Offering Circular

GRANADA

GRANADA GROUP PLC (incorporated in England and Wales with limited liability under registered number 290076)

£250,000,000 7 per cent. Bonds due 2014

Issue price: 99.78 per cent.

Application has been made to London Stock Exchange Limited (the "London Stock Exchange") for the £250,000,000 7 per cent. Bonds due 2014 of Granada Group PLC (the "Bonds" and the "Company") to be admitted to the Official List. Copies of this document, which comprises listing particulars, have been delivered to the Registrar of Companies in England and Wales as required by Section 149 of the Financial Services Act 1986.

Interest on the Bonds is payable annually in arrear on 8 December in each year at the rate of 7 per cent. per annum. The first payment of interest wi l l be made on 8 December, 1999 in respect of the period from and including 19 August, 1999 to but excluding 8 December, 1999. Payments on the Bonds wil l be made without deduction for or on account of taxes of the United Kingdom to the extent described under "Terms and Conditions of the Bonds - Taxation".

The Bonds mature on 8 December, 2014 but may be redeemed before then at the option of the Company in whole but not in part at any time at their principal amount, together with accrued interest if the Company becomes obliged to pay certain additional amounts as described under "Terms and Conditions of the Bonds - Redemption and Purchase". Upon the occurrence of certain events, as described under "Terms and Conditions of the Bonds - Redemption and Purchase", the holders of the Bonds may require the Company to redeem the Bonds at their principal amount, together with accrued interest.

The Bonds wi l l initially be represented by a temporary global bond (the "Temporary Global Bond"), without interest coupons, which wil l be deposited with a common depositary on behalf of the Cedelbank and Euroclear systems on or about 19 August, 1999. The Temporary Global Bond wil l be exchangeable for interests in a global bond (the "Global Bond"), without interest coupons, on or after a date which is expected to be 28 September, 1999 upon certification as to non-U.S. beneficial ownership. The Global Bond wi l l be exchangeable for definitive Bonds in bearer form in the denominations of £1,000, £10,000 and £100,000 in the limited circumstances set out in it. See "Summary of Provisions relating to the Bonds while represented by the Global Bonds".

Barclays Capital Warburg Dillon Read Deutsche Bank HSBC Markets Greenwich NatWest J.P. Morgan Securities Ltd.

Dated 16 August, 1999

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This Offering Circular comprises listing particulars given in compliance with the listing rules made under Section 142 of the Financial Services Act 1986 by the London Stock Exchange for the purpose of giving information with regard to the Company, the Company and its subsidiaries and affiliates taken as a whole (the "Group") and the Bonds. The Company accepts responsibility for the information contained in this document. To the best of the knowledge and belief of the Company (which has taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.

This Offering Circular does not constitute an offer of, or an invitation by or on behalf of the Company or the Managers (as defined in "Subscription and Sale" below) to subscribe or purchase, any of the Bonds. The distribution of this Offering Circular and the offering of the Bonds in certain jurisdictions may be restricted by law. Persons into whose possession this Offering Circular comes are required by the Company and the Managers to inform themselves about and to observe any such restrictions. For a description of certain further restrictions on offers and sales of Bonds and distribution of this Offering Circular see "Subscription and Sale" below.

No person is authorised to give any information or to make any representation not contained in this Offering Circular and any information or representation not so contained must not be relied upon as having been authorised by or on behalf of the Company or the Managers. The delivery of this Offering Circular at any time does not imply that the information contained in it is correct as at any time subsequent to its date.

The Bonds have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and are subject to U.S. tax law requirements. Subject to certain exceptions, Bonds may not be offered, sold or delivered within the United States or to U.S. persons.

Unless otherwise specified or the context requires, references in this Offering Circular to "pounds sterling", "£", "pence" or "p" are to the lawful currency of the United Kingdom and to euro are to the currency introduced at the start of the third stage of European Economic and Monetary Union pursuant to the Treaty establishing the European Community.

In connection with this issue, Barclays Bank PLC may over-allot or effect transactions which stabilise or maintain the market price of the Bonds at a level which might not otherwise prevail. Such stabilising, if commenced, may be discontinued at any time.

Contents

Page

Terms and Conditions of the Bonds 3

Use of Proceeds 11

Summary of Provisions relating to the Bonds while represented by the Global Bonds 12

Granada Group PLC 14

Capitalisation and Indebtedness of Granada Group PLC 16

Five Year Summary of Consolidated Financial Information 17

United Kingdom Taxation 18

Subscription and Sale 21

General Information 22

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Terms and Conditions of the Bonds

The following are the terms and conditions substantially in the form in which they will be endorsed on the Bonds:

The £250,000,000 7 per cent Bonds due 2014 (the "Bonds", which expression shall in these Conditions, unless the context otherwise requires, include any further Bonds issued pursuant to Condition 16 and forming a single series therewith) of Granada Group PLC (the "Company") are constituted by a trust deed (the "Trust Deed") dated 19 August, 1999 between the Company and Prudential Trustee Company Limited (the "Trustee") as trustee for the holders of the Bonds (the "Bondholders"). The issue of the Bonds was authorised by a resolution dated 29 July, 1999 of a duly authorised committee of the Board of Directors of the Company. The statements in these Conditions include summaries of, and are subject to, the detailed provisions of the Trust Deed. Copies of the Trust Deed, the agency agreement (the "Agency Agreement") dated 19 August, 1999 between the Trustee, the principal paying agent named therein (the "Principal Paying Agent") and the other paying agents referred to below (together with the Principal Paying Agent, the "Paying Agents") are available for inspection during normal business hours by Bondholders and holders of the interest coupons appertaining to the Bonds ("Couponholders" and "Coupons", respectively) at the principal office of the Trustee, being at the date hereof at Laurence Pountney Hi l l , London EC4R 0EU, and at the specified office(s) of each of the Paying Agents for the time being. The expression Coupons shall, unless the context requires otherwise, include the talons for further Coupons (the "Talons") The Bondholders and the Couponholders are entitled to the benefit of, are bound by, and are deemed to have notice of, all the provisions of the Trust Deed and are deemed to have notice of those provisions of the Agency Agreement applicable to them.

1 Form, Denomination and Title

The Bonds are in bearer form, serially numbered and in the denominations of £1,000, £10,000 and £100,000 each with Coupons attached. Bonds of one denomination may not be exchanged for Bonds of another denomination.

Title to the Bonds and the Coupons wi l l pass by delivery. The Company, the Trustee and any Paying Agent may treat the holder of any Bond and the holder of any Coupon as the absolute owner thereof (whether or not such Bond or Coupon shall be overdue and notwithstanding any notice of ownership or writing thereon) for the purposes of making payment and for all other purposes.

2 Status of the Bonds The Bonds and the Coupons are direct and (subject to the provisions of Condition 3) unsecured obligations of the Company and wil l rank pari passu without any preference among themselves and (subject as aforesaid and to certain statutory exceptions) with all other outstanding unsecured and unsubordinated obligations of the Company, present and future.

3 Negative Pledge So long as any of the Bonds remains outstanding (as defined in the Trust Deed) the Company wil l not and wi l l procure, so far as the Company by proper exercise of voting and other rights or powers of control exercisable by the Company in relation to its Subsidiaries (as defined below) can procure, that no Subsidiary shall create any mortgage, lien, pledge or other charge upon, or with respect to, any of its present or future assets or revenues to secure any existing or future Relevant Indebtedness (as defined below) of any person, unless the Company shall, simultaneously with, or prior to, the creation of such mortgage, lien, pledge or other charge take any and all action necessary to procure that all amounts payable by it under the Bonds, the Coupons and the Trust Deed are secured equally and rateably by such mortgage, lien, pledge or other charge to the satisfaction of the Trustee or such other security is provided as the Trustee shall in its absolute discretion deem not materially less beneficial to the Bondholders or as shall be approved by an Extraordinary Resolution (as defined in the Trust Deed) of the Bondholders.

In these Conditions:

"Subsidiary" means a subsidiary within the meaning of Section 736 of the Companies Act 1985.

"Relevant Indebtedness" means any loan or other indebtedness (or any guarantee or indemnity in respect thereof) which is in the form of or represented by bonds, notes or others securities which (i) have a maturity

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of one year or longer, (ii) are for the time being quoted, listed or dealt in on any stock exchange and (iii) (a) if denominated or payable (whether compulsorily or at the option of the holder) in a currency other than pounds sterling or euro, are not agreed to be issued with a view to being offered primarily to persons resident in the jurisdiction of which the currency in which they are so denominated or payable is the lawful currency or (b) if denominated or payable (whether compulsorily or at the option of the holder) in pounds sterling or in euro, are not agreed to be issued with a view to being offered primarily to persons resident in the United Kingdom.

4 Interest

The Bonds bear interest from and including 19 August, 1999 at the rate of 7 per cent. per annum, payable annually in arrear on 8 December. The first such payment shall be made on 8 December, 1999 in respect of the period from and including 19 August, 1999 to but excluding 8 December, 1999 and shall amount to £21.19 per £1,000 in principal amount of the Bonds, £211.94 per £10,000 in principal amount of the Bonds and £2,119.44 per £100,000 in principal amount of the Bonds. When interest is required to be calculated for a period of less than one year, it wi l l calculated on the basis of a 360-day year consisting of 12 months of 30 days each and, in the case of an incomplete month, the actual number of days elapsed.

Bonds wi l l cease to bear interest from the due date for redemption unless, upon due presentation, payment of the principal is improperly withheld or refused.

5 Payments and Exchange of Talons

Payment of principal in respect of the Bonds wi l l be made against presentation and, subject as provided below, surrender of Bonds at the specified office of any Paying Agent by a pounds sterling cheque drawn on, or by transfer to a pounds sterling account maintained by the payee with, a bank in the City of London. Payments of interest in respect of the Bonds wil l (subject as provided below) be made only against presentation and surrender of the appropriate Coupons at the specified office of any Paying Agent in the manner provided in the preceding sentence.

Payments of interest due in respect of any Bond other than on presentation and surrender of matured Coupons shall be made only against presentation of the relevant Bond at the specified office of any Paying Agent.

All payments are subject in all cases to any applicable fiscal or other laws and regulations, but without prejudice to the provisions of Condition 7. No commissions or expenses shall be charged to the Bondholders or Couponholders in respect of such payments.

Each Bond should be presented for payment together with all relative unmatured Coupons (which expression, for the avoidance of doubt, shall include Coupons falling to be issued on exchange of the matured Talon), failing which the full amount of any relative missing unmatured Coupon (or, in the case of payment not being made in full, that proportion of the full amount of the missing unmatured Coupon which the amount so paid bears to the total amount due) wi l l be deducted from the amount due for payment. Each amount so deducted wi l l be paid in the manner mentioned above against presentation and surrender (or, in the case of part payment only, endorsement) of the relative missing Coupon at any time before the expiry of 10 years after the Relevant Date (as defined in Condition 7) in respect of the relevant Bond (whether or not the Coupon would otherwise have been void pursuant to Condition 8) or, if later, five years after the date on which the Coupon would have become due, but not thereafter. Upon any of the Bonds becoming due and repayable prior to 8 December, 2014 the unmatured Talon appertaining thereto wi l l become void for all purposes and no further Coupons wil l be issued in respect thereof.

For the purposes hereof and save as otherwise provided herein, "unmatured Coupons" means Coupons maturing after the due date for redemption of the Bonds to which they appertain.

On and after the Interest Payment Date on which the final Coupon comprised in any Coupon sheet matures, the Talon comprised in the Coupon sheet may be surrendered at the specified office of any Paying Agent in exchange for a further Coupon sheet subject to the provisions of Condition 8. Each Talon shall, for the purposes of these Conditions, be deemed to mature on the Interest Payment Date on which the final Coupon comprised in the relative Coupon sheet matures.

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If the due date for payment of any amount in respect of any Bond or Coupon (or any later date on which a Bond or Coupon is presented for payment) is not at any place of presentation a business day, then the holder wi l l not be entitled to payment at such place of the amount due until the next following business day at such place and wil l not be entitled to any further interest or other payment in respect of any such delay. In this Condition, "business day" means any day on which banks are open for business in the relevant place of presentation and, in the case of payment by transfer to a pounds sterling account as referred to above, on which dealings in foreign currencies may be carried on in London and in such place of presentation.

The names of the initial Principal Paying Agent and other Paying Agents and their specified offices are listed below.

The Company reserves the right, subject to the approval of the Trustee, at any time to vary or terminate the appointment of any Paying Agent and to appoint additional or other Paying Agents provided that the Company wil l at all times maintain a Principal Paying Agent, a Paying Agent having a specified office in London for so long as the Bonds are listed on London Stock Exchange Limited and a Paying Agent having a specified office in a city in a country in continental Europe which is not a member of the European Community. Notice of any such termination or appointment and of any changes in the specified offices of the Paying Agents wi l l be given to the Bondholders in accordance with Condition 13.

6 Redemption and Purchase (a) Final redemption

Unless previously redeemed or purchased and cancelled as provided below, the Company wil l redeem the Bonds at their principal amount on 8 December, 2014.

(b) Redemption for tax reasons

If the Company satisfies the Trustee immediately prior to the giving of the notice referred to below that, as a result of any change in, or amendment to, the laws and regulations of the United Kingdom or any political subdivision or any authority thereof or therein having power to tax, or any change in the application or official interpretation of such laws or regulations, which change or amendment becomes effective on or after 16 August, 1999, the Company would be obliged by law for reasons outside its control, on the occasion of the next payment due in respect of the Bonds or the Coupons, to pay additional amounts as provided in Condition 7, the Company may at its option, having given not less than 30 nor more than 60 days' notice to the Bondholders in accordance with Condition 13 (which notice shall be irrevocable), redeem all the Bonds, but not some only, at their principal amount together with interest accrued to the date of such redemption. Upon the expiry of such notice, the Company shall be bound to redeem the Bonds accordingly.

(c) Put Option If a Restructuring Event (as defined below) and (if at the time that a Restructuring Event occurs there are Rated Securities (as defined below)) a Rating Downgrade (as defined below) in respect of that Restructuring Event (that Restructuring Event and, where applicable, Rating Downgrade together called a "Put Event") occur prior to 8 December, 2014, the holder of each Bond wil l have the option (unless, prior to the giving of the Put Event Notice (as defined below), the Company gives notice under Condition 6(b)) to require the Company to redeem that Bond on the Put Date (as defined below) at its principal amount together with interest accrued up to but excluding the Put Date.

A "Restructuring Event" shall be deemed to have occurred at each time (whether or not approved by the Board of Directors of the Company) that:-

(i) any person or any person acting in concert (as defined in the City Code on Takeovers and Mergers), or any person or person acting on behalf of any such person(s), at any time is/are or become(s) interested (within the meaning of Part VI of the Companies Act 1985) in (a) more than 50 per cent. of the issued ordinary share capital of the Company or (b) shares in the capital of the Company carrying more than 50 per cent. of the voting rights normally exercisable at a general meeting of the Company; or

(ii) otherwise than to a wholly-owned Subsidiary of the Company or to the Company, the Company and/or any of its Subsidiaries sells, transfers, leases or otherwise disposes or is dispossessed by

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any means of the whole or a substantial part of its or, as the case may be, their undertaking or (except in the ordinary course of business of the Company and its Subsidiaries taken as a whole) property or assets, whether by a single transaction or by a number of transactions whether related or not occurring within any period of twelve months, and where the undertaking (or part thereof) or property or assets so disposed of or of which it or they, as the case may be, are dispossessed when taken together constitute the whole or a majority of the assets of the Company and its Subsidiaries taken together; or

(iii) the Company pays or declares a dividend or makes a distribution to shareholders or any class of them generally of cash, securities (other than irredeemable share capital of the Company) or any other property which, in any case, when taken together with the effect of all similar transactions during the period of twelve months immediately preceding such event, would cause the aggregate value of such dividends and/or distributions to exceed 50 per cent. of Consolidated Tangible Net Worth (as defined below); or

(iv) in any twelve month period ending after 16 August, 1999, the Company purchases 50 per cent. or more of its ordinary shares; or

(v) otherwise than in the ordinary course of business of the Company and its Subsidiaries taken as a whole, the Company or any of its Subsidiaries acquires (directly or indirectly) otherwise than from a wholly owned Subsidiary of the Company or from the Company, or provides any financial assistance (directly or indirectly) by way of (a) loan, gift, guarantee, security, indemnity, release, waiver or any agreement to fulfil or assume any obligations of or corresponding with the obligations of any person or (b) any other means whereby Consolidated Tangible Net Worth is or is reasonably likely to be reduced to a material extent, to any person, other than the Company or any wholly owned Subsidiary, for the purpose of any acquisition of, any assets where the acquisition cost of such assets or (in the case of the giving of financial assistance) the value of such financial assistance, when taken together with the aggregate acquisition cost of all other assets so acquired plus the aggregate value of all other financial assistance so given in the twelve months immediately preceding that acquisition or the giving of that financial assistance, exceeds 50 per cent. of Consolidated Tangible Net Worth.

A "Rating Downgrade" shall be deemed to have occurred in respect of a Restructuring Event if within a period ending 90 days after a public announcement of the Restructuring Event having occurred (or such longer period in which the Rated Securities (as defined below) are under consideration (announced publicly within the first-mentioned period) for rating review by a Rating Agency (as defined below)) the rating assigned to the Rated Securities by any Rating Agency immediately prior to the Restructuring Event is withdrawn or reduced from an investment grade rating (Baa3/BBB- (or their respective equivalents for the time being) or better) to a non-investment grade rating (Ba1/BB+ (or their respective equivalents for the time being) or worse) provided that a Rating Downgrade otherwise arising by virtue of a particular reduction in rating shall not be deemed to have occurred in respect of a particular Restructuring Event if the Rating Agency making the reduction in rating to which this definition would otherwise apply does not announce or confirm that the reduction was the result, in whole or part, of any event or circumstance comprised in or arising as a result of the applicable Restructuring Event.

"Rated Securities" means (a) the Bonds or (b) such other comparable long-term unsubordinated unsecured debt of the Company selected by the Company from time to time for the purpose of this definition with the written approval of the Trustee and which possesses an investment grade rating by any Rating Agency.

"Rating Agency" means Standard & Poor's Ratings Services, a division of The McGraw-Hill Companies, Inc. and its successors or Moody's Investors Service, Inc. and its successors or any rating agency substituted for either of them (or any permitted substitute of them) by the Company from time to time with the written approval of the Trustee.

"Consolidated Tangible Net Worth" means at any time the amount as then disclosed in the latest audited consolidated accounts of the Company as paid up or credited as paid up on the issued share capital of the Company, plus the consolidated capital reserves (including any asset revaluation

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reserves) of the Company and its Subsidiary Undertakings (as defined below) plus the consolidated retained earnings of the Company and its Subsidiary Undertakings (or, if appropriate, less the amount standing to the debit of the consolidated profit and loss account of the Company and its Subsidiary Undertakings) plus the amount, if any, by which in the reasonable opinion of the Directors of the Company (and as shall have been stated in the report of the Directors accompanying those audited consolidated accounts or a certificate signed by any two Directors and delivered to the Trustee and dated not more than three months prior to the occurrence of the event or the existence of the circumstances which without the inclusion of such amount would constitute a Restructuring Event) based upon the results of the valuation of all or a representative sample of the relevant property or category of property undertaken by a chartered surveyor (approved in writing by the Trustee in accordance with the applicable guidelines for the time being of the Royal Institution of Chartered Surveyors, the open market value of the real property or any category of real property of the Company and/or any of its Subsidiary Undertakings exceeds the amount shown in those audited consolidated accounts as the net book value thereof, less any amount included in the above which is attributable to minority interests and goodwill and other intangible assets (calculated in accordance with generally accepted accounting principles of the United Kingdom consistently applied). For the purpose of these Conditions, "Subsidiary Undertaking" means, in relation to a company, a subsidiary undertaking within the meaning of Section 258 of the Companies Act 1985 for the time being of that company whose affairs are required to be consolidated in the audited consolidated accounts of that company.

Promptly upon the Company becoming aware that a Put Event has occurred, the Company shall give notice (a "Put Event Notice") to the Bondholders in accordance with Condition 13 specifying the nature of the Put Event and the procedure for exercising the option contained in this Condition 6(c).

To exercise the option to require redemption of a Bond under this Condition 6(c) the holder of the Bond must deliver such Bond, on any business day, in the city of the specified office of the relevant Paying Agent falling within the period (the "Put Period") of 45 days after a Put Event Notice is given, at the specified office of any Paying Agent, accompanied by a duly signed and completed notice of exercise in the form (for the time being current) obtainable from the specified office of any Paying Agent (a "Put Notice") and in which the holder may specify a bank account complying with the requirements of Condition 5 to which payment is to be made under this Condition 6(c). The Bond should be delivered together with all Coupons appertaining thereto maturing after the date (the "Put Date") which is the seventh day after the last day of the Put Period failing which an amount wi l l be deducted from the payment to be made by the Company on redemption of the Bonds in accordance with the provisions of Condition 5. A Put Notice, once given, shall be irrevocable. The Paying Agent to which such Bond and Put Notice are delivered wi l l issue to the Bondholder concerned a non­transferable receipt (a "Receipt") in respect of the Bond so delivered. The Company shall redeem the Bonds in respect of which Receipts have been issued on the Put Date. Payment in respect of any Bond so delivered wi l l be made, if the holder duly specified a bank account in the Put Notice to which payment is to be made, on the Put Date by transfer to that bank account and in every other case on or after the Put Date against presentation and surrender or (as the case may be) endorsement of such Receipt at the specified office of any Paying Agent in accordance with the provisions of Condition 5.

(d) Purchase

The Company or any Subsidiary may at any time purchase Bonds (provided that all unmatured Coupons are attached thereto or delivered therewith) in the open market or otherwise at any time. If purchases are made by tender, tenders must be made available to all Bondholders alike.

(e) Cancellation

All Bonds which are (a) redeemed or (b) purchased by or on behalf of the Company or any Subsidiary wi l l forthwith be cancelled, together with all unmatured Coupons (which expression, for the avoidance of doubt, shall include Coupons falling to be issued on exchange of matured Talons) (if any) attached thereto or delivered therewith, and accordingly may not be reissued or resold.

7 Taxation All payments of principal and interest in respect of the Bonds wi l l be made without withholding or deduction for, or on account of, any present or future taxes, duties, assessments or governmental charges

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of whatever nature imposed or levied by or on behalf of the United Kingdom or any political subdivision or any authority therein or thereof having power to tax, unless the withholding or deduction of such taxes, duties, assessments or governmental charges is required by law. In that event, the Company wil l pay such additional amounts as may be necessary in order that the net amounts received by the holders of the relevant Bonds and Coupons after such withholding or deduction shall equal the respective amounts of principal and interest which would have been receivable in respect of the Bonds or (as the case may be) Coupons in the absence of such withholding or deduction; except that no such additional amounts shall be payable in respect of any Bond or Coupon presented for payment:-

(i) by or on behalf of a holder who is liable to such taxes, duties, assessments or governmental charges in respect of such Bond or Coupon by reason of his having some connection with the United Kingdom other than the mere holding of the Bond or Coupon; or

(ii) in the United Kingdom; or

(iii) more than 30 days after the Relevant Date except to the extent that the holder thereof would have been entitled to additional amounts on presenting the same for payment on the expiry of such period of 30 days.

As used herein, the "Relevant Date" means the date on which such payment first becomes due, but if the full amount of the money payable has not been received by the Principal Paying Agent or the Trustee on or prior to such due date, it means the date on which, the full amount of such money having been so received, notice to that effect shall have been duly published in accordance with Condition 13.

Any reference in these Conditions to principal or interest shall be deemed also to refer to any additional amounts which may be payable under this provision or any undertakings given in addition hereto or in substitution herefor pursuant to the Trust Deed.

8 Prescription Bonds and Coupons (which for this purpose shall not include Talons) wi l l become void unless presented for payment within periods of ten years and five years, respectively, from the Relevant Date in respect thereof. There shall not be included in any Coupon sheet issued upon exchange of a Talon any Coupon which would be void upon issue pursuant to the provisions of this Condition or Condition 5.

9 Events of Default

The Trustee at its discretion may, and if so requested in writing by the holders of at least one-quarter in principal amount of the Bonds then outstanding or if so directed by an Extraordinary Resolution of the Bondholders shall (subject in each case to being indemnified to its satisfaction), give notice to the Company that the Bonds are, and they shall accordingly immediately become, due and payable at par, together with accrued interest as provided in the Trust Deed, in any of the following events ("Events of Default"):-

(i) default is made for seven days or more in the payment of any principal due on the Bonds or any of them or for 14 days or more in the payment of any interest due on the Bonds or any of them; or

(ii) the Company fails to perform or observe any of its other obligations under the Bonds or the Trust Deed and (except where the Trustee certifies in writing that, in its opinion, such failure is incapable of remedy when no such continuation or notice as is hereinafter referred to wi l l be required) such failure continues for the period of 45 days (or such longer period as the Trustee may permit) next following the service by the Trustee on the Company of notice requiring the same to be remedied; or

(iii) any loan or other indebtedness for borrowed money (including interest and other charges thereon or in respect thereof) of the Company or any Principal Subsidiary (as defined below) amounting in aggregate to not less than £10,000,000 or one per cent. of the Company's issued ordinary share capital and consolidated reserves as shown in the latest audited consolidated accounts of the Company, whichever is the higher, as certified by the Auditors (as defined in the Trust Deed) of the Company, or its equivalent in other currencies (the "Specified Limit") becomes due and repayable prematurely by reason of any event of default (howsoever described) in relation thereto or the Company or any Principal Subsidiary defaults in the repayment of any such loan or other indebtedness for borrowed money on the due date for such repayment as extended by any applicable grace period as originally

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provided or the Company or any Principal Subsidiary fails to make any payment due under any guarantee and/or indemnity given by it in respect of any loan or other indebtedness for borrowed money of any person or persons amounting in aggregate to not less than the Specified Limit; or

(iv) an order is made or an effective resolution is passed for winding up the Company or any Principal Subsidiary or if the Company or any Principal Subsidiary stops payment, except a winding up or a stopping of payment for the purpose of a reconstruction or amalgamation the terms of which have previously been approved in writing by the Trustee; or

(v) an encumbrancer takes possession or an administrative or other receiver or any manager is appointed of the Company or any Principal Subsidiary or of the whole or of any part of the undertaking or assets of any of them (being (in the opinion of the Trustee) substantial in relation to the undertaking or assets of the Company and its Subsidiary Undertakings taken as a whole) or if a distress or execution is levied or enforced upon or sued out against the whole or (in the opinion of the Trustee) any substantial part of the chattels or property of the Company or any Principal Subsidiary ((in the opinion of the Trustee) being substantial in relation to the chattels or property of the Company and its Subsidiary Undertakings taken as a whole) and is not removed, discharged or paid out within 60 days; or

(vi) the Company or any Principal Subsidiary is deemed to be unable to pay its debts within the meaning of Section 123 (other than sub-section (1)(a) thereof) of the Insolvency Act 1986 (as that section may be amended from time to time) or the Company or any Principal Subsidiary makes a general assignment for the benefit of its creditors; or

(vii) an administrative order in relation to the Company or any Principal Subsidiary is made by a court,

PROVIDED THAT, in the case of any such Event of Default, other than those described in sub-paragraphs (i) and, in relation to the Company, (iv) and (vi) above, the Trustee shall have certified to the Company that such event is in its opinion materially prejudicial to the interests of the Bondholders.

For the purposes of this Condition, "Principal Subsidiary" means any Subsidiary Undertaking of the Company the amount of whose gross assets (which, for the purposes of this definition of Principal Subsidiary, shall exclude intra-group borrowings and intra-group investments) or pre-tax profits exceed ten per cent. of the aggregate consolidated amount of the gross assets or pre-tax profits of the Company and its Subsidiary Undertakings, where:-

(i) the gross assets or pre-tax profits of a Subsidiary Undertaking shall be ascertained by reference to:-

(a) the accounts (consolidated in the case of a company which itself has Subsidiary Undertakings and which, in the normal course, prepares consolidated accounts) of such Subsidiary Undertaking based upon which the latest audited consolidated accounts of the Company have been made up; or

(b) if such Subsidiary Undertaking becomes a Subsidiary Undertaking of the Company after the end of the financial period to which the latest audited consolidated accounts of the Company relate, the latest accounts (consolidated in the case of a company which itself has Subsidiary Undertakings and which, in the normal course, prepares consolidated accounts) of such Subsidiary Undertaking; and

(ii) the gross assets or pre-tax profits of the Company and its Subsidiary Undertakings shall be ascertained by reference to the latest audited consolidated accounts of the Company and its Subsidiary Undertakings,

all as more particularly set out in the Trust Deed.

A report of the Auditors for the time being of the Company that in their opinion a Subsidiary Undertaking is or is not a Principal Subsidiary shall, in the absence of manifest error, be conclusive and binding.

10 Substitution The Trustee may, without the consent of the Bondholders or Couponholders, agree with the Company to the substitution as principal debtor under the Trust Deed and the Bonds in place of the Company (or of any previous substitute under this provision) of the successor in business (as defined in the Trust Deed) of the

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Company or any other company which is under the control of the Company or of a successor in business of the Company subject to the Trustee being satisfied that the interests of the Bondholders wil l not be materially prejudiced thereby and certain other conditions set out in the Trust Deed (including, in the case of substitution in favour of any company other than a successor in business of the Company, the irrevocable guarantee of the Bonds by the Company or by a successor in business of the Company) being complied with.

In connection with any proposed substitution as aforesaid, the Trustee shall not have regard to the consequences of such substitution for individual Bondholders or Couponholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory.

11 Enforcement At any time after the Bonds shall have become due and repayable, the Trustee may, at its discretion and without further notice, institute such proceedings against the Company as it may think fit to enforce repayment of the Bonds together with accrued interest and to enforce the provisions of the Trust Deed, but it shall not be bound to take any such proceedings unless (a) it shall have been so directed by an Extraordinary Resolution of the Bondholders or so requested in writing by the holders of at least one-quarter in principal amount of the Bonds then outstanding and (b) it shall have been indemnified to its satisfaction.

No Bondholder or Couponholder shall be entitled to proceed directly against the Company unless the Trustee, having become bound so to proceed, fails to do so within a reasonable time and such failure shall be continuing.

12 Replacement of Bonds and Coupons Should any Bond or Coupon be lost, stolen, mutilated, defaced or destroyed it may be replaced at the specified office of the Principal Paying Agent upon payment by the claimant of the expenses incurred in connection therewith and on such terms as to evidence, indemnity and security as the Company may reasonably require. Mutilated or defaced Bonds or Coupons must be surrendered before replacements will be issued.

13 Notices Al l notices to the Bondholders wi l l be valid if published in a leading London daily newspaper (which is expected to be the Financial Times) or such other English language newspaper with general circulation in Europe as the Trustee may approve. If publication is not practicable, notice wil l be given in such other manner as the Trustee may approve. Each such notice shall be deemed to have been given on the date of such publication or, if published more than once, on the date of the first such publication.

14 Meetings of Bondholders, Modification and Waiver The Trust Deed contains provisions for convening meetings of Bondholders to consider any matter affecting their interests, including the modification by Extraordinary Resolution of these Conditions or the provisions of the Trust Deed. The quorum at any such meeting for passing an Extraordinary Resolution wil l be two or more persons holding or representing a clear majority in principal amount of the Bonds at the time outstanding, or at any adjourned meeting two or more persons being or representing Bondholders whatever the principal amount of the Bonds so held or represented, except that at any meeting the business of which includes the modification of certain of these Conditions or certain provisions of the Trust Deed (in each case as described in the Trust Deed), the necessary quorum for passing an Extraordinary Resolution wil l be two or more persons holding or representing not less than two-thirds, or at any adjourned such meeting, one-third in principal amount of the Bonds at the time outstanding. An Extraordinary Resolution passed at any meeting of Bondholders wil l be binding on all Bondholders, whether or not they are present at the meeting, and on all Couponholders.

The Trustee may agree, without the consent of the Bondholders or Couponholders, to any modification (subject to certain exceptions) of, or to the waiver or authorisation of any breach or proposed breach of, any of these Conditions or any of the provisions of the Trust Deed which is not, in the opinion of the Trustee, materially prejudicial to the interests of the Bondholders or to any modification which is (in the opinion of

10

the Trustee) of a formal, minor or technical nature or which is made to correct a manifest error. The Trust Deed contains, in addition, provisions permitting but not requiring the Trustee to agree, without the consent of the Bondholders or Couponholders, on or after the Specified Date (as defined below) to such modifications to the Bonds, the Coupons and the Trust Deed in order to facilitate payment of interest in euro and redemption at the euro equivalent of the sterling principal amount of the Bonds and associated reconventioning, renominalisation and related matters as may be proposed by the Company (and confirmed by an independent financial institution approved by the Trustee to be in conformity with then applicable market conventions) provided that the Company shall be under no obligation to make any such proposals. For these purposes, "Specified Date" means the date on which the United Kingdom participates in the third stage of European Economic and Monetary Union pursuant to the Treaty establishing the European Community or otherwise participates in European Economic and Monetary Union in a similar manner. The Trustee may also determine, without such consent, that an Event of Default shall not be treated as such.

In connection with the exercise by it of any of its trusts, powers or discretions (including, without limitation, any modification, waiver, authorisation or substitution), the Trustee shall have regard to the interests of the Bondholders as a class and, in particular but without limitation, shall not have regard to the consequences of the exercise of its trusts, powers or discretions for individual Bondholders and Couponholders resulting from their being for any purpose domiciled or resident in, or otherwise connected with, or subject to the jurisdiction of, any particular territory and the Trustee shall not be entitled to require, nor shall any Bondholder or Couponholder be entitled to claim, from the Company, the Trustee or any other person any indemnification or payment in respect of any tax consequences of any such exercise upon individual Bondholders or Couponholders except to the extent already provided for in Condition 7 and/or any undertaking given to, or in substitution for, Condition 7 pursuant to the Trust Deed.

Any such modification, waiver, authorisation or determination shall be binding on the Bondholders and the Couponholders and, unless the Trustee agrees otherwise, any such modification shall be notified to the Bondholders in accordance with Condition 13 as soon as practicable thereafter.

15 Indemnification of the Trustee

The Trust Deed contains provisions for the indemnification of the Trustee and for its relief from responsibility, including provisions relieving it from taking proceedings to enforce repayment unless indemnified to its satisfaction.

16 Further Issues

The Company is at liberty from time to time without the consent of the Bondholders or Couponholders to create and issue further notes or bonds either ranking pari passu in all respects (or in all respects save for the first payment of interest thereon), and so that the same shall be consolidated and form a single series, with the outstanding notes or bonds of any series (including the Bonds) or, upon such terms as to status, interest, premium, redemption and otherwise as the Company may at the time of the issue thereof determine. Any further notes or bonds forming a single series with the outstanding notes or bonds of any series (including the Bonds) constituted by any deed supplemental to the Trust Deed shall, and any other further notes or bonds may (with the consent of the Trustee), be constituted by a deed supplemental to the Trust Deed. The Trust Deed contains provisions for convening a single meeting of the Bondholders and the holders of notes and bonds of other series in certain circumstances where the Trustee so decides.

17 Governing Law

The Trust Deed, the Agency Agreement, the Bonds and the Coupons are governed by, and wi l l be construed in accordance with, English law.

USE OF PROCEEDS

The net proceeds of the issue of the Bonds are expected to amount to approximately £248,150,000 and wi l l be used for the general corporate purposes of the Company.

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12

Summary of Provisions Relating to the Bonds while represented by the Global Bonds

The Temporary Global Bond and the Global Bond contain provisions which apply to the Bonds while they are in global form, some of which modify the effect of the terms and conditions of the Bonds set out in this document. The following is a summary of certain of those provisions:

1 Exchange

The Temporary Global Bond is exchangeable in whole or in part for interests in the Global Bond on or after a date which is expected to be 28 September, 1999 upon certification as to non-U.S. beneficial ownership in the form set out in the Temporary Global Bond. The Global Bond is exchangeable in whole but not in part (free of charge to the holder) for the Definitive Bonds described below (i) if the Global Bond is held on behalf of a clearing system and such clearing system is closed for business for a continuous period of 14 days (other than by reason of holidays, statutory or otherwise) or announces an intention permanently to cease business or does in fact do so or (ii) if the Company would suffer a material disadvantage in respect of the Bonds as a result of a change in the laws or regulations (taxation or otherwise) of any jurisdiction referred to in Condition 7 which would not be suffered were the Bonds in definitive form and a certificate to such effect signed by two directors of the Company is delivered to the Trustee. Thereupon (in the case of (i) above) the holder may give notice to the Trustee, and (in the case of (ii) above) the Company may give notice to the Trustee and the Bondholders, of its intention to exchange the Global Bond for Definitive Bonds on or after the Exchange Date specified in the notice.

On or after the Exchange Date (as defined below) the holder of the Global Bond may surrender the Global Bond to or to the order of the Principal Paying Agent. In exchange for the Global Bond, the Company wi l l deliver, or procure the delivery of, an equal aggregate principal amount of duly executed and authenticated Definitive Bonds (having attached to them all Coupons in respect of interest which has not already been paid on the Global Bond), security printed in accordance with any applicable legal and stock exchange requirements and in or substantially in the form set out in Schedule 1 to the Trust Deed. On exchange in full of the Global Bond, the Company wi l l , if the holder so requests, procure that it is cancelled and returned to the holder together with any relevant Definitive Bonds.

"Exchange Date" means a day falling not less than 60 days after that on which the notice requiring exchange is given and on which banks are open for business in the city in which the specified office of the Principal Paying Agent is located and, except in the case of exchange pursuant to (i) above, in the cities in which the relevant clearing system is located.

2 Payments No payment will be made on the Temporary Global Bond unless exchange for an interest in the Global Bond is improperly withheld or refused. Payments of principal and interest in respect of Bonds represented by the Global Bond will be made against presentation for endorsement and, if no further payment falls to be made in respect of the Bonds, surrender of the Global Bond to or to the order of the Principal Paying Agent or such other Paying Agent as shall have been notified to the Bondholders for such purpose. A record of each payment so made will be endorsed in the appropriate schedule to the Global Bond, which endorsement will be prima facie evidence that such payment has been made in respect of the Bonds.

3 Notices

So long as the Bonds are represented by the Temporary Global Bond or the Global Bond and the Temporary Global Bond or the Global Bond is held on behalf of a clearing system, notices to Bondholders may be given by delivery of the relevant notice to that clearing system for communication by it to entitled accountholders in substitution for publication as required by the Conditions. Any such notice shall be deemed to have been given to the Bondholders on the first day after the day on which such notice is delivered to that clearing system as aforesaid.

4 Prescription

Claims against the Company in respect of principal and interest on the Bonds while the Bonds are represented by the Global Bond wi l l become void unless it is presented for payment within a period of 10 years (in the case of principal) and five years (in the case of interest) from the appropriate Relevant Date (as defined in Condition 7).

5 Meetings The holder of the Global Bond will be treated as being two persons for the purposes of any quorum requirements of, or the right to demand a poll at, a meeting of Bondholders and, at any such meeting, as having one vote in respect of each £1,000 in principal amount of Bonds for which the Global Bond may be exchanged.

6 Purchase and Cancellation Cancellation of any Bond required by the Conditions to be cancelled following its purchase will be effected by reduction in the principal amount of the Global Bond.

7 Trustee's Powers In considering the interests of Bondholders while the Global Bond is held on behalf of one or more clearing system(s), the Trustee may have regard to any information provided to it by any such clearing system or its operator as to the identity (either individually or by category) of its accountholders with entitlements to the Global Bond and may consider such interests as if such accountholders were the holder of the Global Bond.

8 Put Option So long as the Bonds are represented by either the Temporary Global Bond or the Global Bond and the Temporary Global Bond or the Global Bond is held on behalf of a clearing system, the owner of a beneficial interest therein may exercise its option to require the Bonds to be redeemed under Condition 6(c) by giving notice in writing to the Principal Paying Agent through, and in accordance with, the operating procedures and rules of, such clearing system.

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Granada Group PLC

History Granada was incorporated and registered in England and Wales on 11 July, 1934 (No. 290076) as a private company limited by shares with the name Granada Theatres Limited and operates under the Companies Act 1985. The name of Granada was changed to Granada Group Limited on 12 June, 1957 and to Granada Group PLC on 4 November, 1981, when it was re-registered as a public limited company.

Principal Activities

Granada is the parent company of the Group which is a leading provider of media and hospitality services in the United Kingdom and an operator of hotels in the United Kingdom and internationally. The Group comprises three divisions: Media, Hospitality (further divided into Restaurants and Hotels) and Rentals.

Granada Television, London Weekend Television and Yorkshire Tyne Tees Television hold the ITV (Channel 3) licences for the North of England and London (weekend). Granada is the largest supplier of programmes to the ITV network and has a 50 per cent. share in ONdigital, which in November 1998 launched a subscription-based terrestrial digital broadcasting service. A new interactive and online Internet service, G-Wizz.net, has also recently been announced. The Media division accounted for 30 per cent. of Granada's operating profit for the half year to March 1999.

The Restaurants sub-division includes motorway services, roadside restaurants, the Travelodge budget hotel chain and contract catering. Granada Motorway Services, the market leader in the United Kingdom, provides a full range of services to road travellers, operating over 40 sites on motorways and trunk roads. Services include restaurants, retailing, fuel and budget hotels. The Roadside Travel business comprises 400 Little Chefs and nearly 180 Travelodges (including those on Granada Motorway Service sites). Granada's contract catering business, Granada Food Services (usually trading under the Sutcliffe name), is the second largest in the United Kingdom with turnover in 1998 of £774 million from over 4,000 contracts. The sub­division accounted for 28 per cent. of Granada's operating profit for the half year to March 1999.

Hotels are operated in four segments: Le Meridien, Posthouse, Heritage and London Signature, accounting for 38 per cent., 33 per cent., 10 per cent., and 19 per cent. respectively of the sub-division's operating profits for the half year to March 1999. Le Meridien comprises 108 hotels across the world, of which 36 are owned and the remainder are management contracts. Posthouse is the United Kingdom's leader in the mid-market sector with 86 hotels, many of which provide conference centres and health and fitness clubs. Heritage comprises 49 U.K. hotels distinguished by their individuality of character and history. Finally there are seven London Signature hotels including one at London Heathrow airport. Hotels accounted for 32 per cent. of Granada's operating profit for the half year to March 1999.

The Rentals division, under the Granada name, rents and retails analogue and digital televisions, video recorders and white goods from over 400 shops throughout the United Kingdom. A direct rental operation is carried out under the name of DVR which markets its services direct to the customer using leaflets and telephone communications. Both also market subscriptions for ONdigital and supply the set-top decoder boxes. In addition, Granada provides insurance and a full service back-up. Granada also supplies the business market with television and electronic equipment services. Rentals generated 10 per cent. of Granada's operating profits for the half year to March 1999.

Overall Group profit before taxation and exceptional items for the financial year ended 26 September, 1998 was £735 million on turnover of £4,031 mil l ion.

Significant Recent Developments

On 30 March, 1999, Granada paid £110 million for an 18.6 per cent. stake in Scottish Media Group which owns the two ITV franchises in Scotland together with publishing interests. At the time of the acquisition Granada announced that it had no intention of making an offer for the rest of the company but would reserve the right to do so if a third party made such an offer or built up a stake of 15 per cent. or more.

On 9 June, 1999 Granada announced interim results for the period to 27 March, 1999. Profit before taxation, digital television and exceptional items amounted to £315 mill ion on turnover of £1,981 mill ion.

On 13 July, 1999, Granada subscribed £22 million for 9.9 per cent. of the shares of The Liverpool Football Club and Athletic Grounds Public Limited Company and entered into a strategic partnership under which

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Granada wi l l manage or act as a consultant on a wide range of commercial issues for the club in merchandising and product licensing, publishing, electronic media rights and catering and corporate hospitality.

On 22 July, 1999, Granada announced that it had signed an agreement with Vivendi to dispose of its remaining indirect stake in British Sky Broadcasting Group plc. The gross consideration receivable by Granada wi l l be £417 mill ion in cash. The disposal is conditional principally on completion of Vivendi's merger with Pathe and obtaining certain regulatory clearances and is not expected to be completed before the fourth quarter of 1999.

Directors of Granada Group PLC

The Directors of the Company and their principal activities outside the Group are as fol lows:-.

Name Title Principal activities outside the Granada Group

Gerry Robinson Chairman Chairman, The Arts Council of England.

Charles Allen Chief Executive Non-Executive Director, Tesco.

Stephanie Monk Human Resources Director Commissioner, Low Pay Commission.

Graham Parrott Commercial Director

Henry Staunton Finance Director Non-Executive Director, EMAP, Ashtead.

Dr John Ashworth Non-Executive Director Chairman, British Library Board.

Richard Clothier Non-Executive Director Chief Executive, Plantation and General Investments.

Michael Orr Non-Executive Director Chairman, Molins, Waddington: Non-Executive Director, Lazard Brothers, Sketchley and W H Smith Group.

Nigel Rich Non-Executive Director Chairman, Ocean Group, Hamptons Group: Non-Executive Director, Harvey-Nichols Group, Pacific Assets Trust

The business address of each of the Directors is the registered office of Granada at Stornoway House, 13 Cleveland Row, London SW1A 1GG.

15

Capitalisation and Indebtedness of Granada Group PLC

The folowing tables set out the audited capital and consolidated reserves of Granda Group PLC as at 26 September, 1998 and the unaudited capital and consolidated reserves and consolidated indebtedness of

Granda Group PLC as at 27 March, 1999.

As at 27 March, As at 26 September,

1999 1998 (Unaudited) (Audited)

£ million £ million Consolidated Shareholders' Funds Called up share capital (fully paid) 240 240 Share Premium Account 120 101 Revaluation reserve 255 255 Profit and loss account 1,376 877

Total 1,991 1,473

As at 27 March, 1999

(Unaudited)

£ million Indebtedness Secured loans and bank borrowings 403 Net finance lease obligations 49 Unsecured borrowings: - due after more than one year 1,347 - due within one year 419

Total 2,218

Notes:

1. The Consolidated Shareholder Funds at 26 September, 1998 have been adjusted to reflect additional provisions of £27 mil l ion for onerous property leases as a result of the adoption of FRS12.

2. The fol lowing table sets out the share capital of Granada Group PLC as at 27 March, 1999

£million

Ordinary Shares: Authorised: £309 mil l ion comprising 1,234,434,788 Ordinary Shares of 25p each Issued: 908,795,954 fully paid 227

Convertible Preference Shares: Authorised: £13 mil l ion comprising 131,447,676 Convertible Preference Shares of 10p each Issued: 131,447,676 fully paid 13

New Convertible Preference Shares: Authorised: £3 mil l ion comprising 32,465,354 New Convertible Preference Shares of 10p each Issued: Ni l Ni l

Wi th the exception of the two for one sub-division of the ordinary shares, approved by shareholders on 30 June, 1999 and effective 5 July, 1999, there has been no material change in the Company's authorised or issued share capital since 27 March, 1999.

3. Save as disclosed above, and except for intra-Group transactions, at 27 March, 1999 no member of the Group had any loan capital outstanding or created but unissued and neither Granada Group PLC nor any of its subsidiaries had any borrowings or indebtedness in the nature of borrowings, including bank overdrafts and liabilities under acceptances (other than normal trade bills) or acceptance credits, mortgages, charges, hire purchase commitments or guarantees or other material contingent liabilities.

4. On 30 March, 1999 the Group acquired an 18.6 per cent. shareholding in Scottish Media Group for £110 mil l ion, and on 1 Apri l , 1999 the Group paid a final dividend of £66 mi l l ion.

5. The payments made in respect of the events disclosed in Note 4 above increased the Group's Indebtedness by £110 mil l ion and £66 mil l ion respectively at the time of the relevant payment. Save for such payments, there has been no material change in the Group's Indebtedness since 27 March, 1999.

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Five Year Summary of Consolidated Financial Information

Balance Sheet

1994 1995 1996 1997 1998

£m £m £m £m £m

Share capital 163 164 231 239 240 Reserves 339 420 757 905 1,260

Shareholders' funds 502 584 988 1,144 1,500 Minority interests 1 1 104 94 92

Net assets 503 585 1,092 1,238 1,592

Represented by: Rental assets 258 267 254 263 275 Other fixed assets 604 763 4,580 4,036 4,133 Investments 123 88 462 366 97 Stocks 184 185 191 225 234 Debtors 444 478 932 799 803

Total assets 1,613 1,781 6,419 5,689 5,542 Net borrowings (293) (342) (3,515) (2,706) (2,294) Other creditors (766) (809) (1,756) (1,696) (1,633) Provisions for liabilities and charges (51) (45) (56) (49) (23)

503 585 1,092 1,238 1,592

Results

Turnover 2,098 2,381 3,817 4,091 4,031

Operating profit before exceptional items 297 382 670 879 977 Share of operating profits/(losses) in associates 2 6 7 (1) (4) Exceptional items - - (76) 11 40

Profit before interest and tax 299 388 601 889 1,013 Net interest (34) (37) (197) (228) (240)

Profit before tax 265 351 404 661 773 Taxation (73) (98) (108) (183) (209)

Profit after tax 192 253 296 478 564 Minority interests - - (2) (6) (7)

Profit for the financial period 192 253 294 472 557

Net borrowings 293 342 3,515 2,706 2,294 Gearing 58% 59% 322% 219% 144% Pro forma gearing (based on revaluation of principal listed investments at market value) 58% 29% 163% 135% 94%

This table has been extracted without material adjustment from the audited consolidated accounts of Granada Group PLC for the year ended 26 September, 1998.

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United Kingdom Taxation

The comments below are of a general nature based on current United Kingdom law and practice. They do not necessarily apply where the income is deemed for tax purposes to be the income of any other person. They relate only to the position of persons who are the absolute beneficial owners of their Bonds and Coupons and may not apply to certain classes of persons such as dealers. Any Bondholders who are in doubt as to their personal tax position should consult their professional advisers.

1 Interest

While the Bonds continue to be in bearer form and listed on a recognised stock exchange within the meaning of Section 841 Income and Corporation Taxes Act 1988 ("ICTA"), the Bonds wi l l constitute "quoted Eurobonds" within the meaning of Section 124 ICTA. Accordingly, payments of interest may be made without withholding or deduction for or on account of United Kingdom income tax where they are:

(a) made by or through a person outside the United Kingdom; or

(b) made by or through a person who is in the United Kingdom and:

(i) the beneficial owner of the Bonds and the related Coupons is not resident in the United Kingdom; or

(ii) the Bonds and related Coupons are held in a "recognised clearing system" within the meaning of Section 841A ICTA (Euroclear and Cedelbank have each been designated as a recognised clearing system for this purpose),

and a declaration to that effect in the form required by law has been given to the person by or through whom the payment is made, or the Inland Revenue has issued a notice to that effect to the person by or through whom the payment is made. The exemption wi l l then be available unless the Inland Revenue has issued a direction that it considers that neither of the conditions in (i) or (ii) is satisfied.

In all other cases, payments of interest wi l l be made under deduction of United Kingdom income tax at the lower rate (currently 20 per cent.) subject to any direction to the contrary from the Inland Revenue in respect of such relief as may be available pursuant to the provisions of any applicable double taxation treaty.

Where a person in the United Kingdom in the course of a trade or profession acts as a collecting agent, i.e. either:

(a) acts as custodian of the Bonds and receives interest on the Bonds, or directs that interest on the Bonds be paid to another person, or consents to such payment; or

(b) collects, receives or secures, or arranges to collect or secure payment of interest on the Bonds for another person (except by means of clearing a cheque or arranging for the clearing of a cheque),

the collecting agent wi l l be required to account for and wil l be entitled to withhold United Kingdom income tax at the lower rate (currently 20 per cent.) unless, inter alia:

(i) the relevant Bonds are held in a recognised clearing system for which the collecting agent is acting as depositary; or

(ii) the relevant Bonds are held in a recognised clearing system and the collecting agent pays or accounts for the interest directly or indirectly to the recognised clearing system; or

(iii) the person beneficially entitled to the interest and the related Bonds is not resident in the United Kingdom; or

(iv) the interest arises to trustees (not resident in the United Kingdom) of certain discretionary or accumulation trusts (where, inter alia, none of the beneficiaries of the trust is resident in the United Kingdom); or

(v) the person beneficially entitled to the interest is eligible under specified provisions for relief from United Kingdom tax in respect of the interest (for example, charities or pension funds); or

(vi) the interest falls to be treated as the income of, or of the government of, a sovereign power or of an international organisation.

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For exceptions (ii) to (vi) to be available, a declaration in a specified form has to be provided (or a notice issued by the Inland Revenue) in all cases. The collecting agent is required to account for, and wi l l be entitled to withhold, United Kingdom income tax at the lower rate, if the Inland Revenue issues a direction to that effect, having reason to believe that no exception applies or that the depositary or collecting agent has failed to comply with certain requirements.

2 UK Source Income

2.1 The interest has a United Kingdom source and accordingly may be chargeable to United Kingdom tax by direct assessment. Where the interest is paid without withholding or deduction, the interest wi l l not be assessed to United Kingdom tax in the hands of holders of the Bonds who are not resident in the United Kingdom, except where such persons carry on a trade, profession or vocation in the United Kingdom through a United Kingdom branch or agency in connection with which the interest is received or to which the Bonds are attributable, in which case (subject to exemptions for interest received by certain categories of agent) tax may be levied on the United Kingdom branch or agency.

2.2 Where interest has been paid under deduction of United Kingdom income tax, Bondholders who are not resident in the United Kingdom may be able to recover all or part of the tax deducted if there is an appropriate provision in an applicable double taxation treaty.

2.3 Bondholders should note that the provisions relating to additional amounts referred to in "Terms and Conditions of the Bonds æ Taxation" above would not apply if the Inland Revenue sought to assess directly the person entitled to the relevant interest to United Kingdom tax. However exemption from, or reduction of, such United Kingdom tax liability might be available under an applicable double taxation treaty.

3 Proposed EU Directive on the Taxation of Savings Income

In May 1998, the European Commission presented to the Council of Ministers of the European Union a proposal to oblige Member States to adopt either a "withholding tax system" or an "information reporting system" in relation to interest, discounts and premiums. It is unclear whether this proposal wi l l be adopted, and if it is adopted, whether it wi l l be adopted in its current form. The "withholding tax system" would require a paying agent established in a Member State to withhold tax at a minimum rate of 20 per cent. from any interest, discount or premium paid to an individual resident in another Member State unless such an individual presents a certificate obtained from the tax authorities of the Member State in which he is resident confirming that those authorities are aware of the payment due to that individual. The "information reporting system" would require a Member State to supply, to other Member States, details of any payment of interest, discount or premium made by paying agents within its jurisdiction to an individual resident in another Member State. For these purposes, the term "paying agent" is widely defined and includes an agent who collects interest, discounts or premiums on behalf of an individual beneficially entitled thereto. If this proposal is adopted, it wi l l not apply to payments of interest, discounts and premiums made before 1 January, 2001.

Bondholders who are individuals should note that, if this proposal is adopted in its current form, the provisions relating to additional amounts, referred to in "Terms and Conditions of the Bonds æ Taxation" above would not apply in respect of any withholding tax imposed as a result thereof.

4 Disposal (including Redemption)

4.1 Corporate Bondholders

Bondholders within the charge to United Kingdom corporation tax wi l l be subject to tax as income on all interest, profits and gains arising from, and from fluctuations in the value of, the Bonds broadly in accordance with their statutory accounting treatment.

4.2 Other Bondholders

The Bonds are "qualifying corporate bonds" with the result that on a disposal of the Bonds neither chargeable gains nor allowable losses wi l l arise for the purposes of taxation of capital gains.

A transfer of a Bond by a holder resident or ordinarily resident for tax purposes in the United Kingdom or who carries on a trade in the United Kingdom through a branch or agency to which the Bond is

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attributable may give rise to a charge to tax on income in respect of an amount representing interest on the Bond which has accrued since the preceding interest payment date.

5 United Kingdom Stamp Duty and Stamp Duty Reserve Tax No United Kingdom Stamp Duty or Stamp Duty Reserve Tax is payable on the issue or transfer by delivery of a Bond or on its redemption.

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Subscription and Sale

Barclays Bank PLC, UBS AG, acting through its division Warburg Dil lon Read, Deutsche Bank AG London, Midland Bank PLC, Greenwich NatWest Limited (as agent for National Westminster Bank Plc) and J.P. Morgan Securities Ltd. (the "Managers") have, pursuant to a Subscription Agreement dated 16 August, 1999, jointly and severally agreed with the Company, subject to the satisfaction of certain conditions, to subscribe the Bonds at 99.78 per cent of their principal amount. The Company has agreed to pay to the Managers a combined management and underwriting commission of 0.50 per cent of such principal amount. In addition, the Company has agreed to reimburse the Managers for certain of their expenses in connection with the issue of the Bonds. The Subscription Agreement entitles the Managers to terminate it in certain circumstances prior to payment being made to the Company.

The Bonds have not been and wi l l not be registered under the Securities Act and may not be offered or sold within the United States or to, or for the account or benefit of, U.S. persons except in certain transactions exempt from the registration requirements of the Securities Act. Terms used in this paragraph have the meanings given to them by Regulation S under the Securities Act.

The Bonds are subject to U.S. tax law requirements and may not be offered, sold or delivered within the United States or its possessions or to a United States person, except in certain transactions permitted by U.S. tax regulations. Terms used in this paragraph have the meanings given to them by the U.S. Internal Revenue Code and regulations thereunder.

Each Manager has agreed that, except as permitted by the Subscription Agreement, it wi l l not offer, sell or deliver the Bonds, (i) as part of their distribution at any time or (ii) otherwise until 40 days after the later of the commencement of the offering and the Closing Date (as defined in the Subscription Agreement) within the United States or to, or for the account or benefit of, U.S. persons, and it wi l l have sent to each dealer to which it sells Bonds during the distribution compliance period a confirmation or other notice setting forth the restrictions on offers and sales of the Bonds within the United States or to, or for the account or benefit of, U.S. persons.

In addition, until 40 days after the commencement of the offering, an offer or sale of Bonds within the United States by a dealer that is not participating in the offering may violate the registration requirements of the Securities Act.

Each Manager has agreed that: (1) it has not offered or sold and wi l l not offer or sell any Bonds to persons in the United Kingdom prior to admission of the Bonds to listing in accordance with Part IV of the Financial Services Act 1986 (the "Act") except to persons whose ordinary activities involve them in acquiring, holding, managing or disposing of investments (as principal or agent) for the purposes of their businesses or otherwise in circumstances which have not resulted and wil l not result in an offer to the public in the United Kingdom within the meaning of the Public Offers of Securities Regulations 1995 or the Act; (2) it has complied and wi l l comply with all applicable provisions of the Act with respect to anything done by it in relation to the Bonds in, from or otherwise involving the United Kingdom; and (3) it has only issued or passed on, and wi l l only issue or pass on, in the United Kingdom any document received by it in connection with the issue of the Bonds, other than any document which consists of or any part of listing particulars, supplementary listing particulars or any other document required or permitted to be published by listing rules under Part IV of the Act, to a person who is of a kind described in Article 11(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1996 or is a person to whom the document may otherwise lawfully be issued or passed on.

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General Information

1 Listing The listing of the Bonds on the London Stock Exchange will be expressed as a percentage of their principal amount (exclusive of accrued interest). It is expected that listing of the Bonds on the London Stock Exchange will be granted on or before 19 August, 1999, subject only to the issue of the Temporary Global Bond. Prior to official listing, however, dealings will be permitted by the London Stock Exchange in accordance with its rules. Transactions will normally be effected for settlement in pounds sterling and for delivery on the third working day after the day of the transaction.

1.1 Legend The Bonds and Coupons will bear the following legend: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Sections 165(j) and 1287(a) of the Internal Revenue Code".

1.2 Clearing Systems The Bonds have been accepted for clearance through the Cedelbank and Euroclear systems with a Common Code of 10055903. The International Securities Identification Number for the Bonds is XS0100559037.

2 Approvals and authorisations The Company has obtained all necessary consents, approvals and authorisations in connection with the issue and performance of the Bonds. The issue of the Bonds was authorised by resolution of a duly authorised committee of the Board of Directors of the Company passed on 29 July, 1999.

3 Accounts The financial information contained in this document does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985 (the "Act"). Statutory accounts for the five years ended 26 September, 1998 have been delivered to the Registrar of Companies in England and Wales. The Company's auditors have made reports under Section 235 of the Act on such statutory accounts which were not qualified within the meaning of Section 262 of the Act and did not contain any statements made under Section 237(2) or (3) of the Act.

KPMG, (Chartered Accountants) audited the accounts of the Company for the year ended 28 September, 1996 and KPMG Audit Plc (Chartered Accountants) has audited the accounts of the Company for the two years ended 26 September, 1998.

Copies of the latest audited consolidated annual accounts of the Company and the latest unaudited consolidated interim results of the Group may be obtained, and copies of the Trust Deed and the Agency Agreement will be available for inspection, at the specified offices of each of the Paying Agents during normal business hours, so long as any of the Bonds is outstanding. The Company does not publish non-consolidated accounts.

4 No significant or material change Except as disclosed in this document, there has been no significant change in the financial or trading position of the Company or of the Group since 27 March, 1999 and no material adverse change in the financial position or prospects of the Company or of the Group since 26 September, 1998.

5 Litigation Neither the Company nor any of its subsidiaries is, or has been, involved in any litigation or arbitration proceedings which may have, or have had during the 12 months preceding the date of this document, a significant effect on the financial position of the Group nor is the Company aware that any such proceedings are pending or threatened.

6 Documents available for inspection Copies of the following documents may be inspected at the offices of Lovell White Durrant, 65 Holborn Viaduct, London EC1A 2DY during usual business hours on any weekday (Saturdays and public holidays excepted) for 14 days from the date of this document:

22

(i) the Memorandum and Articles of the Company;

(ii) the audited consolidated annual accounts of the Group for the two years ended 26 September, 1998 and the unaudited consolidated interim results of the Group for the six months ended 27 March, 1999;

(iii) the Subscription Agreement referred to above;

(iv) drafts (subject to modification) of the Trust Deed to constitute the Bonds which includes the form of the Temporary Global Bond, the Global Bond and the definitive Bonds and Coupons and of the Agency Agreement;

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REGISTERED AND HEAD OFFICE OF THE COMPANY

Stornoway House 13 Cleveland Row

London SW1A 1GG

TRUSTEE

Prudential Trustee Company Limited Laurence Pountney Hill

London EC4R 0EU

PRINCIPAL PAYING AGENT

Citibank, N.A. 5 Carmelite Street London EC4Y OPA

PAYING AGENTS

Citibank (Switzerland) Banque International a Luxembourg S.A. Bahnhofstrasse 63 69, route d'Esch

CH-8021 Switzerland L-2953 Luxembourg

LEGAL ADVISERS

7b the Company To the Managers and the Trustee Lovell White Durrant Linklaters 65 Holborn Viaduct Linklaters & Alliance London EC1A 2DY One Silk Street

London EC2Y 8HQ

AUDITORS OF THE COMPANY

KPMG Audit Plc Chartered Accountants

8 Salisbury Square London EC4Y 8BB

LISTING AGENT

Barclays Bank PLC 5 The North Colonnade

Canary Wharf London E14 4BB

24 Bl'C

KLEY

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