SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
[_] Definitive Proxy Statement COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Additional Materials
[X] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
CABLE TV FUND 11-D, LTD.
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(Name of Registrant as Specified In Its Charter)
N/A
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[_] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: Limited
Partnership Interests
(2) Aggregate number of securities to which transaction applies: 50,000
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): Pursuant to
Rule 0-11(c)(2), the transaction valuation is based upon the
Registrant's 47 percent interest in the $16,122,333 sales price that is
to be paid to Cable TV Joint Fund 11 by Jones Intercable, Inc. in
connection with the transaction that is the subject of the proxy
solicitation.
(4) Proposed maximum aggregate value of the transaction to the Registrant:
$7,577,497
(5) Total fee paid: $1,516
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
Notes:
[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
NOTICE OF VOTE OF THE LIMITED PARTNERS
OF CABLE TV FUND 11-D, LTD.
To the Limited Partners of Cable TV Fund 11-D, Ltd.:
A special vote of the limited partners of Cable TV Fund 11-D, Ltd. (the
"Partnership") is being conducted through the mails on behalf of the
Partnership by Jones Intercable, Inc., the general partner of the Partnership,
for the purpose of obtaining limited partner approval of the sale, to Jones
Intercable, Inc., of the Manitowoc, Wisconsin cable television system (the
"Manitowoc System") owned by Cable TV Joint Fund 11, a joint venture in which
the Partnership has a 47 percent ownership interest, for $16,122,333 in cash,
subject to normal closing adjustments. Information relating to this matter is
set forth in the accompanying Proxy Statement.
If the limited partners approve the proposed sale of the Manitowoc System
and if the transaction is closed, the net sale proceeds will be distributed to
the four constituent partnerships of Cable TV Joint Fund 11 in proportion to
their ownership interests. The Partnership accordingly will receive 47 percent
of such proceeds, estimated to total approximately $9,059,400, and the
Partnership will distribute this portion of the net sale proceeds to its
partners of record as of March 31, 1997. It is estimated that the limited
partners will receive $139 for each $500 limited partnership interest, or $278
for each $1,000 invested in the Partnership. The Partnership then will be
dissolved and liquidated.
Only limited partners of record at the close of business on January 31, 1997
are entitled to notice of, and to participate in, this vote of limited
partners.
It is very important that all limited partners participate in the voting.
Cable TV Joint Fund 11's ability to complete the transaction discussed in the
Proxy Statement and the Partnership's ability to make a distribution to its
partners of its portion of the net proceeds of the sale of the Manitowoc
System pursuant to the terms of the Partnership's limited partnership
agreement are dependent upon the approval of the transaction by the holders of
a majority of the Partnership's limited partnership interests.
Jones Intercable, Inc., as general partner of the Partnership, urges you to
sign and return the enclosed proxy as promptly as possible. The proxy should
be returned in the enclosed envelope.
JONES INTERCABLE, INC.
General Partner
/s/ Elizabeth M. Steele
Elizabeth M. Steele
Secretary
Dated: February 28, 1997
[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY STATEMENT
VOTE OF THE LIMITED PARTNERS OF CABLE TV FUND 11-D, LTD.
This Proxy Statement is being furnished in connection with the solicitation
of the written consents of the limited partners of Cable TV Fund 11-D, Ltd.
(the "Partnership") by Jones Intercable, Inc., the general partner of the
Partnership (the "General Partner"), on behalf of the Partnership, for the
purpose of obtaining limited partner approval of the sale of the Manitowoc,
Wisconsin cable television system (the "Manitowoc System") owned by Cable TV
Joint Fund 11 (the "Venture"), a joint venture in which the Partnership has a
47 percent ownership interest, for $16,122,333 in cash, subject to normal
working capital closing adjustments. The Manitowoc System is proposed to be
sold to the General Partner.
Proxies in the form enclosed, properly executed and duly returned, will be
voted in accordance with the instructions thereon. Limited partners are urged
to sign and return the enclosed proxy as promptly as possible. Proxies cannot
be revoked except by delivery of a proxy dated as of a later date. Officers
and other employees of the General Partner may solicit proxies by mail, by
fax, by telephone or by personal interview. The deadline for the receipt of
proxy votes is April 15, 1997, unless extended, but the vote of the
Partnership's limited partners will be deemed to be concluded on the date that
the General Partner, on behalf of the Partnership, is in receipt of proxies
executed by the holders of a majority of the limited partnership interests
either consenting to or disapproving of the proposed transaction, as the case
may be.
The Partnership has only one class of limited partners and no limited
partner has a right of priority over any other limited partner. The
participation of the limited partners is divided into limited partnership
interests and each limited partner owns one limited partnership interest for
each $500 of capital contributed to the Partnership.
As of December 7, 1996, the Partnership had 50,000 limited partnership
interests outstanding held by approximately 4,007 persons. There is no
established trading market for such interests. To the best of the General
Partner's knowledge, no person or group of persons beneficially own more than
five percent of the limited partnership interests. The General Partner owns 11
limited partnership interests. Officers and directors of the General Partner
own no limited partnership interests.The 11 limited partnership interests
owned by the General Partner will be voted in favor of the proposed
transaction. Only limited partners of record at the close of business on
January 31, 1997 will be entitled to notice of, and to participate in, the
vote.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS
OF SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION
CONTAINED IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
As of the date of this proxy statement, the Partnership's only asset is its
47 percent ownership interest in the Venture. Cable TV Fund 11-A, Ltd. has an
18 percent ownership interest in the Venture, Cable TV Fund 11-B, Ltd. has an
8 percent ownership interest in the Venture and Cable TV Fund 11-C, Ltd. has a
27 percent ownership interest in the Venture. As of the date of this proxy
statement, the Venture's only asset is the Manitowoc System. Upon the
consummation of the proposed sale of the Manitowoc System, the Venture will
pay all of its indebtedness, which totalled approximately $4,775 at September
30, 1996, and then the net sale proceeds will be distributed to the four
constituent partnerships of the Venture in proportion to their ownership
interests in the Venture. The Partnership accordingly will receive 47 percent
of such proceeds, estimated to total approximately $9,059,400, and the
Partnership will distribute its portion of the net sale proceeds to its
partners of record as of March 31, 1997. Because limited partners have already
received distributions in an amount in excess of the capital initially
contributed to the Partnership by the limited partners, the Partnership's
portion of the net proceeds from the Manitowoc System's sale will be
distributed 75 percent to the limited partners and 25 percent to the General
Partner. Based upon pro forma financial information as of September 30, 1996,
as a result of the Manitowoc System's sale, the limited partners of the
Partnership, as a group, will receive approximately $6,940,844 and the General
Partner will receive approximately $2,118,556. Limited partners will receive
$139 for each $500 limited partnership interest, or $278 for each $1,000
invested in the Partnership, from the Partnership's portion of the net
proceeds of the Manitowoc System's sale. Once the Partnership has completed
the distribution of its portion of the net proceeds from the sale of the
Manitowoc System, limited partners of the Partnership will have received a
total of $1,119 for each $500 limited partnership interest, or $2,238 for each
$1,000 invested in the Partnership, taking into account the prior distribution
to limited partners made in 1990.
After the Partnership distributes its portion of the proceeds from the sale
of the Manitowoc System to its partners, the Partnership will be dissolved and
liquidated. Thus, as a result of the sale of the Manitowoc System by the
Venture, the Partnership will cease to be a public entity subject to the
informational reporting requirements of the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
Limited partners should note that there are certain income tax consequences
of the proposed sale of the Manitowoc System, which are outlined herein under
the caption "Federal Income Tax Consequences."
The Board of Directors of the General Partner has approved the proposed sale
of the Manitowoc System and the General Partner recommends approval of the
transaction by the holders of the Partnership's limited partnership interests.
In determining the fairness of the proposed transaction, the General Partner
followed the procedures mandated by Section 2.3(b)(iv)(b) of the Partnership's
limited partnership agreement (the "Partnership Agreement"), which provides
that the Partnership's cable television systems may be sold to the General
Partner or to one of its affiliates if the price paid by the General Partner
or such affiliate is higher than any other bid received in a public bidding
process and is not less than the average of three separate independent
appraisals of the fair market value of the system to be sold. Because the
Venture solicited bids in a public bidding process, which is now closed, the
General Partner was the only bidder and the purchase price to be paid by the
General Partner is equal to the average of three separate independent
appraisals of the fair market value of the Manitowoc System, the Board of
Directors of the General Partner has concluded that the consideration to be
paid to the Venture for the Manitowoc System is fair.
The proposal that is the subject of this proxy solicitation will be adopted
only if approved by the holders of a majority of the limited partnership
interests. Each limited partnership interest entitles the holder thereof to
one vote on the proposal. Because the Partnership Agreement requires that the
proposal to sell the Manitowoc System be approved by the holders of a majority
of the limited partnership interests, abstentions and non-votes will be
treated as votes against the proposal. Because limited partners do not have
dissenters' or appraisal rights in connection with the proposed sale of the
Manitowoc System, if the holders of a majority of the limited partnership
interests approve the proposal, all limited partners will receive a
distribution of the Partnership's portion of the net sale proceeds in
accordance with the procedures prescribed by the Partnership Agreement
regardless of how or whether they vote on the proposal.
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The General Partner has also prepared proxy statements that are being
delivered to the limited partners of Cable TV Fund 11-A, Ltd., Cable TV Fund
11-B, Ltd. and Cable TV Fund 11-C, Ltd. in connection with their votes to
approve the sale of the Manitowoc System by the Venture to the General
Partner. The closing of the sale of the Manitowoc System will occur only if
the transaction is approved by the holders of a majority of the limited
partnership interests of each of the four constituent partnerships of the
Venture. Copies of the proxy statements being delivered to the limited
partners of the Venture's other constituent partnerships have been filed with
the Securities and Exchange Commission and can be obtained either from the
public reference section of the Commission at prescribed rates or from the
General Partner without charge upon written request to Elizabeth M. Steele,
Secretary, Jones Intercable, Inc., 9697 East Mineral Avenue, Englewood,
Colorado 80112, (303) 792-3111.
The approximate date on which this Proxy Statement and Form of Proxy are
being sent to limited partners is February 28, 1997.
SPECIAL FACTORS
THE PARTNERSHIP'S INVESTMENT OBJECTIVES
The Partnership was formed to acquire, develop, operate and, ultimately,
sell cable television systems. The primary objectives of the Partnership have
been to obtain capital appreciation in the value of the Partnership's cable
television properties; to generate tax losses that could be used to offset
taxable income of limited partners from other sources; and to obtain equity
build-up through debt reduction. It was contemplated from the outset of the
Partnership's existence that capital appreciation in Partnership cable
television properties would be converted to cash by a sale of such properties
after a holding period of approximately five to seven years. It also was
contemplated from the outset of the Partnership's existence that the General
Partner could be the purchaser of the Partnership's cable television
properties. Due to the City of Manitowoc's refusal to consent to the transfer
of the Manitowoc System's franchise when the General Partner attempted to sell
the Manitowoc System in 1990, the resulting legal action against the City and
the protracted franchise renewal negotiations, the Manitowoc System has been
held by the Venture for almost 13 years.
The purpose of the sale of the Manitowoc System, from the Partnership's
perspective, is to attain the Partnership's primary investment objective with
respect to the Manitowoc System, i.e., to convert the Partnership's capital
appreciation in the Manitowoc System to cash, and to allow the Partnership to
be dissolved and liquidated. The sale proceeds will be used to repay all
outstanding indebtedness of the Venture, with the remaining sale proceeds to
be distributed to the four constituent partnerships of the Venture. The
Partnership in turn will distribute its portion of the net sale proceeds to
the partners of the Partnership in accordance with the distribution procedures
established by the Partnership Agreement. The sale of the Manitowoc System is
thus the necessary final step in the Partnership's accomplishment of its
investment objectives.
PRIOR ACQUISITIONS AND SALES
The Partnership was formed in January 1984 as a Colorado limited partnership
in connection with a public offering of its limited partnership interests. The
Partnership invested $21,100,000 of limited partner capital contributions in
the Venture, through which it acquired a 47 percent ownership interest in the
Venture. In April 1984, the Venture acquired the cable television systems
serving the communities of Cedarburg, Green Bay, Hustisford, Janesville,
Manitowoc, West Allis, Waupaca and their surrounding areas, all in the State
of Wisconsin. The Venture also acquired an interest in the Kenosha, Wisconsin
cable television franchise and subsequently constructed the Kenosha system.
Except for the Manitowoc System, which is still owned by the Venture, all of
these systems have been sold.
In September 1989, Total TV of Kenosha, a Wisconsin limited partnership in
which the Venture had a 75 percent ownership interest as both the general
partner and a limited partner, sold its cable television system serving the
Kenosha, Wisconsin area to an affiliate of the General Partner. Proceeds to
the Venture from this sale, which totaled approximately $31,828,700, were used
to repay $30,600,000 of the Venture's outstanding
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obligations under its credit facility. Certain minority investors in Total TV
of Kenosha, which were not affiliated with the Venture, the Partnership or the
General Partner, received approximately $5,171,100 from the sale. No
distributions to the four partnerships participating in the Venture were made
from the proceeds of the sale of the Kenosha, Wisconsin system.
In June 1990, the Venture sold its remaining Wisconsin cable television
systems, except for the Manitowoc System. These Wisconsin systems were sold to
an affiliate of the General Partner. Proceeds from that sale, which totaled
approximately $178,600,000, were used to repay all of the Venture's then
outstanding indebtedness in connection with its Wisconsin systems and to make
distributions in June 1990 to the four partnerships participating in the
Venture. The Partnership subsequently distributed its $49,016,548 share of the
sale proceeds to its limited partners. Limited partners of the Partnership
received a distribution of $980 per $500 limited partnership interest, or
$1,961 per $1,000 invested in the Partnership, as a result of the June 1990
sale of these Wisconsin systems.
The Manitowoc System was not sold in 1990 only because the City of Manitowoc
refused to consent to the transfer of the Manitowoc franchise on terms
acceptable to the then-proposed buyer. A dispute arose about a provision of
the Manitowoc franchise that the City claimed allowed the City to acquire the
Manitowoc System upon expiration of the franchise in 1995. In April 1991, the
Venture took legal action against the City seeking a declaration as to whether
the buy-out right was enforceable under federal law. In February 1993, the
court ruled in favor of the Venture and found that the buy-out right would not
be triggered upon the expiration of the franchise, assuming the franchise is
renewed. The court did not determine the question of whether the buy-out right
was enforceable per se under federal law. The City appealed the decision. In
October 1993, however, the City and the Venture settled the legal action and
the appeal was dismissed. In the settlement agreement, the City conceded that
its buy-out right was not applicable in the event the franchise is renewed and
represented to the Venture that the City knew of no reason for non-renewal of
the franchise. The original term of the Manitowoc franchise expired in 1995
and the Manitowoc System was operated through most of 1996 pursuant to
temporary franchise extensions. In November 1996, however, the City agreed to
renew the Manitowoc franchise for a period of five years beginning January 1,
1997 and, at the same time, the City approved the transfer of the franchise
from the Venture to the General Partner provided that the transfer occurs no
later than June 30, 1997.
The Partnership has made one prior distribution to its limited partners: the
June 1990 distribution of the Partnership's portion of the net proceeds of the
sale of the Venture's Cedarburg, Green Bay, Hustisford, Janesville, West Allis
and Waupaca, Wisconsin systems. The Partnership intends to make a distribution
of the Partnership's portion of the net proceeds of the sale of the Venture's
Manitowoc System. Following this distribution, the Partnership will be
dissolved and liquidated.
THE GENERAL PARTNER'S OBJECTIVES
The purpose of the transaction, from the General Partner's perspective, is
to enable the Venture to sell the Manitowoc System at a fair price and to
enable the partnerships that comprise the Venture thereafter to be dissolved
and liquidated in accordance with their investment objectives. Since 1990,
when the original sale of the Manitowoc System was frustrated by the refusal
of the City of Manitowoc to consent to the transfer of the Manitowoc System on
terms acceptable to the then-proposed buyer, the General Partner has sought,
on the Venture's behalf, through both negotiations and litigation with the
City, to resolve the dispute with the City about the City's purported buy-out
right and to obtain a franchise for the Manitowoc System that contained
commercially reasonable terms that in turn would enable the Venture to find a
buyer for the Manitowoc System at a fair price.
Following the settlement of the Venture's lawsuit against the City in
October 1993 and the subsequent commencement of franchise renewal
negotiations, in 1995 the General Partner identified Time Warner Entertainment
Company, L.P. ("Time Warner"), an unaffiliated cable television system
operator, as a potential purchaser of the Manitowoc System because of the
proximity of certain of Time Warner's cable television systems to the
Manitowoc System. In discussions between the General Partner and Time Warner
about the sale of the Manitowoc System, Time Warner indicated that it was
interested in acquiring the Manitowoc System from
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the Venture but Time Warner informed the General Partner that it was not
willing to purchase the Manitowoc System for cash. Time Warner offered instead
to trade a cable system it owned for the Manitowoc System. Because a trade
between the Venture and Time Warner would not have enabled the Venture to
accomplish its investment objective of converting its capital appreciation in
the Manitowoc System to cash, and would have resulted in the Venture owning
yet another cable system, the General Partner determined that the Venture
could not agree to trade the Manitowoc System for a Time Warner system. To
enable the Venture to convert its investment in the Manitowoc System to cash,
the General Partner agreed to acquire the Manitowoc System from the Venture
and then trade it for a Time Warner system that the General Partner determined
that it would like to own. Because of the requirements of the Partnership
Agreement, the General Partner had the Manitowoc System appraised by three
independent appraisers and conducted a public bidding process so that the
General Partner could enter into an asset purchase agreement with the Venture
for acquisition of the Manitowoc System. On September 5, 1995, the Venture and
the General Partner entered into an asset purchase agreement providing for the
sale of the Manitowoc System to the General Partner for a sales price of
$15,735,667, the average of the original three appraisals. Because the City
ultimately refused to agree to the renewal and transfer of the Manitowoc
franchise on terms acceptable to the General Partner and Time Warner, the
proposed purchase of the Manitowoc System by the General Partner and the
subsequent trade of the Manitowoc System with Time Warner did not occur within
the time period prescribed by the General Partner's agreement with Time
Warner.
Because the General Partner had not intended to acquire the Manitowoc System
for its own account and because the General Partner believed that the Venture
would be able to close a sale of the Manitowoc System to an unaffiliated cable
system operator more quickly than to the General Partner (the General Partner
assumed that a sale of the Manitowoc System to an unaffiliated cable system
operator would move through the limited partner approval processes more
expeditiously), in mid-1996 the General Partner, on the Venture's behalf,
began negotiating for the sale of the Manitowoc System to Marcus Cable, a
cable system operator like Time Warner with cable systems in the vicinity of
Manitowoc and thus the most likely unaffiliated purchaser of the Manitowoc
System other than Time Warner. Like Time Warner, however, Marcus Cable could
not come to agreement with the City on the terms for renewal and transfer of
the Manitowoc franchise and Marcus Cable declined to enter into an agreement
to purchase the Manitowoc System.
Upon the conclusion of the unsuccessful negotiations with Marcus Cable in
September 1996, the General Partner determined that it would go forward with
the acquisition of the Manitowoc System itself to enable the Venture to sell
the Manitowoc System at a fair price and to enable the partnerships that
comprise the Venture to be dissolved and liquidated in 1997. Given the passage
of time between September 5, 1995, the date when the General Partner agreed to
purchase the Manitowoc System from the Venture in order to trade it to Time
Warner, and the termination of negotiations with Marcus Cable in September
1996, i.e., approximately one year, the General Partner determined that it
would be in the best interests of the Venture to have the Manitowoc System's
appraisals updated from April 1995 to August 1996, to extend the General
Partner's obligation to purchase the Manitowoc System to a date no later than
June 30, 1997, to renew its efforts to reach agreement with the City on the
franchise's renewal and transfer, to seek limited partner approval of the sale
and then to proceed with its acquisition of the Manitowoc System so that the
Venture and its constitutent partnerships could be liquidated and dissolved
during 1997. The General Partner has accomplished, or is in the process of
completing, each of these tasks.
RELEVANT PROVISIONS OF THE PARTNERSHIP AGREEMENT
Section 2.2(k) of the Partnership Agreement provides that the sale of all or
substantially all of the Partnership's assets is subject to the approval of
the holders of a majority of the Partnership's limited partnership interests.
Because its investment in the Venture is the Partnership's sole asset, and
because the Manitowoc System is the Venture's sole remaining asset, the sale
of the Manitowoc System to the Purchaser is being submitted for limited
partner approval.
Section 2.3(b)(iv)(b) of the Partnership Agreement permits the Partnership
to sell any or all of its cable television systems directly to the General
Partner or one or more of its affiliates if the system to be sold has been
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held by the Partnership for at least three years, unless it is part of, or
related to, another system that has been held for three years, and provided
that the price paid to the Partnership by the General Partner or any such
affiliate is higher than any other bid received in a public bidding process
and is not less than the average of three separate independent appraisals of
the particular cable television system or systems being sold, and that the
cost of such appraisals is not borne by the Partnership. Because the Manitowoc
System has been held by the Venture for at least three years, the General
Partner submitted the only and, therefore, the highest bid received in a
public bidding process and the purchase price to be paid by the General
Partner is equal to the average of three separate independent appraisals of
the fair market value of the Manitowoc System obtained at the General
Partner's expense, the requirements of Section 2.3(b)(iv)(b) of the
Partnership Agreement have been satisfied.
PUBLIC BIDDING PROCESS
In the spring of 1995, the General Partner, on behalf of the Venture, put
the Manitowoc System up for public bid. The process established and announced
by the General Partner was the exclusive means of bidding on the Manitowoc
System during the bid period. In accordance with the requirements of Section
2.3(b)(iv)(b) of the Partnership Agreement, which requires that a public
bidding process be followed in the event that the General Partner or one or
more of its affiliates desires to purchase a cable television system owned by
the Partnership, The Jones Group, Ltd., a cable television brokerage
subsidiary of the General Partner, placed advertisements soliciting bids for
the Manitowoc System in The Denver Post and The Rocky Mountain News,
newspapers of general circulation, and in Cable World and Multichannel News,
cable television industry trade publications. The advertisement ran daily in
The Denver Post and The Rocky Mountain News from June 2 through June 18, 1995,
and it appeared in the June 5, June 12 and June 19, 1995 editions of the
weekly Cable World and Multichannel News.
The Venture, through The Jones Group, Ltd., specified that: all bids were
required to be in writing and submitted no later than the close of business on
July 7, 1995; all bids were required to state a purchase price that would be
paid in cash at closing; all bids were required to be accompanied by a
certification that the bidder was prepared to sign a purchase and sale
agreement in the form provided by the Venture as part of the bidding process;
all bids were required to be accompanied by current financial statements or
other evidence demonstrating that the bidder had the financial ability to
complete the transaction at the closing on the terms specified in the purchase
and sale agreement; and all bids were required to be accompanied by certified
or cashier's check in an amount equal to five percent of the purchase price
specified in the bid. It was disclosed to all bidders that the General Partner
and its affiliates reserved the right to submit a bid, and that the General
Partner or one of its affiliates intended to do so. All potential bidders also
were informed that The Jones Group, Ltd. would be reviewing all bids on behalf
of the Venture, and thus would be aware of the identities of all bidders and
the dollar amounts of all bids.
The Jones Group, Ltd. received seventeen inquiries about the Manitowoc
System and it mailed out eleven information packages, but no potential
purchasers asked to tour the Manitowoc System's facilities and no one other
than the General Partner submitted a bid for the Manitowoc System. The General
Partner complied with all of the bid requirements, including the submission of
a five percent deposit that currently is being held in escrow and will be
refunded if the Venture does not perform its obligations under the purchase
and sale agreement between it and the General Partner.
REASONS FOR THE TIMING OF THE SALE
The decision to proceed with the sale of the Manitowoc System in 1995 was
based upon the status of the franchise renewal negotiations with the City of
Manitowoc, which the General Partner believed were nearing completion, and the
General Partner's perception that the City was willing to renew the franchise
on commercially reasonable terms and to transfer the franchise to a new system
operator. The General Partner had determined that the Partnership had achieved
its investment objectives with respect to the Manitowoc System in 1990 when it
attempted to sell the Manitowoc System at that time, and the General Partner
had been frustrated in its efforts to sell the Manitowoc System by the City's
refusal until 1995 to engage in serious negotiations to
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approve the renewal and transfer the Manitowoc System's cable franchise. The
City finally approved the renewal and transfer of the Manitowoc System's cable
franchise in November 1996 effective as of January 1, 1997.
When investing in the Partnership, by virtue of the provisions of the
Partnership Agreement, the limited partners vested in the General Partner the
right and responsibility to determine when the Partnership's investment
objectives had been substantially achieved. The Manitowoc System was acquired
by the Venture because, in the opinion of the General Partner at the time of
the Manitowoc System's acquisition, it had the potential for capital
appreciation within a reasonable period of time. It is the General Partner's
opinion that during the approximately 13 years that the Manitowoc System has
been held by the Venture, the Partnership's investment objectives with respect
to the Manitowoc System have been achieved.
The General Partner generally considered the benefits to the limited
partners that might be derived by holding the Manitowoc System for an
additional period of time. The General Partner assumed that the Manitowoc
System might continue to appreciate in value and, if so, the Manitowoc System
would be able to be sold for a greater sales price in the future. The General
Partner weighed these assumptions against the risks to investors from a longer
holding period, i.e., the risks that regulatory, technology and/or competitive
developments could cause the Manitowoc System to decline in value, which would
result in a lesser sales price in the future. The General Partner's decision
to sell the Manitowoc System was greatly influenced by the fact that the
contemplated holding period had been exceeded.
Therefore, in light of all of the above factors, the General Partner has
determined that now is the appropriate time for the Partnership to convert its
capital appreciation in the Manitowoc System to cash through the sale of the
Venture's Manitowoc System to the General Partner.
CERTAIN EFFECTS OF THE SALE
Upon consummation of the sale of the Manitowoc System, the proceeds of the
sale will be used to repay all indebtedness of the Venture and then the
Venture will distribute the remaining net sale proceeds to the four
constituent partnerships of the Venture in proportion to their ownership
interests in the Venture and then the Partnership will distribute its portion
of the net sale proceeds to its limited partners and to the General Partner
pursuant to the terms of the Partnership Agreement. Because limited partners
have already received distributions in an amount in excess of the capital
initially contributed to the Partnership by the limited partners, the net
proceeds from the Manitowoc System's sale will be distributed 75 percent to
the limited partners and 25 percent to the General Partner. Based upon the pro
forma financial information as of September 30, 1996, as a result of the
Manitowoc System's sale, the limited partners of the Partnership, as a group,
will receive approximately $6,940,844 and the General Partner will receive
approximately $2,118,556. Limited partners will receive $139 for each $500
limited partnership interest, or $278 for each $1,000 invested in the
Partnership, from the Partnership's portion of the net proceeds of the
Manitowoc System's sale. Once the distributions of the net proceeds from the
sale of the Manitowoc System have been made, limited partners will have
received a total of $1,119 for each $500 limited partnership interest, or
$2,238 for each $1,000 invested in the Partnership, taking into account the
prior distribution to limited partners made in 1990. Both the limited partners
and the General Partner will be subject to federal income tax on the income
resulting from the sale of the Manitowoc System. See the detailed information
below under the caption "Federal Income Tax Consequences."
Another effect of the sale is that it will result in the General Partner
acquiring the Manitowoc System. As the general partner of the Partnership, the
General Partner earns management fees and receives reimbursement of its direct
and indirect expenses allocable to the operation of the Manitowoc System. The
General Partner's right to receive such fees and reimbursements will terminate
on the sale of the Manitowoc System.
Neither Colorado law nor the Partnership Agreement afford dissenters' or
appraisal rights to limited partners in connection with the proposed sale of
the Manitowoc System. If the proposed transaction is approved by the
7
holders of a majority of limited partnership interests, all limited partners
will receive a distribution in accordance with the procedures prescribed by
the Partnership Agreement regardless of how or whether they vote on the
proposal.
RECOMMENDATION OF THE GENERAL PARTNER AND FAIRNESS OF THE PROPOSED SALE OF
ASSETS
The General Partner believes that the proposed sale of the Manitowoc System
and the distribution of the net proceeds therefrom are both procedurally and
substantively fair to all unaffiliated limited partners of the Partnership,
and it recommends that the limited partners approve the transaction. The
General Partner, because of its 25 percent share of the residual sale
proceeds, has an economic interest parallel to the economic interest of the
limited partners in seeing to it that the Manitowoc System is sold for a fair
price. The General Partner's recommendation that the limited partners approve
the sale of the Manitowoc System and its fairness determination should not be
deemed to be free from potential conflicts of interest, however, in light of
the fact that it is the proposed purchaser of the Manitowoc System. Because
the purchaser of the Manitowoc System will benefit from a lower sales price,
the General Partner also has an economic interest in conflict with the
economic interest of the limited partners.
In determining the substantive and procedural fairness of the proposed
transaction, the General Partner's Board of Directors on November 21, 1996
considered each of the following factors, all of which had a positive effect
on its fairness determination. The factors are listed in descending order of
importance, i.e., the first factor listed was given the most weight in the
determination that the proposed transaction is fair, although, as a practical
matter, this is an approximation of the weight given to each factor because
each factor is relevant and the General Partner's Board of Directors was not
able to weigh the relative importance of each factor precisely:
(i) The limited partnership interests are at present illiquid and the
cash to be distributed to limited partners as a result of the proposed sale
of the Manitowoc System will provide limited partners with liquidity and
with the means to realize the appreciation in the value of the Manitowoc
System;
(ii) The purchase price represents the fair market valuation of the
Manitowoc System as of August 31, 1996, as determined by the average of
three separate appraisals of the Manitowoc System by qualified independent
appraisers;
(iii) The purchase price was the highest bid received in a public bidding
process;
(iv) The Venture has held the Manitowoc System for almost 13 years, a
holding period beyond that originally anticipated;
(v) The conditions and prospects of the cable television industry in
which the Venture is engaged, including the developing threat of
competition from DBS services and telephone companies, and the working
capital and other financial needs of the Venture if it were to continue to
operate the Manitowoc System;
(vi) The terms and conditions of the purchase and sale agreement by and
between the Venture and the General Partner, including the fact that the
purchase price will be paid in cash, the fact that the Partnership was not
required to make many of the representations and warranties about the
Manitowoc System or give indemnities that are customarily given in
transactions of this nature, the fact that the purchaser's obligation to
close is not contingent upon its ability to obtain financing, and the fact
that the Venture will pay no brokerage fees upon the sale of the Manitowoc
System, which it likely would have paid if the Manitowoc System were being
sold to an unaffiliated party; and
(vii) The sale is being conducted in accordance with the terms of the
Partnership Agreement, including the fact that the proposed transaction
will not occur unless it is approved by the holders of at least a majority
of the limited partnership interests.
Certain officers of the General Partner worked with each of the three
independent appraisers hired to prepare fair market value appraisals of the
Manitowoc System, providing them with current and historical profit and loss
statements for the Manitowoc System and with current subscriber reports. The
officers and directors of the
8
General Partner received the final appraisal reports. The members of the Board
of Directors of the General Partner adopted the analyses and conclusions of
Malarkey-Taylor Associates, Inc., which valued the Manitowoc System at
$15,567,000, because Malarkey-Taylor Associates, Inc.'s valuation procedures,
assumptions and methodologies most closely approximate the valuation
procedures, assumptions and methodologies used by the General Partner's
management in evaluating cable television systems. The General Partner's Board
of Directors did not specifically adopt the $15,567,000 value placed on the
Manitowoc System by Malarkey-Taylor Associates, Inc., but the Board did
consider the fact that the value determined by this appraisal firm was close
to the average of the three appraisals ($16,122,333) and concluded that this
fact supported its fairness determination.
The General Partner considered the fact that the $16,122,333 purchase price
to be paid to the Venture for the Manitowoc System represents the average of
three independent appraisals of the fair market value of the Manitowoc System
to be very persuasive evidence of the fairness of the proposed transaction.
The fair market valuations of the Manitowoc System were done by respected
industry appraisers using customary measures of value, i.e., determining
present value of projected cash flow, applying multiples to current and
projected cash flow, and comparing the fair market valuation per subscriber to
comparable cable television system sales. Based upon the General Partner's
knowledge of and experience in the cable television industry, and its review
and consideration of the appraisals, it has concluded that the values for the
Manitowoc System determined by the three appraisals are fair and within the
range of values seen in the marketplace for comparable cable television
systems in similar condition.
The $16,122,333 purchase price represents the current fair market value of
the Manitowoc System on a going concern basis. The $16,122,333 purchase price
for the Manitowoc System also compares favorably to the approximately
$2,443,945 net book value of the Manitowoc System at September 30, 1996. The
liquidation value of a cable television system, i.e., the sale of the system
on other than a going concern basis, is not usually considered to be an
accurate indicator of the value of a cable television system, primarily
because the assets of a cable television system typically are worth less when
considered separately than when considered as a going concern. The assets of a
cable television system consequently are not normally sold or purchased
separately. A fair market valuation of a system should, in the General
Partner's view, be a valuation of the system as a going concern. The
liquidation value of the Manitowoc System therefore was not considered by the
General Partner in reaching its determination of fairness.
Because there has never been an established trading market for the
Partnership's limited partnership interests, the General Partner did not have
access to any reliable, official information about the historical or current
market prices for the Partnership's limited partnership interests in the very
limited secondary market where such interests from time to time have been
sold. The General Partner believes that such secondary market deeply discounts
the underlying value of the limited partnership interests due to their highly
illiquid nature. Therefore, even if trading information were available, the
historical or current market prices for the Partnership's limited partnership
interests would not be indicative of the value of the Partnership's 47 percent
ownership of the Venture's cable television system assets. For these reasons,
the General Partner did not consider the historical or current market prices
for the limited partnership interests when reaching its fairness
determination.
The fact that the Venture has held the Manitowoc System for a period beyond
that originally anticipated was a critical factor in the General Partner's
fairness determination--the General Partner believes that the transaction is
fair because a sale at this time will convert an illiquid investment into a
liquid one for all partners. And the current state of the cable television
industry also was considered by the General Partner in making its fairness
determination because the General Partner believes that it is fair to
investors that someone other than the Partnership and the Venture take on the
uncertainties and risks involved in continuing to own and operate the
Manitowoc System.
The fairness of the transaction is also demonstrated in an analysis of
certain of the terms and conditions of the purchase and sale agreement between
the Venture and the General Partner, which favor the interests of the Venture.
There is no financing contingency to closing. Because of the General Partner's
existing extensive
9
knowledge about the Manitowoc System, the Venture has not been required to
make many of the representations and warranties about the quality of the
Manitowoc System's tangible assets, the quantity of the Manitowoc System's
subscribers or the validity of the Manitowoc System's intangible assets
customarily found in cable television system transactions. The Venture likely
would have been required to give such representations and warranties to an
unaffiliated party if the Manitowoc System were being sold to an unaffiliated
party. In addition, the Venture is not required to indemnify the General
Partner for defects discovered by the General Partner after the closing. This
frees the Venture from having to reserve a portion of the sale proceeds to
cover typical indemnification obligations. The Venture also will pay no
brokerage fee in connection with the sale of the Manitowoc System. This will
result in more funds from the sale being available for distribution to the
partners.
The General Partner is aware and considered that although consummation of
this transaction will result in a distribution to the Partnership's limited
partners of approximately $278 per $1,000 of limited partnership capital
invested in the Partnership, the proposed sale will require the limited
partners to recognize, for federal income tax purposes, a gain resulting from
the sale. The proposed sale also will deprive the limited partners of an
opportunity to participate in any future growth of the Manitowoc System. The
General Partner nevertheless concluded that the cash distributions to the
limited partners of the Partnership from the sale of the Manitowoc System
outweighed these consequences.
As disclosed above, the proposed transaction is subject to various potential
conflicts of interest arising out of the Partnership's relationships with the
General Partner. Because the General Partner and its affiliates are engaged in
the ownership and operation of cable television systems, they are generally in
the market to purchase cable television systems for their own account. A
potential conflict thus arises from the General Partner's fiduciary duty as
general partner of the Partnership and its management's fiduciary duty to the
General Partner's shareholders when it determines that Partnership cable
television systems will be sold to the General Partner or one of its
affiliates and not to an unaffiliated third party. This potential conflict of
interest was disclosed to limited partners in the prospectus delivered to
investors at the time of the public offering of interests in the Partnership.
Prior to the Partnership's public offering, the General Partner entered into
negotiations with certain state securities administrators as part of the
process of clearing the offering in the "merit" states, i.e., those states
that permit the sale of securities only if the state securities administrator
deems the offering as a whole to be fair, just and equitable. Several of the
state securities administrators focused on the potential conflicts of interest
in the event that the Partnership were to sell one or more of its cable
television systems to the General Partner or one of its affiliates. The
General Partner agreed to include the provision in the Partnership Agreement
that permits the Partnership to sell its cable television systems directly to
the General Partner or one of its affiliates only after a three-year holding
period and only if the General Partner or such affiliate pays a purchase price
that is higher than any other bid received in a public bidding process and is
not less than the average of three separate independent appraisals of the
particular cable television system being sold. The General Partner has
concluded that the mechanisms for determining the purchase price to be paid to
the Partnership provide sufficient procedural safeguards to minimize the
effects of the potential conflicts of interest inherent in any such
transaction. The fact that these procedures have been carried out in
connection with the Venture's proposed sale of the Manitowoc System, together
with the fact that the transaction is conditioned upon receipt of the approval
of the holders of a majority of the limited partnership interests in the
Partnership, enable the General Partner to conclude that the proposed
transaction is both procedurally and financially fair to all partners.
The directors of the General Partner who are not employees of the General
Partner did not vote separately to approve the transaction, nor did the
outside directors retain an unaffiliated representative to act solely on
behalf of the limited partners for the purposes of negotiating the terms of
the proposed sale of the Manitowoc System and/or preparing a report concerning
the fairness of the proposed sale. While the directors of the General Partner
participating in the approval of the sale recognized that the interests of the
General Partner and the limited partners may not in all respects necessarily
be the same, they recognized also that the purchase price was determined in
accordance with the terms of the Partnership Agreement, that is, by averaging
three separate independent appraisals of the Manitowoc System's fair market
value. The members of the Board of Directors relied on the specific right of
the General Partner under Section 2.3(b)(iv)(b) of the Partnership Agreement
to
10
purchase the Manitowoc System. The members of the Board of Directors reviewed
and considered the appraisals and concluded that the values for the Manitowoc
System determined by the appraisers were fair and were within the industry
norms for comparable transactions. All 13 directors of the General Partner
participated in the November 21, 1996 meeting to discuss the Partnership's
sale of the Manitowoc System to the General Partner. Each of Messrs. Jones,
O'Brien, Krejci, Burney, Frenzel, Jacobs, MacDonald, Thrall, Cole, Solot,
Zisman, Vanaselja and Zoellick voted to approve the transaction.
It is anticipated that if the proposed transaction is not consummated, the
General Partner's current management team will continue to manage the
Manitowoc System on behalf of the Venture until such time as the Manitowoc
System could be sold. No other alternatives currently are being considered. At
this time the Venture does not have the option of selling the Manitowoc System
to the most likely unaffiliated cable television system operators, Time Warner
and Marcus Cable. As described above, both of these cable companies recently
declined to purchase the Manitowoc System because they were unwilling to
accept the franchise renewal terms proposed by the City. The General Partner
subsequently agreed to these renewal terms in November 1996 on the condition
that the City consent to the transfer of the Manitowoc franchise to the
General Partner, which consent is necessary in order for the Venture to
complete the sale of the Manitowoc System to the General Partner as proposed.
THE APPRAISALS
In determining the price that the General Partner would offer for the
Manitowoc System, the General Partner retained Malarkey-Taylor Associates,
Inc., Kagan Media Appraisals Inc. and Bond & Pecaro, Inc. to prepare separate
appraisals of the fair market value of the Manitowoc System. The appraisers
were asked to determine the cash price a willing buyer would give a willing
seller, neither being under any compulsion to buy or sell and both having
reasonable knowledge of relevant facts, in an arm's-length transaction to
acquire the Manitowoc System. The officers and directors of the General
Partner examined each of the appraisals and discussed among themselves the
merits of the appraisals' assumptions, methodologies and conclusions, and,
based on their experience in and knowledge of the cable television industry,
they found them to be fair and reasonable. The written appraisal reports are
available for inspection and copying at the offices of the General Partner
during regular business hours by any interested limited partner of the
Partnership or by his or her authorized representative. Copies of such
appraisals will be mailed by the General Partner to any interested limited
partner or to his or her authorized representative upon written request to the
General Partner at the expense of the requesting limited partner.
The ranges of values determined by each of the three separate independent
appraisals of the fair market value of the Manitowoc System are presented and
discussed on the following pages of this proxy statement. Investors should
note that the ranges of values on a per-$500 limited partnership interest
basis and on the basis of $1,000 invested in the Partnership disclosed herein
have been computed as follows: each value established by an appraiser has been
deemed to be the sales price for the Manitowoc System and then adjustments
have been made to add the Venture's cash on hand and the estimated net closing
adjustments and to subtract the $4,775 in estimated debt repayments, and to
split the Partnership's 47 percent share of this amount on the basis of 25
percent to the General Partner and 75 percent to the limited partners. These
ranges of values are presented in this manner so that limited partners can
compare their hypothetical return at each value with the anticipated return to
limited partners of $139 for each $500 limited partnership interest, or $278
for each $1,000 invested in the Partnership, given a sales price equal to the
average of the three separate independent appraisals.
The General Partner provided the appraisers with current and historical
profit and loss statements for the Manitowoc System and with current
subscriber reports. The appraisers also gathered information from
conversations with the Manitowoc System's management team. From this
information, the appraisers used their independent analyses to project cash
flow, determine growth of homes passed, the Manitowoc System's future
penetration and possible rate adjustments. The appraisals thus reflect the
application of the appraisers' expertise to the data about the Manitowoc
System supplied by the General Partner.
Malarkey-Taylor Associates, Inc. concluded that the Manitowoc System's
overall fair market value as of August 31, 1996 was $15,567,000 ($135 for each
$500 limited partnership interest or $270 for each $1,000 invested in the
Partnership). Kagan Media Appraisals Inc. concluded that the Manitowoc
System's overall fair
11
market value as of August 31, 1996 was $16,100,000 ($139 for each $500 limited
partnership interest or $277 for each $1,000 invested in the Partnership).
Bond & Pecaro, Inc. concluded that the Manitowoc System's overall fair market
value as of August 31, 1996 was $16,700,000 ($143 for each $500 limited
partnership interest or $286 for each $1,000 invested in the Partnership). The
average of these three valuations was $16,122,333 ($139 for each $500 limited
partnership interest or $278 for each $1,000 invested in the Partnership). In
the General Partner's view, the assumptions regarding system operations
underlying the three appraisals have generally remained unchanged since August
31, 1996.
The Malarkey-Taylor Appraisal
Malarkey-Taylor Associates, Inc. ("Malarkey-Taylor") has served the
communications industry for over 30 years. Its team of financial, engineering
and managerial professionals devotes a substantial portion of its time to the
appraisal of cable television systems, cellular telephone systems, paging
systems and broadcast stations. Malarkey-Taylor was selected by the General
Partner to render an opinion as to the fair market value of the Manitowoc
System in light of such overall qualifications. No limitations were imposed
with respect to the appraisal to be rendered by Malarkey-Taylor. The firm was
selected by the General Partner to prepare an independent appraisal of the
Manitowoc System because of the General Partner's familiarity with the firm
and its good reputation in the cable television industry. Malarkey-Taylor has
prepared independent appraisals of other cable television systems owned and/or
managed by the General Partner. The principals of Malarkey-Taylor are not
affiliated in any way with the General Partner.
Malarkey-Taylor used five generally accepted cable television valuation
methods using the income approach to valuation in establishing the range of
fair market values of the Manitowoc System as a going concern. The first
method used a multiple of the past year's operating income derived from
comparable asset values of privately held and publicly traded cable companies.
(The appraisal report did not disclose and the General Partner did not inquire
as to the identities of the companies Malarkey-Taylor used in determining the
multiple.) The second method used a lower multiple of the Manitowoc System's
annualized current month's operating income. The third method applied a
slightly lower multiple of next year's projected operating income. The fourth
method was a discounted net cash flow analysis in which a purchase price
(estimated fair market value) was calculated to achieve a target after-tax
return on equity, given particular operating and financing assumptions unique
to the Manitowoc System's assets. The fifth method was a discounted cash flow
analysis that measured the net present value of the pre-tax operating cash
flows (less capital expenditures, plus the residual value of the Manitowoc
System) that represent the return on the total investment. For each valuation
method, Malarkey-Taylor established a "high" and a "low" estimated fair market
value. The General Partner did not inquire as to the specific details of how
each high and low estimated fair market value for each valuation methodology
was determined because, given Malarkey-Taylor's expertise, the General Partner
concluded that it could rely upon Malarkey-Taylor's analyses and judgment.
The first valuation method used a multiple of the past year's operating
income of the Manitowoc System derived from comparable asset values of
privately held and publicly traded cable companies. Malarkey-Taylor
determined, based upon its expertise and knowledge of the cable television
industry, a "low" multiple of 9.5 and a "high" multiple of 10.5, concluding
that a system comparable to the Manitowoc System would be unlikely to sell for
less than 9.5 times its past year's operating income and would be unlikely to
sell for more than 10.5 times its past year's operating income. While the
appraisal report does not disclose the assumptions of the appraiser in
determining these multiples, the General Partner has no reason to believe that
they are not reasonable. This method resulted in an estimated fair market
value ranging from a low of $15,139,970 ($132 for each $500 limited
partnership interest or $264 for each $1,000 invested in the Partnership) to a
high of $16,733,651 ($143 for each $500 limited partnership interest or $286
for each $1,000 invested in the Partnership) for the Manitowoc System.
The second valuation method used a lower multiple of the Manitowoc System's
annualized current month's operating income. Malarkey-Taylor determined, again
based on its expertise and knowledge of the cable television industry, a "low"
multiple of 9 and a "high" multiple of 10, concluding that a system comparable
to
12
the Manitowoc System would be unlikely to sell for less than 9 times the
dollar amount of its annualized current month's operating income and would be
unlikely to sell for more than 10 times the dollar amount of its annualized
current month's operating income. These multiples are slightly lower than
those used in the previous methodology because of the increased risk and time
factors involved in using current as compared to historical information. While
the appraisal report does not disclose the assumptions of the appraiser in
determining these multiples, the General Partner has no reason to believe that
they are not reasonable. This method resulted in an estimated fair market
value ranging from a low of $14,561,343 ($128 for each $500 limited
partnership interest or $256 for each $1,000 invested in the Partnership) to a
high of $16,179,270 ($136 for each $500 limited partnership interest or $273
for each $1,000 invested in the Partnership) for the Manitowoc System.
The third valuation method applied a slightly lower multiple of next year's
operating income of the Manitowoc System. For this valuation, Malarkey-Taylor
first estimated, through its own analyses of current financial and operating
data provided by the General Partner, next year's operating income for the
Manitowoc System and then, based on its expertise and knowledge of the cable
television industry, set a "low" multiple of 8.5 and a "high" multiple of 9.5,
concluding that a system comparable to the Manitowoc System would be unlikely
to sell for less than 8.5 times the system's projected operating income for
the following year and would be unlikely to sell for more than 9.5 times the
system's projected operating income for the following year. These multiples
are slightly lower than those used in the previous methodologies because of
the increased risk and time factors involved in using projected as compared to
historical and current information. While the appraisal report does not
disclose the assumptions of the appraiser in determining these multiples, the
General Partner has no reason to believe that they are not reasonable. This
method resulted in an estimated fair market value ranging from a low of
$14,825,545 ($130 for each $500 limited partnership interest or $259 for each
$1,000 invested in the Partnership) to a high of $16,569,726 ($142 for each
$500 limited partnership interest or $284 for each $1,000 invested in the
Partnership) for the Manitowoc System.
The fourth valuation method was a discounted net cash flow analysis in which
a purchase price (estimated fair market value) was calculated to achieve a
target after-tax return on equity given particular operating and financing
assumptions specific to the Manitowoc System. This method involved the use of
projected operations for the Manitowoc System and a pre-determined target
return on equity for a hypothetical buyer. Based on the firm's use of typical
debt-to-equity ratios and debt services, it tested various purchase prices,
i.e., potential fair market values, to determine a value that yielded the
desired return on equity. Based on system information made available to
Malarkey-Taylor by the General Partner and on information generally available
to Malarkey-Taylor about the cable television industry, the firm made
assumptions concerning the housing growth, plant mileage, growth in the number
of subscribers for basic and pay television, adjustments in subscriber rates,
increases in operating expenses and capital expenditures. Malarkey-Taylor also
made specific assumptions concerning the capital structure that a typical,
prudent buyer might experience, as well as the probable interest rates that
would be applicable in connection with any debt financing that might be
incurred. Malarkey-Taylor did a "high" and a "low" analysis. In its "high"
analysis, Malarkey-Taylor projected that the Manitowoc System's revenues would
grow from $4,142,168 in 1997 to $5,919,768 in 2003; that the Manitowoc
System's operating expenses would grow from $2,397,986 in 1997 to $3,366,640
in 2003; and that net income would grow from ($368,565) in 1997 to $171,919 in
2003. In Malarkey-Taylor's "low" analysis, revenues and operating expenses are
projected to increase to the same levels by 2003, but net income is projected
to increase from ($329,920) in 1997 to $199,217 by 2003. Malarkey-Taylor
projected that the Manitowoc System would add approximately 15 miles of cable
plant per year between 1997 and 2003, resulting in growth of the Manitowoc
System's cable plant from 170.5 miles in 1997 to 185.6 miles in 2003.
Malarkey-Taylor projected that the number of homes passed by the Manitowoc
System would grow from 16,481 in 1997 to 17,705 in 2003. Malarkey-Taylor
projected that basic subscribers would grow from 11,523 in 1997 to 12,782 in
2003. Malarkey-Taylor projected penetration of the Manitowoc System increasing
from 70.4 percent in 1997 to 73.4 percent in 2003. Malarkey-Taylor projected
that premium television subscriptions would grow from 7,337 in 1997 to 8,139
in 2003. Malarkey-Taylor estimated that the Manitowoc System would take
relatively small rate increases between 1997 and 2003, with, for example, 3
percent increases in basic rates each year, a 7 percent increase in expanded
basic rates in 1997, a 5 percent increase in such rates in 1998 and a 3
percent increase in such rates through the rest of the period.
13
Malarkey-Taylor estimated that rate increases for pay television subscriptions
would average 1 percent per year. Malarkey-Taylor estimated that rate
increases for pay-per-view showings, converter rentals and installations would
average 3 percent per year. These projections, if true, would result in an
increase in basic rates from $11.08 in 1995 to $13.69 in 2003, and an increase
in the rates for the expanded basic tier from $9.58 in 1996 to $12.46 in 2003.
The "low" value was determined using a 14 percent return on equity and the
"high" value was determined using a 12 percent return on equity. This method
resulted in an estimated fair market value ranging from a low of $15,018,836
($131 for each $500 limited partnership interest or $262 for each $1,000
invested in the Partnership) to a high of $16,161,365 ($139 for each $500
limited partnership interest or $278 for each $1,000 invested in the
Partnership) for the Manitowoc System.
The fifth valuation method was a discounted cash flow analysis that measured
the net present value of the pre-tax operating cash flows (less capital
expenditures, plus the residual value of the Manitowoc System) that represent
the return on the total investment rather than those that could result from an
assumed "purchase" with a pre-determined debt to equity ratio. The same set of
financial projections that the firm prepared and used in the fourth valuation
methodology were used for growth in subscribers, revenues, operating expenses
and capital expenditures. The projected pre-tax operating cash flows for the
Manitowoc System, plus the last-year residual value of the Manitowoc System
less capital expenditures, were discounted to the present time at an
acceptable current cost of money. This method indicated the present value of
the future pre-tax operating cash flows, using an acceptable discounted factor
based on the weighted average cost of money. The "high" value was determined
using a 15 percent target return on investment and the "low" value was
determined using a 16.5 percent target return on investment. This method
resulted in an estimated fair market value ranging from a low of $14,941,776
($131 for each $500 limited partnership interest or $262 for each $1,000
invested in the Partnership) to a high of $16,046,984 ($138 for each $500
limited partnership interest or $277 for each $1,000 invested in the
Partnership) for the Manitowoc System.
Malarkey-Taylor's valuation methodologies resulted in differing values for
the Manitowoc System. The reason for this is grounded in the basic approach
that the firm takes. The five different methods allow five different views of
the system's value. The first method looks at past performance, but allows
nothing for future performance. The second method looks at the system as it is
as of the date of the appraisal. The third method looks at the system's
projected operating income in the first year following the proposed sale. Both
discounted cash flow methods fully consider the future value of the system by
recognizing projected operating income and expenses, including capital
expenditures. Based upon all of the available information about a system being
appraised, the appraiser decides how to weight each of the five methods. The
final estimated fair market value is not a straight average of all of the
methods. Although the weighting is not shown in the appraisal report,
Malarkey-Taylor generally prefers the discounted cash flow methods since they
consider a broader range of factors that represent all sources of value,
present and future. Malarkey-Taylor accordingly generally gives greater
consideration to the discounted cash flow methods in its final judgment
concerning the fair market value of a cable television system. Malarkey-
Taylor's conclusions as to the range of values were based upon information and
data supplied by the General Partner, Malarkey-Taylor's onsite inspection of
the Manitowoc System in 1995, interviews with management and general cable
television industry information. The fair market value appraisal of
$15,567,000 ($135 for each $500 limited partnership interest or $270 for each
$1,000 invested in the Partnership) reached by Malarkey-Taylor was based on
the various valuations generated by it, and Malarkey-Taylor's general
knowledge and expertise in the cable television industry.
As compensation for rendering an opinion as to the fair market value of the
Manitowoc System, the General Partner paid Malarkey-Taylor a fee of $4,536.
Such fee was not contingent upon the conclusion reached by Malarkey-Taylor in
its opinion. As compensation for rendering opinions as to the fair market
value of other cable television systems owned and/or managed by the General
Partner and its affiliates, and completing the analysis of the allocations of
purchase prices between tangible and intangible assets for various cable
television systems owned and/or managed by the General Partner and its
affiliates, Malarkey-Taylor has received fees totalling $338,419 during the
two years prior to the date hereof.
14
The Kagan Appraisal
Kagan Media Appraisals, Inc. ("Kagan") has more than twenty-seven years of
experience in appraising communications properties. During that period, Kagan,
according to its records, has appraised more than $26 billion worth of media
properties. Kagan was selected by the General Partner to render an opinion as
to the fair market value of the Manitowoc System in light of such overall
qualifications. No limitations were imposed with respect to the appraisal to
be rendered by Kagan. The firm was selected by the General Partner to prepare
an independent appraisal of the Manitowoc System because of the firm's
reputation in the industry, and its relationship with one of the most notable
analysts on the cable television industry. Kagan has prepared independent
appraisals of other cable television systems owned and/or managed by the
General Partner. Certain affiliates of Kagan generally invest in publicly held
media companies pursuant to an investment policy adopted by them in 1974. As a
result, portfolios owned and/or managed by affiliates of Kagan maintain a
long-term investment in the General Partner. In addition, the General Partner
subscribes to a number of information services provided by affiliates of Kagan
and employees of the General Partner from time to time enroll in seminars or
serve as panelists in seminars conducted by affiliates of Kagan. The General
Partner believes that Kagan's holdings in it are not material and do not
compromise Kagan's status as an independent appraiser of the Manitowoc
System's value. Kagan has certified to the General Partner in its appraisal
report that it has no present or contemplated financial interest in the
Manitowoc System and that its employment and compensation are in no way
contingent upon the value reported.
Kagan used two cable television system appraisal methodologies in reaching a
conclusion as to the fair market value of the Manitowoc System, namely: (i)
projected future cash flows discounted back to a cumulative present value, and
(ii) correlation of those results with analysis of recent comparable cable
television system sales.
With respect to the Manitowoc System, Kagan projected that household growth
in the system's service area will average 0.6 percent per year from 1997
through 2006. Kagan concluded that the Manitowoc System's penetration can be
expected to grow gradually from the current 70.3 percent to 74 percent in the
years 2001 through 2006. Kagan projected that for the remainder of the
forecast period basic rates would increase at approximately 5 percent
annually. Kagan concluded that the basic churn rate would remain constant
throughout the period at 21 percent per year. Kagan assumed that pay rate
increases would average 4 percent per year. Kagan also analyzed growth in pay-
per-view, advertising, home shopping and ancillary revenues. Kagan concluded
that the combination of expected household growth, steady gains in
penetration, modest rate increases and continued growth in pay-per-view, home
shopping and advertising revenues are projected to raise total system revenue
to $7,800,000 in 2006 to $50.42 per subscriber per month. This is an average
growth rate of approximately 5.9 percent annually over the ten-year forecast
period. The ten-year discounted cash flow projections yielded a value of
approximately $16,400,000 ($141 for each $500 limited partnership interest or
$282 for each $1,000 invested in the Partnership) for the Manitowoc System.
In order to correlate this statistical valuation with the realities of the
marketplace, Kagan analyzed the sale of a number of comparable cable
television systems that took place in 1996. Comparison of a cable television
system to similar properties recently sold is an accepted appraisal
methodology used to correlated statistical findings with the realities of the
marketplace. Each of the comparables involved cable systems similar to the
Manitowoc System in size, area demographics, basic and pay penetration levels
and revenue per subscriber. Like cable properties can be compared to one
another on a value-per-subscriber or cash flow multiple basis. This test is a
valuation yardstick that reflects a multiple of the cash flow a subscriber is
expected to generate in the first or second year of ownership. Kagan reported
that cable systems have historically sold most often in the range of 9 to 11
times projected first-year cash flow with the higher end of the range
generally assigned to systems that are expected to achieve significant near-
term increases in cash flow. Thus, a cable subscriber forecasted to generate
$170 of cash flow in the coming year and selling at 11 times that cash flow
would be valued at $1,870 and that same subscriber selling at 13 times cash
flow would be valued at $2,210. For the Manitowoc System's comparable
analysis, Kagan studied sales of cable television systems serving between
5,000 and 20,000 subscribers, with basic penetration rates of between 50
percent and 85 percent. Kagan emphasized stand-alone, similarly sized systems
located in one primary area.
15
The first comparable that Kagan considered was a February 1996 transaction
where a Mississippi system was sold for a cash flow multiple of 9.5. Applying
this cash flow multiple to the Manitowoc System produced a comparable value of
$17,200,000 ($146 for each $500 limited partnership interest or $293 for each
$1,000 invested in the Partnership). A second comparable considered was the
sale of a California system in July 1996 for a cash flow multiple of 8.8.
Applying this cash flow multiple to the Manitowoc System produced a comparable
value of $16,000,000 ($138 for each $500 limited partnership interest or $276
for each $1,000 invested in the Partnership). Kagan also looked at a
transaction that closed in June 1996 which involved the sale of a different
California system for a cash flow multiple of 7.6. If applied to the Manitowoc
System, that transaction's cash flow multiple would yield a comparable value
of $13,800,000 ($122 for each $500 limited partnership interest or $245 for
each $1,000 invested in the Partnership) for the Manitowoc System. The final
transaction examined by Kagan involved the sale of a Washington system for a
cash flow multiple of 9.5. Applying this comparable to the Manitowoc System
implies a comparable value of $17,200,000 ($146 for each $500 limited
partnership interest or $293 for each $1,000 invested in the Partnership) for
the Manitowoc System. The average of the four comparable values examined by
Kagan was $16,100,000 ($139 for each $500 limited partnership interest or $277
for each $1,000 invested in the Partnership).
Kagan finally correlated the values determined by the discounted cash flow
analysis and the comparable sales analysis. This correlation of values was a
highly subjective process undertaken by the independent appraiser. The
discounted cash flow analysis yielded a value for the Manitowoc System of
approximately $16,400,000 ($141 for each $500 limited partnership interest or
$282 for each $1,000 invested in the Partnership) while the analysis of
comparable sales yielded a value for the Manitowoc System of approximately
$16,100,000 ($139 for each $500 limited partnership interest or $277 for each
$1,000 invested in the Partnership). Kagan concluded that the proximity of
these values, within less than 2 percent of each other, arrived at through two
independent appraisal methodologies, underscored the validity of the
assumptions used to cast the ten-year cash flow projections and established a
range within which the value of the Manitowoc System could be expected to
fall. In arriving at a single estimate of value, Kagan considered the fact
that although the Manitowoc System has some upside in basic penetration, this
is limited by satellite competition and the fact that the system has no spare
channel capacity to increase offerings, making it that much more vulnerable to
competition. In addition, Kagan noted that the Manitowoc System has only
moderate upside in household growth. All of these factors led Kagan to value
the Manitowoc System at the lower end of the value range. Kagan concluded that
the fair market value of the Manitowoc System at August 31, 1996 was
approximately $16,100,000 ($139 for each $500 limited partnership interest or
$277 for each $1,000 invested in the Partnership). The analysis undertaken by
Kagan was based in part on financial statements and operating data of the
Manitowoc System furnished to Kagan by the General Partner.
As compensation for rendering an opinion as to the fair market value of the
Manitowoc System, the General Partner paid Kagan a fee of $20,000. Such fee
was not contingent upon the conclusion reached by Kagan in its opinion. As
compensation for rendering opinions as to the fair market value of other cable
television systems and related businesses owned and/or managed by the General
Partner and its affiliates, and completing the analysis of the allocations of
purchase prices between tangible and intangible assets for various cable
television systems owned and/or managed by the General Partner and its
affiliates, Kagan has received fees totalling $247,260 during the two years
prior to the date hereof.
The Bond & Pecaro Appraisal
Bond & Pecaro, Inc. ("Bond & Pecaro") is a consulting firm specializing in
valuations, asset appraisals and related financial services for the
communications industry. The firm has appraised assets of more than 1,500
communications facilities. Bond & Pecaro was selected by the General Partner
to render an opinion as to the fair market value of the Manitowoc System in
light of such overall qualifications. No limitations were imposed with respect
to the appraisal to be rendered by Bond & Pecaro. The firm was selected by the
General Partner to prepare an independent appraisal of the Manitowoc System
because of the firm's reputation in the industry. Bond & Pecaro has prepared
independent appraisals of other cable television systems owned and/or managed
by the General Partner. The principals of Bond & Pecaro are not affiliated in
any way with the General Partner.
16
Like Kagan, Bond & Pecaro used both the income and the market methodologies
to determine the fair market value of the Manitowoc System as of August 31,
1996. The firm developed a discounted cash flow analysis to determine the
value of the Manitowoc System based upon its economic potential. The results
of this analysis indicated that the value of the Manitowoc System as of August
31, 1996 was $16,713,500 ($143 for each $500 limited partnership interest or
$286 for each $1,000 invested in the Partnership). In order to verify the
results of the discounted cash flow analysis, Bond & Pecaro also utilized a
comparable sales approach, relying upon an analysis of subscriber multiples.
The results of this analysis supported the firm's conclusions about valuation
resulting from application of the income approach.
Bond & Pecaro reported that the initial parameter upon which its discounted
cash flow projection is based is homes passed. Two factors affect the number
of homes passed: new plant construction and household growth. In preparing its
projection, Bond & Pecaro assumed that the number of households in the
Manitowoc System's franchise area will increase at a rate equivalent to the
average growth projected for the areas served by the system as a whole, or
approximately 0.8 percent per year. Bond & Pecaro concluded that the basic
penetration rate would grow modestly over the 10-year projected period from
the current 69.4 percent to approximately 85 percent by 2006. The firm
projected that pay penetration of the Manitowoc System will increase from a
level of 63.2 percent in 1996 to approximately 72 percent by 2006. Bond &
Pecaro concluded that due to regulatory and competitive restrictions, service
rates for basic and expanded basic services are expected to grow with
inflation while premium channel service rates are expected to remain
relatively flat throughout the 10-year projected period. Bond & Pecaro
estimated that pay-per-view service revenue will increase at a 12 percent
annual rate through 2006, that commercial advertising will increase at an 11.3
percent annual rate through 1999 and at an 11.4 percent rate thereafter
through the period and that annual installation revenue would grow at a
compound annual rate of 3.5 percent during the projection period. The firm
concluded that equipment rental revenues as well as other revenues also should
increase by 3.5 percent annually through 2006. Bond & Pecaro concluded that
total system revenues would increase from $3,900,000 in 1996 to approximately
$7,200,000 in 2006. For purposes of its appraisal, Bond & Pecaro assumed that
the Manitowoc System would maintain an operating profit margin of 42.5
percent, which was the system's operating profit margin in August 1996.
Depreciation and amortization estimates were based upon an estimated tangible
asset value of $2,820,000, the continuing annual capital expenditures required
to upgrade and maintain the system's plant and equipment and the system's
estimated intangible asset value. Bond & Pecaro used an estimated tax rate of
40.1 percent to project the taxable income of the Manitowoc System because the
estimated rate reflects the combined federal, state and local tax rates in
effect on August 31, 1996. Capital expenditures were projected at
approximately 8 percent of the estimated value of the tangible assets of the
Manitowoc System as of August 1996.
Bond & Pecaro then determined the net after-tax cash flow for the Manitowoc
System. After taxes were subtracted from the system's taxable income, non-cash
depreciation and amortization expense was added back to net income to yield
after-tax cash flow. From the after-tax cash flow, a provision for subsequent
capital expenditures was deducted to calculate the net after-tax cash flow.
Bond & Pecaro used a discount rate of 12 percent to calculate the present
value of the net after-tax cash flows. In order to account for the risks
associated with investments in the cable television industry and in the
Manitowoc System in particular, Bond & Pecaro added a premium to a base
discount rate to develop the 12 percent rate employed in its analysis. Bond &
Pecaro then applied a multiplier of 10.75 to the Manitowoc System's 2006
operating cash flow. Bond & Pecaro's appraisal noted that multiples used in
the valuation of cable television systems of a type similar to the Manitowoc
System range from twelve to nine times operating cash flow, depending on
market conditions and a system's profit potential. Bond & Pecaro noted also
that exceptional circumstances will warrant multiples outside of this range.
The appraisal report indicated that the selected multiple of 10.75 was used to
estimate the value of the system at the end of the investment period.
According to Bond & Pecaro, this multiple reflects the state of the market for
cable television systems as of August 31, 1996, tempered by the economic
conditions of the system's franchise service area, the necessity for a system
rebuild and the uncertainty introduced by re-regulation of the cable
television industry and competition from telephone companies and direct
broadcast satellite operators. The 10-year discounted cash flow projection of
Bond & Pecaro yielded a value of approximately $16,713,500 ($143 for each $500
limited partnership interest or $286 for each $1,000 invested in the
Partnership) for the Manitowoc System.
17
In order to correlate this statistical valuation with the realities of the
marketplace, Bond & Pecaro analyzed the sale of ten comparable cable
television systems that took place between November 1995 and August 1996. The
sales examined by Bond & Pecaro were selected based upon their comparability
to the Manitowoc System. Subscriber counts for the comparable cable television
systems were within 25 percent of the August 31, 1996 subscriber count for the
Manitowoc System. The prices paid for these comparable systems ranged from
$9.6 million to $20 million. With this analysis, Bond & Pecaro concluded that
the average price per subscriber paid for the ten comparable cable television
systems sales was approximately $1,419. Bond & Pecaro concluded that the
Manitowoc System's overall fair market value was $16,700,000 ($143 for each
$500 limited partnership interest or $286 for each $1,000 invested in the
Partnership). This $16,700,000 value reflects a subscriber multiple of
approximately $1,540 per subscriber, which is consistent with prevailing
subscriber multiples of comparable sales.
A representative of Bond & Pecaro visited the offices and technical
facilities of the Manitowoc System in June 1995 as part of its preparation of
the appraisal report. The firm's representative consulted with system
management regarding market factors and system-specific issues that impacted
the value of the system's tangible and intangible assets. Specific data
provided by the system and the General Partner included historical audited
financial statements for fiscal years 1992 through 1995, 1996 year to date
unaudited financial statements, operating statistical summaries, system
technical data, market demographic data and related materials. Other sources
consulted in the preparation of the appraisal included industry factbooks,
government publications and similar reference materials. Bond & Pecaro also
relied upon information furnished by the Manitowoc System's management
relating to the age, condition and adequacy of the system's physical plant.
As compensation for rendering an opinion as to the fair market value of the
Manitowoc System, the General Partner paid Bond & Pecaro a fee of $5,295. Such
fee was not contingent upon the conclusions reached by Bond & Pecaro in its
opinion. As compensation for rendering opinions as to the fair market value of
other cable television systems owned and/or managed by the General Partner and
its affiliates, Bond & Pecaro has received fees totalling $64,866 during the
two years prior to the date hereof.
COSTS OF THE TRANSACTION
The following is a reasonably itemized estimate of all expenses incurred or
to be incurred in connection with the proposed sale of the Manitowoc System,
all of which will be paid by the General Partner, including without limitation
the cost of soliciting the votes of the holders of limited partnership
interests:
Filing fees $ 1,516
Legal fees $10,000
Accounting fees $10,000
Appraisal fees $29,830
Printing costs $35,000
Postage and miscellaneous costs $10,000
PROPOSED SALE OF ASSETS
THE PURCHASE AND SALE AGREEMENT
Pursuant to the terms and conditions of a purchase and sale agreement dated
as of September 5, 1995, as amended September 30, 1996 (the "Purchase and Sale
Agreement") by and between the Venture and the General Partner, the Venture
has agreed to sell the Manitowoc System to the General Partner. The General
Partner intends to finance its acquisition of the Manitowoc System using cash
on hand and cash generated from operations. Based upon amounts estimated as of
September 30, 1996, the aggregate cost of the acquisition of the Manitowoc
System to the General Partner, including the adjusted contract purchase price,
will be approximately $15,841,995.
18
The closing of the sale will occur on a date upon which the Venture and the
General Partner mutually agree by June 30, 1997. It is anticipated that the
closing will occur within a few weeks after receipt of the approval of the
sale by the limited partners of the Venture's four constituent partnerships.
Because the closing is conditioned upon, among other things, the approval of
the limited partners of the Venture's four constituent partnerships and the
receipt of material third party consents necessary for the transfer of the
Manitowoc System to the General Partner, there can be no assurance that the
proposed sale will occur. If all conditions precedent to the General Partner's
obligation to close are not eventually satisfied or waived, the General
Partner's obligation to purchase the Manitowoc System will terminate on June
30, 1997.
THE MANITOWOC SYSTEM
The assets to be acquired by the General Partner consist primarily of the
real and personal, tangible and intangible assets of the Venture's Manitowoc
System. The General Partner will purchase all of the tangible assets of the
Manitowoc System, including, among other things, the headend equipment,
underground and aboveground cable distribution systems, towers, earth
satellite receive stations, and furniture and fixtures of the Manitowoc
System. The Purchaser also will acquire certain of the intangible assets of
the Manitowoc System, including, among other things, all of the franchises,
leases, agreements, permits, licenses and other contracts and contract rights
of the Manitowoc System. Also included in the sale are certain parcels of real
estate owned by the Manitowoc System, the subscriber accounts receivable of
the Manitowoc System and all of the Manitowoc System's engineering records,
files, schematics, maps, reports, promotional graphics, marketing materials
and reports filed with federal, state and local regulatory agencies. Certain
of the Manitowoc System's assets will be retained by the Venture, including
cash or cash equivalents on hand and in banks, certain insurance policies and
rights and claims thereunder, and any federal or state income tax refunds to
which the Venture may be entitled.
PURCHASE PRICE
Subject to the working capital adjustments described below, the purchase
price for the Manitowoc System is $16,122,333. The purchase price will be
reduced by any accounts payable and accrued expenses and vehicle lease
obligations existing on the closing date. The purchase price will be increased
by any accounts receivable existing on the closing date. The purchase price
for the Manitowoc System also will be adjusted as of the closing date with
respect to all items of income and expense associated with the operation of
the Manitowoc System. This adjustment will reflect, in accordance with
generally accepted accounting principles, that all expenses and income
attributable to the period on or after the closing date are for the account of
the General Partner and those prior to the closing date are for the account of
the Venture. Please see Note 3 of the Notes to Unaudited Pro Forma Financial
Statements for a detailed accounting of the estimated closing adjustments.
CONDITIONS TO CLOSING
The General Partner's obligations under the Purchase and Sale Agreement are
subject to the following conditions: (a) the Venture shall have obtained all
material consents and approvals from governmental authorities and other third
parties necessary to the transfer of the Manitowoc System to the General
Partner, and (b) all representations and warranties of the Venture shall be
true and correct in all material respects as of the closing date. The Venture
has obtained the consent of the City of Manitowoc, and the General Partner
does not anticipate that the Venture will experience any significant
difficulty in obtaining the other necessary consents and approvals to the
currently proposed sale. If, however, the Venture fails to obtain certain
consents and approvals of third parties with whom the Manitowoc System has
contracted, the General Partner likely will waive this condition to closing.
In such circumstances, the General Partner would agree to indemnify the
Venture for any liabilities incurred in connection with a closing without
prior receipt of all necessary consents. The Venture's obligations under the
Purchase and Sale Agreement are subject to the receipt of the purchase price
for the Manitowoc System.
FEDERAL INCOME TAX CONSEQUENCES
The purpose of the following discussion of the income tax consequences of
the proposed transaction is to inform the limited partners of the Partnership
of the federal income tax consequences to the Partnership and to
19
its partners arising from the sale of the Manitowoc System. The tax
information included herein was prepared by the tax department of the General
Partner. The tax information is taken from tax data compiled by the General
Partner in its role as the Partnership's tax administrator and is not based
upon the advice or formal opinion of counsel. The tax discussion that follows
is merely intended to inform the limited partners of factual information and
should not be considered tax advice.
By the expected date of the Manitowoc System's sale, the limited partners
will have received certain tax benefits from their investment in the
Partnership. Assuming maximum federal income tax rates and no other sources of
passive income, limited partners will have received $11,770,801 in tax
benefits from Partnership losses ($471 per $1,000 invested).
The sale of the Manitowoc System will result in a gain for federal income
tax purposes. The amount of this gain allocated to limited partners is
approximately $4,786,283. The General Partner estimates that $3,936,772 ($158
per $1,000 invested) of this gain will be treated as ordinary income. This
amount of ordinary income results from the recapture of depreciation on
personal property under Section 1245. The General Partner estimates that the
remainder of the gain, $849,511 ($34 per $1,000 invested), will be treated as
long term capital gain under Section 1231.
Assuming the 31 percent rate applies to ordinary income and the 28 percent
rate applies to long term capital gain income, as a result of the sale of the
Manitowoc System, a limited partner will be subject to federal income taxes of
$58 per $1,000 invested in the Partnership. The taxable income will be
recognized in the year of the closing of the sale, which is expected to be
1997.
The sale of the Manitowoc System will cause the liquidation of the
Partnership, which will result in an additional tax deduction for the limited
partners. The final capital account balance reported on the 1997 Schedule K-1
of each limited partner will reflect a positive ending capital account balance
that is projected to equal $130 per $1,000 invested. This amount represents
partnership syndication costs that may be deducted on the limited partners'
tax return as a long term capital loss under Section 731. The deduction of
long term capital losses may be limited depending on each partners' specific
income tax situation.
Limited partners who are non-resident aliens or foreign corporations
("foreign persons") are subject to a withholding tax on their share of the
Partnership's income from the sale of the Manitowoc System. The withholding
rates are 39.6 percent for individual partners and 35 percent for corporate
partners. The tax withheld will be remitted to the Internal Revenue Service
and the foreign person will receive a credit on their U.S. tax return for the
amount of the tax withheld by the Partnership. The tax withheld will be
treated as a distribution to the limited partner.
20
CERTAIN INFORMATION ABOUT THE PARTNERSHIP
AND THE GENERAL PARTNER
The General Partner acquires, develops and operates cable television systems
for itself and for its managed limited partnerships. Based on the number of
basic subscribers served by the General Partner's owned and managed cable
television systems, the General Partner is one of the largest cable television
system operators in the United States. It owns and/or manages for affiliated
public limited partnerships 56 cable television systems in 23 states serving
approximately 1.4 million basic subscribers. The principal executive offices
of the Partnership and the General Partner are located at 9697 East Mineral
Avenue, Englewood, Colorado 80112, and their telephone number is (303) 792-
3111.
The limited partnership interests of the Partnership are registered pursuant
to Section 12(g) of the Exchange Act. As such, the Partnership currently is
subject to the informational reporting requirements of the Exchange Act and,
in accordance therewith, is obligated to file periodic reports, proxy
statements and other information with the Securities and Exchange Commission
relating to its business, financial condition and other matters. Reports and
other information filed by the Partnership can be inspected and copied at the
public reference facilities maintained by the Commission at 450 Fifth Street,
N.W., Room 1024, Washington, D.C. 20549, and at the following regional offices
of the Commission: 7 World Trade Center, Suite 1300, New York, New York 10048
and Northwest Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. The Partnership will be liquidated and dissolved after the
sale of the Manitowoc System. The Partnership's registration and reporting
requirements under the Exchange Act will be terminated upon dissolution of the
Partnership.
The General Partner also is subject to the informational filing requirements
of the Exchange Act and, in accordance therewith, files periodic reports,
proxy statements and other financial information with the Securities and
Exchange Commission relating to its business, financial condition and other
matters. Information, as of particular dates, concerning the General Partner's
directors and officers, their compensation, options granted to them, the
principal holders of the General Partner's securities and any material
interest of such persons in transactions with the General Partner is required
to be disclosed in certain documents filed with the Commission. Such reports,
proxy statements and other information may be inspected at the above-listed
public reference facilities maintained by the Commission. Copies of such
materials may be obtained upon payment of the Commission's prescribed charges
by writing to the Commission's principal office at 450 Fifth Street, N.W.,
Washington, D.C. 20549.
The name, business address and principal occupation and employment for the
past five years of each of the directors and executive officers of the General
Partner are set forth in Schedule 1 to this Proxy Statement. To the best
knowledge of any of the persons listed on Schedule 1 hereto, except as
disclosed on such schedule, no persons listed on such schedule beneficially
own any limited partnership interests in the Partnership.
Except as disclosed herein, neither the General Partner nor, to the best of
its knowledge, any of the persons listed on Schedule 1 hereto, has any
contract, arrangement, understanding or relationship with any other person
with respect to any limited partnership interest of the Partnership,
including, but not limited to, any contract, arrangement, understanding or
relationship concerning the transfer or the voting of any of such interests,
joint ventures, loan or option arrangements, puts or calls, guaranties of
loans, guaranties against loss or the giving or withholding of proxies.
CERTAIN RELATED PARTY TRANSACTIONS
The General Partner and its affiliates engage in certain transactions with
the Venture as contemplated by the Partnership Agreement. The General Partner
believes that the terms of such transactions are generally as favorable as
could be obtained by the Venture from unaffiliated parties. This determination
has been made by the General Partner in good faith, but none of the terms were
or will be negotiated at arm's-length and there can
21
be no assurance that the terms of such transactions have been or will be as
favorable as those that could have been obtained by the Venture from
unaffiliated parties.
The General Partner charges the Venture a management fee relating to its
cable television system, and the Venture reimburses the General Partner for
certain allocated overhead and administrative expenses in accordance with the
terms of the Partnership Agreement. These expenses consist primarily of
salaries and benefits paid to corporate personnel, rent, data processing
services and other facilities costs. Such personnel provide engineering,
marketing, administrative, accounting, legal and investor relations services
to the Partnership and the Venture. Allocations of personnel costs are based
primarily on actual time spent by employees of the General Partner with
respect to cable television systems managed. Systems owned by the General
Partner and all other systems owned by partnerships for which Jones
Intercable, Inc. is the general partner are also allocated a proportionate
share of these expenses. No duplicate management or other fees or
reimbursements are charged to the Partnership and the Partnership bears only
47 percent of the fees and reimbursements paid by the Venture, which is
attributable to the Partnership's 47 percent ownership interest in the
Venture.
The General Partner from time to time also advances funds to the Venture and
charges interest on the balances payable from the Venture. The interest rate
charged the Venture approximates the General Partner's weighted average cost
of borrowing.
The Manitowoc System receives stereo audio programming from Superaudio, a
joint venture owned 50 percent by an affiliate of the General Partner and 50
percent by an unaffiliated party, educational video programming from Mind
Extension University, Inc., an affiliate of the General Partner, and computer
video programming from Jones Computer Network, Ltd., an affiliate of the
General Partner, for fees based upon the number of subscribers receiving the
programming.
Jones Infomercial Networks, Inc. ("Infomercial"), an affiliate of the
General Partner, provides advertising time for third parties on the Manitowoc
System. In consideration, the revenues generated from the third parties are
shared two-thirds and one-third between Infomercial and the Venture. During
the year ended December 31, 1995 and the nine months ended September 30, 1996,
the Venture received revenues from Infomercial totalling $4,559 and $2,584,
respectively.
The charges to the Venture for related party transactions were as follows
for the periods indicated:
FOR THE YEAR
FOR THE NINE ENDED
MONTHS ENDED DECEMBER 31,
SEPTEMBER 30, ----------------
1996 1995 1994
------------- ------- --------
Management fees............................ $138,526 $81,634 $164,805
Allocation of expenses..................... 193,989 282,057 272,753
Interest expense........................... 1,344 6,848 13,306
Amount of notes and advances outstanding... 0 45,258 72,764
Highest amount of notes and advances
outstanding............................... 77,215 77,215 72,764
Programming fees:
Superaudio............................... 5,240 6,318 6,105
Mind Extension University................ 5,750 6,759 5,532
Jones Computer Network................... 10,863 12,760 3,316
USE OF PROCEEDS FROM MANITOWOC SYSTEM SALE
The following is a brief summary of the Partnership's estimated use of the
proceeds from the sale of the Manitowoc System. All of the following selected
financial information is based upon amounts as of September 30, 1996 and
certain estimates of liabilities at closing. Final results may differ from
these estimates. A more detailed discussion of the financial consequences of
the sale of the Manitowoc System is set forth below
22
under the caption "Unaudited Pro Forma Financial Information." All limited
partners are encouraged to review carefully the unaudited pro forma financial
statements and notes thereto.
If the holders of a majority of limited partnership interests of the four
partnerships that comprise the Venture approve the proposed sale of the
Manitowoc System and the transaction is closed, the Venture will pay all of
its indebtedness and then the net sale proceeds will be distributed to the
four constituent partnerships of the Venture. The Partnership will receive 47
percent of such proceeds and the Partnership will distribute this portion of
the net sale proceeds pursuant to the terms of the Partnership Agreement. The
estimated uses of the sale proceeds are as follows:
Contract Sales Price of the Manitowoc System.................... $16,122,333
Add:Cash on Hand................................................ 3,483,777
Less:Estimated Net Closing Adjustments.......................... (280,338)
Repayment of Debt............................................ (4,775)
-----------
Cash Available for Distribution to Joint Venturers......... 19,320,997
Cash Distributed to Other Joint Venturers.................. (10,261,597)
-----------
Cash Available for Distribution by the Partnership......... $ 9,059,400
===========
Limited Partners' Share (75%).............................. $ 6,940,844
===========
General Partner's Share (25%).............................. $ 2,118,556
===========
Based upon financial information available at September 30, 1996, below is
an estimate of all cash distributions that will have been made to limited
partners after the distribution of the proceeds from the sale of the Manitowoc
System is completed.
Summary of Estimated Cash Distributions to Limited Partners:
Return of Limited Partners' Initial Capital on the 1990 Sale
of the Venture's Wisconsin Systems........................... $25,000,000
Limited Partners' Share of Residual Proceeds on the 1990 Sale
of the Venture's Wisconsin Systems........................... 24,016,548
Limited Partners' Share of Residual Proceeds on the 1996 Sale
of the Venture's Manitowoc System............................ 6,940,844
-----------
Total Estimated Cash Received by Limited Partners............. $55,957,392
===========
Total Cash Received per $1,000 of Limited Partnership Capital. $ 2,238
===========
Total Cash Received per $500 Limited Partnership Interest .... $ 1,119
===========
The estimated after-tax internal rate of return on an investment in the
Partnership is approximately 12.7 percent. This internal rate of return
includes the distribution to be made of the net proceeds from the sale of the
Manitowoc System and the prior distribution of the net proceeds from the sale
of the Venture's Wisconsin systems in June 1990.
23
Based on financial information available at September 30, 1996, the
following table presents the estimated results of the Partnership when the
Venture has completed the sale of the Manitowoc System:
Dollar Amount Raised....................................... $25,000,000
Number of Cable Television Systems Purchased Directly...... None
Number of Cable Television Systems Purchased Indirectly.... Eight
Date of Closing of Offering................................ April 1984
Date of First Sale of Properties........................... September 1989
Tax and Distribution Data per $1,000 of Limited Partnership
Capital:
Federal Income Tax Results
Ordinary Income (Loss)
--from operations...................................... $(1,392)
--from recapture....................................... $ 1,883
Capital Gain (Loss).................................... $ 747
Cash Distributions to Investors
Source (on GAAP basis)
--investment income.................................... $ 1,238
--return of capital.................................... $ 1,000
Source (on cash basis)
--sales................................................ $ 2,238
UNAUDITED PRO FORMA FINANCIAL INFORMATION
OF CABLE TV FUND 11-D, LTD.
The following unaudited pro forma financial statements assume that as of
September 30, 1996, the Venture had sold the Manitowoc System for $16,122,333.
The funds available to the Venture, adjusting for the estimated net closing
adjustments of the Manitowoc System, are expected to total approximately
$15,841,995. Such funds will be used to repay indebtedness and the balance
will be distributed to the four constituent partnerships of the Venture
pursuant to the percentage ownership interests in the Venture of each
Partnership and then each partnership will distribute its share of the net
proceeds pursuant to the terms of their partnership agreements, which will be
75 percent to the limited partners and 25 percent to the General Partner.
The unaudited pro forma financial statements should be read in conjunction
with the appropriate notes to the unaudited pro forma financial statements.
ALL OF THE FOLLOWING UNAUDITED PRO FORMA FINANCIAL INFORMATION IS BASED UPON
AMOUNTS AS OF SEPTEMBER 30, 1996 AND CERTAIN ESTIMATES OF LIABILITIES AT
CLOSING. FINAL RESULTS MAY DIFFER FROM SUCH INFORMATION.
24
CABLE TV FUND 11-D, LTD.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1996
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ----------
ASSETS
Cash and cash equivalents................... $ -- $9,059,400 $9,059,400
Investment in cable television venture...... 2,918,652 (2,918,652) --
---------- ---------- ----------
Total Assets............................ $2,918,652 $6,140,748 $9,059,400
========== ========== ==========
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Accrued distribution to Limited Partners.. $ -- $6,940,844 $6,940,844
Accrued distribution to General Partner... -- 2,118,556 2,118,556
---------- ---------- ----------
Total Liabilities....................... -- 9,059,400 9,059,400
---------- ---------- ----------
Partners' Capital (Deficit):
General Partner........................... (172,716) 172,716 --
Limited Partners.......................... 3,091,368 (3,091,368) --
---------- ---------- ----------
Total Partners' Capital (Deficit)....... 2,918,652 (2,918,652) --
---------- ---------- ----------
Total Liabilities and Partners' Capital
(Deficit)................................ $2,918,652 $6,140,748 $9,059,400
========== ========== ==========
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited balance sheet.
25
CABLE TV FUND 11-D, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ---------
EQUITY IN NET INCOME OF CABLE TELEVISION
JOINT VENTURE................................ $212,839 $(212,839) $ --
-------- --------- --------
NET INCOME.................................... $212,839 $(212,839) $ --
======== ========= ========
NET INCOME PER LIMITED PARTNERSHIP UNIT....... $ 4.21 $ (4.21) $ --
======== ========= ========
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement.
26
CABLE TV FUND 11-D, LTD.
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
PRO FORMA PRO FORMA
AS REPORTED ADJUSTMENTS BALANCE
----------- ----------- ---------
EQUITY IN NET INCOME OF CABLE TELEVISION
JOINT VENTURE............................... $206,588 $(206,588) $ --
-------- --------- -----
NET INCOME................................... $206,588 $(206,588) $ --
======== ========= =====
NET INCOME PER LIMITED PARTNERSHIP UNIT...... $ 4.09 $ (4.09) $ --
======== ========= =====
The accompanying notes to unaudited pro forma financial statements are an
integral part of this unaudited statement
27
CABLE TV FUND 11-D, LTD.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
1) The Partnership has a 47 percent ownership interest in the Venture
through capital contributions made during 1984 of $21,100,000. The following
calculations present the sale of the Manitowoc System and the resulting
estimated distributions to be received by the Partnership.
2) The unaudited pro forma balance sheet of the Partnership assumes that the
Venture had sold the Manitowoc System for $16,122,333 as of September 30,
1996. The unaudited statement of operations of the Partnership assumes that
the Venture had sold the Manitowoc System as of January 1, 1995.
3) The Venture had a cash balance of $3,483,777 at September 30, 1996. Of
this cash balance, approximately $1,300,000 represents cash generated from the
operations of the Manitowoc System and approximately $2,184,000 represents
residual proceeds from the sale of the Wisconsin systems in 1990. This cash
will be distributed with the net proceeds from the sale of the Manitowoc
System. The $1,300,000 generated from the operations of the Manitowoc System
will be distributed 99 percent to the limited partners and 1 percent to the
General Partner. The $2,184,000 of residual proceeds will be distributed 75
percent to the limited partners and 25 percent to the General Partner.
4) The estimated gain recognized from the sale of the Manitowoc System and
corresponding estimated distribution to limited partners as of September 30,
1996 has been computed as follows:
GAIN ON SALE OF ASSETS:
Contract sales price.............................................. $16,122,333
Less: Net book value of investment in cable television properties
at September 30, 1996....................................... (2,443,945)
Additional franchise costs..................................... (1,850,000)
-----------
Gain on sale of assets............................................ $11,828,388
===========
Partnership's share of gain on sale of assets..................... $ 5,546,200
===========
DISTRIBUTIONS TO PARTNERS:
Contract sales price.............................................. $16,122,333
Add:Trade receivables, net........................................ 102,278
Prepaid expenses.................................................. 22,309
Less:Accrued liabilities assumed by the General Partner........... (380,553)
Subscriber prepayments............................................ (24,372)
-----------
Adjusted cash received............................................ 15,841,995
Less:Outstanding debt to third parties............................ (4,775)
Add:Cash on hand.................................................. 3,483,777
-----------
Cash available for distribution................................... 19,320,997
Cash distributed to other Joint Venturers......................... (10,261,597)
-----------
Cash available for distribution by the Partnership................ $ 9,059,400
===========
Amount due Limited Partners (75%)................................. $ 6,940,844
===========
Amount due General Partner (25%).................................. $ 2,118,556
===========
28
AVAILABLE INFORMATION
The Partnership's Quarterly Report on Form 10-Q for the fiscal quarter ended
September 30, 1996 and the Partnership's Annual Report on Form 10-K for the
fiscal year ended December 31, 1995 are being mailed to the limited partners
of the Partnership together with this Proxy Statement. Copies of the three
independent appraisals of the fair market value of the Manitowoc System and
copies of the Purchase and Sale Agreement between the Venture and the
Purchaser are available to each limited partner of the Partnership upon
written request to Elizabeth M. Steele, Secretary, Jones Intercable, Inc.,
9697 East Mineral Avenue, Englewood, Colorado 80112, (303) 792-3111. Copies of
these documents will be provided at the expense of the requesting limited
partner.
A Rule 13e-3 Transaction Statement furnishing certain additional information
with respect to the transaction described herein has been jointly filed by the
Partnership and the Purchaser with the Securities and Exchange Commission.
INCORPORATION BY REFERENCE
The Partnership's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 and the Partnership's Quarterly Report on Form 10-Q for the
fiscal quarter ended September 30, 1996 are incorporated by reference in this
Proxy Statement. The Partnership specifically incorporates by reference herein
Item 1. Business, Item 2. Properties, Item 5. Market for the Registrant's
Common Stock and Related Security Holder Matters, Item 6. Selected Financial
Data, Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations and Item 8. Financial Statements from its 1995 Annual
Report on Form 10-K and the September 30, 1996 Quarterly Report on Form 10-Q
in its entirety.
29
SCHEDULE 1
EXECUTIVE OFFICERS AND DIRECTORS OF THE GENERAL PARTNER
Set forth below is the name, residence or business address, present
principal occupation or employment and five-year employment history of the
executive officers and directors of the General Partner. Also set forth is the
aggregate number of limited partnership interests of the Partnership
beneficially owned by each such person. The present principal occupation of
each executive officer of the General Partner is as an executive officer of
the General Partner. The Partnership has no officers or employees. All persons
listed, except for Messrs. Burney, MacDonald and Vanaselja, are citizens of
the United States. Messrs. Burney, MacDonald and Vanaselja are citizens of
Canada.
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
Glenn R. Jones Mr. Jones has served as Chairman of the 0
c/o Jones Intercable, Inc. Board of Directors and Chief Executive
9697 E. Mineral Avenue Officer of the General Partner since its
Englewood, CO 80112 formation in 1970.
Christopher J. Bowick Mr. Bowick is the General Partner's Group 0
c/o Jones Intercable, Inc. Vice President/Technology and its Chief
9697 E. Mineral Avenue Technical Officer. Prior to joining the
Englewood, CO 80112 General Partner in 1991, Mr. Bowick worked
as Vice President of Engineering of
Scientific Atlanta's transmission systems
business division.
Derek H. Burney Mr. Burney was appointed a Director of the 0
c/o Bell Canada General Partner in December 1994 and he
International Inc. became Vice Chairman of the General
1000 rue de la Gauchetiere Partner's Board in January 1995. Mr. Burney
Bureau 1100 joined BCE Inc., Canada's largest
Montreal (PQ) telecommunications company, in January
Canada H3B 4Y8 1993, and he has been Chairman of Bell
Canada International Inc., a subsidiary of
BCE Inc., since that time and, in addition,
he has been the subsidiary's Chief
Executive Officer since July 1993. Prior to
joining BCE Inc., Mr. Burney was Canada's
ambassador to the United States from 1989
to 1992.
Robert E. Cole Mr. Cole was appointed a director of the 0
c/o Jones Intercable, Inc. General Partner in March 1996. Mr. Cole is
9697 E. Mineral Avenue currently self-employed as a partner of
Englewood, CO 80112 First Variable Insurance Marketing and is
responsible for marketing to National
Association of Securities Dealers, Inc.
firms in northern California, Oregon,
Washington and Alaska. From 1993 to 1995,
Mr. Cole was the director of marketing for
Lamar Life Insurance Company; from 1992 to
1993, Mr. Cole was senior vice president of
PMI Inc., a third party lender serving the
special needs of corporate owned life
insurance (COLI) and from 1988 to 1992, Mr.
Cole was the principal of a specialty
investment banking firm that provided
services to finance the ownership and
growth of emerging companies, productive
assets and real property.
30
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
Kevin P. Coyle Mr. Coyle, Group Vice President/Finance of 0
c/o Jones Intercable, Inc. the General Partner, has been the General
9697 E. Mineral Avenue Partner's Chief Financial Officer since
Englewood, CO 80112 1990. Mr. Coyle has been an associate of
the General Partner since 1981.
William E. Frenzel Mr. Frenzel was appointed a Director of the 0
1775 Massachusetts Avenue, General Partner in April 1995. He has been
NW a Guest Scholar since 1991 with the
Washington, DC 20036 Brookings Institution, a research
organization located in Washington D.C.
Until his retirement in January 1991, Mr.
Frenzel served for twenty years in the
United States House of Representatives.
Donald L. Jacobs Mr. Jacobs was appointed a Director of the 0
60435 Tekampe Road General Partner in April 1995. From 1983 to
Bend, OR 97702 1992, at which time Mr. Jacobs retired, Mr.
Jacobs was an executive officer of TRW.
Prior to his retirement, he was Vice
President and Deputy Manager of the Space
and Defense Sector; prior to that
appointment, he was the Vice President and
General Manager of the Defense Systems
Group; and prior to that appointment, he
was President of ESL, Inc., a subsidiary of
TRW.
Larry Kaschinske Mr. Kaschinske has been the Controller and 0
c/o Jones Intercable, Inc. Chief Accounting Officer of the General
9697 E. Mineral Avenue Partner since 1994. Mr. Kaschinske has been
Englewood, CO 80112 an associate of the General Partner since
1984.
James J. Krejci Mr. Krejci has been a Director of the 0
c/o Jones Intercable, Inc. General Partner since 1987. He was the
9697 E. Mineral Avenue President of the International Division of
Englewood, CO 80112 International Gaming Technology
headquartered in Reno, Nevada from May 1994
until March 1995. Prior to joining
International Gaming Technology, Mr. Krejci
had been a Group Vice President of the
General Partner since 1987.
31
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
John A. MacDonald Mr. MacDonald was appointed a Director of 0
c/o Bell Canada the General Partner in November 1995. Mr.
International Inc. MacDonald is Executive Vice President-
1000 rue de la Gauchetiere Business Development and Chief Technology
Bureau 1100 Officer of Bell Canada. Prior to joining
Montreal (PQ) Bell Canada in November 1994, he was
Canada H3B 4Y8 President and Chief Executive Officer of
The New Brunswick Telephone Company, a post
he had held since March of that year. Mr.
MacDonald began his career with NBTel in
1977 and he held various posts with that
Company until his departure in November
1994.
James B. O'Brien Mr. O'Brien has been President, Chief 0
c/o Jones Intercable, Inc. Operating Officer and a Director of the
9697 E. Mineral Avenue General Partner since 1989. Mr. O'Brien has
Englewood, CO 80112 been with the General Partner since 1982 in
various operational management positions.
Raphael M. Solot Mr. Solot was appointed a director of the 0
c/o Jones Intercable, Inc. General Partner in March 1996. Mr. Solot is
9697 E. Mineral Avenue an attorney in private practice. He has
Englewood, CO 80112 practiced law for 31 years with an emphasis
on franchise, corporate and partnership law
and complex litigation.
Elizabeth M. Steele Ms. Steele joined the General Partner in 0
c/o Jones Intercable, Inc. 1987 as Vice President/General Counsel and
9697 E. Mineral Avenue Secretary. Prior to that time, Ms. Steele
Englewood, CO 80112 was a partner at Davis, Graham & Stubbs, a
Denver, Colorado law firm that serves as
counsel to the General Partner.
Howard O. Thrall Mr. Thrall was appointed a director of the 0
c/o Jones Intercable, Inc. General Partner in March 1996 and he had
9697 E. Mineral Avenue previously served as a director of the
Englewood, CO 80112 General Partner from December 1988 to
December 1994. Mr. Thrall is senior vice
president--corporate development for First
National Net, Inc., a leading service
provider for the mortgage banking industry.
From September 1993 through July 1996, Mr.
Thrall served as vice president of sales,
Asian region for World Airways, Inc. From
1984 until August 1993, Mr. Thrall was with
the McDonnell Douglas Corporation, where he
was a regional vice president, commercial
marketing with the Douglas Aircraft Company
subsidiary.
32
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
Siim A. Vanaselja Mr. Vanaselja was appointed a director of 0
c/o Bell Canada the General Partner in August 1996. Mr.
International Inc. Vanaselja joined BCE, Inc., Canada's
1000 rue de la Gauchetiere largest telecommunications company, in
Bureau 1100 February 1994 and he has served in various
Montreal (PQ) Canada H3B capacities with that company and its
4Y8 subsidiaries since that time. He currently
serves as Chief Financial Officer at Bell
Canada International Inc. Prior to joining
BCE Inc. and since August 1989, Mr.
Vanaselja was a partner in the Toronto
office of KPMG Peat Marwick Thorne.
Raymond L. Vigil Mr. Vigil has been Group Vice 0
c/o Jones Intercable, Inc. President/Human Resources of the General
9697 E. Mineral Avenue Partner since 1993. Previous to joining the
Englewood, CO 80112 General Partner, Mr. Vigil served as
Executive Director of Learning at U S West.
Prior to U S West, Mr. Vigil worked in
various human resources posts over a 14-
year term with the IBM Corporation.
Ruth E. Warren Ms. Warren has been Group Vice 0
c/o Jones Intercable, Inc. President/Operations of the General Partner
9697 E. Mineral Avenue since 1990. Ms. Warren has been with the
Englewood, CO 80112 General Partner in various operational
management positions since 1980.
Cynthia A. Winning Ms. Winning joined the General Partner as 0
c/o Jones Intercable, Inc. Group Vice President/Marketing in December
9697 E. Mineral Avenue 1994. Prior to joining the General Partner,
Englewood, CO 80112 Ms. Winning served in 1994 as the President
of PRS Inc., a Denver, Colorado sports and
event marketing company. From 1979 to 1981
and from 1986 to 1994, Ms. Winning served
as the Vice President and Director of
Marketing for Citicorp Retail Services,
Inc.
33
AGGREGATE NUMBER
OF LIMITED
PARTNERSHIP INTERESTS
NAME AND ADDRESS OCCUPATION OR EMPLOYMENT BENEFICIALLY OWNED
---------------- ------------------------ ---------------------
Sanford Zisman Mr. Zisman was appointed a director of the
c/o Jones Intercable, Inc. General Partner in June 1996. Mr. Zisman is
9697 E. Mineral Avenue a member of the law firm Zisman & Ingraham,
Englewood, CO 80112 P.C. of Denver, Colorado. He has practiced
law for 31 years, with an emphasis on tax,
business and estate planning and probate
administration.
Robert L. Zoellick Mr. Zoellick was appointed a Director of the 0
3900 Wisconsin Avenue, NW General Partner in April 1995. Mr. Zoellick
Washington, DC 20016 is Executive Vice President, General
Counsel and Corporate Secretary of Fannie
Mae, a federally chartered and stockholder-
owned corporation that is the largest
housing finance investor in the United
States. From August 1992 to January 1993,
Mr. Zoellick served as Deputy Chief of
Staff of the White House and Assistant to
the President. From May 1991 to August
1992, Mr. Zoellick served concurrently as
the Under Secretary of State for Economic
and Agricultural Affairs and as Counselor
of the Department of State. From 1985 to
1988, Mr. Zoellick served at the Department
of Treasury in various capacities.
34
- --------------------------------------------------------------------------------
[LOGO OF JONES INTERCABLE APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Cable TV Fund 11-D, Ltd., a Colorado
limited partnership, hereby votes on the sale of Cable TV Joint Fund 11's
Manitowoc, Wisconsin cable television system to Jones Intercable, Inc. for a
sales price of $16,122,333 in cash, subject to normal closing adjustments,
pursuant to the terms and conditions of that certain Purchase and Sale
Agreement dated as of September 5, 1995, as amended September 30, 1996, as
follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(continued on other side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
PLEASE SIGN EXACTLY AS NAME
APPEARS.
DATED: _____________________, 1997
__________________________________
Beneficial Owner Signature
(Investor)
__________________________________
Authorized Trustee/Custodian
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF JONES INTERCABLE, INC. APPEARS HERE]
9697 EAST MINERAL AVENUE
ENGLEWOOD, COLORADO 80112
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE PARTNERSHIP BY THE GENERAL PARTNER
The undersigned Limited Partner of Cable TV Fund 11-D, Ltd., a Colorado
limited partnership, hereby votes on the sale of Cable TV Joint Fund 11's
Manitowoc, Wisconsin cable television system to Jones Intercable, Inc. for a
sales price of $16,122,333 in cash, subject to normal closing adjustments,
pursuant to the terms and conditions of that certain Purchase and Sale
Agreement dated as of September 5, 1995, as amended September 30, 1996, as
follows:
[_] CONSENTS [_] WITHHOLDS CONSENT [_] ABSTAINS
(continued on other side)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED LIMITED PARTNER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR THE PROPOSED SALE TRANSACTION.
PLEASE SIGN EXACTLY AS NAME
APPEARS.
When limited partnership inter-
ests are held by more than one
person, all owners should sign.
When signing as attorney, as ex-
ecutor, administrator, trustee or
guardian, please give full title
as such. If a corporation, please
sign in full corporation name by
authorized officer. If a partner-
ship, please sign in partnership
name by authorized person.
DATED: _____________________, 1997
__________________________________
Signature
__________________________________
Signature
__________________________________
Signature
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
- --------------------------------------------------------------------------------