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Arqiva Broadcast Parent Limited

Financial Report Full year ending 30th June 2013

Arqiva Broadcast Parent Limited Financial Report – Full year ending 30th June 2013

Arqiva Broadcast Parent Limited 2

This Financial Report is delivered pursuant to Condition 4.5 of the Junior Notes.

The date of this Financial Report is 9th October 2013. Unless otherwise defined herein, capitalised terms have the meanings given in the final offering memorandum for the Junior Notes dated 21 February 2013.



CONTENTS

Page

FORWARD LOOKING STATEMENTS ................................................................................................... 4

INDUSTRY AND MARKET INFORMATION ........................................................................................... 5

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ............................................................................................................................ 6

Description of Business ..................................................................................................................... 6

Financial Overview ............................................................................................................................. 7

Refinancing ........................................................................................................................................ 7

Recent Developments ........................................................................................................................ 8

Fiscal Year Ended 30 June 2013 Compared to the Year Ended 30 June 2012 .............................. 11

Profit and Loss ............................................................................................................................. 11

Capital expenditures .................................................................................................................... 15

Net cash flows .............................................................................................................................. 16

Contractual Obligations and Commitments ................................................................................. 18

Contingent Liabilities .................................................................................................................... 18

Off-Balance Sheet Arrangements ................................................................................................ 19

Management ......................................................................................................................................... 20

Principal Shareholders .......................................................................................................................... 24

Risk management ................................................................................................................................. 25

Principal risks and uncertainties facing the business ...................................................................... 25

Market Risk Disclosure .................................................................................................................... 26

Critical Accounting Policies ................................................................................................................... 27

Appendix ............................................................................................................................................... 30

Description of Certain Income Statement Line Items ...................................................................... 30

Note Regarding EBITDA And Reconciliation From EBITDA To Net Cash Inflow From Operating Activities ........................................................................................................................................... 33

Summary Corporate and Financing Structure ................................................................................. 34

CONDENSED CONSOLIDATED AUDITED FINANCIAL STATEMENTS FOR THE FULL YEAR ENDED 30 JUNE 2013 OF ABPL ............................................................................................ 35

For full year ended 30 June 2013 .................................................................................................... 35



THIS FINANCIAL REPORT IS NOT AN OFFER OR SOLICITATION OF AN OFFER TO BUY OR SELL SECURITIES. IT IS SOLELY FOR INFORMATION PURPOSES ONLY. THIS FINANCIAL REPORT DOES NOT CONTAIN ALL OF THE INFORMATION THAT IS MATERIAL TO A PROSPECTIVE INVESTOR.

This document is not a prospectus for any securities or transaction. Investors should only subscribe for any securities on the basis of information in a relevant prospectus and not on the basis of any information provided herein. This document does not disclose all the risks and other significant issues related to an investment in any securities/transaction. Prior to transacting, potential investors should ensure that they fully understand the terms of any securities/transaction and any applicable risks.

This Financial Report has been prepared pursuant to Condition 4.5 of the Junior Notes and certain information reporting covenants of the Notes. This Financial Report has been prepared by the Group (Arqiva Broadcast Parent Limited and its subsidiaries) and may be amended and supplemented and may not be relied upon for the purposes of entering into any transaction. Although the Group has taken all reasonable care to ensure that the information herein is accurate and correct, neither of the Group, or any of its respective directors, officers, employees, shareholders, affiliates, agents, advisers, other representatives (collectively, Representatives) makes any additional representation, warranty or undertaking, express or implied, as to the fairness, accuracy, completeness or correctness of the information or the opinions contained herein or any other material discussed in the Financial Report.

The financial information set forth in this Financial Report has been subjected to rounding adjustments for ease of presentation. Accordingly, in certain instances, the sum of the numbers in a column or a row in tables may not conform exactly to the total figure given for that column or row. Percentage figures included in this Financial Report have not been calculated on the basis of rounded figures but have been calculated on the basis of such amounts prior to rounding.

The views reflected herein are solely those of the Group and are subject to change without notice. All estimates, projections, valuations and statistical analyses are provided to assist the recipient in the evaluation of the matters described herein and may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results and to the extent that they are based on historical information, they should not be relied upon as an accurate prediction of future performance. Certain analysis is presented herein and is intended solely for purposes of indicating a range of outcomes that may result from changes in market parameters. It is not intended to suggest that any outcome is more likely than another, and it does not include all possible outcomes or the range of possible outcomes, one of which may be that the investment value declines to zero.

FORWARD LOOKING STATEMENTS

This Financial Report contains various forward-looking statements regarding events and trends that are subject to risks and uncertainties that could cause the actual results and financial position of the Group to differ materially from the information presented herein. When used in this Financial Report, the words “estimate”, “project”, “intend”, “anticipate”, “believe”, “expect”, “should” and similar expressions, as they relate to the Group, are intended to identify such forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Save as otherwise required by any rules or regulations, the Group does not undertake any obligations publicly to release the result of any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.

The risks and uncertainties referred to above include:

actions or decisions by governmental and regulatory bodies, or changes in the regulatory framework in which the Group operates, which may impact the ability of the Group to carry on its businesses;

changes or advances in technology, and availability of resources such as spectrum, necessary to use new or existing technology, or customer and consumer preferences regarding technology;

the performance of the markets in the UK, the EU and the wider region in which the Group operates;



the ability of the Group to realise the benefits it expects from existing and future projects and investments it is undertaking or plans to or may undertake;

the ability of the Group to develop, expand and maintain its telecommunications infrastructure;

the ability of the Group to obtain external financing or maintain sufficient capital to fund its existing and future investments and projects;

the Group’s dependency on only a limited number of key customers for a large percentage of its revenue; and

expectations as to revenues not under contract.

Any forward looking statements contained in this Financial Report speak only as at the date of this Financial Report. Without prejudice to any requirements under applicable laws and regulations, the Group expressly disclaims any obligation or undertaking to disseminate after the date of this Financial Report any updates or revisions to any forward looking statements contained herein to reflect any change in expectations thereof or any change in events, conditions or circumstances on which any such forward looking statement is based.

INDUSTRY AND MARKET INFORMATION

This Financial Report includes market share and industry data which the Group obtained from industry publications and surveys, industry reports prepared by consultants, internal data and customer feedback. The market, economic and industry data has primarily been derived and extrapolated from publicly available information from sources including Ofcom, BARB, Digital UK, Digital Television Multiplex Operators Limited (combined into Digital UK on 1 January 2013), HM Treasury, operator data and websites, broadcaster reports, and the UK government. None of the third party sources has made any representation, express or implied, and has not accepted any responsibility, with respect to the accuracy or completeness of any of the information contained in this Financial Report.

These third party sources generally state that the information they contain has been obtained from sources believed to be reliable. However, these third party sources also state that the accuracy and completeness of such information is not guaranteed and that the projections they contain are based on significant assumptions. As the Group does not have access to all of the facts and assumptions underlying such market data, statistical information and economic indicators contained in these third party sources, the Group is unable to verify such information and cannot guarantee its accuracy, fairness or completeness. Similarly, internal surveys, industry forecasts and market research have not been independently verified.

In addition, certain information in this Financial Report is not based on published data obtained from independent third parties or extrapolations thereof but on information and statements reflecting the Group’s best estimates based upon information obtained from trade and business organisations and associations, consultants, and other contacts within the industries in which the Group competes, as well as information published by the Group’s competitors. Such information is based on the following: (i) in respect of the Group’s market position, information obtained from trade and business organisations and associations and other contacts within the industries in which the Group competes, and (ii) in respect of industry trends, the Group’s senior management team’s business experience and experience in the industry and the markets in which the Group operates.



MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the Group’s financial condition and results of operations should be read in conjunction with the Group’s audited consolidated financial statements and the related notes to those consolidated financial statements contained elsewhere in this Financial Report. Some of the statements contained below, including those concerning future revenues, costs, capital expenditures, acquisitions and financial condition, contain forward-looking statements. As such statements involve inherent uncertainties, actual results may differ materially from the results expressed in or implied by such forward-looking statements. A discussion of such uncertainties is provided under “Forward Looking Statements.”

Results of operations for prior years or the recent period are not necessarily indicative of the result to be expected for any future period. Performance indicators and ratios reported herein, such as EBITDA, are not financial measures defined in accordance with IFRS, or UK GAAP and, as such, may be calculated by other companies using different methodologies and having different result. Therefore, these performance indicators and ratios are not directly comparable to similar figures and ratios reported by other companies. Description of Business

The Group is the UK’s national provider of essential television and radio broadcast infrastructure as well as a key provider of communications and infrastructure services to major distributors of media and wireless voice and data services in the UK. The Group’s core tower business (comprising terrestrial broadcast and wireless site share infrastructure) generates predictable operating profits, supported by diverse revenue streams, long-life assets, with a significant proportion of revenues being driven by long term contracts.

The Group has the following key competitive positions:

• regulated position as the sole UK national provider of network access (NA) and managed transmission services (MTS) for terrestrial television broadcasting, the most popular television broadcast platform in the UK, owning and operating all television transmission towers used for digital terrestrial television (DTT) broadcasting in the UK under long term contracts with public service broadcaster (PSB) customers (who depend on the Group to meet the obligations under their licences to extend coverage to 98.5% of the UK population) as well as commercial broadcasters, with a recently upgraded digital network as a result of the £600 million digital switchover (DSO), which the Group completed under budget and on schedule in October 2012;

• market leader for commercial spectrum on DTT, owning two of the three commercial Multiplexes (out of a total of six DTT Multiplexes) plus two new HD DTT Multiplexes (recently awarded to carry additional HD services on Freeview) used for transmission of DTT services in the UK, carrying 31 out of 53 total commercially broadcast standard definition (SD) DTT channels as at 30 June 2013. The constrained number of DTT video streams at approximately 50, compared to approximately 500 and approximately 250 channels available over satellite and cable respectively, makes these streams particularly attractive to broadcasters;

• owner of over 90% of the radio transmission towers for terrestrial broadcasting in the UK and operator of the only commercial national digital radio Multiplex and, as at 30 June 2013, 26 of the 58 local radio Multiplexes;

• largest independent (non-MNO) portfolio of wireless tower sites in the UK, which are licensed to national Mobile Network Operators (MNOs) and other wireless network operators, with approximately 25% of the total active licensed macrocell site market and approximately four times the active licensed macrocell sites of the next largest independent operator as at 30 June 2013, and holding a strong and difficult to replicate position in rural and suburban regions where cost, economies of scale, planning permission restrictions and regulations that limit a landlord’s ability to terminate the leases for the Group’s sites provide barriers to entry for competitors;

• a new presence in managed networks via the Mobile Infrastructure Project;



• WiFi infrastructure presence;

• largest owner of independent satellite uplink infrastructure and satellite distribution services in the UK in terms of the number of channels uplinked for UK Direct-to-Home (DTH) satellite broadcast that serves as an alternative for customers who do not wish to use BSkyB’s uplinking services, with a 45% market share of channels uplinked as at 30 June 2013;

• significant proportion of revenue attached to long term contracts with automatic RPI-linked increases; and

• sole provider of smart metering communications for the North region of the UK – a 15 year contract for the provision of electricity and gas smart metering to around c10m homes in Scotland and Northern England utilising 842 sites.

Financial Overview

The Group has demonstrated broadly stable turnover and strong EBITDA growth over the past three years, as it improved its revenue mix by replacing relatively low margin satellite, secure solutions and installation service businesses with higher margin DTT and other businesses. Turnover was broadly stable at £825.7 million, £831.7 million, and £819.0 million for the years ended 30 June 2011, 2012 and 2013 respectively. EBITDA grew from £366.7 million to £402.6 million (a 9.8% increase) between the years ended 30 June 2011 and 2012 and to £416.3 million in 2013 (a 3.4% increase) for the year ended 30 June 2013. Capital expenditures of the Group declined over the periods as the Group completed the DSO rollout and were £173.9 million, £161.5 million and £122.0 million for the years ended 30 June 2011, 2012 and 2013 respectively. Refinancing

On 28 February 2013, the Group (through Arqiva Financing plc) sold £750,000,000 aggregate principal amount of Senior Notes under its multicurrency programme for the issuance of notes, and concurrently (through Arqiva Broadcast Finance plc) sold £600,000,000 of Junior Notes, which are structurally subordinated to the Senior Notes. The proceeds from the Senior and some of the Junior Notes (together, the Notes) together with £867 million of existing cash and new shareholder funding were used to refinance the Group’s existing senior and junior debt, and to meet related hedging and transaction costs. The Notes were offered and sold to qualified institutional buyers in reliance on the exemption from registration provided by Rule 144A under the U.S. Securities Act of 1933, as amended (Rule 144A), and to persons other than U.S. persons in offshore transactions in reliance on Regulation S thereunder.

Concurrently with the offering of the Notes the Group operating through a financing vehicle (Senior Finco), entered into senior term facilities (the Senior Term Facilities) providing £1,586,000,000 on a committed basis. The Group also entered into a liquidity facility (the Senior Liquidity Facility), providing in aggregate up to £200,000,000 to permit drawings to allow the Group to service interest and scheduled principal due under the Senior Term Facilities and the Senior Secured Notes, as well as certain senior ranking expenses owed to other transaction parties.

The Group has also entered into a capital expenditure facility (the Senior Capex Facility) providing for borrowing up to an aggregate £400,000,000, and a working capital facility (the Senior Working Capital Facility) providing for borrowing up to an aggregate of £100,000,000 on a revolving basis.

On 22 February 2013, the Group entered into a Common Terms Agreement (the CTA) which set out representations, warranties and covenants given by the Group under the Senior Notes and the Senior Facilities. The CTA establishes information covenants requiring the provision of information by the Group on an annual and quarterly basis to certain other parties to the CTA, and financial covenants requiring certain financial conditions to be met by the Group.

Prior to the closing of the Senior Financing, the Group had a hedging portfolio of a notional amount of approximately £2.6 billion (the Senior Existing Hedges). This portfolio comprised approximately £1.3 billion of interest rate swaps and approximately £1.3 billion of inflation linked swaps (ILS). On 28 February 2013, the Group terminated approximately £0.3 billion of the interest rate swaps, and retained approximately £1.0 billion of the notional amount, together with £1.3 billion ILS and amended their terms.



During June 2013, the Group completed a US Private Placement transaction raising £398.5 million in a combined sterling (£163.0 million) and US Dollar denominated (£235.5 million equivalent) offering, the proceeds of which have been applied to the early repayment of the term bank facilities. The Group entered into USD358.0 million (£235.5 million equivalent) of cross-currency swaps to fix the Sterling cost of future interest and capital repayment obligations relating to the USD tranche of the Private Placement.

To facilitate the refinancing the Group effected a corporate restructuring, which included reorganisation of the legal entity structure among certain of the Group’s existing and newly established subsidiaries. Upon completion of the corporate restructuring, on 28 February 2013, (the Company) Arqiva Broadcast Parent Limited acquired the entire issued share capital of Arqiva Financing No 2 Limited (AF2) for an amount of £1 from Arqiva Financing No 3 Plc (AF3). The Company financed this transaction (the Transaction) via the issue of additional share capital to its immediate parent company, AF3.

Because the substantive effect of the Transaction was a group reorganisation resulting in a change to the identity of the holding company, the Group has consolidated the results of AF2 and its subsidiaries under the principles of merger accounting in accordance with FRS 6 “Acquisitions and Mergers”. The audited financial information for the year ended 30 June 2013 is reported for Arqiva Broadcast Parent Limited. The audited financial information for the year ended 30 June 2012 is reported for AF2 to reflect the corporate structure at the time of the refinancing and maintain consistency with the financial reporting in the final offering memorandum for the Senior Notes dated 21 February 2013.

Recent Developments

Smart Metering

Smart metering is a project to install smart energy meters in every home in Great Britain in order to improve efficiency and facilitate monitoring of gas and electricity use by consumers. On the 14th August 2013, Arqiva was chosen by the Department for Energy and Climate Change (DECC) as the preferred bidder to provide smart metering communications for the North region. The contract was signed on 20 September 2013. This region covers c10m premises in Scotland and the North of England. The award was in recognition of the technical superiority of Arqiva's proven smart metering communications solution, which has been shown to work equally well across all parts of the country. The solution includes Sensus technology that has been successfully deployed internationally in more than 16 million smart meters and devices. It is capable of supporting the evolution of smart services more broadly, including locations deep inside buildings that other communications technologies have struggled to reach.

MIP

On the 13th May 2013, the Department of Culture and Media and Sport (DCMS) announced that Arqiva had been successful in winning the contract for the Mobile Infrastructure Project (MIP), for which it will provide towers, passive site equipment (such as antennas) and network management services which the mobile network operators will utilise. The Mobile Infrastructure Project is a government initiative to expand and improve coverage to regions of the UK which currently have no mobile access or mobile access of poor quality, with the ultimate goal of providing service to 75% of the 0.3% of premises that are currently in areas without any 2G services (‘not-spots’). The DCMS has committed funding of c£150 million in capital investment in these sites.

BBC Radio

In August 2013, the Group was successful in winning a new contract for provision of BBC analogue and digital radio services and in addition, for the next phase of the digital radio build-out. The contract includes radio transmission services for the BBC’s FM, MW, LW and core National Digital Audio Broadcast (DAB) networks. The contract term is 17 years for the DAB networks and 7 years for the analogue services (FM, MW and LW). Arqiva will also build out the BBC National DAB network, increasing coverage in the UK. The contract covers some of the UK’s most popular radio stations on



analogue and digital radio, including BBC Radio 1, 2, 3 and 4, BBC 5 Live and BBC regional radio stations.

600 and 700MHz Spectrum

The DTT platform currently uses 600 and 700MHz spectrum. Ofcom published a statement regarding the future use of the 600/700 MHz spectrum in November 2012, indicating that Ofcom is likely to consult on clearing DTT from the 700 MHz spectrum for possible future mobile use and the possible use of the spectrum in the 600 MHz band, which has been vacated by analogue TV, for digital terrestrial television. This will require realignment of the physical infrastructure of affected Multiplexes, the cost of which in the past has been borne by Ofcom.

On 16 July 2013, following a consultation, Ofcom confirmed that it would proceed with the process to award Arqiva the single licence for 600 MHz spectrum (550 to 606 MHz), cleared as a result of the Digital Switchover. This is for the establishment of new DTT Multiplexes using DVB-T2/MPEG4 technology, the same technical standards as the current high definition (“HD”) DTT Multiplex. The licence will run until 2026, but with a minimum duration to 31 December 2018, subject to revocation on 24 months' notice. Arqiva is required to cover 10% of UK households within 12 months and 50% of UK households within two years, including 25% coverage in each of the four countries in the United Kingdom (England, Scotland, Wales and Northern Ireland).

Administered Incentive Pricing (AIP)

Ofcom published a consultation on Spectrum Pricing for Terrestrial Broadcasting on 13 March 2013. It had previously considered setting charges which reflect the opportunity cost of spectrum – an approach it describes as Administered Incentive Pricing (AIP). However, Ofcom have now stated that it would not be appropriate to introduce AIP for terrestrial television broadcasting at this stage which is a positive outcome for Arqiva. In the short term, Ofcom proposes to apply a mechanism to simply recover their limited on-going costs in managing the spectrum. They will consult on the level of these cost-based spectrum management charges later in 2013.

In the longer term, Ofcom proposed that they will introduce AIP for terrestrial television broadcasting by around 2020. Ofcom also confirmed in their statement of July 2013 that AIP based charges would not be applied to either DAB radio or to local TV broadcasting.

Local TV

Local TV is a government initiative that has been implemented by Ofcom with oversight from the BBC Trust. The BBC Trust agreed with the Government as part of the BBC’s licence fee settlement in 2010 to make up to £40m available to help establish local television. By adopting an innovative approach to network design involving equipment previously used for low powered DTT, Arqiva developed a solution that makes local TV economically viable. The Multiplex operator licence for local TV was awarded to Comux, a community-owned business appointed by Ofcom in January 2013. Arqiva was then subsequently awarded a 12 year contract by Comux, on 31 July 2013, to provide the transmission services for local TV.

Business Re-alignment

To deliver the new contracts recently won and successfully pursue other growth opportunities, Arqiva has reviewed its organisational structure to better align the business to drive and support its long term growth and improve customer service. The re-alignment took effect from 1 October 2013 and the key changes are as follows:

Moving to five product led divisions; o Digital Platforms o Terrestrial Broadcast o Smart Metering (including machine to machine) o Satellite o Telecoms



Business Operations to be split up vertically between the relevant customer facing divisions A new CTO function to drive new product development and manage shared services across

the company With support from a central corporate function comprising;

o Finance o Strategy and Business Development o People and Organisation o Commercial

O2/Vodafone joint venture - Cornerstone Telecommunications Infrastructure Limited

This new joint venture creates a shared grid of 18,500 masts, representing an increase of more than 40% in points of presence for each operator. The companies expect that this will result in a 10% overall reduction in the total number of sites used by both operators.

Arqiva remains in commercial discussions with CTIL and we expect to manage the negotiations concerning this network sharing with O2 and Vodafone within our current financial projections.



Fiscal Year Ended 30 June 2013 Compared to the Year Ended 30 June 2012

Overview

The Group’s results of operations and financial condition are affected by a variety of factors, a number of which are outside the control of the Group. Set out below is a discussion of the most significant factors that have affected the Group’s results during the periods under review. Profit and Loss

The following table sets forth certain of the Group’s profit and loss data for the periods indicated:

Year Ended 30 June

2012

2013

(£ millions)

Continuing Operations

Turnover (including share of joint venture) ........................... 843.8 827.4Less share of joint venture turnover ..................................... (12.2) (8.4)

Group turnover .................................................................... 831.7 819.0Cost of sales ......................................................................... (314.5) (291.1)

Gross profit ......................................................................... 517.1 527.9

Depreciation .......................................................................... (99.7) (105.7)Amortisation .......................................................................... (155.2) (158.7)Operating expenses .............................................................. (114.5) (111.7)Exceptional administrative expenses .................................... (23.7) (28.3)

Group operating profit ........................................................ 124.1 123.5

Share of operating profit / (loss) in joint venture and associates .......................................................................................... 3.9 1.7

1Total operating profit: Group and share of joint venture

and associates ................................................................ 128.0 125.2

Income from investments ...................................................... 0.1 0.1

Fundamental reorganisation ................................................. — —Loss on disposal of assets .................................................... — —

Non-operating profit exceptional items ................................. — 0.1

Profit on ordinary activities before taxation and interest 128.1 125.3

Interest receivable and similar income ................................. 1.7 1.0Net bank and other loan interest ........................................... (221.3) (240.4)Other interest ........................................................................ (32.4) (57.7)Share of joint venture interest payable ................................. (2.3) (1.0)

Net third party interest payable ......................................... (254.2) (298.0)Interest payable to parent undertakings ............................... (242.5) (267.8)

Loss on ordinary activities before taxation ..................... (368.6) (440.5)

Tax on loss on ordinary activities .......................................... 16.5 17.2

Loss on ordinary activities after taxation......................... (352.1) (423.3)

Equity minority interests ........................................................ (0.1) (0.3)

Loss for the financial year ................................................. (352.2) (423.6)



Turnover

For the year ended 30 June 2013, turnover for the Group was £819.0 million, representing a 1.5% decrease from £831.7 million during the year ended 30 June 2012, due primarily to a reduction in Satellite turnover as the Group continues to make strategic reductions to its low margin wholesale space and outside broadcast areas, the expiry of certain contracts in the Site Share business unit and reductions in government spending in the Secure Solutions business unit

The following table sets forth the Group’s turnover by division and business unit for the periods indicated:

Year Ended 30 June

2012 2013

% Change

(£ millions, except percentages)

Turnover by division and business unit

Broadcast and Media ................................................... 464.4 454.7 (2.1)% Terrestrial Broadcast ...................................................... 267.0 284.0 6.4% Satellite ........................................................................... 197.4 170.7 (13.5)%Digital Platforms ........................................................... 121.6 132.0 8.6% Telecoms ....................................................................... 245.7 232.3 (5.5)% Site Share and WiFi........................................................ 223.2 212.3 (4.9)% Secure Solutions ............................................................ 22.5 20.0 (11.0)%

Total Group turnover ................................................... 831.7 819.0 (1.5)%

Broadcast and Media

Turnover for the Group’s Broadcast and Media division during the year ended 30 June 2013 was £454.7 million, which was a 2.1% reduction from £464.4 million in the year ended 30 June 2012. The main movements in turnover for Terrestrial Broadcast and Satellite are detailed below.

Terrestrial Broadcast

Turnover for the Group’s Terrestrial Broadcast business during the year ended 30 June 2013 was £284.0 million, representing a 6.4% increase from £267.0 million during the year ended 30 June 2012, due primarily to a higher level of project related revenues generated from the Channel 61/62 Clearance activities, other major broadcast projects, and consultancy services that are of variable scale in any given year. In addition, the completion of the technical delivery of DSO rollout in October 2012 resulted in increased turnover for high power DTT, which was largely offset by a reduction in analogue television and low-powered DTT turnover compared to the previous year due to the finalisation of the switch to high power DTT services as part of the DSO rollout.

Satellite

Turnover for the Group’s Satellite business during the year ended 30 June 2013 was £170.7 million, representing a 13.5% decrease from £197.4 million during the year ended 30 June 2012, due primarily to exiting the low-margin wholesale satellite space resale business, together with a weakening of the Euro and a decision to exit Outside Broadcast (a business involving satellite trucks which broadcast from locations such as sports stadiums). This also resulted in a significant reduction in satellite capacity costs to minimise the decline in overall gross profit.

Digital Platforms

Turnover for the Group’s Digital Platforms division during the year ended 30 June 2013 was £132.0 million, representing an 8.6% increase from £121.6 million during the year ended 30 June 2012, due primarily to an increased number of video streams available and sold during the period together with inflation linked fee increases to many existing contracts.



Telecoms

Turnover for the Group’s Telecoms division during year ended 30 June 2013 was £232.3 million, representing a 5.5% decrease from £245.7 million during year ended 30 June 2012, due primarily to the movements in turnover for Site Share and Secure Solutions detailed below.

Site Share and WiFi

Turnover for the Group’s Site Share and WiFi areas during year ended 30 June 2013 was £212.3 million, representing a 4.9% decrease from £223.2 million during the year ended 30 June 2012, due primarily to the expiry of a Site Share contract in Northern Ireland and a reduction in installation services turnover as network consolidation activity reduced and MNOs waited for availability of new 4G spectrum. These reductions were partially offset by the inclusion of turnover from the WiFi business following the acquisition of Spectrum Interactive and RPI linked increases on site share contracts.

Secure Solutions (previously Government)

Turnover for the Group’s Secure Solutions business unit during the year ended 30 June 2013 was £20.0 million, representing an 11.0% decrease from £22.5 million in the prior year. This was primarily due to a reduction in sales of mobile data terminals during the year, arising from a reduction in customer procurement budgets during this period.

Cost of Sales

For the year ended 30 June 2013, cost of sales for the Group was £291.1 million, representing a 7.4% decrease from £314.5 million in the prior year, due primarily to a reduction in Satellite capacity costs as a result of the Group making strategic reductions in its low margin wholesale space business together with a reduction in the Group’s cost of sales for Installation Services and Secure Solutions activities within Telecoms, as a result of the corresponding declines in turnover for these businesses during the period as described above.

Gross profit

For the year ended 30 June 2013, gross profit for the Group was £527.9 million, representing a 2.1% increase from £517.1 million in the prior year, due to a change in the product mix from low margin to higher margin products offsetting the slight revenue decrease.

EBITDA

For the full year ended 30 June 2013, EBITDA for the Group was £416.3 million, representing a 3.4% increase from £402.6 million during the full year ended June 2012, due primarily to the change in product mix detailed above. EBITDA margin improved by 3 percentage points from 48% to 51%. For reconciliation of Group operating profit to EBITDA, see “Note Regarding EBITDA And Reconciliation From EBITDA To Net Operating Cash Inflow From Operating Activities” in the Appendix.

Depreciation

Depreciation for the Group during the year ended 30 June 2013 was £105.7 million, representing a 6.0% increase from £99.7 million in the prior year, due primarily to continued investment in the DSO programme which resulted in additional DSO assets commencing service, and the depreciation of certain Channel 61/62 Clearance project assets with short useful economic lives.

Amortisation

Amortisation for the Group during the year ended 30 June 2013 was £158.7 million, representing a 2.3% increase from £155.2 million in the prior year, due primarily to additional amortisation of goodwill on minor acquisitions. The amortisation charges in both years continue to be driven mainly by the goodwill amortisation of the acquisitions of NTL Broadcast and National Grid Wireless.



Operating expenses

Operating expenses for the Group during the year ended 30 June 2013 were £111.7 million, representing a 2.4% decrease from £114.5 million in the prior year, mainly due to tight cost control and a one-off provision release following successful recovery of a bad debt offsetting other increases.

Exceptional administrative expenses

Exceptional administrative expenses for the Group during the year ended 30 June 2013 were £28.3 million, representing a 19.4% increase from £23.7 million during the year ended 30 June 2012. The increase was due primarily to the cost of certain one-off activities, such as substantial costs relating to the smart metering contract bid, severance costs, and refinancing costs.

Share of operating profit in joint ventures and associates

Share of operating profit / (loss) in joint ventures and associates for the Group during the year ended 30 June 2013 was a £1.7 million profit which was a decrease from £3.9 million during the year ended 30 June 2012, due primarily to the one off increase in levels of turnover and therefore the profitability of the joint venture companies in the prior period.

Income from investments

Income from investments for the Group during the year ended 30 June 2013 was £0.1 million, which was unchanged from the year ended 30 June 2012. This amount relates to dividend payments received from investments in companies over which the Group does not have control, and are therefore excluded from the consolidation in accordance with accounting standards.

Interest receivable and similar income

Interest receivable and similar income during the year ended 30 June 2013 was £1.0 million, which was a decrease from £1.7 million during the year ended 30 June 2012, due primarily to a decrease in finance income receivable on the accounting for the defined benefit pension plan under FRS17 ‘Retirement Benefits’.

Net bank and other loan interest

Interest payable for the Group during the year ended 30 June 2013 was £240.4 million, representing an 8.6% increase from £221.3 million during the year ended 30 June 2012, primarily due to an increase in the margin payable on debt and bonds issued, partially offset by a reduction in the accretion element of the inflation linked swaps as a result of lower RPI. The year ended 30 June 2013 includes four months of the new financing structure.

Other interest

Other interest payable for the Group during the year ended 30 June 2013 was £57.7 million, representing a 78.1% increase from £32.4 million during the year ended 30 June 2012, due primarily to the accelerated amortisation of debt issue costs arising on refinancing. Other interest payable is primarily non-cash but includes £1.1 million relating to cash payments for finance leases.

Share of joint venture interest payable

Share of joint venture interest payable for the Group during the year ended 30 June 2013 was £1.0 million, a decrease from £2.3 million during the year ended 30 June 2012, due primarily to a decrease in the interest bearing liabilities of the joint venture.

Interest payable to parent undertakings

Interest payable to parent undertakings for the Group during the year ended 30 June 2013 was £267.8 million, representing a 10.4% increase from £242.5 million during the year ended 30 June 2012. This variance was primarily due to the increase in the principal balances owed due to the capitalisation of unpaid interest during the period. £62 million of the charge was paid in cash to the holding company level and included in the £867 million of existing cash used to repay the debt.



Tax on loss on ordinary activities

Tax on loss on ordinary activities during the year ended 30 June 2013 was a £17.2 million credit, representing a 4.2% increase from a £16.5 million credit during the year ended 30 June 2012, due primarily to an increase in the deferred tax credit. In the period the Group's current tax liability was £0.4 million (related primarily to overseas tax) due to the availability of interest deduction and capital allowances as a result of the capital investment of the Group. In the year the capital allowances available were not claimed, since they were not required in order to reduce the current tax liability to £nil. This increased the deferred tax credit in respect of accelerated capital allowances. The Group’s effective tax rate during the twelve months ended 30 June 2013 was 3.8%. This was lower than the Group’s effective tax rate of 4.2% during the year ended 30 June 2012 due to a higher deferred tax credit in respect of the prior year adjustment.

Loss for the financial period

The loss for the year ended 30 June 2013 was £423.6 million, representing a 20.3% increase from a £352.2 million loss during the year ended 30 June 2012. This was due primarily to an increase in interest payable.

Capital expenditures

The Group’s operations are capital intensive and the Group requires maintenance capital expenditure as well as investment capital expenditure to support its growth and development. The capital expenditure reported for the year ended 30 June 2013 reflects the new definitions following refinancing. Maintenance capital expenditure is expenditure that is incurred to deliver cost-savings, productivity enhancements, to extend the useful life of existing fixed assets, or replace worn out and obsolete fixed assets with new ones in order to support existing contracts. ‘Growth – contracted’ is capital expenditure that is incurred to deliver revenues and which is supported by a signed customer contract. ‘Growth - non-contracted’ is capital expenditure that is incurred to deliver revenues and which is supported by a business case but there is no signed customer contract at the time at which it is incurred and reported. As the above are reported on an incurred basis, capital creditors/accruals reflect the timing difference to arrive at “cash capital expenditure”. The prior period is reported based on definitions as per the previous financing arrangements.

The table below sets out the Group’s capital expenditures for the years ended 30 June 2012 and 2013:

Year Ended 30 June

2012 2013(2)

(£ millions)

Maintenance ................................ 30.2 43.9 DSO .............................................. 72.5 25.5 Growth contracted(1) ...................... 58.8 59.4 Growth non-contracted ................ 9.8 Capital creditors/accruals ............. (16.6)

Total net cash capital expenditure and financial investment .................. 161.5 122.0

(1) Growth capital expenditure also includes cash sales of fixed assets. (2) Capital expenditure for year ended 30 June 2013 reflects the new definitions following

refinancing. Prior year financials are reported as per previous definitions, therefore not comparable for maintenance and growth capital expenditure categories.

For the year ended 30 June 2013, the Group’s capital expenditure and financial investment was £122.0 million, representing a 24.4% decrease from £161.5 million during the year ended 30 June 2012. For the year ended 30 June 2013, £43.9 million of capital expenditure and financial investment related to maintenance capital expenditure, £25.5 million related to DSO capital expenditure, £59.4 million related to growth contracted capital expenditure, £9.8 million related to growth non-contracted



capital expenditure and a capital creditors/accrual adjustment of £(16.6)m reflected the amount of capital expenditure booked to trade creditors and/or accruals. Maintenance capital expenditure comprised of maintenance of site infrastructure and IT estate for the year ended 30 June 2013. Prior year’s maintenance capital expenditure was lower as some of the spend was classified as growth capital expenditure under the previous definitions. The overall decrease in the year ended 30 June 2013 was primarily attributable to completion of the technical delivery of the DSO project.

Net cash flows

The following table sets forth information regarding the Group’s statement of cash flows for the periods presented:

Year Ended 30 June

2012 2013

(£ millions)

Consolidated cash flow data

Net cash inflow from operating activities ................... 378.5 349.2 Dividends from investments ...................................... 0.1 0.1 Returns on investment and servicing of finance ........ (171.5) (171.8) Tax paid .................................................................... (0.2) (0.2) Net capital expenditure and financial investment ...... (161.5) (122.0) Acquisitions and disposals ........................................ (2.1) (29.0) Equity dividends paid ................................................ (0.2) (0.1) Financing .................................................................. 3.3 15.7

Increase in net cash ................................................ 46.3 41.9 Net cash inflow from operating activities

For year ended 30 June 2013, the Group’s net cash inflow from operating activities was £349.2 million, consisting of EBITDA of £416.3 million, less exceptional items of £28.3 million, negative movements in working capital of £40.6 million and other positive movements of £1.8 million. This was a 7.7% decrease from £378.5 million during the year ended 30 June 2012 largely because the previous year benefitted from a £49 million positive working capital impact relating to a one-off MNO receipt for a new contract.

For a reconciliation of net cash flows to EBITDA, see “Note Regarding EBITDA And Reconciliation From EBITDA To Net Operating Cash Inflow From Operating Activities” in the Appendix.

Working capital movement

Working capital is part of “Net cash inflow from operating activities” in the Group’s summary consolidated cash flow statement. The Group defines working capital movement as the movement in current assets, current liabilities and certain long term liabilities including deferred income and provisions greater than one year that form part of the Group’s net cash inflow from operating activities (but excluding non-working capital movements that are included in the balance sheet movements for these areas such as capital creditors and imputed interest).



The table below sets out the Group’s calculation of working capital as at the dates indicated.

Year Ended 30 June

2012 2013

(£ millions)

Decrease / (increase) in debtors ...................... (11.1) (6.1)

Net increase/ (decrease) in creditors ............... 10.2 (25.1)

Net increase / (decrease) in provisions ............ 0.3 (9.4)

Total working capital movement ................... (0.6) (40.6)

The components of the Group’s working capital are:

• Decrease/(increase) in debtors comprising trade debtors, prepayments and accrued income;

• Net increase/(decrease) in creditors including trade creditors, sundry creditors, VAT creditors, accruals, and deferred income less than and greater than one year, and,

• Net increase/(decrease) in provisions include provisions less than and greater than one year.

From an annual perspective the Group’s working capital movement is seasonal in nature due to the different contractual timings of receipts and payments. The Group invoices the majority of its Site Share customers annually in advance, and these billings and subsequent cash collections are mainly centred upon the third quarter of the fiscal year. In addition, annual staff bonus payments are made in the first quarter of the fiscal year. As a result, the Group’s cash inflow from operations in the second half of the fiscal year, historically, has been approximately double the amount of the first half of the fiscal year, which is reflected in the working capital fluctuation. Consequently, working capital tends to be significantly negative in the first half of the year as a higher proportion of profit and loss revenues are non-cash.

The Group’s working capital movement was negative £40.6 million during the year ended 30 June 2013, which represented a significant adverse movement from negative £0.6 million during the year ended 30 June 2012. This was principally due to a £49 million positive impact in the previous year from a one-off upfront receipt for a new MNO contract.

Dividends from investments

For the year ended 30 June 2013, the Group’s dividends from investments was £0.1 million, consisting of amounts received from the Group’s investment in MXR Holdings Limited, a company which owns and operates several regional digital radio Multiplexes within the UK.

Net cash outflow from returns on investment and servicing of finance

For the year ended 30 June 2013, the Group’s returns on investment and servicing of finance was an outflow of £171.8 million, consisting of £0.6 million in interest received, less £171.3 million in interest paid to third party creditors, and £1.1 million from the interest element of finance lease rentals.

Tax paid

For the year ended 30 June 2013, the Group paid £0.2 million in corporation tax, consisting predominantly of amounts paid in overseas jurisdictions.

Acquisitions and disposals

For the year ended 30 June 2013, the Group’s acquisitions and disposals was negative £29.0 million, consisting mainly of acquisition costs relating to Spectrum Interactive Limited and Connect TV Limited. These two acquisitions were undertaken prior to the refinancing and generate considerable positive EBITDA contribution in the Telecoms and Digital Platforms business areas respectively. Since the refinancing, acquisitions and disposals have been immaterial at negative £0.3m.



Equity dividends paid

For the year ended 30 June 2013, the Group’s equity dividends paid was £0.1 million which also relates to the Group’s investment in MXR Holdings Limited.

Net cash flow from financing

For the year ended 30 June 2013, the Group’s net financing inflow was £15.7 million, consisting of £656.6 million of inflow from borrowings from parent undertakings, £3,334.5 million inflow from raising external borrowings less £3,751.0 million repayment of external borrowings, £97.2 million payment of debt issue costs and facility arrangement fees, £98.1 million deferred derivative close out costs, £28.5 million restricted cash, £0.5 million in the capital element of finance lease payments and £0.1 million payment of a loan to a joint venture. Net cash flow from financing differs to that within the profit and loss account due primarily to non-cash charges in the profit and loss account in respect of the amortisation of debt issue costs, imputed interest, accretion liabilities and movements in the amount of accrued interest balances.

(Decrease)/increase in net cash

For the year ended 30 June 2013 the Group’s increase in net cash was £41.9 million due to the above factors.

Contractual Obligations and Commitments

The following table sets out the amounts due by period under the Group’s contractual obligations as at 30 June 2013:

Payments due by Period

Total

Less than1 Year

1 to 3 Years

3 to 5 Years

More than5 Years

(£ millions) Senior debt – A ............................................................. 400.0 - 400.0 - - Senior debt – B ............................................................. 786.0 - - 786.0 - Senior bonds ................................................................. 1,148.5 - - - 1,148.5Junior bonds .................................................................. 600.0 - - - 600.0 Trade creditors .............................................................. 68.4 68.4 - - - Accrued liability on inflation rate swap .......................... 20.2 - 20.2 - - Finance lease obligations1 ............................................ 14.5 0.5 0.6 0.9 12.5 Capital commitments ..................................................... 19.8 19.8 - - - Operating lease commitments ...................................... 142.9 18.5 30.6 21.5 72.4 Other creditors .............................................................. 433.0 317.4 27.6 32.1 56.0

Total non-Group .......................................................... 3,633.3 424.5 479.0 840.4 1,889.4

Amounts owed to Group undertakings .......................... 3,458.9 112.1 - - 3,346.8

Total .............................................................................. 7,092.2 536.6 479.0 840.4 5,236.2

(1) These amounts exclude future interest payments associated with these liabilities

Average interest rates on borrowed funds after adjusting to include the principal accretion on inflation index linked swaps were 5.08%, 4.89% and 6.41% in the fiscal years ended 30 June 2011, 2012 and 2013 respectively.

Contingent Liabilities

Under the terms of the Group’s external debt facilities, the Company has provided security over substantially all of its fixed and other assets by way of a Whole Business Securitisation structure.



Off-Balance Sheet Arrangements

The Group has not used special purpose vehicles or similar financing arrangements on an historical basis. In addition, the Group has not had and does not have off-balance sheet arrangements with any of its affiliates.

The Group uses Interest Rate Swaps (IRS) and Inflation Linked Swaps (ILS) to reduce its exposure to fluctuation in variable interest rates on its debt and to inflation on its revenue contracts. Receipts and payments on IRS and ILS are recognised as they are incurred over the life of the instrument. Changes in the fair value of such derivatives are not required to be recognised under UK GAAP, but are instead disclosed in the notes. Amounts received and paid under IRS and ILS are shown at net value under financing costs, where they are part of the same legal agreement and settled at net value in practice. Accreting liabilities on ILS are recognised on an accruals basis. The Group also utilises forward purchase contracts for foreign currency transactions, and the changes in the fair value of such derivatives are not recognised, and the gain or loss on the settlement of such contracts is incorporated in the profit and loss account.

Prior to refinancing, the Group had interest rate swaps and inflation swap agreements covering a total notional value of £2,625.0 million in order to hedge its exposure to variable interest rates. £1,312.5 million had been hedged via interest rate swaps and £1,312.5 million had been hedged via RPI linked swaps. The swaps had a mandatory break clause at the earlier of any refinancing of the Group's senior facilities or April 2014.

In February 2013, the Group refinanced its debt raising £2,334.5 million of senior debt. As part of the refinancing £289.3 million of interest rate swaps were terminated and the remaining £2,335.7 million of notional interest rate and inflation swaps were restructured.

Inflation linked swaps (ILS)

£1,312.5 million of fixed and variable rate debt is hedged via three classes of inflation linked swaps which fix interest at an average rate of 2.9498% indexed with RPI. In addition, the principal amount of these swaps increases with RPI. One class of these swaps with a nominal value of £235.0 million has a 10 year mandatory break clause, whilst the remaining two classes are break-free. The maturity date for all three classes of inflation swaps is April 2027. The accrued principal accretion on inflation linked swaps as at 28 February 2013 amounting to £286.5 million was paid at the refinancing date.

Interest rate swaps (IRS)

£1,023.2 million of variable rate debt is now hedged via two classes of interest rate swaps at an average fixed rate of 5.7926%. The interest rate swaps have 3 year and 5 year mandatory break clauses co-terminus with the variable rate bank debt.

An amount of £20.2 million (2012: £255.2 million) reflecting accrued liabilities under the inflation swaps is included within creditors. The remaining fair value of the interest rate, inflation and cross currency swaps at 30 June 2013 (excluding the inflation swap accrual), is a liability of £1,412.3 million which comprises £1,051.8 million in relation to the RPI linked swaps, £351.8 million in relation to the interest rate swaps, and £8.7 million in relation to the cross currency swaps (2012: total £1,044.7 million), which is not recognised on the balance sheet in accordance with Group accounting policy and UK GAAP accounting standards. This fair value is calculated on a mark to market basis.

Private Placement hedging arrangements

On the 27 June 2013, AF1 entered into £398.5 million of Floating / Fixed Interest Rate Swaps to overlay the above RPI swaps, amending the cash flow characteristics to align to the fixed payable coupon on the £398.5 million Private Placement Notes issued by Arqiva PP Financing Plc (‘APPF’). In addition, AF1 entered into USD 358.0 million (£235.5 million equivalent) of cross-currency swaps to fix the Sterling cost of future interest and capital repayment obligations relating to the USD tranche of the Private Placement at an exchange rate of 1.52.



MANAGEMENT

Board of Directors The Board of Directors of the Group consists of a non-executive Chairman together with eight non-executive members listed in the table below. It meets approximately six times per annum to discuss the performance of the Group against its strategic objectives, current and future projects and innovations and to discuss any other issues that may impact the day-to-day running of the business in the short- to medium-term.

The Board of Directors is the main policy making and oversight board of the Group and, together with the Management Board, conducts the day-to-day operations of the activities of the Group.

Name

Date of Birth Position

Leonard Peter Shore 08/09/1950 Independent Non-Executive Chairman

Peter Douglas 05/03/1947 Non-Executive Director Alain Carrier 17/08/1967 Non-Executive Director Christian Seymour 09/07/1964 Non-Executive Director Edward Beckley 17/06/1975 Non-Executive Director Damian Walsh 14/09/1953 Non-Executive Director Jeremy Beeton 31/03/1953 Non-Executive Director Robert Wall 07/11/1979 Non-Executive Director Clive Ansell 26/12/1957 Independent Non-Executive

Director

Biographies Leonard Peter Shore Independent Non-Executive Chairman Mr. Shore joined Arqiva as Director and Chairman in 2007. From 2010 to 2011, Mr. Shore was CEO of Media and Communications Partners as well as Chairman of Airwave. From 2004 to 2007, he worked in advisory roles for Investec Australia in the telecommunications, internet and technology fields. From 2001 to 2007, Mr. Shore was Chairman and Director of Hostworks and from 2001 to 2004 he was Chairman and CEO of Unwired.

Peter Douglas Non-Executive Director Mr. Douglas is a nominee director on behalf of the Canada Pension Plan Investment Board (CPPIB). His forty-five year career in the broadcast transmission and telecommunications sectors began in the Broadcast Division of Marconi. After a period as a project manager in the BBC, he moved to the Independent Broadcasting Authority (the IBA). In 1990, the Engineering Division of the IBA was privatised, following which Mr. Douglas acted as Managing Director from 1996 until 2004, when the business was sold to a consortium led by Macquarie. Mr. Douglas has served on a number of other boards, including NTL, Channel 5 Engineering Services, SDN, Broadcast Australia and Global Radio.

Alain Carrier Non-Executive Director Mr. Carrier joined CPPIB in January 2008, and is responsible for leading the Private Investments department in Europe and the Global Infrastructure Group of CPPIB. Based in London, he also assists in the overall development of CPPIB’s activities in the broader EMEA region. Mr. Carrier has more than 20 years of financial industry experience. Prior to joining CPPIB, Mr. Carrier was most recently Managing Director at Goldman Sachs & Co. in their Investment Banking division in New York and London. Prior to that, he was an Associate at the New York-based law firm, Sullivan & Cromwell.



Christian Seymour Non-Executive Director Mr. Seymour is the Head of Infrastructure for Europe at Industry Funds Management (IFM). He has worked at IFM for ten years as an investment professional responsible for making and managing investments across a wide range of infrastructure sectors, including energy, transport and telecommunications. In addition, Mr. Seymour has eighteen years of experience in energy marketing and technical engineering management for energy and infrastructure development, having worked with companies such as Duke Energy, Santos, BHP Billiton, Bechtel and Woodside.

Edward Beckley Non-Executive Director Mr. Beckley is the European head of Macquarie Infrastructure and Real Assets (MIRA). He joined Macquarie in London in 1999 with a financial background. During his time with Macquarie he has worked across all infrastructure asset classes in both advisory and funds management capacities. Mr. Beckley is also a member of the Investment Committee for the Macquarie European Infrastructure Funds and holds a number of non-executive directorships for European infrastructure businesses.

Damian Walsh Non-Executive Director Mr. Walsh is the nominee director on behalf of the MTAA Superannuation Fund (NTL Broadcast) Utilities Pty Ltd. He has more than thirty years of international experience as a chartered accountant and management consultant and was most recently Managing Director at The Highland Group, a global management consultancy. Mr. Walsh started his career in Australia with the accountancy firm Arthur Young and was appointed Partner in 1984. He has since held senior strategy, management and business development roles with Ernst & Young and Arthur Andersen in Australia, the U.S. and the UK.

Jeremy Beeton Non-Executive Director Mr. Beeton CB is a Senior Adviser at MIRA. He has significant experience in the infrastructure sector in Europe and globally. Most recently, he led the UK Government’s Olympic Executive, where he was responsible to Ministers for the successful delivery of the 2012 London Olympics programme. Prior to the role on the Olympic Executive, as Principal Vice President and Director of Bechtel, he had responsibility for management and delivery of Bechtel’s worldwide civil engineering projects in infrastructure and aviation, a portfolio amounting to some $30 billion. That followed several leadership positions over a number of years in capital intensive industries. Additionally, Mr. Beeton is a non-executive director of SSE, an Advisory Board member for PricewaterhouseCoopers, a member of Court at Strathclyde University, a Chartered Engineer and a Fellow of the Institute of Civil Engineers.

Robert Wall

Non-Executive Director Mr. Wall joined CPP Investment Board in July 2007. Since joining he has played a key role in a number of significant transactions, including the pursuit of an investment in Auckland International Airport, the takeover of Macquarie Communications Infrastructure Group, and a direct investment into Gassled (the world’s largest network of undersea gas transportation pipes). Mr. Wall has also represented CPPIB on the Boards of Arqiva, Broadcast Australia and Solveig Gas Norway. Prior to joining CPP Investment Board, Mr. Wall worked as a Senior Engineer with Buro Happold Limited in the United Kingdom. Previously he was an Engineer with Beca Carter Hollings & Ferner Ltd in New Zealand.

Clive Ansell Independent Non-Executive Director Mr. Ansell is currently CEO-Technology at Tribal Group. Prior to this he was President for Strategy, Marketing & Propositions at BT Global Services, leading global strategy, marketing, M&A, product



development & management, professional practices and new business. At BT Mr. Ansell also held the position of Group Strategy Director at BT Group plc and BT’s Regional Director for London, which included a role in the core London 2012 Olympic Bid team. As Group Strategy Director, Mr. Ansell led BT’s regulatory activities at the group level and was the architect and chief negotiator with Ofcom in putting together the Regulatory Settlement in the UK in the Telecoms Strategic Review in 2005 and 2006, as well as launching BT’s Openreach business.

Operating Board (comprising the Senior Management Team) The following table sets out certain information with respect to the senior management of the Group. The address for each of these managers is Crawley Court, Winchester, SO21 2QA, United Kingdom.

Name

Age Position

John Cresswell 02/05/1961 Chief Executive Officer Phil Moses 10/06/1964 Chief Financial Officer Matthew Brearley

07/05/1965 Director of People and Organisation

Michael Giles 03/06/1964 Group Commercial DirectorSteve Holebrook

02/09/1965 Managing Director – Terrestrial Broadcast

Nicolas Ott 06/02/1965 Managing Director – Telecoms

Charles Constable 08/08/1962 Managing Director – Digital Platforms

Wendy McMillan 15/09/1975 Group Strategy and Business Development Director

Cameron Rejali 27/08/1961 Chief Technology Officer

Barrie Woolston 11/02/1961 Managing Director (interim) – Satellite

Biographies John Cresswell Chief Executive Officer Mr. Cresswell was appointed CEO of Arqiva in January 2011. Previously he was the Chief Operating Officer of ITV plc. Mr. Cresswell was appointed to the ITV plc Board in 2006 as Finance Director until 2007 when he was appointed COO. He was appointed interim CEO in November 2009 until leaving in April 2010. He previously held senior roles in the broadcast sector.

Phil Moses Chief Financial Officer

Mr. Moses joined Arqiva as CFO in June 2011, having held a variety of senior finance roles at BT since 1991. Most recently he was CFO of Openreach, a c£5bn revenue business that is functionally separate from the rest of BT. Other roles included CFO of BT Ignite, Director of Investor Relations and Group Controller.

Matthew Brearley Director of People and Organisation Mr. Brearley joined Arqiva in February 2012. He previously held the position of Human Resources & Property Director at Vodafone UK. From 2002 to 2004 he was Head of Retail Human Resources at Marks & Spencer. He also held a similar position at Kingfisher Group.



Michael Giles Group Commercial Director

Prior to becoming Group Commercial Director, Mr. Giles held senior legal and commercial roles at NTL Business and NTL Broadcast, overseeing major contract negotiations and leading the integration of the NGW and Arqiva businesses.

Steve Holebrook Managing Director — Broadcast & Media

Prior to becoming Managing Director of Broadcast & Media, Mr. Holebrook served as managing director of Arqiva’s terrestrial broadcast division for five years. Mr. Holebrook was previously director of NTL Broadcast’s satellite service group and led the establishment of ad-hoc, play-out and direct-to-home platforms within its service portfolio. Prior to joining NTL in 1995, Mr. Holebrook held a variety of positions in the satellite and telecommunications industry, working for Mercury, Kingston Satellite Services, British Aerospace and British Telecom International.

Nicolas Ott Managing Director — Telecoms

Mr. Ott joined Arqiva in January 2012 as Managing Director of Government, Mobile and Enterprise (and now the Telecoms division). Mr. Ott joined Arqiva from the UK’s largest mobile operator, Everything Everywhere, where he was the Vice-President for Strategy, Regulation and Planning for Everything Everywhere and prior to that for Orange UK. In this role he successfully led the pre-merger integration of Orange UK and T-Mobile UK. He has held several other positions, including Chief of Staff to the Chairman & CEO of France Telecom group, Finance Director at Equant (later to become Orange Business Services) and CFO of the French subsidiary of Global Crossing. Mr. Ott is a qualified accountant, having attained his Diplôme d’Etudes Supérieures Comptables & Financières.

Charles Constable Managing Director — Digital Platforms

Mr Constable joined Arqiva in 2011 as Managing Director of the Digital Platforms Division. Mr Constable has worked with a range of terrestrial broadcasters over the past 20 years, including the BBC, ITV and, more recently, Five, where as Director of Strategy he was responsible for Five's investment in YouView. When with the BBC, Mr Constable ran the Director General's office when Greg Dyke was in the role. His first task was to put the Freeview bid together. He also directed the BBC's Charter renewal process and ran the Content Supply Review. Prior to working in television, Charles spent 8 years in management consulting, principally with the US strategy firm, Bain & Company.

Wendy McMillan Group Strategy and Business Development Director

Ms. McMillan is Group Strategy and Business Development Director, and she is responsible for developing the overall strategic direction of Arqiva as well as leading business development, marketing, technology, regulation & public affairs and transformation. Prior to joining in June 2011, she founded an online professional services business for which she received the Cartier Women's Initiative Award for Europe in 2010. Her corporate experience includes a number of senior roles at BT - spanning operational and commercial line management as well as strategy, whilst her earlier career was spent in strategic and financial roles at Sappi Ltd, Bain & Company and Smedvig Capital.

Cameron Rejali

Chief Technology Officer

Mr Rejali joined in 2013 from BT, where he was Managing Director of Voice and Interoperability Services within BT's Innovate & Design business unit. In this role he led the transformation of BT's £5 billion global voice portfolio by developing BT's next generation IP voice and interoperability services, as well as BT Group's Customer Experience program. Prior to this, Mr Rejali was MD of Product



Management & Development for BT Wholesale where he developed and launched broadband services, wholesale ethernet services for fixed and mobile carriers, and global IP Exchange services. Before joining BT, Cameron held a variety of senior management positions at Sprint Corporation. Cameron is responsible for developing new product opportunities and providing technology leadership throughout the Group. Barrie Woolston

Managing Director (interim) - Satellite

Mr Woolston has Managing Director responsibility for the Satellite and Media division. He joined Arqiva in July 2005 as Commercial Director with responsibility for developing new satellite and media markets in the broadcast and data communications sector. In 2010 Barrie became Commercial Director for Arqiva Broadcast and Media which included commercial and international growth responsibility for the satellite and media business.

Mr Woolston started his career in the UK automotive industry where he held Management Board positions at SAAB and Porsche before moving into broadcasting where he developed and launched two TV channels in a JV with BskyB, the UK’s premier DTH platform. PRINCIPAL SHAREHOLDERS

The following table sets out the principal entities directly or indirectly owning at least 5% of the share capital of the Group’s ultimate parent, ABHL, as at the date of this report and the percentage of share capital held by such entities:

Name of relevant entities

Number of shares held

Percentageof share

capital (%) Frequency Infrastructure Communication Assets Limited ....................... 314,028,405 48.0MEIF II Luxembourg Communications S.à.r.l .......................................... 163,547,390 25.0Codan Trust Company (Cayman) Limited ............................................... 97,061,692 14.8The Trust Company Limited ..................................................................... 35,495,023 5.4MTAA Superannuation Fund (NTL Broadcast) Utilities Pty Ltd as

trustee of the MTAA Superannuation Fund (NTL Broadcast) Utilities Trust ..................................................................................................... 33,789,299 5.2



RISK MANAGEMENT

Principal risks and uncertainties facing the business

The Group has a formal process for monitoring risks and maintains a corporate risk register which is regularly reviewed and reported to senior management and the Directors. The key business risks affecting the Group are set out below together with the Group’s mitigating actions; in addition the Group has long term contracts in place with a number of significant blue chip customers which support the Group’s long term financial stability.

Division Description of risk Risk mitigation

Telecoms The level of demand for wireless communications and impact on demand for access to the Group’s towers.

Significant amounts of capital expenditure have been invested in developing the wireless communications infrastructure in the UK. The Group monitors the demand for mobile data which continues to grow and indications are that spectrum capacity, and antenna deployments will need to increase to cope with this demand. The Group continues to closely monitor the development of wireless technology and network deployment activities by MNOs.

Telecoms Network sharing activity amongst the MNOs.

However, the Group has already secured long term contracts with many of the MNOs, including Everything Everywhere (‘EE’), and is at an advanced stage in negotiations with other MNOs.

The Group's sites are predominantly located in rural and suburban areas. Their location exclusivity and restrictive planning regulations creates significant barriers to MNOs reducing their presence on Arqiva's portfolio.

Arqiva continues to monitor closely the development of wireless technology and network deployment activities by the MNOs. The Group seeks to protect itself by negotiating long term contracts where it makes itself the focal point for consolidation, and facilitates the MNOs consolidation in return for long term revenue certainty.

All International decisions regarding the future use of the 600 / 700MHz spectrum for DTT.

During DSO, the 600 Mhz band had been cleared in preparation for an auction for the long term use of that spectrum for additional DTT Multiplexes. This process was put on hold following The World Radio Conference 2012 (‘WRC-12’) which signalled that countries may clear the 700 Mhz band of DTT in preparation for future use by Mobile Broadband.

In November 2012, Ofcom published a UHF Strategy Statement confirming its intention to release 700 MHz for Mobile Broadband use whilst ensuring 600 Mhz band accessibility for DTT, should the change in 700Mhz go ahead post 2018. Ofcom published a consultation for the interim use of the 600 Mhz band for temporary HD DTT Multiplexes, for which Arqiva was the successful applicant.

There is a risk of future changes to this Ofcom UHF strategy. The Group continues to engage with Ofcom and the broadcasters to ensure that Arqiva and the television industry’s needs are fully considered and sufficient spectrum is available for DTT.

B&M Interference to terrestrial broadcast transmissions with the launch of 4G

As part of the Group’s engagement with Ofcom and the broadcasters, we will ensure that Arqiva and the television industry’s needs are fully considered as part



services in 800 MHz

The introduction of White Space services in the UHF band presents the risk of additional interference to DTT. Therefore the DTT platform may suffer some churn to other platforms.

of these spectrum planning discussions.

In addition, the Group has an open and regular dialogue with at800 (a trademark of Digital Mobile Spectrum Limited (‘DMSL’) which is funded by and represents the UK mobile operators who will be launching 4G mobile services at 800 MHz).

The Group is actively involved in trials and discussions around mitigating any such potential interference.

B&M and Digital Platforms

Developments in alternative broadcast technologies, such as broadband internet connected TV, which competes against the Group’s DTT transmission business.

DTT retains the largest share of broadcast transmission in the UK. In addition the Group has mitigated some of this risk by investing in YouView TV Limited, a joint venture formed to develop and promote the DTT platform, together with its development of Connect TV – a hybrid IPTV/DTT offering

Financing Risk

The Group will need to refinance at least part of its debt as it matures and may need additional financing to cover capital expenditure and certain other expenses.

The Group mitigates this risk by:

the strength of the stable long term investment grade capital structure in place. Our BBB rating (from Standard & Poors and Fitch) reflects our strong ability to raise cash and repay debt from our cash flows over a reasonable period of time,

maintaining an active dialogue with lenders and investors,

maintaining debt with a variety of medium and long term maturities so that over time we do not have a significant concentration of debt due for refinancing in any given year,

aiming to refinance debt well in advance of the maturity date.

Market Risk Disclosure

The Group’s operations expose it to a variety of financial risks that include the effects of changes in price, credit risk, liquidity risk, cash flow interest rate risk and foreign exchange risk. The Group’s overall risk management programme seeks to minimise potential adverse effects as noted below.

Price risk

Energy is a major component of the Group’s cost base. A large proportion of this is managed via pass-through arrangements to customers. The Group’s residual exposure to fluctuations in the electricity price is managed by forward purchasing the majority of power requirements up to 18 months in advance. Milestones are set on larger projects so that changes in power costs are known in advance and can be hedged, in order to ensure the financial risks of volatile pricing are mitigated.

Credit risk

The Group is exposed to credit risk on customer receivables which is managed through appropriate credit checking procedures prior to taking on new customers; and higher risk customers paying in advance of services being provided. Performance is closely monitored to ensure agreed service levels are maintained reducing the level of queried payments and mitigating the risk of uncollectable debts.



Liquidity risk

To ensure it has sufficient available funds for working capital requirements and planned growth, the Group maintains cash reserves and access to undrawn committed facilities to cover forecast requirements. As at 30 June 2013 the Group had £100.0 million available working capital facilities and £120.3 million cash available to cover short term cash flow timing differences if required, together with a £400.0 million capital expenditure facility. In addition, the Group has £200.0 million of liquidity facilities available to cover senior interest payments if required. Details of the debt maturity profile are provided in note 17 of the accounts. The Group carefully manages the counterparty risk on its liquid funds and derivative financial instruments with balances currently spread across a large number of major financial institutions which have satisfactory credit ratings assigned by international credit rating agencies. The levels of counterparty risk are monitored through the Group’s ongoing risk management processes, which includes a regular review of the counterparty ratings. Risk in this area is limited further by setting a maximum level and term for deposits with any single counterparty.

Cash flow interest risk

The Group has variable rate bank debt and uses interest rate and inflation swaps to hedge its exposure to rising interest rates. The Group maintains a hedging policy to manage interest rate risk and to ensure the certainty of future interest cash flows. It currently has fixed rate hedging, split between interest rate swaps and inflation swaps. Interest rate swaps convert variable rate interest costs to fixed rate interest costs while inflation swaps convert fixed or variable rate interest costs to RPI-linked costs, which fluctuate in line with the RPI index as do a proportion of the Group's revenue contracts. Details of the interest rate profile of the Group are provided in note 17 of the accounts.

Foreign exchange risk

The Group operates predominantly from UK sites and in the UK market, but has some transactions denominated in foreign currency. While some customer and supplier contracts are denominated in other currencies (mainly US Dollars and Euros), the majority of the Group’s revenues and costs are sterling based, and accordingly exposure to foreign exchange risk is limited. Management regularly monitor the impact of foreign exchange risks and assess the need to put any mitigating financial instruments in place. During the year, forward foreign exchange contracts were used to fix the exchange rate for certain overseas revenue contracts, and cross currency swaps were taken out to fix the exchange rate in relation to US Dollar denominated Senior bonds. CRITICAL ACCOUNTING POLICIES

Turnover

Turnover, which is stated net of value added tax, includes the value of charges made for transmission services, distribution services, products, facilities leasing, research and development contracts, external network services to national and international telecommunication operators, other contracts, rents from properties and charges made under site sharing agreements.

Turnover is recognised as services are provided. Cash received or invoices raised in advance is taken to deferred income and recognised as turnover when service is provided. Where consideration received in advance is discounted, the effect of the time value of money, where material, is reflected within turnover and interest payable and similar charges. During the financial year ended 30 June 2013 £6.5 million of revenue and £11.4 million of interest expense was recognised as a result of the time value of money. Turnover recognised in advance of cash received or invoices raised is taken to accrued income.

Derivative financial instruments

The Group uses interest rate and inflation swaps to reduce its exposure to fluctuations in variable interest rates on its debt. Receipts, payments and accreting liabilities on interest rate and inflation swaps are recognised on an accruals basis, over the life of the instrument. Changes in the fair value of such derivatives are not recognised. Amounts received and paid under interest rate and inflation swaps are shown net under financing costs, where they are part of the same legal agreement and settled net in practice. The Group utilises forward foreign exchange contracts to hedge the value of its



foreign currency transactions. In addition, the Group utilises cross currency swaps to hedge the principal and interest payments due under the USD tranche of the Private Placement against variations in foreign exchange and interest rates. The changes in the fair value of such derivatives are not recognised, and the gain or loss on settlement is taken to the profit and loss account.

Leasing Commitments

Assets held under finance leases, which are leases where substantially all the risks and rewards of ownership of the asset have passed to the Group, are capitalised in the balance sheet and depreciated over their useful economic lives or the lease term, if shorter.

The capital elements of future lease obligations are recorded as liabilities, while the interest elements are charged to the profit and loss account over the period of the lease to produce a constant rate of charge on the balance of capital repayments outstanding.

Operating lease payments for assets leased from third parties are charged to the profit and loss account on a straight line basis over the period of the lease.

Equipment leased to customers under finance leases is deemed to be sold at normal selling price and this value is taken to turnover at the inception of the lease. Debtors under finance leases represent outstanding amounts due under these agreements, less finance charges allocated to future periods. Finance lease interest is recognised over the primary period of the lease so as to produce a constant rate of return on the net cash investments.

Recent and Prospective Changes in Accounting Policies

To the best of the Group’s knowledge, there are no accounting standards applicable to it that will require a prospective change in any of its accounting policies.

Basis of Preparation

The financial statements have been prepared in accordance with the Companies Act 2006 and applicable UK accounting standards under the historical cost convention. In order to show a true and fair view, the Group’s policy in respect of merger accounting departs from the requirements of the Companies Act 2006. Details of the departures are given in the financial statements.

Basis of Consolidation

The consolidated financial statements incorporate the assets and liabilities of all entities controlled by the Group and the results of all controlled entities. Businesses acquired, previously held externally to the Group, are accounted for as acquisitions with effect from the date control passes. Those disposed of are accounted for up until the date of disposal. Intra group profits have been eliminated. Undertakings, other than subsidiary undertakings, in which the Group has an investment representing not less than 20% of the voting rights and over which it exerts significant influence are treated as associated undertakings. Associates are accounted for using the equity method of accounting in accordance with FRS 9, “Associates and joint ventures”. Joint ventures are accounted for using the gross equity method. The consolidated financial statements include the appropriate share of those undertakings’ results and reserves.

Pensions

Defined benefit schemes are funded, with the assets of the scheme held separately from those of the Group, in separate trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and terms to the scheme liabilities.

Any defined benefit asset or liability is presented separately on the face of the balance sheet and net of deferred tax.

In the year to June 2009, Arqiva Limited operated two defined benefit pension schemes, the Arqiva Defined Benefit Pension Plan (the Plan) and the Arqiva Services Limited Pension Scheme (the Scheme). The Scheme merged into the Plan on 31 December 2009. Therefore, as from 30 June



2010, there is now a single defined benefit pensions arrangement operating, with Arqiva Limited as the sponsor. On this basis the disclosure for the schemes has been combined

The assets of the scheme are held separately from those of Arqiva Limited in trustee-administered funds.

The triennial valuation of the Group’s defined benefit pension obligations as at 30 June 2011, for actuarial funding purposes, has resulted in an assessed deficit of £17.4m. Gross plan liabilities at the valuation date were £130.5m compared to gross plan assets of £113.1m. Arqiva Limited has agreed with the trustee to make deficit recovery payments into the Plan of £5.7m in July 2013, £5.7m in July 2014 and £4.1m in July 2015, after taking into account payments already made under the previous recovery plan since the date of the valuation. See Note 25 to the Group’s audited condensed consolidated financial statements for year ended 30 June 2013.

Tangible fixed assets and depreciation

Tangible fixed assets are stated at original purchase cost (which includes costs directly attributable to bringing the assets into working condition), being fair value for acquired tangible fixed assets, less accumulated depreciation and any provision for impairment.

In accordance with FRS 15 ‘Tangible fixed assets’, directly attributable finance costs are capitalised where assets take a significant period of time to become ready for use.

Depreciation is provided on a straight line basis at rates calculated to write off the cost or valued amount, less estimated residual value, of assets over their estimated useful economic lives. The useful economic lives of the assets have been determined taking into account the expected rate of technological developments, market requirements and expected use of the assets. The selected depreciation rates are regularly reviewed to ensure they remain appropriate to the Group’s circumstances.

Asset Description Estimated Useful LifeFreehold buildings 60 – 70 years Leasehold buildings Length of lease Plant and equipment - Communications infrastructure network 8 – 100 years - Network computer equipment 3 – 20 years - Motor vehicles 3 – 5 years

Freehold land is not depreciated.

Capital work in progress is not depreciated until construction is complete and the asset is capable of operating in the manner intended by the Group in accordance with FRS 15.

Provisions

The provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects the current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as interest expense.

Decommissioning provisions are recognised within provisions for liabilities and charges and included within fixed assets, where the costs of dismantling assets are considered material. The amounts recognised within fixed assets are depreciated over the useful economic life of the asset. The provisions are discounted to reflect the time value of money where material.

Goodwill

Purchased goodwill is capitalised and amortised on a straight line basis over its estimated useful life, which is considered to be no longer than 20 years. The Group capitalises costs associated with the acquisition of subsidiaries within goodwill.



APPENDIX

Description of Certain Income Statement Line Items

Turnover

Turnover, which is stated net of value added tax, includes the value of charges made for transmission services, distribution services, products, facilities leasing, research and development contracts, external network services to national and international telecommunication operators, other contracts, rents from properties, capital works contributions from third parties and charges made under site sharing agreements.

Turnover and profit for the Group are recognised when services are provided. Cash received in advance from customers is accounted for as deferred income and recognised as turnover when service is provided. Turnover recognised in advance of cash received is accounted for as accrued income. See “— Critical Accounting Policies”. Broadcast and Media

Turnover for the Group’s Broadcast and Media division comprises turnover from the Group’s Terrestrial Broadcast and Satellite sub-divisions.

Terrestrial Broadcast

Turnover for the Group’s terrestrial broadcast business primarily comprises turnover from digital television broadcasting, analogue television broadcasting (up to the date of the completion of the DSO), digital and analogue radio broadcasting, and radio Multiplex services provided for Ofcom and broadcast clients.

Satellite

Turnover for the Group’s Satellite business primarily comprises turnover from the UK DTH platform, satellite distribution platforms, satellite managed networks and other activities (media management, digital cinema, events, satellite data communications, wholesale space and an international fibre network). Digital Platforms

Turnover for the Group’s Digital Platforms division comprises turnover generated from sales of broadcast channel slots for DTT, radio and data services on the Group’s existing two licensed DTT Multiplexes. A license for two new HD DTT Multiplexes was also awarded by Ofcom July 2013 in the 600 MHz spectrum.

Telecoms

Turnover for the Group’s Telecoms division primarily comprises turnover from the Group’s site share and Secure Solutions businesses.

Site Share and WiFi

Turnover for the Group’s Site Share business primarily comprises turnover from wireless site share primarily to MNOs and their JVs as well as to customers who are not themselves MNOs, such as Airwave. Services provided through site share include site licensing, site access, network services and installation services. The Group’s WiFi business makes it one of the UKs largest WiFi hotspot providers which provides the services, primarily on a wholesale basis.

Secure Solutions (previously Government)

Turnover for the Group’s Secure Solutions business primarily arises from providing mission-critical communications solutions to public sector organisations throughout the UK and Ireland, including frontline emergency services. Major customers include the Royal National Lifeboat Institution, the



Maritime and Coastguard Agency and UK Border Agency and certain UK police authorities, including the UK’s two largest police forces, the Metropolitan Police (through BAE Systems Detica) and Strathclyde Police. Cost of sales

Cost of sales accounts for those costs that are either variable in line with changes in turnover or can be directly attributable to a single customer. This includes third-party project and power costs. Cost of sales also includes items such as the cost of rent, business rates, satellite and video stream capacity and charges relating to the movement of data around the Group’s infrastructure, for example to the main transmission towers and multiplexing sites. However, for the Group’s terrestrial broadcast (NA and MTS) contracts, the Group passes through certain of its costs for elements such as rent, taxes and electricity. Also included are a number of maintenance (including internal staff costs), equipment hire, software maintenance and facility costs. Depreciation

Depreciation includes depreciation of owned fixed assets, impairment of owned fixed assets and depreciation of assets held under finance leases. Amortisation

Amortisation includes amortisation of goodwill in respect of Subsidiaries that arises upon consolidation and amortisation of intangible assets. The amortisation charge is largely driven by goodwill amortisation which mainly relates to the acquisitions of NTL Broadcast by Macquarie Communications Infrastructure Group and National Grid Wireless by Arqiva in 2005 and 2007 respectively. The goodwill is amortised on a straight line basis over its estimated useful life, which is considered to be no longer than 20 years. Operating expenses

Operating expenses represent operating costs of the business that are not directly variable in line with changes in turnover, such as staff costs not associated with the maintenance of customer contracts or networks and the majority of corporate support costs. Such costs include the salaries and wages of employees, licence and operating arrangement fees, sales and marketing costs, travel and consultancy fees. Exceptional administrative expenses

Exceptional administrative expenses are one-off items where the earnings or charges are not considered to be indicative of the Group’s ongoing operations. Net third party interest payable

Net third party interest payable includes interest receivable and similar income, net bank loan interest, bond interest, other interest and share of joint venture interest payable.

Interest receivable and similar income includes bank interest, finance lease interest receivable and other interest.

Bank loan interest includes bank loan interest and swap payments (including accrued liabilities on the ILS). Other interest

Other interest includes the amortisation of debt issue costs, finance lease interest payable and imputed interest on advance payments from customers (relating to cash receipts collected in advance for some long-term contracts,. For the periods under review, other interest is almost entirely non-cash while a small cash element relates to payments for finance leases.



Joint venture turnover

Share of joint venture turnover represents the Group’s percentage share of turnover generated by its joint venture companies. Joint ventures are accounted for using the gross equity method. The consolidated financial statements include the appropriate share of those undertakings’ results and reserves. Interest payable to parent undertakings

As part of the Group’s refinancing, the majority of the balances with group undertakings have been formalised under a single subordinated loan agreement with the direct parent company which has a long term maturity date of 2033. In addition, further funds have been advanced by parent undertakings on a subordinated basis which facilitated the repayment of previous bank facilities. Under the terms of the subordinated loan agreement, these loans have maturity dates of 20 years, cannot be recalled earlier than the final maturity date other than with the agreement of the borrower, and interest can be deferred if the borrower does not have sufficient available cash flow.

Exceptionals

Non-operating profit exceptional items represent those material items derived from events or transactions which require separate disclosure in the profit and loss accounts under accounting standards in order to fairly present the results for the financial period.

Fundamental reorganisation is a subset of non-operating profit exceptionals.



Note Regarding EBITDA And Reconciliation From EBITDA To Net Cash Inflow From Operating Activities

EBITDA is presented to enhance a prospective investor’s understanding of the Group’s results of operations and financial condition. The Group defines EBITDA as Group operating profit (taken from the Group’s consolidated profit and loss data) before depreciation and amortisation, exceptional administrative expenses and one-off items where the earnings or charges are not considered to be indicative of the Group’s ongoing operations.

EBITDA is a supplemental measure of financial performance that is not required by, nor presented in accordance with, UK GAAP. EBITDA is not a measure of performance under UK GAAP and investors should not consider EBITDA as an alternative to (a) operating profit or profit for the period (as determined in accordance with UK GAAP) as a measure of the Group’s operating performance, (b) cash flows from operating investing and financing activities as a measure to meet the Group’s cash needs or (c) any other measures of performance under generally accepted accounting principles. Investors should exercise caution in comparing EBITDA as reported by the Group to EBITDA of other companies.

EBITDA has been included in this Financial Report because it is a measure that the Group’s management uses to assess the Group’s operating performance.

The following table provides a reconciliation of profit on ordinary activities before interest to EBITDA for the periods indicated:

£ millions

Year Ended 30 June

2012 2013

(audited) Group operating profit ................................. 124.1 123.4 Depreciation ................................................... 99.7 105.7 Amortisation .................................................... 155.2 158.7 Exceptional administrative expenses .............. 23.7 28.3 Other (including loss on disposal of fixed assets and

non-interest finance costs including bank charges) 0.1

EBITDA ......................................................... 402.6 416.3

A reconciliation of EBITDA to the Net cash inflow from operating activities is provided below:

£ millions

Year Ended 30 June 2012

Year Ended 30 June 2013

EBITDA 402.6 416.3 Exceptional costs (23.7) (28.3)

Working capital (0.6) (40.6) Other (including loss on disposal of fixed assets and non-interest finance costs including bank charges) 0.2 1.8

Net cash inflow from operating activities 378.5 349.2



Summary Corporate and Financing Structure

Hedges

Junior Group

Senior Financing Group

Arqiva Senior Finance

Limited

Arqiva Group Parent Limited

Arqiva Group Intermediate Limited

Arqiva Group Holdings Limited

Hedges, Capex,

Working Capital & Liquidity Facilities

distribution of dividends

Arqiva Financing No. 3 plc

ArqivaBroadcast

IntermediateLimited

Notes Arqiva Broadcast

Finance plc

Subordinated Loans

Fixed and floating charge

Arqiva Broadcast

Parent Limited

Shareholder Loan Notes

Intercompany Loans

Intermediate HoldCo

Subordinated Guarantee

Liquidity Facility & Hedges

Arqiva Financing plc

Senior Secured Notes

Subsidiaries (including Arqiva Limited and Arqiva

Services Limited)

Arqiva Financing No.1 Limited

Senior Term Facilities

Intercompany

loans

Arqiva Financing

No. 2 Limited

Intermediate HoldCo

Guarantee

Senior FinCo/ Borrower Loans

Senior Issuer/Borrower Loans

Assets

Fixed charge



Guarantors

Arqiva companies which are neither issuers or guarantors.

Issuers

Main Parties:

• Parent Guarantor: Arqiva Broadcast Parent Limited

• Intermediate Guarantor: Arqiva Financing No. 2 Limited

• Issuer: Arqiva Broadcast Finance plc

• Intermediate HoldCo: Arqiva Broadcast Intermediate Limited

• Senior Parent: Arqiva Parent Group Limited

• Senior Borrower: Arqiva Financing No. 1 Limited

• Senior FinCo: Arqiva Senior Finance Limited

• Senior Issuer: Arqiva Financing plc

Arqiva Broadcast Holdings Limited

Arqiva PP Financing

plc



CONDENSED CONSOLIDATED AUDITED FINANCIAL STATEMENTS FOR THE FULL YEAR ENDED 30 JUNE 2013 OF ABPL

For full year ended 30 June 2013

arqiva broadcast parent limited · financial report – full year ending 30th june 2013 arqiva...

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