<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 17, 1998
REGISTRATION NO. 333-50201
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
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
U S WEST, INC.
7800 EAST ORCHARD ROAD
ENGLEWOOD, CO 80111
(303) 793-6500
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:
JEFFREY J. WEINBERG, ESQ.
DAVID S. LEFKOWITZ, ESQ. MORTON A. PIERCE, 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
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<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>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
(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 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 365,092,338 General Cable shares issued and
outstanding and 5,670,981 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) .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.
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
<PAGE>
THIS REGISTRATION STATEMENT CONSISTS OF THE OFFER TO PURCHASE/PROSPECTUS,
DATED . JUNE, 1998 AND THE DISCLOSURE DOCUMENT, DATED . JUNE 1998, EACH
AS SET FORTH HEREIN.
The following note will be deleted prior to the effectiveness of the
registration statement of which this document forms a part and the mailing
of this document:
The information in this document, which is in draft form, is subject to
updating, completion, revision, further verification and amendment. This
draft document does not constitute or form part of any offer or invitation
to sell, or any solicitation of any offer to purchase, any securities of
General Cable or Telewest, nor shall it or any part of it form the basis of,
or be relied on in connection with, any contract therefor. In particular,
this draft document refers to certain events as having occurred which have
not occurred on the date it is filed with the US Securities and Exchange
Commission but are expected to occur prior to publication of the final offer
documents to be issued in connection with the merger. In addition, this
draft document contains the statements of fact, belief and opinion which are
currently intended to be made and to be true as at the date of publication
of the offer document but which may be different from the actual statements
of fact, belief and opinion contained in the final offer document.
No reliance may be placed for any purpose whatsoever on the information
contained in this document or on its completeness.
The announcement relating to the merger made by Telewest and General Cable
on 15 April 1998 set out certain pre-conditions to the posting of the offer
document. Satisfaction of these pre-conditions has not yet been announced.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+ +
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+US SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR +
+MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS DOCUMENT AND THE ACCOMPANYING DISCLOSURE DOCUMENT +
+SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY +
+NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH +
+OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR +
+QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED 17 JUNE 1998
OFFER TO PURCHASE/PROSPECTUS (FOR US LAW PURPOSES)
OFFER DOCUMENT
TELEWEST COMMUNICATIONS PLC
Proposed Merger of
Telewest Communications plc
and General Cable PLC
. June 1998
- - --------------------------------------------------------------------------------
THIS OFFER DOCUMENT RELATES TO THE OFFER BY J. HENRY SCHRODER & CO. LIMITED ON
BEHALF OF TELEWEST TO PURCHASE THE OUTSTANDING GENERAL CABLE SHARES FOR 1.243
NEW TELEWEST SHARES AND 65 PENCE IN CASH FOR EACH GENERAL CABLE SHARE AND THE
OUTSTANDING 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 and a copy of which 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, constitute 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 ENTIRETY, PARTICULARLY THE MATTERS REFERRED TO
UNDER "RISK FACTORS" BEGINNING ON PAGE I-111 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 . . 1998. THE
PROCEDURE FOR ACCEPTANCE OF THE OFFER IS SET OUT ON PAGES 20 TO 26 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), . . 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 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.
(iii)
<PAGE>
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
(save only for the Condition in relation to Admission) have been satisfied,
fulfilled or, where permitted, waived. Telewest expects that it 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.
RULE 10B-13 EXEMPTION
In accordance with normal UK practice, BT Alex. Brown International, who will
be acting as a market maker in General Cable shares, 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
(iv)
<PAGE>
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 to the Offer being made by Schroders should be read accordingly.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
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.
Copies of any documents incorporated by reference in this Offer Document or
the Disclosure Document and which are not presented herein or delivered
herewith, other than exhibits to such documents that are not specifically
incorporated herein or therein by reference, are available without charge,
upon written or oral request, to any person (including any beneficial owner of
Telewest or General Cable securities), to whom this Offer Document and the
Disclosure Document are delivered. Requests for such documents should be
directed to the Receiving Agent or the US Depositary at their respective
addresses or telephone numbers set out herein.
(v)
<PAGE>
CONTENTS
- - --------------------------------------------------------------------------------
<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. Birmingham Cable and Cable London..................................... 7
7. Further details of the Offer.......................................... 7
8. The new Telewest securities........................................... 9
9. Information on Telewest............................................... 9
10. Information on General Cable.......................................... 10
11. Background to the Offer............................................... 10
12. Reasons for the Offer................................................. 15
13. Recommendation of General Cable's Board of Directors.................. 15
14. Advice of General Cable's Financial Adviser........................... 15
15. Management and employees.............................................. 16
16. Regulation............................................................ 16
17. General Cable Share Schemes........................................... 16
18. Taxation.............................................................. 16
19. Accounting treatment.................................................. 15
20. Comparison of shareholder rights...................................... 15
21. Procedure for acceptance of the Offer................................. 20
22. Rights of withdrawal.................................................. 27
23. Settlement............................................................ 27
24. Further information................................................... 28
25. Action to be taken.................................................... 28
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-6
Part C: Form of Acceptance............................................ I-16
II Financial effects of acceptance....................................... II-1
III Additional 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 and, with respect to
holders of General Cable ADSs only, the Letter of
Transmittal 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 Corporation" The Cable Corporation Limited
"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
"Conditions"
the conditions of the Offer described in Part A
of Appendix I and "Condition" means any one of
them
(vii)
<PAGE>
"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 some time 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 . 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, the
Stock Exchange Medallion Program or the New York
Stock Exchange, Inc. Medallion Signature Program
"Escrow Agent" Lloyds Bank Registrars (in its capacity as a
CREST participant under ID 2RA69)
"Extraordinary General
Meeting" or "EGM" the extraordinary general meeting of Telewest to
be held on . 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 . . 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 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
(viii)
<PAGE>
"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 General Cable shares and General Cable ADSs
securities"
"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, when adopted
"General Cable holders of General Cable shares
shareholders"
"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
"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 merger of Telewest and General Cable to be
effected pursuant to the Offer
(ix)
<PAGE>
"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 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 new Telewest shares and new Telewest ADSs
securities"
"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 the General Cable
securities on the terms and subject to the
conditions set out in this document and the
Acceptance Form (including, where the context so
requires or permits, any subsequent revision,
variation, extension or renewal thereof)
"Offer Document" this document including the Appendices
"Offer to
Purchase/Prospectus" this document and the accompanying Disclosure
Document for US law purposes only
"Official List" The Official List of the London Stock Exchange
"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
(x)
<PAGE>
"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 10.00 pm (London
time) on . June 1998 and, in the case of
Telewest ADSs, 10.00 pm (New York City time) on
. June 1998
"Regulations" the Uncertificated Securities Regulations 1995
"Relationship Agreement" an amended and restated agreement, dated as of 15
April 1998, made between MediaOne International
Holdings, 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 the period following the expiry of the Initial
Period" Offer Period during which the Offer remains open
for acceptance
"TCHL" Telewest Communications Holdings Limited
"TCI" Tele-Communications 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
(xi)
<PAGE>
"Telewest ADS Register" the register of Telewest ADS holders maintained
by the Depositary
["Telewest Convertible holders of Telewest Convertible Preference
Preference shareholders" 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
the Telewest 1995 Restricted Share Scheme, the
"Telewest Share Schemes" 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)
"TINTA" Tele-Communications International, Inc.
"TINTA Affiliate" United Artists Programming--Europe, Inc.
"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
"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
"US Exchange Act"
the United States Securities Exchange Act of
1934, as amended, and the rules thereunder
"US person" a US person as defined in Regulation S under the
US Securities Act
(xii)
<PAGE>
"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]
. 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 assessment 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 28 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 . 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 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--Birmingham Cable and Cable London" of the
Disclosure Document.
THE OFFER
The Offer is being made on the following basis:
<TABLE>
<S> <C>
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
</TABLE>
Based on Telewest's closing share price of . pence on . June 1998 (the
latest practicable date prior to the publication of this document), the Offer
values each General Cable share at . pence, each General Cable ADS at $ .
(based on an exchange rate of (Pounds)1 = $ . , 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) . million.
This represents a premium of . % 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 . % 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 new Telewest shares and cash in pounds sterling
as set out above.
THE MIX AND MATCH ELECTION
Holders of General Cable securities who validly accept the Offer 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 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 offsetting 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 on page 6 of this document 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 once terms have been 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 18 of the letter from Schroders, headed
"Taxation" on pages 16 to 19 of this document. 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). To the extent that such
options are not exercised and in the event the Offer becomes or is declared
unconditional in all respects, appropriate proposals (which will include both
cash cancellation and roll-over alternatives) will be put to holders of
options under the General Cable Share Schemes.
GENERAL CABLE UNAUDITED RESULTS FOR THE THREE MONTHS ENDED 31 MARCH 1998
On 16 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.
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.
2
<PAGE>
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 Vivendi 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 as 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 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;
3
<PAGE>
(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, and the advice of BT Wolfensohn that BT Wolfensohn
considered the terms of the Offer to be 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 Financial Adviser to General Cable" in Appendix IV;
(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 Financial Adviser to General Cable" 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 19 TO 26 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 . . 1998.
Yours faithfully
Sir Anthony Cleaver
Chairman
4
<PAGE>
[LOGO OF SCHRODERS APPEARS HERE]
. 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 . . 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 21 OF THIS LETTER.
ACCEPTANCES SHOULD BE RECEIVED AS SOON AS POSSIBLE BUT IN ANY EVENT BY NOT
LATER THAN 3.00 PM (UK TIME), 10.00 AM (NEW YORK CITY TIME), ON . . 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:
<TABLE>
<S> <C>
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
</TABLE>
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
- - --------------------------------------------------------------------------------
J. HENRY SCHRODER & CO. LIMITED
120 Cheapside, London EC2V 6DS
Regulated by SFA 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 new Telewest shares and cash in
pounds sterling as set out above.
Based on Telewest's closing share price of 80 pence on 20 February 1998 (the
last dealing day in London prior to the announcement by General Cable that it
was in discussions which might lead to 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)610 million and values each
General Cable share at approximately 164 pence and each General Cable ADS at
approximately $13.45 (based on an exchange rate of (Pounds)1 = $1.6363 being
the Noon Buying Rate on 20 February 1998).
Based on Telewest's closing share price of . pence on . June 1998 (the
latest practicable date prior to the publication of this document), the Offer
values each General Cable share at . pence, each General Cable ADS at $ .
(based on an exchange rate of (Pounds)1 = $ . , 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) . million.
This represents a premium of . % 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 . % 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 may elect,
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 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 offsetting 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 SAVE
FOR ADMISSION. 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
THAT ARE ACQUIRED IN THE COMPULSORY ACQUISITION 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 .
pence per new Telewest share, being the closing share price of a Telewest
share on . June 1998 (the latest practicable day prior to publication of
this document). Similarly, holders of General Cable ADSs will receive cash
instead of new Telewest ADSs and vice versa at a rate of . pence per new
Telewest ADS, being such closing share price multiplied by ten. In respect of
such ADS holders, the Depositary will arrange for such amount to be translated
to US dollars at the exchange rate prevailing at or about the time of payment.
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
6
<PAGE>
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) extending the closing date of the Offer for a
period that is longer than the minimum period required by law, (ii) extending
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) waiving or varying any other Condition if the
Panel has consented to Telewest invoking the 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.
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 of record at the close of
business 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 30 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 a total amount
of approximately (Pounds)240 million (net of expenses). 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.
6. 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.
7. 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 . July 1998 for the purpose of
7
<PAGE>
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 . . 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 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 (save for the Condition in relation to Admission) 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 shares 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 [Day 60] 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 [Day 81] 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 23
("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 9 of Appendix III to this document ("The Compulsory
Acquisition").
8
<PAGE>
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.
8. 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 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. Application has been made
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 when dealings, for normal settlement, commence on the London Stock
Exchange in the new Telewest shares.
[However, since holders of General Cable securities who make Mix and Match
elections will not know the exact number of new Telewest securities which they
will receive until they receive settlement of consideration under the Offer,
such holders should consult the Receiving Agent at . before dealing before
that time.]
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
will not be paid but will be retained for the benefit of the Combined Group.
9. 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.
9
<PAGE>
10. 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.
11. BACKGROUND TO THE OFFER
During the past few years, the directors and officers of Telewest and
representatives of TCI, U S WEST, 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
SBCC (as described in the Disclosure Document) and in 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 except in relation to
General Cable's acquisition of Imminus (as described in "Part I--Section
Three--Information on General Cable" the Disclosure Document).
In January 1998, the Board of Birmingham Cable (consisting of representatives
of the corporate shareholders, the Telewest Group, General Cable and Comcast),
were considering a possible refinancing of Birmingham Cable, including
amendments to its bank facility and additional equity investments by the
corporate shareholders. In connection with these matters, representatives of
General Cable indicated to Telewest that General Cable wished either to
increase its operational control over Birmingham Cable or to reduce its
economic exposure in relation to Birmingham Cable.
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 pre-emptive right to acquire Comcast's
interests in both Birmingham Cable and Cable London upon the 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 commencing the
process provided in such arrangements by which the value of Comcast's interest
in Birmingham Cable is to be established.
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 . February 1998 to
discuss the proposal.
On . February 1998, Mr. Burdick and Mr. Miller (the 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 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.
10
<PAGE>
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 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 reiterated 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 the
Telewest and General Cable groups.
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 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 entered 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 (former 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
leadership 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.
11
<PAGE>
On 26 February 1998, Telewest wrote to NTL and Comcast indicating 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
non-executive Director of General Cable and a Director of Vivendi) to discuss
strategy, management and valuation for a combined group. Later that day Mr.
Stenham (Non-executive Deputy Chairman of Telewest) and a representative of
Schroders met with Sir Anthony Cleaver 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 U S WEST, TCI 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 its holding of approximately 40.2% in
General Cable and the position of General Cable's investment in Birmingham
Cable.
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
12
<PAGE>
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 at that time
valued each General Cable share at 180p. TCI, U S WEST 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 agree to 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 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 with the
increased element to be subscribed for by U S WEST 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 (a subsidiary of
Vivendi that holds Vivendi's shares in General Cable) 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
13
<PAGE>
set out in the agreement, its directors would, subject to their fiduciary
duties and responsibilities under the 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 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 the meeting, Schroders orally 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
Board regarding the terms of the proposed offer and advised the Board, after
taking into account the General Cable Directors' commercial assessments, that
as of 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 Board unanimously
resolved to approve the proposed offer and recommend it for acceptance by
General Cable shareholders.
On 15 April 1998, the Telewest Board met to consider the final terms of the
proposed offer. At the meeting, Mr. Davidson and Mr. Burdick, 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 TCI, U S WEST 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, the relevant parties
entered into 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).
On . June 1998, Telewest announced that the pre-conditions to the proposed
offer had been satisfied. On the same day, documentation relating to the Offer
was posted to holders of General Cable securities and documentation relating
to the Offer, the Pre-emptive Issue and the EGM was posted to holders of
Telewest securities.
14
<PAGE>
12. 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,
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. With a national network and local broadband access to
approximately 24% of all UK households, 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 data services, digital television and high-speed Internet
access using its broadband network;
. produce incremental revenue from delivering integrated services to
residential market segments across a larger subscriber base;
. 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; and
. accelerate the development of the Combined Group's business
telephony capabilities using General Cable's expertise in this
area and a wholesale telephony business.
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 depend on the continued
availability of the necessary funding. See "Part I--Section Two--Information
on the Combined Group--Working Capital" of the Disclosure Document.
13. 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.
14. ADVICE OF GENERAL CABLE'S FINANCIAL ADVISER
Please refer to Appendix IV for a summary of the financial advice received by
General Cable.
15. MANAGEMENT AND EMPLOYEES
Telewest intends that, following completion of the Merger, the Board of
Telewest should initially consist of 14 Directors comprising seven non-
executive Directors (designated by MediaOne, TINTA, Cox, SBC and Vivendi),
four executive Directors and three 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 once terms have
been agreed with the appropriate individual.
15
<PAGE>
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.
16. REGULATION
The Offer may give rise to a merger situation qualifying for investigation
within the meaning of the Fair Trading Act 1973. It is therefore conditional
on an announcement being made indicating, in terms satisfactory to Telewest,
that it is not the intention of the Secretary of State for Trade and Industry
to refer the Offer, or any matters arising therefrom or relating thereto, to
the Monopolies and Mergers Commission. In this connection, Telewest has made
submissions to the Director General of Fair Trading.
Approaches have also been made by Telewest to other relevant regulators
including OFTEL and the ITC. It is currently anticipated that all such
consents and confirmations will be received within the normal UK timetable for
an offer in the UK.
17. 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. To the extent that such options are not
exercised and in the event that the Offer becomes or is declared unconditional
in all respects, appropriate proposals (which will include both cash
cancellation and roll-over alternatives) will be put to holders of options
under the General Cable Share Schemes.
18. 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
16
<PAGE>
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.
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 or her disposal of General Cable securities pursuant to
the Offer or on any disposal or demand 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 General Cable securityholders 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 shares
or General Cable ADSs that accept the Offer. The discussion contained in this
Offer Document is based on the law in effect as of the date of this Offer
Document. 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
17
<PAGE>
of a "straddle", "hedge" or "conversion transaction" with other investments
and taxpayers whose functional currency is not the US dollar, (ii) General
Cable securityholders owning directly, indirectly or by attribution, 10% or
more of the General Cable securities or (iii) General Cable securityholders
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").
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 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
Telewest shareholders 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 Telewest shareholders converting the Telewest Convertible
Preference shares are treated as "transferors," in order for the Overall
Transaction to qualify as a Section 351 Transaction Telewest shareholders
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 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
18
<PAGE>
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, long-term capital gains
are eligible for reduced rates of taxation. The reduced rate applied to long-
term capital gains of individual US Holders depends upon whether the General
Cable securities were held for (i) more than one year but not more than
eighteen months or (ii) more than eighteen months. 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.
19. ACCOUNTING TREATMENT
The Offer will be accounted for by Telewest as an acquisition for financial
accounting purposes in accordance with both UK and US GAAP. Under acquisition
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 incorporated at their fair
value.
20. 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 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.
21. PROCEDURE FOR ACCEPTANCE OF THE OFFER
This section should be read together with the notes on the relevant
Acceptance Form.
19
<PAGE>
(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 in respect of their
General Cable shares. 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 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
21. 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 address 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 EC4N 1SL 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 . . 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.
20
<PAGE>
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 21 and Part C of Appendix I.
(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 . . 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 . . 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;
21
<PAGE>
. 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 . . 1998.
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 . . 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 10.00 p.m. (London time), 5.00 p.m. (New York
City time) on . . 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
22
<PAGE>
to Rule 10 are that any Acceptance Form must be completed to a suitable
standard (i.e., 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 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 securities
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 also 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 instructions printed on the relevant
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 forth 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 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
23
<PAGE>
and pounds instead by marking the box "Special Exchange Instructions" on the
Letter of Transmittal. General Cable ADS holders 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 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 address[es]
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:
Tender & Exchange Department
P.O. Box 11248
Church Street Station
New York, New York 10286-1248
By hand or overnight courier:
Tender & Exchange Department
101 Barclay Street
Receive and Deliver Window
New York, New York 10286
24
<PAGE>
(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.
25
<PAGE>
(ii) The Notice of Guaranteed Delivery may be delivered by hand or mailed
to the US Depositary and must include a signature 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 (800) 507-9357].
26
<PAGE>
22. RIGHTS OF WITHDRAWAL
With certain exceptions pursuant to an SEC exemptive order, 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 21
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.
23. SETTLEMENT
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 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.
27
<PAGE>
(C) GENERAL CABLE ADSS
Instead of new Telewest shares and pounds sterling, 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 to dollars at the exchange rate
obtainable 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
obtainable by the US Depositary on the business day on which funds 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 prevailing on or about the business day on
which funds are made available to the US Depositary by Telewest. 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
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.
24. 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.
25. 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 . AND .
RESPECTIVELY NO LATER THAN 3.00 PM (LONDON TIME), OR 10.00 AM (NEW YORK CITY
TIME) ON . . 1998.
Yours faithfully,
for and on behalf of J Henry Schroder & Co. Ltd
James Steel
Director
28
<PAGE>
- - -------------------------------------------------------------------------------
APPENDIX I
Conditions and Further Terms of the Offer
- - -------------------------------------------------------------------------------
Part A-CONDITIONS OF THE OFFER
The Offer is subject to the following conditions:
1. valid10 acceptances being received (and not, where permitted, withdrawn) by
3.00 pm (London time), 10.00 am31.1 (New York City time), on ~ ~ 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) shares10, (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. the24.9 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
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. it being indicated in terms satisfactory to Telewest that it is not the
intention of the Secretary of State for Trade and Industry to refer the
proposed acquisition of General Cable by Telewest, or any matters arising
therefrom, to the Monopolies and Mergers Commission;
7. 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;
8. no relevant authority having:
(a) withdrawn or refused to renew, or threatened to withdraw or to refuse to
renew, any licence or permission; or
I-1
<PAGE>
(b) instituted, implemented or taken, or threatened to take any other
action;
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;
9. 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-2
<PAGE>
(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,
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;
10. 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;
11. except as publicly announced (by the delivery of an announcement to the
Company Announcement 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
I-3
<PAGE>
(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 11 in any case where such result would be material in the
context of the General Cable Group taken as a whole;
12. 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;
I-4
<PAGE>
(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 12;
13. 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;
14. 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;
I-5
<PAGE>
(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 14
(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 satisfaction of condition 1 until
such time as conditions 2 to 14 inclusive have been satisfied, 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
satisfied 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 (if so capable
of waiver) or treat as satisfied any of the conditions 2 to 14 (inclusive)
by a date earlier than [Day 60] (or such later date to which the first
Closing Date may, with the consent of the Panel, be extended)
notwithstanding that the other conditions may at such earlier date have
been waived or satisfied and that there are at such earlier date no
circumstances indicating that any of the conditions may not be capable of
fulfilment. The First Closing Date cannot be extended beyond midnight
(London time), 7.00 pm (New York City time) on [D + 60] 1998, except with
the consent of the Panel.
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
I-6
<PAGE>
(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 will24.6 initially be open for acceptance until 3.00 pm (London
time), 10.00 am (New York City time)(31.1) on ~ ~ 1998. Although no
revision is envisaged, if the Offer is revised it will remain open for
acceptance for a period of at(32.1) least 14 days (or such other period as the
Panel may permit) from the date on which written notification of the
revisi(31.2) on 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 [Day
46].
(b) The Offer,24.6 whether revised or not, shall not (except with the Panel's
consent) be capable of becoming unconditional(31.6) after midnight on [Day 60]
(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(31.5) 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 (UK time), 8.00 am (New York City time) on [Day 60] (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 [Day 60], 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 (UK time),
8.00 am (New York City time) on [Day 60] may (except where the City Code
otherwise permits) only be taken into account with the Panel's agreement.
(c) If the Offer becomes24.6 unconditional, it will remain open for acceptance
for not less than 14 days from the date on(17.2(c)) which it would otherwise
have expired. If the Offer has become unconditional and it is stated by
or(31.4) 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(31.2) have
not accepted the Offer.
(d) If a competitive24.6 situation arises after Telewest has made a "no
extension" statement and/or a "no increase"(31.5) statement in relation to the
Offer, Telewest may, if it specifically reserved the right to do so at the time
such(32.2) 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 suchRule 31.5 withdrawal and that it is free to extend or revise the
Offer (as appropriate) as soon asNote 2 and possible (and in any event within
four Business Days of the firm announcement of the competingRule 32.2 offer or
other competitive situation) and holders of General Cable securities areNote 2
informed in writing at the earliest practicable opportunity or, in the case of
holders of 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 reservedRule 31.5 the right to do so, choose not to be
bound by a "no increase" or a "no extension" statement ifNote 3 it would
otherwise prevent the publication of an increased or improved offer (either as
to theRule 32.2 value or nature of the consideration offered or otherwise)
which is recommended for acceptance byNote 3 the Board of Directors of General
Cable or in other circumstances permitted by the Panel.
I-7
<PAGE>
(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 UK and 8.30 am (New York City time) in the US 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 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
I-8
<PAGE>
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] p.m. (London time), [10.30] a.m. (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 Bank of New York at one of the addresses shown on page . , 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(b) 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 1, 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 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
I-9
<PAGE>
procedures for book-entry transfer set out in paragraph 21(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 21 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 . p in cash for each new Telewest share being the closing share
price of a Telewest share on . June 1998 (the latest practicable time prior
to publication of this document) and, in respect of elections for new Telewest
ADSs on the basis of . p in cash for each new Telewest ADS, being such
closing price multiplied by ten. The US Depositary will arrange for such
amount to be translated to US dollars at the exchange rate prevailing at or
about the time of payment.
(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
I-10
<PAGE>
satisfied in new Telewest securities on the basis of one new Telewest share
for each . p in cash and one new Telewest ADS for . p 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
save for Admission. Holders of General Cable securities who accept after that
date and holders of General Cable securities that 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.
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 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.
I-11
<PAGE>
(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 opinion to be
or remain satisfied in each case by midnight (UK time) on [Day 60] or such
later date(s) as Telewest may, with the Panel's consent, decide. 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) The Offer will lapse if the acquisition of General Cable by Telewest is
referred to the Monopolies and Mergers Commission before 3.00 pm (London
time), 10.00 am (New York City time), on . . 1998 or the time and date
when the Offer becomes unconditional, whichever is the later. In such a case,
the second sentence of paragraph 7(a) of this Part B will apply.]
I-12
<PAGE>
(c) 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.
(d) The Offer is made [at time] on [Publication Date] 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.
(e) 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.
(f) (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(f)(iii) of this Part B) to have exclusive 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(f)(ii) of this Part B is included for the benefit of Telewest,
Schroders, the Receiving Agent and the US Depositary and accordingly,
notwithstanding the exclusive agreement, set out in paragraph (f)(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.
(g) 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
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.
(h) 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;
I-13
<PAGE>
(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.
(i) 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.
(j) 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.
(k) 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.
(l) 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.
(m) 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 securities 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.
(n) 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 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.
(o) 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.
(p) 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).
I-14
<PAGE>
(q) 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.
(r) 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 offering 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 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.
I-15
<PAGE>
(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 [_]5 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) 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 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,
I-16
<PAGE>
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 [Receiving 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 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 7 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
I-17
<PAGE>
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:
(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
I-18
<PAGE>
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 21 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 21 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;
(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;
I-19
<PAGE>
(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 an 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 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 Offer per General Cable share
- - --new Telewest shares (i) .
- - --cash 65
-----
- - --total value .
Market value of one General Cable share on 20 February 1998 (ii) 109
Increase in capital value .
-----
This represents an increase of .%
-----
<CAPTION>
NOTES $ (V)
<S> <C> <C>
INCREASE IN CAPITAL VALUE FOR AN ADS HOLDER
Value of Offer per General Cable ADS
- - --new Telewest shares (i) .
- - --cash .
-----
- - --total value .
Market value of one General Cable ADS on 19 February 1998 (iii) 8.875
Increase in capital value .
-----
This represents an increase of .%
-----
</TABLE>
Notes:
(i) Based on the middle market quotation of a Telewest share of . pence
as derived from the Official List on . June 1998, the latest
practicable dealing date prior to the publication of this document.
(ii) Based on the middle market quotation of a General Cable share of 109
pence as derived from Official List 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 = . as at . . 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 shall not be
deemed to establish or expand any liability under the securities laws of the
US and/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 directors24.2(c)
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
The24.2(b)(vi) 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 19 February 1998 (the last dealing day prior to the
commencement of the Offer Period) and for ~ 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 undertakings24.3(a)(iv) to accept the Offer have been received in
respect of 146,785,916 General Cable shares held by 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 of24.3(a)(ii) 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 ~ 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) In addition, [ ] had a non-beneficial interest in ~ Telewest
shares.]
(iv) As at ~ June 1998 (being the latest practicable date prior
to24.3(a)(iii) the publication of this document) the persons acting in concert
with Telewest, in addition to those referred to(iv) and (v) 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" on page I-86 [excluding any references to the holdings of Mercury
Asset Management Group Ltd, which is not acting in concert with Telewest].
[(iv) The Directors of Telewest24.3(c) have dealt for value in Telewest shares
during the disclosure period as follows:]
[(v) Persons acting in24.3(c) concert with Telewest, in addition to those
referred to in paragraph 5(a)(iv) above, have dealt for value in Telewest
shares during the disclosure period as follows:]
III-2
<PAGE>
(b) Shares in General Cable
(i) T24.3(a)(ii) he 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 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:
Director Beneficial Non-Beneficial
Sir Anthony Cleaver 50,520 -
P X Galteau 15,260 -
D J Miller - -
Ian Gray 25,000 -
M J C Villaneau - -
J C Banon 630 -
G A Tritt - -
Dr G G Gray 5,260 -
W A Rice 20,000 -
(ii) As at ~ 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>
P X 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 30/11/98 14/02/2000
14/08/96 18,404 163p 30/11/98 14/02/2000
D J 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 13/03/2004
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
14/3/97 81,425 196.5p 14/3/2000 14/3/2004
5/12/97 160,000 100p 05/12/2000 04/12/2004
M J C Villaneau 25/04/94 270,000 100p 25/04/94 18/04/2001
J C Banon - - - - -
C A Tritt - - - - -
Dr G G Gray - - - - -
W A Rice - - - - -
</TABLE>
(iii) As at ~ June 1998 (being24.3(a) the latest practicable date prior to
the publication of this document), the following(iii) (iv); persons acting in
concert with Telewest owned or controlled the followingand (v) 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
P X Galteau 12/09/97 Purchase 10,000 107p
D J Miller -- -- -- --
I Gray 15/12/97 Purchase 25,000 99p
M J C Villaneau -- -- -- --
J C Banon -- -- -- --
C A Tritt -- -- -- --
Dr G G Gray -- -- -- --
W A Rice 02/12/97 Purchase 20,000 98.5p
</TABLE>
(v) Dealings for value in General Cable shares by persons acting in concert
with Telewest during the disclosure period were as follows:
(C) GENERAL
(i) Save as disclosed in this paragraph 5, 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, 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, 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.
(iv) Save as disclosed in this document or in the Disclosure Document, none
of Telewest, any person acting in concert with Telewest, General Cable and
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;
(cc) the directors (together in each case with their close relatives and
related trusts) of the company and of any relevant company;
III-4
<PAGE>
(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 .
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, 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.
III-5
<PAGE>
D J 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 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, ceased 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 pre-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 approximately
(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 George G 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.
Ms Cheryl 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.
III-6
<PAGE>
DIRECTORS' REMUNERATION IN 1997 (IN (Pounds))
<TABLE>
<CAPTION>
BENEFITS IN 1997
FEES SALARY BONUSES PENSION(1) KIND(2) TOTAL
------ ------- ------- ---------- ----------- -------
<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 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 -- -- -- -- -- --
FM Jobard (alternate) -- -- -- -- -- --
(appointed 25 November
1997)
B Leroy (alternate)
(appointed 25 November
1997) -- -- -- -- -- --
------ ------- ------ ------ ------ -------
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 . June 1998.
INDEMNITY OF OFFICERS
Subject to the Companies Act, the board of General Cable shall have 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 shall
be 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 Offer 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 securities to which the Offer relates, then (i)
Telewest will be entitled, and intends to acquire compulsorily the remainder
of the outstanding General Cable securities in accordance with Sections 428-
430F of the Companies Act and (ii) if Telewest acquires 90% or more of the
entire issued share capital of General Cable, a holder of General Cable
securities may require Telewest to purchase his or her General Cable
securities 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 IV to this Offer Document.
If the level of acceptances of the Offer is insufficient to enable the
Compulsory Acquisition of the outstanding General Cable securities, Telewest
will evaluate its other alternatives to acquire the remaining General Cable
securities. Such alternatives could include acquiring additional General Cable
securities 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 securities 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
securities 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.
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
III-8
<PAGE>
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 7(b) of Part B of Appendix I.
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
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.
III-9
<PAGE>
(b) Save as disclosed on page . , 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.
(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.
13. DOCUMENTS AVAILABLE FOR INSPECTION
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.
III-10
<PAGE>
- - -------------------------------------------------------------------------------
APPENDIX IV
ADVICE OF GENERAL CABLE'S FINANCIAL ADVISER
- - -------------------------------------------------------------------------------
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 middle market price on the London Stock Exchange of
Telewest shares on 6 April 1998). As of . June 1998, the last practicable
date prior to the posting of this document, the closing middle market price
for Telewest shares on the London Stock Exchange was . pence per Telewest
share, and, as a result, the Offer valued General Cable shares at
approximately . 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
middle market price of General Cable shares on the following dates: 5
February 1998 (the date of the
IV-1
<PAGE>
announcement of the 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 middle market 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 middle market price of General Cable shares on
6 April 1998; (b) a premium of 9%, 13%, 16% and 22%, respectively, on the
closing middle market price of General Cable shares on 27 March 1998; (c) a
premium of 56%, 61%, 65% and 74%, respectively, on the closing middle
market price of General Cable shares on 20 February 1998; and (d) a premium
of 110%, 117%, 122% and 135%, respectively, on the closing middle market
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.
IV-2
<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
IV-3
<PAGE>
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.
IV-4
<PAGE>
- - -------------------------------------------------------------------------------
APPENDIX V
CERTAIN PROVISIONS OF THE COMPANIES ACT
- - -------------------------------------------------------------------------------
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.
V-1
<PAGE>
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>
The following note will be deleted prior to the effectiveness of the
registration statement of which this document forms a part and the mailing
of this document:
The information in this document, which is in draft form, is subject to
updating, completion, revision, further verification and amendment. This
draft document does not constitute or form part of any offer or invitation
to sell, or any solicitation of any offer to purchase, any securities of
General Cable or Telewest, nor shall it or any part of it form the basis of,
or be relied on in connection with, any contract therefor. In particular,
this draft document refers to certain events as having occurred which have
not occurred on the date it is filed with the US Securities and Exchange
Commission but are expected to occur prior to publication of the final offer
documents to be issued in connection with the merger. In addition, this
draft document contains the statements of fact, belief and opinion which are
currently intended to be made and to be true as at the date of publication
of the offer document but which may be different from the actual statements
of fact, belief and opinion contained in the final offer document.
No reliance may be placed for any purpose whatsoever on the information
contained in this document or on its completeness.
The announcement relating to the merger made by Telewest and General Cable
on 15 April 1998 set out certain pre-conditions to the posting of the offer
document. Satisfaction of these pre-conditions has not yet been announced.
<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
. 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>
TABLE OF CONTENTS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I - GENERAL INFORMATION
Directors, Secretary, Registered Office and Advisers of Telewest... I-3
Definitions........................................................ I-4
Section One The Merger and Related Matters........................ I-12
Section Two Information on Telewest............................... I-16
Section Three Information on General Cable......................... I-36
Section Four Information on the Combined Group..................... I-66
Section Five Regulatory Matters and Competition.................... I-94
Section Six Risk Factors.......................................... I-107
Section Seven Additional Information............................... I-115
Section Seven Consents............................................. I-165
Section Seven Service of Process and Enforcement of Liabilities.... I-165
Section Seven Miscellaneous........................................ I-165
Section Seven No Significant Change................................ I-166
Section Seven Additional Sources of Information.................... I-166
Section Seven Documents for Inspection and Available Information... I-167
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-49
Section Three UK GAAP Pro Forma Financial Information of the
Combined Group....................................... II-110
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-51
Section Three US GAAP Pro Forma and Comparative Financial
Information of the Combined Group.................... III-55
</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-. 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. Application has been made to the Nasdaq Market 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 SHAREHOLDERS
- - --------------------------------------------------------------------------------
SHARE CAPITAL OF TELEWEST FOLLOWING THE OFFER, THE PRE-EMPTIVE ISSUE AND
CONVERSION
Authorised Issued and fully paid
Nominal Value Number Nominal Value Number
-- -- Telewest Shares (Pounds)213,848,121 2,138,481,211
- - --------------------- ----------------------------------
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 cancelled in exchange for cash payments. 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 total indebtedness of the
Telewest Group, the General Cable Group and the total indebtedness of the two
groups:
<TABLE>
<CAPTION>
TELEWEST GENERAL CABLE COMBINED
GROUP GROUP GROUP
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
SHORT-TERM BORROWINGS
LONG-TERM BORROWINGS
OBLIGATIONS UNDER FINANCE LEASES
OTHER
----------------------------------------------
==============================================
</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). and the General Cable Group had
cash balances of (Pounds)..
<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
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-15
SECTION TWO - INFORMATION ON TELEWEST
- - -------------------------------------------------------
Overview.................................................................. I-17
History................................................................... I-19
Recent Developments....................................................... I-19
Cable Television.......................................................... I-20
Cable Telephony........................................................... I-22
Pricing................................................................... I-23
Sales and Marketing....................................................... I-24
Customer Service.......................................................... I-25
Churn..................................................................... I-25
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-45
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-62
Principal Shareholders.................................................... I-69
Certain Related Party Transactions........................................ I-80
SECTION FIVE - REGULATORY MATTERS AND COMPETITION
- - -------------------------------------------------------
Regulatory Matters...................................................... I-83
Competition............................................................. I-91
SECTION SIX - RISK FACTORS
- - -------------------------------------------------------
Integration of Telewest and General Cable............................... I-96
Ability to Manage Growth and Expansion.................................. I-96
Limited Consumer Acceptance of Cable Television and Cable Telephony in
the UK................................................................. I-96
Need to Renegotiate or Refinance Existing Facilities; Requirement for
Additional Funds....................................................... I-97
Anticipated Bond Offering; Adverse Consequences of Additional Financial
Leverage............................................................... I-97
History of Losses....................................................... I-98
Limited Control of Affiliated Companies................................. I-98
Significant Competition................................................. I-99
Extensive Government Regulation......................................... I-101
Construction of Networks................................................ I-100
Influence of Principal Shareholders..................................... I-100
Extensive Government Regulation......................................... I-101
Technological Changes................................................... I-101
Limited Access to Programming Supply.................................... I-101
Year 2000 Compliance.................................................... I-101
Potential Volatility of Share Price..................................... I-102
Impact of Shares for Future Sale........................................ I-102
SECTION SEVEN - ADDITIONAL INFORMATION
- - -------------------------------------------------------
Incorporation........................................................... I-103
Share Capital........................................................... I-103
Certain Trading Market, Dividend and Exchange Rate Information.......... I-105
Subsidiary Undertakings and Other Interests............................. I-108
Summary of Memorandum and Articles of Association....................... I-112
Description of American Depositary Receipts............................. I-123
Shares Eligible for Future Sale......................................... I-130
Employee Share Schemes.................................................. I-131
Pension Schemes and Other Employee Benefit Schemes...................... I-141
Experts................................................................. I-142
Validity of Securities.................................................. I-142
Legal Proceedings....................................................... I-142
Financing Arrangements.................................................. I-142
Material Contracts...................................................... I-151
Licences................................................................ I-154
Premises................................................................ I-155
Taxation................................................................ I-159
Stamp Duty and Stamp Duty Reserve Tax................................... I-164
Consents................................................................ I-165
Service of Process and Enforcement of Liabilities....................... I-165
Miscellaneous........................................................... I-165
No Significant Change................................................... I-166
Additional Sources of Information.......................................
Documents for Inspection and Available Information...................... I-167
Premises................................................................ I-168
</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)
The address for each of the Directors, other than the Proposed Directors, is:
Genesis Business Park
Albert Drive
Woking
Surrey GU21 5RW
PROPOSED DIRECTORS+
William Anthony Rice*
Michel Jean Charles Villaneau*
+ to be appointed upon completion of the Merger
* Non-Executive
The address for each of the Proposed Directors is:
37 Old Queen Street
London SWIH 9JA
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 the Nasdaq becoming effective
"Birmingham Cable" Birmingham Cable Corporation Limited
"Birmingham Cable the Articles of Association of Birmingham Cable
Articles"
"BSkyB" British Sky Broadcasting Group plc
"BDB" British Digital Broadcasting plc
"Bridge Facility" the (Pounds)100 million bridge facility provided
to Telewest by an institutional lender to fund
the purchase of General Cable's shares in
Birmingham Cable and Cable London
"BT" British Telecommunications 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 Birmingham Cable and Cable London
Affiliated Companies"
"Combined Group cable television and telephony franchises owned
Affiliated Franchises" by the Combined Group Affiliated Companies
"Combined Group" the Telewest Group as enlarged by the Merger
"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 some time after the Offer has become or
been declared wholly unconditional
"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 of 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
I-4
<PAGE>
"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
"Directors" or "Board" the Board of Directors of Telewest
"dollars" or "$" US dollars
"EGM Circular" the circular to Telewest shareholders and holders
of Telewest Convertible Preference shares
containing notice of the Extraordinary General
Meeting
"dollars" or "$" US dollars
"Extraordinary General the extraordinary general meeting of Telewest to
Meeting" or "EGM" be held on . July 1998 at which resolutions
will be proposed, among other things, to approve
the Offer and the Pre-emptive Issue
"Excluded Holder" a Telewest securityholder on the register of
members of Telewest or the Telewest ADS Register,
as appropriate, as at the close of business on
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
"Flextech" Flextech plc
"FSA" the Financial Services Act 1986, as amended
"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 the cable television and telephony franchise
Affiliated Franchise" owned by Birmingham Cable
"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 Unapproved
Executive Share Option Scheme, the General Cable
BLC 1996 Unapproved Executive Share Option Scheme
and the General Cable Sharesave Scheme, when
adopted
"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
"GUHL" General Utilities Holdings Limited
"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.
"Merger" the merger of Telewest and General Cable to be
effected pursuant to the Offer
"Mix and Match Election" an election available to accepting 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
"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
I-6
<PAGE>
"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
"NTL"
NTL Incorporated
"NTL/Comcast Merger"
the proposed merger of NTL and Comcast announced
5 February 1998
"Offer"
the recommended offer by Schroders on behalf of Telewest to acquire all of the
General Cable securities on the terms and subject to the conditions set out in
the Offer Document and the Acceptance Form (including, where the context so
requires or permits, any subsequent revision, variation, extension or renewal
thereof)
"Offer Document"
the document dated ~ 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
"Panel"
The Panel on Takeovers and Mergers
"PDSL"
prescribed diffusion service licence
"Pre-emptive Issue"
the issue, by way of open offer, of 260,665,436 new Telewest shares to
Qualifying Telewest securityholders
"Proposed Directors"
William Anthony Rice and Michel Jean Charles Villaneau
"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 the Telewest Convertible Preference shareholders
whose names appear on the register of members of Telewest 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 plc,
Registrar's Dept., The Causeway, Worthing, W. Sussex, BN99 6DB, 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
I-7
<PAGE>
<TABLE>
<S> <C>
10.00 pm (London time) on . June 1998 and, in
the case of Telewest ADSs, 10.00 pm (New York
City time) on . June 1998
"Relationship Agreement"
an amended and restated agreement, dated as of 15
April 1998, made between MediaOne International
Holdings, the MediaOne Affiliates, TINTA, the
TINTA Affiliate, Cox, the COX Affiliate, SBC, the
SBC Affiliate and Telewest
"SBC" SBC Communications, Inc.
"SBC Affiliate" Southwestern Bell International Holdings (UK-1)
Corporation
"SBC Group" SBC, its holding companies and/or its subsidiary
undertakings, and/or any subsidiary undertakings
of its holding companies
"SBCC"
SBC CableComms (UK)
"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
"Schroders" J. Henry Schroder & Co. Limited
"SEC" the US Securities and Exchange Commission
"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 remaining 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.
"Telewest" Telewest Communications plc (and, where the
context so requires, its predecessor, Old
Telewest)
"Telewest ADSs" American Depositary Shares of Telewest, each
representing ten Telewest shares
"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
Preference shareholders"
holders of Telewest Convertible Preference shares
</TABLE>
I-8
<PAGE>
<TABLE>
<S> <C>
"Telewest Convertible
Preference shares" convertible preference shares of 10 pence each in
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 permits, each
of them
"Telewest securities" Telewest shares, Telewest ADSs and Telewest
Convertible Preference shares
"Telewest holders of Telewest securities
securityholders"
"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
"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
the United Kingdom of Great Britain and Northern
"UK" Ireland
"US" the United States of America, its territories and
possessions, any state of the United States and
the District of Columbia
"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" value added tax
"Vivendi" Vivendi S.A., formerly known as Compagnie
Generale des Eaux S.A. prior to its name change
in May 1998
"Yorkshire Cable" The Yorkshire Cable Group Limited
</TABLE>
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.
All 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 and (b) all Telewest
Convertible Preference shares are converted to Telewest shares. 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
recent 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 recent 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 . .
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
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> <C>
Record Date for Pre-emptive Issue with 10.00 pm on . June 1998
respect to Telewest shares and
Telewest Convertible Preference shares
Posting of Offer Document, Pre-emptive . June 1998
Issue Circular, EGM Circular and the
Disclosure Document
Record Date for Pre-emptive Issue in 10.00 pm on . June 1998
relation to Telewest ADSs
Latest time for receipt of Forms of
Proxy for the EGM 10.00 am on . July 1998
Extraordinary General Meeting 10.00 am on . July 1998
First closing date for the Offer . am on . July 1998 1
Latest time and date for the splitting 3.00 pm on . August 1998 2
of Application Forms (to satisfy bona
fide market claims only)
Latest time and date for the receipt of 3.00 pm on . August 1998 3
completed Application Forms and pay-
ment in full under the Pre-emptive Is-
sue
Dealings in new Telewest shares to [On the business day following the
commence on the London Stock Exchange date on which the Pre-emptive Issue
(8.30 am) and quotations of new closes and the Offer is declared
Telewest ADSs to commence on Nasdaq unconditional in all respects]
(9.30 am New York City time)
Latest time and date for elections [Five days following the date on
under the Mix and Match Election which the Offer is declared
unconditional in all respects]
Expected date of despatch of share [Within ten business days of
certificates and cheques pursuant to the date on which the Pre-emptive
the Pre-emptive Issue Issue closes]
Expected date of despatch of cheques [Within 14 days of the date on
and share certificates [and crediting which the Offer is declared
of CREST accounts] pursuant to the unconditional in all respects]
Offer for acceptances received prior
to the close of the Mix and Match
Election
</TABLE>
- - ------------
NOTES:
(1) At this date the Offer may lapse, be extended or declared unconditional
in all respects. The Offer shall not (except with the Panel's consent)
be capable of becoming unconditional in all respects after [Day 60].
(2) 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.
(3) This time and date may be extended from time to time by press release
issued by Telewest not later than five 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 time.
- - --------------------------------------------------------------------------------
I-12
<PAGE>
- - --------------------------------------------------------------------------------
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 . 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 43
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. Accepting General Cable securityholders 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 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 General Cable securityholders
making off-setting elections. To the extent that elections cannot be satisfied
as a result of such offsetting elections, entitlements to cash and new Telewest
securities will be scaled down on a pro rata basis.
Based on Telewest's closing share price of 80 pence 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 General Cable), the Offer values
each General Cable share at 164 pence, each General Cable ADS at $13.45 (based
on the Noon Buying Rate of (Pounds)1 = $1.6363 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)610 million. Based on Telewest's
closing share price of . pence on . June 1998 (the latest practicable date
prior to the publication of this document), the Offer values each General Cable
share at . pence, each General Cable ADS at $ . (based on the Noon Buying
Rate of (Pounds)1 = $ . 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) . 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 securities) 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
approved at the Extraordinary General Meeting. The new Telewest securities
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,
SECTION ONE GENERAL INFORMATION
I-13
<PAGE>
in each case held by such Qualifying Telewest securityholders and registered in
their names on the Record 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 and will be retained for the benefit of the
Combined Group.
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 shareholder. The
Application Form is personal to the Qualifying Telewest shareholder(s) named
therein and cannot be assigned, transferred or split except up to 3.00 pm
(London time) on . 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"
entitlement to the Pre-emptive Issue. Qualifying Telewest shareholders who have
sold or transferred all or part of their registered holdings prior to . 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 . July 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
. 1998 (or such later date to which Telewest may extend the Pre-emptive
Issue).
Share and ADR certificates in respect of new Telewest securities issued
pursuant to the Pre-emptive Issue are expected to be dispatched, at the risk of
the persons entitled thereto, no later than 10 days
SECTION ONE GENERAL INFORMATION
I-14
<PAGE>
after the Offer becomes unconditional in all respects. No temporary documents
of title will be issued. Pending despatch of such certificates, transfers will
be certified against the applicable register.
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 (as set out on page . ) 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. Under the terms of issue of the Telewest Convertible Preference
shares, such 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. Depending on, among other things, the number of new Telewest
shares acquired by Qualifying Telewest securityholders other than the TINTA
Affiliate, the MediaOne Affiliates, the Cox Affiliate and the SBC Affiliate
pursuant to the Pre-emptive Issue, some Telewest Convertible Preference shares
may remain in issue following completion of the Merger.
NEW TELEWEST SECURITIES
An aggregate of 1,210,913,611 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 . 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-emptive
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.
BIRMINGHAM CABLE AND CABLE LONDON
BIRMINGHAM CABLE
General Cable has an interest of approximately 44.95% in the share capital of
Birmingham Cable. Telewest has an interest of approximately 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 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 entire interest in Birmingham Cable (subject to the
appraisal of the value
SECTION ONE GENERAL INFORMATION
I-15
<PAGE>
of the Birmingham Cable shares owned by Comcast). 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 NTL's acquisition of
Comcast. Failing Comcast's agreement thereto, General Cable has agreed, subject
to the operation of the pre-emption provisions in Birmingham Cable's Articles,
to sell its holding of shares in Birmingham Cable to TCHL for (Pounds)100
million. 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. Telewest intends to fund the purchase of General Cable's shares
in Birmingham Cable (and Cable London) with the proceeds of the Bridge
Facility.
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 merger
between NTL and Comcast. 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 had not been completed. In addition,
Comcast has written to Telewest disputing Telewest's interpretation of the Co-
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.
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.
SECTION ONE GENERAL INFORMATION
I-16
<PAGE>
- - --------------------------------------------------------------------------------
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 27.5% 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 344,000 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 an additional 405,000 equity homes and 29,000 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
87.4% and 87.3%, respectively, of the homes in the Telewest Affiliated
Franchises, approximately (Pounds)2.0 billion had been invested in the
construction of the network of the Telewest Owned and Operated Franchises and
(Pounds) 865 million had been invested in the construction of the networks of
the Telewest Affiliated Franchises (in each case 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.
SECTION TWO GENERAL INFORMATION
I-17
<PAGE>
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
--------------------------------------------------------------------
1995 1996 1997 1998(2)
<S> <C> <C> <C> <C>
CABLE TELEVISION
Homes passed 1,987,344 2,575,142 2,970,168 2,988,116
Homes passed and
marketed 1,831,458 2,335,953 2,760,184 2,794,836
Customers 401,469 528,142 605,988 617,877
Penetration rate
(3) 21.9% 22.6% 22.0% 22.1%
Average monthly
revenue per
customer (4) (Pounds)21.32 (5) (Pounds)22.95 (Pounds)23.40 (Pounds)23.72
Average churn
rate 41.0%(6) 33.4%(7) 34.0%(7) 34.8%
RESIDENTIAL
TELEPHONY
Homes passed 1,750,288 2,396,658 2,791,684 2,809,632
Homes passed and
marketed 1,652,604 2,254,734 2,725,154 2,760,826
Residential
customers (8) 429,405 620,377 810,358 831,585
Penetration rate
(9) 26.0% 27.5% 29.7% 30.1%
Residential
lines connected 430,926 627,009 836,168 864,325
Average monthly
revenue per line
(10) (Pounds)20.48(11) (Pounds)20.26 (Pounds)19.19 (Pounds)19.10
Average churn
rate per line 21.87%(12) 19.6%(7) 20.0%(7) 20.5%
BUSINESS
TELEPHONY
Business
customers 14,225 20,882 25,475 26,532
Business lines
connected 40,021 67,823 100,989 110,015
Average number
of business
lines per
customer (13) 2.8 3.2 4.0 4.1
Average monthly
revenue per line
(14) (Pounds)58.92 (15) (Pounds)54.50 (Pounds)43.62 (Pounds)42.81
Average churn
rate per line 12.4%(16) 14.5%(7) 15.0%(7) 14.4%
<CAPTION>
TELEWEST AFFILIATED FRANCHISES (1) TOTAL (1)
--------------------------------------------------------------------- ---------------------------------------
1995 1996 1997 1998(2) 1995 1996 1997 1998(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CABLE TELEVISION
Homes passed 242,415 316,878 347,563 349,704 2,229,759 2,892,020 3,317,731 3,337,820
Homes passed and
marketed 235,196 290,882 336,398 337,432 2,066,654 2,626,835 3,096,582 3,132,268
Customers 56,003 71,457 81,364 82,722 457,472 599,599 687,352 700,599
Penetration rate
(3) 23.8% 24.6% 24.2% 24.5% N/A N/A N/A N/A
Average monthly
revenue per
customer (4) (Pounds)19.16 (Pounds)20.35 (Pounds)21.27 (Pounds)23.11 N/A N/A N/A N/A
Average churn
rate 31.5%(6) 28.9%(7) 37.0%(7) 37.6% N/A N/A N/A N/A
RESIDENTIAL
TELEPHONY
Homes passed 237,940 299,603 347,913 350,122 1,986,228 2,696,261 3,139,597 3,159,554
Homes passed and
marketed 229,956 288,307 337,173 337,851 1,882,560 2,543,041 3,062,327 3,098,677
Residential
customers (8) 48,250 65,724 84,324 87,888 477,655 686,101 894,682 919,473
Penetration rate
(9) 21.0% 22.8% 25.0% 26.0% N/A N/A N/A N/A
Residential
lines connected 48,549 66,512 86,372 90,427 479,475 693,521 922,540 954,752
Average monthly
revenue per line
(10) (Pounds)27.25 (Pounds)27.05 (Pounds)24.86 24.97 N/A N/A N/A N/A
Average churn
rate per line 23.8%(12) 25.8%(7) 29.9%(7) 29.2% N/A N/A N/A N/A
BUSINESS
TELEPHONY
Business
customers 1,760 2,416 2,856 2,988 15,985 23,298 28,331 29,520
Business lines
connected 7,496 10,746 15,684 16,791 47,517 78,569 116,673 126,806
Average number
of business
lines per
customer (13) 4.3 4.4 5.5 5.6 N/A N/A N/A N/A
Average monthly
revenue per line
(14) (Pounds)75.39(15) (Pounds)71.95 (Pounds)71.29 (Pounds)62.29 N/A N/A N/A N/A
Average churn
rate per line 25.0%(16) 24.8%(7) 23.1%(7) 21.3% N/A N/A N/A N/A
</TABLE>
- - ----------
Notes:
"N/A" means not applicable.
(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) If the SBCC Merger had been completed on 1 January 1995, the average
monthly revenue per customer would have been (Pounds)21.11 in 1995.
(6) 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. If the SBCC Merger had been completed on 1 January 1995, the
average cable television churn rate for the Telewest Owned and Operated
Franchises would have been 44.5% in 1995.
(7) 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.
(8) 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.
(9) 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.
(10) 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.
(11) If the SBCC Merger had been completed on 1 January 1995, the average
monthly revenue per line would have been (Pounds)20.69 in 1995.
(12) 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.
If the SBCC Merger had been completed on 1 July 1995, the average
residential telephony churn rate per line for the Telewest Owned and
Operated Franchises would have been 21.8% in 1995.
SECTION TWO GENERAL INFORMATION
I-18
<PAGE>
(13) 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.
(14) 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.
(15) If the SBCC Merger had been completed on 1 December 1995, the average
monthly revenue per business telephony line would have been (Pounds)59.39
in 1995.
(16) Average business telephony churn rate per line for each period represents
(i) the total number of business cable telephony lines terminated by
customers or Telewest during such period, divided by (ii) the average
number of business cable telephony lines in such period. If the SBCC
Merger had been completed on 1 January 1995, the average business
telephony churn rate per line for the Telewest Owned and Operated
Franchises would have been 13.1% in 1995.
HISTORY
During the 1980's and early 1990's, TCI and MediaOne acquired interests in
various UK cable franchises. In December 1991, TCI 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, following which TCI and MediaOne beneficially owned approximately
26.5% and 26.5% respectively, of the Old Telewest ordinary shares and 26.5%
and 26.5%, respectively, 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.
SECTION TWO GENERAL INFORMATION
I-19
<PAGE>
During 1997, the Telewest Group also implemented an initiative to strengthen
its product offering. The Telewest Group trialed a further development of its
"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 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 interests of 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 "-- 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 "Part
One--Section One--The Merger".
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 2,988,100 homes
passed 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 "--Programming--Sources of
Programming". Customers can choose to receive basic service programming alone
or together with premium programming.
The recently introduced Front Row pay-per-view analogue movie 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
SECTION TWO GENERAL INFORMATION
I-20
<PAGE>
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 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. See "Section Five -- Certain 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. The aggregate amount paid by the
Telewest Group to BSkyB for the year ended 31 December 1997 was (Pounds)67.5
million.
In 1995, the BSkyB Contract was submitted to the Office of Fair Trading (the
"OFT") and the European Commission for review. In 199., 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 in
199. 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 TCI, 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 is also a director of the Mirror Group plc, which owns the other 90%
SECTION TWO GENERAL INFORMATION
I-21
<PAGE>
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. The Telewest Group believes that programming obtained from all the
affiliated programming suppliers is obtained on terms no less favourable than
those available to unrelated third parties.
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
operators. As at 31 March 1998, the Telewest Group had passed and marketed
approximately 2,760,826 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-sized 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
specialized 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 customers 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.
SECTION TWO GENERAL INFORMATION
I-22
<PAGE>
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), and higher-quality
pictures and sound. 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.
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 Franchises and the
nine 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 cost of constructing the Interfranchise Network
will be approximately (Pounds)50.5 million and is expected to be 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.
I-23
SECTION TWO GENERAL INFORMATION
<PAGE>
MILLENNIUM PACKAGE PRICING
The basic charge for the Millennium package varies between (Pounds)12.99 and
(Pounds)21.99 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
movie 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. 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. The Telewest Group believes that the Millennium product
provides it with an effective way to retain customers.
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 on 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 -- Certain
Regulatory Matters and Competition -- Certain 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 Mercury Communications Limited ("Mercury") and other suppliers. The
Telewest Group's monthly line rental charge for a business customer as at 31
December 1997 varied by service from (Pounds)10.99 to (Pounds) . 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,
I-24
SECTION TWO GENERAL INFORMATION
<PAGE>
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.
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's churn rates for business telephony service increased from 14.5% in the
12-month period ended 31 March 1997 to 15.0% in the 12-month period ended 31
March 1998. The Telewest Group believes that churn rates for business telephony
service increased primarily as a result of more competitive products directed
to larger business customers being offered by competitors.
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.
I-25
SECTION TWO GENERAL INFORMATION
<PAGE>
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 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 (as discussed below),
network design considerations (e.g., location of head-end), franchise
demographics and ease of interconnection with other Telewest Owned and Operated
Franchises.
For information regarding build obligations under the Telewest Group's Cable
Television Licenses and telecommunications licences, see "--Section Five --
Regulatory Matters and Competition -- Regulatory Matters-- Network
Construction".
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 increases the cost of construction as compared with above-
ground installations and 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
customer 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
I-26
SECTION TWO GENERAL INFORMATION
<PAGE>
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 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 --
Certain Regulatory Matters and Competition -- Certain 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 seeks to use its increased buying power to obtain more-
favourable contract terms covering longer periods (typically, one to three
years).
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.,
I-27
SECTION TWO GENERAL INFORMATION
<PAGE>
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
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.
I-28
SECTION TWO GENERAL INFORMATION
<PAGE>
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 2,970,168
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
Baisc penetration rate
(1) 23.3% 21.4% 22.7% 21.2% 22.1%
Average monthly revenue
per customer (1) (Pounds)24.94 (Pounds)22.89 (Pounds)23.98 (Pounds)23.12 (Pounds)23.72
Average churn rate (1) 33.5% 33.2% 39.4% 32.8% 34.8%
RESIDENTIAL TELEPHONY
Homes passed 632,359 879,032 688,157 610,084 2,791,684
Homes passed and
marketed 612,226 832,757 720,818 595,025 2,809,632
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)22.28 (Pounds)18.64 (Pounds)18.26 (Pounds)18.03 (Pounds)19.10
Average churn rate per
line (1) 21.0% 19.8% 21.3% 20.3% 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)53.76 (Pounds)36.46 (Pounds)47.45 (Pounds)34.31 (Pounds)42.81
Average churn rate per
line (1) 13.6% 10.7% 22.0% 15.9% 14.4%
</TABLE>
- - ------------
(1) For the definitions of these terms, see the footnotes to the table on page
I-17.
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, Kingston and Richmond began in
1985, 1990 and 1991, respectively. The construction of these franchises is now
complete.
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
I-29
SECTION TWO GENERAL INFORMATION
<PAGE>
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 564,069 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 666,461 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 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,
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 management 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 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
I-30
SECTION TWO GENERAL INFORMATION
<PAGE>
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 discussed below 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 7,863
Penetration rate (1) 27.2% 27.2% 23.9% 23.9% 17.2% 17.2%
Additional outlets 35,652 9,804 32,811 16,406 13,694 2,260
Average monthly revenue
per customer (1) (Pounds)19.22 (Pounds)19.22 (Pounds)22.92 (Pounds)22.92 (Pounds)23.71 (Pounds)23.71
Average churn rate (1) 37.6% 37.6% 36.6% 36.6% 37.1% 37.1%
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 10,306
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 10,306
Average monthly revenue
per line (1) (Pounds)20.98 (Pounds)20.98 (Pounds)28.21 (Pounds)28.21 (Pounds)29.01 (Pounds)29.01
Average churn rate per
line (1) 28.1% 28.1% 32.1% 32.1% 28.3% 28.3%
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
Average monthly revenue
per line (1) (Pounds)56.55 (Pounds)56.55 (Pounds)61.23 (Pounds)61.23 (Pounds)86.37 (Pounds)86.37
Average churn rate per
line (1) 33.1% 33.1% 23.7% 23.7% 11.1% 11.1%
</TABLE>
- - ------------
(1) For the definitions of the terms, see the footnotes to the table on page I-
17.
(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.
I-31
SECTION TWO GENERAL INFORMATION
<PAGE>
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.
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).
TCHL (a wholly owned subsidiary of Telewest) and Comcast jointly own
approximately 54.94% of the issued share capital of Birmingham Cable. General
Cable owns approximately 44.95% 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") pursuant to which TWG provides
consulting services relating to cable telephony operations, the Comcast
affiliate provides consulting services relating to cable television operations
and General Cable provides consulting services relating to business telephony
operations. Each consultant also provides consulting services relating to the
financial management of the Birmingham Cable Companies. Under TWG's consulting
agreement, the Birmingham Cable Companies have agreed to pay TWG an annual fee
based on a share of a percentage of the Birmingham Cable Companies'
consolidated gross revenues. 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 if TCHL and Comcast and their affiliates together cease
to be the holder of the largest percentage of the issued share capital of
Birmingham Cable and the management agreement referred to below is terminated
for that reason.
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 Birmingham Cable's articles of association, 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 a 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.
I-32
SECTION TWO GENERAL INFORMATION
<PAGE>
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 articles of association of Birmingham Cable 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 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 the 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 the Birmingham Cable companies 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.
I-33
SECTION TWO GENERAL INFORMATION
<PAGE>
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 . % and Comcast owns
approximately . % 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.
The articles of association of Cable London 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. 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 pursuant to which TWG provides consulting services relating to
telephony operations and the Comcast affiliate provides consulting services
relating to cable television operations. 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 1998 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, 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, 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% 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
I-34
SECTION TWO GENERAL INFORMATION
<PAGE>
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% 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 Wood Gundy plc, as
security trustee for the Cable London Banks.
The Cable London Facility contains various financial and other covenants
applicable to Cable London and certain of its subsidiaries.
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
SECTION TWO GENERAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
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.
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 March 1998, the Systems together include 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 75,000 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
SECTION THREE GENERAL INFORMATION
<PAGE>
The following chart sets forth General Cable's ownership interest in its
subsidiaries and associates:
-----------------
General Cable PLC
-----------------
45%
------------------------------------
Birmingham Cable Corporation Limited
------------------------------------
100%
------------------------------
General Cable Holdings 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 (the licence holder for the
Windsor franchise) ("WTh") 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 of 90 million ordinary shares, with such shares listed
on the London Stock Exchange and American Depositary Receipts, each
representing five General Cable shares quoted on Nasdaq. On 13 March 1997,
General Cable acquired Filegale Limited ("Filegale") and its wholly-owned
operating subsidiary, 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 was 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 an agreement (the "Merger Agreement") dated 29 March 1998 between
Telewest, General Cable, Vivendi and General Utilities Holdings Limited
("GUHL"), 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
I-37
SECTION THREE GENERAL INFORMATION
<PAGE>
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 14 members.
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 a subsidiary of Telewest for (Pounds)100 million. For a
discussion of the terms of such sale 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 (which, subject to
price and available financing, it proposes to exercise).
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 operation, in
October 1997 General Cable announced that it was changing its strategy for
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 basic service were
raised between (Pounds)3 and (Pounds)5 per month; and prices for all customers
taking premium channels were raised between (Pounds)1 and (Pounds)4 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, and The Toronto-
Dominion Bank.
On 13 March 1997, General Cable acquired Imminus in connection with 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.
As at 31 December 1997, an aggregate of approximately (Pounds)572 million in
equity and shareholder loans had been invested in the Systems by General Cable
and its co-investors, and the Systems had passed approximately 1.24 million
homes representing approximately 74% of the franchise homes in the Systems.
I-38
SECTION THREE GENERAL INFORMATION
<PAGE>
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 as
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
Plant, Property
and equipment
net
((Pounds)m).... 152.2 188.0 210.0 210.6 156.9 223.4 275.0 279.9 180.2 225.0 242.3 242.8
Revenue
((Pounds)m).... 30.0 42.0 52.0 14.0 20.1 32.5 46.1 13.0 39.0 52.3 67.0 19.0
EBITDA (UK GAAP)
((Pounds)'000)(6).. 2,543 8,256 12,100 3,816 (5,379) 736 9,622 3,783 3,729 8,121 10,207 4,197
EBITDA (US GAAP)
((Pounds)'000)(6).. 2,615 8,032 6,986 3,623 (5,501) 699 6,809 3,748 2,963 7,815 10,207 4,197
BUSINESS
TELECOMMUNICATIONS
Business
customers...... 1,606 1,912 2,087 2,129 1,669 2,620 3,047 3,285 2,154 2,994 3,748 4,052
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
Percentage of
total revenue.. 41% 39% 38% 38% 13% 17% 21% 23% 12% 13% 14% 16%
Revenue per line
((Pounds))..... 1,135 1,054 932 880 695 584 567 543 728 744 684 606
RESIDENTIAL
TELEPHONY
Homes passed.... 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.. 172,009 231,354 278,883 283,602 198,405 269,664 372,533 385,753 291,875 369,512 429,638 414,744
Residential
lines.......... 38,655 49,234 62,458 64,130 58,900 80,002 101,039 103,547 81,268 105,128 123,354 126,600
Penetration
rate........... 22% 21% 22% 23% 30% 30% 27% 27% 28% 28% 29% 31%
Percentage of
total revenue.. 34% 38% 37% 38% 53% 50% 48% 48% 46% 46% 45% 42%
Revenue per line
((Pounds))..... 354 362 349 345 238 233 244 243 272 262 265 251
Churn (%)....... 22% 25% 26% 29% 23% 22% 24% 25% 22% 25% 30% 22%
CABLE TELEVISION
Homes passed.... 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.. 188,147 231,726 276,761 281,065 198,405 269,664 372,553 385,753 291,875 369,512 429,638 414,744
Subscribers..... 33,485 42,928 47,652 45,482 43,818 68,611 69,154 67,714 88,719 111,432 116,995 117,700
Penetration
rate........... 18% 19% 17% 16% 22% 25% 19% 18% 30% 30% 27% 28%
Percentage of
total revenue.. 25% 23% 25% 24% 34% 33% 32% 29% 42% 41% 41% 42%
Revenue per
subscriber
((Pounds))..... 265 266 284 295 198 204 216 223 222 217 235 268
Pay-to-basic
ratio(7)....... 159% 170% 186% 181% 121% 124% 113% 94% 168% 170% 173% 144%
Churn (%)....... 35% 30% 36% 47% 35% 28% 43% 36% 35% 27% 38% 33%
<CAPTION>
GROSS GENERAL CABLE
TOTAL DATA (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
Plant, Property
and equipment
net
((Pounds)m).... 732.2 564.3 570.2
Revenue
((Pounds)m).... 182.0 136.6 38.0
EBITDA (UK GAAP)
((Pounds)'000)(6).. 31,809 24,199 8,974
EBITDA (US GAAP)
((Pounds)'000)(6).. 22,777 16,010 8,778
BUSINESS
TELECOMMUNICATIONS
Business
customers...... 8,882 6,476 13,502
Business lines.. 64,661 49,993 53,700
Percentage of
total revenue.. 30% 34% 35%
Revenue per line
((Pounds))..... 1,070 1,154 1,054
RESIDENTIAL
TELEPHONY
Homes passed.... 1,239,682 944,665 956,444
Homes marketed.. 1,081,054 798,737 809,195
Residential
lines.......... 286,851 208,701 214,000
Penetration
rate........... 27% 26% 26%
Percentage of
total revenue.. 39% 38% 38%
Revenue per line
((Pounds))..... 276 276 271
Churn (%)....... 27% 26% 25%
CABLE TELEVISION
Homes passed.... 1,239,682 944,665 956,444
Homes marketed.. 1,078,952 796,986 807,077
Subscribers..... 233,801 161,591 138,780
Penetration
rate........... 22% 20% 20%
Percentage of
total revenue.. 30% 28% 27%
Revenue per
subscriber
((Pounds))..... 239 239 255
Pay-to-basic
ratio(7)....... 158% 150% 131%
Churn (%)....... 39% 39% 38%
</TABLE>
- - ------------
(1) Includes Imminus data for revenues, EBITDA, plant, property and equipment
and 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%).
(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) "EBITDA" has been presented in accordance with both UK 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 expenditure and working
capital movements. EBITDA should not be construed as an alternative to
operating loss (as determined in accordance with UK and US GAAP), as an
indicator of a System's operating performance, as an alternative to loss
before or after tax (as determined in accordance with UK and US GAAP) or
as a measure of a System's liquidity. The Gross Total and General Cable
Data for EBITDA under UK GAAP include the EBITDA attributable to General
Cable.
(7) The pay-to-basic ratio for each period is subject to seasonal variations.
I-39
SECTION THREE GENERAL INFORMATION
<PAGE>
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 of 31 December 1997, the
Yorkshire System had completed 56% of its network build (as measured by homes
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 has completed 94% of its network and achieved
its final build milestone (as measured by homes 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
The Birmingham System is not managed on a unified basis with the rest of the
General Cable Group; instead, it is an autonomous entity.
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
SECTION THREE GENERAL INFORMATION
<PAGE>
DESCRIPTION OF NETWORKS
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 were 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 ("nodes"), which
typically serve approximately 500 homes. The Systems' telecommunications
networks generally utilise from the 500 home nodes to the customer's premises
either fibre-optic cable distribution for business customers or a twisted-pair
copper wire distribution 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.
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, DASS2 and DPNSS. 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 Northern Telecom 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 Northern Telecom
DMS-100 switches, the Western London System has three Northern Telecom DMS100
switches and the Birmingham System has four Northern Telecom DMS-100
I-41
SECTION THREE GENERAL INFORMATION
<PAGE>
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 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 signals, substantial
transmission capacity is required to provide a cable television programme 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 and Western London Systems were originally
designed utilising a switched star design. The DTI initially encouraged the use
of this design by granting 23-year telecommunications licences to operators
employing switched star, but only 15-year licences to operators employing tree
and branch architecture. 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.
I-42
SECTION THREE GENERAL INFORMATION
<PAGE>
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 Northern Telecom Magellan Passport switches across five
nodal sites in London, Manchester, Bristol, Bradford and Birmingham, all
interconnected by an ATM backbone.
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.
I-43
SECTION THREE GENERALE INFORMATION
<PAGE>
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 Group either purchases from Nokia or leases from Northern Telecom
substantially all of 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 any other licence holder that seeks interconnect arrangements
and either party may request intervention from the Director General if there 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 for cable television 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
I-44
SECTION THREE GENERAL INFORMATION
<PAGE>
(on the basis of projected premises passed) that are currently forecasted by
the Network Division (all figures are adjusted to 31 December):
<TABLE>
<CAPTION>
WESTERN LONDON YORKSHIRE BIRMINGHAM
SYSTEM SYSTEM SYSTEM
MILESTONE MILESTONE MILESTONE
<S> <C> <C> <C>
1997.................................... 268,000 416,000 321,000
1998.................................... 268,000 499,000 394,000
1999.................................... 268,000 499,000 456,000
2000.................................... 268,000 499,000 456,000
2001.................................... 268,000 617,000 456,000
2002.................................... 268,000 734,000 456,000
2003.................................... 268,000 828,000 456,000
</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 industry in general.
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 UK value added tax ("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.
I-45
SECTION THREE GENERAL INFORMATION
<PAGE>
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 UK Premier League football. BSkyB's contract for UK
Premier League football has been referred for review by the Restrictive
Practices Court. See "-- Section Five -- Regulatory Matters and Competition".
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 described below. BSkyB currently provides the Consumer
and Small Business Division with [seven] channels, six premium 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. See "-- Section Five -- Regulatory
Matters and Competition". 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 OFT approved
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. See "-- Section Five -- Regulatory Matters and
Competition".
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.
I-46
SECTION THREE GENERAL INFORMATION
<PAGE>
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
(integrated services data network), DASS2 (digital access signal
system), DPNSS (digital public network signal system), 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 (asynchronous transfer mode), 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. This
service is currently offered by each of the Systems.
. Switched Data Network. Through the data networks acquired in connection
with the Imminus acquisition, General Telecom offers managed data
services [on a national and international basis], 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
I-47
SECTION THREE GENERAL INFORMATION
<PAGE>
franchise areas, General Telecom operates under the respective Systems'
telecommunications licences. Outside such franchise areas, however, General
Telecom operates under the General Telecommunications Limited and Imminus
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 Cable and
Cable Corporation 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).
. 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.
For the year ended 31 December 1997, General Cable derived 72% of its revenue
from telecommunications (with business telecommunications comprising 34% and
residential telephony comprising 38%) and 28% from cable television.
I-48
SECTION THREE GENERAL INFORMATION
<PAGE>
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 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 Windsor Television
Limited and Middlesex Cable Limited, 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.
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
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 these purposes 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.
I-49
SECTION THREE GENERAL INFORMATION
<PAGE>
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, the
Cable Corporation's financing arrangements require General Cable, through GCH,
to own not less than 80% of the ordinary share capital of Cable Corporation.
See "Item 9. Management's Discussion and Analysis of Results of Operations and
Financial Condition--The GCH Facility and Other Financing Arrangements".
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
less than 0.2% held by minority investors.
The relationships between Birmingham Cable and its shareholders are governed
by a number of agreements and by the provisions of Birmingham Cable's
memorandum and 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
Birmingham Cable's memorandum and articles of association.
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 controlling 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 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 provides advice on residential telephony operations and a
Comcast subsidiary provides advice on cable television operations. General
Cable and the other consultants will also provide advice on the financial
management of Birmingham Cable including matters of strategy and operation of
budgets. The total remuneration payable under the three agreements (the
"Aggregate Fee") will represent a percentage of the consolidated gross revenue
of Birmingham Cable and its subsidiary undertakings, reducing from 3% in 1994
to 2% in 1998 and thereafter. For its services, General Cable received 20% of
the Aggregate Fee in 1995 and thereafter will receive the proportion of the
Aggregate Fee which represents the proportion of business customer revenue (as
provided in the agreements) of the Birmingham Cable Group to total revenue, not
to exceed 40%. Each agreement will terminate in April 2000, subject to
Birmingham Cable's right to
I-50
SECTION THREE GENERAL INFORMATION
<PAGE>
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 to terminate
all the agreements after April 2000, if the joint shareholding of Comcast and
Telewest ceases to be the largest shareholding in Birmingham Cable, and
Birmingham Cable may terminate General Cable's consultancy agreements if
General Cable ceases to hold 33.33% or more of Birmingham Cable's issued
ordinary share capital. It is anticipated that management fees will not be
payable in the immediate future as a result of restrictions in the terms of the
Birmingham Cable's financing arrangements.
Comcast and Telewest have a management agreement with Birmingham Cable
whereby they have the right, subject to the overall direction and control of
Birmingham Cable's board of directors, to manage the day-to-day business and
affairs of Birmingham Cable. 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. 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 controlling 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 articles of association 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
SECTION THREE GENERAL INFORMATION
<PAGE>
EMPLOYEES
As at 31 December 1997, General Cable, Cable Corporation, Yorkshire Cable,
Birmingham Cable and Imminus and 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....................................................... 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
SECTION THREE GENERAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
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 franchise, 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 49.95% of Birmingham Cable
(representing the 27.47% interest in Birmingham Cable currently owned by the
Telewest Group and Telewest's pro rata share (.%) 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 31% of the homes in the UK areas
for which cable franchises have been awarded.
The following table sets out the 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)
<S> <C> <C> <C>
Homes 5,199,000 1,667,000 .
Equity Homes 4,367,000 1,355,000 5,722,000
Businesses 344,000 104,000 .
Equity Businesses 289,000 84,000 378,000
</TABLE>
- - ------------
(1) The data contained in this table under "Telewest Group" and "General Cable
Group" are taken from the tables on pages I- . and I- . 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.
I-53
SECTION FOUR GENERAL INFORMATION
<PAGE>
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
COMBINED GROUP OWNED AND 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
Homes passed and
marketed
Basic subscribers
RESIDENTIAL TELEPHONY
Homes passed
Homes passed and
marketed
Residential subscribers
Residential lines
connected
BUSINESS TELEPHONY
Business subscribers
Business lines connected
</TABLE>
- - ------------
(1) The information contained in this table under "Combined Group Owned and
Operated Franchises" and "Combined Group Affiliated Franchises" are taken
from the tables on pages I- . and I- . 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 Affiliated Franchises reflects the Combined
Group's equity interest based on the assumptions set out in the first
paragraph on page I- . .
(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.
As at 31 March 1998, network construction with cable television and cable
telephony capability had been completed for approximately . % and . %,
respectively, of the homes that will comprise the Combined Group Franchises. At
such date the Combined Group's network consisted of in excess of . kilometres
passing 3.9 million homes.
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
approximately 80% complete and is expected to be completed in August 1998.
SECTION FOUR GENERAL INFORMATION
I-54
<PAGE>
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. With its Interfranchise Network and local broadband access to
approximately 32% of all UK households, 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
data services, digital television and high-speed Internet access using
its broadband network;
. produce incremental revenue from delivering integrated services to
residential market segments across a larger subscriber base;
. 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; and
. accelerate the development of the Combined Group's business telephony
capabilities using General Cable's expertise in this area and a
wholesale telephony business.
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;
. 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;
. increasing the emphasis on penetration of the business markets 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;
SECTION FOUR GENERAL INFORMATION
I-55
<PAGE>
. 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
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 acquisition opportunities in the future as some of the
existing franchise holders decide to divest all or a portion of their UK
interests for strategic or other reasons or shareholders of other operators
determine that their prospects would be enhanced as part of a larger group. In
that regard, the Telewest Group has in the past engaged, and in the future may
engage, in discussions regarding acquisitions and business combinations in the
UK, some of which may be significant and any of which may ultimately lead to
acquisitions or business combinations. Any such acquisitions or combinations
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 -- Birmingham 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 approximately 1,106,200 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
SECTION FOUR GENERAL INFORMATION
I-56
<PAGE>
the Deposit Agreement relating to the Telewest ADSs. See "Section Seven --
Additional Information -- Description of American Depositary Receipts".
FINANCIAL YEAR END
The financial year end for Telewest following the Merger will continue to be
31 December of each year, the same as 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 on page . , 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 favourable 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 favourable 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.
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 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 was 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
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).
SECTION FOUR GENERAL INFORMATION
I-57
<PAGE>
BOARD OF DIRECTORS
Telewest intends that, following completion of the Merger, the Board will
initially consist of 14 Directors comprising seven non-executive Directors
(designated by MediaOne, TINTA, Cox, SBC and Vivendi), four executive Directors
and three non-executive 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 once terms have been agreed with the appropriate
individual.
<TABLE>
<CAPTION>
NAME AGE POSITION HELD
<S> <C> <C>
DIRECTORS
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 James 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. (now re-named MediaOne 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. 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 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).
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 Office of Fair Trading 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.
SECTION FOUR GENERAL INFORMATION
I-58
<PAGE>
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, Stephen 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. 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. Evans has served as a non-executive Director of Telewest since March
1998. He has been President and Chief Executive of TINTA since January 1998,
having 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 [International], a division of British Sky Broadcasting,
overseeing all international programming and the creation of new channels.
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, 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
previous to that he was Group Treasurer of BAe.
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. 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. 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.
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
SECTION FOUR GENERAL INFORMATION
I-59
<PAGE>
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 civil engineer and a graduate of the Ecole
Polytechnique and The Ecole Nationale des Ponts et Chaussees, Paris.
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 (the "Board" or the "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 of Association of Telewest
(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.
The Articles include provision for the principal shareholders to appoint
Directors for so long as they maintain a specified level of interest 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
(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% (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
Telewest 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
SECTION FOUR GENERAL INFORMATION
I-60
<PAGE>
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.
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 TCI 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 it 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 of 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 the SBC Group/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/24/. Mr. Ames will serve as the representative of MediaOne and . will
serve as the representative of the SBC Group/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.
SECTION FOUR I-61 GENERAL INFORMATION
<PAGE>
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 so appoint, 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 . .
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 and Mr. Ames. . and Mr. Ames will serve as the representatives of the
TINTA Group and the MediaOne Group, respectively. The observers appointed by
the SBC Group and by the Cox Group to attend meetings of the Remuneration
Committee will be . and . , respectively. 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 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
Compensation".
SENIOR EXECUTIVES
Following completion of the Merger, the individuals set out below are
expected to serve as senior executives of Telewest. All individual persons,
other than . , are currently senior executives of Telewest. . will be
appointed as a senior executive of Telewest upon completion of the Merger.
<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 concerning Messrs. Van Valkenburg and
Burdick, see "-- Board of Directors".
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.
SECTION FOUR I-62 GENERAL INFORMATION
<PAGE>
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.
EXECUTIVE REMUNERATION
The following table sets out the compensation paid by the Telewest Group [or
the General Cable Group], as the case may be, 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 [or the General Cable Group], as the case may be, 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.
SECTION FOUR I-63 GENERAL INFORMATION
<PAGE>
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>
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.
(7) Mr. Burdick served as Acting Chief Financial Officer from September
1996 and was apppointed 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.
SECTION FOUR I-64 GENERAL INFORMATION
<PAGE>
(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.
SECTION FOUR I-65 GENERAL INFORMATION
<PAGE>
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 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 the Nasdaq National
Market), 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.
SECTION FOUR I-66 GENERAL INFORMATION
<PAGE>
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.
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
SECTION FOUR I-67 GENERAL INFORMATION
<PAGE>
Participation Plan and (ii) two additional payments in cash or shares, subject
to certain conditions, as compensation for two awards under the LTIP to which
he was entitled but 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.
DIRECTOR AND SENIOR EXECUTIVE OWNERSHIP OF TELEWEST SECURITIES
As at . 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 .
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 . 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
beginning on page . .
- - ------------
SECTION FOUR GENERAL INFORMATION
I-68
<PAGE>
PRINCIPAL SHAREHOLDERS
(A ) 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 . 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 . . 0 0.0
Group Ltd (6)
33 King William Street
London EC4
</TABLE>
- - ------------
(1) For so long as the Telewest shares are listed on the London Stock Exchange,
subject to certain exceptions, 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 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 for TCI.
SECTION FOUR GENERAL INFORMATION
I-69
<PAGE>
(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 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 for MediaOne.
(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 . , under the City Code.
SECTION FOUR GENERAL INFORMATION
I-70
<PAGE>
(B) 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 and all Qualifying Telewest securityholders take up
their entitlements under the Pre-emptive Issue in full (other than SBC, which
has indicated to Telewest that it does not intend to take up its entitlement
under the Pre-emptive Issue) and that 145,370,540 Telewest shares have been
transferred by Cox U.K. to TW Holdings (see "--Voting Arrangements between the
TINTA Affiliate Group and the MediaOne Affiliate 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 (7) SHARES (7)
<C> <C> <S>
Tele-Communications, Inc.
5619 DTC Parkway
Englewood, Colorado 80111 (1)(4) 608,374,814 28.4
MediaOne Group,Inc.
118 Inverness Road West
Englewood, Colorado 80112 (2)(4) 608,374,814 28.4
SBC Communications, Inc.
2 Read's Way
Suite 222, Corporate Commons
New Castle, Delaware 19720 (3) 207,392,584 9.7
Cox Communications, Inc.
1400 Lake Hearn Drive
Atlanta, Georgia 30319 (4) 108,157,255 5.1
Vivendi S.A.
52 Rue d'Anjou
Paris 75008
France (5) 182,454,894 8.5
Mercury Asset Management Group Ltd
(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 145,370,540 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 on 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 "Closing Date"). TW Holdings also
owns the 608,374,814 Telewest shares that are listed as beneficially owned
by MediaOne and therefore has an interest in a total of 1,071,379,088
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 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 145,370,540 Telewest shares
to be transferred to TW Holdings by the Cox Affiliate on the Closing 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
SECTION FOUR GENERAL INFORMATION
I-71
<PAGE>
voting power. TW Holdings also directly owns the 608,374,814 Telewest
shares that are listed as beneficially owned by TCI and therefore has an
interest in a total of 1,071,379,088 Telewest shares (50.1% of the issued
Telewest shares) (without double counting the Telewest shares transferred
to TW Holdings by the Cox Affiliate).
. % of TW Holdings is owned by MediaOne UK and . % 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 . Telewest shares) and
MediaOne Cable (as to . 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 145,370,540 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. Cox U.K. 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
Mercury Asset Management Group Ltd ("MAM") is derived from MAM's Rule 8
Disclosure, dated . June 1998, under the City Code and assumes MAM takes
up its entitlement under the Pre-emptive Issue but does not reflect any
new Telewest shares that MAM may receive pursuant to the Offer.
(7) In the event no Qualifying Telewest shareholders other than the TINTA
Affiliate, the MediaOne Affiliates and the Cox Affiliate take up their
entitlements under the Pre-emptive Issue, the number of Telewest shares
transferred by the Cox Affiliate to TW Holdings would be 85,064,332 and
the number of Telewest shares (and the percentage of Telewest shares)
beneficially held by TCI, MediaOne and Cox would be 557,646,377 (26.7%),
579,267,999 (27.6%) and 173,707,975 (8.3%), respectively.
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 AFFILIATE AND THE MEDIAONE AFFILIATE
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
SECTION FOUR GENERAL INFORMATION
I-72
<PAGE>
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). 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,
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 which would qualify as a
Class 2 transaction for the purposes of the Listing Rules or would otherwise be
announced by the Telewest Board; (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 other than pursuant to the Offer,
the Pre-emptive Issue or the Conversion or pursuant to options, 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 for the time being beyond 14.
The Cox Affiliate has agreed to transfer 145,370,540 Telewest shares
(assuming all Qualifying Telewest securityholders take up their full
entitlements under the Pre-emptive Issue pro rata) or 85,064,322 Telewest
shares (in the event no Qualifying Telewest securityholders other than the
TINTA Affiliate, the MediaOne Affiliates, the SBC Affiliate and the Cox
Affiliate take up their entitlements under the Pre-emptive Issue) 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."
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
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/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
SECTION FOUR GENERAL INFORMATION
I-73
<PAGE>
pursuant to a Permitted Demerger, provided in each case 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 a
change of control. Where the MediaOne Group or the TINTA Group is subject to a
change of control, 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. The
affected group has the right to choose whether to buy or sell at that price or
to consent to the change of control.
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 refusal in favour of MediaOne International Holdings and TINTA
other than in respect of: (a) Public Transfers (defined 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 by reason of the TINTA Group or the
MediaOne Group failing to exercise their pre-emptive rights (see "--Pre-
emptive Rights" below).
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 . 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 Resolution . of 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.
SECTION FOUR GENERAL INFORMATION
I-74
<PAGE>
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.
Otherwise, and for so long as the MediaOne Group or the TINTA Group
individually hold 15% or more of the Telewest shares, 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 for so long as it holds at least 7.5% of the
Telewest shares.
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.
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.
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
[To be provided when agreed with the Panel]
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) hold 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,
SECTION FOUR GENERAL INFORMATION
I-75
<PAGE>
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) 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 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").
SECTION FOUR GENERAL INFORMATION
I-76
<PAGE>
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.
An affiliate of TCI has agreed that for so long as it owns 30% or more of the
issued voting shares of Flextech, Flextech will have a right of first refusal
with respect to offers made to the affiliate of TCI relating to English-
language cable and satellite programming opportunities in the UK and Europe.
The right of first refusal is subject to the consent of the supplier of any
such programming offered to the affiliate of TCI and other parties that may
have interests therein and to Flextech being able to fund such offer out of its
own resources. These restrictions will be binding upon Telewest.
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 relationships 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
SECTION FOUR GENERAL INFORMATION
I-77
<PAGE>
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 as discussed under " -- Limitations on Scope of Business
of Telewest and its Principal Shareholders" above.
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 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 as
discussed under " -- Limitations on Scope of Business of Telewest and its
Principal Shareholders" above. 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
Vivendi, through its subsidiary GUHL, 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. For
the year ended 31 December 1997, Vivendi had revenues of FF 167 billion ($28.6
billion). 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. Vivendi's subsidiaries generated approximately (Pounds)1.8 billion in
aggregate revenue in the UK for the year ended 31 December 1997. As at 31
December 1997, the Vivendi Group had provided a total of (Pounds)146.8 million
in equity financing to General Cable by subscribing for 146.8 million General
Cable shares at par.
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.
SECTION FOUR GENERAL INFORMATION
I-78
<PAGE>
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.(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.
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 forth certain information as at . 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 . . %
Mercury Asset Management plc . . %
Prudential Corporation PLC . . %
Legal & General Investment Management Limited . . %
Directors and officers of General Cable as a group . . %
</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
such offer was 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. 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. 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 the 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
SECTION FOUR GENERAL INFORMATION
I-79
<PAGE>
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 Vivendi (except where the transaction is
one in which Vivendi is treated similarly to shareholders generally).
The Independent Directors 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 General Cable 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.
SECTION FOUR GENERAL INFORMATION
I-80
<PAGE>
TECHNOLOGY SHARING AGREEMENTS
TCI 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 TCI 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
For a description of certain restrictions on Telewest's ability to dispose of
certain assets without the consent of certain of the MediaOne Group, the TCI
Group, the SBC Group and the Cox Group, see " -- Voting Arrangements".
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 of 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".
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
SECTION FOUR GENERAL INFORMATION
I-81
<PAGE>
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 Pounds260,000 (index-linked 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 Transactions6.F.6(a)
Save as disclosed in ~ ,6.F.6(b) 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 FOURGENERAL INFORMATION
I-82
<PAGE>
- - --------------------------------------------------------------------------------
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 both
the Broadcasting Act 1990 (the "Broadcasting Act"), which replaced the Cable
and Broadcasting Act 1984, the Telecommunications 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 licence issued under the
Telecommunications Act which allows the holder to construct (if
Telecommunication Code powers are attached to the licence) and operate the
physical network necessary to provide cable television and telephony services
in the defined area. 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 the holder group's franchise-specific telecommunications 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 Department of Trade and Industry ("DTI") and the
Department of Culture, Media and Sport ("DCMS").
ITC
The Broadcasting Act established the ITC to license and regulate commercial
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 Licenses) 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 into 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 licence conditions,
establishing and administering standards for telecommunications equipment and
contractors, investigating complaints and exercising certain functions to
promote or ensure competition
SECTION FIVE GENERAL INFORMATION
I-83
<PAGE>
in telecommunications markets. The Director General may modify
telecommunications 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 issue
enforcement orders requiring compliance, where the conditions of a
telecommunications 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 is
responsible for, among other things, issuing telecommunications 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 forth 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, these
arrangements are under review.
SECTION FIVE GENERAL INFORMATION
I-84
<PAGE>
As a result of the policy change announced in Broadband Britain, 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
application is successful, the fees payable under the relevant 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 2 local
programme service licences, respectively (including one in relation to the
Birmingham franchise), which enable them to produce local programming,
including local advertisements.
TERM, RENEWAL AND REVOCATION OF CABLE TELEVISION LICENCES
The terms and renewal of PDSLs and LDSLs are governed by the Broadcasting
Act. For details of the PDSLs and LDSLs held by the Telewest Group and the
PDSLs held by 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 level, to 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.
SECTION FIVE GENERAL INFORMATION
I-85
<PAGE>
TELECOMMUNICATIONS REGULATION
TELECOMMUNICATIONS LICENCES
A telecommunications 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. 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 ("SMATV"), 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.
Telewest's and General Cable's telecommunications 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 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 licences contain prohibitions on undue preference and
discrimination in providing a service. A cable operator's telecommunications
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 the Telewest Group and General Cable Group telecommunications 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 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 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 a
consultation with the industry on a new framework for calculating licence fees,
but with the underlying policy of recovering costs remaining unchanged.
A telecommunications 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 licenses to
provide voice telephony services, but 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,
SECTION FIVE GENERAL INFORMATION
I-86
<PAGE>
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 such direction has been received by any member of the
Telewest Group or the General Cable Group.
TELECOMMUNICATIONS CODE
Under telecommunications 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 licences terminated. This procedure is
under review by OFTEL.
TERM, RENEWAL AND REVOCATION OF TELECOMMUNICATIONS LICENCES
The franchise specific telecommunications 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 licence cannot be extended and
application must be made for a new licence.
A telecommunications license 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 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. PTOs (including the Telewest
Group and the General Cable Group) are required under their telecommunications
licences to enter into interconnection 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.
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 licences. Telewest is not able to predict the outcome of the
implementation process.
SECTION FIVE GENERAL INFORMATION
I-87
<PAGE>
PRICE REGULATION
BT currently is subject to controls over the prices it may charge residential
and small business customers, including a requirement that 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 condition on fair
trading (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 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 other
service providers other than BT are not currently regulated by the Director
General, but are subject to the fair trading condition in all
telecommunications 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 provide reciprocal portability from its network to
those other operators (as required by their telecommunications 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 be 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. 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.
NETWORK CONSTRUCTION
Prior to December 1994, milestones for cable networks were contained in the
telecommunications license 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 those build milestones with the effect that the Telewest Group has
no build obligations under those four licences until 2000.
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.
SECTION FIVE GENERAL INFORMATION
I-88
<PAGE>
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 31 December 1999
South-East Region 205,736 31 December 1999
2000 South-East Region 228,736 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 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 were advertised and three have now been awarded to British Digital
Broadcasting plc (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. However, 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
SECTION FIVE GENERAL INFORMATION
I-89
<PAGE>
Regulations which became effective on 7 January 1997. The Regulations provide
that conditional access operators, such as BSkyB, are required to co-operate
with broadcasters 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 UK Secretary of State granted a class license 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 license
contains similar provisions to those in the Regulations and, in addition,
includes the fair trading condition.
Under the class license, 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 and conditional access control services for digital
television. The guidelines set out how OFTEL would propose to deal with anti-
competitive behaviour in relation to the provision of those 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 relevant 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 1995. See "--Section
Two--Information on Telewest--Cable Television--Sources of Programming".
In this context, the UK Government has introduced a Competition Bill which
proposes to grant concurrent powers to the industry specific regulators and the
DGFT for the enforcement of prohibitions modelled on Article 85 and 86 of the
EC Treaty. The Bill introduces in UK Law those prohibitions on and 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 of Telecommunications 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 make an enforcement order.
SECTION FIVE GENERAL INFORMATION
I-90
<PAGE>
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 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 Interconnection 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 "--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. This Directive would
require certain operators to separate their cable television activities from
their cable telephony activities.
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. 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.
SECTION FIVE GENERAL INFORMATION
I-91
<PAGE>
CABLE TELEVISION
GENERAL
Approximately 45% of the UK population now has access to cable television and
other broadband services. Connections to these services exceed 3.5 million
homes, 2.5 million of these for cable television customers. As at 30 April
1998, 163 UK cable franchises had been awarded.
Prior to April 1998, the ITC's policy was to grant only one Cable Television
License in any one 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
setting forth 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 should
be allowed to compete in the provision of broadcast entertainment 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
franchises will become non-exclusive as of 1 January 2001.
The principal current and potential competitors for the cable television
business of Telewest and General Cable 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 (weekly average of more than 26 hours per person during the fourth
quarter of 1997). 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, an independent
market research study indicates that viewers have a desire for a wider variety
of television programming. This study indicates that in the UK, more than one-
third of all viewing in homes with either a cable television or satellite
service was of cable or satellite channels. 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 and are becoming
increasingly popular. DTH satellite penetration has increased from
approximately 500,000 homes in 1989 to 4 million at 31 December 1997. BSkyB is
the leading supplier of satellite programming in the UK. BSkyB is also the
principal competitor of Telewest and General Cable in retail pay television as
well as one of its 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 operatory 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. Telewest and General
SECTION FIVE GENERAL INFORMATION
I-92
<PAGE>
Cable currently offer their Front Row service. See "--Section Two--Information
on Telewest--Cable Television".
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.
Telewest and General Cable currently expect to begin introducing digital
services in 1999. Telewest and General Cable believe their 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 thereby ;
. Capacity of the Telewest digital system will be greater than that
available on the BDB system (which is expected to offer the equivalent
of 30 television channels).
. Digital broadcast services on the Telewest system will 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's believes is 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 Telewest and General Cable
have also requested access to those services. The European Commission is
currently considering the extent to which the joint venture might involve any
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 and 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. Such auctions of spectrum could result in
increased competition for the Telewest Group and the General Cable Group.
SECTION FIVE GENERAL INFORMATION
I-93
<PAGE>
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, 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--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 further 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 sought number portability from Telewest in one region, the
Midlands. This will allow those Telewest customers who choose to switch to BT
to do so without changing their telephone number. BT has sought number
portability from General Cable in the majority of General Cable's franchise
areas.
As a result of changes to the Interconnection Directive (see "--Regulatory
Matters--Telecommunications Regulation--Carrier Pre-Selection"), the Telewest
Group 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. 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.
SECTION FIVE GENERAL INFORMATION
I-94
<PAGE>
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.
The acquisition of Imminus enables the General Cable Group to provide Managed
Data Network Services. Traditionally Imminus has concentrated on the travel
sector, with AT&T and Istel, and is likely to face competition from BT in the
future.
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.
SECTION FIVE GENERAL INFORMATION
I-95
<PAGE>
- - --------------------------------------------------------------------------------
SECTION SIX
RISK FACTORS
- - --------------------------------------------------------------------------------
In connection with the Merger, shareholders should consider carefully 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" below 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.
SECTION SIX GENERAL INFORMATION
I-96
<PAGE>
NEED TO RENEGOTIATE OR REFINANCE EXISTING FACILITIES; REQUIREMENT FOR
ADDITIONAL FUNDS
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 on page . , 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 favourable 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 favourable 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.
The Combined Group may require additional funding after 31 December 1999. If
additional funding was 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
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).
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. Although the amount and terms of such
debt securities have not been finalised, Telewest expects that they will
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
SECTION SIX GENERAL INFORMATION
I-97
<PAGE>
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.
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, under UK GAAP, including non-cash depreciation and
amortisation expenses of approximately (Pounds)354 million under UK GAAP.
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 under UK GAAP, including non-cash depreciation and
amortisation expenses of approximately (Pounds) . million under UK GAAP.
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.
LIMITED CONTROL OF AFFILIATED COMPANIES
Following completion of the Merger, the Combined Group anticipates that it
will own at least a 49.95% interest in Birmingham Cable and an interest of
approximately 50.0% in Cable London (the "Combined Group's Affiliated
Companies"). The precise percentage interest to be owned by the Combined 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 Birmingham
Cable Articles, (c) resolution of disputes between Telewest and Comcast
concerning the operation of the Co-Ownership Agreement and Birmingham Cable
Articles and (d) the ability of the Combined Group to obtain financing for the
purchase of the Comcast interest in Birmingham Cable. If the NTL/Comcast Merger
is completed, the Combined Group will have the right to acquire 100% of Cable
London at a price determined by the Cable London Board as provided in the
General Cable Articles. 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. Accordingly, there can be no assurance
that the Combined Group will acquire or control more than the 49.95% and
approximately 50.0% interests in Birmingham Cable and Cable London,
respectively. See "-- Section One--The Merger and Related Matters--Birmingham
Cable and Cable London".
Even if the Combined Group acquires more than a 50% interest in the Combined
Group's Affiliated Companies, there can be no assurance as to when the Combined
Group will have the ability to control the day-to-day management or operations
of the Combined Group Affiliated Companies. At present,
SECTION SIX GENERAL INFORMATION
I-98
<PAGE>
although the Telewest Group has representatives on each board of directors of
the Combined Group Affiliated Companies and has the right to approve certain
significant transactions and other corporate matters, the Combined Group's
ability to control the day-to-day management or operations of the Combined
Group Affiliated Companies is limited. Consequently, the value of the Combined
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 Combined
Group is unable, without the consent of the other principal shareholder
(Comcast), to cause the Combined Group Affiliated Companies to implement
strategies that the Combined Group may favour, or to cause dividends or other
distributions to be made. The Combined Group is also restricted by certain
agreements with other parties from transferring its interests in the Combined
Group Affiliated Companies without the consent of the relevant partners.
Accordingly, there can be no assurance that the Combined Group will be able to
realise the full economic benefit from its ownership interests in the Combined
Group Affiliated Companies, whether through the receipt of dividends or other
distributions from the Combined Group Affiliated 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 that in the future it may face competition from
programming provided by video-on-demand services, including those that may be
provided by PTOs, and digital terrestrial broadcasting. 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 and new sources of
capital. Further information on cable television competition can be found under
"-- Section Five -- Certain 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, fully built networks 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".
SECTION SIX GENERAL INFORMATION
I-99
<PAGE>
CONSTRUCTION OF NETWORKS
Although the Groups have commenced or completed construction in all of their
franchises, and relaxed construction milestones have recently been approved for
certain franchises, as at 31 December 1997 networks remain to be built for
approximately . % of the homes in the Combined Group Owned and Operated
Franchises. 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. Under the terms of current licences, the Groups are required to
construct cable systems passing approximately . additional premises in 1998,
1999 and 2000. 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 licence 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 retain 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.
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
SECTION SIX GENERAL INFORMATIO1
I-100
<PAGE>
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 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
Department of National Heritage and broadcasting licences are issued and
monitored by the ITC. For further information on regulatory issues, see "--
Section Five -- Certain Regulatory Matters and Competition". Changes in the
regulation 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 the leading supplier of cable television programming and the
exclusive supplier of certain programming, including Sky Sports and the most
popular premium film channels available in the UK. BSkyB also competes with the
Groups through its DTH satellite service that provides programming to more
than . million homes 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. [Describe current General Cable
relationship with BSkyB.] For a description of the terms of the agreement[s]
with BSkyB, see "Section Seven -- Additional Information -- Material
Contracts".
YEAR 2000 COMPLIANCE
The Telewest Group has established a Steering Committee to oversee the
procedures for compliance with Year 2000 requirements; its work is reviewed
periodically by internal and external auditors, and integrated with similar
programs run by the major corporate shareholders. The project has been set an
objective of complete compliance in good time for the millennium, 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.
Telewest currently believes it will be able to achieve year 2000 compliance by
the end of 1999, and currently does not anticipate any material disruption in
its operations as the result of any failure by Telewest to be in compliance or
that year 2000 compliance costs will have a material adverse effect on
SECTION SIX GENERAL INFORMATION
I-101
<PAGE>
Telewest's results of operations or financial position. 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. 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 2,138,481,211 Telewest shares in issue (assuming that all options
outstanding under the General Cable Share Schemes will be cancelled in exchange
for cash payments). 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
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 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.
SECTION SIX GENERAL INFORMATION
I-102
<PAGE>
- - --------------------------------------------------------------------------------
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 10p 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 735,968,440 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 230,830,208 Telewest Convertible Preference
shares, with 91,977,480 Telewest shares and 115,415,104 Telewest Convertible
Preference shares being issued to Cox UK Communications L.P., 45,988,740
Telewest shares and 57,707,552 Telewest Convertible Preference shares being
issued to Southwestern Bell International Holdings (UK-1) Corporation 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 an ordinary resolution passed on 8 May 1998, the Directors
are generally and unconditionally authorised pursuant to Section 80 of the
Companies Act 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.
(e) An ordinary resolution will be proposed at the Extraordinary General
Meeting which, if passed, will (i) increase the authorised share capital of
Telewest from (Pounds) . to (Pounds) . by the creation of . new Telewest
shares and (ii) in substitution for all previous powers, authorise the
Directors
SECTION SEVEN GENERAL INFORMATION
I-103
<PAGE>
pursuant to Section 80 of the Companies Act to allot relevant securities up to
an aggregate nominal amount of (Pounds) . for a period expiring on the earlier
of .. 1999 or 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 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 .. [2003] or the conclusion of
the Annual General Meeting of Telewest to be held in [2003].
(f) At the date of this document, Telewest's authorised and issued share
capital is as follows:
<TABLE>
<CAPTION>
AUTHORISED ISSUED
------------------------- ---------------------------
((Pounds)) No. ((Pounds)) No.
<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
-----------------------------------------------------
</TABLE>
(g) Immediately following completion of the Merger, the Pre-emptive Issue and
Conversion, Telewest's authorised and issued share capital (all of which will
be fully paid-up) will be as follows:
<TABLE>
<CAPTION>
AUTHORISED ISSUED
-------------- -------------------------
((Pounds)) No. ((Pounds)) No.
<S> <C> <C> <C> <C>
Telewest shares 213,848,121 2,138,481,211
</TABLE>
A maximum of . Telewest shares will be reserved for issue in respect of
options to be granted under the Telewest Share Schemes described in "--Employee
Share Schemes".
(h) 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.
(i) 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.
(j) 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.
(k) Telewest shares are, and the new Telewest shares will be, in registered
form and are capable of being held in uncertificated form in CREST.
(l) Telewest shares are traded on the Official List of the London Stock
Exchange, and Telewest ADSs representing Telewest shares are quoted on Nasdaq.
SECTION SEVEN GENERAL INFORMATION
I-104
<PAGE>
(m) (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, 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 TCI 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 Official List, 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 . 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
19 February 1998 80.00 105.50
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 98.50 180.50
. June 1998 .
(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 . .
. June 1998 . .
</TABLE>
SECTION SEVEN GENERAL INFORMATION
I-105
<PAGE>
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 trade 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 $ 24.38 $ 17.81
Second Quarter 188.5 pence 145 pence $ 28.50 $ 21.63
Third Quarter 161 pence 119 pence $ 25.13 $ 18.50
Fourth Quarter 141.5 pence 117.5 pence $ 23.25 $ 18.63
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 69.5 pence $ 16.38 $ 11.50
Second Quarter (through .
June)
</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 88.5 pence
and 87 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 . June 1998, the latest practicable day prior to the publication of this
document, the middle- market quotation for Telewest shares was . pence and the
last reported sale price of Telewest ADSs on Nasdaq was $ . .
On . June 1998, . Telewest shares (not including those held through
Telewest ADSs) were held by approximately . holders with registered addresses
in the US, equivalent to approximately . % of the outstanding Telewest shares.
On such date, . Telewest ADSs were held by . registered holders of Telewest
ADRs representing Telewest ADSs, equivalent to approximately . % 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 prices for General Cable shares on the London Stock
Exchange and (b) the high and low reported trade prices of General Cable ADSs
on Nasdaq.
SECTION SEVEN GENERAL INFORMATION
I-106
<PAGE>
<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 158 pence $ 14.88 $ 12.06
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 $ 14.88 $ 14.13
Third Quarter 161 pence 196.5 pence $ 13.50 $ 8.38
Fourth Quarter 129 pence 82.5 pence $ 10.63 $ 6.63
1998 First Quarter 168 pence 78 pence $ 14.13 $ 6.25
Second Quarter (through
. June)
</TABLE>
- - ------------
(1) The prices 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
160.5 pence and 159 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 . June 1998, the latest practicable day prior to the publication of this
document, the middle market quotation on the London Stock Exchange for General
Cable shares was . pence, and the last reported sale price of General Cable
ADSs on Nasdaq was $ . .
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.
General Cable has not paid any dividends on the General Cable shares.
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.
SECTION SEVEN GENERAL INFORMATION
I-107
<PAGE>
On . June 1998 (the latest practicable date prior to the publication of this
document), the Noon Buying Rate was (Pounds)1.00 = $ . .
<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 1.53 1.64 1.46
1995 1.55 1.58 1.64 1.53
1996 1.71 1.56 1.72 1.49
1997 1.65 1.64 1.71 1.56
1998 (through . June) -- -- -- --
</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.
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 (except as referred to in note 2 below) either directly or indirectly
wholly owned by Telewest, are listed below. All the companies are incorporated
in England and Wales unless marked with an asterisk, indicating incorporation
in Scotland/67/.
(1) TELEWEST GROUP COMPANIES/68/
- - --------------------------------------------------------------------------------
<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. 1 100,000 shares of (Pounds)1 50% partner in the Joint
Limited(1)(3) each Venture and 0.5% partner in
each of the US limited
partnerships
Theseus No. 2 100,000 shares of (Pounds)1 50% partner in the Joint
Limited(1)(3) 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]
</TABLE>
SECTION SEVEN GENERAL INFORMATION
I-108
<PAGE>
<TABLE>
- - -------------------------------------------------------------------------------------------
<CAPTION>
NAME OF COMPANY ISSUED AND FULLY PAID SHARE CAPITAL NATURE OF BUSINESS
<S> <C> <C>
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.
(2) Cable Guide Limited is 66.67% owned by the Telewest Group and has its
registered office at Genesis Business Park, Albert Drive, Woking, Surrey
GU21 5RW.
(3) Unlimited companies incorporated in England and Wales.
(4) .
(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>
SECTION SEVEN GENERAL INFORMATION
I-109
<PAGE>
(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 51,073,486 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) [541,021,202 A shares Building and 50.0 A shares and . B
of 10 pence each and operation of cable shares
1,557,705 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. Windsor Television Limited, the holder of the Windsor
licences, and Middlesex Cable Limited, the holder of the Hillingdon and
Hounslow licences, are wholly owned subsidiaries of Cable Corporation.
LONDON INTERCONNECT
The Telewest Group has a 16.67% 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.
SECTION SEVEN GENERAL INFORMATION
I-110
<PAGE>
(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.
Windsor Television Limited, Middlesex Cable Limited 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 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
The Cable Corporation Cable House 18,255,389 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 and
232,028,300 special non-
voting deferred
redeemable shares of 1
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 Holding company
Investments London SW1H 9JA (Pounds)1 each
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
US$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 51,808,733 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>
SECTION SEVEN GENERAL INFORMATION
I-111
<PAGE>
<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
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 166,110 "A" ordinary Holding company
Southgate Park shares of 10 pence each
Bakewell Road 172,890 "B" ordinary
Orton Southgate shares of 10 pence each
Peterborough PE2 6YS 172,890 "C" ordinary
shares of 10 pence each
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
SECTION SEVEN GENERAL INFORMATION
I-112
<PAGE>
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 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.
SECTION SEVEN GENERAL INFORMATION
I-113
<PAGE>
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.
(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
SECTION SEVEN GENERAL INFORMATION
I-114
<PAGE>
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 EGM. Each of TINTA, U S West, 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.
SECTION SEVEN GENERAL INFORMATION
I-115
<PAGE>
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 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 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, 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 of
Telewest's licences or proposed licences), refuse to register any share
transfer unless: (a) it is in
SECTION SEVEN GENERAL INFORMATION
I-116
<PAGE>
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).
(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
SECTION SEVEN GENERAL INFORMATION
I-117
<PAGE>
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 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
SECTION SEVEN GENERAL INFORMATION
I-118
<PAGE>
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,
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. 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 sub-division 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 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.
SECTION SEVEN GENERAL INFORMATION
I-119
<PAGE>
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 sub-division 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
the Nasdaq National Market.
(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 group hold (whether directly or via its interests in TW
Holdings) at least 15% of the Telewest shares in issue (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%
(reduced to 5% following certain dilutive issues) (defined as 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 group 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 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.
SECTION SEVEN GENERAL INFORMATION
I-120
<PAGE>
(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.
(E) 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.
(F) COMPENSATION 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.
(G) 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:
(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
SECTION SEVEN GENERAL INFORMATION
I-121
<PAGE>
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.
(H) 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 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].
(I) 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
SECTION SEVEN GENERAL INFORMATION
I-122
<PAGE>
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 of Telewest 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.
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.
SECTION SEVEN GENERAL INFORMATION
I-123
<PAGE>
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 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 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
SECTION SEVEN GENERAL INFORMATION
I-124
<PAGE>
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.
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
SECTION SEVEN GENERAL INFORMATION
I-125
<PAGE>
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 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.
SECTION SEVEN GENERAL INFORMATION
I-126
<PAGE>
(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 this 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 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
SECTION SEVEN GENERAL INFORMATION
I-127
<PAGE>
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.
(H) 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.
(I) 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,
SECTION SEVEN GENERAL INFORMATION
I-128
<PAGE>
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.
(J) 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 "--
Articles of Association -- Telewest Shares -- Disclosure Interests" above, 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
"--Articles of Association -- Telewest Shares -- Disclosure of Interests"
above. 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" above, 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.
(K) 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 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
SECTION SEVEN GENERAL INFORMATION
I-129
<PAGE>
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.
(L) GOVERNING LAW
The Deposit Agreement is governed by the laws of the State of New York.
7.SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of the Merger, the Pre-emptive Issue and Conversion, Telewest
will have 2,138,481,211 Telewest shares in issue (assuming that all options
outstanding under the General Cable Share Schemes will be cancelled in exchange
for cash payments). 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.
Telewest shares not registered 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 under the Securities Act ("Rule 144"), but
SECTION SEVEN GENERAL INFORMATION
I-130
<PAGE>
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 under the Securities Act) 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
"Executive Schemes"), (e) the Telewest 1995 Share Participation Scheme (the
"SPS"), (f) the Telewest Equity Participation Plan (the "EPP") and (g) the
Telewest Long-Term Incentive Plan (the "LTIP"). A description of each of the
Telewest employee share schemes is set forth below.
As at . 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.
SECTION SEVEN GENERAL INFORMATION
I-131
<PAGE>
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 16/6/98 -- 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 3,293,873
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 3,741,977
---------
.
---------
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
---------
.
---------
</TABLE>
The savings contracts associated with the options granted on 11 December
became effective from 1 February 1998.
THE RSS
At . June 1998, awards over 1,080,468 shares were outstanding. The exercise
period of these awards is from 13 January 1998 to 20 January 2007.
THE LTIP
At . 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.
(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
SECTION SEVEN GENERAL INFORMATION
I-132
<PAGE>
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.
(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.
SECTION SEVEN GENERAL INFORMATION
I-133
<PAGE>
(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] [(Pounds)10] and not more than (Pounds)250 per
month for a three- or five-year period (or such other period as is permitted
under the savings contract). 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 of the
London Stock Exchange 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.
(VI) 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.
(VII) 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.
(VIII) 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.
SECTION SEVEN GENERAL INFORMATION
I-134
<PAGE>
(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 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.
SECTION SEVEN GENERAL INFORMATION
I-135
<PAGE>
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 out-perform the Financial Times Stock Exchange 100
Index 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.
(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
SECTION SEVEN GENERAL INFORMATION
I-136
<PAGE>
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.
(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).
SECTION SEVEN GENERAL INFORMATION
I-137
<PAGE>
(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 Telewest Employees' Share Ownership
Plan (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, 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 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 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.
SECTION SEVEN GENERAL INFORMATION
I-138
<PAGE>
(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 total
shareholder return ("TSR") meeting a performance condition relating to the TSR
of FT-SE 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 the Nasdaq National Market) in each case over a three-
year period. If Telewest's TSR is in the top quartile of the FT-SE 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 50th place in the FT-SE 100,
the participant will receive 12.5% of the number of shares awarded to him or
her; if below 50th place in the FT-SE 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
SECTION SEVEN GENERAL INFORMATION
I-139
<PAGE>
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 take-over, 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.
(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.
SECTION SEVEN GENERAL INFORMATION
I-140
<PAGE>
(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 known as 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, 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.PENSION SCHEMES AND OTHER EMPLOYEE BENEFIT SCHEMES
TELEWEST
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 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.
SECTION SEVEN GENERAL INFORMATION
I-141
<PAGE>
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) TELEWEST GROUP
Except as disclosed under "-- Section One--The Merger and Related Matters--
Birmingham Cable and Cable London," 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) 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".
13.1TELEWEST 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
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
SECTION SEVEN GENERAL INFORMATION
I-142
<PAGE>
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, date 12 June 1998 permits
Telewest to enter into the Bridge Facility.
(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, 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.
SECTION SEVEN GENERAL INFORMATION
I-143
<PAGE>
(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 "Second Secured Facility"). The proceeds of the
facility are available for substantially the same purposes as the proceeds of
the Senior Secured Facility.
SECTION SEVEN GENERAL INFORMATION
I-144
<PAGE>
(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.
(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.
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%
SECTION SEVEN GENERAL INFORMATION
I-145
<PAGE>
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.
(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 Royal Bank of Scotland plc. The total obligations of the
Telewest Group under these finance lease arrangements amounts to
(Pounds)75,534,000.
SECTION SEVEN GENERAL INFORMATION
I-146
<PAGE>
13.2GENERAL CABLE RELATED FINANCING ARRANGEMENTS
(A) THE GCH FACILITY AGREEMENT
(I) GENERAL
On 31 December 1997, General Cable Holdings Limited ("GCH") entered into a
syndicated facility agreement (the "GCH Facility Agreement") arranged by Banque
Paribas, CIBC Wood Gundy plc, NatWest Markets 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
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 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 Group Limited YCG or Cable Corporation. YCG 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 YCG,
Cable Corporation and Imminus continue, with the interest exposure management
policies until 31 December 2001.
(III) COVENANTS
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. 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.
(IV) EVENTS OF DEFAULT
The GCH Facility Agreement 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. 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, 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, 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.
(V) GUARANTEES AND SECURITY
The obligations of GCH under the GCH Facility Agreement are guaranteed by
each of YCG, TCC, Filegale and certain subsidiary undertakings of GCH
(together, 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.
SECTION SEVEN GENERAL INFORMATION
I-147
<PAGE>
(VI) INTERCREDITOR AGREEMENT
In connection with the GCH Facility Agreement and the finance leasing
arrangements entered into by Cable Corporation and YCG, 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, which regulates the priority
of the various security interests created by GCH and the Original Guarantors
and subordinating 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 facility agreement (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
Agreement 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, The Cable Corporation Equipment Limited ("TCCEL"),
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 Agreement.
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, inter alia, the GCH Facility Agreement and certain of the covenants are
repeated separately.
SECTION SEVEN GENERAL INFORMATION
I-148
<PAGE>
The obligations of Cable Corporation under the finance lease agreements
entered into with NWSFL are guaranteed by each of WTL, MCL and 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.
Also on 24 December 1996, YCG and a number of its subsidiaries entered into
certain finance lease arrangements as follows:
YCG, 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, a subsidiary of National Westminster Bank Plc.
YCG and Sheffield Cable Communications Limited ("SCC") entered into certain
finance lease arrangements with Lombard Commercial Limited ("LCL"), a
subsidiary of Lombard North Central PLC.
SECTION SEVEN GENERAL INFORMATION
I-149
<PAGE>
YCG 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 YCG set out above will be referred to as the "sub-lessees" and NWSF, LCL and
RFL will be referred to as the "lessors."
The operation of these finance lease arrangements has not been altered as a
result of the refinancing of YCG 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 YCG upon and subject to the
terms and conditions of two finance lease agreements entered into between YCG
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 YCG has taken or will take on lease will be subleased by it to the sub-
lessees, on the terms of subleases between YCG and of the sub-lessees. There is
a general cross-default with, inter alia, the GCH Facility Agreement and
certain of the covenants are repeated separately.
The obligations of YCG 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, 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 YCG.
Under the terms of a lease security agreement entered into by YCG and the
lessors, YCG 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 YCG's obligations under the finance lease
agreements including (i) a letter of credit in an amount (which may increase or
decrease from time to time) determined in accordance with the provisions of the
lease security agreements and (ii) an assignment by way of security of YCG's
rights in relation to monies which may from time to time be credited to a
deposit account in YCG's name with National Westminster Bank plc in accordance
with the requirements of that lease security agreement.
(II) BANQUE PARIBAS FACILITY AGREEMENT
Pursuant to its obligations under the lease security agreement described in
the preceding paragraph, on 24 December 1996, YCG entered into a facility
agreement with Banque Paribas (the "Banque Paribas Facility Agreement")
pursuant to which, among other things, Banque Paribas agreed to issue a letter
of credit for a principal amount of up to a maximum of (Pounds)45 million (the
"Letter of Credit") to NWSFL, LCL and RFL, and YCG agreed to indemnify Banque
Paribas in respect of any payments made under the Letter of Credit and, inter
alia, any losses or liabilities suffered or incurred by Banque Paribas under or
in connection with the Letter of Credit. On 30 December 1996, this facility was
increased to (Pounds)77 million. That indemnity obligation and other amounts
owed to Banque Paribas under the Banque Paribas Facility Agreement are secured,
inter alia, pursuant to a security deposit agreement creating security over a
cash deposit made by YCG with Banque Paribas, 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 Banque Paribas in relation to
this facility.
SECTION SEVEN GENERAL INFORMATION
I-150
<PAGE>
(III) 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 Agreement as set out above.
(IV) INTERCREDITOR AGREEMENT
In connection with the finance leasing arrangements set out above, YCG,
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.
13.3NEW 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) BRIDGE FINANCING FACILITY
(1) GENERAL
(2) REDEMPTION
(3) SECURITY
(4) COVENANTS
(5) EVENTS OF DEFAULT
14.MATERIAL CONTRACTS
(A) 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:
(a)the Relationship Agreement (see "Part . " of this document);
(b)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:
SECTION SEVEN GENERAL INFORMATION
I-151
<PAGE>
(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 EGM; 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 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.
(B) 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 International Pte Ltd
("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
SECTION SEVEN GENERAL INFORMATION
I-152
<PAGE>
owned by it in consideration for the allotment and issue of 84.458 million
new General Cable shares (the "YCG Consideration Shares"), of which
approximately [48 million 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 Singapore Telecom from disposing of the YCG 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 YCG 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 YCG
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, inter alia, 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 agreement relating to YCG;
(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 Limited ("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, inter alia, 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.;
SECTION SEVEN GENERAL INFORMATION
I-153
<PAGE>
(ix) the merger agreement between Telewest (1), General Cable (2),
Vivendi (3) and General Utilities Holdings Limited (4), dated 29 March 1998
(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 General
Utilities Holdings Limited irrevocably committed to accept the Offer and
restrict dealings in the securities of General Cable and Telewest, and (c)
General Cable, Vivendi and General Utilities Holdings Limited 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;
(x) 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 Telewest
Communications Holdings Limited, Telewest Communications Holdings Limited
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 Birmingham Cable's
articles of association.
15.LICENCES
(A) TELEWEST GROUP
The Telewest Group holds LDLs for the following franchise areas: Croydon
(expires 14 October 2000), Bristol (expires 31 August 2005), Taunton and
Bridgwater (expires 20 May 2014), Fylde and Wyre (expires 14 September 2011),
Southport (expires 18 January 2013), 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 South, 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 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 2005), 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 24 April 2006), South Thames Estuary (expires 29 November
2005), North Thames Estuary (expires 13 November 2005), Cheltenham (expires 25
June 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).
SECTION SEVEN GENERAL INFORMATION
I-154
<PAGE>
(B) THE GENERAL CABLE GROUP
The General Cable Group holds [PDSL's] 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 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), 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 and18 July 2022).
(C) 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 December 2005), Enfield (expires 30 December 2005) and
Hackney & Islington (expires 30 December 2005). Subsidiaries of Cable
Corporation own PDSLs for Windsor & Iver (expires 1 December 2000) and
Hillingdon & Hounslow (expires 31 December 2005).
Birmingham Cable holds telecommunications licences for Birmingham (expires 1
November 2012) and Wythall (expires 5 January 2022). Subsidiaries of Cable
London own Telecommunications 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 Licences for Windsor & Iver (expires 29 September 2008) and
Hillingdom & Hounslow (expires 14 February 2014).
16.PREMISES
(A) TELEWEST
The Telewest Group leases or owns various freehold and leasehold 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
</TABLE>
SECTION SEVEN GENERAL INFORMATION
I-155
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
AREA
ADDRESS CURRENT USE (SQUARE FEET)
<S> <C> <C>
Unit 550 and Unit 700 Avon Regional Franchise Group 43,000
Aztec West headquarters, head-end equipment and
Waterside Drive warehouse
Almondsbury
Bristol
Units 3 and 4 Cotswold Regional Franchise Group 20,270
Midpoint Business Park headquarters, head-end equipment and
Staverton warehouse
Units 1 and 2 Offices for London South 18,000
Blue Riband Estate
Factory Lane
Croydon
</TABLE>
(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 . . Offices and
Buildings technical
Summers Road facility
Brunswick Business Park
Liverpool L3 4BJ
Cable Plaza Waterfront 2,520 . . Midlands/ North
West West Regional
The Waterfront headquarters
Brierley Hill
West Midlands
Unit 1 34,000 . . Corporate
Genesis Business Park headquarters,
Albert Drive offices
Woking
Surrey GU21 5RW
Unit 1 Ground Floor: 7 December (Pounds)506,000 Corporate
Genesis Business Park 19,830 1998 headquarters
Albert Drive First Floor:
Woking 19,090
Surrey GU21 SRW
1 South Gyle 46,290 25 April 2017 (Pounds)180,000 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)116,014 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
</TABLE>
SECTION SEVEN GENERAL INFORMATION
I-156
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE LENGTH CURRENT
AREA OF LEASE ANNUAL CURRENT
ADDRESS (SQUARE FEET) (YEARS) EXPIRY DATES RENT USE
<S> <C> <C> <C> <C> <C>
Unit 3 Wells Court 11,645 10 September One peppercorn Network service
Forsyth Road 2004 until 31 August centre and
Sheerwater 1995 and then a corporate
Woking minimum of offices
Surrey (Pounds)216,160
</TABLE>
(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
London SW1H 9JA headquarters
35 Old Queen Street 2,615 Offices
London SW1H 9JA
Cable House 16,295 Offices and
Waterside Drive computer facility
Langley, Berks
84/85 Buckingham Avenue 7,500 Offices and
Slough Trading Estate, Berks switching equipment facility
Arun House 5,500 Offices and
Unit 3 Langley Quay recording 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
</TABLE>
SECTION SEVEN GENERAL INFORMATION
I-157
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE AREA
ADDRESS (SQUARE FEET) CURRENT USE
<S> <C> <C>
642/643 Ajax Avenue 0 Offices and
Trading Estate warehouse
Slough
Berkshire
Beechcroft, Southgate Park 0 Offices
Bakewell Road
Orton Southgate
Peterborough
</TABLE>
SECTION SEVEN GENERAL INFORMATION
I-158
<PAGE>
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 tax position or who is subject to tax in any jurisdiction other
than the UK should consult his 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 1/4 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 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;
SECTION SEVEN GENERAL INFORMATION
I-159
<PAGE>
(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
SECTION SEVEN GENERAL INFORMATION
I-160
<PAGE>
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.
SECTION SEVEN GENERAL INFORMATION
I-161
<PAGE>
Thus, for example, for dividends paid before 6 April 1999, an Eligible US
Holder who receives the (Pounds)8 dividend in the above example would be
considered, for US federal income tax purposes, to receive a dividend of
(Pounds)10 ((Pounds)8 dividend paid plus the (Pounds)2 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 dividend in the above example for US federal income tax
purposes would be considered to receive a dividend of (Pounds)8.89 ((Pounds)8
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, 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.
SECTION SEVEN GENERAL INFORMATION
I-162
<PAGE>
(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 (the "New
Regulations"), such dividends paid in the United States or through the office
of a US-related person would be subject to US backup withholding.
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
SECTION SEVEN GENERAL INFORMATION
I-163
<PAGE>
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
SECTION SEVEN GENERAL INFORMATION
I-164
<PAGE>
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 judgements 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 judgements (other
than arbitration awards) in civil and commercial matters. Consequently, a final
judgement 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 judgement 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 judgement 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 judgement is final and conclusive on the merits and is for
a definite sum of money, (c) the judgement does not contravene English public
policy, (d) the judgement is not for a tax, penalty or judgement arrived at by
doubling, trebling or otherwise multiplying a sum assessed as compensation for
the loss or damage sustained and (e) the judgement 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 judgements in civil and commercial
matters obtained for US federal or state courts; however, there can be no
assurance that such judgements 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 the Commission
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.
SECTION SEVEN GENERAL INFORMATION
I-165
<PAGE>
(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 nominal6.B.15(d)(ii)
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 Inverness6.B.15(h)(i) Road West, Englewood, Colorado 80112 and 1400
Lake Hearn Drive, Atlanta, Georgia 30319, respectively.
22. NO SIGNIFICANT10.41(a)(i)
CHANGE
(a) Telewest
There has been no significant change in the financial or trading
position6.E.8 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
for6.E.8 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 other UK cable
operators [in terms or number of equity homes, customers, revenues and ~ ].
(ii) The statement in "-Section Five- ~ - ~ " that BSkyB is the principal
provider of multi-channel television services in the UK and the sole source of
certain popular television programmes, is based on ~ .
(iii) The statement in "-Section Five- ~ - ~ " that DTH retail prices have
historically increased on an annual basis is based on ~ .
(iv) The statement in "-Section Five- ~ - ~ " that DTH satellite penetration
has increased from approximately 500,000 homes in 1989 to 4,000,000 at 31
December 1997 is based on ~ .
(v) The statement in "-Section Three-Information on General
Cable-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 ~ .
(vi) The statements in "-Section Five- ~ - ~ " that approximately 15% of BT's
business lines are used for indirect access and that BT's market shares for
international calls from business customers is lower than for other services is
based on ~ .
(vii) The statements in "-Section Five-Certain Regulatory Matters and
Competition-Competition-Cable Television-General" that approximately 45% of the
UK population now has access to cable television and that connections to these
services now exceed 3.5 million homes, 2.5 million of these for cable
television are based on ~ . The statement in the same section that 163 cable
franchises had been awarded as at 31 April 1998 is based on ~ .
(viii) The statement in "-Section Five-Certain Regulatory Matters and
Competition-Competition-Cable Television-Broadcast" that daily viewing time in
the UK has been among the highest in the world is based on ~ . The independent
market research study referred to in that section is ~ .
(ix) The statement in "-Section Five-Certain Regulatory Matters and
Competition-Competition-Other Competitors" that there are presently more than
160 suppliers of telecommunications services
SECTION SEVENGENERAL INFORMATION
I-166
<PAGE>
within the UK is based on ~ . The statement in the same section that as at ~
1998, less than 10% of UK residential customers use indirect access operators
is based on ~ .
(x) The statement in "-Section Six-Risk Factors-Significant Competition-Cable
Telephony" that more than ~ % of UK residential telephony customers are
currently customers of BT, is based on ~ .
(xi) The statement in "-Section Six-Risk Factors-Limited Access to
Programming Supply" that BSkyB's DTH satellite service provides programming to
more than ~ million homes in the UK is based on ~ .
(xii) The financial information on Vivendi in "-Section Four - Information on
the Combined Group - Principal Shareholders - Pre-Merger Beneficial Ownership
of General Cable" is extracted from the audited financial statements of
Vivendi.
(xiii) Additional information on BT, BSkyB, Mercury, CWC, Energis, Colt
Telecom Group plc, Ionica L3 Limited, BDB [and others] is extracted from public
sources.
24. DOCUMENTS FOR INSPECTION AND AVAILABLE INFORMATION
(a) Copies of the following documents may be inspected at the offices of6.C.7
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) up to and including ~ 1998 or for the duration of the Offer if
longer;
(i) the Memorandum and Articles of Association of Telewest (as proposed
to6.C.7(a) be amended);
(ii) the Memorandum and Articles of Association of General Cable;
(iii) the audited accounts of the Telewest Group for the two years ended
316.C.7(g) December 1997;
(iv) the audited accounts of the General Cable Group for the two years ended
31 December 1997;6.C.7(g
(v) the service agreements referred to in "-Section Four - Information
on6.C.7(c) 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
Shares Schemes";6.C.7(c)
(viii) the rules of the General Cable Share Schemes6.C.7(e)
; 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;6.C.7(d)
(xi) 6.C.7(e) the letter from KPMG Audit Plc regarding pro forma financial
information in Part II of this document; and
(ix) the written consent of KPMG Audit Plc to the inclusion of its letter
referred to in paragraph (xi) above.
(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 Securities and Exchange Commission. Such reports, proxy
statements and other information concerning Telewest can be
SECTION SEVENGENERAL INFORMATION
I-167
<PAGE>
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
the Commission'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 Commission 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 Commission. The ADSs are quoted through the Nasdaq
National Market 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.
. June 1998
SECTION SEVEN GENERAL INFORMATION
I-168
<PAGE>
----------------
PART II
----------------
UK FINANCIAL INFORMATION
RELATING TO
TELEWEST COMMUNICATIONS PLC
AND
GENERAL CABLE PLC
UK FINANCIAL INFORMATION
II-1
<PAGE>
CONTENTS -- PART II
<TABLE>
- - -------------------------------------------------------------------------------
<CAPTION>
PAGE
<S> <C>
SECTION ONE
- - -------------------------------------------------------------------------------
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-47
UK GAAP Audited Financial Information .................................. II-48
UK GAAP Unaudited Financial Information for the Three Months ended 31
March 1998 ............................................................ II-81
SECTION THREE
- - -------------------------------------------------------------------------------
UK GAAP PRO FORMA FINANCIAL INFORMATION OF THE COMBINED GROUP ........... II-82
UK GAAP Pro forma Financial Information ................................ II-83
</TABLE>
UK FINANCIAL INFORMATION
II-2
<PAGE>
- - --------------------------------------------------------------------------------
SECTION ONE
UK GAAP FINANCIAL INFORMATION OF TELEWEST
- - --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
II-3
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
II-4
<PAGE>
- - --------------------------------------------------------------------------------
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
(a) KPMG Audit Plc have given and have not withdrawn their consent to the
inclusion in this document of their name and report and the references to them
in the form and context in which they are included and have approved the
content of their reports for the purposes of Section 152(i)(e) of the FSA.
SECTION ONE UK FINANCIAL INFORMATION
II-5
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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>
SECTION ONE UK FINANCIAL INFORMATION
II-6
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
3.CASH FLOW STATEMENTS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
----------------------------------------
Note 1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C> <C>
(RESTATED) (RESTATED)
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)
----------------------------------------
(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
SECTION ONE UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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
5.1BASIS 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.
5.2ACCOUNTING 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.
5.2.2BASIS OF PREPARATION
The financial statements have been prepared in accordance with
applicable accounting standards and under the historical cost accounting
rules.
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.
5.2.3INVESTMENTS
The consolidated profit and loss accounts includes 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.
5.2.4GOODWILL
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.
5.2.5CAPITALISATION OF OVERHEADS
Subsidiary undertakings capitalise that proportion of overheads which
relates to the construction of the cable network.
II-8
SECTION ONE UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
5.2.6DEPRECIATION
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.
5.2.7FOREIGN 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 at the balance sheet date and the gains or losses on
translation are included in the profit and loss account.
5.2.8LEASES
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
SECTION ONE UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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.
5.2.9TURNOVER
Turnover represents the invoiced value (excluding value added tax) of
services supplied by the Group.
5.2.10STOCKS
Stocks are stated at the lower of cost and net realisable value.
5.2.11FRANCHISE 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.
5.2.12TAXATION
The charge for taxation is based on the loss for the year and takes into
account taxation 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.
5.2.13PENSION 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.
5.2.15INTERCONNECTION 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.
5.2.16FINANCIAL 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
SECTION ONE UK FINANCIAL INFORMATION
II-10
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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.
5.2.17FINANCE 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 requirements.
5.3SEGMENTAL 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>
SECTION ONE UK FINANCIAL INFORMATION
II-11
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
5.4OPERATING 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.
5.5LOSS 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
--------------------------------------
5.6REMUNERATION 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
Company the services of certain Directors.
SECTION ONE UK FINANCIAL INFORMATION
II-12
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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
-----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
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
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>
SECTION ONE UK FINANCIAL INFORMATION
II-13
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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>
5.7STAFF NUMBERS AND COSTS
The average number of persons employed by the Group (including
Directors) during the year, analysed by category, was as follows:
<TABLE>
<CAPTION>
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>
SECTION ONE UK FINANCIAL INFORMATION
II-14
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
5.8OTHER 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
--------------------------------------
5.9INTEREST 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
--------------------------------------
5.10TAX ON LOSS ON ORDINARY ACTIVITIES
1995 1996 1997
<CAPTION>
(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>
5.11LOSS 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).
SECTION ONE UK FINANCIAL INFORMATION
II-15
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
5.12TANGIBLE 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.
SECTION ONE UK FINANCIAL INFORMATION
II-16
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
5.13FIXED 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 Company.
SECTION ONE UK FINANCIAL INFORMATION
II-17
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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.
5.14STOCKS
All stock is in the form of raw materials and consumables.
5.15DEBTORS
<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
-------------------------
5.16CREDITORS--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.
5.17CREDITORS -- 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>
SECTION ONE UK FINANCIAL INFORMATION
II-18
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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>
<CAPTION>
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
SECTION ONE UK FINANCIAL INFORMATION
II-19
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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%.
5.18DEFERRED 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.
5.19MINORITY 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.
SECTION ONE UK FINANCIAL INFORMATION
II-20
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
5.20CALLED 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
---------------------------
<CAPTION>
(Pounds)'000 (Pounds)'000
<S> <C> <C>
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
---------------------------
<CAPTION>
ALLOTTED, CALLED UP AND
FULLY PAID NUMBER NUMBER
<S> <C> <C>
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
---------------------------
<CAPTION>
(Pounds)'000 (Pounds)'000
<S> <C> <C>
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 of 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
directed 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.
SECTION ONE UK FINANCIAL INFORMATION
II-21
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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
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.
SECTION ONE UK FINANCIAL INFORMATION
II-22
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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.
5.21RESERVES
<TABLE>
<CAPTION>
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>
5.22COMMITMENTS AND CONTINGENCIES
CAPITAL COMMITMENTS
The amount of capital expenditure contracted 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>
SECTION ONE UK FINANCIAL INFORMATION
II-23
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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>
<CAPTION>
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>
SECTION ONE UK FINANCIAL INFORMATION
II-24
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
5.26PURCHASE 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>
5.28RELATED 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:
SECTION ONE UK FINANCIAL INFORMATION
II-25
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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/2/ 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).
5.29PRINCIPAL 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.
SECTION ONE UK FINANCIAL INFORMATION
II-26
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
All subsidiary undertakings have been included in the consolidated
financial statements.
COMPANIES
<TABLE>
<S> <C>
Telewest Communications (Midlands)
Cable Adnet Limited 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
Telewest Communications (Motherwell)
Cable Internet Limited 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
PARTNERSHIPS
<CAPTION>
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
JOINT VENTURES
<CAPTION>
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>
5.30PRINCIPAL 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>
SECTION ONE UK FINANCIAL INFORMATION
II-27
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP AUDITED 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.
SECTION ONE UK FINANCIAL INFORMATION
II-28
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- - --------------------------------------------------------------------------------
SECTION ONE UK FINANCIAL INFORMATION
II-29
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- - --------------------------------------------------------------------------------
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:
"TELEWEST COMMUNICATIONS PLC
1ST QUARTER RESULTS 1998
<TABLE>
<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
Cusotmers 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
SECTION ONE UK FINANCIAL INFORMATION
II-30
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- - --------------------------------------------------------------------------------
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 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."
SECTION ONE UK FINANCIAL INFORMATION
II-31
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- - --------------------------------------------------------------------------------
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
LOANS
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>
SECTION ONE UK FINANCIAL INFORMATION
II-32
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- - --------------------------------------------------------------------------------
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>
SECTION ONE UK FINANCIAL INFORMATION
II-33
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP UNAUDITED FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31 MARCH
1998
- - --------------------------------------------------------------------------------
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
INVESTMENTS
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)
----------------------------------------
MANAGEMENT OF LIQUID RESOURCES
Increase/(decrease) in fixed
deposits (net) 53,288 (16,052) (10,574)
----------------------------------------
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 . to . 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.
SECTION ONE UK FINANCIAL INFORMATION
II-34
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
II-35
SECTION ONE UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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.
The following information provides certain operating and financial data for
the three years ended 31 December 1995, 1996 and 1997 and the three months
ended 31 March 1997 and 1998. It has been extracted without material adjustment
from the Group's published annual report for the year ended 31 December 1997
and the press release for the three months ended 31 March 1998.
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 Financial Review.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(all amounts in (Pounds)million)
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED 31 DECEMBER ENDED 31 MARCH
------------------------------- ----------------
1995 1995 1996 1997 1997 1998
PROFORMA (UNAUDITED)
<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) (50.1) (14.4) (14.2)
Selling, general and
administrative (137.8) (105.4) (167.3) (193.3) (45.5) (45.2)
Depreciation (82.3) (61.5) (129.7) (177.4) (37.5) (46.7)
-------------------------------------------------
(301.7) (228.6) (419.6) (514.3) (120.6) (131.4)
-------------------------------------------------
Operating loss (110.5) (83.8) (129.3) (127.8) (30.2) (21.0)
OTHER INCOME (EXPENSE)
Share of loss of affiliates (12.1) (12.1) (15.2) (21.3) (5.0) (6.7)
Financial expenses, net (25.3) (18.8) (105.4) (160.8) (34.3) (42.6)
Other (0.7) (0.7) (1.0) (0.8) (0.2) --
-------------------------------------------------
Net loss (148.6) (115.4) (250.9) (310.7) (69.7) (70.3)
-------------------------------------------------
</TABLE>
SUMMARY OF OPERATIONS FOR THE THREE MONTHS PERIODS ENDED 31 MARCH 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 31 March
1997 to (Pounds)110.4 million in the three month period ended 31 March 1998,
primarily due to the larger customer base created by the Telewest Group's
continuing network construction.
SECTION ONE UK FINANCIAL INFORMATION
II-36
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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 31 March 1997 to (Pounds)44.2
million in the three months ended 31 March 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 31 March 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 31 March 1997 to 2,794,836 at 31 March 1998.
Penetration improved slightly from 22.0% at 31 December 1997 to 22.1% at 31
March 1998 compared to a slight decrease from 22.6% as at 31 December 1996 to
22.2% as at 31 March 1997. Churn increased from 34.3% in the three month period
ended 31 March 1997 to 37.2% in the three month period ended 31 March 1998 and
from 32.6% in the twelve-month period ended 31 March 1997 to 34.8% in the
twelve month period ended 31 March 1998. This increase in churn was due in part
to customer service related problems resulting from the Telewest Group's
restructure and redundancy programme and the cable television price increases
implemented from 1 November 1997.
Average monthly revenue per cable television customer increased by 0.6% from
(Pounds)23.57 in the three month period ended 31 March 1997 to (Pounds)23.72 in
the three month period ended 31 March 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 1 November 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 31 March 1997 to
(Pounds)61.9 million in the three month period ended 31 March 1998.
Residential telephony revenue increased by (Pounds)8.8 million or 22.1% from
(Pounds)39.7 million in the three month period ended 31 March 1997 to
(Pounds)48.4 million in the three month period ended 31 March 1998. Business
telephony revenue increased by (Pounds)4.2 million or 45.4% from (Pounds)9.3
million in the three months ended 31 March 1997 to (Pounds)13.5 million in the
three months ended 31 March 1998.
The increase in residential telephony revenue in the three month period ended
31 March 1998 compared to the corresponding period ended 31 March 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 31 March 1997 to (Pounds)19.10 in the three month
period ended 31 March 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 31 March 1997 to 2,760,826 at 31 March 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 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 31 December 1997 to
30.1% at 31 March 1998 and from 27.5% at 31 December 1996 to 28.2% at 31 March
1997. Churn increased from 19.8% in the three months ended 31 March 1997 to
21.7% in the three months ended 31 March
II-37
SECTION ONE UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
1998 and from 19.5% in the twelve-month period ended 31 March 1997 to 20.5% in
the twelve months ended 31 March 1998.
The increase in business telephony revenue in the three month period ended 31
March 1998 compared to the corresponding period ended 31 March 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 31 March 1997 to (Pounds)42.81 in
the three month period ended 31 March 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 31 March 1997 to
129,375 at 31 March 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 31 March 1997 to (Pounds)4.3 million in the three month period
ended 31 March 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 and depreciation and amortisation expense) increased by
9.0% from (Pounds)120.6 million in the three month period ended 31 March 1997
to (Pounds)131.4 million in the three month period ended 31 March 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 31 March
1997 to 57% in the three month period ended 31 March 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 31 March 1997 to 23% for the three month period ended 31
March 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.
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 31 March 1997 to 41% for the corresponding
period in 1998. 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 scales resulting from its enlarged operations.
Total labour and overhead costs capitalized in the three month period ended 31
March 1998 were (Pounds)15.3 million,
SECTION ONE UK FINANCIAL INFORMATION
II-38
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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,
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 31 March 1997 to (Pounds)46.7 million in the three month
period ended 31 March 1998. With effect from 1 January 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 31 March 1997 would have
increased by approximately (Pounds)2.6 million.
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 31 March 1997 and 1998, respectively.
Financial expenses, net, consisted primarily of interest expense of
(Pounds)42.9 million for the three month period ended 31 March 1998,
((Pounds)29.4 million for the three month period ended 31 March 1997) and
foreign exchange loss of (Pounds)1.3 million for the three month period ended
31 March 1998, ((Pounds)7.5 million foreign exchange loss for the three month
period ended 31 March 1997) offset in part by interest income earned on short-
term investments and loans to Telewest Affiliated Companies of (Pounds)1.6
million for the three month period ended 31 March 1998 ((Pounds)2.5 million for
the three month period ended 31 March 1997). Interest expense increased by
(Pounds)13.5 million in the three month period ended 31 March 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 31 March 1998 exchange rate
and from marking the associated hedging instruments to their market value at 31
March 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 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 our 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).
II-39
SECTION ONE UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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.
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
SECTION ONE UK FINANCIAL INFORMATION
II-40
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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. All goodwill arising
on acquisitions is directly written off to reserves.
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 fully 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 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.
II-41
SECTION ONE UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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 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.
SECTION ONE UK FINANCIAL INFORMATION
II-42
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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.
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 Telewest Group's policy to hedge non-Sterling denominated
borrowings to reduce or eliminate exchange rate exposure.
II-43
SECTION ONE UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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 extremis, in all such amounts outstanding
under the facility becoming due and payable. At 31 March 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 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,
SECTION ONE UK FINANCIAL INFORMATION
II-44
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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 31 March 1998, the
aggregate notional principal amount of the swaps was (Pounds)500 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; its work is reviewed
periodically by internal and external auditors, and integrated with similar
programmes run by the major corporate shareholders. The project has been set an
objective of complete compliance in good time for the millennium, 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.
II-45
SECTION ONE UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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, 1997 and the three month period
ended 31 March 1998, respectively, was (Pounds)269.1 million, (Pounds)515.6
million, (Pounds)440.6 million and (Pounds)48.8 million, the latter being
substantially lower than in the three month period ended 31 March 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.
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.
SECTION ONE UK FINANCIAL INFORMATION
II-46
<PAGE>
- - --------------------------------------------------------------------------------
SECTION TWO
UK GAAP FINANCIAL INFORMATION OF GENERAL CABLE
- - --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
II-47
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
II-48
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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.
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-49
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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>
SECTION TWO UK FINANCIAL INFORMATION
II-50
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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-51
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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>
SECTION TWO UK FINANCIAL INFORMATION
II-52
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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 increases 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>
5.3 ANALYSIS 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 3,950 13,300 -- --
-------------------------------------------------
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-53
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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>
SECTION TWO UK FINANCIAL INFORMATION
II-54
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
5.4 ACQUISITION OF SUBSIDIARIES
IMMINUS LIMITED AND ITS PARENT COMPANY FILEGALE LIMITED
On 13 March 1997 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 General Cable PLC. 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 utilised (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-55
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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>
5.6MAJOR 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
6.1BASIS 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.
6.2ACCOUNTING POLICIES
The financial statements have been prepared in accordance with 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.
6.2.1Basis of accounting
These accounts have been prepared under the historical cost basis of
accounting.
6.2.2Presentation of financial information
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.
SECTION TWO UK FINANCIAL INFORMATION
II-56
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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.
SECTION TWO UK FINANCIAL INFORMATION
II-57
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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.
SECTION TWO UK FINANCIAL INFORMATION
II-58
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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>
SECTION TWO UK FINANCIAL INFORMATION
II-59
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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>
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>
SECTION TWO UK FINANCIAL INFORMATION
II-60
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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 CGE
appointed 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.
SECTION TWO UK FINANCIAL INFORMATION
II-61
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
6.5EXCEPTIONAL 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>
6.6INTEREST 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>
6.7INTEREST 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>
SECTION TWO UK FINANCIAL INFORMATION
II-62
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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>
SECTION TWO UK FINANCIAL INFORMATION
II-63
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
6.9LOSS 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>
6.10LOSS 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).
SECTION TWO UK FINANCIAL INFORMATION
II-64
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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.
SECTION TWO UK FINANCIAL INFORMATION
II-65
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
6.12INVESTMENTS
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.
SECTION TWO UK FINANCIAL INFORMATION
II-66
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
6.13SUBSIDIARY 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 1 pence 100.0
Overall 83.45
</TABLE>
<TABLE>
<S> <C>
*Windsor Television Limited Barnsley Cable Communications
*The Cable Corporation Equipment Limited Limited
*Middlesex Cable Limited Yorkshire Cable Finance Limited
*Cable Alarms Limited Doncaster Cable Communications
*Windsor Alarms Limited Limited
*European Business Network Limited Rotherham Cable Communications
*Chariot Collection Services Limited Limited
**The Yorkshire Cable Group Limited Halifax Cable Communications Limited
Yorkshire Cable Communications Limited Sheffield Cable Communications
Bradford Cable Communications Limited Limited
Wakefield Cable Communications
Yorkshire Cable Telecom Limited Limited
Yorkshire Cable Limited Mayfair Way Management Limited
Yorkshire Cable Properties Limited Filegate Limited
Northern Credit Limited Fastrak Limited
Imminus (Ireland) Limited
Imminus Limited
General Cable Group Limited (Ord. 10 pence)
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 General Cable
PLC (100% unless otherwise stated:
<TABLE>
<S> <C>
Bradford Cable Telecom Limited
General Cable Communications Limited General Cable Programming Limited (Ord. 10 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)
(Jersey) (ord 50 pence & pref (Pounds)1)
General Communications International Limited
Applied Communication Solutions Limited
General Cable Holdings Limited New TCC Limited (Ord. 10 pence)
General Telecommunications General Communications Corporation
International Limited Limited
General Media Communications Limited
</TABLE>
SECTION TWO UK FINANCIAL INFORMATION
II-67
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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 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 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>
SECTION TWO UK FINANCIAL INFORMATION
II-68
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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.
SECTION TWO UK FINANCIAL INFORMATION
II-69
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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.
SECTION TWO UK FINANCIAL INFORMATION
II-70
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
(Pounds)'000 (Pounds)'000
<S> <C> <C>
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>
SECTION TWO UK FINANCIAL INFORMATION
II-71
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
6.15CREDITORS -- 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
TCC, YCG and Imminus in order to prepay the loan facilities previously arranged
by these companies. As on the date of these payments 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 loss 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 dominated) 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 included 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.
SECTION TWO UK FINANCIAL INFORMATION
II-72
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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 The Cable Corporation Ltd 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>
SECTION TWO UK FINANCIAL INFORMATION
II-73
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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>
SECTION TWO UK FINANCIAL INFORMATION
II-74
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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).
6.20RECONCILIATION 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.
SECTION TWO UK FINANCIAL INFORMATION
II-75
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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>
SECTION TWO UK FINANCIAL INFORMATION
II-76
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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 Shares 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 above of 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.
SECTION TWO UK FINANCIAL INFORMATION
II-77
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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 --
---------------------------------------------------
1,278 899 1,697 642
---------------------------------------------------
</TABLE>
6.24CAPITAL 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):
6.25RELATED 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.
SECTION TWO UK FINANCIAL INFORMATION
II-78
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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.
6.26ACCOUNTS 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>
SECTION TWO UK FINANCIAL INFORMATION
II-79
<PAGE>
- - -------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED 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.
SECTION TWO UK FINANCIAL INFORMATION
II-80
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP UNAUDITED INTERIM FINANCIAL INFORMATION FOR THE THREE MONTHS ENDED 31
MARCH 1998
- - --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
II-81
<PAGE>
- - --------------------------------------------------------------------------------
SECTION THREE
UK GAAP PRO FORMA FINANCIAL INFORMATION OF THE COMBINED GROUP
- - --------------------------------------------------------------------------------
SECTION THREE UK FINANCIAL INFORMATION
II-82
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
UK GAAP PRO FORMA FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
SECTION THREE UK FINANCIAL INFORMATION
II-83
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
UK GAAP PRO FORMA FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
BASIS OF INFORMATION
Set out below is the unaudited pro forma balance sheet 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 financial information combines the results and net
assets of Telewest Communications plc as if the acquisition of General Cable
PLC had been completed on 1 January 1997.
Because of the nature of the pro forma financial information, the unaudited
pro forma combined balance sheet may not give a true picture of the Combined
Group's financial position or results and has been prepared for illustrative
purposes only.
SECTION THREE UK FINANCIAL INFORMATION
II-84
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
UK GAAP PRO FORMA FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
BALANCE SHEET
<TABLE>
<CAPTION>
TELEWEST GENERAL CABLE
AS AT 31 AS AT 31 PRO FORMA
MARCH 1998 MARCH 1998 ADJUSTMENTS COMBINED
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
FIXED ASSETS
Intangible -- -- 671,024 671,024
Tangible 1,707,390 494,756 (21,150) 2,180,996
Investments 77,993 24,523 (25,666) 76,850
----------------------------------------------------
1,785,383 519,279 624,208 2,928,870
----------------------------------------------------
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) (30,000) (334,396)
----------------------------------------------------
Net current
assets/(liabilities) (102,388) 167,329 (30,000) 34,941
----------------------------------------------------
Total assets less
current liabilities 1,682,995 686,608 594,208 2,963,811
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)
----------------------------------------------------
197,929 190,847 600,392 989,168
----------------------------------------------------
Capital and reserves
Called up share capital 142,363 365,092 (293,619) 213,836
Share premium 9,187 94,917 120,025 224,129
Merger reserve 534,257 -- 549,559 1,083,816
Other reserves 270,237 -- -- 270,237
Profit and loss account (758,115) (269,162) 224,427 (802,850)
----------------------------------------------------
Equity shareholders'
funds 197,929 190,847 600,392 989,168
----------------------------------------------------
</TABLE>
SECTION THREE UK FINANCIAL INFORMATION
II-85
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
UK GAAP PRO FORMA 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
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Turnover 386,498 111,848 -- 498,346
Operating costs (514,262) (132,525) (40,388) (687,175)
--------------------------------------------------
Operating loss (127,764) (20,677) (40,388) (188,829)
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)
--------------------------------------------------
Loss on ordinary
activities before tax (309,909) (88,951) (40,388) (439,248)
Tax on loss on ordinary
activities (521) 212 -- (309)
--------------------------------------------------
Loss on ordinary
activities after taxation (310,430) (88,739) (40,388) (439,557)
Minority interests (293) 5,562 (5,562) (293)
--------------------------------------------------
Retained loss for the
financial year (310,723) (83,177) (45,950) (439,850)
--------------------------------------------------
</TABLE>
SECTION THREE UK FINANCIAL INFORMATION
II-86
<PAGE>
SOURCES OF INFORMATION
The relevant financial information for the purpose of preparing the unaudited
pro forma balance sheet has been sourced from:
. the unaudited consolidated quarterly financial statements of Telewest
Communications plc and General Cable PLC for the three months ended 31 March
1998 as set out on pages . to . ; and
. the audited consolidated financial statements of Telewest Communications
plc and General Cable PLC for the year ended 31 December 1997 as set out on
pages . to . .
The adjustments made in preparing the pro forma financial statements of the
Combined Group are explained below:
. to reflect the issue of approximately 454 million new Telewest shares and
(Pounds)240 million of cash for the acquisition of General Cable PLC;
. to reflect the issue of approximately 260 million new Telewest shares under
the Pre-emptive Issue at a price of 92.5p;
. to reflect the estimated costs of the transaction;
. to reflect normal consolidation adjustments;
. to reflect the amortisation of goodwill arising from the acquisition of
General Cable; and
. to reflect the estimated fair value adjustments and increase in
depreciation charges arising from the alignment of accounting policies.
The adjustments relating to the amortisation of goodwill and alignment of
depreciation charges will have an ongoing effect on the Combined Group's profit
and loss account.
SECTION THREE UK FINANCIAL INFORMATION
II-87
<PAGE>
PO Box 89612.35
8 Salisbury Square
London EC4Y 8BB
United Kingdom
The Directors
Telewest Communications plc
Genesis Business Park
Albert Drive
Woking
Surrey
GU21 5RW
The Directors
J Henry Schroder & Co Limited
120 Cheapside
London
EC2V 6DS
[ ] June 1998
Dear Sirs
Telewest Communications plc ("Telewest")
We have reviewed the calculations and basis of preparation of the pro forma
profit and loss account and pro forma balance sheet of the Combined Group (for
the purposes of this letter, the Combined Group shall refer to Telewest as
enlarged by the acquisition of General Cable PLC) as at 31 March 1998 and for
the year ended 31 December 1997 (the "pro forma financial information"), for
which the Directors of Telewest are solely responsible. The pro forma financial
information, which has been prepared for illustrative purposes only, is set out
in Part II of the prospectus and listing particulars dated ~ June 1998.
We conducted our work in accordance with Statements of Investment Circular
Reporting Standards issued by the Auditing Practices Board.
In our opinion:
~ the pro forma financial information has been properly compiled on the basis
of preparation set out therein;
~ such basis is consistent with the accounting policies of Telewest; and
~ the adjustments are appropriate for the purposes of the pro forma financial
information as disclosed pursuant to paragraph 12.29 of the Listing Rules.
The above opinion is provided solely on the basis of and in accordance with
standards and practice established in the United Kingdom. In the United States,
reporting standards and practice are different and the role of the reporting
accountant does not provide for an opinion in the manner referred to above.
Accordingly, this opinion should not be relied upon as if it has been provided
in accordance with United States standards.
Yours faithfully
KPMG Audit Plc
GENERAL INFORMATION
II-88
<PAGE>
- - --------------------------------------------------------------------------------
PART III
----------------
- - --------------------------------------------------------------------------------
US FINANCIAL INFORMATION
RELATING TO
TELEWEST COMMUNICATIONS PLC
AND
GENERAL CABLE PLC
III-1
<PAGE>
CONTENTS -- PART III
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------
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 Interim Condensed Consolidated Financial
Statements........................................................... III-49
SECTION TWO
- - ----------------------------------------------------------------------------
UK GAAP FINANCIAL INFORMATION OF GENERAL CABLE (WITH RECONCILIATION TO
US GAAP).............................................................. III-56
UK GAAP Selected Consolidated Financial Information................... III-57
Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................ III-63
UK GAAP Audited Consolidated Financial Statements of General Cable
with a Reconciliation of Net Income and Shareholders' Equity to US
GAAP................................................................. III-87
UK GAAP Audited Consolidated Financial Statements of Birmingham Cable
with a Reconciliation of Net Income and Shareholders' Equity to US
GAAP................................................................. III-124
SECTION THREE
- - ----------------------------------------------------------------------------
US GAAP UNAUDITED PRO FORMA AND COMPARATIVE FINANCIAL INFORMATION OF
THE COMBINED GROUP.................................................... III-145
US GAAP Unaudited Pro Forma Financial Information..................... III-146
SECTION FOUR
- - ----------------------------------------------------------------------------
Experts................................................................ III-155
</TABLE>
III-2 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
SECTION ONE
US GAAP FINANCIAL INFORMATION OF TELEWEST
- - --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
III-3
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP SELECTED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
III-4
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP SELECTED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
The selected consolidated financial data set forth below for the Predecessor
Business as at and for the year ended December 31, 1993, the Joint Venture 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.
SECTION ONE US FINANCIAL INFORMATION
III-5
<PAGE>
- - -------------------------------------------------------------------------------
TELEWEST
US GAAP SELECTED 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.
SECTION ONE US FINANCIAL INFORMATION
III-6
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
III-7
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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>
SECTION ONE US FINANCIAL INFORMATION
III-8
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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 programme 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
SECTION ONE US FINANCIAL INFORMATION
III-9
<PAGE>
- - -------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
- - -------------------------------------------------------------------------------
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.
SECTION ONE US FINANCIAL INFORMATION
III-10
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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 arise 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
SECTION ONE US FINANCIAL INFORMATION
III-11
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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.
SECTION ONE US FINANCIAL INFORMATION
III-12
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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 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 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. Amortisation 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 consist 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
SECTION ONE US FINANCIAL INFORMATION
III-13
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
debentures are fully 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.
SECTION ONE US FINANCIAL INFORMATION
III-14
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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 have 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 is 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 labour
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 its Affiliated Companies
accounted for under the equity method, principally Birmingham Cable Corporation
Limited and Cable London plc, was (Pounds)16.0 million and (Pounds)12.8 million
in 1996 and 1995, respectively.
SECTION ONE US FINANCIAL INFORMATION
III-15
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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
SECTION ONE US FINANCIAL INFORMATION
III-16
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
The Telewest Group has established a Steering Committee to oversee the
procedures for compliance with Year 2000 requirements; its work is reviewed
periodically by internal and external auditors, and integrated with similar
programs run by the major corporate shareholders. The project has been set an
objective of complete compliance in good time for the millennium, 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 page I-14, 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.
SECTION ONE US FINANCIAL INFORMATION
III-18
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
III-19
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- - --------------------------------------------------------------------------------
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
SECTION ONE US FINANCIAL INFORMATION
III-20
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
<S> <C> <C> <C> <C>
-----------------------------------------------------
<CAPTION>
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
<S> <C> <C> <C> <C>
-----------------------------------------------------
<CAPTION>
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
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
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.
SECTION ONE US FINANCIAL INFORMATION
III-22
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
<S> <C> <C> <C> <C>
--------------------------------------------------
<CAPTION>
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
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
- - --------------------------------------------------------------------------------
<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.
SECTION ONE US FINANCIAL INFORMATION
III-24
<PAGE>
- - -------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995
- - -------------------------------------------------------------------------------
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
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - -------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED 31 DECEMBER 1997,
1996 AND 1995 (CONTINUED)
- - -------------------------------------------------------------------------------
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
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - -------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - -------------------------------------------------------------------------------
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.
SECTION ONE US FINANCIAL INFORMATION
III-28
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
Telewest has chosen to continue 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 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
III-29
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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.
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
SECTION ONE US FINANCIAL INFORMATION
III-30
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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.
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
III-31
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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.
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.
SECTION ONE US FINANCIAL INFORMATION
III-32
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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>
----------------------------------------------------------------------------
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
----------------------
</TABLE>
----------------------------------------------------------------------------
SECTION ONE US FINANCIAL INFORMATION
III-33
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
8 INVESTMENTS
----------------------------------------------------------------------------
Telewest has investments in affiliates accounted for under the equity
method at December 31, 1997 and 1996 as follows:
----------------------------------------------------------------------------
<TABLE>
<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.
SECTION ONE US FINANCIAL INFORMATION
III-34
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION ONE US FINANCIAL INFORMATION
III-35
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION ONE III-36 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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,
--------------------
<CAPTION>
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>
----------------------------------------------------------------------------
SECTION ONE III-37 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED 31 DECEMBER 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
13 DEBT
Debt is summarized as follows at December 31, 1997 and 1996:
----------------------------------------------------------------------------
<TABLE>
<CAPTION>
WEIGHTED AVERAGE INTEREST RATE
--------------------------------------
<CAPTION>
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
SECTION ONE III-38 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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 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%
SECTION ONE III-39 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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.
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>
SECTION ONE III-40 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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 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
SECTION ONE III-41 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
ordinary shares of TCCL ceased on the London Stock Exchange and Nasdaq
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.
SECTION ONE III-42 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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 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-43
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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>
----------------------------------------------------------------------------
SECTION ONE III-44 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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-45
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION ONE III-46 US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - --------------------------------------------------------------------------------
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.
18RELATED 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-47
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - -------------------------------------------------------------------------------
TELEWEST
US GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS
- - -------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 1997,
1996 AND 1995 (CONTINUED)
- - -------------------------------------------------------------------------------
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-48
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST
US GAAP UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
III-49
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
<TABLE>
- - -------------------------------------------------------------------------------
<CAPTION>
3 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED
MARCH 31 MARCH 31 MARCH 31
1998 1998 1997
($'000) ((Pounds)'000) ((Pounds)'000)
<S> <C> <C> <C>
TURNOVER
Cable television 74,068 44,180 38,101
Telephony -- residential 81,203 48,436 39,674
Telephony -- business 22,636 13,502 9,287
Other (including (Pounds)697 and
(Pounds)377 in 1998 and 1997,
respectively, from related
parties) 7,219 4,306 3,328
----------------------------------
185,126 110,424 90,390
----------------------------------
OPERATING COSTS AND EXPENSES
Programming (including
(Pounds)2,718 and (Pounds)3,248 in
1998 and 1997, respectively, to
related parties) (42,343) (25,257) (23,198)
Telephony (23,808) (14,201) (14,379)
Selling, general, and
administrative (including
(Pounds)219 and (Pounds)341 in
1998 and 1997, respectively, to
related parties) (75,790) (45,207) (45,529)
Depreciation (78,333) (46,724) (37,456)
Amortisation of goodwill (11,063) (6,599) (6,594)
----------------------------------
(231,337) (137,988) (127,156)
----------------------------------
OPERATING LOSS (46,211) (27,564) (36,766)
----------------------------------
OTHER INCOME/(EXPENSE)
Interest income (including
(Pounds)578 and (Pounds)415 in
1998 and 1997,respectively, from
related parties) 1,888 1,126 2,362
Interest expense (71,622) (42,721) (30,314)
Foreign exchange gains/(losses),
net 11,115 6,630 (24,127)
Share of net losses of affiliates (11,239) (6,704) (4,978)
Gain on disposal of assets 857 511 121
Minority interest in profits of
consolidated subsidiaries, net (44) (26) (117)
----------------------------------
LOSS BEFORE INCOME TAXES (115,256) (68,748) (93,819)
----------------------------------
Income tax credit/(expense) 34 20 (64)
NET LOSS (115,222) (68,728) (93,883)
----------------------------------
BASIC AND DILUTED LOSS PER ORDINARY
SHARE (PENCE) (0.12) (0.07) (0.10)
----------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements
III-50
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
BALANCE SHEETS
<TABLE>
<CAPTION>
UNAUDITED UNAUDITED DECEMBER 31,
MARCH 31, 1998 MARCH 31, 1998 1997
($'000) ((Pounds)'000) ((Pounds)'000)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 73,556 43,875 29,582
Trade receivables (net of
allowance for doubtful
accounts of (Pounds)8,097 in
1998 and (Pounds)6,507 in
1997) 71,434 42,609 36,627
Other receivables 46,377 27,663 26,207
Prepaid expenses 17,013 10,148 7,625
Investments in affiliates,
accounted for under the
equity method, and related
receivables 87,726 52,327 59,707
Other investments, at cost 43,029 25,666 25,666
Property and equipment (less
accumulated depreciation of
(Pounds)528,846 in 1998 and
(Pounds)481,451 in 1997) 2,858,277 1,704,907 1,705,520
Goodwill (less accumulated
amortization of
(Pounds)70,895 in 1998 and
(Pounds)64,301 in 1997) 770,035 459,311 465,905
Other assets (less accumulated
amortization of
(Pounds)12,054 in 1998 and
(Pounds)10,140 in 1997) 81,827 48,808 56,513
---------------------------------
TOTAL ASSETS 4,049,274 2,415,314 2,413,352
---------------------------------
LIABILITIES AND SHAREHOLDERS'
EQUITY
Accounts payable 55,920 33,355 26,710
Other liabilities 313,322 186,891 198,664
Debt 2,428,947 1,448,820 1,373,054
Capital lease obligations 126,676 75,560 75,534
---------------------------------
TOTAL LIABILITIES 2,924,865 1,744,626 1,673,962
---------------------------------
MINORITY INTERESTS 1,117 666 640
---------------------------------
SHAREHOLDERS' EQUITY
Convertible preference shares,
10 pence par value;
661,000,000 shares
authorized, and 496,066,708
shares issued and outstanding 83,166 49,607 49,607
Ordinary shares, 10 pence par
value; 2,010,000,000 shares
authorized, and 927,567,600
shares issued and outstanding 155,507 92,757 92,757
Additional paid-in capital 2,234,585 1,332,887 1,332,887
Accumulated deficit (1,346,712) (803,288) (734,560)
---------------------------------
1,126,546 671,963 740,691
Ordinary shares held in trust
for the Telewest Restricted
Share Scheme (3,254) (1,941) (1,941)
---------------------------------
TOTAL SHAREHOLDERS' EQUITY 1,123,292 670,022 738,750
---------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 4,049,274 2,415,314 2,413,352
---------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
III-51
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
- - -------------------------------------------------------------------------------
<S> <C> <C> <C>
3 MONTHS 3 MONTHS 3 MONTHS
ENDED ENDED ENDED
MARCH 31, 1998 MARCH 31, 1998 MARCH 31, 1997
($'000) ((Pounds)'000) ((Pounds)'000)
CASH FLOWS BEFORE OPERATING
ACTIVITIES
Net loss (115,222) (68,728) (93,883)
Adjustments to reconcile net
loss to net cash provided
by/(used in) operating
activities :
Depreciation 78,333 46,724 37,456
Amortization of goodwill 11,055 6,594 6,594
Amortization of deferred
financing costs and issue
discount on senior discount
debentures 40,145 23,946 18,276
Unrealized (loss)/gain on
foreign currency translation (11,107) (6,625) 23,794
Share of net losses of
affiliates 11,239 6,704 4,978
Gain on disposal of assets (857) (511) (121)
Minority interests in profits 44 26 117
Change in operating assets and
liabilities :
Change in receivables (7,754) (4,625) (11,553)
Change in prepaid expenses (4,230) (2,523) 167
Change in accounts payable 9,710 5,792 (15,034)
Change in other liabilities (18,125) (10,811) 7,976
----------------------------------------------
NET CASH USED IN OPERATING
ACTIVITIES (6,769) (4,037) (21,233)
----------------------------------------------
CASH FLOWS FROM INVESTING
ACTIVITIES
Cash paid for property and
equipment (82,727) (49,345) (92,619)
Additional investments in and
loans to affiliates (3,692) (2,202) (8,505)
Proceeds from disposals of
assets 5,346 3,188 999
----------------------------------------------
NET CASH USED IN INVESTING
ACTIVITIES (81,073) (48,359) (100,125)
----------------------------------------------
CASH FLOWS FROM FINANCING
ACTIVITIES
Cash paid for credit facility
arrangement costs (9,891) (5,900) 0
Proceeds from borrowings 125,737 75,000 150,000
Repayment of borrowings (18) (10) 0
Capital element of finance
lease repayments (4,024) (2,401) (1,020)
----------------------------------------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 111,804 66,689 148,980
----------------------------------------------
NET INCREASE IN CASH AND CASH
EQUIVALENTS 23,962 14,293 27,622
Effect of exchange rate
changes on cash and cash
equivalents -- -- 64
----------------------------------------------
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 49,594 29,582 79,116
----------------------------------------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD 73,556 43,875 106,802
----------------------------------------------
- - -------------------------------------------------------------------------------
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
III-52
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
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 3, 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-53
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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-54
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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-55
SECTION ONE US FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
SECTION TWO
UK GAAP FINANCIAL INFORMATION OF GENERAL CABLE (WITH RECONCILIATION
TO US GAAP)
- - --------------------------------------------------------------------------------
III-56
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
III-57
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
SELECTED CONSOLIDATED FINANCIAL INFORMATION
SECTION TWO________________________________________UK 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 has also 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 -- Description of
Business -- The Systems -- System Operating Data".
The 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. In General Cable's Consolidated Financial
Statements, revenues are referred to as turnover, income is referred to as
profit and expenses are referred to as costs.
III-58
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED 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-59
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
SELECTED SYSTEM FINANCIAL DATA
- - --------------------------------------------------------------------------------
General Cable believes that the presentation of consolidated financial
information for each of the Cable Corporation, Yorkshire Cable and Birmingham
Cable enhances the understanding of the General Cable Group and the development
of the Systems' operations. 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 Results of Operations and Financial Condition" 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 statements set out below have been prepared in
accordance with UK GAAP, which differs in significant respects from US GAAP.
Note . to the Birmingham Cable Financial Statements provides a description of
the principal differences between UK GAAP and US GAAP, as they relate to
Birmingham Cable, for the three years ended 31 December 1997. In the Birmingham
Cable Financial Statements, revenues are referred to as turnover and income is
referred to as profit.
<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)
Exceptional/Charge --
Fundamental
Reorganisation -- -- -- -- (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 . for footnotes.
III-60
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
SELECTED SYSTEM FINANCIAL DATA (CONTINUED)
- - --------------------------------------------------------------------------------
<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)
Exceptional Charge --
Fundamental
Reorganisation -- -- -- -- (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) 27,493 (5,560) (20,897) 36,923 87,904 144,163
Long-term borrowings (1,120) (4,071) (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 98,316 137,589 177,591 222,896 242,302 397,375
Net current assets
(liabilities) (4,270) (4,554) 118,039 57,571 (12,997) (21,315)
Long-term borrowings (3,757) (5,120) (183,204) (186,185) (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>
SECTION TWO UK FINANCIAL INFORMATION
III-61
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP SELECTED FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
SELECTED SYSTEM FINANCIAL DATA (CONTINUED)
- - --------------------------------------------------------------------------------
- - ------------
(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.
III-62
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
III-63
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 Consolidated Financial Statements have been prepared in accordance with
UK GAAP, which differs in significant respects from US GAAP. Note 25 to the
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. In the Consolidated Financial Statements, revenues are
referred to as turnover, income is referred to as profit and expenses are
referred to as costs.
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
III-64
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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--Systems 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 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.
SECTION TWO UK FINANCIAL INFORMATION
III-65
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
<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)98,368,000 (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)98,368,000 (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)98,368,000 (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-66
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 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"). The Company 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. The Company 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
SECTION TWO UK FINANCIAL INFORMATION
III-67
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 (Pounds)33,000,000, 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
of General Cable 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-68
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 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
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.
SECTION TWO UK FINANCIAL INFORMATION
III-69
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
GENERAL CABLE PLC
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.
III-70
SECTION TWO UK FINANCIAL INFORMATION
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 exceptional reorganisation charge 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
SECTION TWO UK FINANCIAL INFORMATION
III-71
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 exceptional reorganisation charge 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 6,400 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
SECTION TWO UK FINANCIAL INFORMATION
III-72
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 Group acquired Filegale and its subsidiary Imminus on 13 March 1997.
During the period since acquisition, Imminus contributed (Pounds)13,600,000 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
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 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.
SECTION TWO UK FINANCIAL INFORMATION
III-73
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 64%,
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
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 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.
SECTION TWO UK FINANCIAL INFORMATION
III-74
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 the 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.
SECTION TWO UK FINANCIAL INFORMATION
III-75
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
III-76
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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
SECTION TWO UK FINANCIAL INFORMATION
III-77
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
III-78
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
GCH is a wholly owned subsidiary of General Cable and acts as an intermediate
holding company. The Company'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
SECTION TWO UK FINANCIAL INFORMATION
III-79
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 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 until 31
December 2001.
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 amendment, an event of default would occur if, inter
alia, Telewest does not maintain directly or
SECTION TWO UK FINANCIAL INFORMATION
III-80
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 subordinating 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 Corporation has taken or will take
on lease will be subleased by it to WTL or MCL, on the terms of
SECTION TWO UK FINANCIAL INFORMATION
III-81
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
- - --------------------------------------------------------------------------------
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. The Company 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 which 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.
SECTION TWO UK FINANCIAL INFORMATION
III-82
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 NWSF,
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,
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 a lease security agreement entered into by Yorkshire Cable
and 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) a letter of credit in an amount
(which may increase or decrease from time to time) determined in accordance
with the provisions of the 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 that
lease security agreement.
SECTION TWO UK FINANCIAL INFORMATION
III-83
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
Pursuant to its obligations under the lease security agreement described in
the preceding paragraph, on 24 December 1996, Yorkshire Cable entered into a
facility agreement with Banque Paribas (the "Banque Paribas Facility
Agreement") pursuant to which, inter alia, Banque Paribas agreed to issue a
letter of credit for a principal amount of up to a maximum of
(Pounds)45,000,000 (the "Banque Letter of Credit") to NWSFL, LCL and RFL and
Yorkshire Cable agreed to indemnify Banque Paribas in respect of any payments
made under the Banque Letter of Credit and, inter alia, any losses or
liabilities suffered or incurred by Banque Paribas under or in connection with
the Banque Letter of Credit. On 30 December 1996 this facility was increased to
(Pounds)77,000,000. The indemnity obligation and other amounts owed to Banque
Paribas under the Banque Paribas Facility Agreement are secured, inter alia,
pursuant to a security deposit agreement creating security over a cash deposit
made by Yorkshire Cable with Banque Paribas, which deposit will from time to
time be increased each time Cable Corporation requests an increase in the
amount of the Banque Letter of Credit. General Cable has also entered into
certain indemnity and security arrangements in favour of Banque Paribas in
relation to this facility.
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 Agreement 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 together with any additional
drawing made to fund the redemption of the Preference Shares or the payment of
the option price (up to an aggregate maximum of (Pounds)175,000,000) 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.
SECTION TWO UK FINANCIAL INFORMATION
III-84
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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
SECTION TW0 UK FINANCIAL INFORMATION
III-85
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
- - --------------------------------------------------------------------------------
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 BCC. 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 BCC. The major differences between UK GAAP and US GAAP
concern cable communications industry accounting, expense recognition in 1997.
The Company 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.
SECTION TWO UK FINANCIAL INFORMATION
III-86
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
III-87
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILATION OF NET
INCOME AND SHAREHOLDER'S EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
<S> <C>
GENERAL CABLE PLC AND SUBSIDIARIES
Report of Independent Accountants..................................... III-89
Consolidated Profit and Loss Accounts for the years ended December 31,
1997,
1996, 1995........................................................... III-90
Consolidated Balance Sheets at December 31, 1997, 1996................ III-91
Consolidated Statements of Cash Flows for the years ended December 31,
1997,
1996, 1995........................................................... III-92
Reconciliation of Movements in Shareholders' Funds for the years ended
December 31, 1997, 1996, 1995........................................ III-93
Notes to the Financial Statements..................................... III-96
BIRMINGHAM CABLE CORPORATION LIMITED AND SUBSIDIARIES
Report of Independent Accountants..................................... III-125
Consolidated Profit and Loss Accounts for the years ended December 31,
1997, 1996
and 1995............................................................. III-126
Consolidated Balance Sheets at December 31, 1997, 1996 and 1995....... III-127
Consolidated Statements of Cash Flows for the years ended December 31,
1997, 1996
and 1995............................................................. III-128
Notes to the Financial Statements..................................... III-129
</TABLE>
SECTION TWO UK FINANCIAL INFORMATION
III-88
<PAGE>
- - --------------------------------------------------------------------------------
GENERAL CABLE PLC
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- - --------------------------------------------------------------------------------
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-87 to
III-120. 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
SECTION TWO UK FINANCIAL INFORMATION
III-89
<PAGE>
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-90
<PAGE>
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-91
<PAGE>
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-92
<PAGE>
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-93
<PAGE>
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-94
<PAGE>
- - --------------------------------------------------------------------------------
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-95
SECTION TWO UK FINANCIAL INFORMATION
<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 FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
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 . )
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.
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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-97
SECTION TWO UK FINANCIAL INFORMATION
<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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
(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-99
SECTION TWO UK FINANCIAL INFORMATION
<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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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-101
SECTION TWO UK FINANCIAL INFORMATION
<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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
<TABLE>
<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
--------------------------------------
</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>
<CAPTION>
1995 1996 1997
(Pounds)'000 (Pounds)'000 (Pounds)'000
<S> <C> <C> <C>
(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>
<CAPTION>
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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 (Pounds)8,000: 1996:
(Pounds)207,000 1995:
(Pounds)207,000) -- -- --
-- (Financing costs capitalised
in accordance with FRS4
(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>
<CAPTION>
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.
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
12.TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
<CAPTION>
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
<CAPTION>
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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 -- -- 6,013
-----------------------------------
Reorganisation costs in accordance with US GAAP -- -- (30,635)
-----------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-122
<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 FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
<CAPTION>
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.
SECTION TWO UK FINANCIAL INFORMATION
III-123
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
SECTION TWO UK FINANCIAL INFORMATION
III-124
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
- - --------------------------------------------------------------------------------
TO BE PROVIDED
SECTION TWO UK FINANCIAL INFORMATION
III-125
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
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>
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>
SECTION TWO UK FINANCIAL INFORMATION
III-126
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-127
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION OF NET
INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-128
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
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.
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.
SECTION TWO UK FINANCIAL INFORMATION
III-129
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
III-130
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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 16,288
-----------------------------------
-----------------------------------------------------------------------------
</TABLE>
SECTION TWO UK FINANCIAL INFORMATION
III-131
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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 installments 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>
SECTION TWO UK FINANCIAL INFORMATION
III-132
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
III-133
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
III-134
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
III-135
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
The preference shareholding in BCFL is now recorded as an investment by
BCCL as shown in note 10.
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>
SECTION TWO UK FINANCIAL INFORMATION
III-136
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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-cancelable operating leases
as follows:
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------
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
<S> <C> <C> <C> <C> <C> <C>
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>
SECTION TWO UK FINANCIAL INFORMATION
III-137
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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).
17 PENSION 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>
SECTION TWO UK FINANCIAL INFORMATION
III-138
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
(B) ANALYSIS OF CHANGES IN FINANCING
<TABLE>
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHARE
FINANCE CAPITAL
LEASE (INCLUDING SHORT TERM LONG TERM
OBLIGATIONS PREMIUM) DEBT DEBT
(Pounds)'000 (Pounds)'000 (Pounds)'000 (Pounds)'000
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>
19 CAPITAL 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>
SECTION TWO UK FINANCIAL INFORMATION
III-139
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
20RELATED 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.
SECTION TWO UK FINANCIAL INFORMATION
III-140
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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.
SECTION TWO UK FINANCIAL INFORMATION
III-141
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
.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:
RECONCILIATIONS
<TABLE>
<CAPTION>
---------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-142
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
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>
SECTION TWO UK FINANCIAL INFORMATION
III-143
<PAGE>
- - --------------------------------------------------------------------------------
BIRMINGHAM CABLE CORPORATION LIMITED
UK GAAP AUDITED CONSOLIDATED FINANCIAL STATEMENTS WITH A RECONCILIATION
OF NET INCOME AND SHAREHOLDERS' EQUITY TO US GAAP
- - --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS--(CONTINUED)
- - --------------------------------------------------------------------------------
LEASE OBLIGATIONS
Future minimum lease payments including interest are as follows:
<TABLE>
-----------------------------------------------------------------
<S> <C> <C>
AS AT DECEMBER 31, 1997
---------------------------
CAPITAL LEASES OPERATING
(IN (Pounds)'000) LEASES
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.
SECTION TWO UK FINANCIAL INFORMATION
III-144
<PAGE>
- - --------------------------------------------------------------------------------
SECTION THREE
US GAAP UNAUDITED PRO FORMA AND COMPARATIVE FINANCIAL INFORMATION OF THE
COMBINED GROUP
- - --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
III-145
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION/5/
- - --------------------------------------------------------------------------------
SECTION THREE US FINANCIAL INFORMATION
III-146
<PAGE>
- - -------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION
- - -------------------------------------------------------------------------------
INTRODUCTORY NOTE
The unaudited pro forma financial information which has been prepared under US
GAAP, reflects the following proposed transactions:
. the acquisition of General Cable by Telewest, accounted for as a purchase
with the assets and liabilities recorded at their fair values;
. the pre-emptive issue of ordinary shares by Telewest; and
. the conversion of 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 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 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 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".
SECTION THREE US FINANCIAL INFORMATION
III-147
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA 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)(e) (222,204) (372,525)
Amortization of goodwill (26,395) (4,444) (28,854)(d) (59,693) (100,075)
Reorganization costs -- (30,635) -- (30,635) (51,360)
------------------------------------------------------------------------
(540,657) (167,455) (33,454) (741,566) (1,243,235)
------------------------------------------------------------------------
OPERATING LOSS (154,159) (55,607) (33,454) (243,220) (407,758)
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) (33,454) (434,170) (727,886)
Income tax expense (137) (222) -- (359) (602)
------------------------------------------------------------------------
NET LOSS (332,452) (68,623) (33,454) (434,529) (728,488)
Minority interest -- 4,413 (4,413) --
------------------------------------------------------------------------
LOSS FOR FINANCIAL YEAR (332,452) (64,210) (37,867) (434,529) (728,488)
------------------------------------------------------------------------
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 (20.3)p (34.1)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.
SECTION THREE US FINANCIAL INFORMATION
III-148
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA 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) (100,183)
Depreciation (46,724) (11,702) (1,150) (59,576) (99,879)
Amortization of goodwill (6,599) (1,111) (7,213) (14,923) (25,018)
--------------------------------------------------------------------
(137,988) (37,483) (8,363) (183,834) (308,198)
--------------------------------------------------------------------
OPERATING LOSS (27,564) (5,496) (8,363) (41,423) (69,446)
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) (43)
--------------------------------------------------------------------
LOSS BEFORE INCOME TAXES (68,748) (9,172) (8,363) (86,283) (144,653)
Income tax expense 20 153 -- 173 290
--------------------------------------------------------------------
NET LOSS (68,728) (9,019) (8,363) (86,110) (144,363)
Minority interest -- 519 (519) --
--------------------------------------------------------------------
LOSS FOR FINANCIAL
PERIOD (68,728) (8,500) (8,882) (86,110) (144,363)
--------------------------------------------------------------------
Weighted average number
of ordinary shares
outstanding ('000) 927,568 365,092 -- 2,138,481 2,138,481
--------------------------------------------------------------------
PRO FORMA LOSS PER SHARE (7.4)p (2.3)p -- (4.0)p (6.6)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.
SECTION THREE US FINANCIAL INFORMATION
III-149
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA 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)(e) 79,249 132,861
Property and
equipment 1,704,907 555,729 (21,150)(d) 2,239,486 3,754,498
Goodwill 459,311 165,225 488,192 (c) 1,112,728 1,865,488
Other assets 48,808 -- -- 48,808 81,827
------------------------------------------------------------------------------
TOTAL ASSETS 2,415,314 996,376 441,376 3,853,066 6,459,665
------------------------------------------------------------------------------
LIABILITIES AND
SHAREHOLDERS'
EQUITY
Other
liabilities 220,246 94,222 24,000 (a)(e) 338,468 567,441
Debt 1,524,380 483,556 -- 2,007,936 3,366,305
------------------------------------------------------------------------------
TOTAL
LIABILITIES 1,744,626 577,778 24,000 2,346,404 3,933,746
------------------------------------------------------------------------------
MINORITY
INTERESTS 666 4,058 (4,058)(e) 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)
26,054 (a) 213,836 358,496
Additional paid
in capital 1,332,887 94,917 (94,917)(a)
549,560 (a)
214,942 (a) 2,097,389 3,516,272
Accumulated
deficit (803,288) (45,469) 45,469 (a) (803,288) (1,346,712)
------------------------------------------------------------------------------
671,963 414,540 421,434 1,507,937 2,528,056
Ordinary shares
held in trust
for the
Telewest
Restricted
Share Scheme (1,941) -- -- (1,941) (3,254)
------------------------------------------------------------------------------
670,022 414,540 421,434 1,505,996 2,524,802
Commitments and
contingencies -- -- -- -- --
------------------------------------------------------------------------------
TOTAL
LIABILITIES AND
SHAREHOLDERS'
EQUITY 2,415,314 996,376 441,376 3,853,066 6,459,665
------------------------------------------------------------------------------
</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.
SECTION THREE US FINANCIAL INFORMATION
III-150
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
a) Pro forma adjustments have been made to reflect the acquisition of the
entire share capital of General Cable. It is proposed that this acquisition is
satisfied by the issuance of approximately 454 million Telewest shares and
approximately (Pounds)240 million in cash to be raised through a pre-emptive
issue of approximately 260 million Telewest shares of 10p, valuing General
Cable at (Pounds). million (based on the middle market quotation of (Pounds).
per Telewest share on [date], 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 fair value (March 31,1998) 414,540
Elimination of Telewest investment in TCCL (25,666)
Elimination of General Cable minority interest in TCCL 4,058
Elimination of balance due from TCCL to Telewest 6,000
Adjustment to record General Cable property and equipment at fair
value (21,150)
Goodwill and intangibles 488,192
-------
865,974
=======
</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.
f) The historical loss per share of General Cable has been calculated based
on 365,092,000 shares deemed outstanding for the entire year and for the
quarter ended March 31, 1998. The pro forma combined loss per share is based on
the . 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.
SECTION THREE US FINANCIAL INFORMATION
III-151
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UNAUDITED PRO FORMA FINANCIAL INFORMATION
- - --------------------------------------------------------------------------------
CAPITALIZATION
- - --------------------------------------------------------------------------------
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 92,757 365,092 213,836
Additional paid in capital(1) 1,330,946 94,917 2,097,389
Accumulated deficit (803,288) (45,469) (803,288)
----------------------------------------------
Total capitalization 2,195,068 902,154 3,516,539
----------------------------------------------
</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.
SECTION THREE US FINANCIAL INFORMATION
III-152
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA 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.
SECTION THREE US FINANCIAL INFORMATION
III-153
<PAGE>
- - --------------------------------------------------------------------------------
THE COMBINED GROUP
US GAAP UNAUDITED PRO FORMA 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 0.03 0.02 0.25 0.15
Book value 1.63 0.97 -- --
</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 and March 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.
(e) General Cable pro forma equivalent book value per share amounts are based
on the aggregate of 454,181,467 Telewest shares received in exchange for the
365,092,000 General Cable Ordinary Shares. The General Cable equivalent pro
forma loss per share had been based on the 454,181,467 Telewest shares received
in exchange for the 365,092,000 General Cable Ordinary Shares.
SECTION THREE US FINANCIAL INFORMATION
III-154
<PAGE>
- - --------------------------------------------------------------------------------
SECTION FOUR
EXPERTS
- - --------------------------------------------------------------------------------
SECTION FOUR EXPERTS
III-155
<PAGE>
- - --------------------------------------------------------------------------------
THE EXPERTS
- - --------------------------------------------------------------------------------
SECTION FOUR EXPERTS
III-156
<PAGE>
- - --------------------------------------------------------------------------------
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.
SECTION FOUR EXPERTS
III-157
<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
a.Exhibits
<TABLE>
<S> <C>
2.1 Agreement Relating to the Merger of General Cable PLC and the Company, dated 29 March
1998, among
the Company, General Cable PLC, Compagnie Generale des Eaux and General Utilities
Holdings Limited. (5)
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).
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).
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
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).
5.1 Opinion of Freshfields, Counsel to Telewest, as to the validity of the Telewest
shares. (4)
10.1 Relationship Agreement, dated as of November 22, 1994, by and among Old Telewest,
certain subsidiaries of TCI and certain subsidiaries of 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).
10.2 Shareholders Agreement, entered into as of November 22, 1994, between certain
subsidiaries of TCI and certain subsidiaries of 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).
10.3 Registration Rights Agreement, dated October 3, 1995, among the Company, the TCI
Affiliate, the U S WEST 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 U S WEST
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. (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 Corporation Limited ("BCCL"), 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 10.5 (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>
II-3
<PAGE>
<TABLE>
<S> <C>
10.12 Management Agreement, dated April 25, 1990, among BCCL, 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
onApril 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 plc 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)).
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 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).
10.22 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).
</TABLE>
II-4
<PAGE>
<TABLE>
<S> <C>
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 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") filed with the Securities and Exchange Commission on April 29,
1994, as amended on June . , 1998 (Registration No. 33-78398)). (4)
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, BCCL,
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).
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
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).
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 filed with the
Securities and Exchange Commission on April 15, 1998 as amended on June . , 1998.
(4)
10.48 Employment Agreement, dated August 7, 1997, between Charles Burdick 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).
10.49 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>
II-6
<PAGE>
<TABLE>
<S> <C>
10.52 Letter, dated April 15, 1998, from the Company to the 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).
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. Willian Anthony Rice and Michel Jean Charles
Villaneau). (4)
23.6 Consent of J. Henry Schroder & Co. Limited.
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. (1)
99.7 Opinion of BT Wolfsensohn. (4)
</TABLE>
- - --------
(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.
(4) To be filed by amendment.
+ An application has been filed with the Securities and Exchange Commission
requesting confidential treatment for certain portions of these Amendments.
b. Financial Statement Schedules None.
c. Item 4(b) Reports. See Exhibit 99.7 above.
II-7
<PAGE>
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 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.
II-8
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN LONDON, ENGLAND, ON JUNE 17, 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:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
* Director June 17, 1998
- - -------------------------------------
A. GARY AMES
* Director June 17, 1998
- - -------------------------------------
LORD BORRIE
* Director June 17, 1998
- - -------------------------------------
STEPHEN M. BRETT
* Director June 17, 1998
- - -------------------------------------
DAVID EVANS
* Director June 17, 1998
- - -------------------------------------
JAMES O. ROBBINS
Director June , 1998
- - -------------------------------------
ROBERT SHANER
* Director June 17, 1998
- - -------------------------------------
ANTHONY W.P. STENHAM
* Director and Acting June 17, 1998
- - ------------------------------------- Chief Executive
DAVID VAN VALKENBURG Officer (Principal
Executive Officer)
/s/ Charles Burdick Director and Group June 17, 1998
- - ------------------------------------- Finance Director
CHARLES BURDICK (Principal
Financial and
Accounting Officer)
</TABLE>
S-1
<PAGE>
Authorized Representative in the
United States:
<TABLE>
<S> <C>
By: * June 17, 1998
---------------------------------
DAVID EVANS
*By: /s/ Charles Burdick June 17, 1998
---------------------------------
ATTORNEY-IN-FACT
</TABLE>
S-2
<PAGE>
EXHIBIT INDEX
<TABLE>
<S> <C>
2.1 Agreement Relating to the Merger of General Cable PLC and the Company, dated 29
March 1998, among the Company, General Cable PLC, Compagnie Generale des Eaux
and General Utilities Holdings Limited.
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).
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).
5.1 Opinion of Freshfields, Counsel to Telewest, as to the validity of the Telewest
shares. (4)
10.1 Relationship Agreement, dated as of November 22, 1994, by and among Old
Telewest, certain subsidiaries of TCI and certain subsidiaries of 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).
10.2 Shareholders Agreement, entered into as of November 22, 1994, between certain
subsidiaries of TCI and certain subsidiaries of 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).
10.3 Registration Rights Agreement, dated October 3, 1995, among the Company, the
TCI Affiliate, the U S WEST 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 U
S WEST 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).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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. (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 Corporation Limited ("BCCL"), 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 10.5 (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>
<TABLE>
<S> <C>
10.12 Management Agreement, dated April 25, 1990, among BCCL, 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 plc 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)).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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 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).
10.22 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 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)
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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"), filed with the Securities and Exchange
Commission on April 29, 1994, as amended on June . , 1998 (Registration No.
33-78398). (4)
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,
BCCL, 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).
</TABLE>
<TABLE>
<S> <C>
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).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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 filed with
the Securities and Exchange Commission on April 15, 1998 as amended on June
. , 1998. (4)
10.48 Employment Agreement, dated August 7, 1997, between Charles Burdick 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).
10.49 Loan Agreement, by and among Telwest 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, 1996).
10.52 Letter, dated April 15, 1998, from the Company to the General Cable PLC.
(Incorporated by reference to the Company's Schedule 13D filed with the
Securities and Exchange Commission on April 20, 1996).
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, 1996).
10.54 Letter, dated April 15, from TCI, U S WEST, Cox and SBC to General Cable PLC.
(Incorporated by reference to the Company's Schedule 13D filed with the
Securities and Exchange Commission on April 20, 1996).
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).
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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. (4)
23.5 Consents of proposed directors (Messrs. William Anthony Rice and Michel Jean
Charles Villaneau). (4)
23.6 Consent of J. Henry Schroder & Co. Limited
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. (1)
99.7 Opinion of BT Wolfsensohn. (4)
</TABLE>
- - --------
(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.
(4) To be filed by amendment.
+ An application has been filed with the Securities and Exchange Commission
requesting confidential treatment for certain portions of these Amendments.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion by reference 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 Telewest Communications
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, which is incorporated by
reference. We also consent to the reference to our firm under the caption
"Experts".
KPMG Audit plc
London, England
16 June 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference 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
16 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 and reference to our
firm under the caption "Experts".
Robson Rhodes
London, England
16 June 1998
<PAGE>
EXHIBIT 99.1
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
SCHRODER & CO., INC.
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 10:00 P.M.
(LONDON TIME), 5:00 P.M. (NEW YORK CITY TIME) ON , 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
(For Eligible Courier:
Tender & Exchange Institutions Only)
Department (212) 815-6213 Tender & Exchange
P.O. Box 11248 Department
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 can obtain a
Form of Acceptance (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 , 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 may elect,
subject to availability, to vary the proportions in which they receive new
Telewest securities and cash by making a "Mix and Match Election" to receive
either all new Telewest securities or all cash in respect of a designated
portion of their General Cable securities. However, the total number of
Telewest shares (including shares underlying ADSs) and the total amount of
cash to be paid out in the Offer will not be varied as a result of the Mix and
Match Elections and, to the extent that elections cannot be satisfied in full,
they will be scaled down on a pro rata basis. A Mix and Match Election made
pursuant to this Letter of Transmittal will not be valid unless the General
Cable ADSs in respect of which election are made are validly tendered and not
withdrawn prior to 5:00 p.m., New York City Time, on the fifth calendar day
after the date on which the Offer becomes or is declared unconditional in all
respects. See "Mix and Match Election" below and "4. The Mix and Match
Election" 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. See "21. Procedure for Acceptance of the Offer -- (C) Holders
of General Cable ADSs -- (c) Alternative Consideration" 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.
2
<PAGE>
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 "21. Procedure for Acceptance of the Offer --
(C) Holders of General Cable ADSs -- (d) Book-Entry Transfer" 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 Subsequent Offer Period, such holder's
acceptance of the Offer may nevertheless be effected using the guaranteed
delivery procedure set out under "21. Procedure for Acceptance of the Offer--
(C) Holders of General Cable ADSs -- (i) Guaranteed Delivery Procedures" 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 constitute
an authority to Telewest, J. Henry Schroder & Co. Limited and each of their
respective directors in accordance with the terms of 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 this document 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 ADR/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
completed, the undersigned hereby instructs the U.S. Depositary to (i) issue
and/or mail, or cause to be issued and/or mailed,
5
<PAGE>
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
prevailing on the Business Day on which funds are made available to the
relevant payment agent 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 prevailing on the
Business Day on which funds are made available to the relevant payment agent
by Telewest. 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
purchased and/or General Cable
Address __________________________ ADRs evidencing General Cable
ADSs in respect of which the
__________________________________ Offer is not accepted or which
(INCLUDE ZIP CODE) 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 ADR certifi-
cates
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, subject to availability, to vary the
proportions in which you receive new Telewest ADSs and cash in respect
of your holding of General Cable ADSs and complete the following items,
as applicable:
Insert in the space provided the number of General Cable ADSs in
respect of which you wish to receive new Telewest ADSs only (if
available): ____________________________________ General Cable ADSs.
Insert in the space provided the number of General Cable ADSs for
which you wish to receive cash only (if available):
_________________________________________ General Cable ADSs.
Note: the sum of the numbers of General Cable ADSs set forth in
the two immediately preceding blanks must not exceed the number of
General Cable ADSs tendered herewith (see page 1 of this Letter of
Transmittal).
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: BANK OF NEW YORK
- - --------------------------------------------------------------------------------
SUBSTITUTE PLEASE PROVIDE YOUR TIN
FORM W-9 IN THE BOX AT RIGHT AND Part I--Social Security
DEPARTMENT OF THE CERTIFY BY SIGNING AND Number or
TREASURY DATING BELOW. Employer Identification
INTERNAL REVENUE SERVICE Number
PAYER'S REQUEST FOR ------------------------
TAXPAYER IDENTIFICATION Name --------------------------
NUMBER (TIN) (If awaiting TIN
------------------------ write "Applied
Business Name For")
Please check --------------------------
appropriate box: Part II--For
[_] Individual/Sole Payee's exempt from
proprietor backup withholding,
[_] Corporation see the enclosed
[_] Partnership Guidelines for
[_] Other ______________ Certification of
Taxpayer
Identification
------------------------ Number on
Address Substitute Form W-9,
check the Exempt
------------------------ box below, and
City, State, Zip Code complete the Form W-9.
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 "21. Procedure for Acceptance of the Offer--(C) Holders of General
Cable ADSs--(d) Book-Entry Transfer" 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 and any other documents required by this Letter of Transmittal, or
an Agent's Message, 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 Subsequent Offer Period 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 "21. Procedure for Acceptance of the
Offer--(C) Holders of General Cable ADSs--(i) Guaranteed Delivery Procedures"
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 Subsequent Offer Period; 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 and any other documents required by this Letter of Transmittal, are
received by the US Depositary within three Business Days after the date of
execution of such Notice of Guaranteed Delivery. For these purposes, a
"Business Day" is any day on which the New York Stock Exchange is open for
business.
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 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 US Depositary at the address and telephone number set forth
above, or the Dealer Manager at the addresses and telephone numbers set forth
below, or to the Receiving Agent at the appropriate address and telephone
number set forth in the Offer to Purchase.
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.
PAYER'S NAME: THE BANK OF NEW YORK, AS US DEPOSITARY
THE DEALER MANAGER FOR THE OFFER IN THE UNITED STATES IS:
SCHRODER & CO., INC.
[Address & Phone Number]
14
<PAGE>
EXHIBIT 99.2
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 , 1998
BY
SCHRODER & CO., INC.
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
As set forth in "21. Procedure for Acceptance of the Offer--(C) Holders of
General Cable ADSs--(i) Guaranteed Delivery Procedures" in the Telewest
Communications plc Offer to Purchase/Prospectus, dated June , 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 Subsequent
Offer Period (as defined in the Offer to Purchase). Such form may be delivered
by hand or mailed to the US Depositary and must include a signature guarantee
by an Eligible Institution (as defined in the Offer to Purchase) in the form
set out herein. See "21. Procedure for Acceptance of the Offer--(C) Holders of
General Cable ADSs--(i) Guaranteed Delivery Procedures" 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
Tender & Exchange (for Eligible Institutions Courier:
Department (212) 815-6213 Tender & Exchange
P.O. Box 11248 For Information Telephone: Department
Church Street Station (800) 507-9357 101 Barclay Street
New York, New York 10286- Receive and Deliver
1248 Window
New York, New York 10286
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 "21. Procedure for Acceptance of The Offer--(C)
Holders of General Cable ADSs--(i) Guaranteed Delivery Procedures" 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 "21. PROCEDURE FOR ACCEPTANCE OF THE OFFER--(C) HOLDERS OF
GENERAL CABLE ADSs--(i) GUARANTEED DELIVERY PROCEDURES" 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 "21. PROCEDURE FOR ACCEPTANCE OF THE OFFER--(C) HOLDERS
OF GENERAL CABLE ADSs--(d) BOOK-ENTRY TRANSFER" 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 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, and any other
required documents, all within three New York Stock Exchange 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
THIS DOCUMENT SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR
INTO CANADA, AUSTRALIA OR JAPAN.
3
<PAGE>
EXHIBIT 99.3
OFFER TO PURCHASE
ALL ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
GENERAL CABLE PLC
BY
SCHRODER & CO., INC.
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 10:00 P.M.
(LONDON TIME), 5:00 P.M. (NEW YORK CITY TIME) ON , 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 , 1998
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
Schroder & Co., Inc. ("Schroder") has been appointed by Telewest
Communications plc ("Telewest") to act as dealer manager in the United States
in connection with an offer by Schroder, 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 , 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;
5. Guidelines for Certification of Taxpayer Identification Number or
Substitute Form W-9; and
6. The return envelope addressed to the US Depositary.
<PAGE>
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), and any other documents required by
the Letter of Transmittal.
Telewest will not pay any fees or commissions to any broker, dealer, or
other person (other than Schroder, the US Depositary 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
client.
Additional copies of the enclosed materials may be obtained from the
Schroder 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,
Schroder & Co., Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF SCHRODER, 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.
THIS DOCUMENT SHOULD NOT BE FORWARDED OR TRANSMITTED IN OR INTO
CANADA, AUSTRALIA OR JAPAN.
2
<PAGE>
EXHIBIT 99.4
OFFER TO PURCHASE
ALL ORDINARY SHARES AND AMERICAN DEPOSITARY SHARES
EVIDENCED BY AMERICAN DEPOSITARY RECEIPTS
OF
GENERAL CABLE
BY
SCHRODER & CO., INC.
ON BEHALF OF
TELEWEST COMMUNICATIONS PLC
THERE WILL BE AN INITIAL OFFER PERIOD WHICH WILL EXPIRE AT 10:00 pm
(LONDON TIME), 5:00 P.M. (NEW YORK CITY TIME) ON , 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 , 1998
To Our Clients:
Enclosed for your consideration is the Offer to Purchase/Prospectus, dated
June , 1998 (the "Offer to Purchase"), the Letter of Transmittal and a
Notice of Guaranteed Delivery relating to an offer by Schroder & Co., Inc. 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 Depository 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 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.
3. The Initial Offer Period of the Offer will expire at 10:00 p.m. (London
time), 5:00 p.m. (New York City time), on , 1998, unless extended (in
accordance with the terms thereof).
1
<PAGE>
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. 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 , 1998 (the "Offer to Purchase"), and the related Letter
of Transmittal relating to an offer by Schroder & Co., Inc. 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.
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 . June 1998 (the "Offer Document") and with the accompanying
disclosure document dated . 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 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 EC4N ISL, as soon as
possible, but in any event so as to arrive no later than [3.00] p.m. (London
Time) [10.00 a.m.] New York City time, on . . 1998. A first class reply-
paid envelope 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 . 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 ZRA69, 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 p.m. (London Time), 10.00 a.m. (New York City Time), on . . 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 difference 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.
- - -------------------------------------------------------------------------------
THE OFFER Complete here [_]
1
To accept the Offer [4] and, if
in its basic form, appropriate, Box [5] [3], you will be
insert in Box [1] the and/or Box [6]. If deemed to have
total number of you do not wish to accepted the Offer in
General Cable Shares make an election respect of your
for which you wish to under the Mix and entire holding of
accept the Offer, Match Facility you General Cable Shares
whether or not you need not complete Box (being your entire
wish to make an [2]. holdings under the
election under the name(s) and
Mix and Match If no number, or a address(es) specified
Facility. number greater than in Box [4] or, if
your entire holding your General Cable
You must also sign of General Cable Shares are in CREST,
Box [3] in accordance Shares, is inserted under the participant
with the instructions in Box [1] and you ID and member account
set out herein and have signed Box ID specified in
complete Box Box [6]).
- - -------------------------------------------------------------------------------
THE MIX AND MATCH FACILITY Complete here [_]
2 To elect to vary the (b) you should insert
proportion in which in Box [2B] the inserted or deemed to
you receive new number of General be inserted Box [1]
Telewest Shares and Cable Shares in you will be deemed to
cash in respect of respect of which have made an election
your holding of you wish to in respect of your
General Cable Shares. receive cash entire holding of
only. General Cable Shares
(a) you should insert (as described in
in Box [2A] the You must also paragraph 1 above) to
number of General complete Boxes [1] receive new Telewest
Cable Shares in and [4] and sign Box Shares and cash in
respect of which [3] in accordance the proportion which
you wish to with the instructions the number inserted
receive new set out herein. in Box [2A] bears to
Telewest Shares The number in Box the number inserted
only: [2A] added to the in Box [2B].
AND number in Box [2B]
must not exceed the
number inserted or
deemed to be inserted
in Box [1]. If the
sum of the numbers in
Boxes [2A] and [2B]
does exceed the
number
- - -------------------------------------------------------------------------------
SIGNATURES Sign here [_]
3 You must sign Box [3] General Cable page 4 of this Form.
regardless of which shareholders (if any) In the case of a
other Box(es) you or otherwise have any holder which is a
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
- - -------------------------------------------------------------------------------
NAMES AND ADDRESS(ES) Complete here [_]
4
Complete Box [4] with you any event that no address
the full name and consideration. If the outside Canada,
address of the sole address of the first Australia and Japan
or first named holder named holder in Box is provided until
together with the [4] is in the United such an address is
names of ALL other States, Canada, provided.
registered holders in Australia or Japan
BLOCK CAPITALS. you must provide in
Box [5] an
alternative address
Unless you complete outside the United
Box [5], the address States, Canada,
of the first named Australia and Japan
holder inserted in for the despatch of
Box [4] is the consideration. No
address which will be consideration will be
used when sending despatched in the
- - -------------------------------------------------------------------------------
ALTERNATIVE ADDRESS Complete here [_]
5
If you want the Canada, Australia or holders with
consideration and/or Japan, you should registered addresses
other document(s) to complete Box [5]. in Canada, Australia
be sent to someone Box [5] must be or Japan and by
other than the first- completed (but not holders who have
registered holder with an address in completed Box [4]
(e.g. your bank Canada, Australia or with an address in
manager or Japan) by Canada, Australia or
stockholder), but not Japan.
to
- - -------------------------------------------------------------------------------
PARTICIPANT ID AND MEMBER ID Complete here [_]
6
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 paragraphs .
participant ID and instruction the to . of Part B of
the member account ID participant ID and Appendix I to the
under which such member account ID 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
Acceptance reference foot of page 1 of
this Form.
You must also
transfer (or procure
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
. of Part B of "YES" in Box [7] you
Appendix I to the will be deemed to
Offer Document YOU have given such
warranties.
- - -------------------------------------------------------------------------------
<PAGE>
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.
- - --------------------------------------------------------------------------------
TO ACCEPT THE OFFER BOX [1]
1
Complete Box [1] and Box [4] and sign Box [3]
No. of General Cable
Shares
for which you are
accepting the Offer
- - --------------------------------------------------------------------------------
TO MAKE AN ELECTION UNDER THE MIX AND MATCH FACILITY
BOX
2 [2A]
Complete Box [1], Box [2A], Box [2B] and Box [4] and sign Box [3]
No. of General Cable Shares for
which you wish to receive new
Telewest Shares only (if
available)
BOX
[2B]
The sum of the numbers in Boxes [2A] and [2B] must not exceed the number in
Box [1].
No. of General Cable Shares for
which you wish to receive cash
only (if available)
- - --------------------------------------------------------------------------------
SIGN HERE TO ACCEPT THE OFFER
BOX [3]
3
Signed and delivered as a deed by:
Witnessed by:
1. ___________________ 1 Name ________________ Address _________________
_______________________ Signature _______________
2. ___________________ 2 Name ________________ Address _________________
_______________________ Signature _______________
3. ___________________ 3 Name ________________ Address _________________
_______________________ Signature _______________
4. ___________________ 4 Name ________________ Address _________________
_______________________ Signature _______________
NOTE: THE SIGNATURE OF EACH REGISTERED HOLDER SHOULD BE WITNESSED
- - --------------------------------------------------------------------------------
FULL NAME(S) AND ADDRESS(ES)
BOX [4]
4
First named registered holder Joint registered holder(s)
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)
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.
- - --------------------------------------------------------------------------------
ADDRESS OUTSIDE CANADA, AUSTRALIA AND JAPAN TO For use by the
WHICH CONSIDERATION AND/OR OTHER DOCUMENT(S) IS/ARE Registrar/the
5 TO BE SENT IF NOT YOUR OWN London Stock
BOX [5] Exchange
Name ____________________________________________
Address _________________________________________
____________________ Postcode __________________
- - --------------------------------------------------------------------------------
PARTICIPANT ID AND MEMBER ACCOUNT ID BOX [6]
6
Complete this Box only if your General Cable Participate ID
Shares are in CREST ______________________
Member Account ID
______________________
- - --------------------------------------------------------------------------------
OVERSEAS PERSONS ONLY BOX [7]
7
Please put "YES" in Box [7] only if you are
unable to give the representations and warranties
required by paragraph . of Part B of Appendix I
to the Offer Document.
- - --------------------------------------------------------------------------------
Page 3
<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 document 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 1(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 Facility) 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 Facility will not affect the validity of an acceptance of the Offer.
Page 4
