notifiable Situation does
not exist in relation to any member shall not affect their discretion to
subsequently determine that a Notifiable Situation does exist in relation to
such member.
Appointment, Retirement and Removal of Directors
Number of directors
70. Unless and until otherwise decided by the Company by ordinary resolution
the number of directors shall be not less than two, and shall not be subject to
any maximum.
Power of the Company to appoint directors
71. Subject to the articles and to the power of members of the TINTA Group and
the MediaOne Group and the SBC Group and the Cox Group and the Vivendi Group to
appoint directors pursuant to article 72, the Company may by ordinary resolution
appoint a person who is willing to act to be a director, either to fill a
vacancy or as an addition to the board, but the total number of directors may
not exceed any maximum number which may be fixed in accordance with the
articles.
Power of members of the TINTA Group and the MediaOne Group and the SBC Group and
the Cox Group and the Vivendi Group to appoint, remove and replace directors
72.1 For so long as members of the TINTA Group hold not less than a Qualifying
Interest the members of the TINTA Group shall have the right to appoint two
persons, who are willing so to act, as directors and to remove and replace any
director so appointed by them. For so long as the members of the TINTA Group
hold not less than a Lesser Qualifying Interest the members of the TINTA Group
shall have the right to appoint one person, who is willing so to act, as a
director and to remove and replace any director so appointed by them.
72.2 For so long as members of the MediaOne Group hold not less than a
Qualifying Interest, the members of the MediaOne Group shall have the right to
appoint two persons, who are willing so to act, as directors and to remove and
replace any director so appointed by them. For so long as the members of the
MediaOne Group hold not less than a Lesser Qualifying Interest the members of
the MediaOne Group shall have the right to appoint one person, who is willing so
to act, as a director and to remove and replace any director so appointed by
them.
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72.3 For so long as members of the SBC Group together hold not less than a
Lesser Qualifying Interest the members of the SBC Group shall have the right to
appoint one person, who is willing so to act, as a director and to remove and
replace any director so appointed by them.
72.4 For so long as members of the Cox Group together hold not less than a
Lesser Qualifying Interest the members of the Cox Group shall have the right to
appoint one person, who is willing so to act, as a director and to remove and
replace any director so appointed by them.
72.5 For so long as members of the Vivendi Group together hold not less than a
Lesser Qualifying Interest the members of the Vivendi Group shall have the right
to appoint one person, who is willing to act, as a director and to remove and
replace any director so appointed by them.
72.6 Any appointment, removal and/or replacement of a director pursuant to
article 72.1 or 72.2 or 72.3 or 72.4 or 72.5 shall be effected by notice to the
Company signed by or on behalf of a member of the TINTA Group or the MediaOne
Group or the SBC Group or the Cox Group or the Vivendi Group, as the case may
be. The notice shall be left at or sent by post or facsimile transmission to
the office or such other place designated by the board for the purpose. The
appointment or removal and/or replacement shall take effect immediately on
deposit of the notice in accordance with the articles or on such later date (if
any) specified in the notice.
72.7 On any vote or resolution of the Company to remove any director appointed
pursuant to or to amend article 72.1 or 72.2 or 72.3 or 72.4 or 72.5, the
members of the TINTA Group or the MediaOne Group or the SBC Group or the Cox
Group or the Vivendi Group (as appropriate) entitled to appoint, remove and/or
replace him or any director pursuant to article 72.1 or 72.2 or 72.3 or 72.4 or
72.5 as the case may be shall have in aggregate twice the number of votes cast
(on a show of hands or by proxy) in favour of such vote or resolution by or on
behalf of all the other members.
Power of the board to appoint directors
73. Without prejudice to the power of the Company to appoint a person to be a
director pursuant to the articles and to the power of members of the TINTA Group
and the MediaOne Group and the SBC Group and the Cox Group and the Vivendi Group
to appoint directors pursuant to article 72, the board may appoint a person who
is willing to act as a director, either to fill a vacancy or as an addition to
the board. A director appointed in this way may hold office only until the
dissolution of the next annual general meeting after his appointment unless he
is reappointed during the meeting. He is not required, and is not taken into
account in determining the number of directors who are, to retire by rotation at
the meeting.
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Appointment of executive directors
74. Subject to the Acts and to article 70, the board may appoint one or more of
its body to hold employment or executive office (including that of chief
executive officer or managing director) with the Company for such term (subject
to the Acts) and on any other conditions the board thinks fit. The board may
revoke or terminate an appointment, without prejudice to a claim for damages for
breach of contract.
Independence of directors
75. For so long as members of the TINTA Group together hold in aggregate 15 per
cent. or more in nominal value of the shares giving the right to attend and vote
at general meetings of the Company or for so long as members of the MediaOne
Group together hold in aggregate 15 per cent. or more in nominal value of the
shares giving the right to attend and vote at general meetings of the Company,
such members of the TINTA Group or of the MediaOne Group, as the case may be,
shall each exercise their voting rights as members of the Company, and shall
each request that the TINTA Designated Directors or, as the case may be, the
MediaOne Designated Directors appointed by them exercise their voting rights as
members of the board (subject always to such Designated Director's fiduciary and
other duties as a director) to ensure that, to the extent that they are able to
do so through the exercise of their votes, the majority of the directors are
Independent Directors.
Eligibility of new directors
76.1 Subject to article 71 no person other than a director retiring (by
rotation or otherwise) may be appointed or reappointed a director at a general
meeting unless:
(a) he is recommended by the board; or
(b) not less than seven nor more than 42 days before the date fixed for the
meeting, notice has been given to the Company by a member (other than the
person to be proposed) qualified to vote at the meeting of the intention
to propose that person for appointment or reappointment. The notice shall
(a) state the particulars which would, if the proposed director were
appointed or reappointed, be required to be included in the Company's
register of directors, (b) be accompanied by notice given by the proposed
director of his willingness to be appointed or reappointed, and (c) be
lodged at the office.
76.2 A director need not be a member.
Voting on resolution for appointment
77. A resolution for the appointment of two or more persons as directors by a
single resolution is void unless an ordinary resolution that the resolution for
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appointment is proposed in this way has first been agreed to by the meeting
without a vote being given against it.
Retirement at annual general meeting
78. At each annual general meeting all of the directors shall retire from
office.
Position of retiring director
79. A director who retires at an annual general meeting may, if willing to act,
be reappointed. If he is not reappointed or deemed reappointed, he may retain
office until the meeting (or, in the case of a TINTA Designated Director, a
member of the TINTA Group or, in the case of a MediaOne Designated Director, a
member of the MediaOne Group or, in the case of an Cox Designated Director, a
member of the Cox Group or in the case of an SBC Designated Director, a member
of the SBC Group or, in the case of a Vivendi Designated Director, a member of
the Vivendi Group) appoints someone in his place or, if it does not do so, until
the end of the meeting.
Deemed reappointment
80. At an annual general meeting at which a director retires (other than in the
case of a TINTA Designated Director, a MediaOne Designated Director, a Cox
Designated Director, an SBC Designated Director or a Vivendi Designated
Director) the Company or (in the case of a TINTA Designated Director) a member
of the TINTA Group or (in the case of a MediaOne Designated Director) a member
of the MediaOne Group or (in the case of an SBC Designated Director) a member of
the SBC Group or (in the case of a Cox Designated Director) a member of the Cox
Group or (in the case of a Vivendi Designated Director) a member of the Vivendi
Group may fill the vacancy and, if it does not do so, the retiring director is,
if willing, deemed reappointed unless (other than in the case of a TINTA
Designated Director, a MediaOne Designated Director, an SBC Designated Director,
a Cox Designated Director or a Vivendi Designated Director) it is expressly
resolved not to fill the vacancy or (in the case of a TINTA Designated Director)
a member of the TINTA Group notifies the Company of the removal of such director
as a TINTA Designated Director pursuant to article 72.1 or (in the case of a
MediaOne Designated Director) a member of the MediaOne Group notifies the
Company of the removal of such director as a MediaOne Designated Director
pursuant to article 72.2 or (in the case of a Cox Designated Director) a member
of the Cox Group notifies the Company of the removal of such director as a Cox
Designated Director pursuant to article 72.4 or (in the case of an SBC
Designated Director) a member of the SBC Group notifies the Company of the
removal of such director as an SBC Designated Director pursuant to article 72.3
or (in the case of a Vivendi Designated Director) a member of the Vivendi Group
notifies the Company of the removal of such director as a Vivendi Designated
Director pursuant to article 72.5 or (other than in the case of a TINTA
Designated Director or a MediaOne Designated Director or a Cox Designated
Director or an SBC
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Designated Director or a Vivendi Designated Director) a resolution for the
reappointment of the director is put to the meeting and lost.
No retirement on account of age
81. No person is incapable of being appointed a director by reason of his
having reached the age of 70 or another age. Special notice is not required in
connection with the appointment or the approval of the appointment of such
person. No director is required to vacate his office because he has reached the
age of 70 or another age and section 293 of the Act does not apply to the
Company. Where a general meeting is convened at which, to the knowledge of the
board, a director is to be proposed for appointment or reappointment who is at
the date of the meeting 70 or more, the board shall give notice of his age in
the notice convening the meeting or in a document accompanying the notice, but
the accidental omission to do so does not invalidate proceedings or an
appointment or reappointment of that director at that meeting.
Removal by ordinary resolution
82. Subject to article 72, in addition to any power of removal conferred by the
Acts, the Company may by ordinary resolution remove a director before the
expiration of his period of office (without prejudice to a claim for damages for
breach of contract) and may (subject to the articles) by ordinary resolution
appoint another person who is willing to act to be a director in his place. A
person appointed in this way is treated, for the purposes of determining the
time at which he or another director is to retire, as if he had become a
director on the date on which the person in whose place he is appointed was last
appointed or reappointed a director.
Vacation of office by director
83.1 Without prejudice to the provisions for retirement contained in the
articles, the office of a director is vacated if:
(a) he resigns by notice delivered to the secretary at the office or tendered
at a board meeting;
(b) he ceases to be a director by virtue of a provision of the Acts, is
removed from office pursuant to the articles or becomes prohibited by law
from being a director;
(c) he becomes bankrupt, has an interim receiving order made against him,
makes an arrangement or compounds with his creditors generally or applies
to the court for an interim order under section 253 of the Insolvency Act
1986 in connection with a voluntary arrangement under that Act;
(d) an order is made by a court of competent jurisdiction on the ground
(however formulated) of mental disorder for his detention or for the
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appointment of a guardian, receiver, curator bonis or other person to
exercise powers with respect to his affairs or he is admitted to hospital
in pursuance of an application for admission for treatment under the
Mental Health Act 1983 or, in Scotland, under the Mental Health (Scotland)
Act 1984 and the board resolves that his office be vacated;
(e) both he and his alternate director appointed pursuant to the provisions of
the articles (if any) are absent, without the permission of the board,
from board meetings for six consecutive months and the board resolves that
his office be vacated;
(f) (other than in the case of a TINTA Designated Director or a MediaOne
Designated Director or an SBC Designated Director or a Cox Designated
Director or a Vivendi Designated Director) he is removed from office by
notice addressed to him at his last-known address and signed by all his
co-directors (without prejudice to a claim for damages for breach of
contract); or
(g) (in the case of a TINTA Designated Director or a MediaOne Designated
Director or an SBC Designated Director or a Cox Designated Director or a
Vivendi Designated Director) he is removed as a director pursuant to
article 72.1 or 72.2 or 72.3 or 72.4 or 72.5 as the case may be.
83.2 A resolution of the board declaring a director to have vacated office
under the terms of article 83.1 is conclusive as to the fact and grounds of
vacation stated in the resolution.
Alternate Directors
Appointment
84.1 A director (other than an alternate director) may by notice delivered to
the secretary at the office, or in any other manner approved by the board,
appoint as his alternate director:
(a) another director, or
(b) another person approved by the board (or, in the case of a TINTA
Designated Director, nominated by a member of the TINTA Group or, in the
case of the MediaOne Designated Director, nominated by a member of the
MediaOne Group or in the case of the SBC Designated Director nominated by
any member of the SBC Group or in the case of the Cox Designated Director
nominated by any member of the Cox Group or in the case of a Vivendi
Designated Director, nominated by any member of the Vivendi Group) and
willing to act.
84.2 No appointment of an alternate director who is not already a director is
effective until his consent to act as a director in the form prescribed by the
Acts has been received at the office.
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84.3 An alternate director need not be a member and is not counted in reckoning
the number of directors for the purpose of article 70.
Revocation of appointment
85. A director may by notice delivered to the secretary at the office revoke
the appointment of his alternate director and, subject to the provisions of
article 84, appoint another person in his place. If a director ceases to hold
the office of director or if he dies, the appointment of his alternate director
automatically ceases. If a director retires but is reappointed at the meeting
at which his retirement takes effect, a valid appointment of an alternate
director which was in force immediately before his retirement continues to
operate after his reappointment as if he has not retired. The appointment of an
alternate director ceases on the happening of an event which, if he were a
director otherwise appointed, would cause him to vacate office.
Participation in board meetings
86. An alternate director is, if he gives the Company an address in the United
Kingdom or the United States of America at which notices may be served on him,
entitled to receive notice of all meetings of the board and all committees of
the board of which his appointor is a member and, in the absence from those
meetings of his appointor, to attend and vote at the meetings and to exercise
all the powers, rights, duties and authorities of his appointor. A director
acting as alternate director has a separate vote at meetings of the board and
committees of the board for each director for whom he acts as alternate director
but he counts as only one for the purpose of determining whether a quorum is
present.
Responsibility
87. A person acting as an alternate director is an officer of the Company, is
alone responsible to the Company for his acts and defaults, and is not deemed to
be the agent of his appointor.
Remuneration, Expenses and Pensions
Directors' fees
88. Unless otherwise decided by the Company by ordinary resolution, the Company
shall pay to the directors (but not alternate directors) for their services as
directors such amount of aggregate fees as the board decides (not exceeding
(Pounds)500,000 per annum or such larger amount as the Company may by ordinary
resolution decide). The aggregate fees shall be divided among the directors in
such proportions as the board decides or, if no decision is made, equally. A
fee payable to a director pursuant to this article is distinct from any salary,
remuneration or other amount payable to him pursuant to other provisions of the
articles and accrues from day to day.
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Additional remuneration
89. A director who, at the request of the board, goes or resides abroad, makes
a special journey or performs a special service on behalf of the Company may be
paid such reasonable additional remuneration (whether by way of salary,
percentage of profits or otherwise) and expenses as the board may decide.
Expenses
90. A director is entitled to be repaid all reasonable travelling, hotel and
other expenses properly incurred by him in the performance of his duties as
director, including expenses incurred in attending meetings of the board or of
committees of the board or general meetings or separate meetings of the holders
of a class of shares or debentures.
Remuneration and expenses of alternate directors
91. An alternate director is not entitled to a fee from the Company for his
services as an alternate director. The fee payable to an alternate director is
payable out of the fee payable to his appointor and consists of such portion (if
any) of the fee as he agrees with his appointor. The Company shall, however,
repay to an alternate director expenses incurred by him in the performance of
his duties if the Company would have been required to repay the expenses to him
under article 90 had he been a director.
Directors' pensions and other benefits
92.1 The board may exercise all the powers of the Company to provide pensions
or other retirement or superannuation benefits and to provide death or
disability benefits or other allowances or gratuities (by insurance or
otherwise) for a person who is or has at any time been a director of (i) the
Company, or (ii) a company which is or was a subsidiary undertaking of the
Company, or (iii) a company which is or was allied to or associated with the
Company or a subsidiary undertaking of the Company, or (iv) a predecessor in
business of the Company or of a subsidiary undertaking of the Company (and for
any member of his family, including a spouse or former spouse, or a person who
is or was dependent on him). For this purpose the board may establish,
maintain, subscribe and contribute to any scheme, trust or fund and pay
premiums. The board may arrange for this to be done by the Company alone or in
conjunction with another person.
92.2 A director or former director is entitled to receive and retain for his
own benefit a pension or other benefit provided under article 92.1 and is not
obliged to account for it to the Company.
Remuneration of executive director
93. The salary or remuneration of a director appointed to hold employment or
executive office in accordance with the articles may be a fixed sum of money, or
wholly or in part governed by business done or profits made, or as otherwise
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decided by the board, and may be in addition to or instead of a fee payable to
him for his services as director pursuant to the articles.
Powers and Duties of the Board
Powers of the board
94. Subject to the Acts, the memorandum of association of the Company and the
articles and to directions given by special resolution of the Company, the
business of the Company is managed by the board which may exercise all the
powers of the Company whether relating to the management of the business or not.
No alteration of the memorandum of association or of the articles and no
direction given by the Company shall invalidate a prior act of the board which
would have been valid if the alteration had not been made or the direction had
not been given. The provisions of the articles giving specific powers to the
board do not limit the general powers given by this article.
Powers of directors being less than minimum required number
95. Subject to article 72, if the number of directors is less than the minimum
prescribed by the articles or decided by the Company by ordinary resolution, the
remaining director or directors may act only for the purposes of appointing an
additional director or directors to make up that minimum or convening a general
meeting of the Company for the purpose of making such appointment. If no
director or directors is or are able or willing to act, two members may convene
a general meeting for the purpose of appointing directors. An additional
director appointed in this way holds office (subject to the articles) only until
the dissolution of the next annual general meeting after his appointment unless
he is reappointed during the meeting.
Powers of executive directors
96. The board may delegate to a director holding executive office (including a
chief executive officer or managing director) any of its powers, authorities and
discretions for such time and on such terms and conditions as it thinks fit. In
particular, the board may grant the power to sub-delegate, and may retain or
exclude the right of the board to exercise the delegated powers, authorities or
discretions collaterally with the director. The board may at any time revoke the
delegation or alter its terms and conditions.
Delegation to committees
97. The board may delegate any of its powers, authorities and discretions for
such time and on such terms and conditions as it thinks fit to a committee
consisting of one or more directors (save that in relation to any committee, at
least one member must be a TINTA Designated Director, provided there is at the
relevant time such a director holding office as such, and one member must be a
MediaOne Designated Director, provided there is at the relevant time such a
director holding office as such), and (if thought fit) one or more other
persons, but
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only if a majority of the members of the committee are directors or alternate
directors. Any such committee shall be chaired by an Independent Director and
shall comprise a majority of members independent of TINTA and MediaOne. For so
long as the Cox Group and the SBC Group have the right to appoint a director in
accordance with article 72, the Cox Group and the SBC Group shall jointly have
the right to appoint a director as a member of the Audit Committee. No
resolution of a committee is effective unless a majority of those present when
it is passed are directors or alternate directors. In particular, the board may
grant the power to sub-delegate, and may retain or exclude the right of the
board to exercise the delegated powers, authorities or discretions collaterally
with the committee. The board may at any time revoke the delegation or alter its
terms and conditions or discharge the committee in whole or in part. Where a
provision of the articles refers to the exercise of a power, authority or
discretion by the board and that power, authority or discretion has been
delegated by the board to a committee, the provision shall be construed as
permitting the exercise of the power, authority or discretion by the committee.
For as long as there is an SBC Designated Director and/or a Cox Designated
Director and/or a Vivendi Designated Director, the SBC Designated Director
and/or the Cox Designated Director and/or the Vivendi Designated Director (as
the case may be) shall be entitled to be appointed as an observer to any
committee constituted pursuant to this article 97 to receive notice of and
attend and observe at its meetings but not to be a member of such committee or
to vote at such meetings.
Local management
98. The board may establish local or divisional boards or agencies for managing
the affairs of the Company in a specified locality, either in the United Kingdom
or elsewhere, and may appoint persons to be members of a local or divisional
board or agency, and may fix their remuneration. The board may delegate to a
local or divisional board or agency any of its powers, authorities and
discretions for such time and on such terms and conditions as it thinks fit. In
particular, the board may grant the power to sub-delegate, may retain or exclude
the right of the board to exercise the delegated powers, authorities or
discretions collaterally with the local or divisional board or agency and may
authorise the members of a local or divisional board or agency (or any of them)
to fill a vacancy or to act despite a vacancy. The board may at any time revoke
or alter the terms and conditions of the appointment or delegation. Subject to
terms and conditions imposed by the board, the proceedings of a local or
divisional board or agency with two or more members are governed by those
articles that regulate the proceedings of the board, so far as applicable.
Power of attorney
99. The board may by power of attorney or otherwise appoint a person to be the
agent of the Company and may delegate to that person any of its powers,
authorities and discretions for such purposes, for such time and on such terms
and conditions (including as to remuneration) as it thinks fit. In particular,
the board may grant the power to sub-delegate and may retain or exclude the
right of the
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board to exercise the delegated powers, authorities or discretions collaterally
with the agent. The board may at any time revoke or alter the terms and
conditions of the appointment or delegation.
Associate directors
100. The board may appoint a person (not being a director) to an office or
employment having a designation or title including the word director or attach
to an existing office or employment that designation or title and may terminate
the appointment or use of that designation or title. The inclusion of the word
director in the designation or title of an office or employment does not imply
that the person is, or is deemed to be, or is empowered to act as, a director
for any of the purposes of the Acts or the articles.
Exercise of voting powers
101. Subject to article 104, the board may exercise or cause to be exercised the
voting powers conferred by shares in the capital of another company held or
owned by the Company, or a power of appointment to be exercised by the Company,
in any manner it thinks fit (including the exercise of the voting power or power
of appointment in favour of the appointment of a director as an officer or
employee of that company or in favour of the payment of remuneration to the
officers or employees of that company).
Provision for employees
102. The board may exercise the powers conferred on the Company by the Acts to
make provision for the benefit of a person employed or formerly employed by the
Company or any of its subsidiary undertakings (or any member of his family,
including a spouse or former spouse, or any person who is or was dependent on
him) in connection with the cessation or the transfer to a person of the whole
or part of the undertaking of the Company or the subsidiary undertaking.
Registers
103. Subject to the Acts, the board may exercise the powers conferred on the
Company with regard to the keeping of an overseas, local or other register and
may make and vary regulations as it thinks fit concerning the keeping of a
register.
Borrowing powers
104.1 Subject to the following provisions of this article 104, the board may
exercise all the powers of the Company to borrow money and to mortgage or charge
all or part of the undertaking, property and assets (present or future) and
uncalled capital of the Company and, subject to the Acts, to issue debentures
and other securities, whether outright or as collateral security for a debt,
liability or obligation of the Company or of a third party.
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104.2 The board shall restrict the borrowings of the Company and shall exercise
all voting and other rights or powers of control exercisable by the Company in
relation to its subsidiary undertakings so as to procure (as regards subsidiary
undertakings, to the extent that it can procure by such exercise) that the
aggregate principal amount outstanding in respect of moneys borrowed by the
group does not at any time, without the previous sanction of an ordinary
resolution of the Company, exceed a sum equal to the greater of:
(a) (Pounds)4,000,000,000; and
(b) five times the adjusted capital and reserves.
104.3 In this article 104:
(a) adjusted capital and reserves means a sum equal to the aggregate of:
(i) the amount paid up on the allotted or issued share capital of the
Company; and
(ii) the amount standing to the credit or debit of the consolidated
reserves;
all as shown in the relevant balance sheet but after:
(aa) making appropriate adjustments in respect of:
(1) a variation in the amounts referred to in article 103.3(a) and
(b) since the date of the relevant balance sheet; for this
purpose (aa) if a proposed allotment of shares by the Company
for cash has been underwritten, those shares are deemed to
have been allotted and the amount (including a premium) of the
subscription moneys payable in respect of those shares (not
being moneys payable later than six months after the date of
allotment) are deemed to have been paid up to the extent so
underwritten on the date on which the issue of those shares
was underwritten (or, if the underwriting was conditional, the
date on which it became unconditional), and (bb) where the
Company is under an obligation (whether immediately or at a
future date) to issue shares on conversion (however effected)
of other securities of a group undertaking and the obligation
to effect conversion is not conditional on any act, omission
or event (other than lapse of time), the share capital of the
Company and the consolidated reserves shall be calculated as
if the securities had been converted;
(2) an undertaking which has become a group undertaking since the
date of the relevant balance sheet;
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(3) an undertaking which has ceased to be a group undertaking
since the date of the relevant balance sheet;
(bb) excluding (so far as not already excluded) amounts attributable to
minority interests;
(cc) deducting (so far as not already deducted):
(A) sums equivalent to the book values of goodwill and other
intangible assets shown in the relevant balance sheet (as
adjusted pursuant to the preceding provisions of this article
103) but adding back the amount of goodwill that would have
remained on the relevant balance sheet (as adjusted) if all
goodwill arising on acquisitions of group undertakings after
22 November 1994 and which has been written off against
reserves in accordance with generally accepted accounting
practice in the United Kingdom had been carried on the balance
sheet as an asset and amortised on a straight-line basis over
20 years (or such longer period, as decided by the Company, as
may be in accordance with generally accepted accounting
practice in the United Kingdom), this amount to be certified
by the auditors; and
(B) the amount of a distribution declared, recommended, paid or
made by a group undertaking to a person other than a group
undertaking out of profits accrued up to and including the
date of, but not provided for in, the relevant balance sheet;
and
(C) making such other adjustments (if any) as the auditors
consider appropriate or necessary to reflect changes in
circumstances since the date of the relevant balance sheet;
(b) external interest means, in relation to a group undertaking that is not
wholly owned, that part of the issued and paid-up equity share capital of
the group undertaking that is not beneficially owned, directly or
indirectly, by another group undertaking;
(c) external interest percentage means, in relation to a group undertaking that
is not wholly owned, the percentage that the external interest forms of the
whole of the issued and paid-up equity share capital of the group
undertaking;
(d) group means (aa) the Company, and (bb) all undertakings which are included
in the group accounts in which the relevant balance sheet is comprised and
which would be so included if group accounts were prepared at the relevant
time (and as if that time were the end of the Company's financial year),
and (cc) all undertakings which are not included in the group accounts in
which the relevant balance sheet is comprised but which would be so
included if group accounts were
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prepared at the relevant time (and as if that time were the end of the
Company's financial year);
(e) group undertaking means the Company or another undertaking in the group;
(f) moneys borrowed include the following:
(i) the nominal amount of and the amount of any premium paid in
respect of any allotted or issued share capital (not being
equity share capital) of a group undertaking not beneficially
owned, directly or indirectly, by another group undertaking;
(ii) the principal amount of any loan capital (whether secured or
unsecured) of a group undertaking not beneficially owned,
directly or indirectly, by another group undertaking;
(iii) the principal amount of any borrowings by a person other than a
group undertaking, the repayment of which is the subject of a
guarantee or indemnity by a group undertaking or is secured on
the assets of a group undertaking;
(iv) the outstanding amount raised by acceptances under an acceptance
credit opened on behalf of and in favour of a group undertaking
by a bank or accepting house (except for acceptances of, or
acceptance credits in relation to, trade bills for purchases of
goods or services in the ordinary course of business and
outstanding for six months or less);
(v) a fixed or minimum premium payable on repayment or redemption of
borrowings that constitute moneys borrowed for the purposes of
this article 104; and
(vi) amounts raised under a transaction (including, without
limitation, forward sale or purchase agreements and outstanding
obligations under finance leases and hire purchase contracts
classified as finance leases, but excluding operating leases
(within the meanings given to those terms by Statement of
Standard Accounting Practice 21)) having the commercial effect
of borrowings entered into to enable the finance of operations
or capital requirements;
but exclude:
(vii) borrowings by one group undertaking from another, including the
principal amount of any loan capital (whether secured or
unsecured) and the nominal amount of any allotted or issued
share capital (not being equity share capital) of a group
undertaking beneficially owned, directly or indirectly, by
another group undertaking, except that, where the group
undertaking from
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which such borrowings are made is not wholly owned, a percentage
of the borrowings equal to the external interest percentage are
not excluded;
(viii) borrowings made for the purpose of, and applied within six
months of being made in, repaying the whole or part of
borrowings that constitute moneys borrowed for the purposes of
this article 104;
(ix) borrowings for the purpose of financing a contract to the extent
that part of the price receivable under the contract is
guaranteed or insured by the Export Credit Guarantee Department
of the Department of Trade and Industry or by another
institution fulfilling a similar function;
(x) where a group undertaking is not wholly owned, a percentage of
its borrowings that constitute moneys borrowed for the purposes
of this article 104 equal to the external interest percentage;
(xi) an amount equal to the borrowings of an undertaking outstanding
immediately before and repaid within 90 days after it becomes a
group undertaking;
(xii) the amount of moneys borrowed which are for the time being
deposited with a governmental authority in any part of the world
in connection with import deposits or a similar governmental
scheme to the extent that the group undertaking making the
deposit retains its interest in the deposit;
(xiii) a sum advanced or paid to a group undertaking (or its agents or
nominees) by a customer of a group undertaking as an unexpended
customer receipt or progress payment pursuant to a contract
between the customer and a group undertaking; and
(xiv) amounts treated as amounts due to trade creditors in the
consolidated group accounts of the Company in which the relevant
balance sheet is comprised;
and deducting:
(xv) an amount equal to the aggregate outstanding of:
(1) all cash deposits or credit balances on a current account of
a group undertaking with a bank (not itself being a group
undertaking) except for those held by banks as collateral
for borrowings;
(2) the realisable value of certificates of deposit and
securities of governments and companies; and
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(3) other readily realisable deposits or credit balances
(whether made with a bank or otherwise);
in each case beneficially owned, directly or indirectly, by a
group undertaking, but excluding (aa) in the case of any such
items beneficially owned, directly or indirectly, by a group
undertaking that is not wholly owned, a percentage of those
items equal to the external interest percentage and (bb) any sum
advanced or paid to a group undertaking (or its agents or
nominees) by a customer of a group undertaking as an unexpended
customer receipt or progress payment pursuant to a contract
between the customer and a group undertaking;
(g) relevant balance sheet means the consolidated balance sheet dealing with
the state of affairs of the Company and its subsidiary undertakings
comprised in the latest group accounts prepared and approved by the board
and on which the auditors have made their report pursuant to the Acts; and
(h) wholly owned means, in relation to a group undertaking, that it has no
member that is not itself a group undertaking or a person acting on behalf
of a group undertaking.
104.4 When the amount of moneys borrowed to be taken into account for the
purposes of this article 104 on a particular day is being ascertained, moneys
denominated or repayable in a currency other than sterling shall be converted
for the purpose of calculating the sterling equivalent either:
(a) at the rate of exchange specified in a forward purchase contract, currency
option, back-to-back loan, swap or other arrangement taken out or entered
into to reduce the risk associated with fluctuations in rates of exchange
in respect of repayment of those moneys (a hedging agreement); or
(b) if repayment of those moneys has not been covered by a hedging agreement,
at the more favourable to the Company of:
(i) the rate of exchange used for the conversion of that currency in
the relevant balance sheet, or
(ii) if no rate was used, the middle-market rate of exchange quoted
by Barclays Bank PLC at the close of business in London on the
date of the relevant balance sheet, or
(iii) the middle-market rate of exchange quoted by Barclays Bank PLC
at the close of business in London on the business day
immediately preceding the day on which the calculation falls to
be made.
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104.5 A report or certificate of the auditors as to the amount of the adjusted
total of capital and reserves or the aggregate amount of moneys borrowed for the
purposes of this article 104 is conclusive and binding on all concerned.
Nevertheless the board may at any time act in reliance on a bona fide estimate
of the amount of the adjusted total of capital and reserves or the aggregate
amount of moneys borrowed and if in consequence the limit on moneys borrowed set
out in this article 104 is inadvertently exceeded, the amount of moneys borrowed
equal to the excess may be disregarded for 90 days after the date on which by
reason of a determination of the auditors or otherwise the board becomes aware
that this situation has or may have arisen.
104.6 No debt incurred or security given in respect of moneys borrowed in
excess of the limit imposed by this article 104 is invalid or ineffectual except
where express notice that the limit has been or will be exceeded has been given
to the lender or recipient of the security at the time when the debt is incurred
or security given. No lender or other person dealing with the Company is
concerned to see or enquire whether the limit is observed.
Register of charges
105. The Company shall keep a register of charges in accordance with the Acts
and the fee to be paid by a person other than a creditor or member for each
inspection of the register of charges is the maximum sum prescribed by the Acts
or, failing which, decided by the board.
Directors' interests
106.1 Subject to the Acts and article 106.2, a director, notwithstanding his
office:
(a) may enter into or otherwise be interested in a contract, arrangement,
transaction or proposal with the Company or in which the Company is
otherwise interested either in connection with his tenure of an office or
place of profit or as seller, buyer or otherwise;
(b) may hold another office or place of profit with the Company (except that
of auditor or auditor of a subsidiary of the Company) in conjunction with
the office of director and may act by himself or through his firm in a
professional capacity to the Company, and in that case on such terms as
to remuneration and otherwise as the board may decide either in addition
to or instead of remuneration provided for by another article;
(c) may be a director or other officer of, or employed by, or a party to a
contract, transaction, arrangement or proposal with or otherwise
interested in, a company promoted by the Company or in which the Company
is otherwise interested or as regards which the Company has a power of
appointment; and
(d) is not liable to account to the Company for a profit, remuneration or
other benefit realised by such office, employment, contract, arrangement,
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transaction or proposal and no such contract, arrangement, transaction or
proposal is avoided on the grounds of any such interest or benefit.
106.2 A director who, to his knowledge, is in any way (directly or indirectly)
interested in a contract, arrangement, transaction or proposal with the Company
shall declare the nature of his interest at the meeting of the board at which
the question of entering into the contract, arrangement, transaction or proposal
is first considered, if he knows his interest then exists or, in any other case,
at the first meeting of the board after he knows that he is or has become
interested. For the purposes of this article 106:
(a) a general notice given to the board by a director that he is to be
regarded as having an interest (of the nature and extent specified in the
notice) in a contract, transaction, arrangement or proposal in which a
specified person or class of persons is interested is a sufficient
disclosure under this article 105 in relation to that contract,
transaction, arrangement or proposal; and
(b) an interest of which a director has no knowledge and of which it is
unreasonable to expect him to have knowledge is not treated as his
interest.
106.3 Except as provided in this article 106, a director may not vote on a
resolution of the board or of a committee of the board concerning a contract,
arrangement, transaction or proposal to which the Company is or is to be a party
and in which he is or is to be, to his knowledge, materially interested directly
or indirectly (otherwise than by virtue of his interest in shares or debentures
or other securities of or otherwise in or through the Company), but this
prohibition does not apply to a resolution concerning any of the following
matters:
(a) the giving to him of a guarantee, security or indemnity in respect of
money lent or obligations incurred by him or any other person at the
request of or for the benefit of the Company or any of its subsidiary
undertakings;
(b) the giving to a third party of a guarantee, security or indemnity in
respect of a debt or obligation of the Company or any of its subsidiary
undertakings for which he himself has assumed responsibility in whole or
in part, either alone or jointly with others, under a guarantee or
indemnity or by the giving of security;
(c) a contract, arrangement, transaction or proposal concerning an offer of
shares, debentures or other securities of the Company or any of its
subsidiary undertakings for subscription or purchase, in which offer he
is or may be entitled to participate as a holder of securities or in the
underwriting or sub-underwriting of which he is to participate;
(d) a contract, arrangement, transaction or proposal to which the Company is
or is to be a party concerning another company (including a subsidiary
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undertaking of the Company) in which he is interested (directly or
indirectly) (a relevant company) and whether as an officer, shareholder,
creditor or otherwise, if he is not the holder of or beneficially
interested in one per cent. or more of the capital of the relevant
company. For the purposes of this paragraph (d):
(i) a director is deemed to have an interest in one per cent. or
more of the capital of a relevant company if (directly or
indirectly) he is the holder of or beneficially interested in
one per cent. or more of a class of equity share capital of the
relevant company or of the voting rights available to members of
the relevant company or if he can cause one per cent. or more of
those voting rights to be cast at his direction;
(ii) shares held by a director as bare or custodian trustee and in
which he has no beneficial interest, shares comprised in a trust
in which the director's interest is in reversion or is in
remainder (if and so long as another person is entitled to
receive the income from the trust) and shares comprised in an
authorised unit trust scheme in which the director is interested
only as a unit holder are disregarded;
(iii) where a director is deemed for the purposes of this paragraph
(d) to be interested in one per cent. or more in the capital of
a relevant company and that relevant company is materially
interested in a contract, the director is also deemed to be
materially interested in that contract;
(e) a contract, arrangement, transaction or proposal concerning the adoption,
modification or operation of a pension, superannuation or similar scheme
or retirement, death or disability benefits scheme or personal pension
plan or employees' share scheme under which he may benefit and which
either (a) has been approved by or is subject to and conditional on
approval by the Inland Revenue for taxation purposes, or (b) relates to
both employees and directors of the Company (or any of its subsidiary
undertakings) and does not accord to a director as such a privilege or
advantage not accorded to the employees to whom the scheme or fund
relates;
(f) a contract, arrangement, transaction or proposal for the benefit of
employees of the Company or any of its subsidiary undertakings under
which the director benefits in a similar manner to employees and which
does not accord to a director as such a privilege or advantage not
accorded to the employees to whom it relates; and
(g) a contract, arrangement, transaction or proposal concerning the purchase
or maintenance of any insurance policy under which he may benefit.
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106.4 A director may not vote or be counted in the quorum on a resolution of
the board or committee of the board concerning his own appointment (including
fixing or varying the terms of his appointment or its termination) as the holder
of an office or place of profit with the Company or any company in which the
Company is interested. Where proposals are under consideration concerning the
appointment (including fixing or varying the terms of appointment or its
termination) of two or more directors to offices or places of profit with the
Company or a company in which the Company is interested, such proposals shall be
divided and a separate resolution considered in relation to each director. In
such case each of the directors concerned (if not otherwise debarred from voting
under this article 106) is entitled to vote (and be counted in the quorum) in
respect of each resolution except that concerning his own appointment.
106.5 If a question arises at a meeting as to the materiality of a director's
interest (other than the interest of the chairman of the meeting) or as to the
entitlement of a director (other than the chairman) to vote or be counted in a
quorum and the question is not resolved by his voluntarily agreeing to abstain
from voting or being counted in the quorum, the question shall be referred to
the chairman and his ruling in relation to the director concerned is conclusive
and binding on all concerned.
106.6 If a question arises at a meeting as to the materiality of the interest
of the chairman of the meeting or as to the entitlement of the chairman to vote
or be counted in a quorum and the question is not resolved by his voluntarily
agreeing to abstain from voting or being counted in the quorum, the question
shall be decided by resolution of the directors or committee members present at
the meeting (excluding the chairman) whose majority vote is conclusive and
binding on all concerned.
106.7 For the purposes of this article 106, the interest of a person who is for
the purposes of the Acts connected with (within the meaning of section 346 of
the Act) a director is treated as the interest of the director and, in relation
to an alternate director, the interest of his appointor shall be treated as the
interest of the alternate director in addition to an interest which the
alternate director otherwise has. This article 106 applies to an alternate
director as if he were a director otherwise appointed.
106.8 For the avoidance of doubt, any TINTA Designated Director or MediaOne
Designated Director or SBC Designated Director or Cox Designated Director or
Vivendi Designated Director shall be deemed, for all purposes (and not only for
the purposes of the articles), not to have an interest in any contract,
arrangement, transaction or proposal in which TINTA or MediaOne or SBC or Cox or
Vivendi respectively and the members of their respective groups or associates
have an interest.
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Proceedings of Directors and Committees
Board meetings
107. Subject to the articles, the board may meet for the despatch of business,
adjourn and otherwise regulate its proceedings as it thinks fit.
Notice of board meetings
108. A director may, and the secretary at the request of a director shall,
summon a board meeting at any time. Notice of a board meeting is deemed to be
duly given to a director if it is given to him personally or by word of mouth or
sent in writing to him at his last-known address or another address given by him
to the Company for that purpose at least 24 hours in advance of a meeting. A
director may waive the requirement that notice be given to him of a board
meeting, either prospectively or retrospectively. A director absent or intending
to be absent from the United Kingdom or the United States of America may request
that notices of board meetings during his absence be sent in writing to him at
an address given by him to the Company for that purpose. If no request is made
it is not necessary to give notice of a board meeting to a director who is
absent from the United Kingdom or the United States of America.
Quorum
109. The quorum necessary for the transaction of business is a majority of the
directors present in person or by alternate director. A duly convened meeting of
the board at which a quorum is present is competent to exercise all or any of
the authorities, powers and discretions vested in or exercisable by the board.
Chairman of board
110. The board may appoint one of its body as chairman to preside at every
board meeting at which he is present and one or more deputy chairmen and decide
the period for which he is or they are to hold office (and may at any time
remove him or them from office). If no chairman or deputy chairman is elected,
or if at a meeting neither the chairman nor a deputy chairman is present within
five minutes of the time fixed for the start of the meeting, the directors and
alternate directors (in the absence of their appointors) present shall choose
one of their number to be chairman. If two or more deputy chairmen are present,
the senior of them shall act as chairman, seniority being determined by length
of office since their last appointment or reappointment. As between two or more
who have held office for an equal length of time, the deputy chairman to act as
chairman shall be decided by those directors and alternate directors (in the
absence of their appointors) present. A chairman or deputy chairman may hold
executive office or employment with the Company.
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Voting
111. Questions arising at a meeting of the board are determined by a majority
of votes. In case of an equality of votes the chairman shall not have a second
or casting vote.
Participation by telephone
112. A director or his alternate director may participate in a meeting of the
board or a committee of the board through the medium of conference telephone or
similar form of communication equipment if all persons participating in the
meeting are able to hear and speak to each other throughout the meeting. A
person participating in this way is deemed to be present in person at the
meeting and is counted in a quorum and entitled to vote. Subject to the Acts,
all business transacted in this way by the board or a committee of the board is
for the purposes of the articles deemed to be validly and effectively transacted
at a meeting of the board or a committee of the board although fewer than two
directors or alternate directors are physically present at the same place. The
meeting is deemed to take place where the largest group of those participating
is assembled or, if there is no such group, where the chairman of the meeting
then is.
Resolution in writing
113. A resolution in writing executed by all directors for the time being
entitled to receive notice of a board meeting and not being less than a quorum
or by all members of a committee of the board is as valid and effective for all
purposes as a resolution passed at a meeting of the board (or committee, as the
case may be). The resolution in writing may consist of several documents in the
same form each executed by one or more of the directors or members of the
relevant committee. The resolution in writing need not be signed by an alternate
director if it is signed by his appointor and a resolution signed by an
alternate director need not be signed by his appointor.
Proceedings of committees
114.1 Proceedings of committees of the board shall be conducted in accordance
with regulations prescribed by the board (if any). Subject to those regulations
and articles 114.2 and 114.3, proceedings shall be conducted in accordance with
applicable provisions of the articles regulating the proceedings of the board.
114.2 Where the board resolves to delegate any of its powers, authorities and
discretions to a committee and that resolution states that the committee shall
consist of any one or more unnamed directors, it is not necessary to give notice
of a meeting of that committee to directors other than the director or directors
who form the committee.
114.3 The quorum necessary for the transaction of business of any committee
shall be a majority of the members of such committee who are directors present
in person or by an alternate director.
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Minutes of proceedings
115.1 The board shall cause minutes to be made in books kept for the purpose
of:
(a) all appointments of officers and committees made by the board and of any
remuneration fixed by the board; and
(b) the names of directors present at every meeting of the board, committees of
the board, the Company or the holders of a class of shares or debentures,
and all orders, resolutions and proceedings of such meetings.
115.2 If purporting to be signed by the chairman of the meeting at which the
proceedings were held or by the chairman of the next succeeding meeting, minutes
are receivable as prima facie evidence of the matters stated in them.
Validity of proceedings of board or committee
116. All acts done by a meeting of the board, or of a committee of the board,
or by a person acting as a director, alternate director or member of a committee
are, notwithstanding that it is afterwards discovered that there was a defect in
the appointment of a person or persons acting, or that they or any of them were
or was disqualified from holding office or not entitled to vote, or had in any
way vacated their or his office, as valid as if every such person had been duly
appointed, and was duly qualified and had continued to be a director, alternate
director or member of a committee and entitled to vote.
Secretary and Authentication of Documents
Secretary
117.1 Subject to the Acts, the board shall appoint a secretary or joint
secretaries and may appoint one or more persons to be an assistant or deputy
secretary on such terms and conditions (including remuneration) as it thinks
fit. The board may remove a person appointed pursuant to this article from
office and appoint another or others in his place.
117.2 Any provision of the Acts or of the articles requiring or authorising a
thing to be done by or to a director and the secretary is not satisfied by its
being done by or to the same person acting both as director and as, or in the
place of, the secretary.
Authentication of documents
118. A director or the secretary or another person appointed by the board for
the purpose may authenticate documents affecting the constitution of the Company
(including the memorandum of association and the articles) and resolutions
passed by the Company or holders of a class of shares or the board or a
committee of the board and books, records, documents and accounts relating to
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the business of the Company, and to certify copies or extracts as true copies or
extracts.
Seals
Safe custody
119. The board shall provide for the safe custody of every seal.
Application of seals
120. A seal may be used only by the authority of a resolution of the board or
of a committee of the board. The board may decide who will sign an instrument to
which a seal is affixed (or, in the case of a share certificate, on which the
seal may be printed) either generally or in relation to a particular instrument
or type of instrument. The board may also decide, either generally or in a
particular case, that a signature may be dispensed with or affixed by mechanical
means. Unless otherwise decided by the board:
(a) share certificates and certificates issued in respect of debentures or
other securities (subject to the provisions of the relevant instrument)
need not be signed or, if signed, a signature may be applied by mechanical
or other means or may be printed; and
(b) every other instrument to which a seal is affixed shall be signed by one
director and by the secretary or a second director.
Official seal for use abroad
121. The Company may exercise the powers conferred by the Acts with regard to
having an official seal for use abroad, and those powers shall be vested in the
board.
Dividends and other payments
Declaration of dividends
122. Subject to the Acts and the articles, the Company may by ordinary
resolution declare a dividend to be paid to the members according to their
respective rights and interests, but no dividend may exceed the amount
recommended by the board.
Interim dividends
123. Subject to the Acts, the board may declare and pay such interim dividends
(including a dividend payable at a fixed rate) as appear to it to be justified
by the profits of the Company available for distribution. If the share capital
is divided into different classes, the board may pay interim dividends on shares
which rank after shares conferring preferred rights with regard to dividend as
well as on shares with preferred rights, unless at the time of payment a
preferential dividend is in
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arrear. If the board acts in good faith, it does not incur any liability to the
holders of shares conferring preferred rights for a loss they may suffer by the
lawful payment of an interim dividend on shares ranking after those with
preferred rights.
Entitlement to dividends
124. Except as otherwise provided by the rights attached to shares, a dividend
shall be declared and paid according to the amounts paid up on the shares in
respect of which the dividend is declared and paid, but no amount paid up on a
share in advance of a call may be treated for the purpose of this article as
paid up on the share. Dividends shall be apportioned and paid proportionately to
the amounts paid up on the shares during any portion or portions of the period
in respect of which the dividend is paid.
Method of payment
125.1 The Company may pay a dividend, interest or another amount payable in
respect of a share in cash or by cheque, dividend warrant or money order, or by
a bank or other funds transfer system, or by such other method as the holder or
joint holders of the share in respect of which the payment is made (or the
person or persons entitled by transmission to the share) may in writing direct.
Any joint holder or other person jointly entitled to a share may give an
effective receipt for a dividend, interest or other amount paid in respect of
the share.
125.2 The Company may send a cheque, warrant or order by post (i) in the case
of a sole holder, to his registered address, or (ii) in the case of joint
holders, to the registered address of the person whose name stands first in the
register, or (iii) in the case of a person or persons entitled by transmission
to a share, as if it were a notice given in accordance with article 140, or (iv)
in any case, to a person and address that the person or persons entitled to the
payment may in writing direct.
125.3 Every cheque, warrant or order is sent at the risk of the person entitled
to the payment and shall be made payable to the order of the person or persons
entitled. The payment of the cheque, warrant or order is a good discharge to the
Company. If payment is made by a bank or other funds transfer, or by another
method at the direction of the holder or holders or other person or persons
entitled, the Company is not responsible for amounts lost or delayed in the
course of the transfer or in carrying out these directions.
125.4 Without prejudice to article 68, the board may withhold payment of a
dividend (or part of a dividend) payable to a person entitled by transmission to
a share until he has provided any evidence of his right that the board may
reasonably require.
125.5 Where an Approved Depositary (approved by the board for the purposes of
this article 125.5) has requested to receive dividends in a currency other than
pounds sterling, the board may in its absolute discretion approve the entering
into of arrangements with such Approved Depositary to enable payment of any
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dividend to be made to such Approved Depositary in such other currency for value
on the date on which the relevant dividend is paid, or such later date as the
board may determine.
Dividends not to bear interest
126. No dividend or other amount payable by the Company in respect of a share
bears interest as against the Company unless otherwise provided by the rights
attached to the share.
Calls or debts may be deducted from dividends etc.
127. The board may deduct from a dividend or other amounts payable to a person
in respect of a share amounts due from him to the Company on account of a call
or otherwise in relation to a share.
Unclaimed dividends etc.
128. All unclaimed dividends, interest or other amounts payable by the Company
in respect of a share may be invested or otherwise made use of by the board for
the benefit of the Company until claimed. Dividends unclaimed for a period of 12
years from the date they became due for payment are forfeited and cease to
remain owing by the Company. The payment of an unclaimed dividend, interest or
other amount payable by the Company in respect of a share into a separate
account does not constitute the Company a trustee in respect of it.
Uncashed dividends
129. If, in respect of a dividend or other amount payable in respect of a
share, on any one occasion:
(a) a cheque, warrant or order is returned undelivered or left uncashed, or
(b) a transfer made by a bank or other funds transfer system is not accepted,
and reasonable enquiries have failed to establish another address or account of
the person entitled to the payment, the Company is not obliged to send or
transfer a dividend or other amount payable in respect of that share to that
person until he notifies the Company of an address or account to be used for
that purpose. If the cheque, warrant or order is returned undelivered or left
uncashed or transfer not accepted on two consecutive occasions, the Company may
exercise this power without making any such enquiries.
Payment of dividends in specie
130. Without prejudice to article 124, the board may, with the prior authority
of an ordinary resolution of the Company, direct that payment of a dividend may
be satisfied wholly or in part by the distribution of specific assets and in
particular of paid-up shares or debentures of another company. Where a
difficulty arises in connection with the distribution, the board may settle it
as it thinks fit and in
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particular may issue fractional certificates (or ignore fractions), may fix the
value for distribution of the specific assets (or any part of them), may decide
that a cash payment be made to a member on the basis of the value so fixed, in
order to secure equality of distribution, and may vest assets in trustees on
trust for the persons entitled to the dividend as may seem expedient to the
board.
Payment of scrip dividends
131.1 Subject to the Acts, but without prejudice to article 124, the board may,
with the prior authority of an ordinary resolution of the Company, allot to
those holders of a particular class of shares who have elected to receive them
further shares of that class or ordinary shares, in either case credited as
fully paid, (new shares) instead of cash in respect of all or part of a dividend
or dividends specified by the resolution, subject to any exclusions,
restrictions or other arrangements the board may in its absolute discretion deem
necessary or expedient to deal with legal or practical problems under the laws
of, or the requirements of a recognised regulatory body or a stock exchange in,
any territory.
131.2 Where a resolution under article 131.1 is to be proposed at a general
meeting and the resolution relates in whole or in part to a dividend to be
declared at that meeting, then the resolution declaring the dividend is deemed
to take effect at the end of that meeting.
131.3 A resolution under article 131.1 may relate to a particular dividend or
to all or any dividends declared or paid within a specified period, but that
period may not end later than the beginning of the fifth annual general meeting
following the date of the meeting at which the resolution is passed.
131.4 The board shall determine the basis of allotment of new shares so that,
as nearly as may be considered convenient without involving rounding up of
fractions, the value of the new shares (including a fractional entitlement) to
be allotted (calculated by reference to the average quotation, or the nominal
value of the new shares, if greater) equals (disregarding an associated tax
credit) the amount of the dividend which would otherwise have been received by
the holder (the relevant dividend). For this purpose the average quotation of
each of the new shares is the average of the middle-market quotations for a
fully-paid share of the Company of that class derived from the Daily Official
List of the London Stock Exchange on the business day on which the relevant
class of shares is first quoted ex the relevant dividend (or such other date as
the board may deem appropriate to take account of any subsequent issue of shares
by the Company) and the four subsequent business days or shall be as determined
by or in accordance with the ordinary resolution.
131.5 The board may make any provision it considers appropriate in relation to
an allotment made pursuant to this article, including but not limited to:
(a) the giving of notice to holders of the right of election offered to them;
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(b) the provision of forms of election (whether in respect of a particular
dividend or dividends generally);
(c) determination of the procedure for making and revoking elections;
(d) the place at which, and the latest time by which, forms of election and
other relevant documents must be lodged in order to be effective; and
(e) the disregarding or rounding up or down or carrying forward of fractional
entitlements, in whole or in part, or the accrual of the benefit of
fractional entitlements to the Company (rather than to the holders
concerned).
131.6 The dividend (or that part of the dividend in respect of which a right of
election has been offered) is not declared or payable on shares in respect of
which an election has been duly made (the elected shares); instead new shares
are allotted to the holders of the elected shares on the basis of allotment
calculated as in article 131.4. For that purpose, the board may resolve to
capitalise out of amounts standing to the credit of reserves (including a share
premium account, capital redemption reserve and profit and loss account),
whether or not available for distribution, a sum equal to the aggregate nominal
amount of the new shares to be allotted and apply it in paying up in full the
appropriate number of new shares for allotment and distribution to the holders
of the elected shares. A resolution of the board capitalising part of the
reserves has the same effect as if the capitalisation had been declared by
ordinary resolution of the Company pursuant to article 132. In relation to the
capitalisation the board may exercise all the powers conferred on it by article
132 without an ordinary resolution of the Company.
131.7 The new shares rank pari passu in all respects with each other and with
the fully-paid shares of the same class in issue on the record date for the
dividend in respect of which the right of election has been offered, but they
will not rank for a dividend or other distribution or entitlement which has been
declared or paid by reference to that record date.
Capitalisation of profits
132. Subject to the Acts, the board may, with the authority of an ordinary
resolution of the Company:
(a) resolve to capitalise an amount standing to the credit of reserves
(including a share premium account, capital redemption reserve and profit
and loss account), whether or not available for distribution;
(b) appropriate the sum resolved to be capitalised to the members in proportion
to the nominal amount of ordinary shares (whether or not fully paid) held
by them respectively and apply that sum on their behalf in or towards:
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(i) paying up the amounts (if any) for the time being unpaid on shares
held by them respectively, or
(i) paying up in full unissued shares or debentures of a nominal amount
equal to that sum,
and allot the shares or debentures, credited as fully paid, to the members
(or as they may direct) in those proportions, or partly in one way and
partly in the other, but the share premium account, the capital redemption
reserve and profits which are not available for distribution may, for the
purposes of this article 132, only be applied in paying up unissued shares
to be allotted to members credited as fully paid;
(c) make any arrangements it thinks fit to resolve a difficulty arising in the
distribution of a capitalised reserve and in particular, where shares or
debentures become distributable in fractions, the board may deal with the
fractions as it thinks fit, including issuing fractional certificates,
disregarding fractions or selling shares or debentures representing the
fractions to a person for the best price reasonably obtainable and
distributing the net proceeds of the sale in due proportion amongst the
members (except that if the amount due to a member is less than (Pounds)3,
or such other sum as the board may decide, the sum may be retained for the
benefit of the Company);
(d) authorise a person to enter (on behalf of all the members concerned) into
an agreement with the Company providing for either:
(i) the allotment to the members respectively, credited as fully
paid, of shares or debentures to which they may be entitled on
the capitalisation, or
(ii) the payment by the Company on behalf of the members (by the
application of their respective proportions of the reserves
resolved to be capitalised) of the amounts or part of the
amounts remaining unpaid on their existing shares,
an agreement made under such authority being effective and binding on all
those members; and
(e) generally do all acts and things required to give effect to the resolution.
Record dates
133. Notwithstanding any other provision of the articles, but subject to the
Acts and rights attached to shares, the Company or the board may fix any date as
the record date for a dividend, distribution, allotment or issue. The record
date may be on or at any time before or after a date on which the dividend,
distribution, allotment or issue is declared, made or paid.
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Accounts
Inspection of accounts
134.1 The board shall ensure that accounting records are kept in accordance
with the Acts.
134.2 The accounting records shall be kept at the office or, subject to the
Acts, at another place decided by the board and shall be available during
business hours for the inspection of the directors and other officers. No
member (other than a director or other officer) has the right to inspect an
accounting record or other document except if a right is conferred by the Acts
or he is authorised by the board.
Accounts to be sent to members etc.
135.1 In respect of each financial year, a copy of the Company's annual
accounts, directors' report and auditors' report on those accounts shall be sent
by post or delivered to:
(a) every member (whether or not entitled to receive notices of general
meetings),
(b) every holder of debentures (whether or not entitled to receive notices of
general meetings), and
(c) every other person who is entitled to receive notices of general meetings,
not less than 21 clear days before the date of the meeting at which copies of
those documents are to be laid in accordance with the Acts. This article 135
does not require copies of the documents to which it applies to be sent or
delivered to:
(i) a member or holder of debentures of whose address the Company is unaware,
or
(ii) more than one of the joint holders of shares or debentures.
135.2 Where permitted by the Acts, a summary financial statement derived from
the Company's annual accounts and the directors' report in the form and
containing the information prescribed by the Acts may be sent or delivered to a
person in place of the documents required to be sent or delivered by article
135.1.
Notices
136. A notice to be given to or by a person pursuant to the articles shall be
in writing except that a notice convening a meeting of the board or of a
committee of the board need not be in writing.
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Service of Notices and Other Documents on Members
137.1 A notice or other document may be given to a member by the Company either
personally or by sending it by post in a pre-paid envelope addressed to the
member at his registered address, or by leaving it at that address (or at
another address notified for the purpose) in an envelope addressed to the
member.
137.2 In the case of joint holders of a share, a notice or other document shall
be given to whichever of them is named first in the register in respect of the
joint holding and notice given in this way is sufficient notice to all joint
holders.
137.3 If a member (or, in the case of joint holders, the person first named in
the register) has a registered address outside the United Kingdom or the United
States of America but has notified the Company of an address in the United
Kingdom or the United States of America at which notices or other documents may
be given to him, he is entitled to have notices given to him at that address,
but otherwise no such member or person is entitled to receive a notice or other
document from the Company.
Notice by Advertisement
138. If by reason of the suspension or curtailment of postal services in the
United Kingdom or the United States of America the Company is unable effectively
to convene a general meeting by notices sent by post, the board may, in its
absolute discretion and as an alternative to any other method of service
permitted by the articles, resolve to convene a general meeting by a notice
advertised in at least, in the case of the suspension or curtailment of postal
services in the United Kingdom, one leading United Kingdom national daily
newspaper and, in the case of the suspension or curtailment of postal services
in the United States of America, the Wall Street Journal and the New York Times,
(but, if any such newspaper shall by reason of industrial action or otherwise
not be published on the date on which the advertisement is due to appear,
publication in such other newspaper(s) as the board shall consider appropriate
shall be sufficient). In this case the Company shall send confirmatory copies
of the notice by post if at least seven clear days before the meeting the
posting of notices to addresses throughout the United Kingdom and/or the United
States of America again becomes practicable.
Evidence of Service
139.1 A notice or other document addressed to a member at his registered
address or address for service in the United Kingdom or the United States of
America is, if sent by post (by airmail if posted from outside the United
Kingdom to an address within the United Kingdom or from outside the United
States of America to an address within the United States of America), deemed to
be given within 24 hours if pre-paid as first class post and within 48 hours if
pre-paid as second class post after it has been posted, and in proving service
it is
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sufficient to prove that the envelope containing the notice or document
was properly addressed, pre-paid and posted.
139.2 A notice or document not sent by post but left at a registered address or
address for service in the United Kingdom or the United States of America is
deemed to be given on the day it is left.
139.3 Where notice is given by newspaper advertisements, the notice is deemed
to be given to all members and other persons entitled to receive it at noon on
the day when the advertisements appear or, if they appear on different days, at
noon on the last of the days when the advertisements appear.
139.4 A member present in person or by proxy at a meeting or of the holders of
a class of shares is deemed to have received due notice of the meeting and,
where required, of the purposes for which it was called.
Notice Binding on Transferees etc.
140. A person who becomes entitled to a share by transmission, transfer or
otherwise is bound by a notice in respect of that share (other than a notice
served by the Company under section 212 of the Act) which, before his name is
entered in the register, has been properly served on a person from whom he
derives his title.
Notice in case of Entitlement by Transmission
141. Where a person is entitled by transmission to a share, the Company may
give a notice or other document to that person as if he were the holder of a
share by addressing it to him by name or by the title of representative of the
deceased or trustee of the bankrupt member (or by similar designation) at an
address in the United Kingdom or the United States of America supplied for that
purpose by the person claiming to be entitled by transmission. Until an address
has been supplied, a notice or other document may be given in any manner in
which it might have been given if the death or bankruptcy or other event had not
occurred. The giving of notice in accordance with this article is sufficient
notice to all other persons interested in the share.
Miscellaneous
Destruction of Documents
142.1 The Company may destroy:
(a) a share certificate which has been cancelled at any time after one year
from the date of cancellation;
(b) a mandate for the payment of dividends or other amounts or a variation or
cancellation of a mandate or a notification of change of name or
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<PAGE>
address at any time after two years from the date the mandate, variation,
cancellation or notification was recorded by the Company;
(c) an instrument of transfer of shares (including a document constituting
the renunciation of an allotment of shares) which has been registered at
any time after six years from the date of registration; and
(d) any other document on the basis of which any entry in the register is
made at any time after six years from the date an entry in the register
was first made in respect of it.
142.2 It is presumed conclusively in favour of the Company that every share
certificate destroyed was a valid certificate validly cancelled, that every
instrument of transfer destroyed was a valid and effective instrument duly and
properly registered and that every other document destroyed was a valid and
effective document in accordance with the recorded particulars in the books or
records of the Company, but:
(a) the provisions of this article 142 apply only to the destruction of a
document in good faith and without express notice to the Company that the
preservation of the document is relevant to a claim;
(b) nothing contained in this article 142 imposes on the Company liability in
respect of the destruction of a document earlier than provided for in this
article 142 or in any case where the conditions of this article are not
fulfilled; and
(c) references in this article 142 to the destruction of a document include
reference to its disposal in any manner.
Winding up
143. On a voluntary winding up of the Company the liquidator may, on obtaining
any sanction required by law, divide among the members in kind the whole or any
part of the assets of the Company, whether or not the assets consist of property
of one kind or of different kinds. For this purpose the liquidator may set the
value he deems fair on a class or classes of property, and may determine on the
basis of that valuation and in accordance with the then existing rights of
members how the division is to be carried out between members or classes of
members. The liquidator may not, however, distribute to a member without his
consent an asset to which there is attached a liability or potential liability
for the owner.
Indemnity
144.1 Subject to the Acts, but without prejudice to an indemnity to which he
may otherwise be entitled, every officer of the Company shall be indemnified out
of the assets of the Company against all costs, charges, losses and liabilities
incurred by him in the execution of his duties or the exercise of his powers,
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<PAGE>
authorities and discretions including (without prejudice to the generality of
the foregoing) a liability incurred:
(a) defending proceedings (whether civil or criminal) in which judgment is
given in his favour or in which he is acquitted, or which are otherwise
disposed of without a finding or admission of material breach of duty on
his part, or
(b) in connection with any application in which relief is granted to him by
the court from liability for negligence, default, breach of duty or breach
of trust in relation to the affairs of the Company.
144.2 The board may exercise all the powers of the Company to purchase and
maintain insurance for the benefit of a person who is an officer or employee, or
former officer or employee, of the Company or of a company which is a subsidiary
undertaking of the Company or in which the Company has an interest (whether
direct or indirect), or who is or was trustee of a retirement benefits scheme or
another trust in which an officer or employee or former officer or employee is
or has been interested, indemnifying him against liability for negligence,
default, breach of duty or breach of trust or another liability which may
lawfully be insured against by the Company.
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<PAGE>
EXHIBIT 5.1
Telewest Communications plc
Genesis Business Park
Albert Drive
Woking
Surrey GU21 5RW
26 June 1998
Dear Ladies and Gentlemen
Telewest plc (the Company)
1. This opinion is given in connection with:
(a) the Offer Document and the Disclosure Document (together constituting the
Offer to Purchase/Prospectus) forming part of Amendment No 2 to the
Company's Registration Statement on Form S-4 (the Form S-4); and
(b) the Pre-emptive Issue Circular and the Offer Document (together
constituting the Prospectus) forming part of Amendment No 1 to the
Company's Registration Statement on Form S-3 (the Form S-3 and, together
with the Form S-4, the Registration Statements),
filed under the United States Securities Act of 1933, as amended, on 29 June
1998 with respect to the new Telewest shares (as defined therein) (the Telewest
Shares).
2. This opinion is limited to English law as applied by the English courts and
is given on the basis that it will be governed by and construed in accordance
with, and any liability which may arise in respect of it is to be governed by,
English law. We have made no investigation of the laws of any jurisdiction other
than England and the United Kingdom as far as they are applicable thereto and
neither express nor imply any opinion as to any other laws. We
<PAGE>
have assumed that none of the opinions expressed below would be affected by the
laws (including public policy) of any jurisdiction outside England and Wales.
3. We have examined and relied on copies of such corporate records and other
documents, including the Registration Statements and reviewed such matters of
law as we have deemed necessary or appropriate for the purpose of this opinion.
4. Upon the basis of and subject to the foregoing it is our opinion that the
Company is a public limited company incorporated under the laws of England and
Wales under the Companies Act 1985 and that, subject to the Telewest Shares
being allotted by the Committee of the Board of Directors of the Company duly
authorised so to do, such Telewest Shares, when paid for and issued in
accordance with the terms of the Offer to Purchase/Prospectus and the
Prospectus, will be validly issued and fully paid and not liable to capital
calls from the Company.
5. This opinion is given to you for use in connection with the filing of the
Registration Statements. This opinion is strictly limited to matters dealt with
herein and does not extend to and is not to be read as extending by implication
to any other.
6. We hereby consent to the filing of this opinion with the SEC as an exhibit
to each of the Registration Statements and of the use of our name in each
Registration Statement under the caption "Service of Process and Enforcement of
Liabilities". In giving this consent, we do not admit that we are within the
category of persons whose consent is required within Section 7 of the Securities
Act of 1933, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Yours faithfully
Freshfields
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Exhibit 10.55
MEDIAONE INTERNATIONAL HOLDINGS, INC.
MEDIAONE UK CABLE, INC and MEDIAONE CABLE PARTNERSHIP HOLDINGS, INC.
TELE-COMMUNICATIONS INTERNATIONAL, INC.
UNITED ARTISTS PROGRAMMING-EUROPE, INC.
COX COMMUNICATIONS, INC.
COX U.K. COMMUNICATIONS, LP
SBC INTERNATIONAL, INC.
SOUTHWESTERN BELL INTERNATIONAL HOLDINGS (UK-1) CORPORATION
TELEWEST COMMUNICATIONS plc
-----------------------------------------------
AMENDED AND RESTATED RELATIONSHIP AGREEMENT
-----------------------------------------------
CLIFFORD CHANCE
<PAGE>
CONTENTS
CLAUSE PAGE
1. INTERPRETATION............................................................2
2. CONDITIONS...............................................................13
3. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS.............................15
4. DIRECTORS................................................................15
5. CLOSING..................................................................17
6. MATTERS REQUIRING CONSENT................................................19
7. VOTING AGREEMENT AMONG TINTA GROUP AND U S WEST GROUP....................20
8. RESTRICTIONS ON TRANSFERS BY TINTA GROUP AND U S WEST GROUP..............21
9. RIGHTS OF FIRST OFFER, RIGHTS OF FIRST REFUSAL AND CHANGE OF
CONTROL..................................................................22
10. SPECIFIC RIGHTS OF SHAREHOLDER GROUPS TO MAINTAIN OWNERSHIP
LEVEL....................................................................27
11. GENERAL RIGHTS OF SHAREHOLDER GROUPS TO MAINTAIN OWNERSHIP
LEVEL....................................................................30
12. NON-COMPETITION..........................................................31
13. SCOPE OF COMPANY BUSINESS................................................35
14. CONTRACTUAL RESTRICTIONS.................................................35
15. INDEMNIFICATIONS.........................................................35
16. GAIN RECOGNITION CONSENT REQUIREMENTS....................................37
17. CITY CODE ON TAKEOVERS AND MERGERS.......................................38
18. CONFIDENTIALITY..........................................................38
19. JOINT AND SEVERAL LIABILITY FOR CONTROLLED AFFILIATES....................38
20. TERM.....................................................................38
21. TERMINATION OF 1994 AND 1995 AGREEMENTS..................................38
<PAGE>
22. COMPETITION..............................................................39
23. COSTS....................................................................39
24. FURTHER ASSURANCE........................................................39
25. GENERAL..................................................................39
26. ASSIGNMENT...............................................................40
27. NOTICES..................................................................40
28. GOVERNING LAW AND JURISDICTION...........................................42
29. COUNTERPARTS.............................................................43
SCHEDULE 1 - CONTRACTUAL RESTRICTIONS........................................44
SCHEDULE 2 - DEED OF ADHERENCE...............................................45
SCHEDULE 3 - PROVISIONS PRESERVED FROM THE OLD RELATIONSHIP AGREEMENT........46
Agreed form documents:
1. Announcement
2. New Articles
3. TW Holdings Operating Agreement
<PAGE>
THIS AGREEMENT is made as of 15 April 1998
BETWEEN:
(1) MEDIAONE INTERNATIONAL HOLDINGS, INC. (previously known as US WEST
International Holdings Inc.), a company incorporated in Delaware, USA whose
principal place of business is 7800 East Orchard Road, Englewood, Colorado
80111, USA ("MediaOne Holdings");
(2) MEDIAONE UK CABLE, INC. (previously known as US WEST UK Cable Inc.) and
MEDIAONE CABLE PARTNERSHIP HOLDINGS, INC. (previously known as US WEST
Cable Partnership Holdings Inc.), each being a company incorporated in
Delaware, USA whose principal place of business is 7800 East Orchard Road,
Englewood, Colorado 80111, USA ("MediaOne UK" and "MediaOne Cable"
respectively );
(3) TELE-COMMUNICATIONS INTERNATIONAL, INC., a company incorporated in
Delaware, USA whose principal place of business is 5619 DTC Parkway,
Englewood, Colorado 80111, USA ("TINTA");
(4) UNITED ARTISTS PROGRAMMING-EUROPE, INC., a company incorporated in
Colorado, USA whose principal place of business is 5619 DTC Parkway,
Englewood, Colorado 80111, USA ("UAP-E ");
(5) COX COMMUNICATIONS, INC., a company incorporated in Delaware, USA whose
principal place of business is 1400 Lake Hearn Drive, Atlanta, Georgia
30319, USA ("Cox");
(6) COX U.K. COMMUNICATIONS, L.P., a limited partnership incorporated in
Delaware, USA whose principal place of business is c/o The Corporation
Trust Company, 1209 Orange Street, Wilmington, Delaware 19801, USA ("CUK");
(7) SBC INTERNATIONAL, INC., a company incorporated in Delaware, USA whose
principal place of business is #2 Reed's Way, Suite 222, Corporate Commons,
New Castle, Delaware 19720, USA ("SBCI");
(8) SOUTHWESTERN BELL INTERNATIONAL HOLDINGS (UK-1) CORPORATION, a company
incorporated in Delaware, USA whose principal place of business is #2
Reed's Way, Suite 222, Corporate Commons, New Castle, Delaware 19720, USA
("SBIHUK-1"); and
(9) TELEWEST COMMUNICATIONS plc, a company incorporated in England and Wales
(registered no. 2983307), whose registered office is at Genesis Business
Park, Albert Drive, Woking, Surrey GU21 5RW, England (the "Company").
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<PAGE>
WHEREAS:
(A) The parties to this Agreement entered into an agreement dated 15 April 1998
in substantially the same form as this Agreement (the "Original
Agreement");
(B) The parties have agreed that a number of amendments should be made to the
Original Agreement, which amendments are incorporated in this Agreement;
and
(C) The parties have agreed that this Agreement shall replace the Original
Agreement in all respects with effect from 15 April 1998.
THE PARTIES AGREE as follows:
1. INTERPRETATION
1.1 In this Agreement, unless indicated to the contrary:
"Act" means the Companies Act 1985 (as amended);
"Affiliate" means with respect to any Person, any other
Person directly or indirectly Controlling,
directly or indirectly Controlled by or under
direct or indirect common Control with such
Person;
"ADS" means an American Depository Share representing
Ordinary Shares;
"Announcement" means the announcement in the agreed form of
the Company's firm intention to make the Offer;
"Assumptions" means the assumptions that (a) all options over
shares in the capital of General Cable plc have
been exercised during the Offer; (b) the Offer
has been accepted in full and all Ordinary
Shares required to be issued as consideration
under the Offer have been issued; (c) all the
Ordinary Shares proposed to be issued under the
Telewest Open Offer have been issued and TW
Holdings owns all the Ordinary Shares which
TINTA, MediaOne Holdings and their Affiliates
are entitled to subscribe under the Telewest
Open Offer or required to subscribe or procure
subscribers for under the Subscription
Agreement; (d) all options outstanding on the
Issue Date over shares in the capital of the
Company which are exercisable in accordance
with their terms prior to 31 December 1999 have
been exercised; and (e) neither TINTA, MediaOne
Holdings nor any of their respective Affiliates
has disposed of any
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<PAGE>
interest in any Ordinary Shares or Preference
Share in issue on the date of this Agreement;
"Board" means the board of directors of the Company;
"business day" means any day other than a Saturday or Sunday
or a public holiday in the State of Colorado,
the State of Delaware or England and Wales;
"Cable Telephony" means any voice or data telecommunications
transmission service which operates in whole or
in part by cable links to subscribers'
premises, is interconnected at some point to a
public switched network and is intended to
serve customers in the United Kingdom;
"Cable Television" means any service provided to customers on a
subscription or pay-per-view basis which sends
sounds or visual images or both by means of
cable, radio or microwave transmission systems
for television reception at two or more
locations, whether sent for simultaneous
reception or at different times in response to
subscribers' requests, including without
limitation video on demand and other
interactive services and other entertainment,
telecommunications and information services
proposed to be offered by the Company, as
described in the Disclosure Documents;
"Change in Control" means with respect to MediaOne Holdings and its
Affiliates (other than MediaOne) or TINTA and
its Affiliates (other than TCI), the
acquisition (whether by merger, consolidation,
sale, assignment, lease, transfer or otherwise,
in one transaction or any related series of
transactions) of beneficial ownership by any
Person (other than pursuant to a distribution
in specie, spin off, share dividend, demerger
or similar transaction and other than, with
respect to beneficial ownership of equity
interests in TINTA or any of its Affiliates, by
TINTA or any of its Affiliates and, with
respect to beneficial ownership of equity
interests in MediaOne Holdings or any of its
Affiliates, by MediaOne Holdings or any of its
Affiliates) of equity interests in TINTA and/or
any of its Affiliates (other than TCI) or
MediaOne Holdings and/or any of its Affiliates
(other than MediaOne), as the case may be, as a
result of which such Person has
-3-
<PAGE>
the power, directly or indirectly, to direct
the voting and disposition of Ordinary Shares
held by TINTA and its Affiliates or MediaOne
Holdings and its Affiliates, as the case may
be, representing at least 15 per cent. of the
outstanding Ordinary Shares of the Company. A
Change in Control shall be deemed voluntary if
it is the result of a transaction agreed to by
TINTA or any of its Affiliates or by MediaOne
Holdings or any of its Affiliates, as the case
may be. A Change in Control shall be deemed
involuntary if it is the result of actions by
Persons (other than TINTA or any of its
Affiliates or MediaOne Holdings or any of its
Affiliates, as the case may be) taken without
the agreement or consent of TINTA or any of its
Affiliates or of MediaOne Holdings or any of
its Affiliates, as the case may be;
"Closing Price" means the sale price for Ordinary Shares (i)
with respect to Ordinary Shares to be offered
on the London Stock Exchange, the sale price
which appears on the relevant Reuters Screen
for the Company as of 11:00 a.m. (London time)
on a Trading Day, provided that if such
Ordinary Shares do not appear on such Reuters
Screen or such Reuters Screen is temporarily
unavailable, the sale price with respect to the
Ordinary Shares will be the last reported sale
price which appears in the Official List of the
London Stock Exchange on a Trading Day and (ii)
with respect to Ordinary Shares to be offered
on the New York Stock Exchange in the form of
ADSs the last reported sale price on a Trading
Day or, in case no such sale takes place on
such day, the average of the reported closing
bid and asked prices as reported on the New
York Stock Exchange Composite Tape, or, if such
sales are not so reported, the reported last
sale price or, if no such sale takes place on
such day, the average of the reported closing
bid and asked prices on the principal national
securities exchange on which the ADSs are
listed or admitted to trading, or if not listed
or admitted to trading on any national
securities exchange, on the NASDAQ National
Market System ("NASDAQ"), or if the ADSs are
not quoted on such National Market System, the
average of the closing bid and asked prices in
the over-the-counter market
-4-
<PAGE>
as furnished by any New York Stock Exchange
member firm selected by the Board for that
purpose;
"Control" means with respect to any Person, the
possession, directly or indirectly, by another
Person of the power to direct or cause the
direction of the management or policies of such
Person, whether through equity ownership, by
contract or otherwise, but a Person shall not
be deemed to Control another Person solely by
virtue of any veto rights granted to it as a
minority equity owner or by virtue of super
majority voting rights and the words
"Controlled" and "Controlling" shall be
construed accordingly;
"Controlled Affiliate" means with respect to any Person, any Affiliate
of such Person which is under the Control of
such Person provided that each of Flextech plc,
At Home Corporation, Princes Holdings Limited
and MPC shall not be treated as a Controlled
Affiliate of the TINTA Group or the MediaOne
Group and TWE shall not be treated as a
Controlled Affiliate of the MediaOne Group and
for the purposes of this definition, any Person
in which both Cox or one or more of its
Affiliates and SBCI or one or more of its
Affiliates own equity interests shall be deemed
a Controlled Affiliate of each of Cox and SBCI
if (i) the aggregate of such equity interests
would be sufficient, if owned by one Person, to
confer Control of such Person on the Person
owning such equity interests and (ii) Cox or
its Affiliates and SBCI or its Affiliates have
entered into binding arrangements regarding the
exercise of voting rights in such equity
interests or have otherwise agreed in writing
to co-operate so as to direct the management or
policies of such Person;
"Controlling Shareholder" has the same meaning as in paragraph 3.12 of
Chapter 3 of the Listing Rules;
"Co-operation Agreement" means the co-operation agreement dated 3
October 1995 and entered into between the
Company/Old Telewest, Cox, CUK, SBCI, SBIHUK-1
and SBIHUK-2;
"Cox Group" means Cox and its Affiliates from time to time
or any Person or group of Persons within the
meaning
-5-
<PAGE>
given to the expression "Cox Group" in the New
Articles;
"Cox Shareholder" means CUK (whilst it is a member of the Cox
Group and a Shareholder) and/or any Shareholder
who is a member of the Cox Group for the time
being;
"Director" means a director of the Company;
"Disclosure Documents" means the prospectus, registration statement
and listing particulars filed, distributed or
used in connection with Old Telewest's initial
public offering of Ordinary Shares in 1994 or
in connection with the Company's acquisition of
SBC CableComms and Old Telewest in 1995;
"Fair Market Value" means as to any property, the price at which a
willing seller would sell and a willing buyer
would buy such property having full knowledge
of the facts, in an arm's length transaction
without time constraints, and without being
under any compulsion to buy or sell;
"Fixed Wireless Telephony" means a telecommunication service consisting of
the conveyance of messages through the agency
of Wireless Telegraphy (as defined in the
United Kingdom Wireless Telegraphy Act 1949) to
or from any Applicable Cable System (as defined
in the relevant telecommunications license)
operated by the Company or an Affiliate under a
Telecommunications License (as defined in the
IPO Documents) held by it or an Affiliate
directly from or to any apparatus designed or
adapted to be capable of being used while in
motion, provided that such service would not
involve the operation of a network capable of
handing calls off from radio or cell site to
cell site;
"Fully Diluted Ordinary means, at any time, the Ordinary Shares in
Shares" issue at such time and the Ordinary Shares
which would be in issue if all options and
rights outstanding for the time being to
subscribe for Ordinary Shares or securities
convertible into or exchangeable for Ordinary
Shares were exercisable and had been exercised
and the relevant Ordinary Shares and securities
issued and all securities convertible into or
-6-
<PAGE>
exchangeable for Ordinary Shares in issue (or
assumed to be in issue) at such time were
convertible or exchangeable and had been converted
or exchanged and the relevant Ordinary Shares
issued;
"General Cable" means General Cable PLC;
"Group System" means any Cable Television or Cable Telephony
system in which the Company has a direct or
indirect ownership interest from time to time;
"Independent Directors" means those Directors who are not designated by the
TINTA Group or the MediaOne Group in accordance
with Article 72 of the New Articles and are not
partners, officers or employees of, and do not have
a material consultancy with, the TINTA Group or the
MediaOne Group;
"IPO Documents" means the prospectus, registration statement and
listing particulars filed, distributed or used in
connection with Old Telewest's initial public
offering of Ordinary Shares in 1994;
"Issue Date" means such date as is agreed in writing between the
Company, TINTA, MediaOne and Cox and, failing
agreement, the day falling 14 days after the later
of the first closing date of the Offer and the date
the Offer becomes or is declared wholly
unconditional (or if not a business day, the next
preceding day);
"MediaOne" means MediaOne, Inc., a Delaware corporation (to be
renamed MediaOne Group, Inc.);
"MediaOne Cable Conversion
Shares" means a number of Preference Shares equal to the
product of the number of TW Holdings Conversion
Shares multiplied by the number of Preference
Shares held by MediaOne Cable and divided by the
total number of TW Holdings Preference Shares, any
fraction being rounded up;
"MediaOne Group" means MediaOne Holdings and its Affiliates from
time to time or any Person or group of Persons
within the meaning given to the expression
"MediaOne Group" in the New Articles;
"MediaOne Shareholder" means each of MediaOne UK and MediaOne Cable
(whilst it is a member of the MediaOne Group and a
-7-
<PAGE>
Shareholder) and/or any Shareholder who is a member
of the MediaOne Group for the time being;
"MediaOne UK Conversion
Shares" means a number of Preference Shares equal to the
product of the number of TW Holdings Conversion
Shares multiplied by the number of Preference
Shares held by MediaOne UK and divided by the total
number of TW Holdings Preference Shares, any
fraction being rounded up;
"MPC" means Mercury Personal Communications, a
partnership doing business as "One-2-One";
"New Articles" means the articles of association to be adopted by
the Company in the agreed form with effect from the
date on which the Offer becomes or is declared
wholly unconditional;
"1994 Agreements" means the Old Shareholders Agreement and the Old
Relationship Agreement;
"1995 Agreements" means the Co-operation Agreement and the Share
Dealing Agreement;
"Offer" means the proposed general offer to be made by or
on behalf of the Company for the entire issued and
to be issued share capital of General Cable in the
terms described in the Announcement or on such
revised terms as each of MediaOne Holdings, TINTA
and Cox may agree by notice to the Company;
"Offer Documents" means the offer documents and circulars to be sent
to shareholders of the Company and/or General Cable
and the disclosure documents incorporating UK
listing particulars and US proxy solicitation
materials to be published in connection with the
Offer and the Telewest Open Offer;
"Old Relationship Agreement" means the relationship agreement entered into as of
22 November 1994 by and among Old Telewest, TINTA,
MediaOne Holdings and the parties to the Old
Shareholders' Agreement as amended by an agreement
between the same parties as of 19 June 1995 and as
further supplemented by an agreement between the
same parties and the Company dated 3 October 1995;
-8-
<PAGE>
"Old Shareholders Agreement" means the shareholders' agreement dated as of 22
November 1994 by and between United Artists Cable
Television UK Holdings, Inc., UAP-E, MediaOne UK
and MediaOne Cable as amended by an agreement
between the same parties dated 19 June 1995 and
supplemented by a further agreement between the
same parties, Old Telewest and the Company dated 3
October 1995;
"Old Telewest" means Telewest Communications Cable Limited, a
company incorporated in England and Wales
(registered no. 2883742) whose registered office is
at Genesis Business Park, Albert Drive, Woking,
Surrey GU21 5RW, England;
"Ordinary Share" means an ordinary share, 10p par value, of the
Company, including any such share represented by an
ADS, and wherever this Agreement requires or
permits the calculation of a number or percentage
of Ordinary Shares in issue held by any Shareholder
or Shareholder Group such number or percentage
shall include the Pro Rata Shares of that
Shareholder or Shareholder Group and, except in the
case of clause 10.3, the Ordinary Shares into which
any Preference Shares are convertible for the time
being (ignoring any prohibition or restriction on
the conversion thereof);
"Ownership Interest" means, with respect to each Person owning an
interest in TW Holdings, all of the interests of
such Person in TW Holdings (including, without
limitation, an interest in the profits and losses
of TW Holdings, a capital account interest in TW
Holdings and all other rights and obligations of
such Person under the TW Holdings Operating
Agreement);
"Percentage Ownership" has the meaning given to that expression in clause
10.1;
"Permitted Demerger" means a distribution in specie, share dividend,
spin off, demerger or similar transaction resulting
in one or more Affiliates of the transferor owning
80 per cent. or more of the Ordinary Shares owned
by the transferor immediately prior to such
transaction;
"Person" means an individual, corporation, general or
limited partnership, limited or unlimited liability
company,
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<PAGE>
trust, association, unincorporated organisation,
government or any authority, agency or body
thereof, or other entity;
"Preference Share" means a convertible preference share, 10p par
value, of the Company;
"Private Transfer" means the Transfer of Shares by a Shareholder in a
negotiated transaction, rather than through a
brokerage transaction effected on a national
securities exchange, NASDAQ or the London Stock
Exchange;
"Pro Rata Shares" means, with respect to any Shareholder Group at any
time, the number of Ordinary Shares held by TW
Holdings attributable to such Shareholder Group
being:
(a) in the case of the MediaOne Group and the
TINTA Group, the product rounded to the
nearest whole number of (x) the sum of the
number of Ordinary Shares owned by TW Holdings
less the number of such shares in which
another Shareholder Group has a beneficial
interest as of such time, multiplied by (y)
the aggregate percentage Ownership Interest in
TW Holdings, expressed as a decimal, held by
members of such Shareholder Group as at such
time; and
(b) in the case of the Cox Group, the Ordinary
Shares owned by TW Holdings in which any
member of the Cox Group has a beneficial
interest;
"Public Transfer" means the Transfer of Shares by a Shareholder
through a brokerage transaction effected on a
national securities exchange, NASDAQ or the London
Stock Exchange, including a Private Transfer to a
broker in anticipation of a Public Transfer to be
effected by that broker;
"Qualifying Group" has the meaning given to that expression in clause
10.1;
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"Relevant Person" means a director, officer or employee of any of
TINTA, MediaOne Holdings, SBCI or Cox or their
respective Affiliates;
"Required Consent" has the meaning given to that expression in clause
6.2;
"SBC Group" means SBCI and its Affiliates from time to time;
"SBC Shareholder" means SBIHUK-1 (whilst it is a member of the SBC
Group and a Shareholder) and/or any Shareholder who
is a member of the SBC Group for the time being;
"SBIHUK-2" Southwestern Bell International Holdings (UK-2)
Corporation (which has merged with and into
SBIHUK-1);
"Share Dealing Agreement" means the share dealing agreement dated 3 October
1995 and made between Cox, CUK, SBCI, SBIHUK-1,
SBIHUK-2, TINTA, MediaOne Holdings and the
Company/Old Telewest;
"Shareholders" means each of MediaOne UK, MediaOne Cable, UAP-E,
CUK and SBIHUK-1 and each Person who acquires
Shares and becomes a party to this Agreement by
completing, executing and delivering a deed of
adherence in accordance with clause 26.2, for so
long as it holds any Shares or owns any Shares and
remains a party to this Agreement;
"Shareholder Group" means any of the Cox Group, the SBCI Group, the
TINTA Group or the MediaOne Group;
"Shares" means the Ordinary Shares and the Preference
Shares;
"Subscription Agreement" means the subscription agreement of today's date
between TINTA, MediaOne, Cox and the Company
relating to the Telewest Open Offer;
"TCI" means Tele-Communications, Inc., a Delaware
corporation;
"Telewest Group" means the Company and every Person Controlled by
the Company;
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"Telewest Open Offer" means the open offer proposed to be made on behalf
of the Company in connection with the Offer as more
particularly described in the Subscription
Agreement;
"TINTA Group" TINTA and its Affiliates from time to time or any
Person or group of Persons within the meaning given
to the expression "TINTA Group" in the New
Articles;
"TINTA Shareholder" means UAP-E (whilst a member of the TINTA Group and
a Shareholder) and/or any Shareholder who is a
member of the TINTA Group for the time being;
"Trading Day" means each Monday, Tuesday, Wednesday, Thursday and
Friday other than a day on which securities are not
traded on the applicable exchange or market;
"Transfer" means, in relation to any Shares, to sell, assign,
pledge, grant a security interest in, or otherwise
dispose of such shares or any legal or beneficial
interest therein or agree to do any of the
foregoing;
"TWE" means Time Warner Entertainment Company, L.P.;
"TW Holdings" means TW Holdings, L.L.C., a Colorado limited
liability company;
"TW Holdings Conversion
Shares" has the meaning given to that expression in clause
5.2.5;
"TW Holdings Operating
Agreement" means the amended and restated operating agreement
of TW Holdings to be entered into in the agreed
form;
"TW Holdings Preference
Shares" means the Preference Shares held by MediaOne Cable,
MediaOne UK and UAP-E and owned by TW Holdings at
the date hereof;
"UAP-E Conversion Shares" means a number of Preference Shares equal to the
product of the number of TW Holdings Conversion
Shares multiplied by the number of Preference
Shares held by UAP-E and divided by the total
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number of TW Holdings Preference Shares, any
fraction being rounded up;
"United Kingdom" means England, Wales, Scotland and Northern
or "UK" Ireland, as their territories and boundaries exist
on the Issue Date;
"Wireless means any voice or data telecommunications
Telephony" transmission service which operates by means
of radiowave, microwave, cellular or other similar
technology as part of a licensed mobile
communications system or personal communications
network.
1.2 In this Agreement unless indicated to the contrary, a reference to:
1.2.1 a document in the "agreed form" is a reference to a document in a form
approved and for the purposes of identification signed by or on behalf
of each party;
1.2.2 a statutory provision includes a reference to the statutory provision
as modified or re-enacted or both from time to time whether before or
after the date of this Agreement and any subordinate legislation made
under the statutory provision whether before or after the date of this
Agreement;
1.2.3 a Person includes a reference to that Person's legal personal
representatives, successors and lawful assigns;
1.2.4 a clause or schedule, unless the context otherwise requires, is a
reference to a clause of or schedule to this Agreement; and
1.2.5 a document is a reference to that document as from time to time
supplemented or varied.
1.3 The headings in this Agreement do not affect its interpretation.
2. CONDITIONS
2.1 The provisions of this Agreement (other than this clause 2 and clauses
5.1(a) and (c) and 15 and those provisions relevant to the
interpretation or enforcement of clauses 2, 5.1(a) and (c), 5.5 and 15)
are conditional upon the following conditions being satisfied, or
waived by notice by each of MediaOne Holdings, TINTA and Cox to the
Company:
2.1.1 the publication of the Announcement through the Regulatory News Service
of the London Stock Exchange on the date of this Agreement (or such
later time and/or date as MediaOne Holdings, TINTA and Cox may agree in
writing); and
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2.1.2 the formal document containing the Offer having been posted to holders
of General Cable shares by 30 June 1998 (or such later time and/or date
as MediaOne Holdings, TINTA and Cox may agree in writing) and the Offer
being declared unconditional in all respects on or before 15 September
1998.
2.2 The Company agrees with MediaOne Holdings, TINTA and Cox not to declare
the Offer unconditional unless the Resolutions (as defined in the
Subscription Agreement), including the following shareholders
resolutions have been passed at a duly convened and held general
meeting of the Company on or before 15 September 1998 and such
resolutions remain in full force and effect:
2.2.1 to approve this Agreement in accordance with Chapter 11 of the Listing
Rules of the London Stock Exchange;
2.2.2 to increase the Company's ordinary share capital and for a period of
five years to authorise the Directors under section 80 of the Companies
Act 1985 to allot Ordinary Shares and to the extent necessary to
disapply section 89 of the Companies Act 1985 to allow for the
consummation of the Telewest Open Offer and the Offer and the issue of
Ordinary Shares upon the exercise, conversion or exchange of the
options, rights and securities (other than issued Ordinary Shares)
comprised in the Fully Diluted Ordinary Shares; and
2.2.3 to adopt the New Articles.
2.3 If at any time any party becomes aware of a fact or circumstance that
might prevent a condition set out in clause 2.1 being satisfied, it
shall immediately inform the other parties.
2.4 If a condition set out in clause 2.1 has not been satisfied or waived
in accordance with clause 2.1 on or before 29 September 1998 or becomes
incapable of satisfaction or the Offer lapses or is withdrawn, this
Agreement shall terminate and each party's further rights and
obligations shall cease upon such termination, provided that
termination shall not affect a party's accrued rights and obligations
at the date of termination.
2.5 Each party shall use all reasonable endeavours to facilitate the
preparation, filing and circulation of all documents required by
applicable laws and competent authorities to be prepared, filed and
circulated by the Company or General Cable in connection with the Offer
and the Telewest Open Offer (including the provision to the Company of
information relating to its Shareholder Group that is reasonably
requested by the Company for inclusion therein).
2.6 SBCI and SBIHUK-1 undertake to MediaOne Holdings, TINTA and Cox that
they shall not, and shall procure that their Affiliates will not, take
up any rights under the Telewest Open Offer or otherwise acquire any
Shares or any interest in any Shares prior to the Issue Date.
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3. REPRESENTATIONS, WARRANTIES AND UNDERTAKINGS
Each party represents, warrants and undertakes to each other party
(other than a member of the same Shareholder Group), as of the date of
execution of this Agreement, as follows:
3.1 it is duly organised or formed, validly existing and in good standing
under the laws of its jurisdiction of incorporation or formation;
3.2 it has full power and authority to conduct its business as currently
conducted, to execute and deliver this Agreement and to carry out the
transactions contemplated by this Agreement and the execution, delivery
and performance by it of this Agreement and the consummation by it of
the transactions contemplated by this Agreement have been duly
authorised by all necessary corporate or partnership action;
3.3 the obligations expressed to be undertaken by it under this Agreement
are legal, valid and binding upon it, except as validity, binding
effect and the enforceability may be subject to or limited by
bankruptcy, insolvency, reorganisation, moratorium and other similar
laws relating to or affecting the rights of creditors generally, and
subject to general principles of equity, regardless of whether
considered in a proceeding at law or in equity;
3.4 the execution and delivery of this Agreement by it and compliance by it
with the provisions of this Agreement will not violate, result in any
breach of, constitute a default under or require a consent or waiver
under its certificate of incorporation, articles of incorporation,
bylaws, memorandum and articles of association, operating agreement or
partnership agreement, as the case may be, or any indenture, lease,
agreement or instrument to which it is a party or by which it or any of
its property may be bound, or under any decree, judgment, order,
statute, legal principle, rule or regulation applicable to it, other
than any violation, breach or default that would not have an adverse
effect on the performance by it of the terms of this Agreement;
3.5 it has obtained, made or given all material authorisations, orders,
approvals, consents, registrations, filings and notices required to be
obtained, made or given by it from, with or to any Person with respect
to entering into this Agreement.
4. DIRECTORS
4.1 As at the date hereof the Board comprises:
A.G. Ames (Chairman) (appointed by MediaOne)
A.W.P Stenham (Deputy Chairman)
D.R. Van Valkenburg (acting Chief Executive)
C.J. Burdick (Finance Director)
Lord Borrie QC
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S. Brett (appointed by TINTA)
D. Evans (appointed by TINTA)
J.O. Robbins (appointed by Cox)
R.W. Shaner (appointed by SBCI)
4.2 The Company shall convene a meeting of the Board to be held upon the
Offer becoming or being declared unconditional in all respects at which
the parties shall use all reasonable endeavours, subject to the
agreement of terms, to ensure that a resolution is passed to appoint an
executive director of General Cable nominated by General Cable as an
executive Director.
4.3 Any Director appointed by the Cox Group to the Board in accordance with
article 72.4 of the New Articles shall, if not a director, officer or
employee of Cox or an Affiliate of Cox, not be appointed until Cox
shall have received the prior written consent of the Board to such
appointment (such consent not to be unreasonably withheld or delayed).
4.4 Any Director appointed by the SBC Group to the Board in accordance with
article 72.3 of the New Articles shall, if not a director, officer or
employee of SBCI or an Affiliate of SBCI, not be appointed until SBCI
shall have received the prior written consent of the Board to such
appointment (such consent not to be unreasonably withheld or delayed).
4.5 Notwithstanding the right of the TINTA Group to appoint a director to
the Audit Committee in accordance with article 97 of the New Articles
it hereby agrees with the Company that it will not do so whilst the Cox
Group and the SBC Group have the right to so appoint a director to the
Audit Committee.
4.6 For so long as the TINTA Group foregoes its right to appoint a director
to the Audit Committee in accordance with article 97 of the New
Articles, the Company hereby agrees with the TINTA Group that it will
allow the TINTA Group to appoint an observer to the Audit Committee in
the same manner as the Cox Group and the SBC Group have the right to so
appoint an observer to Committees pursuant to article 97 of the New
Articles.
4.7 The Directors other than the MediaOne Designated Directors or the TINTA
Designated Directors or the Cox Designated Director or the SBC
Designated Director or the CGE Designated Director (each as defined in
the New Articles) shall be appointed by the board or the Company in
general meeting provided that each such appointee shall be a person
reasonably acceptable to the MediaOne Designated Directors for so long
as the MediaOne Group is a Qualifying Group and the TINTA Designated
Directors for so long as the TINTA Group is a Qualifying Group.
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5. CLOSING
5.1 The Company shall (a) not issue any Ordinary Shares to the General
Cable shareholders pursuant to the Offer prior to the Issue Date, (b)
issue on the Issue Date those Ordinary Shares due to be allotted to
General Cable shareholders from whom valid acceptances are received on
or before the date when the Offer is declared wholly unconditional,
after the conversion of the Preference Shares in accordance with clause
5.2 and after the allotment and issue of all the Ordinary Shares
offered under the Telewest Open Offer (other than any Ordinary Shares
not subscribed for by any party in accordance with the Subscription
Agreement), and (c) not increase the Fully Diluted Ordinary Share
capital prior to the Issue Date otherwise than pursuant to the Telewest
Open Offer, the Offer or the Subscription Agreement.
5.2 Not later than the day preceding the Issue Date the Company shall
calculate and notify MediaOne Holdings, TINTA and Cox of:
5.2.1 the number of Ordinary Shares TW Holdings, MediaOne Holdings, TINTA and
their Affiliates will hold on the Issue Date on the basis of the
Assumptions (before any conversions pursuant to clauses 5.3 and 5.4
below and before any transfer of Ordinary Shares by Cox to TW Holdings)
(the "Basic TW Holdings Shares");
5.2.2 the number of Ordinary Shares which will represent 50.1 per cent.
of all of the Ordinary Shares in issue on the Issue Date on the basis
of the Assumptions (before any of the conversions pursuant to clauses
5.3 and 5.4 below and before any transfer of Ordinary Shares by Cox to
TW Holdings) (the "Basic 50.1 per cent. Shares");
5.2.3 the number of Ordinary Shares which CUK will hold on the Issue Date on
the basis of the Assumptions (before any of conversions pursuant to
clauses 5.3 and 5.4 below and before any transfer of Ordinary Shares by
Cox to TW Holdings) (the "Basic Cox Shares");
5.2.4 (if the Basic 50.1 per cent. Shares exceed the sum of the Basic TW
Holdings Shares and the Basic Cox Shares) the number of Preference
Shares (if any) required to be converted on the Issue Date (the "First
Conversion Shares"), being the number required to ensure that TW
Holdings and CUK will own 50.1 per cent. of the Telewest Ordinary
Shares in issue on the basis of the Assumptions and on the basis of the
First Conversion Shares having been converted;
5.2.5 if applicable, the allocation of the First Conversion Shares between TW
Holdings (the "TW Holdings Conversion Shares") and CUK (the "Cox
Conversion Shares") on the basis that:
(a) if it would be possible for a number of Preference Shares
owned by TW Holdings equal to the number of First Conversion
Shares to be converted on behalf of TW Holdings whilst leaving
TW Holdings owning 50.1 per cent. of the Preference Shares
remaining in issue, the TW Holdings Conversion Shares shall
equal all the First Conversion Shares; and
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(b) otherwise the First Conversion Shares shall be allocated
between TW Holdings and CUK so that following conversion of
the TW Holdings Conversion Shares and the Cox Conversion
Shares TW Holdings will own exactly 50.1 per cent. of the
Preference Shares remaining in issue;
5.2.6 the number of MediaOne Cable Conversion Shares, MediaOne UK Conversion
Shares and the UAP-E Conversion Shares; and
5.2.7 the number of Ordinary Shares which CUK has agreed with TW Holdings,
MediaOne Holdings and TINTA to transfer to TW Holdings before the issue
of Ordinary Shares to General Cable shareholders in accordance with
clause 5.1(b) (the "Cox Transfer Shares"), in the case of there being
no First Conversion Shares being the number by which the Basic 50.1 per
cent. Shares exceed the Basic TW Holdings Shares and in the case of
there being First Conversion Shares being the sum of the Basic Cox
Shares plus the Cox Conversion Shares (if any).
5.3 If any First Conversion Shares are allocated to TW Holdings in
accordance with clause 5.2.5, each of MediaOne UK, MediaOne Cable and
UAP-E hereby exercises its right to convert the MediaOne UK Conversion
Shares, MediaOne Cable Conversion Shares and UAP-E Conversion Shares
respectively and the Company shall convert such shares on the Issue
Date (which shall be the "conversion date" for such shares for the
purposes of the New Articles) before the issue of the Ordinary Shares
to General Cable shareholders in accordance with clause 5.1(b) and
after the allotment and issue of all the Ordinary Shares offered under
the Telewest Open Offer (other than any Ordinary Shares not subscribed
for by any party in accordance with the Subscription Agreement), and
article 4.7 of the New Articles shall not apply to such conversion.
5.4 CUK hereby exercises its right to convert the Cox Conversion Shares and
the Company shall convert such shares on the Issue Date (which shall be
the "conversion date" for such shares for the purposes of the New
Articles) before the issue of the Ordinary Shares to General Cable
shareholders in accordance with clause 5.1(b) and after the allotment
and issue of all the Ordinary Shares offered under the Telewest Open
Offer (other than any Ordinary Shares not subscribed for by any party
in accordance with the Subscription Agreement), and article 4.7 of the
New Articles shall not apply to such conversion.
5.5 If at any time any holder or holders of Preference Shares exercise(s)
its or their right to convert any number of Preference Shares on a
particular conversion date each Shareholder within the MediaOne Group,
the TINTA Group and the Cox Group shall be treated as having exercised
its right to convert its entire holding of Preference Shares for the
time being on the same conversion date. Article 4.7 of the New Articles
shall apply to such conversions accordingly and all the Preference
Shares converted on such date shall be converted simultaneously.
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5.6 The Company shall use all reasonable efforts to ensure that all the
Ordinary Shares arising from conversion of the Preference Shares are
admitted to the Official List by the London Stock Exchange.
6. MATTERS REQUIRING CONSENT
6.1 For so long as the MediaOne Group or the TINTA Group hold 15 per cent.
or more of the Ordinary Shares in issue for the time being and from
time to time (ignoring any Ordinary Shares issued after the date hereof
pursuant to or for the purposes of share options), the Company shall
not and shall procure that none of its subsidiary undertakings will do,
or agree to do, any of the following things without the Required
Consent and no Shareholder shall knowingly acquiesce in the doing
thereof without the Required Consent:
6.1.1 any material acquisition or disposal outside the ordinary course of the
business of the Telewest Group, and for these purposes an acquisition
or disposal shall be deemed material and outside the ordinary course of
the business of the Telewest Group if it represents a class 2
transaction under the Listing Rules of the London Stock Exchange or the
Company intends in any event to announce the acquisition or disposal;
6.1.2 incur any borrowings or indebtedness in the nature of borrowings after
(otherwise than under a facility or agreement entered into before) this
Agreement becomes unconditional which when aggregated with any
borrowings or indebtedness in the nature of borrowings of the Telewest
Group so incurred and outstanding at the time being (ignoring
intra-group borrowings and indebtedness and borrowings or indebtedness
under any facility or agreement for which the Required Consent has
already been obtained) exceeds (pound)50 million or, after this
Agreement becomes unconditional, grant any security interests in any
assets which, when aggregated with other assets of the Telewest Group
over which security interests are granted after this Agreement becomes
unconditional (ignoring any security interests for which the Required
Consent has already been obtained), together have a Fair Market Value
of (pound)50 million or more, or agree to any material amendment,
supplement or variation of the terms of any borrowings, indebtedness in
the nature of borrowings or security interests;
6.1.3 allot or issue any shares or securities convertible into or
exchangeable for shares or grant any options or rights to subscribe
for shares or any such securities (other than the issue of Ordinary
Shares pursuant to clause 10 and pursuant to the Telewest Open Offer
and the Offer and the conversion of Preference Shares and any issue of
shares pursuant to the exercise of any option (to the extent required
under its terms to be met by an issue of new shares rather than a
transfer of existing shares) or the conversion or exchange of any
security granted or issued prior to today's date or with the Required
Consent after the date on which this Agreement becomes unconditional);
6.1.4 appoint or remove the Chief Executive Officer of the Company; or
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6.1.5 increase the number of Directors holding office for the time being
beyond 14.
6.2 For the purposes of clause 6.1, "Required Consent" means prior consent
by notice to the Company from:
6.2.1 the MediaOne Group, for so long as the MediaOne Group holds or owns
in aggregate 15 per cent. or more of the Ordinary Shares in issue for
the time being; and
6.2.2 the TINTA Group, for so long as the TINTA Group holds or owns in
aggregate 15 per cent. or more of the Ordinary Shares in issue for the
time being.
7. VOTING AGREEMENT AMONG TINTA GROUP AND U S WEST GROUP
7.1 Subject to clause 7.3 the MediaOne Shareholders and the TINTA
Shareholders undertake to one another that they shall exercise the
voting rights attached to the Ordinary Shares owned by them and shall
cause the Directors nominated by them to vote (subject to their
fiduciary duties as Directors of the Company) in all matters in such
manner as shall be agreed upon by the TINTA Shareholders and the
MediaOne Shareholders provided that if the TINTA Shareholders or the
MediaOne Shareholders (or the directors nominated by them respectively)
have a conflict of interest in any matter, they shall abstain and the
others may vote on such matter as they deem appropriate.
7.2 If the TINTA Shareholders and the MediaOne Shareholders cannot agree on
any matter within a period of 10 days after the matter is first
presented for decision, the matter in dispute shall be referred to the
Chief Executive Officers of the ultimate parent companies of the TINTA
Shareholders and the MediaOne Shareholders (or other representatives
designated by each of such Shareholder Groups) and the decision of such
officers shall be final and binding. If those officers cannot agree on
any matter presented to them prior to the earlier of the date the vote
is to be taken or five days after the matter is first submitted to
them, voting shall occur in such manner that would be most likely to
continue the status quo, without materially increasing the Company's
financial obligations or materially deviating from its approved budget
and business plan.
7.3 Clauses 7.1 and 7.2 shall cease to apply if after 31 December 1999 the
TINTA Group or the MediaOne Group so elect by notice given to the other
following the disposal by the other after the date hereof of more than
43 million Ordinary Shares (through one or more transactions) otherwise
than to an Affiliate or pursuant to a Permitted Demerger or a transfer
permitted by clause 8.3.2.
7.4 Subject to clause 7.8, each TINTA Shareholder and MediaOne Shareholder
shall exercise its voting rights attached to the Ordinary Shares owned
by it (and its rights under the TW Holdings Operating Agreement in
respect of the voting rights attached to the Ordinary Shares held by TW
Holdings) and shall make reasonable efforts to ensure that (subject to
their fiduciary duties) its appointees on the Board conduct themselves,
in such a way that:
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7.4.1 the terms of this Agreement are implemented in full; and
7.4.2 no amendments to the New Articles shall be effected which would be
contrary to the maintenance of the Company's independence from the
TINTA Group and the MediaOne Group.
7.5 Subject to clause 7.8, each TINTA Shareholder and MediaOne Shareholder
agrees with the Company not to use its voting rights attached to the
Ordinary Shares owned by it (other than its rights arising under
article 72 of the New Articles) (and to exercise its rights under the
TW Holdings Operating Agreement in respect of the voting rights
attached to the Ordinary Shares held by TW Holdings) to vote in favour
of the appointment of a person to the Board who is an employee, partner
or officer of, or has a material consultancy with, any member of the
TINTA Group or the MediaOne Group.
7.6 Subject to clause 7.8, if any transaction, arrangement or agreement (or
amendment thereto) to which the Telewest Group is a party or proposes
to be a party gives rise to a conflict between the interests of the
TINTA Group or the MediaOne Group and the interests of the Telewest
Group, the prior approval of the Board consisting solely of the
Independent Directors and the Directors appointed by the MediaOne Group
(in the case of an arrangement with the TINTA Group) or by the TINTA
Group (in the case of an arrangement with the MediaOne Group) shall be
required before the Telewest Group can proceed with the transaction,
arrangement or agreement (or amendment thereto), as the case may be.
7.7 Subject to clause 7.8, any transactions, agreements or arrangements
(including trading arrangements) between any member of the TINTA Group
or the MediaOne Group and the Telewest Group shall be at arm's length
on a normal commercial basis and will be subject to the prior approval
of the Board consisting solely of Independent Directors and the
Directors appointed by the MediaOne Group (in the case of an
arrangement with the TINTA Group) or by the TINTA Group (in the case of
an arrangement with the MediaOne Group).
7.8 Clauses 7.4, 7.5, 7.6 and 7.7 shall only apply for so long as the
MediaOne Group and the TINTA Group continue to be the Controlling
Shareholder of the Company.
8. RESTRICTIONS ON TRANSFERS BY TINTA GROUP AND U S WEST GROUP
8.1 Subject to clause 8.3, the MediaOne Shareholders undertake to TINTA
that the MediaOne Group shall not Transfer any Shares to any Person on
or before 31 December 1999.
8.2 Subject to clause 8.3, the TINTA Shareholder undertakes to MediaOne
Holdings that the TINTA Group shall not Transfer any Shares to any
Person on or before 31 December 1999.
8.3 The restrictions contained in clauses 8.1 and 8.2 shall not apply:
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8.3.1 to the Transfer of Shares to an Affiliate of the transferor if such
Affiliate first complies with clause 26.2 (and for such purpose an
entity jointly controlled by the TINTA Group and the MediaOne Group
shall be deemed an Affiliate of each such Group); or
8.3.2 to the Transfer of Shares with the written consent of the TINTA Group
(in the case of a Transfer by the MediaOne Group) or the MediaOne Group
(in the case of a Transfer by the TINTA Group) provided that such
Shareholder Group approves (in its sole discretion) the identity of the
transferee and, if the transferee becomes a member of the MediaOne
Group or the TINTA Group, the transferee first complies with clause
26.2; or
8.3.3 to the Transfer of Ordinary Shares pursuant to a Permitted Demerger.
8.4 Any attempted Transfer of Shares contrary to the requirements of
this clause 8 shall be void and as such shall not be registered by
the Company.
9. RIGHTS OF FIRST OFFER, RIGHTS OF FIRST REFUSAL AND CHANGE OF CONTROL
9.1 TCI and MediaOne rights of first offer
9.1.1 Clauses 9.1.2 to 9.1.7 shall not apply:
(a) to any Public Transfer by the Cox Group or the SBC Group;
(b) to any Transfer of shares or other equity in a holding company
of the Shareholder where the Shares remain Controlled by the
Cox Group or the SBC Group (as the case may be);
(c) to any Transfer of shares to a transferee who is a member of
the same Shareholder Group as the transferor or, in the case
of a Transfer by the SBC Group, is a member of the Cox Group
or, in the case of a Transfer by the Cox Group, is a member of
the SBC Group and who, prior to the Transfer taking effect,
duly completes, executes and delivers to the Company a deed of
adherence in the form set out in Schedule 2;
(d) to any Transfer accepting a third party offer for all the
shares of the Company (including giving an irrevocable
undertaking to accept such an offer);
(e) to any Transfer selling shares to a bona fide third party
offeror for all the Shares of the Company; or
(f) to any Transfer pursuant to an offer by either the SBC Group
or the Cox Group for all the shares of the Company,
but shall apply to all Transfers including, without limitation,
involuntary Transfers such as a Transfer pursuant to a foreclosure sale
and Transfers of any shares or other
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equity in a holding company of the Shareholder whereby the Shares cease
to be Controlled by the SBC Group or the Cox Group (as the case may be)
or whereby the SBC Group or the Cox Group (as the case may be) dispose
of any Person of which the Shares directly or indirectly held by such
Person represent 50 per cent. or more of the assets of such Person.
9.1.2 If at any time the Cox Group or the SBC Group (as relevant, the
"Seller") have decided to Transfer all (or some) of its Shares ("Sale
Shares") other than to any Person in accordance with clause 9.1.1, the
Seller shall first give a written notice ("Sale Notice") to the Board
on behalf of the Company and to TINTA and MediaOne Holdings (each of
TINTA and MediaOne Holdings being a "Relevant Purchaser"). The Seller
and each Relevant Purchaser shall meet and shall enter into good faith
negotiations and use their best efforts to agree a price at which, and
the proportions in which, all of the Sale Shares will be sold to all
or some of them. If the Seller and the Relevant Purchasers are not
able to agree any such price and proportions within a period of 30
days after the date of the Sale Notice, the Seller shall be entitled,
within 5 days after the expiry of such period, to serve a further
written notice (a "Transfer Notice") on the Relevant Purchasers,
inviting the Relevant Purchasers to offer to purchase or procure the
purchase of all of the Sale Shares as provided below in clause 9.1.3.
9.1.3 The Relevant Purchasers shall have the right to offer to purchase or
procure the purchase of all of the Sale Shares (in such proportions as
may be agreed between them) by giving notice to the Seller within 20
days of receipt of the Transfer Notice (the "Acceptance Period") which
notice (the "Offer Notice") shall specify the price (the "Offer Price")
at which, and the proportions in which, they are prepared to purchase
or procure the purchase of all the Sale Shares. The Relevant Purchasers
shall not be entitled to give separate Offer Notices and any such
separate Offer Notices received shall be deemed to be invalid.
9.1.4 On receipt of an Offer Notice in respect of the Sale Shares, the Seller
shall within 10 days after the Acceptance Period serve a written notice
on each Relevant Purchaser either unconditionally accepting or
unconditionally refusing the offer comprised therein.
9.1.5 If the Seller accepts the offer contained in any Offer Notice pursuant
to clause 9.1.3:
(a) subject to sub-paragraph (b) the Relevant Purchasers shall
become bound (in the proportions specified in the Offer
Notice) to purchase or procure the purchase of, and the Seller
shall become bound to sell all of, the Sale Shares at the
Offer Price; and
(b) completion of the sale and purchase of the Sale Shares shall
take place in accordance with clause 9.4.
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9.1.6 If:
(a) following service of a Transfer Notice pursuant to clause
9.1.2 the Relevant Purchasers do not serve a valid Offer
Notice in respect of all of the Sale Shares; or
(b) the Seller does not accept the offer contained in any Offer
Notice pursuant to clause 9.1.3; or
(c) the Relevant Purchasers have not completed the purchase of the
Sale Shares in accordance with clause 9.4,
the Seller shall be entitled to Transfer the Sale Shares to one or more
third party purchasers (the "Third Party Purchasers") at any price (in
a case within paragraph (a) or (c) above) or at a price being not less
than the Offer Price which was not accepted (in a case within paragraph
(b) above) provided that in each such case the Transfer shall be
completed (subject to registration) within a period of 90 days after
the date of the Transfer Notice. For such purposes, in respect of any
Preference Shares comprising Sale Shares closing will be deemed to have
taken place upon the delivery to the registrars for the time being of
the Company by a Third Party Purchaser of a valid conversion notice in
accordance with article 4.6 of the New Articles.
9.1.7 If the Seller is unable to complete (or procure the completion of) the
Transfer of the Sale Shares to a Third Party Purchaser within the
period specified in clause 9.1.6 it shall not be entitled to transfer
any of the Sale Shares to a Third Party Purchaser otherwise than in
accordance with the foregoing provisions of this clause 9.1 following
service of a further Transfer Notice or Sale Notice as relevant.
9.2 Rights of first refusal between the TINTA Group and the MediaOne Group
9.2.1 Clauses 9.2.2 to 9.2.7 shall not apply to any Transfer by a Shareholder
to an Affiliate of that Shareholder or to any Transfers pursuant to a
Permitted Demerger (provided that any transferee who is or becomes a
member of the same Shareholder Group as the transferor, first duly
completes, executes and delivers to the Company a deed of adherence in
the form set out in Schedule 2).
9.2.2 Subject to clause 9.2.1, a TINTA Shareholder or MediaOne Shareholder
desiring to make a Transfer of Shares (the "Seller") shall first make a
written offer (the "Offer") to sell such Shares to the MediaOne Group
or the TINTA Group respectively (the "Relevant Purchaser") on the same
terms and conditions on which the Seller proposes to Transfer the
Shares. If the proposed Transfer is a Public Transfer, the Seller shall
give notice to the Relevant Purchaser stating the number of Shares it
proposes to Transfer and that such Shares will be sold to the Relevant
Purchaser at a price per Share equal to the average of the Closing
Prices for six Trading Days comprising the three Trading Days prior to
and including the date that any notice is sent pursuant to clause 9.2.3
and the three Trading Days following the date of such
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notice. If the proposed Transfer is a Private Transfer, such offer
shall state the price and the other terms and conditions of the
proposed Transfer and shall be accompanied by a copy of the offer from
the proposed transferee. The price as so determined or stated in the
Seller's notice shall be the "Offer Price". The foregoing
notwithstanding, the Seller may withdraw the Offer without liability to
the Relevant Purchaser hereunder if the Offer Price, determined with
respect to any Public Transfer, is less than 90 per cent. of the
Closing Price on the date of the Offer (or if such date is not a
Trading Day, on the immediately preceding Trading Day).
9.2.3 The Relevant Purchaser shall have the right for a period of 30 days
after receipt of the Offer to elect to purchase all, but not less than
all, of the Shares offered at the Offer Price (less, in case of a
proposed Public Transfer, any underwriting or sales commission or
discount that would have been paid in the proposed Public Transfer) by
giving written notice of acceptance to the Seller within that period.
If the Relevant Purchaser does not elect to purchase all the Shares
offered, the Seller may Transfer the offered Shares pursuant to the
terms disclosed under clause 9.2.2 which, in the case of a Private
Transfer, shall be at a price equal to or greater than the Offer Price.
If the offered Shares are not Transferred within 90 days after the
Relevant Purchaser's option period expires, a new offer shall be made
to the Relevant Purchaser before any Transfer is made.
9.2.4 If in the case of a Private Transfer, a third party's offer involves
consideration other than immediate payment of cash at closing, the
Relevant Purchaser may pay the Fair Market Value of such other
consideration, as determined by agreement between the Seller and the
Relevant Purchaser, in cash. If they cannot agree on such cash
equivalent within seven days after the Relevant Purchaser gives notice
of its election to purchase the offered Shares, the Relevant Purchaser
may, by written notice to the Seller, initiate appraisal proceedings
under clause 9.2.5 for determination of the Fair Market Value of such
consideration. The Fair Market Value shall be determined without regard
to income tax consequences to the Seller as a result of receiving cash
in lieu of other consideration. Once the Fair Market Value is
determined, (i) the Relevant Purchaser, in its sole discretion, may
elect either to purchase the Shares in cash by giving notice of such
election to the Seller within 10 days after receipt of the appraiser's
decision or to withdraw its acceptance of the Offer, and (ii) the
Seller may in its sole discretion withdraw the Offer provided that in
such case it may not Transfer such Shares pursuant to the proposed
Private Transfer.
9.2.5 Any appraisal of the Fair Market Value of consideration shall be made
by an appraiser jointly appointed by the TINTA Group and the MediaOne
Group to make such determination. If the parties fail to agree on an
appraiser within 20 days after receipt of the notice requiring or
permitting an appraisal of Fair Market Value, each of the TINTA Group
and the MediaOne Group shall appoint one appraiser, which shall be an
investment banking firm of national repute. The two appraisers so
selected shall each make an appraisal of Fair Market Value within 30
days after their selection. If such determinations vary by 20 per cent.
or more of the higher determination, the two appraisers shall select a
third appraiser with similar
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qualifications which shall make its determination of such Fair Market
Value within 30 days after its selection. Such third appraiser shall
not be informed of or otherwise consider the appraisals of the other
two in reaching its determination. The Fair Market Value shall be the
average of the two closest values if three appraisals are made or, if
the determinations of the first two appraisers vary by 20 per cent. or
less of the higher of such two determinations, the average of those two
determinations. If any Shareholder Group fails to appoint an appraiser
as required hereunder, the other Shareholder Group may refer the matter
to the American Arbitration Association, which shall promptly appoint
an appraiser hereunder on behalf of the Shareholder Group failing to
make such appointment. Appraisers appointed under this clause 9.2.5
shall act as experts and not as arbitrators and, absent fraud or
manifest error, the determination of an appraiser or appraisers
hereunder shall be binding on the parties.
9.3 Change in Control of TINTA or MediaOne
If at any time there is an involuntary Change in Control with respect
to MediaOne Holdings and its Affiliates or TINTA and its Affiliates,
MediaOne Holdings and its Affiliates or TINTA and its Affiliates, as
the case may be, experiencing the Change in Control (the "Subject
Group") shall give notice to the other group (the "Responding Group")
promptly after the Subject Group becomes aware of the Change in
Control. If at any time a Subject Group experiences a voluntary Change
in Control, the Subject Group shall give notice to the Responding Group
promptly after the terms of the Change in Control are set forth in a
binding agreement. The Responding Group must within 30 days after its
receipt of such notice give notice to the Subject Group either (a)
consenting to the Change in Control or (b) stating the price at which
the Responding Group is willing to sell all of its Shares to the
Subject Group or to buy all of the Subject Group's Shares (the "Quoted
Price"). Failure to give notice of such election within the time
permitted shall be deemed consent to the Change in Control. If the
Responding Group notifies the Subject Group that it does not consent to
the Change in Control, the Subject Group must, within 30 days after its
receipt of the Responding Group's notice, give notice to the Responding
Group of its election to sell all of its Shares to the Responding Group
or to buy all of the Responding Group's Shares, in either case at the
Quoted Price.
9.4 General transfer provisions
9.4.1 The closing of the purchase of any Shares by the TINTA Group or the
MediaOne Group pursuant to clauses 9.1, 9.2 or 9.3 shall take place at
the Company's principal offices:
(a) in the case of clause 9.1, within 60 days after agreement of
the price and proportions in which the Sale Shares can be
transferred by the Seller pursuant to clause 9.1.2 or within
30 days after acceptance ("Acceptance") by the Seller of the
offer contained in any Offer Notice pursuant to clause 9.1.3;
and
(b) in the case of clauses 9.2 and 9.3 on a day specified by the
purchaser (other than a Saturday, Sunday or day on which
banking institutions in New York
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are required by law to be closed) which is no more than 90
days after the day of exercise of the relevant purchase
option,
or, if later, the date on which all necessary consents to such Transfer
by governmental authorities shall have been obtained which, in the case
of clause 9.1, shall be no later than 30 days from the date of
Acceptance. At the closing the Seller shall deliver certificates
representing the Shares to be sold free and clear of any lien, charge
or encumbrance, duly endorsed or accompanied by stock transfers
executed in blank, and such other documents as may be reasonably
necessary to effectuate the sale. The Seller shall give customary
representations and warranties regarding the title of such shares to
the Relevant Purchaser(s). The purchase price (to the extent payable in
cash) shall be paid in cash in immediately available funds.
9.4.2 The Relevant Purchaser may rescind its notice of acceptance given
pursuant to clause 9.2.3 at any time on or prior to the thirtieth day
following the date on which such notice is given (but not thereafter)
if (i) prior to the date of such notice of acceptance the Relevant
Purchaser had sought in good faith a waiver from the Panel with respect
to the application of any provision of Rule 9 of the City Code on Take-
overs and Mergers which absent such waiver would require the Relevant
Purchaser to offer to purchase all of the outstanding Ordinary Shares,
and (ii) such waiver or any shareholder approval required by the Panel
has been denied (or has not been granted as of the last day of such
rescission period) provided that if the Relevant Purchaser so rescinds
its acceptance, the 90 day period referred to in clause 9.4.1(b) shall
be extended by the number of days between the date of such acceptance
and the date of rescission.
9.4.3 Notwithstanding any other provision of this clause 9, no Person may
Transfer any Shares unless it has complied with all applicable legal
requirements, including without limitation applicable United States
federal and state securities laws. Upon the exercise by a Person of any
right to acquire Shares hereunder, the parties shall use commercially
reasonable efforts to obtain any necessary consents or approvals of any
governmental authorities or other third parties necessary to promptly
effect such Transfer.
10. SPECIFIC RIGHTS OF SHAREHOLDER GROUPS TO MAINTAIN OWNERSHIP LEVEL
10.1 The following definitions are used in this clause 10:
"15 Per Cent. Group" means each of the following Shareholder Groups:
(a) the TINTA Group, for so long as the TINTA Group holds 15 per
cent. or more of the Ordinary Shares in issue for the time
being and from time to time (ignoring any Ordinary Shares
issued after the date hereof pursuant to or for the purposes
of share options); and
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(b) the MediaOne Group, for so long as the MediaOne Group holds
15 per cent. or more of the Ordinary Shares in issue for the
time being and from time to time (ignoring any Ordinary Shares
issued after the date hereof pursuant to or for the purposes
of share options);
"Percentage Ownership" means:
(a) in relation to each 15 Per Cent. Group, issued Ordinary Shares
representing 15 per cent. of the Fully Diluted Ordinary
Shares; and
(b) in relation to each 7.5 Per Cent. Group, issued Ordinary
Shares representing 7.5 per cent. of the Fully Diluted
Ordinary Shares;
"Qualifying Group" means a 15 Per Cent. Group or a 7.5 Per Cent. Group;
"Qualifying Shareholder" means a Shareholder within a Qualifying Group;
"Rights Issue" means an offering of Ordinary Shares or securities
convertible into Ordinary Shares or carrying the right to vote at
general meetings of the Company's shareholders (whether by way of a
rights issue, open offer or otherwise) to holders of Ordinary Shares in
the capital of the Company in proportion (as nearly as may be) to their
existing holdings of Ordinary Shares but subject to the Directors
having a right to make such exclusions or other arrangements in
connection with the offer as they deem necessary or expedient:
(a) to deal with equity securities representing fractional
entitlements; and
(b) provided that such exclusions or arrangements do not affect
any Shareholder Group, to deal with legal or practical
problems under the laws of, or the requirements of any
recognised regulatory body or any stock exchange in, any
territory;
"7.5 Per Cent. Group" means:
(a) each of the TINTA Group and the MediaOne Group for so long as
such group holds 7.5 per cent. or more but less than 15 per
cent. of the Ordinary Shares in issue for the time being and
from time to time (ignoring any Ordinary Shares issued after
the date hereof pursuant to or for the purposes of share
options); and
(b) the Cox Group for so long as the Cox Group holds 7.5 per cent.
or more of the Ordinary Shares in issue for the time being and
from time to time (ignoring any Ordinary Shares issued after
the date hereof pursuant to or for the purposes of share
options).
10.2 Subject to clause 6.1.3, the Company shall give notice to each
Qualifying Shareholder of any proposed issuance (other than a Rights
Issue) of Ordinary Shares or of securities convertible into or
exchangeable for Ordinary Shares or carrying the right
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to vote at general meetings of the Company's shareholders which would
(assuming the conversion or exchange of any such convertible securities
into or for Ordinary Shares) reduce the number of Ordinary Shares owned
by a Qualifying Group below its Percentage Ownership (a "Dilutive
Issue").
10.3 Without prejudice to clause 10.4, while (a) TW Holdings holds or owns
50.1 per cent. or more of the Ordinary Shares in issue for the time
being and from time to time, or (b) the MediaOne Group and the TINTA
Group together hold or own 50.1 per cent. or more of the Ordinary
Shares in issue for the time being and from time to time the MediaOne
Shareholders and the TINTA Shareholders (the "MediaOne/TINTA
Shareholders") shall have the option to subscribe for that number of
Ordinary Shares necessary to permit TW Holdings (in the case of (a)
above) and the MediaOne/TINTA Shareholders (in the case of (b) above)
to maintain ownership of sufficient issued Ordinary Shares in aggregate
as will represent 50.1 per cent. of the Fully Diluted Ordinary Shares
immediately following a Dilutive Issue assuming that the Qualifying
Shareholders exercise their options under clause 10.4 in full. Each
MediaOne/TINTA Shareholder shall, within 15 days after receipt of a
notice from the Company to the effect that all conditions to such
issuance have been satisfied, notify the Company whether, and to what
extent, it wishes to exercise such option and whether it would like to
subscribe any surplus Ordinary Shares under option but not taken up in
accordance with this clause. If any Ordinary Shares under option under
this clause in respect of a particular Dilutive Issue are not taken up
in accordance with this clause the Company shall allocate such excess
shares to those MediaOne/TINTA Shareholders who requested additional
Ordinary Shares and in case of competition for such shares, pro rata to
their existing holdings of Ordinary Shares.
10.4 The Qualifying Shareholders within each Qualifying Group shall have the
option to subscribe for that number of new Ordinary Shares (in such
proportions as they may agree and otherwise among them pro rata
according to their respective shareholdings) necessary to permit their
Qualifying Group to maintain ownership of sufficient Ordinary Shares to
maintain its Percentage Ownership immediately following a Dilutive
Issue assuming and provided that such Qualifying Shareholder exercised
its option (if any) under clause 10.3 in full. Each Qualifying
Shareholder shall, within 15 days after receipt of notice from the
Company to the effect that all conditions to such issuance have been
satisfied, notify the Company whether, and to what extent, it wishes to
exercise such option, which may be exercised in full or in part.
10.5 Prior to exercising their rights under clause 10.4 the MediaOne Group
and the TINTA Group agree with each other to consult each other and, if
the exercise of their rights to the desired extent may have
implications under Rule 9 of the City Code on Takeovers and Mergers, to
consult the Panel. If within 10 days of receipt of notice from the
Company to the effect that all conditions to the proposed issuance have
been satisfied the Panel has not granted or has denied a waiver of all
requirements under Rule 9 for the TINTA Group or the MediaOne Group to
make a mandatory offer as a result of the exercise of their rights
under clause 10.4 or any shareholder approval required by the Panel has
not been granted or has been denied and both the MediaOne Group and
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the TINTA Group wish to exercise their rights under clause 10.4 to an
extent which in aggregate would trigger the requirement for a mandatory
offer under Rule 9, unless TINTA and MediaOne Holdings otherwise agree,
the TINTA Group and the MediaOne Group shall exercise their rights
under clause 10.4 only to the maximum extent practicable without
triggering any requirement under Rule 9 for a mandatory offer and, in
case of competition, pro rata to their then existing holdings of
Ordinary Shares.
10.6 Any shares subscribed for by a Qualifying Shareholder pursuant to
clause 10.3 or 10.4 shall be subscribed for in cash at a price per
share equal to the average Closing Price for the 10 consecutive Trading
Days ending on the Trading Day immediately preceding the date of the
Dilutive Issue. Such Ordinary Shares shall be issued immediately before
the Dilutive Issue which gave rise to the option described in this
clause 10.
10.7 The Company will seek statutory authority to allot Ordinary Shares
(pursuant to section 80 of the Act) and for the disapplication of the
statutory pre-emption rights (pursuant to section 95 of the Act) for a
period of five years and hereby agrees to use its reasonable endeavours
to renew any and every such statutory authority to allot and for the
disapplication of the pre-emption rights thereafter for so long as the
Company is obligated by the anti-dilution provision of this clause 10.
The Company further undertakes that it shall only increase the Fully
Diluted Ordinary Shares if thereafter there is sufficient authorised
but unissued share capital for the Company to comply with its
obligations pursuant to this clause 10 and also only if there are
outstanding and valid a statutory authority to allot (pursuant to
section 80 of the Act) and a disapplication of the statutory pre-
emption rights (pursuant to section 95 of the Act) in respect of
sufficient Ordinary Shares for the Company to comply with its
obligations under this clause. The Shareholders undertake to each other
and to the Company to vote in favour of any such proposed resolutions.
10.8 The Company shall use all reasonable efforts to ensure that all
Ordinary Shares issued pursuant to this clause 10 are admitted to the
Official List by the London Stock Exchange.
11. GENERAL RIGHTS OF SHAREHOLDER GROUPS TO MAINTAIN OWNERSHIP LEVEL
The Company agrees to use its best efforts, consistent with the
interests of shareholders generally, to ensure that any issuance of
Shares is done in a manner that provides each Shareholder Group with an
opportunity to acquire additional Shares in amounts necessary from time
to time to enable them to maintain their percentage Ordinary Share
ownership in the Company. The Company shall apply for all such Ordinary
Shares to be admitted to the Official List by the London Stock
Exchange.
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12. NON-COMPETITION
12.1 Subject to clauses 12.5 and 12.6, MediaOne Holdings undertakes to the
Company that (unless the Company, by a vote of directors other than
those appointed by the MediaOne Shareholders consents) it will procure
that neither MediaOne nor any of its Controlled Affiliates shall, so
long as the MediaOne Shareholders have the right to appoint two
directors to the Board and for a period of one year after the MediaOne
Shareholders cease to have such right:
12.1.1 own directly assets comprising Cable Telephony and Cable Television
systems in the United Kingdom (excluding in respect of terrestrial TV)
other than through its relationship with the Company and the Company's
Affiliates; or
12.1.2 acquire an equity interest in any Person (other than the Company, TWE,
Flextech plc, MPC or their Controlled Affiliates) if (a) at the time of
such acquisition such Person directly or indirectly through one or more
Controlled Affiliates owns any Cable Telephony or Cable Television
systems in the UK (excluding in respect of terrestrial TV), unless
immediately prior to such acquisition the acquiror and its Controlled
Affiliates owned more than 10 per cent. of the outstanding equity
interests in such Person, or (b) such acquisition of equity interests
is being made pursuant to an agreement or arrangement in which the
proceeds of the issuance of such equity interest would be used to
acquire or invest in a Cable Telephony or Cable Television system in
the UK (excluding in respect of terrestrial TV).
12.2 Subject to clauses 12.5 and 12.6, TINTA undertakes to the Company that
(unless the Company, by a vote of directors other than those appointed
by the TINTA Shareholders consents) it will procure that neither TCI
nor any of its Controlled Affiliates shall, so long as the TINTA
Shareholders have the right to appoint two directors to the Board and
for a period of one year after the TINTA Shareholders cease to have
such right:
12.2.1 own directly assets comprising Cable Telephony and Cable Television
systems in the United Kingdom (excluding in respect of terrestrial TV)
other than through its relationship with the Company and the Company's
Affiliates; or
12.2.2 acquire an equity interest in any Person (other than the Company,
Flextech plc, MPC, At Home Corporation, Princes Holdings Limited or
their Controlled Affiliates) if (a) at the time of such acquisition
such Person directly or indirectly through one or more Controlled
Affiliates owns any Cable Telephony or Cable Television systems in the
UK (excluding in respect of terrestrial TV), unless immediately prior
to such acquisition the acquiror and its Controlled Affiliates owned
more than 10 per cent. of the outstanding equity interests in such
Person, or (b) such acquisition of equity interests is being made
pursuant to an agreement or arrangement in which the proceeds of the
issuance of such equity interest would be used to acquire or invest in
a Cable Telephony or Cable Television system in the UK (excluding in
respect of terrestrial TV).
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12.3 Subject to clauses 12.5 and 12.6, Cox undertakes to the Company that
(unless the Company, by a vote of directors other than those appointed
by Cox consents) neither Cox nor any of its Controlled Affiliates
shall, so long as the Cox Group has the right to appoint a director to
the Board and for a period of one year after the Cox Group ceases to
have such right:
12.3.1 own directly assets comprising Cable Telephony and Cable Television
systems in the United Kingdom (excluding in respect of terrestrial TV)
other than through its relationship with the Company and the Company's
Affiliates; or
12.3.2 acquire an equity interest in any Person (other than the Company,
Flextech plc, At Home Corporation, or their Controlled Affiliates) if
(a) at the time of such acquisition such Person directly or indirectly
through one or more Controlled Affiliates owns any Cable Telephony or
Cable Television systems in the UK (excluding in respect of terrestrial
TV), unless immediately prior to such acquisition the acquiror and its
Controlled Affiliates owned more than 10 per cent. of the outstanding
equity interests in such Person or (b) such acquisition of equity
interests is being made pursuant to an agreement or arrangement in
which the proceeds of the issuance of such equity interest would be
used to acquire or invest in a Cable Telephony or Cable Television
system in the UK (excluding in respect of terrestrial TV).
12.4 Subject to clauses 12.5 and 12.6, SBCI undertakes to the Company that
(unless the Company, by a vote of directors other than those appointed
by SBCI consents) neither SBCI nor any of its Controlled Affiliates
shall, so long as the SBC Group has the right to appoint a director to
the Board and for a period of one year after the SBC Group ceases to
have such right:
12.4.1 own directly assets comprising Cable Telephony and Cable Television
systems in the United Kingdom (excluding in respect of terrestrial TV)
other than through its relationship with the Company and the Company's
Affiliates; or
12.4.2 acquire an equity interest in any Person (other than the Company or its
Controlled Affiliates) if (a) at the time of such acquisition such
Person directly or indirectly through one or more Controlled Affiliates
owns any Cable Telephony or Cable Television systems in the UK
(excluding in respect of terrestrial TV), unless immediately prior to
such acquisition the acquiror and its Controlled Affiliates owned more
than 10 per cent. of the outstanding equity interests in such Person,
or (b) such acquisition of equity interests is being made pursuant to
an agreement or arrangement in which the proceeds of the issuance of
such equity interest would be used to acquire or invest in a Cable
Telephony or Cable Television system in the UK (excluding in respect of
terrestrial TV).
12.5 Notwithstanding the restrictions set forth in clauses 12.1, 12.2, 12.3
and 12.4 MediaOne Holdings, MediaOne, TCI, TINTA, SBCI, Cox and their
respective Controlled Affiliates (each a "Relevant Investor") may
acquire and subsequently own assets comprising Cable Television or
Cable Telephony systems in the UK if, prior to the Relevant Investor
acquiring such assets, it first offers the opportunity to
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the Company, stating the terms on which the opportunity is available.
The Company shall within 30 days after receipt of such notice give
notice to the Relevant Investor stating whether it wishes to undertake
such opportunity and failure to do so shall be deemed rejection of the
right to undertake the opportunity. The directors appointed by the
Shareholder Group of which the Relevant Investor is a member ("Relevant
Investor Group") shall not vote with respect to any decision by the
Company whether to pursue an opportunity offered by the Relevant
Investor Group, and if the Relevant Investor Group votes as a
shareholder against any means of funding the pursuit of such
opportunity which requires shareholder approval (other than a guarantee
or similar agreement that would impose an obligation on the Relevant
Investor Group), the Relevant Investor Group shall not pursue the
opportunity independently. In the event that the Company notifies the
Relevant Investor that it does not wish to undertake such opportunity
then within a further 180 days of such notification the Relevant
Investor may take all necessary actions to enter into agreements
relating to such opportunity (on terms no more favourable than those
offered to the Company) and to the extent the Relevant Investor does
not do so then before entering into such agreements after the expiry of
such 180 day period it must first re-offer the opportunity to the
Company on the terms set out herein. Except as stated herein, MediaOne,
MediaOne Holdings, TCI, TINTA, SBCI, Cox and their Controlled
Affiliates shall be free to pursue any other business opportunity
anywhere in the world.
12.6 Nothing contained in this clause 12 shall prohibit or otherwise
restrict MediaOne, MediaOne Holdings, TCI, TINTA, SBCI or Cox or their
respective Affiliates from:
12.6.1 owning or acquiring 10 per cent. or less of the outstanding equity of
a Person that engages in Cable Television or Cable Telephony in the
United Kingdom;
12.6.2 owning or acquiring an interest in any Person engaged in (a) Wireless
Telephony, (b) billing, validation or call authorisation service and
related or ancillary services for use by any provider of
telecommunications services, or (c) any subscriber voice or data
telecommunications transmission service that interconnects a Group
System with any other telecommunications networks outside the licensed
territory of any Group System, but does not compete with a Group System
for Cable Telephony customers;
12.6.3 directly or indirectly providing any subscriber voice or data
telecommunications transmission service (including but not limited to
Wireless Telephony) that operates only in part by cable links to
subscribers' premises (except in respect of the interconnection of
such service to cable links which serve customers in the licensed
territory of any Group System, but the ability to engage in such
service outside of such interconnection shall not be restricted);
12.6.4 owning or acquiring, directly or indirectly, an interest in any Person
that provides, or is providing, programming or content services in the
United Kingdom; or
12.6.5 acquiring an interest in any Person whose annual gross revenues from
Cable Television and Cable Telephony in the United Kingdom in its most
recently
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completed fiscal year prior to the acquisition constituted 20 per cent.
or less of its total annual gross revenues; provided that if any of
MediaOne Holdings, TINTA, SBCI, Cox or their respective Controlled
Affiliates acquires in accordance with this clause 12.6.5 after the
date hereof a Controlling interest in any Person (other than Flextech
plc, TWE or MPC or their Controlled Affiliates) which owns Cable
Television or Cable Telephony assets in the United Kingdom, the Company
shall have the option (subject to third party rights and any
contractual restrictions) so long as clause 12.1, 12.2, 12.3 or 12.4,
as the case may be, is applicable to the acquiror's Shareholder Group,
to acquire the interest in the Cable Television and Cable Telephony
assets in the United Kingdom of that Person for the Fair Market Value
thereof payable in cash, provided that (a) the option must be
exercised, if at all, by the Company by giving written notice to the
Relevant Investor within 30 days after the Relevant Investor gives
notice to the Company of the existence of such opportunity and closed
within 120 days after the date of the notice of exercise and (b) the
Relevant Investor acquiring such interest shall not vote on any
decision whether to exercise the option granted in this clause 12.6.5.
12.7 Each of the exceptions set forth in clauses 12.6.1 through 12.6.5 is
separately applicable and independent of any of the other exceptions.
12.8 Whenever the Fair Market Value of any transaction or interest is
required to be determined hereunder, the Relevant Investor and the
Company may upon notice require that Fair Market Value determination be
made by an appraiser jointly appointed by the Relevant Investor and the
Company. If the Relevant Investor and the Company fail to agree on an
appraiser within 20 days after receipt of the notice requiring an
appraisal of Fair Market Value, they shall each appoint one appraiser,
which shall be an investment banking firm of national repute in the UK.
The two appraisers so selected shall each make an appraisal of Fair
Market Value within 30 days after their selection. If such
determinations vary by 20 per cent. or more of the higher
determination, the two appraisers shall select a third appraiser with
similar qualifications which shall make its determination of such Fair
Market Value within 30 days after its selection. Such third appraiser
shall not be informed of or otherwise consider the appraisals of the
other two in reaching its determination. The Fair Market Value shall be
the average of the two closest values if three appraisals are made or,
if the determinations of the first two appraisers vary by less than 20
per cent. of the higher of such two determinations, the average of
those two determinations. If any party fails to appoint an appraiser as
required hereunder, the other party may refer the matter to the
American Arbitration Association, which shall promptly appoint an
appraiser hereunder on behalf of the party failing to make such
appointment. The 30-day period specified in clause 12.6.5 above shall
be suspended pending final determination of Fair Market Value.
Appraisers appointed under this clause shall act as experts and not as
arbitrators and, absent fraud or manifest error, the determination of
an appraiser hereunder shall be binding on the parties.
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13. SCOPE OF COMPANY BUSINESS
Subject to clause 14, the Company agrees with each of the MediaOne
Group and the TINTA Group, for so long as it is a Qualifying Group that
the business of the Company and its Controlled Affiliates shall be
limited to providing Cable Television, Cable Telephony services and
Wireless Telephony services in the United Kingdom and all matters
incidental thereto, including television programming in the United
Kingdom incidental to the Company's Cable Television business in the
United Kingdom (collectively, "Company Business"), and such other
businesses as such Shareholder Group shall approve by written consent.
The Company shall not own or acquire an equity interest in any Person
that engages in a business other than those in which the Company is
permitted to engage pursuant to this clause 13. Neither the Company nor
any of its Affiliates shall use the "Telewest" mark (or any mark
confusingly similar to it) outside of the UK and the TINTA
Shareholders, the MediaOne Shareholders and their respective Affiliates
shall not use the "Telewest" mark (or any mark confusingly similar to
it) within the UK.
14. CONTRACTUAL RESTRICTIONS
14.1 The Company undertakes to the MediaOne Group that so long as the
MediaOne Shareholders own more than 5 per cent. of the Company's issued
Ordinary Shares and so long as the contractual restrictions described
in Part I of Schedule 1 remain in effect, the Company will not
knowingly take or omit to take (and will not permit its Controlled
Affiliates to take or omit to take) any action that could cause a
breach or violation of the contractual restrictions (as such exist on
the date hereof) described in Part I of Schedule 1, and also undertakes
to the TINTA Group that for so long as the TINTA Shareholders own more
than 5 per cent. of the Company's issued Ordinary Shares and so long as
the contractual restrictions described in Part II of Schedule 1 remain
in effect, that the Company will not knowingly take or omit to take
(and will not permit its Controlled Affiliates to take or omit to take)
any action that could cause a breach or violation of the contractual
restrictions (as such exist on the date hereof) described in Part II of
Schedule 1.
14.2 Notwithstanding anything in this Agreement to the contrary, the Company
may (i) engage in the business of Fixed Wireless Telephony services,
(ii) sell Wireless Telephony services solely as a distributor or
retailer of such services through a contractual relationship with one
or more owners of any Wireless Telephony business, including but not
limited to MPC, provided that the Company does not have any ownership
interest in and does not operate such Wireless Telephony business, and
(iii) the Company may jointly invest with MPC in mobile radio voice
telephony networks to be constructed by MPC or its Affiliates.
15. INDEMNIFICATIONS
15.1 The Company shall indemnify and hold harmless each of TINTA, MediaOne
Holdings, SBCI and Cox for themselves and as trustees for their
respective Affiliates and each Relevant Person from and against any
costs, damages, liabilities and
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obligations (including but not limited to attorneys' fees and payment
of any settlement or judgment) arising out of any claim, action or
proceeding relating to the Offer Documents, except those matters as to
which such Person or one of its Affiliates has specifically agreed to
indemnify the Company pursuant to this clause 15. If the
indemnification in this clause 15 is at any time legally or
procedurally unavailable to any Person, the Company shall contribute to
the amount paid or payable by such Person on account of such claim,
action or proceeding an amount equal to the amount the Company
otherwise would be required to pay that Person as indemnification under
this clause 15.
15.2 The TINTA Shareholders shall indemnify and hold harmless the Company
and its directors, officers and employees for the time being and from
time to time from and against any costs, damages, liabilities and
obligations (including but not limited to attorneys' fees and payment
of any settlement or judgment) arising out of any claim, action or
proceeding (including any claim by any other Shareholder pursuant to
this clause 15) relating to any portion of the Offer Documents provided
by the TINTA Group in writing for use in the Offer Documents and/or
arising from any failure by the TINTA Group to provide all the
information required to be disclosed in relation to the TINTA Group in
the Offer Documents. If the indemnification provided in this clause
15.2 is at any time legally or procedurally unavailable to any person,
the TINTA Shareholders shall contribute to the amount paid or payable
by such Person on account of such claim, action or proceedings an
amount equal to amount they otherwise would be required to pay that
Person as indemnification under this clause 15.2.
15.3 The MediaOne Shareholders shall indemnify and hold harmless the Company
and its directors, officers and employees for the time being and from
time to time from and against any costs, damages, liabilities and
obligations (including but not limited to attorneys' fees and payment
of any settlement or judgment) arising out of any claim, action or
proceeding (including any claim by any other Shareholder pursuant to
this clause 15) relating to any portion of the Offer Documents provided
by the MediaOne Group in writing for use in the Offer Documents and/or
arising from any failure by the MediaOne Group to provide all the
information required to be disclosed in relation to the MediaOne Group
in the Offer Documents. If the indemnification provided in this clause
15.3 is at any time legally or procedurally unavailable to any Person,
the MediaOne Shareholders shall contribute to the amount paid or
payable by such Person on account of such claim, action or proceeding
an amount equal to that amount they otherwise would be required to pay
that Person as indemnification under this clause 15.3.
15.4 The SBC Shareholders shall indemnify and hold harmless the Company and
its directors, officers and employees for the time being and from time
to time from and against any costs, damages, liabilities and
obligations (including but not limited to attorneys' fees and payment
of any settlement or judgment) arising out of any claim, action or
proceeding (including any claim by any other Shareholder pursuant to
this clause 15) relating to any portion of the Offer Documents provided
by the SBC
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Group in writing for use in the Offer Documents and/or arising from any
failure by the SBC Group to provide all the information required to be
disclosed in relation to the SBC Group in the Offer Documents. If the
indemnification provided in this clause 15.4 is at any time legally or
procedurally unavailable to any Person, the SBC Shareholders shall
contribute to the amount paid or payable by such Person on account of
such claim, action or proceeding an amount equal to that amount they
otherwise would be required to pay that Person as indemnification under
this clause 15.4.
15.5 The Cox Shareholders shall indemnify and hold harmless the Company and
its directors, officers and employees for the time being and from time
to time from and against any costs, damages, liabilities and
obligations (including but not limited to attorneys' fees and payment
of any settlement or judgment) arising out of any claim, action or
proceeding (including any claim by any other Shareholder pursuant to
this clause 15) relating to any portion of the Offer Documents provided
by the Cox Group in writing for use in the Offer Documents and/or
arising from any failure by the Cox Group to provide all the
information required to be disclosed in relation to the Cox Group in
the Offer Documents. If the indemnification provided in this clause
15.5 is at any time legally or procedurally unavailable to any Person,
the Cox Shareholders shall contribute to the amount paid or payable by
such Person on account of such claim, action or proceeding an amount
equal to that amount they otherwise would be required to pay that
Person as indemnification under this clause 15.5.
15.6 The Company covenants with and undertakes to each of Cox and CUK that
it will indemnify and keep each of them indemnified from and against
all stamp duty, stamp duty reserve tax and related interest, penalties
and costs arising out of or in connection with the transfer from TW
Holdings to CUK of any Ordinary Shares transferred to TW Holdings from
CUK ("Tax"). The Company shall pay to CUK in cleared funds an amount
equal to any Tax paid by CUK within 5 working days of CUK's demand for
the same.
15.7 Each Shareholder Group and the Company shall act reasonably to mitigate
any loss or liability in respect of which it claims indemnity under
this Clause 15.
16. GAIN RECOGNITION CONSENT REQUIREMENTS
The Company covenants to each of the MediaOne Group, the TINTA Group,
the Cox Group and the SBC Group that for so long as (i) they each own
or (ii) the SBC Group and the Cox Group in aggregate own or (ii) the
MediaOne Group and the TINTA Group in aggregate own at least 7.5 per
cent. of the Ordinary Shares in issue the Company will not and will
procure that no member of the Telewest Group will, (i) without the
written consent of such Shareholder Group, dispose of assets (including
securities of an Affiliate of the Company) in one transaction or a
series of related transactions within any 18 month period having a Fair
Market Value of (pound)20,000,000 or more if, in the judgment of such
Shareholder Group, the disposition could require it to recognise gain
under the Gain Recognition Agreements between it and the US Internal
Revenue Service or (ii) in the case of MediaOne and the TINTA Group,
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dispose of or reorganise any interest in or Control of any member of
the Telewest Group intra-group or acquire any equity interest in a
Person not Affiliated with the Company immediately prior to such
acquisition if the effect of any such disposition, reorganisation or
acquisition would be to create an intermediate holding Person within
the Telewest Group. The Company shall be entitled to conclusively rely
on notice from any of MediaOne Holdings, TINTA, Cox or SBCI (as the
case may be) as to any consent given by their respective Shareholder
Groups.
17. CITY CODE ON TAKEOVERS AND MERGERS
If any Shareholder Group takes any action which causes another
Shareholder Group or Groups to be under an obligation pursuant to Rule
9 of the City Code on Takeovers and Mergers (the "Code"), the
Shareholder Group which takes such action shall fulfil all the
obligations of such other Shareholder Group or Groups (but not the
Company) thereunder and shall pay all consideration and expenses
attributable to such Shareholder Group or Groups in connection
therewith.
18. CONFIDENTIALITY
Save as required by law or any regulatory authority, each Shareholder
shall keep confidential, and shall procure that all members of its
Shareholder Group will keep confidential, any confidential information
of the Telewest Group which is or has been given to it by or on behalf
of the Telewest Group unless the information is already in the public
domain other than through the default of the Shareholder or a member of
its Shareholder Group in complying with this clause.
19. JOINT AND SEVERAL LIABILITY FOR CONTROLLED AFFILIATES
MediaOne Holdings, TINTA, SBCI and Cox shall each be jointly and
severally liable with their respective Controlled Affiliates for any
and all of the obligations and liabilities of their respective
Controlled Affiliates under this Agreement.
20. TERM
This Agreement shall continue whilst any party hereto retains any
rights and/or obligations hereunder and shall terminate forthwith (in
relation to a party no longer having any rights and/or obligations)
upon that ceasing to be the case.
21. TERMINATION OF 1994 AND 1995 AGREEMENTS
21.1 This Agreement supersedes the 1994 Agreements and the 1995 Agreements
and each parties' further rights and obligations thereunder shall cease
upon this Agreement becoming unconditional provided that (a) the
parties' rights and obligations accrued thereunder prior to such time
shall not be affected, and (b) if pursuant to clause 2.4 (having become
unconditional) this Agreement is terminated, the 1994 Agreements and
the 1995 Agreements shall revive as if no termination of those
agreements had occurred pursuant to this clause.
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21.2 The Company, the MediaOne Group and the TINTA Group shall comply with
the provisions of Schedule 3 in place of clauses 16(b) and (c) and 17
of the Old Relationship Agreement.
21.3 Clause 3.6 of the Old Shareholders Agreement, clause 18 of the Old
Relationship Agreement and clause 6 of the Co-operation Agreement shall
not apply in relation to the issue or conversion of any Shares pursuant
to the Offer, the Telewest Open Offer, this Agreement or the
Subscription Agreement.
22. COMPETITION
No provision of this Agreement, or of an agreement or arrangement of
which it forms part, by virtue of which this Agreement, or an agreement
or arrangement of which it forms part, is subject to registration under
the Restrictive Trade Practices Acts 1976 and 1977, takes effect until
the day after the date on which particulars have been furnished to the
Director General of Fair Trading in accordance with those Acts.
23. COSTS
Each party shall pay its own costs relating to the negotiation,
preparation, execution and performance by it of this Agreement and of
each document referred to in it.
24. FURTHER ASSURANCE
The parties agree that they shall execute and deliver any other
documents and instruments, and take any other actions reasonably
requested by another party necessary or appropriate to give effect to
this Agreement.
25. GENERAL
25.1 Whenever in this Agreement action by a Shareholder Group is required or
permitted, that action shall be deemed taken if approved by members of
that Shareholder Group owning a majority of the total number of Shares
owned by all the members of that Shareholder Group.
25.2 A variation of this Agreement is valid only if it is in writing and
signed by or on behalf of each party.
25.3 The parties agree that each party would be irreparably damaged if any
party failed to perform any obligation under this Agreement, and that
such party would not have an adequate remedy at law for money damages
in such event. Accordingly, each party hereto will be entitled to
specific performance and injunctive and other equitable relief to
enforce the performance of this Agreement. This provision is without
prejudice to any other rights that such party may have under this
Agreement, at law or in equity.
25.4 The failure to exercise or delay in exercising a right or remedy
provided by this Agreement or by law does not constitute a waiver of
the right or remedy or a waiver of
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other rights or remedies. No single or partial exercise of a right or
remedy provided by this Agreement or by law prevents further exercise
of the right or remedy or the exercise of another right or remedy.
25.5 The rights and remedies contained in this Agreement are cumulative and
not exclusive of rights or remedies provided by law.
25.6 The invalidity or unenforceability of any provision of this Agreement
in any jurisdiction shall not affect the validity or enforceability of
the remainder of this Agreement in that jurisdiction or the validity or
enforceability of this Agreement, including such provision, in any
other jurisdiction.
25.7 Each date, time or period referred to in this Agreement is of the
essence. If the parties agree in writing to vary a date, time or
period, the varied date, time or period is of the essence.
26. ASSIGNMENT
26.1 A party may not assign or transfer or purport to assign a right or
obligation under this Agreement without having first obtained the
written consent of the other parties.
26.2 The benefit of the rights of a Shareholder (subject to the burden of
the obligations of a Shareholder) under this Agreement shall be
afforded to a transferee who is or becomes a member of the same
Shareholders Group as the transferor provided that the transferee duly
completes, executes and delivers to the Company a deed of adherence in
the form set out in Schedule 2.
27. NOTICES
27.1 Any notice under this Agreement shall be in writing and signed by or on
behalf of the party giving it and may be served by leaving it or
sending it by fax, prepaid recorded delivery or registered post (and
air mail if overseas) to the address and for the attention of the party
receiving it set out in clause 27.2 or as otherwise notified under this
Agreement. In the absence of evidence of earlier receipt, any notice so
served shall be deemed to have been received:
(a) if delivered personally, when left at the relevant address;
(b) if sent by mail other than air mail, 48 hours after posting it;
(c) if sent by air mail, 96 hours after posting it;
(d) if sent by fax, on receipt of confirmation of its transmission.
27.2 The current addresses of the parties for the purpose of clause 27.1 are
set out below. These may be altered by the parties by notice to the
other parties at any time:
MediaOne Holdings 7800 E. Orchard Road Suite 480
MediaOne UK Englewood
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MediaOne Cable: Colorado 80111 USA
For the attention of: General Counsel
Fax: 1 303 793 6707
TINTA 5619 DTC Parkway
UAP-E: Englewood
Colorado 80111 USA
For the attention of: Stephen Brett
FAX: 1 303 488 3245
Company: Genesis Business Park
Albert Drive
Woking
Surrey GU21 5RW
For the attention of: Victoria Hull
Fax: 01483 295165
SBCI #2 Reed's Way
SBIHUK-1: Suite 222 Corporate Commons
Newcastle
Delaware 19720 USA
For the attention of: Michael Thompson,
Vice President and Secretary
Fax: 1 302 322 2838
Cox 1400 Lake Hearn Drive
CUK: Atlanta George 30319
USA
For the attention of: Dallas Clement
Fax: 1 404 847 6336
In the case of
Cox and CUK, with
copy (which shall
not constitute service
of notice) to: Olswang
90 Long Acre
London WC2E 9TT
For the attention of: Simon Morgan
Fax: 0171 208 8888
In the case of SBCI
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and SBIHUK-1, with
copy (which shall not
constitute service of
notice) to: Bird & Bird
90 Fetter Lane
London EC4A 1JP
For the attention of: Neil Blundell
Fax: 0171 415 6111
28. GOVERNING LAW AND JURISDICTION
28.1 This Agreement is governed by and shall be construed in accordance with
English law.
28.2 The courts of England have exclusive jurisdiction to hear and decide
any suit, action or proceedings, and to settle any disputes, which may
arise out of or in connection with this Agreement (respectively,
"Proceedings" and "Disputes") and, for these purposes, each party
irrevocably submits to the jurisdiction of the courts of England.
28.3 Each party irrevocably waives any objection which it might at any time
have to the courts of England being nominated as the forum to hear and
decide any Proceedings and to settle any Disputes and agrees not to
claim that the courts of England are not a convenient or appropriate
forum.
28.4 Process by which any Proceedings are begun in England may be served on
any party by being delivered in accordance with clause 27 or may be
served on the parties without addresses in England (as set out in
clause 27.2 above) by being delivered to the agents at the addresses
indicated below (or such other agent or address as the party in
question may notify to the other parties):
MediaOne Holdings, Clifford Chance Secretaries Limited
MediaOne UK, 200 Aldersgate Street
MediaOne Cable: London EC1A 4JJ
For the attention of: Chantal Brackenbury/
Angela Orban
Fax: 0171 600 5555
TINTA Grays Inn Secretaries Limited
UAP-E: 5 Chancery Lane
London EC4 1BU
For the attention of: Philip Goodwin/Simon
Brown
Fax: 0171 404 0087
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SBCI, Bird & Bird
SBIHUK-1: 90 Fetter Lane
London EC4A 1JP
For the attention of: Neil Blundell
Fax: 0171 415 6111
Cox Olswang
CUK: 90 Long Acre
London WC2E 9TT
For the attention of: Simon Morgan
Fax: 0171 208 8888
Nothing contained in this clause 28.4 affects the right to serve
process in another manner permitted by law.
29. COUNTERPARTS
This Agreement may be executed in any number of counterparts each of
which when executed and delivered is an original, but all the
counterparts together constitute the same document.
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SCHEDULE 1
CONTRACTUAL RESTRICTIONS
Part I
(a) In certain agreements that established a partnership to
operate the One 2 One mobile radio voice network, MediaOne has
agreed to certain contractual restrictions which provide that
neither MediaOne nor its Affiliates (including the Company)
will directly or indirectly carry on or have a shareholding or
other economic interest in a person which carries on or has
applied for a license to carry on, as all or part of its
business the activity of running a mobile radio voice
telephony network for the provision of telecommunication
services to the general public within any part of the UK. So
long as MediaOne owns an equity interest in the One 2 One
partnership or any successor to the One 2 One partnership
(including the current partnership after admission of one or
more new partners) in excess of the minimum interest specified
in the One 2 One agreement as of the date of this Agreement,
such contractual restrictions contained in any agreements
governing the business of a successor to the One 2 One
partnership (including the current partnership after admission
of one or more new partners) shall become part of this
Schedule 1 provided that such restrictions are not broader in
scope than those in effect on the date of this Agreement.
(b) MediaOne has agreed that MediaOne and certain of its
affiliates will not compete with Time Warner Entertainment
Company, L.P. ("TWE") in certain businesses, and that they
will offer TWE a right of first refusal in certain
circumstances, as disclosed in the IPO Documents.
Part II
(a) Flextech plc has a right of first refusal with respect to
participation in English-language programming business in the
United Kingdom and Europe under certain circumstances
described in the IPO Documents.
(b) In an agreement relating to the establishment of a joint
venture between BBC Worldwide and Flextech plc for the
establishment and broadcast of television programme services
in the United Kingdom, TINTA has agreed that it will not
itself, and that it will procure that no company of which it
has voting control will, acquire an interest in excess of 20
per cent. of the issued share capital of a company which owns
a commercial broadcast television channel which competes with
one or more of the channels to be established under such joint
venture.
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SCHEDULE 2
DEED OF ADHERENCE
THIS DEED OF ADHERENCE is made on [ ] 199[ ]
BY [ ] of [ ] ("the Covenantor") in favour of the persons whose names are set
out in the schedule to this Deed and is supplemental to the Relationship
Agreement dated 15 1998 made by (1) MediaOne International Holdings, Inc., (2)
MediaOne UK Cable, Inc and MediaOne Cable Partnership Holdings, Inc., (3)
Tele-Communications International, Inc., (4) United Artists Programming-Europe,
Inc., (5) Cox Communications, Inc., (6) Cox U.K. Communications, LP, (7) SBC
International, Inc., (8) Southwestern Bell International Holdings (UK-1)
Corporation and (9) Telewest Communications plc (the "Relationship Agreement").
THIS DEED WITNESSES as follows:
1. The Covenantor confirms that it has been given and read a copy of the
Relationship Agreement and covenants with each person named in the
schedule to this Deed to perform and be bound by all the terms of the
Relationship Agreement as if the Covenantor were a party to the
Relationship Agreement as a Shareholder.
2. This Deed is governed by English law.
IN WITNESS WHEREOF this Deed has been executed by the Covenantor and is intended
to be and is hereby delivered on the date first above written.
SCHEDULE
[Parties to Relationship Agreement including those who have executed earlier
deeds of adherence].
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SCHEDULE 3
PROVISIONS PRESERVED FROM THE OLD RELATIONSHIP AGREEMENT
1. Costs Relating to Telewest Interests
The Company undertakes to reimburse TINTA (for itself and on behalf of
TCI and its Affiliates) and MediaOne Holdings (for itself and on behalf
of MediaOne and its Affiliates) for all losses, damages, costs,
liabilities, deficiencies, claims, suits, proceedings, demands,
judgments, assessments, fines, interest, penalties, costs and expenses
(including, without limitation, settlement costs and legal, accounting,
experts' and other fees, costs and expenses) (but excluding taxes)
based upon, arising out of or associated with (i) the ownership of the
Telewest Interests prior to, on or following the Public Offering, (ii)
the dissolution and liquidation of the UCs and obligations and
liabilities of the UCs arising prior to, upon or subsequent to their
dissolution relating to the ownership and operation of the Telewest
Interests and (iii) the TCI Investors and the MediaOne Investors having
been members of the UCs.
2. Taxation Costs Relating to Telewest Interests.
The Company undertakes to reimburse TINTA (for itself and on behalf of
TCI and its Affiliates) and MediaOne Holdings (for itself and on behalf
of MediaOne and its Affiliates) for all liabilities for taxes which
they incur and which arise in respect of the operation of the
businesses carried on by the Telewest Interests prior to or following
the Public Offering including (but not limited to) Value Added Tax,
income tax levied pursuant to the Pay as You Earn Regulations and
income tax levied pursuant to the Income Tax (Sub-Contractors in the
Construction Industry) Regulations and excluding (for the avoidance of
doubt) any tax liabilities in respect of which TINTA or MediaOne
Holdings have agreed to indemnify Old Telewest under the Tax Deed.
3. Limitations on Reimbursement and Payment Obligations.
No reimbursement or payment due pursuant to clauses 1, 2 or 4 or
arising out of any breach or violation of the Old Relationship
Agreement or the Related Agreements shall be made unless the aggregate
amount payable by that party on account of all such matters exceeds
(pound)10,000, and if such amount is exceeded all payments and
reimbursements shall be paid by that party in full.
4. Indemnifications
(a) The Company undertakes to indemnify and hold harmless TINTA
(for itself and on behalf of TCI and its Affiliates) and
MediaOne Holdings (for itself and on behalf of MediaOne and
its Affiliates) from and against any costs, damages,
liabilities and obligations (including but not limited to
attorneys' fees and payment of any settlement or judgment)
arising out of any claim, action or proceeding relating to the
IPO Documents and the Contemplated Transactions, except those
matters as to which the Investors specifically
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made a representation or warranty to Old Telewest or agreed
specifically to reimburse Old Telewest. If the indemnification
provided in this clause 4(a) is at any time legally or
procedurally unavailable to any Person, the Company shall
contribute to the amount paid or payable by such Person on
account of such claim, action or proceeding an amount equal to
the amount the Company otherwise would be required to pay that
Person as indemnification under this clause 4(a).
(b) TINTA and UAP-E undertake to indemnify and hold harmless the
Company from and against any costs, damages, liabilities and
obligations (including but not limited to attorneys' fees and
payment of any settlement or judgment) arising out of any
claim, action or proceeding relating to any portion of the IPO
Documents provided by the TCI Investors in writing for use in
the IPO Documents. If the indemnification provided in this
clause 4(b) is at any time legally or procedurally unavailable
to any Person, TINTA and UAP-E shall contribute to the amount
paid or payable by such Person on account of such claim,
action or proceeding an amount equal to the amount TINTA and
UAP-E otherwise would be required to pay that Person as
indemnification under this clause 4(b).
(c) MediaOne Holdings and the MediaOne Investors undertake to
indemnify and hold harmless the Company from and against any
costs, damages, liabilities and obligations (including but not
limited to attorneys' fees and payment of any settlement or
judgment) arising out of any claim, action or proceeding
relating to any portion of the IPO Documents provided by the
MediaOne Investors in writing for use in the IPO Documents. If
the indemnification provided in this clause 4(c) is at any
time legally or procedurally unavailable to any Person, the
MediaOne Investors shall contribute to the amount paid or
payable by such Person on account of such claim, action or
proceeding an amount equal to the amount the MediaOne
Investors otherwise would be required to pay that Person as
indemnification under this clause 4(c).
5. Definitions
Set out below are the definitions of the defined terms which are only
used in this Agreement in Schedule 3 above (which are accurate as at 22
November 1994 being the date of the Old Relationship Agreement):
"Contemplated Transactions" means the transactions contemplated by the
Old Relationship Agreement and the Related Agreements, including the
transfer by the MediaOne Investors and the TCI Investors of the
Telewest Interests to the UCs;
"MediaOne Investors" means MediaOne UK and MediaOne Cable.
"Public Offering" means the public offering in 1994 of Ordinary Shares
for sale to the public;
-47-
<PAGE>
"Related Agreements" means the following agreements entered into on the
date of the Old Relationship Agreement (22 November 1994):
(a) Technology Licensing Agreements between (i) Old Telewest
and TINTA, and (ii) Old Telewest and MediaOne Holdings;
(b) Trademark Licensing Agreements between (i) Old Telewest and
MediaOne, and (ii) Old Telewest and TCI;
(c) Secondment Agreements between (i) Old Telewest and TCI, and
(ii) Old Telewest and an Affiliate of the MediaOne Investors;
(d) Tax Deed between Old Telewest, TINTA and MediaOne Holdings;
and
(e) Registration Rights Agreements between (i) Old Telewest and
the TCI Investors and (ii) Old Telewest and the MediaOne
Investors.
"Tax Deed" means deed of indemnity against taxation entered into by Old
Telewest, TINTA and MediaOne Holdings dated 22 November 1994;
"TCI Investors" means UAP-E and United Artists Cable Television UK
Holdings, Inc.;
"Telewest Interests" means the interests owned by the TCI Investors and
the MediaOne Investors in the following partnerships, which were
engaged in the Cable Television and Cable Telephony businesses in the
UK on the date of the Old Relationship Agreement:
(a) TCI/MediaOne Cable Communications Group;
(b) Avon Cable Limited Partnership;
(c) Edinburgh Cable Limited Partnership;
(d) Estuaries Cable Limited Partnership;
(e) United Cable (London South) Limited Partnership;
(f) Tyneside Cable Limited Partnership; and
(g) Cotswolds Cable Limited Partnership.
"UCs" means Theseus No.1 (to whom the TCI Investors contributed their
Telewest Interests on 21 November 1994) and Theseus No.2 (to whom the
MediaOne Investors contributed their Telewest Interests on 21 November
1994).
AS WITNESS this Agreement has been executed by the duly authorised
representatives of the parties the day and year first before written.
-48-
<PAGE>
SIGNED by )
for and on behalf of MEDIAONE )
INTERNATIONAL HOLDINGS, INC. )
SIGNED by )
for and on behalf of MEDIAONE )
UK CABLE, INC. )
SIGNED by )
for and on behalf of MEDIAONE CABLE )
PARTNERSHIP HOLDINGS, INC. )
SIGNED by )
for and on behalf of )
TELE-COMMUNICATIONS )
INTERNATIONAL, INC. )
SIGNED by )
for and on behalf of UNITED ARTISTS)
PROGRAMMING-EUROPE, INC )
SIGNED by )
for and on behalf of )
COX COMMUNICATIONS, INC. )
SIGNED by )
for and on behalf of )
COX U.K. COMMUNICATIONS L.P. )
by COX CABLE INTERNATIONAL, INC., )
its general partner )
-49-
<PAGE>
SIGNED by )
for and on behalf of )
SBC INTERNATIONAL, INC. )
SIGNED by )
for and on behalf of )
SOUTHWESTERN BELL INTERNATIONAL )
HOLDINGS (UK-1) CORPORATION )
SIGNED by )
for and on behalf of )
TELEWEST COMMUNICATIONS plc)
-50-
<PAGE>
EXHIBIT 10.56
AMENDMENT NO. 1
TO
REGISTRATION RIGHTS AGREEMENT
This Amendment No. 1 to Registration Rights Agreement (this "Amendment No.
1") is made and entered into as of the 29th day of June 1998, by and among the
following persons:
1. Vivendi S.A. (formerly known as Compagnie Generale des Eaux S.A.) and
General Utilities Holdings Limited (collectively, the "Vivendi
Affiliates");
2. Telewest Communications plc (formerly known as Telewest plc)
("Telewest");
3. United Artists Programming -- Europe, Inc. (the "TINTA Affiliate");
4. MediaOne UK Cable, Inc. (formerly known as US WEST UK Cable, Inc.) and
MediaOne Cable Partnership Holdings, Inc. (formerly known as US WEST
Cable Partnership Holdings, Inc.) (collectively, the "MediaOne
Affiliates");
5. Southwestern Bell International Holdings (UK-1) Corporation (the "SBC
Affiliate"); and
6. Cox U.K. Communications L.P. (the "Cox Affiliate") (for purposes of
this Amendment No. 1, the TINTA Affiliate, the MediaOne Affiliates, the
SBC Affiliate, and the Cox Affiliate are referred to, collectively, as
the "Existing Investors").
RECITALS
WHEREAS, Telewest and the Existing Investors are parties to a Registration
Rights Agreement, dated October 3, 1995 (the "Registration Rights Agreement");
WHEREAS, Southwestern Bell International Holdings (UK-2) Corporation, which
was a party to the Registration Rights Agreement, is no longer in existence
and has ceased to be a party to the Registration Rights Agreement;
WHEREAS, Telewest proposes to acquire the issued shares and American
Depositary Shares of General Cable PLC ("General Cable") pursuant to an Offer
(as defined in the Offer to Purchase/Prospectus, dated June 29, 1998, of
Telewest (as the same may be amended from time to time, the "Offer to
Purchase")) to be made by J. Henry Schroder & Co. Limited on behalf of
Telewest;
WHEREAS, the Vivendi Affiliates will receive ordinary shares of 10 pence
each of Telewest ("Telewest Ordinary Shares") upon the consummation of the
Offer in respect of their shares in General Cable;
WHEREAS, the parties hereto wish to amend the Registration Rights Agreement
to provide that the Vivendi Affiliates, collectively, will constitute an
"Investor" thereunder and, accordingly, will be entitled to the rights
(including registration rights in respect of the Telewest Ordinary Shares to
be acquired by the Vivendi Affiliates upon the consummation of the Offer), and
be subject to the obligations, of an Investor thereunder;
NOW, THEREFORE, for valuable consideration, the sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:
1. Amendment. The Registration Rights Agreement shall be amended as follows:
a. the term "Registrable Securities" will include the Telewest Ordinary
Shares received by the Vivendi Affiliates pursuant to the Offer and any
other Telewest Ordinary Shares issued to, or otherwise acquired by, the
Vivendi Affiliates at any time (including any securities issued by Telewest
in exchange for, or in respect of, any such Telewest Ordinary Shares,
whether upon a share dividend, share split, scrip issue, bonus issue,
reclassification or otherwise); and
A-1
<PAGE>
b. the Vivendi Affiliates, collectively, will constitute an "Investor" as
defined in the Registration Rights Agreement and will have the rights
(including Piggy-Back Registration and Demand Registration rights (as such
terms are defined in the Registration Rights Agreement)), and be subject to
the obligations of, an Investor under the Registration Rights Agreement.
2. Effectiveness. This Amendment No. 1 shall become effective at the time
the Offer becomes or is declared unconditional in all respects.
3. Governing Law. This Amendment No. 1 shall be governed by Delaware law,
and interpreted in accordance with the laws of Delaware, without reference to
its conflicts of laws principles.
4. Superseding Effect. This Amendment No. 1 supersedes all prior agreements
among the parties hereto relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment No. 1 as of the date first above written.
Telewest Communications plc
By:__________________________________
Name:
Title:
EXISTING INVESTORS:
United Artists Programming --
Europe, Inc.
By:__________________________________
Name:
Title:
MediaOne UK Cable, Inc.
By:__________________________________
Name:
Title:
MediaOne Cable Partnership Holdings,
Inc.
By:__________________________________
Name:
Title:
A-2
<PAGE>
Southwestern Bell International
Holdings (UK-1) Corporation
By:
----------------------------------
Name:
Title:
Cox U.K. Communications L.P.
By:
----------------------------------
Name:
Title:
VIVENDI AFFILIATES:
Vivendi S.A.
By:
----------------------------------
Name:
Title:
General Utilities Holdings Limited
By:
----------------------------------
Name:
Title:
A-3
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion of our report, dated 18 March 1998, on the
consolidated balance sheets of Telewest Communications plc and its
subsidiaries as of 31 December 1996 and 1997 and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
years in the three year period ended 31 December 1997, which report appears in
the Registration Statement of Telewest Communications plc on Form S-4. We also
consent to the reference to our firm under the caption "Experts" in the
Registration Statement.
KPMG Audit plc
London, England
29 June 1998
EX23--1
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in the Registration Statement of Telewest
Communications plc on Form S-4 of our report, dated 15 June 1998, on our
audits of the consolidated financial statements of General Cable PLC and its
subsidiaries as of 31 December 1997 and 1996 and for each of the three years
in the period ended 31 December 1997, included in Part III--Section Two of the
Disclosure Document. We also consent to the reference to our firm under the
caption "Experts".
Coopers & Lybrand
London, England
29 June 1998
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
Dear Sirs
Telewest Communications plc
Consent of Independent Accountants
We consent to the inclusion in this Registration Statement on Form S-4 of
our name in the form and context in which it is included.
Robson Rhodes
London, England
29 June 1998
<PAGE>
Exhibit 23.4
[LETTERHEAD OF DELOITTE & TOUCHE APPEARS HERE]
STRICTLY PRIVATE AND CONFIDENTIAL
The Directors The Directors
Birmingham Cable Corporation Limited Telewest Communications plc
Small Heath Business Park Genesis Business Park
Talbot Way Albert Drive
Birmingham Woking
B10 0HJ Surrey
GU21 5RW
The Directors
J Henry Schroder & Co Limited
120 Cheapside
London
EC2V 6DS
Our Ref: PJNH/IB/DJH 27 June 1998
Dear Sirs
PROPOSED MERGER OF TELEWEST COMMUNICATIONS PLC AND GENERAL CABLE PLC
We refer to the disclosure document (which will constitute Listing Particulars
and Prospectus for UK purposes) "the Disclosure Document" to be dated 29 June
relating to the proposed merger of Telewest Communications plc and General Cable
PLC. We hereby consent to the issue of such Disclosure Document with the
inclusion therein of our report on page III-124 in relation to Birmingham Cable
Corporation Limited in the form and context in which it appears and the
inclusion therein of our name in the form and context in which it appears on
page III-172.
We also hereby authorise the contents of the report referred to above included
in the Offering Circular for the purposes of section 152(1)(e) of the Financial
Services Act 1986.
Yours faithfully,
/s/ Deloitte & Touche
Deloitte & Touche
Chartered Accountants
<PAGE>
Exhibit 23.5
CONSENT OF PROPOSED DIRECTOR
I hereby consent to the reference to my name in the Registration Statement of
Telewest Communications plc on Form S-4 as a Proposed Director and to any other
such references in the form and context in which they are included.
/s/ Anthony Rice
- ----------------------
Anthony Rice
19 June 1998
<PAGE>
Exhibit 23.5
CONSENT OF PROPOSED DIRECTOR
I hereby consent to the reference to my name in the Registration Statement of
Telewest Communications plc on Form S-4 as a Proposed Director and to any other
such references in the form and context in which they are included.
/s/ Michel Villaneau
Michel Villaneau
19 June 1998
<PAGE>
EXHIBIT 23.6
The Directors
Telewest Communications plc
Genesis Business Park
Albert Drive
Woking
Surrey GU21 5RW
Dear Sirs
We hereby consent to the issue of the Registration Statement on Form S-4 of
Telewest Communications plc with the inclusion therein of our letter, our
name, and references thereto, in the form and context in which they are
mentioned.
J. Henry Schroder & Co. Limited
Financial Adviser to Telewest Communications plc
29 June 1998
<PAGE>
EXHIBIT 23.7
29 June 1998
The Directors
Telewest Communications plc
Genesis Business Park
Albert Drive
Woking
Surrey GU21 5RW
Dear Sirs,
We refer to the registration statement on Form S-4 of Telewest Communications
plc dated 29 June 1998 ("the Registration Statement").
We hereby consent to the use of our name as included in the above mentioned
Registration Statement under the captions "Letter from the Chairman of General
Cable" and "Appendix IV - Advice of Financial Adviser to General Cable". In
giving this consent, we do not admit that we come within the category of persons
whose consent is required under Section 7 of the Securities Act of 1933, as
amended, or the rules and regulations of the Securities and Exchange Commission
thereunder, nor do we thereby admit that we are experts with respect to any part
of such Registration Statement within the meaning of the term "experts" as used
in the Securities Act of 1933, as amended, or the rules and regulations of the
Securities and Exchange Commission.
Yours faithfully,
for BT Wolfensohn
/s/ Andrew Grabowski
- --------------------------
Andrew Grabowski
Managing Director
<PAGE>
EXHIBIT 99.1
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE
IN ANY DOUBT ABOUT THE ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK
YOUR OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR,
ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER.
THIS DOCUMENT SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO CANADA,
AUSTRALIA OR JAPAN.
J. Henry Schroder & Co. Limited is acting for Telewest and no one else in
connection with the Offer and will not be responsible to anyone other than
Telewest for providing the protections afforded to customers of J. Henry
Schroder & Co. Limited. J. Henry Schroder & Co. Limited is acting through
Schroder & Co., Inc. for the purposes of making the Offer in and into the
United States.
LETTER OF TRANSMITTAL
TO ACCEPT THE OFFER FOR AMERICAN DEPOSITARY SHARES EVIDENCED BY AMERICAN
DEPOSITARY RECEIPTS
OF
GENERAL CABLE PLC
PURSUANT TO THE OFFER TO PURCHASE
BY
J. HENRY SCHRODER & CO. LIMITED
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 P.M.
(LONDON TIME), 10:00 A.M. (NEW YORK CITY TIME), ON AUGUST 13, 1998,
UNLESS EXTENDED. AT THE CONCLUSION OF THE INITIAL OFFER PERIOD,
INCLUDING ANY EXTENSION THEREOF, IF ALL CONDITIONS HAVE BEEN SATISFIED,
FULFILLED, OR, WHERE PERMITTED, WAIVED, THE OFFER WILL BE EXTENDED FOR
A SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS. HOLDERS OF
GENERAL CABLE SECURITIES WILL HAVE THE RIGHT TO WITHDRAW THEIR
ACCEPTANCES OF THE OFFER DURING THE INITIAL OFFER PERIOD, INCLUDING ANY
EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT OFFER PERIOD, EXCEPT
IN CERTAIN LIMITED CIRCUMSTANCES.
DESCRIPTION OF GENERAL CABLE ADSS TENDERED
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) ADS(S) TENDERED (ATTACH ADDITIONAL
APPEAR(S) ON ADR(S)) LIST IF NECESSARY)
- -------------------------------------------------------------------------------------
TOTAL NUMBER
OF ADSS NUMBER
ADR SERIAL REPRESENTED BY OF ADSS
NUMBER(S)* ADR(S)* TENDERED**
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
</TABLE>
- -------------------------------------------------------------------------------
* Need not be completed for book-entry transfers.
** Unless otherwise indicated, it will be assumed that all General Cable
ADSs delivered to the US Depositary are being tendered. See Instruction
4.
1
<PAGE>
The US Depositary for the Offer is:
THE BANK OF NEW YORK
By Mail: Facsimile Transmission: By Hand or Overnight
Courier:
Tender & Exchange (For Eligible Tender & Exchange
Department Institutions Only) Department
P.O. Box 11248 (212) 815-6213 Tender & Exchange
Church Street Station For Information 101 Barclay Street
New York, New York 10286- Telephone: Receive and Deliver
1248 (800) 507-9357 Window
New York, New York 10286
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE US DEPOSITARY.
ACCEPTANCE OF THE OFFER IN RESPECT OF GENERAL CABLE SHARES (EXCEPT INSOFAR
AS THEY ARE REPRESENTED BY GENERAL CABLE ADSs EVIDENCED BY GENERAL CABLE ADRs)
CANNOT BE MADE BY MEANS OF THIS LETTER OF TRANSMITTAL. If you hold General
Cable shares that are not represented by General Cable ADSs, you may obtain a
Form of Acceptance, Authority and Election (the "Acceptance Form") from the US
Depositary or the Receiving Agent. See Instruction 13 of this Letter of
Transmittal.
The undersigned acknowledges that he or she has received and reviewed the
Telewest Communications plc ("Telewest") Offer to Purchase/Prospectus, dated
June 29, 1998 (the "Offer to Purchase"), and this Letter of Transmittal (the
"Letter of Transmittal"), which together constitute the offer of Telewest (the
"Offer") to acquire, upon the terms and subject to the Conditions set out in
the Offer to Purchase, all outstanding General Cable securities for 1.243 new
Telewest shares and 65 pence in cash per General Cable share and 6.215 new
Telewest shares (in the form of new Telewest ADSs) and 325 pence in cash for
each General Cable ADS. (Capitalized terms used but not defined herein have
the meanings given to them in the Offer to Purchase.)
Holders of General Cable securities who validly accept the Offer within the
relevant time period may utilize a Mix and Match Election whereby they may
elect to vary the proportion of new Telewest securities and cash receivable
under the Offer by electing to receive either all new Telewest securities or
all cash in respect of all or a designated portion of their holdings of
General Cable securities, subject to other holders of General Cable securities
making off-setting elections. To the extent that elections cannot be satisfied
as a result of such off-setting elections, entitlements to cash and new
Telewest securities in excess of the Basic Terms will be scaled down on a pro
rata basis. The Mix and Match Election will remain open until 10:00 a.m., New
York City time, on the date falling five calendar days after the date on which
the Offer becomes or is declared unconditional in all respects. Only holders
of General Cable securities who validly accept the Offer by that date may make
Mix and Match Elections. See "Mix and Match Election" below and Section 4.
"The Mix and Match Election" in the letter from Schroders in the Offer to
Purchase.
Persons validly tendering their General Cable ADSs pursuant to a Letter of
Transmittal may elect to receive new Telewest shares and pounds sterling,
instead of new Telewest ADSs and dollars, in respect of all (but not less than
all) of the General Cable ADSs validly tendered by such holder by placing an
"X" in the box under "Special Exchange Instructions" below. However, no holder
may elect to receive new Telewest shares and dollars or new Telewest ADSs and
pounds sterling. General Cable ADS holders who do not validly elect to receive
new Telewest shares and pounds sterling, will receive dollars and Telewest
ADSs on the following basis: (i) the cash amount payable in pounds sterling to
which such holder would otherwise be entitled pursuant to the terms of the
Offer will be converted, without charge, from pounds sterling to dollars at
the exchange rate obtained by the US Depositary on or about the date the cash
consideration is made available by Telewest to the US Depositary for delivery
in respect of the relevant General Cable ADSs; and (ii) such holder will
receive one Telewest ADS for every ten new Telewest shares to which such
holder would otherwise be entitled pursuant to the Offer. The actual amount of
dollars received will depend upon the exchange rate obtained by the US
Depositary for the funds that are made available to the US Depositary by
Telewest. In all cases, fluctuations in the dollar/pounds sterling exchange
rate are
2
<PAGE>
at the risk of accepting holders of General Cable ADSs who do not elect to
receive their consideration in pounds sterling. See Section 22. "Procedure for
acceptance of the Offer -- (C) Holders of General Cable ADSs -- (c)
Alternative consideration" and Section 24. "Settlement -- (c) General Cable
ADSs" in the letter from Schroders in the Offer to Purchase.
Delivery of a Letter of Transmittal, General Cable ADRs evidencing General
Cable ADSs (or book-entry transfer of such General Cable ADSs evidenced by
General Cable ADRs) and any other required documents to the US Depositary by
General Cable ADS holders will be deemed an acceptance of the Offer by such
holder with respect to such General Cable ADSs evidenced by General Cable ADRs
subject to the terms and conditions set out in the Offer to Purchase and this
Letter of Transmittal.
This Letter of Transmittal is to be used if General Cable ADRs evidencing
General Cable ADSs are to be forwarded herewith. If delivery of General Cable
ADSs is to be made by book-entry transfer to an account maintained by the US
Depositary at The Depository Trust Company pursuant to the procedures for
book-entry transfer set forth in Section 22. "Procedure for acceptance of the
Offer -- (C) Holders of General Cable ADSs -- (d) Book-entry transfer" in the
letter from Schroders in the Offer to Purchase, then either this Letter of
Transmittal or an Agent's Message (as defined below) should be used.
The term "Agent's Message" means a message, transmitted by The Depository
Trust Company and received by the US Depositary and forming a part of a Book-
Entry Confirmation, which states that The Depository Trust Company has
received an express acknowledgement from the participant in The Depository
Trust Company tendering the General Cable ADSs which are the subject of such
Book-Entry Confirmation that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal.
[_] CHECK BOX IF GENERAL CABLE ADSs IN RESPECT OF WHICH THE OFFER IS BEING
ACCEPTED ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT
MAINTAINED BY THE US DEPOSITARY WITH THE DEPOSITORY TRUST COMPANY AND
COMPLETE THE FOLLOWING (ONLY PARTICIPANTS IN THE DEPOSITORY TRUST COMPANY
MAY DELIVER GENERAL CABLE ADSs EVIDENCED BY GENERAL CABLE ADRs BY BOOK-
ENTRY TRANSFER):
Name of Delivering Institution ________________________________________________
Account Number _________________ Transaction Code Number _________________
If a holder of General Cable ADSs wishes to accept the Offer and General
Cable ADRs evidencing such General Cable ADSs are not immediately available or
the procedures for book-entry transfer cannot be completed on a timely basis,
or if time will not permit all required documents to reach the US Depositary
prior to the expiration of the Initial Offer Period or the Subsequent Offer
Period, as the case may be, such holder's acceptance of the Offer may
nevertheless be effected using the guaranteed delivery procedure set out under
Section 22. "Procedure for acceptance of the Offer--(C) Holders of General
Cable ADSs -- (i) Guaranteed Delivery Procedures" in the letter from Schroders
in the Offer to Purchase. See Instruction 2 of this Letter of Transmittal.
HOWEVER, RECEIPT OF A NOTICE OF GUARANTEED DELIVERY WILL NOT BE TREATED AS A
VALID ACCEPTANCE FOR THE PURPOSE OF SATISFYING THE ACCEPTANCE CONDITION.
[_] CHECK BOX ONLY IF GENERAL CABLE ADSs IN RESPECT OF WHICH THE OFFER IS
BEING ACCEPTED ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED
DELIVERY PREVIOUSLY SENT TO THE US DEPOSITARY AND COMPLETE THE FOLLOWING:
Name(s) of registered owner(s) ___________________________________________
Date of execution of Notice of Guaranteed Delivery _______________________
Name of Institution that guaranteed delivery _____________________________
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
3
<PAGE>
Ladies and Gentlemen:
The undersigned hereby instructs the US Depositary to accept the Offer on
behalf of the undersigned with respect to the General Cable ADSs evidenced by
General Cable ADRs (which expression in this Letter of Transmittal shall,
except where the context otherwise requires, be deemed to include, without
limitation, the General Cable shares represented thereby) specified in the box
entitled "Description of General Cable ADSs Tendered," subject to the terms
and Conditions set forth in the Offer to Purchase and this Letter of
Transmittal, by informing Telewest in writing that the Offer has been so
accepted. The undersigned hereby acknowledges that delivery of this Letter of
Transmittal, the General Cable ADRs evidencing tendered General Cable ADSs (or
book-entry transfer of such General Cable ADSs evidenced by General Cable
ADRs) and any other required documents to the US Depositary by a holder of
General Cable ADSs will be deemed (without any further action by the US
Depositary) to constitute acceptance of the Offer by such holder in respect of
such holder's General Cable ADSs, subject to the terms and Conditions set out
in the Offer to Purchase and this Letter of Transmittal.
The undersigned understands that acceptance of the Offer by the undersigned
pursuant to the procedures described herein and in the instructions hereto,
subject to the withdrawal rights described in the Offer to Purchase, will
constitute a binding agreement between the undersigned and Telewest upon the
terms and subject to the Conditions of the Offer. IF ACCEPTANCE HAS BEEN MADE
IN RESPECT OF THE GENERAL CABLE ADSs, THEN A SEPARATE ACCEPTANCE IN RESPECT OF
THE GENERAL CABLE SHARES REPRESENTED BY SUCH GENERAL CABLE ADSs MAY NOT BE
MADE.
The undersigned hereby delivers to the US Depositary the above-described
General Cable ADSs evidenced by General Cable ADRs for which the Offer is
being accepted, in accordance with the terms and Conditions of the Offer to
Purchase and this Letter of Transmittal, receipt of which is hereby
acknowledged.
Upon the terms of the Offer (including, if the Offer is revised, varied,
extended or renewed, the terms or conditions of any such revision, variation,
extension, or renewal), and effective at the time that all Conditions to the
Offer have been satisfied, fulfilled or, where permitted, waived (at which
time Telewest will give notice thereof to the US Depositary), and if he or she
has not validly withdrawn his or her acceptance, the undersigned hereby sells,
assigns and transfers to, or upon the order of, Telewest all right, title and
interest in and to all General Cable ADSs evidenced by General Cable ADRs with
respect to which the Offer is being accepted (and any and all General Cable
ADSs or other securities or rights issuable in respect of such General Cable
ADSs) and irrevocably constitutes and appoints the US Depositary the true and
lawful agent and attorney-in-fact of the undersigned with respect to such
General Cable ADSs (and any such other General Cable ADSs, securities or
rights), with full power of substitution (such power of attorney being deemed
to be an irrevocable power coupled with an interest), to (a) deliver General
Cable ADRs for such General Cable ADSs (and any such other General Cable ADSs,
securities or rights), or accept transfer of ownership of such General Cable
ADSs (and any such other General Cable ADSs, securities or rights) on the
account books maintained by The Depository Trust Company together, in any such
case, with all accompanying evidences of transfer and authenticity, to, or
upon the order of, Telewest, (b) present such General Cable ADRs for such
General Cable ADSs (and any other General Cable ADSs, securities or rights)
for transfer, and (c) receive all benefits and otherwise exercise all rights
of beneficial ownership of such General Cable ADSs (and any such other General
Cable ADSs, securities or rights), all in accordance with the terms of the
Offer.
The undersigned agrees that its execution hereof (together with any
signature guarantees) and its delivery to the US Depositary shall confer to
Telewest, Schroders and each of their respective directors the authority
described in paragraph 5 of Part B of Appendix I to the Offer to Purchase.
The undersigned agrees that effective from and after the date hereof or, if
later, the date on which all Conditions to the Offer are satisfied, fulfilled
or, where permitted, waived: (a) Telewest or its agents shall be entitled to
direct the exercise of any votes and any or all other rights and privileges
(including the right to requisition the convening of a general meeting of
General Cable or of any class of its shareholders) attaching to the General
Cable shares represented by any General Cable ADSs evidenced by General Cable
ADRs in respect of which the Offer has been accepted or is deemed to have been
accepted and not validly withdrawn (the "Accepted ADSs") and (b) the execution
of this Letter of Transmittal by a holder of General Cable ADSs
4
<PAGE>
(together with any signature guarantees) and its delivery to the US Depositary
shall constitute in respect of Accepted ADSs (i) an authority to General Cable
from the undersigned to send any notice, circular, warrant, document or other
communication that may be required to be sent to him or her as a General Cable
ADS holder to Telewest at its registered office, (ii) an authority to Telewest
or any director of Telewest to sign any consent to short notice of a general
or separate class meeting on behalf of the holder of Accepted ADSs and/or to
execute a form of proxy in respect of the Accepted ADSs appointing any person
nominated by Telewest to attend general and separate class meetings of General
Cable (or any adjournments thereof) and to exercise the votes attaching to the
General Cable shares represented by such Accepted ADSs on his or her behalf,
such votes to be cast so far as possible to satisfy any outstanding Condition,
and (iii) the agreement of the undersigned not to exercise any such rights
without the consent of Telewest and the irrevocable undertaking of the
undersigned not to appoint a proxy for or to attend any such general meeting
or separate class meeting of General Cable in respect of such Accepted ADSs.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to accept the Offer and to sell, assign and transfer the
General Cable ADSs evidenced by General Cable ADRs (and the General Cable
shares represented by such General Cable ADSs) in respect of which the Offer
is being accepted or deemed to be accepted (and any and all other General
Cable ADSs, securities or rights issued or issuable in respect of such General
Cable ADSs) and, when the same are purchased by Telewest, Telewest will
acquire good title thereto, free from all liens, equities, charges,
encumbrances and other interests and together with all rights now or hereafter
attaching thereto, including, without limitation, the right to receive and
retain all dividends, interest and other distributions declared, made or paid
on or after April 15, 1998 with respect to the General Cable shares
represented by the General Cable ADSs. The undersigned will, upon request,
execute any additional documents deemed by the US Depositary or Telewest to be
necessary or desirable to complete the sale, assignment and transfer of the
General Cable ADSs evidenced by General Cable ADRs in respect of which the
Offer is being accepted (and any and all other General Cable ADSs, securities
or rights).
The undersigned irrevocably undertakes, represents, and warrants to and
agrees with Telewest (so as to bind him or her, his or her personal
representatives, heirs, successors and assigns) to the effect that the
undersigned: (i) has not received or sent copies of the Offer to Purchase or
any Acceptance Form or any related documents in, into or from Canada,
Australia or Japan and has not otherwise utilized in connection with the
Offer, directly or indirectly, the Canadian, Australian or Japanese mails or
any means or instrumentality (including, without limitation, facsimile
transmission, telex, and telephone) of interstate or foreign commerce, or any
facilities of a national securities exchange, of Canada, Australia or Japan,
(ii) is accepting the Offer from outside Canada, Australia and Japan and (iii)
is not an agent or fiduciary acting on a nondiscretionary basis for a
principal, unless such agent or fiduciary is an authorized employee of such
principal or such principal has given any instructions with respect to the
Offer from outside Canada, Australia and Japan.
All authority herein conferred or agreed to be conferred pursuant to this
Letter of Transmittal shall be binding upon the successors, assigns, heirs,
executors, administrators and legal representatives of the undersigned and
shall not be affected by, and shall survive, the death or incapacity of the
undersigned. Except as stated in the Offer to Purchase, this acceptance is
irrevocable.
Unless otherwise indicated herein under "Special Payment Instructions," the
undersigned hereby instructs the US Depositary to issue, or cause to be
issued, the check for all or the applicable portion of the purchase price to
be paid to the undersigned pursuant to the Offer in the name(s) of the
registered holder(s) appearing above under "Description of General Cable ADSs
Tendered." Similarly, unless otherwise indicated under "Special Delivery
Instructions," the undersigned hereby instructs the US Depositary to mail or
cause to be mailed, the check for all or the applicable portion of the
purchase price to be paid to the undersigned pursuant to the Offer and/or
return, or cause to be returned, any General Cable ADRs evidencing General
Cable ADSs in respect of which the Offer is not being accepted or which are
not purchased (and accompanying documents, as appropriate) and/or deliver the
Telewest ADRs or share certificates to be delivered to the undersigned
pursuant to the Offer to the address(es) of the registered holder(s) appearing
above under "Description of General Cable ADSs Tendered." In the event that
the "Special Payment Instructions" and/or the "Special Delivery Instructions"
are
5
<PAGE>
completed, the undersigned hereby instructs the U.S. Depositary to (i) issue
and/or mail, or cause to be issued and/or mailed, the check for all or the
applicable portion of the purchase price, if any, in the name of, and/or to
the address of, the person or persons so indicated, and/or (ii) return, or
cause to be returned, any General Cable ADRs evidencing General Cable ADSs in
respect of which the Offer is not being accepted or which are not purchased,
if any, to the person at the address so indicated. In the case of a book-entry
delivery of General Cable ADSs evidenced by General Cable ADRs, the
undersigned hereby instructs the US Depositary to credit the account
maintained at The Depository Trust Company with any General Cable ADSs in
respect of which the Offer is not being accepted or which are not purchased.
The undersigned recognizes that the US Depositary will not transfer any
General Cable ADSs which are not purchased pursuant to the Offer from the name
of the registered holder thereof to any other person.
If the box headed "Special Exchange Instructions" is NOT checked, the
undersigned hereby instructs the US Depositary to convert all amounts payable
pursuant to the Offer from pounds sterling to US dollars at the exchange rate
obtained by the US Depositary on or about the date the cash consideration is
made available by Telewest to the US Depositary for delivery to holders of
General Cable ADSs and to pay such amounts by check payable in US dollars. The
actual amount of US dollars received will depend upon the exchange rate
obtained by the US Depositary for the funds that are made available to the US
Depositary by Telewest. General Cable ADS holders should also be aware that
the US dollar/pounds sterling exchange rate which is prevailing at the date on
which the undersigned executes this Letter of Transmittal and on the date of
dispatch of payment may be different from that obtained by the US Depositary.
In all cases fluctuations in the US dollar/pounds sterling exchange rate are
at the risk of accepting General Cable ADS holders who do not elect to receive
their consideration in new Telewest shares in pounds sterling. Such currency
exchange will be effected by the relevant payment agent on behalf of the
tendering General Cable ADS holder and neither Telewest nor any of its
advisors shall have responsibility or obligation with respect thereto.
SUBJECT TO THE TERMS OF THE OFFER TO PURCHASE, THIS LETTER OF TRANSMITTAL
SHALL NOT BE CONSIDERED COMPLETE AND VALID, AND PAYMENT OF CONSIDERATION
PURSUANT TO THE OFFER SHALL NOT BE MADE, UNTIL THE GENERAL CABLE ADRs
EVIDENCING THE GENERAL CABLE ADSs IN RESPECT OF WHICH THE OFFER IS BEING
ACCEPTED AND ALL OTHER REQUIRED DOCUMENTATION HAVE BEEN RECEIVED BY THE US
DEPOSITARY AS PROVIDED IN THE OFFER TO PURCHASE AND THIS LETTER OF
TRANSMITTAL.
[_] CHECK HERE IF ANY OF THE GENERAL CABLE ADRs REPRESENTING GENERAL CABLE
ADSs THAT YOU OWN HAVE BEEN LOST, STOLEN OR DESTROYED AND SEE INSTRUCTION
12.
Number of General Cable ADSs represented by the lost, stolen or destroyed
General Cable ADRs: ______________________________________________________
__________________________________________________________________________
6
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS (SEE SPECIAL DELIVERY INSTRUCTIONS
INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
[_]Check box ONLY if the check [_]Check box ONLY if the check
for the purchase price with for all or the applicable por-
respect to General Cable ADSs tion of the purchase price
purchased is to be issued in with respect to General Cable
the name of someone other than ADSs purchased and/or the
the undersigned. Telewest ADRs or share certif-
icates representing the new
Issue to: Telewest ADSs or shares for
all or the applicable portion
Name _____________________________ of the purchase price with re-
(PLEASE PRINT) spect to General Cable ADSs
Address __________________________ purchased and/or General Cable
__________________________________ ADRs evidencing General Cable
(INCLUDE ZIP CODE) ADSs in respect of which the
Offer is not accepted or which
are not purchased are to be
mailed to someone other than
the undersigned, or to the un-
dersigned at an address other
than that shown above.
Mail [_] Check
[_] Telewest ADRs/share certifi-
cates
[_] General Cable ADRs
Name _____________________________
(PLEASE PRINT)
Address __________________________
__________________________________
(INCLUDE ZIP CODE)
SPECIAL INSTRUCTIONS REGARDING NEW TELEWEST SECURITIES
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
[_]Check box ONLY if the new Telewest securities delivered with respect to
General Cable ADSs purchased are to be registered in the name of someone
other than the undersigned.
Register in name of:
Name: ______________________________________________________________________
(PLEASE PRINT)
Address: ___________________________________________________________________
(INCLUDE ZIP CODE)
7
<PAGE>
MIX AND MATCH ELECTION
[_]Check box if you wish to elect to vary the proportion in which you re-
ceive new Telewest ADSs and cash receivable in the Offer in respect of
your holding of General Cable ADSs and complete the following item (a)
OR (b), as applicable:
(a) Insert in the space provided the number of General Cable ADSs in
respect of which you wish to receive new Telewest ADSs
only: ______________________________________General Cable ADSs;
OR
(b) Insert in the space provided the number of General Cable ADSs for
which you wish to receive cash only: ______ General Cable ADSs.
Note: The number of General Cable ADSs set forth in either item
(a) or item (b) above must not exceed the number of General Cable
ADSs tendered herewith (see the box headed "Description of General
Cable ADSs Tendered" on page 1 of this Letter of Transmittal). You
may NOT make an election under both item (a) and item (b). The
foregoing election will be filled only to the extent that other
holders of General Cable securities make off-setting elections, as
explained in Section 4. "The Mix and Match Election" in the letter
from Schroders in the Offer to Purchase.
SPECIAL EXCHANGE INSTRUCTIONS
[_]Check box ONLY if you wish to receive all (but not part) of the consid-
eration payable in the Offer in the form of new Telewest shares and
pounds sterling, instead of new Telewest ADSs and dollars. (However,
you may NOT elect to receive new Telewest shares and dollars or new
Telewest ADSs and pounds sterling.) If you do not check this box you
will receive new Telewest ADSs and a cash payment by a check in US dol-
lars. The US Depositary will arrange for the conversion of the pound
sterling amounts payable to you to US dollars at the exchange rate ob-
tained by the US Depositary on or about the date the cash consideration
is made available by Telewest to the US Depositary for delivery to
holders of the General Cable ADSs. NOTE: If you make a Mix and Match
Election to receive only new Telewest ADSs in respect of your General
Cable ADSs AND you check the box for Special Exchange Instructions, you
will be electing to receive new Telewest shares in respect of such Gen-
eral Cable ADSs.
8
<PAGE>
SIGN HERE
AND COMPLETE SUBSTITUTE FORM W-9 INCLUDED HEREIN
-------------------------------------
-------------------------------------
(SIGNATURE(S) OF OWNER(S))
Dated: __________________________________________________________________, 1998
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
General Cable ADR(s) evidencing the General Cable ADS(s) or by person(s) to
whom General Cable ADR(s) surrendered have been assigned and transferred, as
evidenced by endorsement, stock powers and other documents transmitted
herewith. If signature is by any trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or others acting in a fiduciary or
representative capacity, please set forth the following and see Instruction
5.)
Name(s) _______________________________________________________________________
_______________________________________________________________________________
(Please Type or Print)
Capacity (full title) _________________________________________________________
Address _______________________________________________________________________
(Include Zip Code)
Area Code and Telephone Number ________________________________________________
Tax Identification or
Social Security No. ___________________________________________________________
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
Authorized Signature __________________________________________________________
Name __________________________________________________________________________
(Please Type or Print)
Title _________________________________________________________________________
Name of Firm __________________________________________________________________
Address _______________________________________________________________________
Area Code and Telephone No. ___________________________________________________
Dated: ________________________________________________________________________
9
<PAGE>
PAYER'S NAME: THE BANK OF NEW YORK
PLEASE PROVIDE YOUR TIN
IN THE BOX AT RIGHT AND
CERTIFY BY SIGNING AND
DATING BELOW.
SUBSTITUTE Part I--Social Security
FORM W-9 Number or
DEPARTMENT OF THE Employer Identification
TREASURY Number
INTERNAL REVENUE SERVICE
------------------------
PAYER'S REQUEST FOR Name --------------------
TAXPAYER IDENTIFICATION
(If awaiting TIN,
write "Applied
For")
NUMBER (TIN) ------------------------
Business Name
Please check --------------------------
appropriate box: Part II--For
Payee's exempt from
[_] Individual/Sole backup withholding,
Proprietor [_] see the enclosed
Corporation Guidelines for
Certification of
Taxpayer
Identification
Number on
Substitute Form W-
9, check the Exempt
box below, and
complete the Form
W-9.
[_] Partnership
[_] Other __
------------------------
Address
------------------------
City, State, Zip Code
Exempt [_]
- --------------------------------------------------------------------------------
CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as
a result of a failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to backup withholding.
Certification Information--You must cross out Item (2) above if you
have been notified by the IRS that you are temporarily subject to
backup withholding because of under-reporting interest or dividends on
your tax return. However, if after being notified by the IRS that you
were subject to backup withholding you received another notification
from the IRS that you are no longer subject to backup withholding, do
not cross out such Item (2). (Also see instructions in the enclosed
Guidelines.)
- --------------------------------------------------------------------------------
Signature Date_____________________________________________________________
- --------------------------------------------------------------------------------
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU WROTE "APPLIED FOR" IN PART
I OF SUBSTITUTE FORM W-9
- --------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office
or (b) I intend to mail or deliver an application in the near future. I
understand that all reportable payments made to me prior to the time I
provide the US Depositary with a properly certified taxpayer
identification number will be subject to a 31% back-up withholding tax.
- --------------------------------------------------------------------------------
Signature Date_____________________________________________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS SUBSTITUTE FORM W-9 MAY RESULT IN
BACK-UP WITHHOLDING OF 31% OF ANY PAYMENT MADE TO YOU. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
10
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee is required on the Letter
of Transmittal if (a) the Letter of Transmittal is signed by the registered
holder(s) of the General Cable ADSs evidenced by General Cable ADRs in respect
of which the Offer is being accepted herewith and such holder(s) have not
completed the box entitled "Special Payment Instructions," the box entitled
"Special Delivery Instructions" or the box entitled "Special Instructions
Regarding New Telewest Securities" on this Letter of Transmittal or (b) the
Offer is being accepted in respect of such General Cable ADSs for the account
of an Eligible Institution. In all other cases, all signatures on this Letter
of Transmittal must be guaranteed by a financial institution (including most
banks, savings and loan associations and brokerage houses) which is a
participant in the Securities Transfer Agents Medallion Program, the New York
Stock Exchange Medallion Program, or the Stock Exchange Medallion Program (an
"Eligible Institution"). See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND ADSS. This Letter of Transmittal is
to be completed either if General Cable ADRs evidencing General Cable ADSs are
to be forwarded herewith or if delivery is to be made by book-entry transfer
of General Cable ADSs to an account maintained by the US Depositary at The
Depository Trust Company pursuant to the procedures for book-entry transfer
set out in Section 22. "Procedure for acceptance of the Offer--(C) Holders of
General Cable ADSs--(d) Book-entry transfer" in the letter from Schroders in
the Offer to Purchase. General Cable ADRs evidencing General Cable ADSs or
confirmation of a book-entry transfer of such General Cable ADSs into the US
Depositary's account at The Depository Trust Company, as well as a properly
completed and duly executed Letter of Transmittal (or facsimile thereof),
together with any required signature guarantees (or, in the case of a book-
entry transfer, an Agent's Message), and any other documents required by this
Letter of Transmittal, must be delivered to the US Depositary at one of its
addresses set forth herein.
General Cable ADS holders whose General Cable ADRs are not immediately
available or who cannot deliver their General Cable ADRs and all other
required documents to the US Depositary or complete the procedures for book-
entry transfer prior to the expiration of the Initial Offer Period or the
Subsequent Offer Period, as the case may be, may accept the Offer with respect
to their General Cable ADSs by properly completing and duly executing a Notice
of Guaranteed Delivery pursuant to the guaranteed delivery procedures set out
in Section 22. "Procedure for acceptance of the Offer--(C) Holders of General
Cable ADSs--(i) Guaranteed Delivery Procedures" in the letter from Schroders
in the Offer to Purchase. Pursuant to the guaranteed delivery procedures: (a)
acceptance must be made by or through an Eligible Institution; (b) a properly
completed and duly executed Notice of Guaranteed Delivery substantially in the
form provided by Telewest must be received by the US Depositary prior to the
expiration of the Initial Offer Period or the Subsequent Offer Period, as the
case may be; and (c) the General Cable ADRs evidencing the General Cable ADSs
in respect of which the Offer is being accepted (or, in the case of General
Cable ADSs held in book-entry form, timely confirmation of the book-entry
transfer of such General Cable ADSs into the US Depositary's account at The
Depository Trust Company as described in the Offer to Purchase), together with
a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees (or, in the case of a book-
entry transfer, an Agent's Message), and any other documents required by this
Letter of Transmittal, are received by the US Depositary within three Nasdaq
trading days after the date of execution of such Notice of Guaranteed
Delivery.
THE METHOD OF DELIVERY OF GENERAL CABLE ADSs EVIDENCED BY GENERAL CABLE ADRs
AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE HOLDERS OF
GENERAL CABLE ADSs ACCEPTING THE OFFER. IF DELIVERY IS BY MAIL, REGISTERED
MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
No alternative, conditional or contingent acceptance will be accepted and no
fractional General Cable ADSs will be purchased. All accepting General Cable
ADS holders, by execution of this Letter of Transmittal (or facsimile
thereof), waive any right to receive any notice of the acceptance of their
General Cable ADSs for payment.
11
<PAGE>
3. INADEQUATE SPACE. If the space provided herein is inadequate, the serial
numbers of the certificates and/or the number of General Cable ADSs should be
listed on a separate schedule attached hereto.
4. PARTIAL ACCEPTANCES (NOT APPLICABLE TO BOOK-ENTRY TRANSFERS). If the
Offer is to be accepted in respect of less than all of the General Cable ADSs
evidenced by any General Cable ADRs delivered to the US Depositary herewith,
fill in the number of General Cable ADSs in respect of which the Offer is
being accepted in the box entitled "Number of ADSs Tendered." In such case, a
new General Cable ADR for the remainder of the General Cable ADSs (in respect
of which the Offer is not being accepted) represented by the old General Cable
ADR will be sent to the registered holders as promptly as practicable
following the date on which the General Cable ADSs in respect of which the
Offer has been accepted are purchased.
The Offer will be deemed to have been accepted in respect of all General
Cable ADSs evidenced by General Cable ADRs delivered to the US Depositary
unless otherwise indicated. In the case of partial acceptances, General Cable
ADSs in respect of which the Offer was not accepted will not be reissued to a
person other than the registered holder.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the
General Cable ADSs in respect of which the Offer is being accepted hereby, the
signature(s) must correspond with the name(s) as written on the face of the
certificates without any change whatsoever.
If any of the General Cable ADSs evidenced by General Cable ADRs in respect
of which the Offer is being accepted hereby are owned of record by two or more
owners, all such owners must sign this Letter of Transmittal.
If any of the General Cable ADSs in respect of which the Offer is being
accepted are registered in different names on different General Cable ADRs, it
will be necessary to complete, sign and submit as many separate Letters of
Transmittal as there are different registrations of General Cable ADRs.
If this Letter of Transmittal or any General Cable ADRs or stock powers are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and proper evidence
satisfactory to Telewest of their authority so to act must be submitted.
When this Letter of Transmittal is signed by the registered holder(s) of the
General Cable ADSs listed and transmitted hereby, no endorsements of
certificates or separate stock powers are required unless payment of the
purchase price is to be issued to a person other than the registered
holder(s). Signatures on such General Cable ADRs or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the General Cable ADSs listed, the General Cable ADRs
must be endorsed or accompanied by appropriate stock powers signed exactly as
the name(s) of the registered holder(s) appear(s) on the General Cable ADRs
evidencing such General Cable ADSs. Signatures on such General Cable ADRs or
stock powers must be guaranteed by an Eligible Institution.
6. STOCK TRANSFER TAXES. Telewest will pay or cause to be paid any stock
transfer taxes with respect to the transfer and sale to it or its order of
General Cable ADSs evidenced by General Cable ADRs pursuant to the Offer. If,
however, delivery of any of the consideration payable pursuant to the Offer is
to be made to any persons other than the registered holder(s), or if General
Cable ADSs in respect of which the Offer is being accepted are registered in
the name of any person other than the person(s) signing this Letter of
Transmittal, the amount of any stock transfer taxes (whether imposed on the
registered holder(s) or such person(s)) payable on account of the transfer to
such person will be deducted from the purchase price (or new Telewest
securities will be withheld) unless satisfactory evidence of the payment of
such taxes or exemption therefrom is submitted.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the General Cable ADRs listed in this
Letter of Transmittal.
12
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If the check for all or the
applicable portion of the purchase price is to be issued in the name of a
person other than the signer of this Letter of Transmittal or if the check or
the Telewest ADRs or share certificates representing the new Telewest
securities for all or the applicable portion of the purchase price is/are to
be sent and/or any General Cable ADRs evidencing General Cable ADSs in respect
of which the Offer is not being accepted or which are not purchased are to be
returned to a person other than the signer of this Letter of Transmittal or to
an address other than that shown in the box entitled "Description of General
Cable ADSs Tendered" on the first page of this Letter of Transmittal, or the
new Telewest securities are to be registered in the name of a person other
than the signer of this Letter of Transmittal, the boxes labeled "Special
Payment Instructions" and/or "Special Delivery Instructions" and/or "Special
Instructions Regarding New Telewest Securities" on this Letter of Transmittal
should be completed.
8. SPECIAL EXCHANGE INSTRUCTIONS. If you wish to elect to receive new Telewest
shares and pounds sterling, instead of new Telewest ADSs and dollars, in
respect of all (but not less than all) of the General Cable ADSs validly
tendered by you, place an "X" in the box appearing under "Special Exchange
Instructions". If you do not check such box all pound sterling amounts payable
pursuant to the Offer will be converted by the US Depositary into US dollars
at the exchange rate obtained by the US Depositary on or about the date the
cash consideration is made available by Telewest to the US Depositary for
delivery to holders of General Cable ADSs.
9. WAIVER OF CONDITIONS. Telewest reserves the absolute right in its sole
discretion to waive any of the specified Conditions of the Offer, in whole or
in part, to the extent permitted by applicable law and the rules of the City
Code.
10. 31% US BACKUP WITHHOLDING. In order to avoid "backup withholding" of US
federal income tax on any cash payment received upon the surrender of General
Cable ADSs pursuant to the Offer, a General Cable ADS holder must, unless an
exemption applies, provide the US Depositary with his or her correct Taxpayer
Identification Number ("TIN") on Substitute Form W-9 on this Letter of
Transmittal and certify, under penalties of perjury, that such number is
correct and that he or she is not subject to backup withholding. If the
correct TIN is not provided, a $50 penalty may be imposed by the Internal
Revenue Service and cash payments made in exchange for the surrendered General
Cable ADSs may be subject to backup withholding. If backup withholding
applies, the US Depositary is required to withhold 31% of any payment made
pursuant to the offer.
Backup withholding is not an additional US federal income tax. Rather, the
US federal income tax liability of persons subject to backup withholding will
be reduced by the amount of such tax withheld. If backup withholding results
in an overpayment of taxes, a refund may be applied for from the Internal
Revenue Service.
The TIN that is to be provided on the Substitute W-9 is that of the
registered holders(s) of the General Cable ADSs or of the last transferee
appearing on the transfers attached to, or endorsed on, the General Cable ADRs
representing such ADSs. The TIN for an individual is his or her social
security number. Each tendering General Cable ADS holder generally is required
to notify the US Depositary of his or her correct TIN by completing the
Substitute Form W-9 contained herein, certifying that the TIN provided on
Substitute Form W-9 is correct (or that such holder is awaiting a TIN), and
that (1) such holder has not been notified by the Internal Revenue Service
that such holder is subject to backup withholding as a result of a failure to
report all interest or dividends, or (2) the Internal Revenue Service has
notified such holder that such holder is no longer subject to backup
withholding. The US Depositary will withhold 31% on any cash payment of the
purchase price for the General Cable ADSs made prior to the time it is
provided with a properly certified TIN.
Exempt persons (including, among others, corporations) are not subject to
backup withholding. A foreign individual or foreign entity may qualify as an
exempt person by submitting a statement (on Form W-8), signed under penalties
of perjury, certifying such person's foreign status. Form W-8 can be obtained
from the US Depositary. A General Cable ADS holder should consult his or her
tax advisor as to his or her qualification for an exemption from backup
withholding and the procedure for obtaining such exemption.
For additional guidance, see the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9.
13
<PAGE>
11. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions and requests for
assistance or additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at the address and telephone number set
forth below.
12. LOST, DESTROYED OR STOLEN CERTIFICATES. If any General Cable ADR
evidencing General Cable ADSs has been lost, destroyed or stolen, the holder
thereof should promptly notify the US Depositary by checking the box
immediately preceding the special payment/special delivery instructions boxes
and indicating the number of General Cable ADSs evidenced by such lost,
destroyed or stolen General Cable ADRs. The holder thereof will then be
instructed as to the steps that must be taken in order to replace such General
Cable ADRs. This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost, destroyed or stolen General
Cable ADRs have been followed.
13. HOLDERS OF GENERAL CABLE SHARES NOT REPRESENTED BY GENERAL CABLE
ADSS. Holders of General Cable shares have been sent a Form of Acceptance with
the Offer to Purchase and may not accept the Offer in respect of General Cable
Shares pursuant to this Letter of Transmittal, except insofar as those shares
are represented by General Cable ADSs. If any holder of General Cable Shares
which are not represented by General Cable ADSs needs to obtain a copy of a
Form of Acceptance, such holder should contact the Receiving Agent at the
appropriate address and telephone number set forth in the Offer to Purchase or
the US Depositary.
14. FRACTIONAL ENTITLEMENTS. Fractions of new Telewest ADSs will not be
allotted to accepting holders of General Cable ADSs (including such holders
who are deemed to accept the Offer) but will be aggregated by the US
Depositary and sold in the market on behalf of such accepting holders and the
proceeds, net of any expenses, will be paid in cash to those entitled thereto.
However, individual cash entitlements in amounts of less than (Pounds)3.00
(net) will not be paid but will be retained for the benefit of the Combined
Group. Telewest will not have any liability to any person for any loss on
alleged loss arising from the price, timing or manner of any such sale.
The Information Agent for the Offer is
INNISFREE
M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Telephone (212) 750-5833
or
CALL TOLL FREE (888)750-5834
14
<PAGE>
Exhibit 99.2
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. IF YOU ARE
IN ANY DOUBT ABOUT THE ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK
YOUR OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR,
ACCOUNTANT OR OTHER INDEPENDENT FINANCIAL ADVISER.
THIS DOCUMENT SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO CANADA,
AUSTRALIA OR JAPAN.
J. Henry Schroder & Co. Limited is acting for Telewest and no one else in
connection with the Offer and will not be responsible to anyone other than
Telewest for providing the protections afforded to customers of J. Henry
Schroder & Co. Limited. J. Henry Schroder & Co. Limited is acting through
Schroder & Co., Inc. for the purposes of making the Offer in and into the
United States.
NOTICE OF GUARANTEED DELIVERY
TO ACCEPT OFFER FOR AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
GENERAL CABLE PLC
PURSUANT TO THE OFFER TO PURCHASE/PROSPECTUS
DATED JUNE 29, 1998
BY
J. HENRY SCHRODER & CO. LIMITED
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
As set forth in Section 22. "Procedure for acceptance of the Offer--(C)
Holders of General Cable ADSs--(i) Guaranteed Delivery Procedures" in the
letter from J. Henry Schroder & Co. Limited ("Schroders") in the Telewest
Communications plc Offer to Purchase/Prospectus, dated June 29, 1998 (the
"Offer to Purchase"), this form or one substantially equivalent hereto must be
used for acceptance of the Offer (as defined in the Offer to Purchase) in
respect of American Depositary Shares ("General Cable ADSs") of General Cable
PLC ("General Cable"), if American Depositary Receipts evidencing General
Cable ADSs ("General Cable ADRs") are not immediately available or the
procedures for book-entry transfer cannot be completed on a timely basis or if
time will not permit all required documents to reach the US Depositary (as
defined in the Offer to Purchase) prior to the expiration of the Initial Offer
Period or the Subsequent Offer Period (each as defined in the Offer to
Purchase), as the case may be. Such form may be delivered by hand or mailed to
the US Depositary and must include a guarantee by an Eligible Institution (as
defined in the Offer to Purchase) in the form set out herein. See Section 22.
"Procedure for acceptance of the Offer--(C) Holders of General Cable ADSs--(i)
Guaranteed Delivery Procedures" in the letter from Schroders in the Offer to
Purchase.
The US Depositary for the Offer is
THE BANK OF NEW YORK
By Mail: Facsimile Transmission: By Hand or Overnight
Courier:
Tender & Exchange (for Eligible Institutions Only) Tender & Exchange
Department (212) 815-6213 Department
101 Barclay Street
P.O. Box 11248 Receive and Deliver
Church Street Station For Information Telephone: Window
New York, New York 10286- (800) 507-9357 New York, New York 10286
1248
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY TO THE US DEPOSITARY.
This form is not to be used to guarantee signatures. If a signature or a
Letter of Transmittal is required to be guaranteed by an Eligible Institution
under the instructions thereto, such signature guarantee must appear in the
applicable space provided in the signature box on the Letter of Transmittal.
ACCEPTANCE OF THE OFFER IN RESPECT OF GENERAL CABLE SHARES (EXCEPT INSOFAR
AS THEY ARE REPRESENTED BY GENERAL CABLE ADSs) MAY NOT BE MADE WITH THIS FORM.
<PAGE>
Ladies and Gentlemen:
The undersigned accepts the Offer in respect of General Cable ADSs upon the
terms and subject to the conditions set forth below pursuant to the guaranteed
delivery procedure set out in Section 22. "Procedure for acceptance of The
Offer--(C) Holders of General Cable ADSs--(i) Guaranteed Delivery Procedures"
in the letter from Schroders in the Offer to Purchase.
THE UNDERSIGNED UNDERSTANDS THAT THE ACCEPTANCE OF THE OFFER IN RESPECT OF
GENERAL CABLE ADSs PURSUANT TO THE GUARANTEED DELIVERY PROCEDURES WILL NOT BE
TREATED AS A VALID ACCEPTANCE FOR THE PURPOSE OF SATISFYING THE ACCEPTANCE
CONDITION. SEE SECTION 22. "PROCEDURE FOR ACCEPTANCE OF THE OFFER--(C) HOLDERS
OF GENERAL CABLE ADSs--(i) GUARANTEED DELIVERY PROCEDURES" IN THE LETTER FROM
SCHRODERS IN THE OFFER TO PURCHASE. TO BE COUNTED TOWARDS SATISFACTION OF THE
ACCEPTANCE CONDITION, THE GENERAL CABLE ADRs EVIDENCING SUCH GENERAL CABLE
ADSs MUST, PRIOR TO THE FIRST CLOSING DATE, BE RECEIVED BY THE US DEPOSITARY
OR, IF APPLICABLE, TIMELY CONFIRMATION OF A BOOK-ENTRY TRANSFER OF SUCH
GENERAL CABLE ADSs INTO THE US DEPOSITARY'S ACCOUNT AT THE DEPOSITARY TRUST
COMPANY PURSUANT TO THE PROCEDURES SET OUT IN SECTION 22. "PROCEDURE FOR
ACCEPTANCE OF THE OFFER--(C) HOLDERS OF GENERAL CABLE ADSs--(d) BOOK-ENTRY
TRANSFER" IN THE LETTER FROM SCHRODERS IN THE OFFER TO PURCHASE MUST BE
RECEIVED BY THE US DEPOSITARY, TOGETHER WITH A DULY EXECUTED LETTER OF
TRANSMITTAL OR FACSIMILE THEREOF WITH ANY REQUIRED SIGNATURE GUARANTEES (OR,
IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE), AND ANY OTHER
REQUIRED DOCUMENTS.
Signature(s): Address(es):
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
(Include Zip Code)
Name of Record Holder(s): Area Code(s) and Telephone No(s).:
- ------------------------------------- -------------------------------------
- ------------------------------------- -------------------------------------
(Please Type or Print)
Number of General Cable ADSs:
If General Cable ADSs will be
tendered by book- entry transfer at
The Depositary Trust Company,
provide the following:
- -------------------------------------
General Cable ADR No.(s) (if available): Account Number:
- ------------------------------------- -------------------------------------
Dated: _____________________________
<PAGE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned participant in the Securities Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Program or the Stock
Exchange Medallion Program, hereby guarantees that the undersigned will
deliver to the US Depositary either the General Cable ADRs representing
the General Cable ADSs with respect to which the Offer is being accepted
hereby in proper form for transfer, or confirmation of the book-entry
transfer of such General Cable ADSs into the US Depositary's account at
The Depositary Trust Company, in any such case together with a properly
completed and duly executed Letter of Transmittal (or manually signed
facsimile thereof), with any required signature guarantees (or, in the
case of a book-entry transfer, an Agent's Message), and any other required
documents, all within three Nasdaq trading days after the date hereof.
----------------------------------- -----------------------------------
Name of Firm, Agent or Trustee (Authorized Signature)
Name:
----------------------------------- ------------------------------
Address (Please Type or Print)
Title:
----------------------------------- -----------------------------
(Zip Code)
Date:
----------------------------------- ------------------------------
Area Code and Telephone No.
NOTE: DO NOT SEND GENERAL CABLE ADRS WITH THIS FORM; GENERAL CABLE ADRS SHOULD
BE SENT WITH YOUR LETTER OF TRANSMITTAL
3
<PAGE>
THIS DOCUMENT SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO
CANADA, AUSTRALIA OR JAPAN.
J. Henry Schroder & Co. Limited is acting for Telewest and no one else in
connection with the Offer and will not be responsible to anyone other than
Telewest for providing the protections afforded to customers of J. Henry
Schroder & Co. Limited. J. Henry Schroder & Co. Limited is acting through
Schroder & Co., Inc. for the purposes of making the Offer in and into the
United States.
OFFER TO PURCHASE
ALL ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
GENERAL CABLE PLC
BY
J. HENRY SCHRODER & CO. LIMITED
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
- --------------------------------------------------------------------------------
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 P.M.
(LONDON TIME), 10:00 A.M. (NEW YORK CITY TIME), ON AUGUST 13, 1998, UNLESS
EXTENDED. AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY
EXTENSION THEREOF, IF ALL CONDITIONS OF THE OFFER HAVE BEEN SATISFIED,
FULFILLED, OR, WHERE PERMITTED, WAIVED, THE OFFER WILL BE EXTENDED FOR A
SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS. HOLDERS OF GENERAL
CABLE SECURITIES WILL HAVE WITHDRAWAL RIGHTS DURING THE INITIAL OFFER
PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT
OFFER PERIOD, EXCEPT IN CERTAIN LIMITED CIRCUMSTANCES.
- --------------------------------------------------------------------------------
June 29, 1998
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
J. Henry Schroder & Co. Limited ("Schroders") has been appointed by Telewest
Communications plc ("Telewest") to make an offer, on behalf of Telewest, to
purchase, upon the terms and subject to the conditions set forth in the
Telewest Offer to Purchase/Prospectus, dated June 29, 1998 (the "Offer to
Purchase") and the related Form of Acceptance or Letter of Transmittal, as
applicable (collectively, the "Offer"), all outstanding ordinary shares of
(Pounds)1 each ("General Cable shares") of General Cable PLC ("General Cable")
for 1.243 new Telewest shares and 65 pence in cash per General Cable share and
all outstanding American Depositary Shares ("General Cable ADSs") of General
Cable, each representing five General Cable shares and evidenced by American
Depositary Receipts ("General Cable ADRs"), for 6.215 new Telewest shares (in
the form of new Telewest American Depositary Shares) and 325 pence in cash per
General Cable ADS.
For your information and for forwarding to those of your clients for whom
you hold General Cable ADSs registered in your name or in the name of your
nominee, we are enclosing the following documents:
1. The Offer to Purchase;
2. A printed form of letter that may be sent to your clients for whose
account you hold General Cable ADSs registered in your name or in
the name of a nominee, with space provided for obtaining such
clients' instructions with regard to the Offer;
3. The Letter of Transmittal to be used by holders of General Cable
ADSs to accept the Offer;
4. A Notice of Guaranteed Delivery;
<PAGE>
5. Guidelines for Certification of Taxpayer Identification Number or
Substitute Form W-9; and
6. The return envelope addressed to the US Depositary.
THE OFFER MAY NOT BE ACCEPTED IN RESPECT OF GENERAL CABLE SHARES BY MEANS OF
A LETTER OF TRANSMITTAL. A FORM OF ACCEPTANCE FOR ACCEPTING THE OFFER IN
RESPECT OF GENERAL CABLE SHARES MAY BE OBTAINED FROM THE US DEPOSITARY OR THE
RECEIVING AGENT (AS EACH SUCH TERM IS DEFINED IN THE OFFER TO PURCHASE).
In all cases, payment for General Cable ADSs purchased pursuant to the Offer
will be made only after timely receipt by the US Depositary of General Cable
ADRs evidencing such General Cable ADSs or a confirmation of book-entry
transfer, together with a properly completed and duly executed Letter of
Transmittal (or a facsimile copy thereof) (or, in the case of a book-entry
transfer, an Agent's Message), and any other documents required by the Letter
of Transmittal.
Telewest does not intend to pay any fees or commissions to any broker,
dealer, or other person (other than Schroders, the US Depositary, the
Information Agent for the Offer and the Receiving Agent as described in the
Offer to Purchase) in connection with the solicitation of acceptances of the
Offer with respect to General Cable ADSs evidenced by General Cable ADRs. You
will, however, be reimbursed for customary mailing and handling expenses
incurred by you in forwarding the enclosed materials to your clients.
Additional copies of the enclosed materials may be obtained from the US
Depositary at its address and telephone number set forth in the Offer to
Purchase.
Terms defined in the Offer to Purchase and not otherwise defined herein
shall have the same meanings in this letter.
Very truly yours,
J. Henry Schroder & Co. Limited
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF SCHRODERS, TELEWEST, THE US DEPOSITARY, OR
THE RECEIVING AGENT OR AUTHORIZE YOU OR ANY OTHER PERSON TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATION ON BEHALF OF ANY OF THEM WITH RESPECT
TO THE OFFER NOT CONTAINED IN THE OFFER TO PURCHASE OR THE LETTER OF
TRANSMITTAL.
2
<PAGE>
THIS DOCUMENT SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO
CANADA, AUSTRALIA OR JAPAN.
J. Henry Schroder & Co. Limited is acting for Telewest and no one else in
connection with the Offer and will not be responsible to anyone other than
Telewest for providing the protections afforded to customers of J. Henry
Schroder & Co. Limited. J. Henry Schroder & Co. Limited is acting through
Schroder & Co., Inc. for the purposes of making the Offer in and into the
United States.
OFFER TO PURCHASE
ALL ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
GENERAL CABLE PLC
BY
J. HENRY SCHRODER & CO. LIMITED
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 3:00 P.M.
(LONDON TIME), 10:00 A.M. (NEW YORK CITY TIME), ON AUGUST 13, 1998) UNLESS
EXTENDED. AT THE CONCLUSION OF THE INITIAL OFFER PERIOD, INCLUDING ANY
EXTENSION THEREOF, IF ALL CONDITIONS OF THE OFFER HAVE BEEN SATISFIED,
FULFILLED, OR, WHERE PERMITTED, WAIVED, THE OFFER WILL BE EXTENDED FOR A
SUBSEQUENT OFFER PERIOD OF AT LEAST 14 CALENDAR DAYS. HOLDERS OF GENERAL
CABLE SECURITIES WILL HAVE WITHDRAWAL RIGHTS DURING THE INITIAL OFFER
PERIOD, INCLUDING ANY EXTENSION THEREOF, BUT NOT DURING THE SUBSEQUENT
OFFER PERIOD, EXCEPT IN CERTAIN LIMITED CIRCUMSTANCES.
To Our Clients: June 29, 1998
Enclosed for your consideration is the Offer to Purchase/Prospectus, dated
June 29, 1998 (the "Offer to Purchase"), the Letter of Transmittal and a
Notice of Guaranteed Delivery relating to an offer by J. Henry Schroder & Co.
Limited on behalf of Telewest Communications plc ("Telewest"), to purchase
upon the terms and subject to the conditions set forth in the Offer to
Purchase and the related Form of Acceptance or Letter of Transmittal, as
applicable (collectively, the "Offer"), all outstanding ordinary shares of
(Pounds)1 each ("General Cable shares") of General Cable PLC ("General
Cable"), for 1.243 new Telewest shares and 65 pence in cash per General Cable
share and all outstanding American Depositary Shares ("General Cable ADSs") of
General Cable, each representing five General Cable shares and evidenced by
American Depositary Receipts ("General Cable ADRs"), for 6.215 new Telewest
shares (in the form of new Telewest American Depositary Shares) and 325 pence
in cash per General Cable ADS.
We are the holder of record of General Cable ADSs evidenced by General Cable
ADRs held by us for your account. An acceptance of the Offer in respect of
such General Cable ADSs can be made only by us as the holder of record and
pursuant to your instructions. Accordingly, we request instructions as to
whether you wish to have us accept the Offer on your behalf in respect of any
or all General Cable ADSs held by us for your account pursuant to the terms
and subject to the conditions set forth in the Offer.
Your attention is invited to the following:
1. The Offer is being made for all General Cable shares and General Cable
ADSs evidenced by General Cable ADRs.
2. The Offer is on the terms and subject to the Conditions set forth in
the Offer to Purchase.
1
<PAGE>
3. The Initial Offer Period of the Offer will expire at 3:00 p.m. (London
time), 10:00 a.m. (New York City time), on August 13, 1998, unless extended
(in accordance with the terms thereof).
4. At the conclusion of the Initial Offer Period, including any extension
thereof, if all Conditions of the Offer have been satisfied, fulfilled or,
where permitted, waived, the Offer will be extended for a Subsequent Offer
Period of at least 14 calendar days.
5. General Cable ADS holders will not be obligated to pay brokerage fees
or commissions or, except as otherwise provided in Instruction 6 of the
Letter of Transmittal, stock transfer taxes applicable to a sale of General
Cable ADSs evidenced by General Cable ADRs to Telewest.
If you wish to have us accept the Offer in respect of any or all of the
General Cable ADSs evidenced by General Cable ADRs held by us for your
account, please so instruct us by completing, executing and returning to us
the instruction form contained in this letter. If you authorize us to accept
the Offer in respect of your General Cable ADSs evidenced by General Cable
ADRs, the Offer will be accepted in respect of all such General Cable ADSs,
unless otherwise indicated in such instruction form.
If you wish to have us make a Mix and Match Election (see Section 4. "The
Mix and Match Election" in the letter from Schroders in the Offer to Purchase
and the Letter of Transmittal) or request Special Exchange Instructions (see
Section 22. "Procedure for acceptance of the Offer--(C) Holders of General
Cable ADSs--(e) Alternative consideration" in the letter from Schroders in the
Offer to Purchase and the Letter of Transmittal) on your behalf, please so
instruct us by checking the appropriate box and completing the requested
information below.
Please forward your instruction form to us in ample time to permit us to
accept the Offer on your behalf prior to the expiration of the Offer. The
specimen Letter of Transmittal is furnished to you for your information only
and cannot be used by you to accept the Offer in respect of General Cable ADSs
evidenced by General Cable ADRs held by us for your account.
Terms defined in the Offer to Purchase and not otherwise defined herein
shall have the same meanings in this letter.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER FOR ALL
GENERAL CABLE SHARES AND GENERAL CABLE ADSS EVIDENCED
BY GENERAL CABLE ADRS
The undersigned acknowledge(s) receipt of your letter and the Offer to
Purchase, dated June 29, 1998 (the "Offer to Purchase"), and the related
Letter of Transmittal relating to an offer by J. Henry Schroder & Co. Limited
on behalf of Telewest Communications plc ("Telewest") to purchase, upon the
terms and subject to the conditions set forth in the Offer to Purchase and the
accompanying Letter of Transmittal (collectively, the "Offer"), all
outstanding ordinary shares of (Pounds)1 each ("General Cable shares") of
General Cable PLC ("General Cable") for 1.243 new Telewest shares and 65 pence
in cash per General Cable share and all outstanding American Depositary Shares
("General Cable ADSs") of General Cable, each representing five General Cable
shares and evidenced by American Depositary Receipts, for 6.215 new Telewest
shares (in the form of new Telewest American Depositary Shares) and 325 pence
in cash per General Cable ADS.
This will instruct you to accept the Offer in respect of the number of
General Cable ADSs indicated below, (or, if no number is indicated below, all
General Cable ADSs) held by you for the account of the undersigned, upon the
terms and subject to the conditions set forth in the Offer.
MIX AND MATCH ELECTION
[_]Check box if you wish to elect to vary the proportion in which you receive
new Telewest ADSs and cash receivable in the Offer in respect of your
holding of General Cable ADSs and complete the following item (a) OR (b),
as applicable:
(a) Insert in the space provided the number of General Cable ADSs in
respect of which you wish to receive new Telewest ADSs only:
_________________________________________ General Cable ADSs.
OR
(b) Insert in the space provided the number of General Cable ADSs for
which you wish to receive cash only: ___________ General Cable ADSs.
Note: The number of General Cable ADSs set forth in either item (a) or
item (b) above must not exceed the number of General Cable ADSs tendered
on your behalf. You may NOT make an election under both item (a) and
item (b). The foregoing election will be filled only to the extent that
other holders of General Cable securities make off-setting elections, as
explained in Section 4. "The Mix and Match Election" in the letter from
Schroders in the Offer to Purchase.
SPECIAL EXCHANGE INSTRUCTIONS
[_]Check box ONLY if you wish to receive all (but not part) of the
consideration payable in the Offer in the form of new Telewest shares and
pounds sterling, instead of new Telewest ADSs and dollars. (However, you
may NOT elect to receive new Telewest shares and dollars or new Telewest
ADSs and pounds sterling.) If you do not check this box you will receive
new Telewest ADSs and a cash payment by a check in US dollars. The US
Depositary will arrange for the conversion of the pound sterling amounts
payable to you to US dollars at the exchange rate obtained by the US
Depositary on or about the date the cash consideration is made available by
Telewest to the US Depositary for delivery to holders of the General Cable
ADSs. NOTE: If you make a Mix and Match Election to receive only new
Telewest ADSs in respect of your General Cable ADSs AND you check the box
for Special Exchange Instructions, you will be electing to receive new
Telewest shares in respect of such General Cable ADSs.
Dated: _____________, 1998
Number of General Cable ADSs to
be tendered/1/:
__________________________________
Signature(s):
--------------------------------
(Please print name(s))
Address(es):
________________________________
________________________________
________________________________
Area Code and Telephone No.
________________________________
Employer Identification or
Social Security No.
- -------
/1/ Unless otherwise indicated, it will be assumed that the Offer is to be
accepted in respect of all General Cable ADSs held by us for your account.
<PAGE>
EXHIBIT 99.5
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER.-- Social Security Numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
- --------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner
(joint account) of the account
or, if combined
funds, any one
of the
individuals(1)
3. Husband and wife (joint The actual owner
account) of the account
or, if joint
funds, either
person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if
account) the minor is the
only
contributor, the
minor(1)
6. Account in the name of The ward, minor,
guardian or committee or incompetent
for a designated ward, person(3)
minor, or incompetent
person
7.a The usual revocable The grantor-
savings trust account trustee(1)
(grantor is also
trustee)
b So-called trust account The actual
that is not a legal or owner(1)
valid trust under State
law
8. Sole proprietorship The owner(4)
account
- --------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------------
<S> <C>
9. A valid trust, estate, The legal entity
or pension trust (Do not furnish
the identifying
number of the
personal
representative
or trustee
unless the legal
entity itself is
not designated
in the account
title.)(5)
10. Corporate account The corporation
11. Religious, charitable, The organization
or educational
organization account
12. Partnership account The partnership
held in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or
nominee nominee
15. Account with the The public
Department of entity
Agriculture in the name
of a public entity
(such as a State or
local government,
school district, or
prison) that receives
agricultural program
payments
- --------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) You must show your individual name, but you may also enter your business or
"doing business" name. You may use either your Social Security Number or
Employer Identification Number.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will
be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local office
of the Social Security Administration or the Internal Revenue Service (the
"IRS") and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include
the following:
. A corporation.
. A financial institution.
. An organization exempt from tax under section 501(a), or an individual
retirement plan or a custodial account under Section 403(b)(7).
. The United States or any agency or instrumentality thereof.
. A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
. A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
. An international organization or any agency or instrumentality thereof.
. A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
. A real estate investment trust.
. A common trust fund operated by a bank under section 584(a).
. An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
. An entity registered at all times under the Investment Company Act of
1940.
. A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
. Payments of patronage dividends where the amount received is not paid in
money.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
. Payments described in section 6049(b)(5) to non-resident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, CHECK "EXEMPT" IN PART II OF THE FORM, SIGN AND DATE
THE FORM AND RETURN IT TO THE PAYER.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer.
Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
under-payment attributable to that failure unless there is clear and
convincing evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE
INTERNAL REVENUE SERVICE.
<PAGE>
EXHIBIT 99.6
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. WHEN
CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK YOUR OWN
PERSONAL FINANCIAL ADVICE FROM YOUR STOCKBROKER, SOLICITOR, ACCOUNTANT OR
OTHER INDEPENDENT FINANCIAL ADVISER DULY AUTHORISED UNDER THE FINANCIAL
SERVICES ACT 1986 IMMEDIATELY.
Schroders, which is regulated by The Securities and Futures Authority Limited,
is acting exclusively for Telewest in connection with the Offer, Schroders is
not acting for, and will not be responsible to, anyone other than Telewest for
providing the protections afforded to customers of Schroders or for giving
advice in relation to the Offer.
This document should be read in conjunction with the accompanying offer
document dated 29 June 1998 (the "Offer Document") and with the accompanying
disclosure document dated 29 June 1998 ("the Disclosure Document") relating to
Telewest, which has been prepared in accordance with the Listing Rules made
under section 142 of the Financial Services Act 1986 and a copy of which has
been delivered to the Registrar of Companies in England and Wales for
registration in accordance with Section 149 of that Act.
If you have sold or transferred all your General Cable shares, please send
this document and the accompanying Disclosure Document, Offer Document and
reply-paid envelope to the purchaser or transferee or to the stockbroker, bank
or other agent through whom the sale or transfer was effected, for commission
to the purchaser or transferee. However, such documents should not be
forwarded or transmitted in or into Canada, Australia or Japan.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before completing this Form.
Application has been made to the London Stock Exchange for the new Telewest
shares to be issued pursuant to the Offer to be admitted to the Official List.
- -------------------------------------------------------------------------------
FORM OF ACCEPTANCE, AUTHORITY AND ELECTION
RECOMMENDED OFFER
BY
SCHRODERS
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
FOR
GENERAL CABLE PLC
- -------------------------------------------------------------------------------
UNLESS THE CONTEXT OTHERWISE REQUIRES, THE DEFINITIONS CONTAINED IN THE OFFER
DOCUMENT ALSO APPLY IN THIS FORM.
ACTION TO BE TAKEN
. To accept the Offer in its basic form and/or to make an election under the
Mix and Match Election facility complete this Form on page 3 by following
the instructions and notes for guidance set out on pages 2 and 4.
. Return this Form, duly completed and signed and accompanied (if your General
Cable shares are in certificated form) by your certificate(s) and/or other
document(s) of title, by post or by hand, to Lloyds Bank Registrars. The
Causeway, Worthing, West Sussex BN99 6DA or, by hand only, to Lloyds Bank
Registrars, Antholin House, 71 Queen Street, London EC4, as soon as
possible, but in any event so as to arrive no later than 3.00 pm (London
time), 10.00 am (New York City time), on 13 August 1998. A first class
reply-paid envelope (for use within the UK only) is enclosed for documents
lodged by post.
. If your General Cable shares are in uncertificated form (that is, in CREST),
you should return this Form and take the action set out in paragraph 22 of
the letter from Schroders contained in the Offer Document to transfer your
General Cable Shares to an escrow balance. For this purpose, the participant
ID of the escrow agent is 2RA69, the member account ID is RA589401 and the
Form of Acceptance reference number of this Form (for insertion in the first
eight characters of the share note field on the TTE instruction) is shown
below. You should ensure that the transfer to escrow settles not later than
3.00 pm (London time), 10.00 am (New York City time), on 13 August 1998. If
you are a CREST sponsored member, you should refer to your CREST sponsor
before completing this Form.
. If you hold General Cable shares in both certificated and uncertificated
form, you should complete a separate Form of Acceptance for each holding.
Similarly, you should complete a separate Form for General Cable shares held
in uncertificated form but under a different member account ID, and for
General Cable shares held in certificated form but under a different
designation. You can obtain further Forms of Acceptance by contacting Lloyds
Bank Registrars (Telephone number: 01903 702767).
. If your General Cable shares are in certificated form and your share
certificate(s) and/or other document(s) of title are with your bank,
stockbroker or other agent, you should complete and sign this Form and
arrange for it to be lodged by such agent with the relevant document(s).
. PLEASE READ PARTS B AND C OF APPENDIX I TO THE OFFER DOCUMENT, THE TERMS OF
WHICH ARE INCORPORATED IN AND FORM PART OF THIS FORM.
. If you hold General Cable shares jointly with others, you must arrange for
all your co-holders to sign this Form.
. A Form of Acceptance contained in an envelope postmarked in Canada,
Australia or Japan or otherwise appearing to Telewest or its agents to have
been sent from Canada, Australia or Japan will not constitute a valid
acceptance of the Offer.
IF YOU ARE IN ANY DOUBT AS TO HOW TO FILL IN THIS FORM, PLEASE CONTACT LLOYDS
BANK REGISTRARS (TELEPHONE: 01903 702767).
The Form of Acceptance reference number for this Form is
<PAGE>
Page 2
HOW TO COMPLETE THIS FORM
The provisions of Parts B and C of Appendix I to the Offer Document are
incorporated into and form part of this Form.
- -------------------------------------------------------------------------------
[1] THE OFFER Complete here [_]
To accept the Offer, and/or Box [6]. If [3], you will be
insert in Box [1] you do not wish to deemed to have
the total number of make an election accepted the Offer in
General Cable shares under the Mix and respect of your
for which you wish to Match Facility you entire holding of
accept the Offer, should not complete General Cable shares
whether or not you Box [2] (in which (being your entire
wish to make an case you will receive holdings under the
election under the the Basic Terms). name(s) and
Mix and Match If no number, or a address(es) specified
Election facility. number greater than in Box [4] or, if
You must also sign your entire holding your General Cable
Box [3] in of General Cable shares are in CREST,
accordance with the shares, is inserted under the participant
instructions set out in Box [1] and you ID and member account
herein and complete have signed Box ID specified in
Box [4] and, if Box [6]).
appropriate, Box [5]
- -------------------------------------------------------------------------------
[2] THE MIX AND MATCH ELECTION Complete here [_]
To elect to vary the You must also If the number in
proportion in which complete Boxes [1] Boxes [2A] or [2B]
you receive new and [4] and sign Box does exceed the number
Telewest shares and [3] in accordance inserted or deemed to
cash in respect of with the instructions be inserted in Box
your holding of set out herein. [1] you will be
General Cable shares. The number in Box [2A] deemed to have made
(a) you should insert or the number in Box an election in
in Box [2A] the l2B must not exceed respect of your
number of General the number inserted entire holding of
Cable shares in or deemed to be General Cable shares
respect of which inserted in Box [1]. (as set out in Box
you wish to [1] above) to
receive new receive new Telewest
Telewest shares shares or cash as
only: appropriate.
OR
(b) you should insert
in Box [2B] the
number of General
Cable shares in
respect of which
you wish to
receive cash
only.
- -------------------------------------------------------------------------------
[3] SIGNATURES Sign here [_]
You must sign Box General Cable page 4 of this Form.
[3] regardless of shareholders (if any) In the case of a
which other Box(es) or otherwise have any holder which is a
you complete. financial interest in corporate body, this
Each holder who is an the General Cable Form must be executed
individual should shares or in the under seal, the seal
execute this Form of proceeds resulting being affixed and
Acceptance by from the execution of witnessed in
completing and this Form. The same accordance with its
signing Box [3] in person may witness Articles of
the presence of an each signature of Association or other
independent witness joint holder(s). regulations, or
who should also sign If this Form is not alternatively signed
where indicated and signed by the as a deed by a
add his or her name registered General director and the
and address. Cable shareholder(s), secretary or two
IN THE CASE OF JOINT insert the name(s) directors in
REGISTERED GENERAL and capacity (e.g. accordance with the
CABLE SHAREHOLDERS executor) of the provisions of section
ALL MUST SIGN. person(s) signing 36A or 36B of the
The witness must be this Form of Companies Act 1985.
over 18 years of age Acceptance. You This Form shall take
and should not be one should also deliver effect as a deed
of the joint evidence of your executed by you and
registered authority in by any joint holders.
accordance with the
notes on
- -------------------------------------------------------------------------------
[4] NAMES AND ADDRESS(ES) Complete here [_]
Complete Box [4] you any outside Canada,
with the full name consideration. If the Australia and Japan
and address of the address of the first is provided until
sole or first named named holder in Box such an address is
holder together with [4] is in Canada, provided.
the names of ALL Australia or Japan
other registered you must provide in
holders in BLOCK Box [5] an alternative
CAPITALS. address outside Canada,
Unless you complete Australia and Japan for
Box [5], the address the despatch of
of the first named consideration. No
holder inserted in consideration will be
Box [4] is the despatched in the event
address which will be that no address
used when sending
- -------------------------------------------------------------------------------
[5] ALTERNATIVE ADDRESS Complete here [_]
If you want the an address in Canada, holders with
consideration and/or Australia or Japan, registered addresses
other document(s) to you should complete in Canada, Australia
be sent to someone Box [5]. or Japan and by
other than the first- Box [5] must be holders who have
registered holder completed (but not completed Box [4]
(e.g. your bank with an address with an address in
manager or stockholder), in Canada, Australia Canada, Australia or
but not or Japan) by Japan.
to
- -------------------------------------------------------------------------------
[6] PARTICIPANT ID AND MEMBER ID Complete here [_]
If your General Cable of) the General Cable number of this Form
shares are in CREST, shares concerned to and the other
you must insert in an escrow balance, information referred
Box [6] the specifying in the TTE to in paragraph 22 of
participant ID and instruction the the letter from
the member account ID participant ID and Schroders set out in
under which such member account ID the Offer Document.
General Cable shares inserted in Box [6]. The Form of
are held by you in You must also specify Acceptance reference
CREST. the Form of number appears at the
You must also Acceptance reference foot of page 1 of
transfer (or procure this Form.
transfer
- -------------------------------------------------------------------------------
[7] OVERSEAS PERSONS Complete here [_]
If you are unable to MUST PUT "YES" in Box
give the warranties [7].
required by paragraph If you do not put
(6) of Part C of "YES" in Box [7] you
Appendix I to the will be deemed to
Offer Document YOU have given such
warranties.
- -------------------------------------------------------------------------------
<PAGE>
Page 3
PLEASE COMPLETE AS EXPLAINED ON PAGES 2 AND 4 IN BLOCK CAPITALS
The provisions of Parts B and C of Appendix I to the Offer Document are
incorporated into and form part of this Form.
- --------------------------------------------------------------------------------
[1] TO ACCEPT THE OFFER BOX [1]
------------------------
Complete Box [1] and Box [4] and sign Box [3]
No. of General Cable
shares for which you
are accepting the
Offer
------------------------
- --------------------------------------------------------------------------------
[2] TO MAKE AN ELECTION UNDER THE MIX AND BOX [2A]
MATCH ELECTION -----------------------------------
Complete Box [1], Box [2A] OR Box [2B]
and Box [5] and sign Box [3]
No. of General Cable shares for
which you wish to receive new
Telewest shares only (if
available)
-----------------------------------
DO NOT FILL IN BOTH BOX [2A] AND BOX [2B] BOX [2B]
-----------------------------------
No. of General Cable shares for
which you wish to receive cash
The number in Boxes [2A]or [2B] must not only (if available)
exceed the number in Box [1]. ------------------------------------
- --------------------------------------------------------------------------------
[3] SIGN HERE TO ACCEPT THE OFFER BOX [3]
----------------------------------------------------------------------------
Signed and delivered as a deed by: Witnessed by:
<TABLE>
<S> <C> <C>
1. _________________________________ 1 Name ________________ Address _________________
_______________________ Signature _______________
2. _________________________________ 2 Name ________________ Address _________________
_______________________ Signature _______________
3. _________________________________ 3 Name ________________ Address _________________
_______________________ Signature _______________
4. _________________________________ 4 Name ________________ Address _________________
_______________________ Signature _______________
</TABLE>
NOTE: THE SIGNATURE OF EACH REGISTERED HOLDER SHOULD BE WITNESSED
- --------------------------------------------------------------------------------
[4] FULL NAME(S) AND ADDRESS(ES) BOX [_]4
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
First named registered holder Joint registered holder(s)
<S> <C>
1 Forename(s) 2 Forename(s)
--------------------------------- -------------------------------
Surname Surname
--------------------------------------- ------------------------------------
(State Mr., Mrs., Miss or title) (State Mr., Mrs., Miss or title)
Address 3 Forename(s)
--------------------------------------- -------------------------------
Surname
---------------------------------------------- -------------------------------------
(State Mr., Mrs., Miss or title)
Postcode 4 Forename(s)
---------------------- ---------------- -------------------------------
Surname
-------------------------------------
(State Mr., Mrs., Miss or title)
- ------------------------------------------------------------------------------------------------
</TABLE>
------------------------------------
Please enter here a daytime telephone
number (including STD code) where you can
be contacted in the event of any query
arising from completion of this Form of
Acceptance.
------------------------------------
- --------------------------------------------------------------------------------
---------------------
[5] ADDRESS OUTSIDE CANADA, AUSTRALIA AND JAPAN TO For use by the
WHICH CONSIDERATION AND/OR OTHER DOCUMENT(S) IS/ARE Registrar/the
TO BE SENT IF NOT YOUR OWN London Stock
Exchange
BOX [5]
-----------------------------------------------------
Name
----------------------------------------------
Address
-------------------------------------------
Postcode
--------------------------- --------------- ---------------------
- --------------------------------------------------------------------------------
[6] PARTICIPANT ID AND MEMBER ACCOUNT ID BOX [6]
--------------------------
Complete this Box only if your General Cable Participant ID
shares are in CREST
--------------------------
Member Account ID
---------------------
--------------------------
- --------------------------------------------------------------------------------
[7] OVERSEAS PERSONS ONLY BOX [_7]
--------------------------
Please put "YES" in Box [_]7 only if you are
unable to give the representations and
warranties required by paragraph (b) of
Part C of Appendix I to the Offer Document.
---------------------------
- --------------------------------------------------------------------------------
<PAGE>
ADDITIONAL NOTES REGARDING THE COMPLETION OF THIS FORM
All signatures by individual shareholders or their attorneys must be
independently witnessed and each witness must complete his or her details and
sign his or her name in the place provided in Box [_]3 of this Form next to
the signature of the relevant General Cable shareholder (or his or her
attorney as the case may be). In the case of a joint holding, ALL the joint
holders must sign personally or under a power of attorney and each individual
signature must be independently witnessed. A company may either execute under
seal, the seal being affixed and witnessed in accordance with its Articles of
Association or other regulations or, if applicable, in accordance with section
36A or 36B of the Companies Act 1985.
In order to avoid inconvenience and delay, the following points may assist
you:
1. IF A HOLDER IS AWAY FROM HOME (E.G. ABROAD OR ON HOLIDAY):
Send this Form by the quickest means (e.g. air mail) to the holder (unless
he is in Canada, Australia or Japan) for execution or, if he has executed a
power of attorney, have this Form signed by the attorney. In the latter
case, the power of attorney (or a copy thereof duly certified in accordance
with the Powers of Attorney Act 1971) should be lodged with this Form for
noting. No other signatures are acceptable.
2. IF YOU HAVE SOLD ALL OF YOUR HOLDING OF GENERAL CABLE SHARES:
If you have sold all your holding of General Cable shares, you should at
once send this Form to the purchaser (unless he is in Canada, Australia or
Japan) or to the stockbroker, bank or other agent through whom you made the
sale for transmission to the purchaser.
3. IF THE SOLE HOLDER HAS DIED:
If grant of probate or letters of administration has/have been registered
with General Cable, this Form must be signed by the personal
representative(s) of the deceased holder, each in the presence of a
witness, and returned to Lloyds Bank Registrars at either of the addresses
given on page 1 of this Form.
If grant of probate or letters of administration has/have not been
registered with General Cable, the personal representative(s) or
prospective personal representative(s) should sign this Form and forward it
to Lloyds Bank Registrars, at either of the addresses given on page 1,
together with the share certificate(s) and/or other documents of title.
However, grant of probate or letters of administration must be lodged with
Lloyds Bank Registrars before the consideration due under the Offer can be
forwarded to the personal representative(s).
4. IF ONE OF THE JOINT HOLDERS HAS DIED:
This Form is valid if signed by the surviving holder(s) and lodged with
Lloyds Bank Registrars with the share certificate(s) and/or other
document(s) of title and death certificate, grant of probate or letters of
administration of the deceased holder.
5. IF YOUR GENERAL CABLE SHARES ARE IN CERTIFICATED FORM AND THE SHARE
CERTIFICATES ARE HELD BY YOUR STOCKBROKER, BANK OR OTHER AGENT:
Complete this Form and, if the share certificate(s) is/are readily
available, arrange for it/them to be lodged by your agent with Lloyds Bank
Registrars at either of the addresses given on page 1 of this Form,
accompanied by the share certificate(s) and/or other document(s) of title.
If the certificate(s) is/are not readily available, lodge this form with
Lloyds Bank Registrars at either of the addresses given on page 1 duly
completed together with a note saying e.g. "certificates to follow", and
arrange for the certificate(s) to be forwarded as soon as possible
thereafter. (It will be helpful for your agent to be informed of the full
terms of the Offer.)
6. IF YOUR GENERAL CABLE SHARES ARE IN CERTIFICATED FORM AND ANY SHARE
CERTIFICATE HAS BEEN LOST:
Complete and lodge this Form together with a letter of explanation and any
available certificate(s) with Lloyds Bank Registrars at either of the
addresses given on page 1. You should then write to the Registrar of
General Cable, Lloyds Bank Registrars, The Causeway, Worthing, West Sussex
BN99 6DA, for a letter of indemnity which should be completed in accordance
with the instructions given. When completed, the letter of indemnity must
be lodged with Lloyds Bank Registrars, at either of the addresses given on
page 1, in support of this Form.
7. IF YOUR GENERAL CABLE SHARES ARE IN CREST
You should take the action set out in the paragraph headed "Procedure for
acceptance of the Offer" in the letter from Schroders contained in the
Offer Document to transfer your General Cable shares to an escrow balance.
You are reminded to keep a record of the Form of Acceptance reference
number (which appears at the foot of page 1 of this Form of Acceptance) so
that such number can be inserted in the TTE instructions.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before completing this Form of Acceptance, as only your CREST sponsor will
be able to send the necessary TTE instructions to CRESTCo.
8. IF YOUR FULL NAME OR OTHER PARTICULARS DIFFER FROM THOSE APPEARING ON THE
CERTIFICATE:
(a) Incorrect name, eg:
Name on the certificate James Smith
Correct name James Smythe
complete this Form with the correct name and lodge it, accompanied by a
letter from your bank, stockbroker or solicitor confirming that the
person described on the certificate and the person who has signed this
Form are one and the same.
(b) Incorrect address:
write the correct address in Box [_]4 of this Form.
(c) Change of name:
lodge your marriage certificate or the deed poll with this Form for
noting.
9. IF YOU ARE NOT RESIDENT IN THE UNITED KINGDOM:
The attention of General Cable shareholders not resident in the United
Kingdom is drawn to paragraph 8 of Part B and paragraph (b) of Part C of
Appendix I to the Offer Document.
Without prejudice to paragraph 8 of Part B of Appendix I of the Offer
Document, Telewest reserves the right to treat as valid any acceptance of
the Offer (but not an election under the Mix and Match Election) which is
not entirely in order or which is not accompanied by the relevant transfer
to escrow or (as appropriate) the relevant share certificate(s) and/or other
documents(s) of title. In that event, no payment of cash or allotment of new
Telewest shares under the Offer will be made until after the relevant
transfer to escrow has been made or (as appropriate) the relevant share
certificate(s) and/or other document(s) of title or indemnities satisfactory
to Telewest have been received.
The invalidity of an election for the Mix and Match Election will not
affect the validity of an acceptance of the Offer.
Page 4
