Capital Raising Prospectus 2017 Securing the UK’s Digital · PDF fileCapital Raising Prospectus 2017 Securing the UK’s Digital Future. ... if you are resident in the United Kingdom

Capital Raising Prospectus 2017 Securing the UK’s Digital Future

THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.

If you are in any doubt as to what action you should take, you are recommended to seek your own financial advice immediatelyfrom your stockbroker, bank manager, solicitor, accountant, fund manager or other appropriate independent financial adviser,who is authorised under the Financial Services and Markets Act 2000 (“FSMA”) if you are resident in the United Kingdom or, ifnot, from another appropriately authorised independent financial adviser.

If you sell or have sold or otherwise transferred all of your Existing Ordinary Shares, please send this document, and Form of Proxy atonce to the purchaser or transferee or to the bank, stockbroker or other agent through whom the sale or transfer was effected for delivery tothe purchaser or transferee, except that such documents should not be distributed, forwarded to or transmitted in or into any jurisdictionwhere to do so might constitute a violation of local securities laws or regulations, including but not limited to the United States and any ofthe other Excluded Territories.

The distribution of this document, any other offering or publicity material relating to the Placing and/or the Offer for Subscriptionand/or any Application Forms into jurisdictions other than the United Kingdom may be restricted by law or regulation. Personsinto whose possession these documents come should inform themselves about and observe any such restrictions. In particular,subject to certain exceptions, such documents should not be distributed, forwarded to or transmitted in or into the United States orany other Excluded Territory. The transfer of the New Ordinary Shares may also be so restricted by law or regulation. Any failureto comply with these restrictions may constitute a violation of the securities laws or regulations of any such jurisdiction. The NewOrdinary Shares are not transferable except in accordance with, and the distribution of the foregoing documents is subject to, therestrictions set out in section 5 of Part 2 of this document. No action has been taken by CityFibre, Citi, finnCap, Liberum, Macquarie orRothschild, that would permit an offer of the New Ordinary Shares, or possession, distribution, forwarding or transmission of the foregoingdocuments in or into any jurisdiction where action for that purpose is required, other than the United Kingdom.

CityFibre Infrastructure Holdings plc(Incorporated and registered in England and Wales, with registered number 08772997)

Proposed Placing of 363,636,364 Placing Shares at 55 pence per Placing Share

Proposed Offer for Subscription of up to 27,272,727 Offer for Subscription Shares at 55 pence perOffer for Subscription Share

Notice of General Meeting

Sole Global Co-ordinator, JointBookrunner and Joint Underwriters

Nominated Advisor andJoint Bookrunner and Joint

Underwriters

Joint Bookrunner and JointUnderwriters

Joint Bookrunner and JointUnderwriters

Financial Advisor

AIM is a market designed primarily for emerging or smaller companies to which a higher investment risk tends to be attachedthan to larger or more established companies. AIM securities are not admitted to the official list of the United Kingdom ListingAuthority.

A prospective investor should be aware of the risks of investing in such companies and should make the decision to invest onlyafter careful consideration and, if appropriate, consultation with an independent financial adviser.

Each AIM company is required pursuant to the AIM Rules for Companies to have a nominated adviser. The nominated adviser isrequired to make a declaration to the London Stock Exchange on admission in the form set out in Schedule Two to the AIM Rulesfor Nominated Advisers.

The London Stock Exchange has not itself examined or approved the contents of this document.

This document, which comprises a prospectus and a circular relating to CityFibre Infrastructure Holdings plc and the Capital Raising andan AIM admission document, has been prepared in accordance with the Prospectus Rules of the UK Listing Authority made under section73A of FSMA, has been approved by the Financial Conduct Authority in accordance with section 85 of FSMA, and is made available tothe public in accordance with Rule 3.2.4(3) of the Prospectus Rules. This document is available at www.cityfibre.com and a printed copyof this document is available on request and free of charge from the Company and finnCap.

The Existing Ordinary Shares have been admitted to trading on AIM. Application will be made to the London Stock Exchange for the NewOrdinary Shares to be admitted to trading on AIM. It is expected that admission of the New Ordinary Shares on AIM will become effective,and dealings in the New Ordinary Shares on AIM will commence, at 8.00 a.m. on 28 July 2017. The New Ordinary Shares are not dealt in onany other recognised investment exchange and no application has been, or is intended to be, made for the New Ordinary Shares to be admittedto trading on any other such exchange. It is emphasised that no application is being made for the admission of the New Ordinary Shares to theOfficial List.

The whole of this document should be read. Shareholders and any other persons contemplating an acquisition of New OrdinaryShares should review the section of this document entitled “Risk Factors” for a discussion of certain factors that should be consideredwhen deciding on what action to take in relation to the Placing and/or the Offer for Subscription or deciding whether or not tosubscribe for or acquire New Ordinary Shares. In making an investment decision each investor must carry out their ownexamination, analysis and enquiry of the Company and the terms of the Capital Raising, including the merits and risks involved.

The latest time and date for application and payment in full for the Offer for Subscription Shares under the Offer for Subscription is11.00 a.m. on 26 July 2017. The procedure for application and payment is set out in Part 2 of this document and, if relevant, also inthe Application Form which is set out at the back of this document.

Notice of a General Meeting of the Company to be held at 11.30 a.m. on 27 July 2017 at CMS Cameron McKenna Nabarro OlswangLLP, Cannon Place, 78 Cannon St, London EC4N 6AF is set out at the end of this document. A Form of Proxy for use in connectionwith the General Meeting is enclosed and, to be valid, should be completed and returned as soon as possible, by post toComputershare Investor Services PLC, Corporate Action Projects, Bristol BS99 6AH or by hand to Computershare Investor ServicesPLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE, by not later than 11.30 a.m. on 25 July 2017. Return of Forms of Proxy willnot prevent Shareholders from attending the General Meeting.

Citigroup Global Markets Limited (“Citi”), which is authorised by the Prudential Regulation Authority and regulated by thePrudential Regulation Authority and the FCA, is acting as sole global co-ordinator, Joint Bookrunner and Joint Underwriter toCityFibre and no one else in connection with the Capital Raising, and will not be responsible to any person other than CityFibre forproviding the regulatory and legal protections afforded to clients of Citi nor for providing advice in relation to the contents of thisdocument or any matter, transaction or arrangement referred to in it.

finnCap Ltd (“finnCap”), which is authorised and regulated by the FCA, is acting as Nominated Adviser, Joint Bookrunner and JointUnderwriter to CityFibre and no one else in connection with the Capital Raising, and will not be responsible to any person other thanCityFibre for providing the regulatory and legal protections afforded to clients of finnCap nor for providing advice in relation to thecontents of this document or any matter, transaction or arrangement referred to in it. The responsibilities of finnCap, as NominatedAdviser under the AIM Rules for Nominated Advisers, are owed solely to London Stock Exchange and are not owed to CityFibre orany Director or to any other person in respect of their decision to acquire New Ordinary Shares in reliance of any part of thisdocument.

Liberum Capital Limited (“Liberum”), which is authorised and regulated by the FCA, is acting as Joint Bookrunner and JointUnderwriter to CityFibre and no one else in connection with the Capital Raising and will not be responsible to any person other thanCityFibre for providing the regulatory and legal protections afforded to clients of Liberum, nor for providing advice in relation to thecontents of this document or any matter, transaction or arrangement referred to in it.

Macquarie Capital (Europe) Limited (“Macquarie”), which is authorised and regulated by the FCA, is acting as Joint Bookrunnerand Joint Underwriter to CityFibre and no one else in connection with the Capital Raising and will not be responsible to any personother than CityFibre for providing the regulatory and legal protections afforded to clients of Macquarie, nor for providing advice inrelation to the contents of this document or any matter, transaction or arrangement referred to in it.

N M Rothschild & Sons Limited (“Rothschild”), which is authorised and regulated by the FCA, is acting as financial adviser toCityFibre and no one else in connection with the Capital Raising, and will not be responsible to any person other than CityFibre forproviding the regulatory and legal protections afforded to clients of Rothschild nor for providing advice in relation to the contents ofthis document or any matter, transaction or arrangement referred to in it.

Apart from the responsibilities and liabilities, if any, which may be imposed on Citi, finnCap, Liberum, Macquarie and Rothschild byFSMA or the regulatory regime established thereunder or otherwise under law, Citi, finnCap, Liberum, Macquarie and Rothschilddo not accept any responsibility whatsoever for the contents of this document, and no representation or warranty, express or implied,is made by Citi, finnCap, Liberum, Macquarie and Rothschild in relation to the contents of this document, including its accuracy,completeness or verification or regarding the legality of any investment in the New Ordinary Shares by any person under the lawsapplicable to such person or for any other statement made or purported to be made by it, or on its behalf, in connection withCityFibre, the New Ordinary Shares or the Capital Raising and nothing in this document is, or shall be relied upon as, a promise orrepresentation in this respect, whether as to the past or the future. To the fullest extent permissible Citi, finnCap, Liberum,Macquarie and Rothschild accordingly disclaim all and any responsibility or liability whether arising in tort, contract or otherwise(save as referred to above) which they might otherwise have in respect of this document or any such statement.

NOTICE TO OVERSEAS PERSONS

This document does not constitute an offer of, or a solicitation to subscribe for or purchase, any securities in any jurisdiction in which suchoffer or solicitation is unlawful or to any person to whom it is unlawful to make such offer or solicitation. Shareholders in the United States,subject to certain exemptions, may not subscribe for or acquire any New Ordinary Shares in connection with the Capital Raising.

The Existing Ordinary Shares and the New Ordinary Shares have not been and will not be registered under the US Securities Act, or under thesecurities laws of any state or other jurisdiction of the United States and may not be offered, sold, pledged, taken up, resold, transferred ordelivered, directly or indirectly, into or within the United States except pursuant to an applicable exemption from, or in a transaction notsubject to, the registration requirements of the US Securities Act and in compliance with any applicable securities laws of any state or otherjurisdiction of the United States. The New Ordinary Shares offered outside the United States are being offered in reliance on Regulation Sunder the US Securities Act. The New Ordinary Shares offered inside the United States are being offered in reliance on an exemption fromthe registration requirements of the US Securities Act. There will be no public offer of the New Ordinary Shares in the United States.

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The Company, Citi, finnCap, Liberum, Macquarie and Rothschild do not make any representation to any offeree, subscriber or acquirer of theNew Ordinary Shares regarding the legality of an investment in the New Ordinary Shares by such offeree, subscriber or acquirer under thelaw applicable to such offeree, subscriber or acquirer. Each investor should consult with his or its own advisers as to the legal, tax, business,financial and related aspects of an acquisition of the New Ordinary Shares.

The New Ordinary Shares and this document have not been recommended, approved or disapproved by the SEC, any state securitiescommission in the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon orendorsed the merits of the offering of the New Ordinary Shares or the accuracy or adequacy of this document. Any representation tothe contrary is a criminal offence in the United States.

The New Ordinary Shares may not be offered, sold, pledged, taken up, resold, transferred or delivered, directly or indirectly, within any of theExcluded Territories (excluding, for these purposes, the United States) except pursuant to an applicable exemption from registration and incompliance with any applicable securities laws. There will be no public offer of the New Ordinary Shares in any of such Excluded Territories.

EXCEPT AS OTHERWISE PROVIDED FOR HEREIN, NEITHER THIS DOCUMENT NOR THE APPLICATION FORMCONSTITUTES AN OFFER OF NEW ORDINARY SHARES TO ANY PERSON WITH A REGISTERED ADDRESS, OR WHO ISLOCATED OR RESIDENT, IN THE UNITED STATES OR ANY OF THE OTHER EXCLUDED TERRITORIES.

The Underwriters may arrange for any Placing Shares not taken up in the Placing to be offered and sold only (i) outside the United States inaccordance with Regulation S under the US Securities Act or (ii) inside the United States to persons reasonably believed to be “qualifiedinstitutional buyers” (“QIBS”) within the meaning of Rule 144A under the US Securities Act in reliance on an exemption from theregistration requirements of the US Securities Act. Any such persons are notified that such offers may be made in reliance on the exemptionfrom the registration requirements of the US Securities Act provided by Rule 144A.

The New Ordinary Shares sold in reliance on Rule 144A are subject to restrictions on transferability and resale and may not be transferred orresold except as permitted under the US Securities Act and applicable securities laws. In jurisdictions where the shares are subject torestrictions on transferability and resale, such shares may not be transferred or resold except as permitted under applicable securities laws andregulations. Prospective subscribers should be aware that they may be required to bear the financial risks of this investment for an indefiniteperiod of time.

In addition, until 40 days after Admission, an offer, sale or transfer of the New Ordinary Shares into or within the United States by a dealer(whether or not participating in the Capital Raising) may violate the registration requirements of the US Securities Act.

All Overseas Persons and any person (including, without limitation, a nominee or trustee) who has a contractual or legal obligation to forwardthis document or any Application Form, if and when received, or any other document to a jurisdiction outside the United Kingdom shouldread section 5 of Part 2 of this document.

ENFORCEABILITY OF US JUDGMENTS

THE COMPANY IS A PUBLIC LIMITED COMPANY INCORPORATED UNDER THE LAWS OF ENGLAND AND WALES.MOST OF THE DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY RESIDE OUTSIDE THE UNITED STATES.IN ADDITION, ALL OR SUBSTANTIALLY ALL OF THE ASSETS OF THE COMPANY, THE DIRECTORS AND THECOMPANY’S EXECUTIVE OFFICERS ARE LOCATED OUTSIDE THE UNITED STATES. AS A RESULT, IT MAY NOT BEPOSSIBLE FOR INVESTORS TO EFFECT SERVICE OF PROCESS WITHIN THE UNITED STATES UPON ANY OF THECOMPANY, THE DIRECTORS OR EXECUTIVE OFFICERS OF THE COMPANY LOCATED OUTSIDE OF THE UNITEDSTATES OR TO ENFORCE AGAINST THEM ANY JUDGMENTS OF US COURTS, INCLUDING JUDGMENTS PREDICATEDUPON CIVIL LIABILITIES UNDER THE SECURITIES LAWS OF THE UNITED STATES OR ANY STATE OR TERRITORYWITHIN THE UNITED STATES. THERE IS SUBSTANTIAL DOUBT AS TO THE ENFORCEABILITY IN THE UNITEDKINGDOM IN ORIGINAL ACTIONS, OR IN ACTIONS FOR ENFORCEMENT OF JUDGMENTS OF US COURTS, BASED ONTHE CIVIL LIABILITY PROVISIONS OF US FEDERAL SECURITIES LAWS. IN ADDITION, PUNITIVE DAMAGES INACTIONS BROUGHT IN THE UNITED STATES OR ELSEWHERE MAY BE UNENFORCEABLE IN ENGLAND ANDWALES.

FOR INVESTORS IN AUSTRALIA ONLY:

This prospectus is not a prospectus under Chapter 6D.2 of the Australian Corporations Act 2001 (Cth) (Corporations Act) and has not beenlodged with the Australian Securities & Investments Commission.

This prospectus is intended for distribution in Australia only to persons to whom it is lawful to offer the securities without a prospectus,because one or more of the exceptions set out in section 708 of the Corporations Act applies. No securities will be issued or sold incircumstances that would require the giving of a prospectus under Chapter 6D.2 of the Corporations Act. You should contact your adviser ifyou are uncertain as to whether a prospectus is required for the offer to you.

The Company is not licensed to provide financial product advice in Australia in relation to the securities. You are recommended to seek yourown advice from your lawyer, accountant or other professional adviser before investing. No cooling off period applies in relation to this offerunder the Corporations Act.

NOTICE TO EEA INVESTORS

In relation to each EEA State (except for the United Kingdom) which has implemented the Prospectus Directive (each a “relevant memberstate”), no New Ordinary Shares have been offered or will be offered pursuant to the Capital Raising to the public in that relevant memberstate prior to the publication of a prospectus in relation to the New Ordinary Shares which has been approved by the competent authority inthat relevant member state or, where appropriate, approved in another relevant member state and notified to the competent authority in therelevant member state, all in accordance with the Prospectus Directive, except that, with effect from and including the relevantimplementation date, offers of New Ordinary Shares may be made to the public in that relevant member state at any time:

(A) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

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(B) to fewer than 100 or, if the relevant member state has implemented the relevant provision of the PD Amending Directive, 150natural or legal persons (other than qualified investors as defined in the Prospectus Directive) in such relevant member state; or

(C) in any other circumstances falling within Article 3(2) of the Prospectus Directive,

provided that no such offer of New Ordinary Shares shall result in a requirement for the publication by the Company, Citi, finnCap, Liberum,Macquarie or Rothschild of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the ProspectusDirective in that relevant member state.

For this purpose, the expression “offer of any New Ordinary Shares to the public” in relation to any New Ordinary Shares in any relevantmember state means the communication in any form and by any means of sufficient information on the terms of the Capital Raising and anyNew Ordinary Shares to be offered so as to enable an investor to decide to subscribe for or acquire any New Ordinary Shares, as the samemay be varied in that relevant member state by any measure implementing the Prospectus Directive in that relevant member state.

NOTICE TO ALL INVESTORS

Any reproduction or distribution of this document, in whole or in part, and any disclosure of its contents or use of any information containedin this document for any purpose other than considering an investment in the New Ordinary Shares is prohibited. By accepting delivery of thisdocument, each offeree of the New Ordinary Shares agrees to the foregoing.

The contents of this document are not to be construed as legal, business or tax advice. Each prospective investor should consult his or its ownlegal adviser, financial adviser or tax adviser for legal, financial or tax advice.

Without limitation, the contents of Company’s website do not form part of this document.

Capitalised terms have the meanings ascribed to them in Part 14 of this document entitled “Definitions”.

The date of this document is 11 July 2017.

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CONTENTS

Page

SUMMARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

PRESENTATION OF INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

EXPECTED TIMETABLE OF PRINCIPAL EVENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30

DIRECTORS, COMPANY SECRETARY, REGISTERED OFFICE AND ADVISERS . . . . . . . . . . . . . . . . . 31

CAPITAL RAISING STATISTICS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

QUESTIONS AND ANSWERS ABOUT THE CAPITAL RAISING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

WHERE TO FIND HELP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38

PART 1 LETTER FROM THE CHAIRMAN OF CITYFIBRE INFRASTRUCTURE HOLDINGSPLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

PART 2 TERMS AND CONDITIONS OF THE OFFER FOR SUBSCRIPTION . . . . . . . . . . . . . . . . . . . . . 50

PART 3 INFORMATION ON CITYFIBRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65

PART 4 SELECTED FINANCIAL AND OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83

PART 5 OPERATING AND FINANCIAL REVIEW OF CITYFIBRE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85

PART 6 INFORMATION ON ENTANET . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

PART 7 UNAUDITED PRO-FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP . . 106

PART 8 TAXATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113

PART 9 INFORMATION CONCERNING THE NEW ORDINARY SHARES . . . . . . . . . . . . . . . . . . . . . . 122

PART 10 ADDITIONAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124

PART 11 HISTORICAL FINANCIAL INFORMATION OF THE GROUP . . . . . . . . . . . . . . . . . . . . . . . . . . 161

PART 12 HISTORICAL FINANCIAL INFORMATION ON ENTANET . . . . . . . . . . . . . . . . . . . . . . . . . . . 230

PART 13 HISTORICAL FINANCIAL INFORMATION ON ENTANET INTERNATIONAL . . . . . . . . . . 260

PART 14 DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 279

PART 15 GLOSSARY OF TECHNICAL TERMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286

NOTICE OF GENERAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288

APPLICATION FORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 290

NOTES ON HOW TO COMPLETE THE APPLICATION FORM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 294

SUMMARY

Summaries are made up of disclosure requirements known as “Elements”. These Elements are numbered inSections A-E (A.1-E.7).

This summary contains all the Elements required to be included in a summary for this type of (i) issuer and(ii) issue of securities. Because some Elements are not required to be addressed, there may be gaps in thenumbering sequence of the Elements.

Even though an Element might be required to be addressed in the summary because of the type of securitiesand issuer, it is possible that no relevant information can be given regarding the Element. In this case a shortdescription of the Element is included in the summary with the mention of the words “not applicable”.

Section A – Introductions and warnings

A.1 Warning

This summary should be read as an introduction to this document. Any decision to invest in theNew Ordinary Shares should be based on consideration of this document as a whole. Where a claimrelating to the information contained in this document is brought before a court, the claimantinvestor might, under the national legislation of the member states of the EEA, have to bear thecosts of translating this document before the legal proceedings are initiated. Civil liability attachesonly to those persons who have tabled the summary including any translation thereof, but only ifthe summary is misleading, inaccurate or inconsistent when read together with the other parts ofthis document or it does not provide, when read together with the other parts of this document, keyinformation in order to aid investors when considering whether to invest in such securities.

A.2 Resale or final placement of securities through financial intermediaries

Not applicable. No consent has been given by the Company or any person responsible for drawingup this prospectus to the use of this prospectus for subsequent resale or final placement of securitiesby financial intermediaries.

Section B – Issuer

B.1 Legal and commercial name

CityFibre Infrastructure Holdings plc (the “Company”).

B.2 Domicile/legal form/legislation under which the issuer operates/ country of incorporation

The Company is a public limited company, incorporated on 13 November 2013 in England andWales with its registered office situated in England and Wales. The Company operates under theCompanies Act 2006.

B.3 Current operations/Principal activities/Principal markets

CityFibre provides fibre connectivity services through designing, building, owning, and operatingfibre optic network infrastructure. The Group is a wholesale operator of fibre networks in townsand cities outside London. The Group provides open access, shared fibre infrastructure that enablesgigabit-capable connectivity for Channel Partners and mobile network operators, who in-turndeliver digital connectivity solutions to their end customers spanning the public sector, business,mobile operator and residential markets.

CityFibre operates across the UK, and currently has full fibre optic metropolitan area networks in42 towns and cities including: Aberdeen, Bristol, Coventry, Edinburgh, Glasgow, Manchester,Milton Keynes, Peterborough, and York. Furthermore, the Company owns and operates a longdistance fibre-optic network that interconnects 22 of its current towns and cities.

CityFibre is a provider of ‘full fibre’ infrastructure, meaning there is no copper or co-axial cableused for the provision of data connectivity services in CityFibre’s networks. This sets it apart fromother infrastructure competitors, notably Openreach and Virgin Media, who rely heavily on legacycopper and co-axial cables for connecting to premises on all but a small percentage of theirnetworks.

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CityFibre’s network is constructed to provide high capacity fibre infrastructure that serves fourprimary market verticals:

Š Public sector – fibre connectivity to council buildings, schools, hospitals, CCTV;

Š Business – fibre connections to enterprises and SMEs (often referred to as Fibre to thePremises – FTTP);

Š Mobile operators – fibre connections to mobile base stations and small cells for 4G andfuture 5G mobile services (often referred to as Fibre to the Tower – FTTT); and

Š Consumers – fibre connections to homes (often referred to as Fibre to the Home – FTTH).

B.4a Current trends, trading and outlook

The Group continued its network footprint expansion throughout 2016, through a combination ofacquisitions, organic growth and incremental sales on existing and acquired assets.

In 2017, CityFibre continued to focus on growing revenues and connections across its existingfootprint, as well as undertaking selective investments in new towns and cities. Financialperformance relating to metro towns and cities was in line with management’s expectations. At theend of May 2017, the Group had entered into contracts with Channel Partners, enabling CityFibreto launch business services into seven further towns and cities, and securing in excess of £8.3million of new contracted revenue. Furthermore, the unrealised value of the Group’s contracts was£102.2 million, giving the Group good visibility of future income

The profile of CityFibre’s growth is characterised by securing a relatively small volume of largervalue contracts that provide fibre connectivity to multiple sites. This is supplemented by securingsmaller contracts at various times for individual fibre connections from existing Channel Partners.Therefore, timing of the larger contracts can affect month by month performance. The Groupsecured few large contracts in the first quarter of 2017, with a higher number of larger contractsexpected in the second quarter and throughout the second half of 2017. The strong and growingpipeline of opportunities means that the Group expects to deliver overall 2017 financialperformance in line with management expectations.

In January 2017, CityFibre announced its intention to construct a new fibre network in Stirlinghaving secured a seven-year anchor contract to provide full fibre connectivity to the public sector,followed in March 2017 with anchor contracts in the business market vertical to construct newnetworks in Cheltenham and Gloucester, two locations located near to the Company’s national longdistance network.

CityFibre will continue to seek opportunities to enter new towns and cities underpinned by suitableanchor contracts. The Directors believe that current trading activity and its pipeline of opportunitieswill enable the Group to progress towards its stated medium-term target to reach no less than 50towns and cities by 2020.

In its existing towns and cities, CityFibre is undertaking investments in active platforms to providewholesale Ethernet services to complement its current dark fibre offering. The Company is on trackto deliver its active platforms into not less than five further towns and cities in the first half of 2017,and is targeting to expand Ethernet services to a further six towns and cities by the end of the year.In expanding its Ethernet services to the business market vertical, CityFibre intends to enter intolaunch partner contracts with Channel Partners to provide fibre connectivity to more businesses inits existing footprint. In April 2017 CityFibre announced contracts to support construction inSlough, Maidenhead and Wakefield followed in June 2017 with contracts in Plymouth and Exeter.These launch partner contracts demonstrate that CityFibre is making further progress tocommercialise the network assets acquired from KCOM and Redcentric Solutions Limited in 2016.

In the public sector, the Directors believe that recent government policy for full fibre, together withplanned government stimulus to encourage local government to anchor new full fibre core metronetworks, will accelerate opportunities for fibre connectivity to more public sector sites. CityFibreis engaged in a significant number of discussions with local authorities and Channel Partners and isbuilding a pipeline of public sector opportunities with the potential for contracts to be awarded tothe Group in the second half of 2017 and beyond.

In 2016 CityFibre completed two landmark network deployments for the UK market: the FTTTnetwork construction in Hull and the FTTH trial in York. As a result, the Company is now

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exploring opportunities to deploy FTTT and FTTH in more UK towns and cities, and is progressingcommercial negotiations with mobile operators and major Channel Partners accordingly. CityFibrehas engaged in commercial discussions with major ISPs and a number of smaller ISPs, to secureChannel Partner relationships intended to provide full fibre broadband services to consumers usingCityFibre’s future FTTH infrastructure. These discussions are advanced and may or may not lead tobinding agreements in due course. The Group has engagement with Channel Partners across all fourprimary market verticals, supported by market demands for fibre connectivity and policies thatencourage the deployment of full fibre and 5G infrastructure to many homes and businesses. TheDirectors believe that CityFibre is well positioned to exploit these opportunities and to continue toexpand its operations.

B.5 Group structure

The Company is the parent company of the Group.

The table below contains a list of the principal subsidiaries of the Company (each of which isconsidered by the Group to be likely to have a significant effect on the assessment of the assets,liabilities, the financial position and/or the profits and losses of the Group):

Name of subsidiary Country ofincorporation

Percentage owned Proportion of votingpower held

CityFibre HoldingsLimited

England and Wales 100% by the Company 100%

CityFibre NetworksLimited


FibreCity Holdings Ltd England and Wales 100% by the Company 100%

Gigler Limited England and Wales 100% by the Company 100%

CityFibre MetroNetworks Limited


FibreCityBournemouth Ltd


CityFibre Limited England and Wales 100% by the Company 100%

B.6 Notifiable interests

As at the Reference Date, the Company had been notified of, or was otherwise aware of, thefollowing persons who are directly or indirectly interested in 3 per cent. or more of the existingissued ordinary share capital of the Company:

As at the Reference Date Immediately following Admission

Name of shareholder Number of OrdinaryShares

% of total numberof issued Ordinary

Shares

Number ofOrdinary

Shares

% of total number ofissued Ordinary

Shares(1)

Woodford InvestmentManagement(2)

48,218,276 18.15 113,672,821 18.06%

Odey AssetManagement

38,882,000 14.64 48,882,000 7.77%

Jupiter AssetManagement

25,536,485 9.61 47,354,666 7.52%

Close Brothers AssetManagement

10,320,527 3.88 11,065,981 1.76%

Employee BenefitTrust

10,159,308 3.82 10,159,308 1.61%

Otus CapitalManagement

8,828,344 3.32 10,101,071 1.61%

Herald InvestmentManagement Ltd

8,369,048 3.15 10,187,229 1.62%

(1) Assuming no take up under the Offer for Subscription and that no new Ordinary Shares (other than the New OrdinaryShares) are issued from the Reference Date until Admission.

(2) Woodford Investment Management Ltd is interested in these shares as agent and discretionary manager of certaindiscretionary managed funds. The shares are held by the funds via their respective nominees.

3

As at the Reference Date, the Company is not aware of any person who, directly or indirectly,jointly or severally, exercises or could exercise control over the Company nor is it aware of anyarrangements the operation of which may at a subsequent date result in a change in control of theCompany.

As at the Reference Date, the Company had been notified of, or was otherwise aware of, itsDirectors, being persons discharging managerial responsibilities within the Company, beinginterested, directly or indirectly, in its issued ordinary share capital of the Company as follows:

As at the Reference Date Immediately following AdmissionName of Director Number of

Ordinary Shares% of total number of

issued OrdinaryShares

Number ofOrdinary

Shares

% of total number ofissued Ordinary

Shares (1)

Greg Mesch (2) 572,803 0.2 572,803 0.09%

Mark Collins (2) 162,987 0.06 162,987 0.03%

Terry Hart (2) 43,007 0 43,007 0.01%

Leo van Doorne (2)(via Kimardo II B.V.) 3,727,767 1.4 3,727,767 0.59%

Gary Mesch (2)(4) 1,166,831 0.4 1,166,831 0.19%

Sally Davis (2) 14,910 0 14,910 0.00%

Steve Charlton (2) – – – 0.00%

Chris Stone (3) – – 1,181,818 0.19%

(1) Assuming no take up under the Offer for Subscription and that no new Ordinary Shares (other than the New Ordinary Shares) are issuedfrom the Reference Date until Admission.

(2) Excludes interests in Ordinary Shares pursuant to Share Incentive Arrangements and a warrant instrument dated 13 January 2014.

(3) Chris Stone has agreed to subscribe for 1,181,818 Placing Shares at the Offer Price. Chris Stone will not be applying for any Offer forSubscription Shares. The number of Shares do not include the Shares to be awarded to Chris Stone under the Non-Employee LTIP.

(4) 1,080,151 of the Ordinary Shares are held by TJL Investment Corporation, a company which Gary Mesch and persons connected with himhave an interest in and 59,590 of the Ordinary Shares are held by persons connected with Gary Mesch.

B.7 Selected historical key financial information

Selected key historical financial information of the Group

The selected historical financial information relating to the Group set out below has been extractedwithout material adjustment from the audited reports and accounts of the Group prepared underIFRS for the financial years ended 31 December 2014, 31 December 2015 and 31 December 2016:

Consolidated income statement

Year ended 31 December2014 2015 2016£000 £000 £000

Revenue 3,844 6,408 15,363

Cost of sales (568) (888) (1,827)

Gross profit (loss) 3,276 5,520 13,536

Administrative expenses (10,726) (11,679) (18,677)

Operating (loss) (7,450) (6,159) (5,141)

Finance income 779 170 45

Finance charges (344) (278) (7,341)

Share of results from associates and joint ventures (42) (126) (147)

(Loss) before taxation (7,057) (6,393) (12,584)

Taxation 31 31 -

(Loss) for the year (7,026) (6,362) (12,584)

Loss per share £(0.09) £(0.06) £(0.05)

4

Consolidated balance sheetAs at 31 December

2014 2015 2016£000 £000 £000

Assets

Non-current assets 33,160 45,501 156,803

Current assets 36,989 15,915 28,778

Total assets 70,149 61,416 185,581

Liabilities

Non-current liabilities (12,343) (10,194) (66,821)

Current liabilities (7,943) (7,413) (10,216)

Total liabilities (20,286) (17,607) (77,307)

Net assets 49,863 43,809 108,544

Share capital 1,111 1,113 2,713

Share premium 63,243 63,243 137,943

Share warrant reserve 85 85 85

Share based payments reserve 773 1,081 2,100

Merger reserve 331 331 331

Retained earnings (15,680) (22,044) (34,628)

Total equity 49,863 43,809 108,544

Consolidated statement of cash flowsYear ended 31 December

2014 2015 2016£000 £000 £000

Net cash utilised in operating activities (3,552) (5,360) (2,367)

Net cash (utilised in)/from investing activities (34,336) 13,782 (115,027)

Net cash from/(utilised in) from financing activities 41,788 (2,877) 124,385

Net increase in cash and cash equivalents 3,900 5,545 6,991

Cash and cash equivalents at the beginning of the year 286 4,186 9,731

Cash and cash equivalents at the end of the year 4,186 9,731 16,722

The following significant changes in the Group’s financial condition and operating results occurredin the years ended 31 December 2014, 2015 and 2016.

Revenue increased by £2.6 million (66.7 per cent.) from £3.8 million in the year ended 31December 2014 to £6.4 million in the year ended 31 December 2015. This increase was driven byorganic growth (that is, the continued expansion in CityFibre’s footprint along with the delivery ofincremental revenues from both existing and new towns and cities). Revenues from the businessmarket vertical improved by £1 million. The Group has been growing business revenues on newnetworks since the second half of 2014 when it started commercialising constructed and acquirednetworks of scale in addition to its York network. Significant growth and geographicaldiversification of revenues occurred in 2015. Gross profit increased by £2.2 million (68.5 per cent.)from £3.3 million in the year ended 31 December 2014 to £5.5 million in the year ended 31December 2015. Gross margin increased by 0.9 percentage points from 85.2 per cent. in the yearended 31 December 2014 to 86.1 per cent. in the year ended 31 December 2015, reflecting theslightly higher profitability of new business added during the period.

5

Revenue increased by £9 million (139.7 per cent.) from £6.4 million in the year ended31 December 2015 to £15.4 million in the year ended 31 December 2016. This increase was drivenby organic growth, and contributions from the KCOM and Redcentric Solutions Limited leasebackagreements, following completion of the asset acquisitions from KCOM and Redcentric SolutionsLimited in 2016. Gross profit increased by £8 million (145.2 per cent.) from £5.5 million in theyear ended 31 December 2015 to £13.5 million in the year ended 31 December 2016. Gross marginincreased by two percentage points, from 86.1 per cent. in the year ended 31 December 2015 to88.1 per cent. in the year ended 31 December 2016, reflecting the continuing addition of moreprofitable incremental new business on the assets during the period. The KCOM commitment had adirect gross margin of 83 per cent.

There has been no significant change in the Group’s financial or trading position since31 December 2016, the date of the last annual report and audited consolidated accounts of theGroup.

Selected key historical financial information of Entanet

The selected historical financial information relating to Entanet for the eleven month period ended31 December 2014 and the financial years ended 31 December 2015 and 31 December 2016 as setout in the following tables has been extracted without material adjustment from the auditedfinancial information in Part 12 of this document:

Consolidated income statement

Period ended31 December Year ended 31 December

2014 2015 2016£000 £000 £000

Turnover 25,753 31,887 35,754

Cost of sales (19,650) (24,075) (28,637)

Gross profit 6,103 7,812 7,117


Operating profit 805 3,407 714


Finance charges (1,987) (1,087) (1,136)

(Loss)/profit before taxation (1,167) 2,333 (407)

Taxation 27 298 144

(Loss)/profit for the period/year (1,140) 2,631 (263)

6

Consolidated balance sheet

As at 31 December

2014 2015 2016£000 £000 £000

AssetsNon-current assets 9,579 9,068 9,221

Current assets 5,065 10,219 8,057

Total assets 14,644 19,287 17,278

LiabilitiesNon-current liabilities (10,075) (11,545) (10,319)



Net assets 420 2,751 2,488

Equity

Share capital 25 25 25

Share premium 625 625 625

Merger reserve 300 - -

Retained earnings (530) 2,101 1,838

Total equity 420 2,751 2,488

Consolidated statement of cash flowsPeriod ended31 December Year ended 31 December

2014 2015 2016£000 £000 £000

Net cash inflow from operating activities 1,136 2,838 1,705

Net cash inflow (outflow) from investing activities 919 (561) (765)

Net cash (outflow) from financing activities (416) (1,342) (1,345)

Net increase (decrease) in cash and cash equivalents 1,639 935 (405)

Cash and cash equivalents at the beginning of the period/year 5 1,644 2,579


The following significant changes in Entanet’s financial condition and operating results occurred inthe eleven month period ended 31 December 2014, and the years ended 31 December 2015 and2016.

Turnover grew from £25.8 million in the period ended 31 December 2014 to £31.9 million in theyear ended 31 December 2015. The majority of growth was driven by increasing demand forEthernet circuits, either as standalone connectivity or as the backbone of wider network solutions.Gross profit, which excludes core network costs grew from £6.1 million in the period ended 31December 2014 to £7.8 million in the year ended 31 December 2015, representing a 24.5 per cent.gross margin. Although this was an improvement on the prior year there was an increase in marginpressure during 2015 arising from aggressive pricing by competitors, continued price deflationparticularly in smaller capacity circuits and the increasing ease with which customers can obtainonline quotes for circuits from competing wholesalers.

During 2015, an exceptional item of £1.9 million income was recognised within administrativeexpenses, being the settlement of certain claims against a former shareholder and certain partiesconnected to that shareholder. Underlying EBITDA excluding exceptional items increased to£3.1 million in the year ended 31 December 2015 at a similar margin to the prior period.

7

Turnover grew from £31.9 million in the year ended 31 December 2015 to £35.8 million in the yearended 31 December 2016. The growth was largely driven by demand for Ethernet circuits, both instandalone connectivity and in IP based network solutions. There was also significant growth inEntanet’s broadband base as a result of strong demand from a large consumer-focussed ChannelPartner. Gross profit reduced from £7.8 million in the year ended 31 December 2015 to £7.1million in the year ended 31 December 2016, representing a 19.9 per cent. gross margin. The fall ingross margin, from 24.5 per cent. in the year ended 31 December 2015, was driven predominantlyby the direct acquisition cost of the growth in the consumer broadband base. The reduction in grossmargin and increased investment in operational and developmental resources led to a reduction inunderlying EBITDA excluding exceptional items from £3.1 million in the year ended 31 December2015 to £2 million in the year ended 31 December 2016.

There has been no significant change in Entanet’s financial or trading position since 31 December2016, the date of the last annual report and audited accounts of Entanet.

The selected historical financial information relating to Entanet International for the seven weeksended 20 February 2014 as set out in the following tables has been extracted without materialadjustment from the audited financial information in Part 13 of this document:

Income statementFor the period ended

20 February 2014For the period ended

31 December 2014£000 £000

Revenue 4,072 25,753Cost of sales (2,985) (19,650)

Gross profit 1,087 6,103Administrative expenses (479) (3,876)Depreciation (65) (460)

Operating profit 543 1,767

Finance income - 19Finance expense - (5)

Profit before taxation 543 1,781Taxation (125) 30

Profit for the period 418 1,811Other comprehensive income - -

Total comprehensive profit for the period 418 1,811

Balance SheetAs at 20 February

2014As at 31 December

2014£000 £000

AssetsNon-current assets 1,318 1,853Current assets 6,196 6,713

Total assets 7,514 8,566

LiabilitiesNon-current liabilities - (202)Current liabilities (5,079) (4,118)

Total liabilities (5,079) (4,320)

Net assets 2,435 4,246

EquityIssued share capital 200 200Retained profits 2,235 4,046

2,435 4,246

8

Statement of cash flows

Net cash inflow/(outflow) from operating activities 2,028 (325)

Net cash outflow from investing activities (44) (608)

Net cash outflow from financing activities (343) (154)

Net increase/(decrease) in cash and cash equivalents 1,641 (1,087)

Cash and cash equivalents beginning of period 1,046 2,687

Cash and cash equivalents at end of period 2,687 1,600

B.8 Selected key pro forma financial information

The following unaudited pro forma statement of net assets and pro forma income statement (the“Pro Forma Financial Information”) have been prepared to show the effect on the consolidatednet assets of the Group had the Entanet Acquisition occurred on 31 December 2016 and the effecton the income statement of the Group had the Entanet Acquisition occurred on 1 January 2016.

The Pro Forma Financial Information has been prepared for illustrative purposes only and in accordancewith Annex II of the Prospectus Directive Regulation, and should be read in conjunction with the notesset out below. Due to its nature, the Pro Forma Financial Information addresses a hypothetical situationand, therefore, does not represent the Group’s actual financial position or results.

Pro forma income statement

AdjustmentsThe GroupYear ended

31 December2016 (1)

EntanetYear ended

31 December2016 (2)

Otheradjustments

(3)

Pro formaearnings of

the EnlargedGroup

£000 £000 £000 £000

Revenue 15,363 35,754 - 51,117

Cost of sales (1,827) (28,637) - (30,464)

Gross profit 13,536 7,117 - 20,653

Total administrative expenses (18,677) (6,403) (4,987) (30,067)

Operating (loss) profit (5,141) 714 (4,987) (9,414)

Finance income 45 15 - 60

Finance cost (7,341) (1,136) - (8,477)

Share of post-tax losses of equityaccounted Joint Venture

(147) - - (147)

Loss before taxation (12,584) (407) (4,987) (17,978)

Income tax - 144 - 144

Loss for the year and totalcomprehensive income (12,584) (263) (4,987) (17,834)

Notes:

1. The results of the Group for the year ended 31 December 2016 have been extracted without materialadjustment from the financial statements of the Group for the year ended 31 December 2016 set out inPart 11 of this document.

2. The results of Entanet have been extracted without material adjustment from the financial information onEntanet for the year ended 31 December 2016, set out in Part 12 of this document.

3. This adjustment comprises the estimated costs of the Entanet Acquisition and the estimated costs of thePlacing that cannot be set off against the share premium account.

4. No account has been taken of the effects of any synergies and of the costs for measures taken to achievethose synergies that may have arisen had the acquisition occurred on 1 January 2016 and that maysubsequently have affected the results of the Group in the year ended 31 December 2016.

5. No account has been taken of the trading performance of either the Group or Entanet since 31 December2016 nor of any other event save as disclosed above.

6. Save for the costs of the Entanet Acquisition and the Placing, the pro forma income statement adjustments areexpected to have a continuing effect on the Enlarged Group.

9

Pro forma statement of net assetsAdjustments

The GroupAs at

31 December2016 (1)

EntanetAs at

31 December2016 (2)

EntanetAcquisition

(3)

NetPlacing

proceeds(4)

Pro formanet assets of

the EnlargedGroup

£000 £000 £000 £000 £000

Assets

Non-current assetsProperty, plant and equipment 155,159 2,684 - - 157,843Intangible assets 1,211 6,537 15,859 - 23,607Investment in Joint Venture 433 - - - 433

156,803 9,221 15,859 - 181,883

Current assetsInventory 3,986 - - - 3,986Trade and other receivables 8,070 5,883 - - 13,953Cash and cash equivalents 16,722 2,174 (29,000) 191,013 180,909

Total current assets 28,778 8,057 (29,000) 191,013 198,848

Total assets 185,581 17,278 (13,141) 191,013 380,731

Liabilities

Non-current liabilitiesInterest bearing loans and borrowings (55,280) (10,186) 10,186 - (55,280)Deferred revenue (11,091) - - - (11,091)Deferred consideration (450) - - - (450)Deferred tax - (133) - - (133)

Total non-current liabilities (66,821) (10,319) 10,186 - (66,954)

Current liabilitiesInterest bearing loans and borrowings - (467) 467 - -Deferred revenue (2,864) - - - (2,864)Trade and other payables (7,352) (4,004) - - (11,356)

Total current liabilities (10,216) (4,471) 467 - (14,220)

Total liabilities (77,037) (14,790) 10,653 - (81,174)

Net assets 108,544 2,488 (2,488) 191,013 299,557

Notes:

1. The net assets of the Group at 31 December 2016 have been extracted without material adjustment fromthe financial statements of the Group for the year ended 31 December 2016 set out in Part 11 of thisdocument.

Adjustments

2. The net assets of Entanet have been extracted without material adjustment from the financialinformation on Entanet for the year ended 31 December 2016, set out in Part 12 of this document.

3. An adjustment has been made to reflect the estimated intangible assets arising on the EntanetAcquisition.

For the purposes of this pro forma information, no adjustment has been made to the separate assets andliabilities of Entanet to reflect their fair value. The difference between the net assets of Entanet as statedat their book value at 31 December 2016 and the estimated consideration has therefore been presentedas a single value in “Intangible assets”. The net assets of Entanet will be subject to a fair valuerestatement as at the effective date of the transaction. Actual intangible assets included in the Group’snext published financial statements may therefore be materially different from those included in the proforma statement of net assets.

The estimated consideration for Entanet is £29 million (on a debt free and cash free basis and subject toadjustments), of which a proportion will be used to repay Entanet’s indebtedness. It has been assumedthat all of the deferred consideration will be payable in cash.

10

£000

Consideration payable in cash 29,000

Repayment of debt (10,653)

Consideration for Entanet’s equity 18,347

Book value of net assets of Entanet as at 31 December 2016 (2,488)

Estimated intangible assets arising on the transaction 15,859

The repayment of debt is based on the balance outstanding at 31 December 2016. The actual balancerepaid is likely to differ from this amount.

4. The Placing will raise net proceeds of £191 million (£200 million gross proceeds less estimatedexpenses of £9 million). No account has been taken of any proceeds from the Offer for Subscription.

5. No account has been taken of the financial performance of the Group or Entanet since 31 December2016 nor of any other event save as disclosed above.

B.9 Profit forecast and Estimate

Not applicable; the Company has not made a profit forecast or estimate.

B.10 Qualification in the audit reports

Not applicable; the audit reports on the historical financial information contained in this documentare not qualified.

B.11 Working capital qualification

Not applicable; the Company is of the opinion that, after taking account of the net proceeds of thePlacing and the existing available facilities to the Group (but excluding any proceeds of the Offerfor Subscription), the Enlarged Group has sufficient working capital for its present requirements,that is for at least the next 12 months from the date of this document.

Section C – Securities

C.1 Type and class of the securities

The Capital Raising comprises an offering of ordinary shares of £0.01 in the Company.

C.2 Currency of the securities issue

The Existing Ordinary Shares are priced in Sterling, and the New Ordinary Shares will be quotedand traded in Sterling.

C.3 Shares issued/Value per share

As at the Reference Date, the Company had in issue 265,672,644 fully paid Ordinary Shares of£0.01 each.

As at the Reference Date, the Company had in issue 5,653,865 Deferred Shares of £0.01 each.

C.4 Description of the rights attaching to the securities

The New Ordinary Shares will be issued as fully paid and will rank pari passu in all respects withthe Existing Ordinary Shares, including for voting purposes and the right to receive dividends orother distributions declared, made or paid after Admission.

C.5 Restrictions on free transferability of the securities

The Ordinary Shares are freely transferable and there are no restrictions on transfer in the UK.

C.6 Admission/Regulated markets where the securities are traded

The Ordinary Shares have been admitted to trading on AIM. Application will be made to theLondon Stock Exchange for the New Ordinary Shares to be admitted to trading on AIM. Noapplication has been made or is currently intended to be made for the Ordinary Shares to beadmitted to listing or trading on any regulated market or any other exchange.

11

C.7 Dividend policy

The objective of the Directors is to achieve capital growth for Shareholders through the continuedexpansion of its fibre infrastructure. Consequently, they do not anticipate that the Company willpay dividends to Shareholders in the short to medium term. The Directors will keep this positionunder review and would intend, at an appropriate stage in the future, to pay a proportion of profitsin each year to Shareholders by way of dividend.

Section D – Risks

D.1 Summary information on the key risks that are specific to the Company or its industry

The Group’s infrastructure is used by Channel Partners and, therefore, revenues depend on ChannelPartner relationships. However, many Channel Partners have existing relationships with othernetwork providers such as Openreach. If the Group is unable to secure satisfactory relationshipswith Channel Partners, on terms favourable to the Group, it may be unable to implement itsbusiness plan in full.

The Group’s business requires the maintenance, upgrade and periodic replacement of facilities andnetworks to continue to function as expected. If there is damage to the network, the Group will berequired to incur expenses to repair the network, which depending on the issue, could besubstantial. Furthermore, as the Group’s network elements become obsolete or reach their designlife capacity, the Group’s operating and capital expenses could significantly increase depending onthe nature and extent of repairs or replacements.

Advances in the process of delivering ultrafast communications could allow the Group’scompetitors to produce products and communications infrastructure faster and more efficiently, andat a substantially lower cost than the Group. If the Group is unable to adapt or incorporatetechnological advances into its operations, its offering could become less competitive.

The deployment of the Group’s networks requires large-scale civil engineering to construct ductand fibre either below the ground or overhead via poles. The Group depends on skilled third partycontractors for the construction and maintenance of its infrastructure. The Group’s operations maybe adversely affected should there be a lack of available contract resources, higher than expectedlabour costs, under performance or insolvency of a contractor.

The Group believes that its future revenue growth depends on the its ability to provide customers withquality service that meets and then exceeds customer service expectations. Interruptions in service orperformance problems, for whatever reason, could undermine confidence in its services, damage itsreputation and consequently limit its ability to retain existing customers or attract new customers.

The communications market is regulated by Ofcom and the Communications Act 2003. Theregulatory framework may change (including as a result of the UK’s decision to leave the EuropeanUnion) in a way that may be prejudicial to the Group’s operations.

Ofcom exercises a degree of control over Openreach by imposing access conditions and chargecontrols that affect Openreach products and pricing. There is a possibility that wholesale pricingwill change and/or access conditions be amended. If these changes result in excessive orunpredicted price reductions being imposed on Openreach wholesale products, this couldnegatively affect the Company’s pricing of competitive fibre.

Ofcom is seeking to make Openreach more independent and this has led to BT agreeing to separateOpenreach into a new company within the BT group. Any adverse change or significant delays toOfcom’s proposals may adversely affect the Company’s ability to implement its business plan in full.

The market in which the Group operates is dominated by one major entity, BT, which has muchgreater capital resources than the Group. Together with Virgin Media, these competitors, amongstothers, will have significantly greater financial, technical, marketing and servicing resources thanthe Group and have longer operating histories or greater name recognition, with a more extensivenetwork and significantly larger customer bases. The Group’s relatively smaller size may thereforebe considered negatively by prospective customers. In addition, the Group’s competitors may beable to respond more quickly to changes in customer requirements and devote greater resources tothe enhancement, promotion or sale of their products.

12

The Group is currently reliant on a limited number of key customers. If the Group loses one or moreof its key customers, or if one or more of its key customers significantly decreases use of the Group’sservices, the Group’s business would be materially and adversely affected. The Group’s futureoperating results will depend on the success of these customers and its other large customers, and itssuccess in selling services to them. If it were to lose a significant portion of the revenue from any ofits top customers, the Group would not be able to replace that revenue in the short term.

The Company will in the longer term require further capital through debt or equity financing orfrom other sources. The Group may be unable to obtain additional financing on acceptable terms orat all if market and economic conditions, the financial condition or operating performance of theGroup or investor sentiment are unfavourable. The Group’s inability to raise additional fundingmay hinder its ability to grow in the longer term.

D.3 Key information on the key risks that are specific to the securities

The market price of the Ordinary Shares could be subject to significant fluctuations due to a changein sentiment in the market regarding the Ordinary Shares. The fluctuations could result fromnational and global economic and financial conditions, factors the Group does not control includingthe market’s response to the Capital Raising, and regulatory changes. Any of these events couldresult in a decline in the market price of the Ordinary Shares.

There is no assurance that the public trading market price of the Ordinary Shares will not declinebelow the Offer Price. Should that occur, Shareholders who have acquired New Ordinary Shares inthe Capital Raising and then sell their Ordinary Shares will suffer an immediate unrealised loss as aresult. Moreover, there can be no assurance that, following Shareholders’ acquisition of NewOrdinary Shares, Shareholders will be able to sell their New Ordinary Shares at a price equal to orgreater than the acquisition price for those shares.

Shareholders will experience dilution in their ownership and voting interests pursuant to the Placingwhether or not Shareholders participate in the Offer for Subscription. Shareholders who do not (orcannot) participate in the Placing will be diluted by 57.8 per cent. (excluding the impact of theOffer for Subscription) or 59.5 per cent. (assuming full take up under the Offer for Subscription).The percentage of the Company’s issued share capital that the Existing Ordinary Shares representwill be reduced by 57.8 per cent. to 42.2 per cent. as a result of the Capital Raising (excluding theimpact of the Offer for Subscription) or by 59.5 per cent. to 40.5 per cent. (assuming full take upunder the Offer for Subscription).

Section E – Offer

E.1 Total net proceeds and costs of the issue

CityFibre expects to raise net proceeds of £191 million by way of the Placing (after deduction ofestimated expenses, including underwriting commissions but excluding VAT, of approximately£9 million) and net proceeds up to £14.8 million by way of the Offer for Subscription (afterdeduction of estimated expenses of approximately £0.2 million assuming the Offer for Subscriptionis taken up in full).

E.2a Reasons for the offer/use of the proceeds

Of the net proceeds, £29 million (on a cash free debt free basis and subject to adjustments) will beused to acquire Entanet, substantially increasing the Company’s wholesale capabilities and itsrelationships with its Channel Partners, especially in the business and consumer market verticals,thereby extending CityFibre’s channels to market. CityFibre intends to apply the balance of the netproceeds to fund the growth of the Group’s full fibre network across UK towns and cities, servingthe four primary market verticals of public sector, mobile, business and consumer.

E.3 Terms and conditions of the offer

The offer in respect of the Capital Raising comprises:

i. an offer of 363,636,364 Placing Shares at the Offer Price to Placees pursuant to thePlacing; and

ii. an offer of up to 27,272,727 Offer for Subscription Shares at the Offer Price pursuant tothe Offer for Subscription.

13

The Placing is fully underwritten by the Underwriters on the terms and conditions of the UnderwritingAgreement and is conditional upon (among other things) (i) the Resolutions being passed at theGeneral Meeting, (ii) the Underwriting Agreement having become unconditional in all respects (savefor the condition relating to Admission) and (iii) Admission becoming effective by not later than8.00 a.m. on 28 July 2017 (or such later date as the Company and the Underwriters may agree).

The Underwriting Agreement may be terminated by the Underwriters prior to Admission upon theoccurrence of certain specified events, in which case neither the Placing nor the Offer forSubscription will proceed.

The Placing

The Company is offering 363,636,364 Placing Shares (representing 136.9 per cent. of the Company’sexisting issued share capital and 55.4 per cent. of the Company’s enlarged issued share capitalimmediately following completion of the Capital Raising, assuming that the Offer for Subscription istaken up in full) as part of the Placing to certain Shareholders and prospective institutional investors.

The Placing is to be made at the Offer Price. The Offer Price represents a 9.09 per cent. discount to theclosing price of 60.50 pence per Ordinary Share on 4 July 2017 (being the last Business Day beforeannouncement of the Capital Raising). The Offer Price in respect of Placing Shares is payable in fullupon Admission, which is expected to become effective at 8.00 a.m. on 28 July 2017.

The Placing will raise gross proceeds of £200 million.

The Placing is fully underwritten by the Underwriters on the terms and conditions of theUnderwriting Agreement. The Placing Shares will be placed with certain Shareholders andprospective institutional investors in transactions exempt from, or not subject to, the registrationrequirements of the US Securities Act.

The Placing Shares will rank pari passu in all respects with each other and all Existing OrdinaryShares, and the Offer for Subscription Shares, as well as for voting purposes and the right to receivedividends or other distributions declared, made or paid after Admission.

The Offer for Subscription

Up to 27,272,727 Offer for Subscription Shares are being made available under the Offer forSubscription at the Offer Price (representing 10.3 per cent. of the Company’s existing issued sharecapital and 4.2 per cent. of the Company’s enlarged issued share capital immediately followingcompletion of the Capital Raising, assuming in both cases that the Offer for Subscription is takenup in full). Applications under the Offer for Subscription must be for a minimum of 2,000 Offer forSubscription Shares (the “Minimum Subscription”) and thereafter in multiples of 2,000 Offer forSubscription Shares. Any application for less than the Minimum Subscription or which is not for amultiple of 2,000 Offer for Subscription Shares will be rejected.

The Offer for Subscription will raise gross proceeds of up to £15 million.

The Placing has been fully underwritten by the Underwriters. The Offer for Subscription is notbeing underwritten by the Underwriters or anyone else.

Application will be made for the Offer for Subscription Shares to be admitted to trading on AIM. Itis expected that Admission will become effective on 28 July 2017 and that dealings for normalsettlement in the Offer for Subscription Shares will commence at 8.00 a.m. on 28 July 2017.

The Offer for Subscription Shares will rank pari passu in all respects with each other and allExisting Ordinary Shares, and the Placing Shares, as well as for voting purposes and the right toreceive dividends or other distributions, made or paid after Admission.

E.4 Interests that are material to the issue/Conflicting interests

Not applicable; there is no interest that is material to the Capital Raising.

E.5 Selling Shareholders and lock-up arrangements

Not applicable; there are no selling Shareholders nor lock-up arrangements in relation to the CapitalRaising.

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E.6 Dilution

Following completion of the Capital Raising, Shareholders who do not (or cannot) participate in thePlacing will suffer a dilution of approximately 57.8 per cent. pursuant to the Placing (excluding theimpact of the Offer for Subscription) or 59.5 per cent. (assuming full take up under the Offer forSubscription).

E.7 Estimated expenses charged to the investor

Not applicable; the Company will not directly charge any expenses to the investors.

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RISK FACTORS

Any investment in the New Ordinary Shares is subject to a number of risks and uncertainties. Prior to investingin the New Ordinary Shares, prospective investors should carefully consider the factors, risks and uncertaintiesassociated with any such investment, the Group’s business, strategy and the industry in which it operates,together with all other information contained in this document including, in particular, the risk factors describedbelow. Prospective investors should note that the risks and uncertainties identified in the Summary are the risksand uncertainties that the Directors believe to be the most relevant to an assessment by a prospective investor ofwhether to consider an investment in the New Ordinary Shares. However, as the risks and uncertainties whichthe Group faces relate to events and depend on circumstances that may or may not occur in the future,prospective investors should consider not only the information on the key risks summarised in the Summary butalso, among other things, the risks and uncertainties described below.

The following is not an exhaustive list or explanation of all risks that prospective investors may face whenmaking an investment in the New Ordinary Shares and should be used as guidance only. The order in which risksare presented is not necessarily an indication of the likelihood of the risks actually materialising, of the potentialsignificance of the risks or of the scope of any potential harm to the Group’s business, operating results,financial condition, prospects or future operations. Additional risks and uncertainties relating to the Group thatare not currently known to the Group, or that the Group currently deems immaterial, may individually orcumulatively also have a material adverse effect on the Group’s business, operating results, financial condition,prospects or future operations. If any of the risks referred to below, or any new risks, should materialise, theprice of the New Ordinary Shares may decline and investors could lose all or part of their investment. Investorsshould carefully consider whether an investment in the New Ordinary Shares is suitable for them in the light ofthe information in this document and their personal circumstances.

Part A: Risks Relating to the Company

The Group’s business is dependent on establishing and maintaining relationships with Channel Partners whocan use its fibre infrastructure

The Group’s infrastructure is used by Channel Partners and, therefore, revenues depend on Channel Partnersrelationships. However, many Channel Partners have existing relationships with other network providers such asOpenreach. Although the Directors believe the Group’s fibre infrastructure and wholesale product portfolio isattractive to Channel Partners, if the Group is unable to secure satisfactory relationships with Channel Partners,on terms favourable to the Group, it may be unable to implement its business plan in full.

Moreover, Channel Partners may in the future decide to provide their own infrastructure rather than relying, forexample, on that of the Group, which would adversely affect the Group’s operations. Any failure by the Group toestablish and maintain relationships with relevant Channel Partners may have a material adverse effect on theGroup’s business, operating results, financial condition, prospects or future operations.

The growth of the Group’s business is partly reliant on procuring contracts with public sector bodies

The Group intends to enter into contracts with public sector ICT providers, local councils and other publicbodies, amongst other types of customer. Public sector contracts may be subject to formal procurementprocesses, which are competitive and may cause delays to the implementation of the Group’s business plan.Furthermore, the local council or public body may operate with only a pre-qualified framework of suppliers,which may exclude the Group.

Any delay or failure to win public sector contracts may have a material adverse effect on the Group’s business,operating results, financial condition, prospects or future operations.

Additionally, future budgetary cuts could reduce public sector appetite for fibre contracts, thereby having anegative impact on the Group’s results.

Contracts awarded pursuant to public procurement may be open to challenge or termination

Contracts awarded pursuant to public procurement may, in some circumstances, be open to challenge by thirdparties claiming a breach of procurement rules or that payments made under the contract constitute state aid inviolation of applicable laws and regulations. In the event that a public sector contract awarded to the Group, or toa private sector Channel Partner to the Group, is challenged, the Group may suffer delays in implementing theproject or the contract may be terminated if the challenge is successful.

Loss of one or more contracts awarded by public procurement or otherwise may have a material adverse effect onthe Group’s business, operating results, financial condition, prospects or future operations.

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The Group’s business is dependent upon the on-going maintenance, upgrading, and replacement of itsnetwork, components and facilities

The Group’s business requires the maintenance, upgrade and periodic replacement of facilities and networks tocontinue to function as expected in a cost-effective manner. This requires both management time as well ascapital expenditure.

If there is damage to the network, the Group will be required to incur expenses to repair the network which,depending on the issue, could be substantial. Furthermore, as the Group’s network elements become obsolete orreach their design life capacity, the Group’s operating and capital expenses could significantly increasedepending on the nature and extent of repairs or replacements.

Additionally, the operation of the network requires the coordination of specialist hardware and software. Failureof the Group to maintain or appropriately operate this could render a fibre system unable to perform at designspecifications, or at all, which could lead to further interruptions and impacts on business continuity. This couldhave an adverse effect on the Group’s ability to implement the business plan and in some cases may have amaterial adverse effect on the Group’s business, operating results, financial condition, prospects or futureoperations.

Exclusivity requirements in future agreements may adversely affect the Group’s business

As part of the Company’s strategy to grow using anchor tenant contracts, the Group at times may provideservices to these tenants on an exclusive basis for a defined period of time. This could limit the potential to fullyleverage and commercialise the assets across the network during that time period which may adversely affect theability to implement the business plan in full.

The Group has incurred operating losses in the past, and it may not be able to achieve or subsequentlymaintain profitability

Since the Group’s inception, it has incurred significant operating losses, and, as of 31 December 2016, the Grouphad retained losses of £34.6 million. Although the Group’s revenue has grown rapidly, increasing from£3.8 million in 2014 to £15.4 million in 2016, the Directors believe that the Group’s future revenue growth willdepend on, among other factors, its ability to execute its strategies set out elsewhere in this document.Accordingly, investors should not rely on the revenue growth of any prior period as an indication of the Group’sfuture performance. If the Group is unable to generate adequate revenue growth and to manage its expenses, itmay continue to incur losses in the future and may not be able to achieve or maintain profitability.

Slow-down in demand for the Group’s infrastructure may have an adverse impact on the Group’s business

Data communications is an active area of research and development and new technologies may develop.Advances in the process of delivering ultrafast communications could allow the Group’s competitors to produceproducts and communications infrastructure faster and more efficiently, and at a substantially lower cost than theGroup. If the Group is unable to adapt or incorporate technological advances into its operations, its offeringcould become less competitive, which would have a materially adverse effect on the Group’s business, operatingresults, financial condition, prospects and future operations.

The construction of the Group’s fibre infrastructure requires availability of skilled contractors, significantexpenses and is subject to risks that could lead to disruptions in its services, cost overruns and unexpectedcapital expenditures

The deployment of the Group’s networks requires large-scale civil engineering to construct duct and fibre eitherbelow the ground or overhead via poles. The Group seeks to mitigate construction risks by entering intopartnerships with civil engineering contractors; however, to do so the Group depends on skilled third partycontractors for the timely construction and maintenance of its infrastructure in accordance with internationalstandards of quality and safety. Whilst this model ensures that the correct skills are leveraged, the Group’soperations may be adversely affected should there be a lack of available contract resources, higher than expectedlabour costs, under performance of a contractor or the insolvency of the contractor.

In addition, the Group may face delays, cost overruns or penalties should the process of construction be delayedor disrupted, or if the costs of materials and labour are subject to unforeseen increases. Any of these factors,alone or in combination, may have a material adverse effect on the Group’s business, operating results, financialcondition, prospects or future operations.

If the Group is unable to maintain a high level of customer service, customer satisfaction and demand for theGroup’s services could suffer

The Group believes that its future revenue growth depends on its ability to provide customers with qualityservice that not only meets the Group’s stated commitments, but meets and then exceeds customer service

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expectations. Interruptions in service or performance problems, for whatever reason, could undermine confidencein its services, damage its reputation and consequently limit its ability to retain existing customers or attract newcustomers. The service the Group provides may be subject to failure resulting from a variety of factors whichmay be under the Group’s control. This may include human error, equipment failure, power loss, failure ofmonitoring systems and maintenance activities, failure of services related to the internet and telecommunicationsprovided by the Group, physical or electronic security breaches, as well as factors not under the Group’s control,such as sabotage, vandalism, system failures of network service providers, fire, earthquake, flood and othernatural disasters, water damage, fibre optic cable cuts, power loss not caused by the Group, improper buildingmaintenance by the landlords of the buildings in which the equipment is located, and terrorism. In particular, afailure of the Group’s operations support systems could adversely affect its ability to process orders andprovision sales, and to bill for services efficiently and accurately, all of which could cause the Group to suffercustomer dissatisfaction, loss of business, loss of revenue or the inability to add customers on a timely basis, anyof which would adversely affect the Group’s ability to generate revenue and negatively impact its operatingresults.

In addition, because many of the Group’s services are critical to its customers’ businesses, a significantinterruption in service could result in lost profits or other loss to customers. Although the Group attempts todisclaim liability for these losses in its service agreements, a court might not enforce a limitation on liabilityunder certain conditions, which could expose the Group to financial loss. In addition, the Group often providescustomers with guaranteed service level commitments. If it is unable to meet these guaranteed service levelcommitments for whatever reason, it may be obligated to provide its customers with credits, generally in theform of free service for a short period of time, which could negatively affect its operating results and the Groupmay be exposed to other liabilities.

The Group’s ability to build its fibre infrastructure is dependent on receiving wayleaves, licences and permits

The Group requires a number of permits to allow it to install and operate infrastructure. Whilst the Group holdsan Ofcom Code Powers licence giving nationwide authority for construction in public land, wayleave agreementswill be required where the network is routed across private land. In addition, the Group’s ability to access publicland relies on it retaining its Ofcom Code Powers licence. There is no certainty that such wayleaves or licenceswill be granted to the Group or in certain cases if granted may lapse or be revoked, which in any such case maydelay or inhibit the implementation of the Group’s business plan in full.

The Group’s business model contemplates that its fibre infrastructure will be used by customers inconjunction with third party communication networks that it does not control

It is the Directors’ intention that, in the future, the Group’s infrastructure will be used in conjunction withcommunications networks that are owned and operated by third parties which the Group does not control. Forexample, Ofcom is currently carrying out a review with regard to Openreach opening up access to its ducts andpoles and the Group in the future may rely in part on access to this infrastructure. Ofcom has agreed in principlethat other operators may have access to Openreach’s ducts and poles, subject to restrictions against usage. Aconsultation is ongoing to relax these restrictions but this consultation is not yet complete. If access is denied ordelayed, or is not made available on commercially attractive and viable terms, or there are performance failureson the part of any of these networks, it may have a material adverse effect on the Group’s business, operatingresults, financial condition, prospects or future operations.

The Group may be adversely affected by changes to industry-specific government regulations and regulatoryframework, as well as changes to other applicable laws and regulations

The communications market is regulated by Ofcom and the Communications Act 2003. The regulatoryframework may change (including as a result of the UK’s decision to leave the European Union) in a way thatmay be prejudicial to the Group’s operations. If the Group is in breach of any of the regulations it may face acensure or fine which may have a material adverse effect on the Group’s business, operating results, financialcondition, prospects or future operations.

Due to Openreach’s significant market power, Ofcom exercises a degree of control over Openreach by imposingaccess conditions and charge controls that affect Openreach products and pricing. Due to periodic market reviewsconducted by Ofcom and a number of external factors in the UK communications market (see “market changes”immediately below) there is a possibility that wholesale pricing will change and/or access conditions beamended. If these changes result in excessive or unpredicted price reductions being imposed on Openreachwholesale products, this could negatively affect the Company’s pricing of competitive fibre products and have amaterial adverse effect on the Group’s business, operating results, financial condition, prospects or futureoperations.

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Changes in laws or regulations (or the interpretation of such laws or regulations), or national government or EUpolicy affecting the Group’s activities and/or those of its customers and competitors, include regulation of pricesand interconnection arrangements, regulation of access arrangements to types of infrastructure, decreasingrevenue, increasing costs or impairing its ability to offer services. In addition, many of the Group’s customersand competitors, especially incumbent local access network service providers, are subject to a wide range ofregulations. These regulations could change from time to time in ways that are difficult to predict.

Market changes, including those driven by Ofcom’s Digital Communications Review, or changes in thecompetitive dynamics of markets affecting the Group’s business may adversely affect the Group’s business

In accordance with its Digital Communications Review, published in February 2016, Ofcom is seeking toimplement new regulation to promote greater investment in fibre and establish sustainable competition to deliverchoice, quality and affordable prices. Linked to this, Ofcom is consulting on new price regulation and accessconditions relating to Openreach’s broadband infrastructure, as well as establishing proposals for better access toOpenreach’s ducts and poles. The proposed regulations will not be implemented until early 2018, and are subjectto change and appeal. Furthermore, Ofcom’s strategy to promote competition and investment in fibreinfrastructure, whilst supportive of the Group’s aims, might encourage new entrants to the market therebychanging the competitive landscape in which the Group operates.

Ofcom is seeking to make Openreach more independent and this has led to BT agreeing to separate Openreachinto a new company within the BT group. Whilst the proposed direction of regulation, including the separation ofOpenreach, is supportive of the Group’s objectives, any adverse change or significant delays to Ofcom’sproposals may adversely affect the Company’s ability to implement its business plan in full, which could have amaterial adverse effect on the Group’s business, operating results, financial condition, prospects or futureoperations.

Furthermore, the communication sector is subject to mergers and consolidation. BT’s recent acquisition of EELimited in 2016 is an example of this. It is possible that further mergers or acquisitions will occur and this mightaffect the structure of the market in which the Group operates, or it may adversely affect the willingness of someproviders to transact with the Group which might adversely affect the Group’s operations.

The recent general election in the UK may result in changes to government policy described in this document

The statements in this document regarding government policy are attributable to the UK government in placeprior to the general election held in the United Kingdom on 8 June 2017 (“General Election”). Whilst theDirectors believe the statements of policy are likely to remain unchanged under the current government, therecan be no assurance of this. Given the uncertainties arising from the results of the General Election, and thepossibility of there being a further general election in the UK in short to medium term, there can be no guaranteethese policies will remain in place. However, the manifestos for all the major UK political parties contain acommitment to improve broadband infrastructure in the UK, although policies may differ in this respect.

The Group’s business is subject to rapidly evolving technologies, and updating its own technology accordingly

The data communications industry is subject to rapid and significant changes in technology, evolving industrystandards, changing customer needs, emerging competition and frequent new product and service introductions.If the Group does not replace or upgrade its technology and equipment that becomes obsolete, there could be anadverse impact on business continuity. Additionally, if the technology choices it makes prove to be incorrect,ineffective or unacceptably costly, the Group will be unable to compete effectively because it will not be able tomeet the expectations of its customers, which may have a material adverse effect on the Group’s business,operating results, financial condition, prospects or future operations.

The Group competes with companies with significantly greater financial and other resources and may facenew competitors or new forms of competition

The market in which the Group operates is dominated by one major entity, BT, which has much greater capitalresources than the Group. Virgin Media, another major provider of broadband infrastructure, has announcedplans to expand its network to more homes. These competitors, amongst others, will have significantly greaterfinancial, technical, marketing and servicing resources than the Group and have longer operating histories orgreater name recognition, with a more extensive network reach and significantly larger installed customer bases.As a result, many of the Group’s competitors can raise capital at a lower cost than the Group can, and they maybe able to adapt more swiftly to new or emerging technologies and changes in customer requirements, takeadvantage of acquisition and other opportunities (including regulatory changes) more readily, and devote greaterresources to the development, marketing and sale of products and services than the Group can. The Group’srelatively smaller size may therefore be considered negatively by prospective customers. In addition, the Group’scompetitors may be able to respond more quickly to changes in customer requirements and devote greaterresources to the enhancement, promotion or sale of their products.

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The Group’s competitors may announce or develop new products, services or enhancements, or be able to offerservices at a much reduced cost, compared to the Group. In addition, new competitors or alliances amongcompetitors could emerge. This increased competition may cause price reductions, reduced gross margins, failureto secure projects and loss of market share, any of which could have a material adverse effect on the Group’sbusiness, financial condition and results of operations.

A significant portion of the Group’s revenue comes from a limited number of customers

Although the Group has approximately 500 long term contracts, it is currently reliant on a limited number of keycustomers, with approximately 50 per cent. of its revenue for the year ended 31 December 2016 generated fromits four top customers. Although the Group is confident that the quality its services provide should continue tomake those relationships successful, there is no assurance that will be the case.

If the Group loses one or more of its major customers, or if one or more of its major customers significantlydecreases use of the Group’s services, the Group’s business would be materially and adversely affected. TheGroup’s future operating results will depend on the success of these customers and its other large customers, andits success in selling services to them. If it were to lose a significant portion of the revenue from any of its topcustomers, the Group would not be able to replace that revenue in the short term.

Certain of the Group’s customers may be subject to solvency risks

The Group is reliant upon its contracts with various customers including but not limited to public authorities,Channel Partners and mobile network operators. As a result, any change to the financial health and/or solvency ofany of these customers could adversely affect the business and operating results of the Group.

The Company may have limited bargaining power with its customers in the negotiation of its customer andpartner contracts

The Group’s contracts may lack uniformity or be based upon the terms and conditions set by its customers. TheGroup’s customers include public authorities, Channel Partners and mobile network operators some of whomwill have substantial purchasing power and negotiating leverage. As a result, the Group may negotiate contractson a case-by-case basis and, in order to close a transaction, may sometimes accept onerous contract terms.Although the Directors consider that the terms negotiated with its customers and partners have, to date, beenbeneficial to the Group, there can be no guarantee that this will continue to be the case. If the Group is unableeffectively to negotiate with key customers and partners, the business and operating results of the Company maybe adversely affected.

The Group acquired certain of its assets prior to their former owner going into liquidation, which assets couldtherefore be the subject of claims

The Company’s business was initially founded through the acquisition of various companies in January 2011from i3 Group Limited (known as Earlestown Technology Limited as of 10 May 2011) (“i3 Group”). i3 Groupwent into administration in May 2011, and subsequently, in May 2012, went into liquidation and was dissolvedon 20 November 2015. One of the companies acquired was H2O Networks Limited (“H2O Networks”). H2ONetworks went into administration on 18 April 2011, and, in April 2012, went into and remains in liquidation.On 18 April 2011 CityFibre Networks Limited acquired all the business and assets of H2O Networks from theadministrators by way of a “pre-pack” sale. The liquidators and administrators of each of i3 Group and H2ONetworks could investigate the affairs of each company prior to their appointment, and the liquidators willreview the conduct of the administrators. To date, the Group has not received notice of any claims. The latestliquidators report for H2O Networks states that investigations have now concluded with no further recoveries forcreditors. Although now unlikely it remains possible that the liquidators could look to bring claims against theGroup in relation to the transaction described above if they felt there were grounds for challenging them. Ifsuccessful, any such claims could have a material adverse effect on the Group’s business, operating results,financial condition, prospects or future operations. In addition, certain individuals employed by H2O Networksprior to its acquisition by the Group were investigated and one was successfully prosecuted by the Serious FraudOffice (“SFO”) for various fraudulent offences carried out prior to the acquisition of H2O Networks by theGroup. None of the CityFibre group of companies (other than H2O Networks), the Directors, nor any CityFibregroup employees have, to the best of the knowledge and belief of the Directors, been investigated by the SFO inrespect of these matters.

The Group may not be able to achieve anticipated economies of scale

The Group expects that economies of scale will allow it to increase revenues while incurring incremental coststhat are proportionately lower than those applicable to its existing business. If the increased costs required tosupport its revenue growth turn out to be greater than anticipated, it may be unable to improve its profitability

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and/or cash flows even if revenue growth goals are achieved. In addition, improvements in its cost structure inthe short term may become more difficult as the amount of potential savings decreases due to the success of pastsavings initiatives.

The Group’s strategy longer term will require additional funds and the Group may be unsuccessful in raisingsuch additional funds on attractive terms or at all

In order successfully to pursue its strategy, the Company will in the longer term require further capital throughdebt or equity financing or from other sources. Any additional equity financing may be dilutive to holders ofOrdinary Shares and any debt financing beyond the Facilities, if available, may require restrictions to be placedon the Group’s future financing and operating activities. The Group may be unable to obtain additional financingbeyond the Facilities on acceptable terms or at all if market and economic conditions, the financial condition oroperating performance of the Group or investor sentiment (whether towards the Group in particular or towardsthe market sector in which the Group operates) are unfavourable. The Group’s inability to raise additionalfunding may hinder its ability to grow in the longer term.

The CFHL Group is subject to financial covenants that could limit its financial and operating flexibility,which could materially and adversely affect its business, financial condition and results of operations

The Facility Agreement contains financial covenants which could limit the CFHL Group’s ability to plan for, orreact to, market conditions, as well as adversely affect its ability to make strategic acquisitions, investments orother capital needs, pursue business opportunities and engage in other business activities that may be in its bestinterests. Such limits placed on its financial and operating flexibility could materially and adversely affect itsbusiness, financial condition and results of operations.

Fluctuations in interest rates and LIBOR may negatively impact the financial prospects and profitability of theCFHL Group

The interest rate payable under the Facility Agreement is linked to LIBOR. Although the Group has put in placean interest rate hedging strategy, fluctuations in interbank interest rates and LIBOR are influenced by factorsoutside of the CFHL Group’s control (such as the fiscal and monetary policies of governments, central banks andUK and international political and economic conditions) and can affect the CFHL Group’s financial prospectsand profitability.

The Group may not be able to retain its key management personnel or attract additional skilled managementpersonnel, and it also expects to be reliant on sub-contractors and contract workers

The Group’s success depends to a significant degree upon the continued contributions of the Executive Directorsand other key personnel. The Group’s future performance will be substantially dependent on its ability to retainand motivate such individuals. The loss of the services of the Executive Directors or of other key personnel couldprevent the Group from executing its business strategy.

Moreover, the Group’s future success depends in part on its ability to hire, train and retain key, skilled personnel,and the Group competes with a number of other organisations for suitable personnel. If the Group fails to retainand hire a sufficient number and type of personnel, it will not be able to maintain and expand its business. TheGroup may be required to increase spending to retain personnel.

In addition to full-time employees, the Group intends to utilise temporary contract workers provided bysub-contractors. There can be no assurance that the Group will be able to engage them on reasonable terms. Anydisruption in the steady and regular supply of workers may adversely affect the Group’s business.

In addition, the Group’s business expects to rely on a number of third party companies. The failure or inability ofcertain of these companies to provide the required services efficiently could disrupt the Group’s operations andhave an adverse effect on the Group’s results of operations.

The Group’s future growth and prospects, and implementation of its strategy, will depend on its ability tomanage the Group’s growth effectively, including in relation to its acquisitions

The ability of the Group to implement its strategy requires effective planning and management of controlsystems. The Group’s growth plans may place a significant strain on its management and operational, financialand personnel resource. Therefore, the Group’s future growth and prospects will depend on its ability to managethis growth.

The Group has in the past, and may in the future, pursue acquisitions to grow its business. The process ofintegrating acquisitions with the Group’s business so that the consolidated business operates as efficiently aspossible requires significant corporate resources, and such efficiencies will be limited to some degree by the

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Group’s debt facilities from time to time. In addition, this process could cause the interruption to, or a loss ofmomentum in, the activities of the Group’s or the Group’s acquired businesses, including customer service,which could have a material adverse effect on its business, operating results, financial condition, prospects, andfuture operations. The management of the integration of the businesses, systems and culture of the Group’sacquisitions requires the continued development of its financial and management controls, including theintegration of information systems and structure, the integration of product offerings and customer base, theintegration of networks, the retention of current personnel and the training of new personnel, all of which coulddisrupt the timeliness of financial information, place a strain on the Group’s management resources and requiresignificant expenditure. Any significant diversion of management’s attention or any major difficultiesencountered in the integration of the business such as insufficient revenue to offset expenses, inadequate returnof capital, and issues not identified in the Company’s pre-acquisition due diligence process, could have a materialadverse effect on its business, operating results, financial condition, prospects, and future operations.

The Group’s insurance coverage may be inadequate to cover all losses or liabilities that may arise

The Group maintains business interruption risk insurance and public liability insurance. It relies on its contractorsto have in place sufficient and appropriate insurance cover in respect of the work they carry out.

The occurrence of an event for which the Group is not insured or is inadequately insured may have a materialadverse effect on the Group’s business, operating results, financial condition, prospects or future operations.

Economic conditions and an economic downturn could adversely affect the Company’s business

Any economic downturn either globally, nationally or locally in any area in which the Group operates may havean adverse effect on the demand for the Group’s products and services. A more prolonged economic downturnmay lead to an overall decline in the volume of the Group’s sales, restricting the Group’s ability to realise aprofit. The markets in which the Group offers its products and services are directly affected by many national andinternational factors that are beyond the Group’s control.

Changes in tax legislation could adversely affect the Group

The Company does not currently pay corporation tax nor does it anticipate doing so in the short to medium termon account of the tax reliefs available, primarily relating to brought forward losses and capital allowances. Anychange in tax legislation concerning utilisation of brought forward trading losses, capital allowances and/ornon-domestic rate relief for the use of fibre infrastructure, may accelerate the time in which the Group is requiredto pay tax. This may have a material adverse effect on the Group’s business, operating results, financialcondition, prospects or future operations.

Terrorist attacks, cyber attacks or other acts of violence or war, or other events outside the Group’s control,may adversely affect the Group’s business either directly or by adversely affecting the Group’s ability to obtainfinancing

Significant terrorist attacks against the UK are possible. Since data communications networks and equipmentmay be considered critical infrastructure, it is possible that the Group’s physical facilities or network controlsystems (and third party infrastructure on which the Group relies) could be the target of such attacks, or that suchattacks could impact other data communications companies in a manner that disrupts the Group’s operations.These concerns also could lead to volatility or illiquidity in world financial markets and could cause consumerconfidence and spending to decrease or otherwise adversely affect the economy. These events could adverselyaffect the Group’s business and its ability to obtain financing on favourable terms.

Unauthorised access to CityFibre’s infrastructure from outside parties (such as computer hackers or cyberterrorists) intent on extracting information, corrupting information or disrupting business processes could disruptbusiness and could result in a loss of assets, loss of data, litigation or arbitration claims or reputational damage,any of which may have a material adverse effect on the Group’s business, operating results, financial condition,prospects or future operations.

Likewise, the Group’s operations may be adversely affected by other risks outside its control including labourunrest, civil disorder, war, subversive activities or sabotage, fires, floods, explosions or other catastrophes,epidemics or quarantine restrictions or other events of force majeure that are, by their nature, out of the Group’scontrol.

Moreover, it is becoming increasingly difficult to obtain adequate insurance for losses incurred as a result ofterrorist attacks and certain other events at reasonable rates. In some cases, such insurance may not be available.

If any such event should occur, and the Group is not insured for such an event, it could have a material adverseeffect on the Group’s business, operating results, financial condition, prospects or future operations.

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The Group may become subject to future litigation

The Group’s industry is subject to legal claims, with and without merit. The Group may become involved in legaldisputes in the future (including legal disputes with industry regulators). Defence and settlement costs can besubstantial, even with respect to claims that have no merit, and they may distract management from pursuing theCompany’s strategy. Due to the inherent uncertainty in the litigation process, there can be no assurance that theresolution of any particular legal proceeding will not have a material adverse effect on the Group’s financialposition or results of operations.

New accounting standards, amendments to standards and interpretations which have been issued but are notyet effective could adversely impact the presentation of the Group’s operating results and financial condition

New accounting standards, amendments to standards and interpretations which have been issued but are not yeteffective (and in some cases had not been adopted by the EU) for the financial year beginning 1 January 2016,including IFRS 15 which relates to accounting for revenues arising from contracts with customers, have not beenadopted in preparing the financial statements of the Group included in Part 11 of this document. The implicationsof these new accounting standards on the Group have not yet been fully evaluated. The main accountingstandards which may be relevant to the Group are set out in note 1 to the Group’s financial statements as at andfor the year ended 31 December 2016 as set out in Part 11 of this document. Once implemented, these newaccounting standards could adversely impact the presentation of the Group’s operating results and financialcondition.

Part B: Risks Related to the Entanet Acquisition

The Entanet Acquisition may not complete

Completion of the Entanet Acquisition is subject to the satisfaction of a number of conditions precedentcontained in the Entanet Acquisition Agreement including, but not limited to, the approval of the Capital Raisingby the Shareholders at the General Meeting and Admission. If Shareholders do not approve the Capital Raising atthe General Meeting or another condition is not satisfied, or if the Entanet Acquisition Agreement is terminatedbecause of a material breach, the Entanet Acquisition will not complete, which may adversely affect the Group’sability to realise its strategy in the timescale anticipated which in turn may have a material adverse effect on theGroup’s business, operating results, financial condition, prospects or future operations.

The Group may not be able fully to realise the benefits of the Entanet Acquisition

The Group’s success will partially depend upon its ability following the Entanet Acquisition to integrate Entanetwithout significant disruption to the Group’s or Entanet’s business. The Entanet Acquisition may divertmanagement’s attention from the ordinary course operation of the business and raise unexpected issues and maytake longer or prove more costly than anticipated. Although the Directors believe that such disruption is unlikely,issues may come to light during the course of integrating Entanet into the Group that may have an adverse effecton the financial condition and results of operations of the Group. There is no assurance that the Company willrealise the potential benefits and cost synergies of the Entanet Acquisition including, without limitation,attracting new Channel Partners to and recurring revenue from the Company’s network to the extent and withinthe time frame contemplated. It may also take longer than anticipated to migrate connections from Entanet’sexisting networks to CityFibre’s network. Furthermore, the Company may be unable to migrate as manyconnections as anticipated, thus depriving the Group of some of the anticipated benefits of the EntanetAcquisition. If the Company is unable to integrate Entanet successfully into the Group then this could have asignificantly negative impact on the Group’s business, operating results, financial condition, prospects or futureoperations.

The Group’s success will partially depend on there being no adverse change in Entanet’s business between thedate of this document and the date of the completion of the proposed Entanet Acquisition.

The Group may fail to retain Entanet’s key personnel

The calibre and performance of Entanet’s senior management and other key employees is critical to the successof securing the benefits of the Entanet Acquisition. While key Entanet personnel will be eligible to participate inthe Group’s share incentive plans, there can be no assurance that the Entanet Acquisition will not result in thedeparture of key personnel from Entanet. If there were a departure of a significant number of management or keyemployees and the Group were not able to attract or develop suitable replacements, it may have an adverse effecton the Company’s ability to execute its strategy in respect of Entanet, which in turn, may have a material adverseeffect on the Group’s business, operating results, financial condition, prospects or future operations.

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The Entanet Acquisition may complete even if there is an adverse change or development in respect ofEntanet, which may affect the value of Entanet, the Group and the Ordinary Shares

Once the Resolutions have been passed at the General Meeting, the Company will be committed to proceed withthe Entanet Acquisition, subject only to rights of termination and the other conditions under the EntanetAcquisition Agreement. The Company has rights to terminate the Entanet Acquisition Agreement if, prior tocompletion, certain events occur or warranties are breached that have a material adverse effect on Entanet.Accordingly, the Entanet Acquisition may proceed even if there is an adverse event or development in respect ofEntanet which either falls short of this test or in circumstances where the Company determines to proceed in anyevent with the acquisition. In the event that the Entanet Acquisition completes and there is a factor of which theCompany is not aware, an adverse event affecting the value of Entanet occurs or the value of Entanet’s businessdeclines prior to completion, the value of Entanet’s business purchased by the Company may be less than theconsideration agreed to be paid by the Company and, as a result, the net assets of the Group could be adverselyaffected. There can be no assurance that the Company would be able to renegotiate the consideration paid forEntanet in such circumstances and the Company may, therefore, pay an amount in excess of fair value forEntanet. A potential payment in excess of fair value may have a material adverse effect on the Group’s business,operating results, financial condition, prospects or future operations. In addition, if a material adverse eventoccurs following completion of the Entanet Acquisition, the price of the Ordinary Shares may be adverselyaffected. Conversely, if the Company exercises its right to terminate the Entanet Acquisition prior to completionfor a material breach, the price of the Ordinary Shares may be adversely affected.

Recourse under the Entanet Acquisition Agreement is limited monetarily and by time

The Company is relying on warranties, covenants and indemnities given by certain of the Sellers under theEntanet Acquisition Agreement. The Company’s recourse under the Entanet Acquisition Agreement for lossesand liabilities resulting from breach of any such warranty or covenant, or for amounts covered under indemnities,is subject to the monetary caps and time limitations specified in that agreement. In addition, the Company hasalso taken out warranty and indemnity insurance to cover certain warranties (up to the agreed limits in suchinsurance policies). Whilst the Company has carried out an extensive due diligence investigation of Entanet, anysuch investigation is limited by the information provided and involves an assessment by management of thenature, magnitude and likelihood of known potential losses and liabilities. The Company cannot assureShareholders that its investigation and due diligence of Entanet has uncovered all events or conditions that mightresult in future losses or liabilities or that any known potential losses or liabilities have been fully addressedunder the relevant provisions in the Entanet Acquisition Agreement. As a result, after completion of the EntanetAcquisition, the Group may suffer losses or incur liabilities for which it has limited or no recourse. Furthermore,if any such losses or liabilities exceed the monetary caps, or became known to the Company after expiry of therelevant time periods within which claims can be brought, each as specified in the Entanet AcquisitionAgreement, the Company may not have any recourse under the Entanet Acquisition Agreement. While theCompany has obtained warranty and indemnity insurance in respect of certain of the warranties in the EntanetAcquisition Agreement, its ability to recover under such insurance is also limited and subject to exclusions. If theCompany was required to bear such losses or liabilities itself, subject to the quantum of such losses or liabilities,it may have a material adverse effect on the Group’s financial position in the medium-to-long term.

Entanet may require greater medium-term expenditure than currently estimated by Entanet’s managementwhich could adversely affect the financial benefits of the Entanet Acquisition and the prospects of the Group

Entanet’s current expenditure plan has been determined by its management in accordance with its strategy whichwas developed prior to the Entanet Acquisition. Following completion of the Entanet Acquisition, the CityFibreand Entanet management teams will set a business plan for Entanet in accordance with the Group’s strategy.Given the differences in each of CityFibre and Entanet’s strategies prior to the Entanet Acquisition, furthermedium-term expenditure may be required in order to develop and fulfil this strategy. Such additional costs mayrelate to, but are not limited to, the hiring of additional employees and further investment in IT systems.

Although the Company’s management has undertaken due diligence on, and appraisal of, Entanet’s businessplan, the level of medium-term capital expenditure required may be greater than is estimated by Entanet’smanagement. This may have an adverse effect on the medium-term cash position of the Group, which in turnmay have a material adverse effect on the Group’s business, operating results, financial condition, prospects orfuture operations.

Third parties may terminate existing contracts with Entanet as a result of the Entanet Acquisition

Entanet has a number of contracts or other arrangements with suppliers that contain “change of control” orsimilar clauses that may allow the counterparty to terminate their contract upon completion of the EntanetAcquisition. Termination of contracts or other arrangements with customers, suppliers and partners may result in

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Entanet being unable to conduct its business on as favourable terms as it was able prior to the EntanetAcquisition. Where practicable, CityFibre and Entanet may seek to obtain consents or waivers from certain ofthese counterparties, but there can be no assurance that any consent or waiver can be obtained on reasonableterms or at all. If certain key third parties were to terminate or require alterations to their existing contracts withEntanet as a result of the Entanet Acquisition, it may have a material adverse effect on Entanet, and accordinglythe realisation of the Group’s strategy and consequently its business, operating results, financial condition,prospects or future operations.

Part C: Risks Relating to the Capital Raising and the Ordinary Shares

The market price of the Ordinary Shares may fluctuate

The market price of the Ordinary Shares could be subject to significant fluctuations due to a change in sentimentin the market regarding the Ordinary Shares. The fluctuations could result from a number of factors including, inparticular, the response of the market to:

(a) national and global economic, financial and political conditions;(b) the Capital Raising and other changes in the Company’s shareholding from time to time;(c) the plans and proposals of the UK, US and other governments with respect to national and global

economic, financial and political developments;(d) market perceptions as to when the Company will be able to pay dividends on the Ordinary Shares;(e) liquidity of financial markets;(f) regulatory changes affecting the operations of the Group;(g) variations in the Group’s and/or its competitors’ operating results, forecasts or prospects, and business

developments of the Group and/or its competitors; and(h) changes in the Group’s management team.

Furthermore, the Group’s operating results and prospects from time to time may be below the expectations ofmarket analysts and investors.

Any of these events could result in a decline in the market price of the Ordinary Shares.

The market price for Ordinary Shares may decline below the price at which investors subscribed for oracquired the Placing Shares or the Offer for Subscription Shares

There is no assurance that the public trading market price of the Ordinary Shares will not decline below the OfferPrice. Should that occur, investors, will suffer an immediate unrealised loss as a result. Moreover, there can be noassurance that, following the exercise of rights, Shareholders will be able to sell their New Ordinary Shares at aprice equal to or greater than the acquisition price for those shares.

The admission of the New Ordinary Shares to trading on AIM may not occur when expected

Until the New Ordinary Shares are admitted to trading on AIM, they will not be fungible with Existing OrdinaryShares currently traded on AIM. There is no assurance that the admission to trading on AIM will take place whenanticipated.

Shareholders will experience dilution of existing ownership of Ordinary Shares

Shareholders will experience dilution in their ownership and voting interests pursuant to the Placing whether ornot Shareholders participate in the Offer for Subscription. Shareholders who do not participate in the Placing willbe diluted by 57.8 per cent. (excluding the impact of the Offer for Subscription) or 59.5 per cent. (assuming fulltake up under the Offer for Subscription). The percentage of the Company’s issued share capital that the ExistingOrdinary Shares represent will be reduced by 57.8 per cent. to 42.2 per cent. as a result of the Capital Raising(excluding the impact of the Offer for Subscription) or by 59.5 per cent. to 40.5 per cent. (assuming full take upunder the Offer for Subscription).

The Ordinary Shares will not be admitted to the Official List

Ordinary Shares (including the New Ordinary Shares) will be traded on AIM and will not be admitted to theOfficial List or admitted to trading on the London Stock Exchange’s main market for listed securities. The rulesof AIM are less demanding than those of the Official List and an investment in Ordinary Shares traded on AIMmay carry a higher risk than an investment in shares admitted to the Official List. In addition, the market inOrdinary Shares on AIM may have limited liquidity, making it more difficult for an investor to realise itsinvestment than might be the case in respect of an investment in shares which are quoted on the London StockExchange’s main market for listed securities. Investors should therefore be aware that the market price of theOrdinary Shares may be more volatile than the market prices of shares quoted on the London Stock Exchange’s

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main market for listed securities and may not reflect the underlying value of the net assets of the Group. Forthese and other reasons, investors may not be able to sell at a price which permits them to recover their originalinvestment.

The ability of Overseas Shareholders to bring actions or enforce judgments against the Company or theDirectors may be limited

The ability of an Overseas Shareholder to bring an action against the Company may be limited under law. TheCompany is a public limited company incorporated in England and Wales. The rights of holders of OrdinaryShares are governed by UK law and by the Company’s Articles of Association. These rights differ from therights of shareholders in some other non-UK corporations.

An Overseas Shareholder may not be able to enforce a judgment against some or all of the Directors and theexecutive officers. The majority of the Directors and executive officers of the Company are residents of theUnited Kingdom. Consequently, it may not be possible for an Overseas Shareholder to effect service of processupon the Directors and executive officers of the Company within the Overseas Shareholder’s country ofresidence or to enforce against the Directors and executive officers of the Company judgments of courts of theOverseas Shareholder’s country of residence based on civil liabilities under that country’s securities laws. Therecan be no assurance that an Overseas Shareholder will be able to enforce any judgments in civil and commercialmatters or any judgments under the securities laws of countries other than the United Kingdom against theDirectors or executive officers of the Company who are residents of the United Kingdom or countries other thanthose in which judgment is made. In addition, English or other courts may not impose civil liability on theDirectors or executive officers of the Company in any original action based solely on foreign securities lawsbrought against the Company or the Directors or executive officers of the Company in a court of competentjurisdiction in England or other countries.

Overseas Shareholders may not be able to exercise future pre-emptive rights

As part of the Capital Raising, the share capital of the Company will be increased and New Ordinary Shares willbe issued. In addition, further share capital increases and share issues may be proposed in the future.Shareholders are entitled to pre-emptive rights in respect of new issues of shares for cash unless those rights arewaived by a Shareholders’ resolution.

Overseas Shareholders may not be able to exercise their pre-emptive rights as part of a future issue of shares forcash (even if pre-emption rights were not waived), unless the Company decides to comply with applicable locallaws and regulations. This is because securities laws of certain jurisdictions may restrict the Company’s ability toallow participation by certain Shareholders in any future issue of shares. In particular, Overseas Shareholderswho are located in the United States may not be able to exercise their rights on a future issue of shares, unless aregistration statement under the US Securities Act is effective with respect to such rights or an exemption fromthe registration requirements is available thereunder. The New Ordinary Shares will not be registered under theUS Securities Act and the Company may not file any such registration statements for future share issues, and anexemption from the registration requirements of the US Securities Act may not be available in any case. In suchan event, Overseas Shareholders with a registered address, or who are located, in the United States would beunable to participate in such an issue.

Future issues of Ordinary Shares by the Company may dilute the holdings of Shareholders and a sale by amajor shareholder of Ordinary Shares may depress the price of the Ordinary Shares

In order successfully to pursue its strategy, the Company will in the longer term require further capital. This mayconsist of a further issue of Ordinary Shares, which may dilute the holdings of Shareholders. Likewise, a majorshareholder may also decide to sell a substantial number of Ordinary Shares in the public market, which couldadversely affect the prevailing market price of the Ordinary Shares and/or impair the Group’s ability to raisecapital through future sales of equity securities.

There can be no guarantee that the Company will pay shareholders dividends

The dividend policy for the Company is set out in section 8 of Part 1 of this document.

As indicated there, the Group does not intend to pay dividends in the short to medium term and there can be noassurance that the Company will eventually declare dividends or as to the level of any dividends. The approval ofthe declaration and amount of any dividends of the Company is subject to the discretion of the directors of theCompany (and, in the case of any final dividend, the discretion of the Shareholders) at the relevant time and willdepend upon, among other things, the Group’s earnings, financial position, cash requirements and availability ofdistributable profits, as well as the provisions of relevant laws and/or generally accepted accounting principlesfrom time to time.

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Moreover, as and when the Company does determine to pay dividends, the Company’s ability to pay them willdepend on the level of distributions, if any, received from the Company’s subsidiaries. Members of the Groupmay from time to time be subject to restrictions on their ability to make distributions to the Company, as a resultof factors such as restrictive covenants contained within loan agreements, foreign exchange limitations,regulatory, fiscal or other restrictions. There can be no assurance that such restrictions will not have a materialadverse effect on the Group’s business, operating results, financial condition, prospects or future operations.

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PRESENTATION OF INFORMATION

1. Introduction

The contents of this document should not be construed as legal, financial or tax advice. Shareholders shouldconsult their own solicitor, financial adviser or tax adviser for legal, financial or tax advice.

2. Notice to Investors

Neither this document nor the Application Form constitutes, or will constitute, or form part of any offer orinvitation to sell or issue, or any solicitation of any offer to subscribe for, purchase or acquire the New OrdinaryShares to any Shareholder with a registered address in or located in the United States. Notwithstanding theforegoing, the Company reserves the right to offer the New Ordinary Shares in the United States in transactionsexempt from, or not subject to, the registration requirements of the US Securities Act.

Shareholders in the United States, subject to certain exceptions, may not subscribe for or acquire any NewOrdinary Shares in connection with the Capital Raising.

3. Financial Information and Other Information

Unless otherwise indicated, financial information for the Company and the Group contained in this document hasbeen extracted without material adjustment from the audited financial statements for the Group for the yearsended 31 December 2014, 31 December 2015 and 31 December 2016, each prepared in accordance with IFRS, asadopted by the European Union, and presented in Sterling. For further information see “Basis of Accounting” inPart 11 of this document.

The financial information for Entanet contained in this document has been adjusted to reflect the accountingpolicies adopted by the Company in its audited financial statements for the year ended 31 December 2016.Accordingly, such historical financial information differs, and may not be comparable to, the audited historicalfinancial statements of Entanet for the period ended 31 December 2014, 31 December 2015 and 31 December2016 filed with the UK’s Company Registrar and included in Entanet’s annual accounts for 2014, 2015 and 2016.

Some of the information set out in this document is derived from studies performed by external parties, includingmarket reports. Some of the other information set out in this document is available to the public. The Companyconsiders all such information to be reliable, but this has not been verified by an independent expert. TheCompany cannot guarantee that any third party using different methods to combine, analyse or calculate the dataon these business sectors would obtain the same results. The Company does not give any guarantees concerningthe accuracy of such information. It is possible some of this information could prove erroneous or out of date.The Company does not undertake to publish updates of this information, except as required by any applicablelegal or regulatory obligation.

The Directors consider a variety of financial measures and operating metrics in analysing the Group’sperformance. The Directors believe that each of these measures provides useful information with respect to theperformance of the Group’s business and operations. These are non-IFRS financial measures and operatingmetrics, and are not audited. These non-IFRS financial measures and operating metrics are not meant to beconsidered in isolation or as a substitute for measures of financial performance reported in accordance withIFRS. Moreover, these non-IFRS financial measures and metrics may be defined or calculated differently byother companies, and as a result the Group’s key performance indicators may not be comparable to similarmeasures and metrics calculated by its peers.

4. No Profit Forecast

No statement in this document is intended to constitute a profit forecast or profit estimate for any period, norshould any statement be interpreted to mean that earnings or earnings per share will necessarily be greater orlesser than those for the relevant preceding financial period for the Company.

5. Forward-Looking Statements

Certain statements contained in this document, including those in the sections headed “Summary” and “RiskFactors” and the Parts headed “Information on CityFibre” and “Operating and Financial Review of CityFibre”constitute “forward-looking statements”. In some cases, these forward-looking statements can be identified bythe use of forward-looking terminology, including the terms “believes”, “estimates”, “plans”, “prepares”,“anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case, their negative or other variationsor comparable terminology. Each person should specifically consider the factors identified in this document,which could cause actual results to differ, before making an investment decision. Such forward-lookingstatements involve known and unknown risks, uncertainties and other factors which may cause the actual results,performance or achievements of the Group, or industry results, to be materially different from any future results,

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performance or achievements expressed or implied by such forward-looking statements. Such forward-lookingstatements are based on numerous assumptions regarding the Group’s present and future business strategies,together with the strategy for the Group and the environment in which the Group will operate in the future. Suchrisks, uncertainties and other factors are set out more fully in the section of this document headed “Risk Factors”and include, among others: general economic and business conditions, industry trends, competition, changes ingovernment regulation, economic downturn and the Group’s ability to implement expansion plans. Theseforward-looking statements speak only as at the Reference Date. Except as required by the FCA, the ProspectusRules, the AIM Rules, the Disclosure Guidance and Transparency Rules, the London Stock Exchange, applicablelaw or relevant regulation, the Company expressly disclaims any obligation or undertaking to release publiclyany updates or revisions to any forward-looking statements contained in this document to reflect any change inthe Company’s expectations with regard thereto or any change in events, conditions or circumstances on whichany such statement is based.

This statement does not seek to qualify the working capital statement given at section 13 of Part 10 of thisdocument.

6. Available Information

Corporate documents relating to the Company that are required to be made available to shareholders pursuant toapplicable law, as well as the Company’s historical financial information, may be consulted at the registeredoffice of the Company. A copy of these documents may be obtained from the Company upon request.

The Company is not required to file periodic reports under Section 13(a) or 15(d) of the US Exchange Act. For solong as the shares remain “restricted securities” under the US Securities Act and the Company is neither subjectto Section 13(a) or 15(d) of the US Exchange Act nor exempt from reporting pursuant to Rule 12g3-2(b)thereunder, the Company will furnish, upon request, to any holder of Placing Shares or Offer for SubscriptionShares or prospective purchaser designated by such shareholder, the information required to be deliveredpursuant to Rule 144A(d)(4) under the US Securities Act to facilitate resales of the shares pursuant to Rule 144A.

7. Enforcement of Foreign Judgments and Service of Process

The Company is a public limited company incorporated under the laws of England and Wales. Most of theDirectors and executive officers of the Company reside outside the United States. In addition, all or substantiallyall of the assets of the Company, most of the Directors and the Company’s executive officers are located outsidethe United States. As a result, it may not be possible for investors to effect service of process within the UnitedStates upon any of the Company, most of the Directors or executive officers of the Company located outside ofthe United States or to enforce against them any judgments of US courts, including judgments predicated uponcivil liabilities under the securities laws of the United States or any state or territory within the United States.There is substantial doubt as to the enforceability in the United Kingdom in original actions, or in actions forenforcement of judgments of US courts, based on the civil liability provisions of US federal securities laws. Inaddition, punitive damages in actions brought in the United States or elsewhere may be unenforceable in Englandand Wales.

8. Rounding

Certain figures included in this document have been subject to rounding adjustments. Accordingly, discrepanciesin tables between the totals and the sums of the relevant amounts is due to rounding.

9. Websites

The content of the Company’s website (or any other website) and the content of any website accessible fromhyperlinks on the Company’s website (or any other website) is not incorporated into, nor does it form any part of,this document.

10. Time

All references in this document to time are to London time unless stated.

11. Definitions

Capitalised terms used in this document have the meanings ascribed to them in Part 14 of this document.

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EXPECTED TIMETABLE OF PRINCIPAL EVENTS

Each of the times and dates in the table below is indicative only and may be subject to change. Please refer to thenotes for this timetable set out below.

Announcement of the Capital Raising 5 July 2017

Prospectus published, Forms of Proxy despatched andApplication Forms despatched

11 July 2017

Offer for Subscription opens 11 July 2017

Latest time and date for receipt of Forms of Proxy 11.30 a.m. on 25 July 2017

Latest time and date for receipt of completedApplication Forms or settlement of relevant CRESTinstructions and payments in full 11.00 a.m. on 26 July 2017

General Meeting 11.30 a.m. on 27 July 2017

Announcement of results of the Capital Raising 27 July 2017

Completion and Admission and dealings in NewOrdinary Shares, fully paid, commence on the LondonStock Exchange by 8.00 a.m. on 28 July 2017

New Ordinary Shares credited to CREST stock accounts by 8.00 a.m. on 28 July 2017

Expected despatch of definitive share certificates for theNew Ordinary Shares in certificated form by 11 August 2017

Notes:

(1) The times and dates set out in the expected timetable of principal events above and mentioned in this document, the Application Formand in any other document issued in connection with the Capital Raising are subject to change by the Company, in which event details ofthe new times and dates will be notified to the UK Listing Authority, the London Stock Exchange and, where appropriate, toShareholders.

(2) Any reference to a time in this document is to London time, unless otherwise specified.

(3) The ability to participate in the Offer for Subscription is subject to certain restrictions relating to applicants with registered addresses orlocated or resident in countries outside the UK, details of which are set out in section 5 of part 2 of this document.

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DIRECTORS, COMPANY SECRETARY, REGISTEREDOFFICE AND ADVISERS

Directors Christopher Michael Renwick Stone (Non-ExecutiveChairman)

William Gregory Mesch (Chief Executive Officer)

Mark Grahame Collins (Director, Public Policy)

Terence Alan Hart (Chief Financial Officer)

Leopold Wilhelmus Antonius Maria van Doorne(Non-Executive Director)

Robert Gary Mesch (Non-Executive Director)

Sally Margaret Davis (Non-Executive Director)

Stephen Charlton (Non-Executive Director)

Company Secretary Christopher Gawn

Registered Office 15 Bedford Street, London, WC2E 9HE

Telephone 0845 293 0774

Company website www.cityfibre.com

Sole Global Co-ordinator, Joint Bookrunner and Citigroup Global Markets LimitedJoint Underwriter Citigroup Centre

Canada SquareCanary WharfLondon E14 5LB

Nominated Adviser, Joint Underwriter and JointBookrunner

finnCap Ltd60 New Broad StreetLondon EC2M 1JJ

Joint Underwriter and Joint Bookrunner Liberum Capital LimitedRopemaker PlaceLevel 12, 25 Ropemaker StreetLondon EC2Y 9LY

Joint Underwriter and Joint Bookrunner Macquarie Capital (Europe) LimitedRopemaker Place28 Ropemaker StreetLondon EC2Y 9HD

Financial Adviser N M Rothschild & Sons LimitedNew CourtSt Swithin’s LaneLondon EC4N 8AL

Reporting Accountant, Tax Adviser and Auditor BDO LLP55 Baker StreetLondon W1U 7EU

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Legal Advisers to CityFibre as to English and US law CMS Cameron McKenna Nabarro Olswang LLPCannon Place78 Cannon StLondon EC4N 6AF

Legal Advisers to the Underwriters and JointBookrunners as to English and US law

Norton Rose Fulbright LLP3 More LondonRiversideLondon SE1 2AQ

Registrar/Receiving Agent Computershare Investor Services PLCThe PavilionsBridgwater RoadBristol BS13 8AE

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CAPITAL RAISING STATISTICS

Shares in issue as at the Reference Date 265,672,644 Ordinary Shares

Offer Price 55 pence

Number of Placing Shares to be issued 363,636,364 Ordinary Shares

Estimated gross proceeds of the Placing £200 million

Number of Offer for Subscription Shares to be issued up to 27,272,727 Ordinary Shares

Estimated gross proceeds of the Offer for Subscription up to £15 million

Aggregate number of New Ordinary Shares to be issued pursuant tothe Capital Raising(1) up to 363,636,364

Estimated gross proceeds of the Capital Raising(1) £200 million

Estimated net proceeds receivable by the Company, after deduction ofcommissions, fees and expenses in respect of the Capital Raising(1) £191 million

New Ordinary Shares as a percentage of the Company’s enlargedissued share capital immediately after the Capital Raising(1)(2) 57.8 per cent.

Shares in issue immediately after the Capital Raising(1)(2) 629,309,008 Ordinary Shares

Notes:

(1) This assumes nil take up of the Offer for Subscription.(2) Assuming that no new Ordinary Shares (other than the New Ordinary Shares) are issued from the Reference Date until Admission.

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QUESTIONS AND ANSWERS ABOUT THE CAPITAL RAISING

The questions and answers set out below (“Questions and Answers about the Capital Raising”) are intended tobe generic guidance only and, as such, you should also read Part 2 of this document for further details of whataction you should take if you wish to participate in the Capital Raising. If you are in any doubt about the actionto be taken, you are recommended to seek immediately your own personal financial advice from yourstockbroker, bank manager, solicitor, accountant, fund manager or other appropriate independent financialadviser duly authorised under FSMA if you are in the United Kingdom, or if you are not, from anotherappropriately authorised financial adviser.

If you are an Overseas Person, you should read the answer to question 4.4 (What should I do if I live outside theUnited Kingdom?) below and you should take professional advice as to whether you are eligible and/or need toobserve any formalities to enable you to participate in the Offer for Subscription.

Shares in the Company can be held in certificated form (that is represented by one or more share certificate(s)) orin uncertificated form (that is, held through CREST). Accordingly, the questions and answers are split into foursections:

Section 1: answers general questions you may have about the Capital Raising;

Section 2: answers questions you may have in respect of the procedures for applying in the Offer forSubscription; and

Section 3: answers some questions about your rights and the actions you may need to take.

If you do not know whether you hold Ordinary Shares in certificated form or uncertificated form, please contactComputershare Investor Services PLC on 0370 707 1168 or if calling from outside the UK on +44 370 707 1168.The helpline is open between 8.30 a.m. to 5.30 p.m., Monday to Friday excluding public holidays in England andWales. Please note that Computershare Investor Services PLC cannot provide any financial, legal or tax adviceand calls may be recorded and monitored for security and training purposes.

1. General

1.1 What is the Placing?

The Placing is a proposed issue of Placing Shares on a non-pre-emptive basis by which certain Shareholders andprospective institutional investors will subscribe for a total of 363,636,364 Placing Shares at the Offer Price,being 55 pence per Placing Share.

The Offer Price represents an approximate 9.09 per cent. discount to the Closing Price of 60.50 pence perOrdinary Share on 4 July 2017 (being the last Business Day prior to announcement of the Capital Raising). TheOffer Price (including the size of the discount) has been determined, following discussions with both existingShareholders and Placees, to be at a level which the Board considers appropriate to ensure the success of theCapital Raising, taking into account the aggregate proceeds to be raised. The Offer Price in respect of the PlacingShares is payable in full upon Admission, which is expected to become effective at 8.00 a.m. on 28 July 2017.

1.2 What is the Offer for Subscription?

An offer for subscription is a way for companies to raise money. Companies do this by giving their existingshareholders and other investors a right to acquire further shares at a fixed price in such numbers as applicantsmay apply for (subject to scaling backing in the event of over-applications). In this instance, Shareholders andother investors are being given the opportunity to apply for Offer for Subscription Shares under the Offer forSubscription.

This Offer for Subscription is an opportunity to apply to acquire up to an aggregate of 27,272,727 Offer forSubscription Shares at the Offer Price, being a price of 55 pence per Offer for Subscription Share. Other than,subject to certain exceptions, where you have a registered address or are located in the United States or anExcluded Territory, you will be entitled to apply to subscribe for Offer for Subscription Shares under the Offerfor Subscription.

The Offer Price represents an approximate 9.09 per cent. discount to the Closing Price of 60.50 pence perOrdinary Share on 4 July 2017 (being the last Business Day prior to announcement of the Capital Raising).

Applications under the Offer for Subscription must be for a minimum of 2,000 Offer for Subscription Shares (the“Minimum Subscription”) and thereafter in multiples of 2,000 Offer for Subscription Shares, up to themaximum number of 27,272,727 Offer for Subscription Shares available in the Offer for Subscription. In theevent that valid applications are received under the Offer for Subscription for more than the maximum number ofOffer for Subscription Shares available, applications shall be allocated in such manner as the Directors may

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determine, in their absolute discretion, although the Directors anticipate such allocations will take into accountapplications made by existing Shareholders for Offer for Subscription Shares. Any application for less than theMinimum Subscription or which is not for a multiple of 2,000 Offer for Subscription Shares will berejected. No assurance can be given that applications (whether by Shareholders or others) under the Offer forSubscription will be met in full or in part or at all.

Unlike in a rights issue, Application Forms are not negotiable documents and cannot themselves be traded.

1.3 Is the Capital Raising underwritten?

The Placing is fully underwritten by the Underwriters but the Offer for Subscription is not underwritten. TheCapital Raising is conditional upon (among other things) (i) the Resolutions being passed at the General Meeting,(ii) the Underwriting Agreement having become unconditional in all respects (other than in respect ofAdmission), and (iii) Admission becoming effective by no later than 8.00 a.m. on 28 July 2017, (or such laterdate as the Company and the Underwriters may agree).

1.4 What happens next?

The Company has called a General Meeting to be held at 11.30 a.m. on 27 July 2017 at the offices of CMSCameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon St, London EC4N 6AF. Please see theNotice of General Meeting at the end of this document. As you will see from the contents of the Notice ofGeneral Meeting, the Board is seeking Shareholder approval for the allotment of the New Ordinary Shares inconnection with the Capital Raising and disapplication of pre-emption rights associated with the issue of the NewOrdinary Shares in connection with the Capital Raising.

If the Resolutions are approved at the General Meeting, the Capital Raising will proceed (subject to certainconditions). Offer for Subscription Shares are expected to be conditionally allotted as soon as practicable afterthe General Meeting.

2. Applying under the Offer for Subscription

2.1 How do I know I am eligible to participate in the Offer for Subscription?

If, subject to certain exceptions, you do not have a registered address or are located in the United States or any ofthe other Excluded Territories, then you should be eligible to participate in the Offer for Subscription.

Subject to certain exceptions, if you have a registered address in the United States or any of the other ExcludedTerritories, you will not be eligible to participate in the Offer for Subscription.

If you would like to apply for any Offer for Subscription Shares, you should complete the Application Form inaccordance with the instructions printed on it and the information provided in this document. CompletedApplication Forms should be returned, along with a cheque drawn in the appropriate form, by post toComputershare Investor Services PLC, Corporate Action Projects, Bristol BS99 6AH or by hand toComputershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE (during normal officehours only) so as to be received by them by no later than 11.00 a.m. on 26 July 2017, after which timeApplication Forms will not be valid. If you wish to make payment electronically please contact Computershare [email protected], who will provide you with the necessary bank account details and areference number to quote when making payment. Applicants choosing to settle via CREST, that is DVP willneed to match their instructions to Computershare’s participant account 8RA21 by no later than 11.00 a.m. on 26July 2017, allowing for the delivery and acceptance of Offer for Subscription Shares to be made against paymentof the Offer Price per Offer for Subscription Share, following the CREST matching criteria set out in theApplication Form.

2.2 What are my choices in relation to the Offer for Subscription?

(a) If you do not want to participate in the Offer for Subscription

If you do not want to participate in the Offer for Subscription, you do not need to do anything. In thesecircumstances, you will not receive any Offer for Subscription Shares.

If you are an existing Shareholder and do not subscribe for Offer for Subscription Shares, then following theissue of the Offer for Subscription Shares pursuant to the Offer for Subscription and the Placing Shares pursuantto the Placing, your interest in the Company will be significantly diluted. Even if a Shareholder subscribes forOffer for Subscription Shares, their proportionate economic interest would be diluted by the issue of Offer forSubscription Shares pursuant to the Offer for Subscription and the issue of Placing Shares pursuant to thePlacing.

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(b) If you want to apply for Offer for Subscription Shares

If you want to apply for Offer for Subscription Shares, you should write the number of Offer for SubscriptionShares you want to apply for in Box 1 and the cash value (at the Offer Price) of the number of Offer forSubscription Shares you want to apply for in Box 2 of your Application Form. Such cash value must not exceed£15 million and must be in respect of a minimum of 2,000 Offer for Subscription Shares and thereafter inmultiples of 2,000 Offer for Subscription Shares. To work out how much you need to pay for the Offer forSubscription Shares, you need to multiply the number of Offer for Subscription Shares you want (which must bein multiples of 2,000) by 55 pence, which is the price in pounds of each Offer for Subscription Share. You shouldwrite this amount in Box 2, rounding up to the nearest whole pence and this should be the amount your cheque ismade out for. You should then return the completed Application Form, together with a cheque for that amount,by post to Computershare Investor Services PLC, Corporate Action Projects, Bristol BS99 6AH or by hand toComputershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE (during normal officehours only) so as to be received by them by no later than 11.00 a.m. on 26 July 2017, after which timeApplication Forms will not be valid. If you post your Application Form by first class post, you should allow atleast four Business Days for delivery. If you wish to make payment electronically please contact Computershareat [email protected], who will provide you with the necessary bank account details and areference number to quote when making payment. Applicants choosing to settle via CREST, that is DVP willneed to match their instructions to Computershare’s participant account 8RA21 by no later than 11.00 a.m. on 26July 2017, allowing for the delivery and acceptance of Offer for Subscription Shares to be made against paymentof the Offer Price per Offer for Subscription Share, following the CREST matching criteria set out in theApplication Form.

If valid applications are received under the Offer for Subscription for more than the maximum number of Offerfor Subscription Shares available, applications shall be allocated in such manner as the Directors may determine,in their absolute discretion, although the Directors anticipate such allocations will take into account applicationsmade by existing Shareholders for Offer for Subscription Shares. No assurance can be given that the applications(whether by Shareholders or others) will be met in full or in part or at all.

If you apply for Offer for Subscription Shares to be issued to you in certificated form, a definitive sharecertificate will then be sent to you for the Offer for Subscription Shares that you are allocated under the Offer forSubscription. Your definitive share certificate for Offer for Subscription Shares is expected to be despatched toyou, at your own risk, by no later than 10 business days from Admission.

2.3 How do I pay?

Completed Application Forms should be returned with a cheque drawn in the appropriate form. All paymentsmust be in pounds sterling and made by cheque made payable to “CIS PLC RE: CityFibre InfrastructureHoldings plc Offer for Subscription A/C” and crossed “A/C Payee Only”. Cheques must be drawn on a bank orbuilding society or branch of a bank or building society in the United Kingdom or Channel Islands which iseither a settlement member of the Cheque and Credit Clearing Company Limited or the CHAPS ClearingCompany Limited or which has arranged for its cheques to be cleared through the facilities provided by any ofthose companies or committees and must bear the appropriate sort code in the top right-hand corner. Third partycheques will not be accepted with the exception of building society cheques where the building society or bankhas confirmed the name of the account holder and the number of an account held in the applicant’s name at thebuilding society or bank by stamping or endorsing the cheque to such effect. The account name should be thesame as that shown on the application. Post-dated cheques will not be accepted. Third party cheques (other thanbuilding society cheques where the building society or bank has confirmed that the applicant has title to theunderlying funds) will not be accepted.

Cheques will be presented for payment upon receipt. The Company reserves the right to instruct ComputershareInvestor Services PLC to seek special clearance of cheques to allow the Company to obtain value for remittancesat the earliest opportunity. No interest will be paid on payments made before they are due. It is a term of theOffer for Subscription that cheques shall be honoured on first presentation and the Company may elect to treat asinvalid acceptances in respect of which cheques are not so honoured. All documents, cheques sent through thepost will be sent at the risk of the sender.

If you wish to make payment electronically please contact Computershare at [email protected],who will provide you with the necessary bank account details and a reference number to quote when making payment.Applicants choosing to settle via CREST, that is DVP will need to match their instructions to Computershare’sparticipant account 8RA21 by no later than 11.00 a.m. on 26 July 2017, allowing for the delivery and acceptance ofOffer for Subscription Shares to be made against payment of the Offer Price per Offer for Subscription Share,following the CREST matching criteria set out in the Application Form.

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2.4 Where do I send my Application Form?

You should send your completed Application Form together with the monies in the appropriate form, by post toComputershare Investor Services PLC, Corporate Action Projects, Bristol BS99 6AH or by hand toComputershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE (during normal officehours only). If you post your Application Form by first-class post, you should allow at least four Business Daysfor delivery. If you do not want to apply for Offer for Subscription Shares then you need take no further action.

2.5 When do I have to decide if I want to apply for Offer for Subscription Shares?

Computershare Investor Services PLC must receive the Application Form by no later than 11.00 a.m. on 26 July2017, after which time Application Forms will not be valid. If an Application Form is being sent by first classpost in the UK, applicants are recommended to allow at least four Business Days for delivery.

2.6 When will I receive my new share certificate?

It is expected that Computershare Investor Services PLC will post all new share certificates within 10 businessdays from Admission.

2.7 When will my CREST account be credited?

If you apply for any Offer for Subscription Shares which are allocated to you to be credited to your CRESTaccount, it is expected that those shares will be credited to the CREST account specified with effect fromAdmission.

3. Further procedures for shares whether in certificated form or in uncertificated form

3.1 What if I change my mind?

Once you have sent your Application Form and payment to Computershare Investor Services PLC, you cannotwithdraw your application or change the number of Offer for Subscription Shares for which you have applied,except in the very limited circumstances which are set out in this document.

3.2 What should I do if I live outside the United Kingdom?

Your ability to apply for Offer for Subscription Shares under the Offer for Subscription may be affected by thelaws of the country in which you live and you should take professional advice about any formalities you need toobserve. Persons resident outside the United Kingdom, including those with a registered address or those locatedor resident in any Excluded Territory, should refer to section 5 of Part 2 of this document.

3.3 What if I hold options and awards under the Company Share Incentive Arrangements?

The Company shall separately advise participants in the Share Incentive Arrangements of adjustments (if any) tobe made to their awards or other rights as a result of the Capital Raising.

3.4 What do I do if I have any further queries about the Capital Raising or the action I should take?

If you have any other questions, please contact Computershare Investor Services PLC on 0307 707 1168 or ifcalling from outside the UK on +44 307 707 1168. The helpline is open between 8.30 a.m. to 5.30 p.m., Mondayto Friday excluding public holidays in England and Wales. Please note that Computershare Investor ServicesPLC cannot provide any financial, legal or tax advice and calls may be recorded and monitored for security andtraining purposes.

Your attention is drawn to the terms and conditions of the Offer for Subscription in Part 2 of this document.

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WHERE TO FIND HELP

If you have any questions relating to the procedure for acceptance and payment under the Offer for Subscription,please telephone the Shareholder Helpline on the numbers set out below. This helpline is available from 8.30a.m. to 5.30 p.m. Monday to Friday (except bank holidays). Calls may be recorded and randomly monitored forsecurity and training purposes.

Shareholder Helpline

0370 707 1168 (from inside the United Kingdom) or

+44 (0)370 707 1168 (from outside the United Kingdom)

Please note that, for legal reasons, the Shareholder Helpline will only be able to provide information contained inthis document and information relating to the Company’s register of members and cannot provide advice on themerits of the Offer for Subscription or provide financial, tax, investment or legal advice.

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PART 1LETTER FROM THE CHAIRMAN OF CITYFIBRE INFRASTRUCTURE

HOLDINGS PLC

(incorporated in England and Wales with registered number 08772997)

Registered Office:

15 Bedford Street,

London

WC2E 9HE

Directors:Christopher Stone (Non-Executive Chairman)Greg Mesch (Chief Executive Officer)Mark Collins (Director, Public Policy)Terry Hart (Chief Financial Officer)Leo van Doorne (Non-Executive Director)Gary Mesch (Non-Executive Director)Sally Davis (Non-Executive Director)Stephen Charlton (Non-Executive Director)

To Shareholders and, for information only, to holders of Options

11 July 2017

Dear Shareholder

Proposed Placing of 363,636,364 Placing Shares at 55 pence per Placing Share

Proposed Offer for Subscription of 27,272,727 Offer for Subscription Shares at 55 pence per Offer forSubscription Share

and Notice of General Meeting

1. Introduction

On 5 July 2017 the Board announced that the Company intends to raise £200 million (approximately£191 million net of costs and expenses) by way of a Placing, which will be fully underwritten by theUnderwriters, and up to £15 million by way of an Offer for Subscription, which is not underwritten, subject tocertain conditions. The net proceeds of the Capital Raising will be used to fund the growth of the Group’s fullfibre network in the UK, including expansion of its metro networks to not less than 50 towns and cities by 2020and the commencement of construction of Fibre to the Home in five to ten of these towns and cities during 2018.In support of the Company’s strategy to focus on wholesale fibre services, part of the proceeds will also be usedto fund the acquisition of Entanet, a provider of wholesale communications services.

The purpose of this letter is to: (i) explain the background to and reasons for the Capital Raising; (ii) explain whythe Board believes that the Capital Raising is in the best interests of the Company and its Shareholders as awhole; and (iii) recommend that you vote in favour of the Resolutions to be proposed at the General Meeting. Inthis respect, this document should be read in its entirety and you should not rely solely on the information in thisPart 1. Your attention, in particular, is drawn to the risk factors set out in the section titled “Risk Factors”.

As more fully described in section 3 of this Part 1, the Company proposes to undertake the Capital Raising toraise gross proceeds of at least £200 million and up to £215 million. The Capital Raising comprises the issue of363,636,364 Placing Shares at a price of 55 pence per Placing Share pursuant to the Placing and up to 27,727,727Offer for Subscription Shares at a price of 55 pence per Offer for Subscription Share pursuant to the Offer forSubscription (together representing 147.1 per cent. of the existing issued ordinary share capital of the Company,and 59.5 per cent. of the enlarged issued ordinary share capital immediately following completion of the CapitalRaising assuming that the Offer for Subscription is taken up in full).

Application will be made to the London Stock Exchange for the Placing Shares and the Offer for SubscriptionShares to be admitted to trading on AIM. It is expected that Admission will become effective and dealings in thePlacing Shares and the Offer for Subscription Shares will commence on the London Stock Exchange at 8.00 a.m.on 28 July 2017. A General Meeting has been convened for 11.30 a.m. on 27 July 2017 at CMS CameronMcKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon St, London EC4N 6AF. Details of the Resolutions tobe proposed at the General Meeting are set out in section 9 of this Part 1 and in the Notice of General Meeting atthe end of this document.

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2. Background to and reasons for the Capital Raising

Since its formation in 2011, CityFibre has become established as an independent provider of wholesale fibreinfrastructure for Channel Partners and mobile operators. CityFibre provides fibre connectivity services throughdesigning, building, owning, and operating fibre optic network infrastructure. The Group is a wholesale operatorof fibre networks in towns and cities outside London. The Group provides open access, shared fibreinfrastructure that enables gigabit-capable connectivity for Channel Partners and mobile network operators, whoin-turn deliver digital connectivity solutions to their end customers spanning the public sector, business, andresidential markets.

The Group now has a presence in 42 towns and cities in the UK providing infrastructure that is an alternative toOpenreach. Having demonstrated its capability to deploy fibre infrastructure to address market demand, theCompany now has opportunities to accelerate and expand its fibre network, and is undertaking the CapitalRaising in order to capitalise on those opportunities.

Growth in global data transmission is driving continued investment in digital communications infrastructure, andparticularly in fibre optic broadband networks. Global IP traffic is forecasted to grow at a compounded rate of22 per cent per annum between 2015 and 2020, driven by adoption of higher-speed broadband and theproliferation of digital connectivity devices, digital services and cloud computing. By 2019, it is predicted thattwo thirds of total IP traffic will originate or terminate in urban metro networks. (Source: Cisco VNI Forecastand Methodology 2014 – 2019).

The UK has one of the highest levels of internet adoption in the world, but in terms of fibre infrastructure it lagsbehind nearly all OECD nations. As of December 2016, 79 per cent. of premises in Spain and 70 per cent. ofpremises in Portugal had access to full fibre broadband. In contrast, the UK’s coverage of full fibre wasapproximately 2 per cent. of premises (Source: Ofcom plans for a full-fibre future, Ofcom). The broadbandnetwork in the UK is currently heavily reliant on copper connections. Together Openreach and Virgin Mediahave announced plans to extend fibre infrastructure to, in aggregate, four million premises by 2020, which wouldonly increase the percentage of UK premises with fibre access to 15 per cent., well below many other OECDnations.

In February 2016 the communications regulator, Ofcom, published its Digital Communications Review, whichoutlined its strategy to promote investment in new fibre infrastructure whilst reducing the industry’s dependenceon Openreach. It targeted the creation of a new fibre infrastructure connecting to 40 per cent. or more UKpremises.

In November 2016 the previous UK government announced its policy for ‘full fibre and 5G’, pledging£1.14 billion of financial support for competitive fibre infrastructure and 5G projects. This was followed inMarch 2017 by Ofcom’s proposals for new regulation to promote competitive investment in FTTH fibrebroadband networks. To encourage new fibre network deployments, Ofcom has put forward proposals forconsultation to encourage competitors to access Openreach’s ducts and poles.

In May 2017, Openreach announced a consultation process to engage with other fibre infrastructure builders andChannel Partners to explore the opportunities for a collaborative approach to FTTH rollout, with the potential tomake full fibre connections available to 10 million premises by the mid 2020’s.

As a builder of ‘full fibre’ infrastructure (meaning there is no copper or co-axial cable used for the provision ofdata connectivity services in CityFibre’s networks) CityFibre is well positioned to take advantage of these policyand regulatory changes. Having grown in scale, through organic growth and targeted acquisitions, CityFibre isable to respond to these new market developments by expanding the reach of its fibre infrastructure, to newtowns and cities and also to more premises within its existing network footprint.

CityFibre’s strategy to deploy high capacity fibre infrastructure across many UK towns and cities, offeringwholesale access to Channel Partners and mobile operators, is aligned to continued demand for fibreinfrastructure across four primary market verticals:


Š Business – fibre connections to enterprises and SMEs (often referred to as Fibre to the Premises –FTTP);

Š Mobile operators – fibre connections to mobile base stations and small cells for 4G and future 5Gmobile services (often referred to as Fibre to the Tower – FTTT); and


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Since its formation in 2011, the Company has grown its network, organically and through acquisition, to 42 UKtowns and cities with 3,383 kilometres of ducted network. In addition, over the past two years the Group hasundertaken three successful pilot projects:

Š Deployment of Fibre to the Tower (FTTT) in Hull with MBNL, Three and EE – marking the UK’s firstcity-wide deployment of dark fibre infrastructure to mobile base stations;

Š Deployment of Fibre to the Home (FTTH) in York in conjunction with Sky and TalkTalk –demonstrating the opportunity to expand CityFibre’s metro networks to full fibre connections for smallbusinesses and homes; and

Š Deployment of a new fibre infrastructure in Southend-on-Sea that uses Openreach’s ducts for someparts of the fibre networks construction – demonstrating the Company’s ability to integrate its networkwith Openreach infrastructure and reduce overall construction costs.

Having demonstrated its capability to deploy infrastructure to address the demands of the Company’s fourprimary market verticals, including FTTT and FTTH, CityFibre has an opportunity to accelerate and expand itsoperations. Recent UK government policy for greater competition and investment in ‘full fibre’ networks hasresulted in a promising pipeline of projects.

The Directors believe that there are significant opportunities to grow the Company’s fibre network and itscustomer base and is undertaking the Capital Raising to support these opportunities as described in more detail insection 3 below. The Company will seek to extend its current metro footprint selectively, ensuring that each newmetro project is anchored by long term contracts that deliver a satisfactory return on the capital investmentrequired and that cover a substantial portion of projected capital expenditure. The same policy will apply to theextension or expansion of existing town and city networks to serve public sector, business and mobile customers.In relation to the construction of Fibre to the Home, the Company will work with Channel Partners to securecommitments to use its FTTH network, or to procure registrations of interest on a street or neighbourhood basis,and would only proceed with construction if there were to be sufficiently robust demonstrations of demand. Insupport of the Company’s strategy to focus on wholesale fibre services, part of the proceeds of the Placing willalso be used to fund the Entanet Acquisition.

3. Use of proceeds from the Capital Raising

The Company intends to raise £200 million (£191 million net of costs and expenses) by way of the Placing andup to £15 million by way of the Offer for Subscription.

Of the net proceeds, approximately £29 million (on a cash free, debt free basis and subject to adjustments) willbe used to acquire Entanet, substantially increasing the Company’s wholesale capabilities and its relationshipswith Channel Partners, especially in the business and consumer market verticals, thereby extending CityFibre’schannels to market.

CityFibre intends to apply the balance of the net proceeds to fund the growth of the Group’s full fibre networkacross UK towns and cities, serving the four primary market verticals of public sector, mobile, business andconsumer.

It is the Directors’ intention that, following the Capital Raising, the Company will pursue its growthopportunities without drawing down further on its existing debt facilities and that the Company will seek torefinance its existing debt facilities during 2018 with a higher level of leverage, in order to optimise its capitalstructure to fund its future growth.

In particular, the Company plans to apply the net proceeds of the Capital Raising:

Š to expand the construction of CityFibre’s metro fibre infrastructure to no less than 50 towns and citiesby 2020;

Š to increase metro connectivity in existing towns and cities;

Š to initiate the Company’s FTTH plan in a select number of towns and cities within CityFibre’s existingor expanded metro footprint, with the intention of using part of the net proceeds of the Placing tocommence construction of an FTTH network in five to ten of these towns and cities during 2018,delivering approximately 300 to 400 FTTH cabinets by the end of 2018; and

Š to pursue opportunities for, and commence the deployment of, FTTT connectivity to mobile basestations and small cells.

The markets in which CityFibre operates are dynamic and the opportunities potentially significant. The Companywill review opportunities as they mature and deploy the net proceeds accordingly. To expand its fibreinfrastructure in line with its strategy, an indicative use of proceeds is as follows:

Š acquisition and integration of Entanet – approximately 17 per cent. of the net proceeds of the Placing;

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Š expand metro infrastructure to new towns and cities, and expansion of metro connectivity in existingtowns and cities (including potential deployment of FTTT connectivity) – 35 per cent. to 40 per cent. ofthe net proceeds of the Placing; and

Š commence the construction of FTTH – 40 per cent. to 50 per cent. of the net proceeds of the Placing.

It is the Directors’ intention that any proceeds raised under the Offer for Subscription shall be applied to fund therollout of the Company’s FTTH plan as more particularly described above and in section 5.2 of Part 3 of thisdocument.

In assessing potential competing demands for capital, the Company intends to maintain its financial discipline.CityFibre’s fibre infrastructure in each town and city is targeted to operate at gross margins of approximately90 per cent.. At maturity (being approximately 5 to 7 years after first cabinet construction) the metroinfrastructure is targeted to deliver a revenue yield on net capital expenditure of greater than 25 per cent. on atown or city basis. FTTH infrastructure is targeted at maturity to deliver a revenue yield on net capitalexpenditure of 18 to 22 per cent. per cabinet. In both cases revenue yield is the recurring annual revenuegenerated measured against the cumulative capital expenditure net of up-front fees paid by the customer for fibreconnections.

3.1 Extend CityFibre’s Footprint to More Towns and Cities

The Group currently owns and operates metro fibre networks in 42 towns and cities. CityFibre seeks to secureanchor contracts to support entry into no less than eight new towns and cities, bringing the total footprint to noless than 50 towns and cities by 2020. The Directors believe that in the long term the Company could target up to100 towns and cities.

Market demand for new fibre infrastructure is giving rise to an accelerated expansion opportunity. For example,the previous UK government’s policy for ‘full fibre’ is set to encourage local authorities to aggregate demand forfibre connectivity to public sector locations. In this regard, £740 million of the £1.14 billion stimulus announcedby the Chancellor in November 2016 is to be directed to local fibre projects, with potential for local authorities toanchor new full fibre networks.

3.2 Increase Metro Connectivity within CityFibre’s Footprint

In every town and city where CityFibre has established a metro fibre infrastructure, the Group’s strategy is to addfibre connections to more premises and grow market share. CityFibre intends to work closely with ChannelPartners to increase the use of CityFibre’s metro fibre products across public sector and business marketverticals. In particular:

Š Growth in Public Sector – Currently the Group has major public sector contracts in nine of its current42 towns and cities. Recent UK government policy for full fibre connected public sector sites presentsan opportunity to expand coverage through more local authority contracts.

Š Expansion to Business Parks – Enterprise and SME users in business parks remain underserved bylegacy networks. On 29 November 2016 the Group announced the proposed expansion of its network toapproximately 500 business parks that are located near to CityFibre’s metro networks in its currentmetro footprint. The Group intends to accelerate this expansion following the Capital Raising.

Š Increase Channel Partners – As a wholesale provider, the Group currently has 54 Channel Partnersthat use its networks to provide data services to their end customers. These Channel Partners principallycomprise ISPs, connectivity resellers and service integrators and address key markets including,business, public sector, consumer and data centres. CityFibre seeks to expand the number of ChannelPartners with which it works and continues to invest in its IT systems, platforms and marketingprogrammes to support its partners.

Š Expand Ethernet Product Portfolio – CityFibre will develop its portfolio of connectivity servicesthrough the introduction of wholesale Ethernet products that complement existing dark fibre services.This will widen the addressable market for the use of CityFibre’s infrastructure across its current andexpanded footprint and open up the opportunity to attract national Channel Partners who seekcity-to-city Ethernet services.

In supporting the growth of its metro connectivity, the Group intends to use part of the net proceeds to acquireEntanet, as described further in section 4 below.

3.3 Commence Rollout of Fibre to the Home

International benchmarks, described in more detail in Part 3 of this document, provide considerable weight to theneed for, and success of, FTTH deployments worldwide. The UK currently ranks amongst the lowest of OECDnations for premises that are directly connected with fibre.

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The Group’s successful FTTH trial in York through its joint venture with Sky and TalkTalk, YorkCo,demonstrated the ability to expand CityFibre’s metro infrastructure to Fibre to the Home. The Group now intendsto expand its fibre infrastructure to residential households in a select number of towns and cities withinCityFibre’s current footprint. Subject to completion of the Capital Raising, construction is scheduled tocommence in five to ten of these towns and cities during 2018.

The deployment of FTTH has been central to both UK government and Ofcom policies, and CityFibre is wellpositioned to exploit this opportunity. The York trial demonstrated CityFibre’s ability to deploy FTTHconnectivity cost effectively and that its Channel Partners were able to offer full fibre broadband to theircustomers at attractive retail prices, thereby demonstrating the propensity for consumers to switch to FTTHconnections. Of those homes in York whose boundaries are passed by the FTTH network constructed by YorkCo,more than 27 per cent. subscribed for an internet service from Sky or TalkTalk on the new YorkCo FTTHnetwork by 31 May 2017, with the highest cabinet penetration now exceeding 40 per cent..

In undertaking its FTTH plan, CityFibre intends to work with Channel Partners to secure commitments to use itsFTTH network, or to procure registrations of interest on a street or neighbourhood basis, hence mitigatingdeployment risks by ensuring there is sufficient demand ahead of construction. The use of Openreach ducts andpoles for some parts of the deployment (as proven by the Group’s trial in Southend-on-Sea) provides anopportunity to lower construction costs for the FTTH deployment.

CityFibre is now in advanced discussions with a number of consumer focused Channel Partners who are keen totake advantage of near gigabit speed broadband delivered on CityFibre’s full fibre infrastructure.

3.4 The Opportunity for Fibre to the Tower

Fibre connectivity to mobile base stations is referred to as Fibre to the Tower (FTTT), or ‘mobile backhaul’.Growth in mobile data is influencing mobile operators to seek higher bandwidth fibre connections to basestations with further demand to connect a large number of ‘small cells’ over time as mobile operators prepare for5G services by 2020.

FTTT uses the same high capacity metro infrastructure deployed for the public sector and business marketverticals. CityFibre is well positioned to serve the connectivity of mobile operators within its existing andexpanded metro footprint, and has demonstrated this capability through its citywide FTTT deployment in Hullfor MBNL, Three and EE. The Directors estimate there are approximately 7,300 mobile base stations within itsexisting footprint, with future potential for 36,500 or more small cells. The Group continues actively to exploreopportunities with mobile operators who seek a transition to dark fibre based FTTT connections withinCityFibre’s existing or expanded metro footprint. Entry to further new towns and cities, if that potential arises, isintended to follow CityFibre’s anchor tenancy model.

3.5 Experience in Building and Operating Fibre Infrastructure

The Group’s strategy to accelerate its expansion is supported by CityFibre’s management capabilities andrelationships with suppliers and civil engineering contractors. The Directors believe that the Group hasestablished the capabilities to co-ordinate and manage fibre infrastructure construction at national scale, asdemonstrated through its existing presence in 42 towns and cities. The Group will increase the number ofemployees only where essential, and it will continue to work with select engineering partners to deliver andoperate CityFibre’s national infrastructure.

4. Entanet Acquisition

The Company has conditionally agreed to purchase the entire issued share capital of Entanet for a cashconsideration of £29 million (on a debt free cash free basis and subject to adjustments). The consideration ispayable in cash on completion of the Entanet Acquisition, other than £4.65 million which is deferred (£3 millionof which is deferred by the Company in respect of indemnity claims for up to 24 months from completion of theEntanet Acquisition and the balance of £1.65 million, which is due to certain management sellers, is deferred forup to 12 months in connection with certain leaver provisions set out in the agreement). The Company proposes tofinance the Entanet Acquisition by utilising part of the net proceeds of the Placing. The Entanet Acquisition isconditional on the passing of the Resolutions to approve the Capital Raising and Admission.

4.1 Overview of Entanet Acquisition

CityFibre’s strategy is to become the leading alternative wholesale full fibre network provider to Openreach. Asdemand for fibre connectivity grows in the UK, CityFibre sees opportunities to expand and accelerate itsnetwork, channels to market and product portfolio.

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Entanet is a wholesale communications provider that uses third party networks owned by other suppliers such asOpenreach, to deliver a wide range of connectivity and telecommunication products and services to ChannelPartners, including broadband, Ethernet, private and wide area networks, IP and PSTN telephony, colocation,hosting and associated services.

The Directors believe the Entanet Acquisition will bring together two complementary wholesale capabilities:CityFibre’s national wholesale fibre infrastructure and Entanet’s established wholesale product portfolio andcommercial relationships with Channel Partners. Entanet would, following the acquisition, become a primaryroute for CityFibre to market its full fibre connectivity through Entanet’s network of Channel Partners.

4.2 Reasons for the Entanet Acquisition and Future Strategy

Entanet’s strategy is focused on the development and growth of wholesale communications services. It packagesdata communications products, including broadband and leased line internet connectivity, IP telephony andhosting services and makes these products and services available nationally, with approximately 1,500 ChannelPartners that serve the business and residential markets having conducted business with Entanet in the 12 monthsended 31 December 2016.

The Directors believe that the Entanet Acquisition will significantly enhance the Group’s wholesale fibrecapability and accelerate its future growth. By combining CityFibre’s fibre infrastructure with Entanet’sestablished wholesale products, systems and relationships with Channel Partners, the Group expects to realise thefollowing synergies and benefits, estimated by the Directors to deliver cost synergies of over £3 million perannum within three years of completion of the Entanet Acquisition:

Š Increase Relationships with Channel Partners – The acquisition is expected to give CityFibre accessto new Channel Partners due to Entanet’s existing position as a wholesale provider with approximately1,500 Channel Partners having conducted business with Entanet in the 12 months ended 31 December2016. This represents a significant potential increase in CityFibre’s indirect routes to market.

Š Achieve Significant Migration Synergies – Entanet’s services operate on the networks of a number ofsuppliers, including BT Wholesale, Openreach, Virgin Media, Colt Technology and Vodafone. Itcurrently services over 45,000 broadband connections and over 3,500 leased lines. A proportion of theseconnections originate and/or terminate in CityFibre’s existing or expanded city footprint, giving rise tothe opportunity to migrate these connections to the Company’s fibre infrastructure over time.

Š Trading and Support Interfaces – The acquisition is expected to give CityFibre access to Entanet’swholesale systems that provide a layer of automated order and billing capabilities as well as customerportals and support systems.

Š Complementary Products – The acquisition is expected to enable CityFibre to utilise Entanet’swholesale product portfolio enhancing CityFibre’s own wholesale fibre capabilities.

Š National Ethernet Capability – The national networks leased by Entanet from other suppliers supportthe end-to-end Ethernet capabilities that are required as part of CityFibre’s product development. Theacquisition is expected to accelerate both the timescale and scope of CityFibre’s Ethernet strategy,enabling faster take up of the Group’s fibre connectivity by national Channel Partners.

The acquisition is expected to enable Entanet to offer the delivery of wholesale services across CityFibre’s fibreinfrastructure in both existing and future metro towns and cities, providing differentiated gigabit speed full fibreconnectivity services through its established base of Channel Partners. One-off integration costs in respect ofEntanet are expected to be approximately £3 million.

The Capital Raising is not conditional on the Entanet Acquisition completing. If, for any reason, the EntanetAcquisition Agreement is terminated prior to Admission, the proceeds of the Capital Raising which wereallocated to fund the Entanet Acquisition will be utilised by the Company for the other purposes described insection 3 of this Part 1.

Further information on Entanet and the benefits of the acquisition are provided in Part 6 of this document. Theterms of the acquisition are detailed in section 18.1 of Part 10 of this document.

5. Current Trading, Trends and Prospects

The Group continued its network footprint expansion throughout 2016, through a combination of acquisitions,organic growth and incremental sales on existing and acquired assets.

In 2017, CityFibre continued to focus on growing revenues and connections across its existing footprint, as wellas undertaking selective investments in new towns and cities. Financial performance relating to metro towns and

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cities was in line with management’s expectations. At the end of May 2017, the Group had entered into contractswith Channel Partners, enabling CityFibre to launch business services into seven further towns and cities, andsecuring in excess of £8.3 million of new contracted revenue. Furthermore, the unrealised value of the Group’scontracts was to £102.2 million, giving the Group good visibility of future income.

The profile of CityFibre’s growth is characterised by securing a relatively small volume of larger value contractsthat provide fibre connectivity to multiple sites. This is supplemented by securing smaller contracts at varioustimes for individual fibre connections from existing Channel Partners. Therefore, timing of the larger contractscan affect month by month performance. The Group secured few large contracts in the first quarter of 2017, witha higher number of larger contracts expected in the second quarter and throughout the second half of 2017. Thestrong and growing pipeline of opportunities means that the Group expects to deliver overall 2017 financialperformance in line with management expectations.

5.1 Expansion to New Towns and Cities

In January 2017, CityFibre announced its intention to construct a new fibre network in Stirling having secured aseven-year anchor contract to provide full fibre connectivity to the public sector, followed in March 2017 withanchor contracts in the business market vertical to construct new networks in Cheltenham and Gloucester, twolocations located near to the Company’s national long distance network.

CityFibre will continue to seek opportunities to enter new towns and cities underpinned by suitable anchorcontracts. The Directors believe that current trading activity and its pipeline of opportunities will enable theGroup to progress towards its stated medium-term target to reach no less than 50 towns and cities by 2020.

5.2 Expansion in Existing Towns and Cities

In its existing towns and cities, CityFibre is undertaking investments in active platforms to provide wholesaleEthernet services to complement its current dark fibre offering. The Company is on track to deliver its activeplatforms into not less than five further towns and cities in the first half of 2017, and is targeting to expandEthernet services to a further six towns and cities by the end of the year.

In expanding its Ethernet services to the business market vertical, CityFibre intends to enter into launch partnercontracts with Channel Partners to provide fibre connectivity to more businesses in its existing footprint. In April2017 CityFibre announced contracts to support construction in Slough, Maidenhead and Wakefield followed inMay 2017 with contracts in Plymouth and Exeter. These launch partner contracts demonstrate that CityFibre ismaking further progress to commercialise the network assets acquired from KCOM and Redcentric SolutionsLimited in 2016.

In the public sector, the Directors believe that recent government policy for full fibre, together with plannedgovernment stimulus to encourage local government to anchor new full fibre core metro networks, will accelerateopportunities for fibre connectivity to more public sector sites. CityFibre is engaged in a significant number ofdiscussions with local authorities and Channel Partners and is building a pipeline of public sector opportunitieswith the potential for contracts to be awarded to the Group in the second half of 2017 and beyond.

5.3 FTTT and FTTH

In 2016 CityFibre completed two landmark network deployments for the UK market: the FTTT networkconstruction in Hull and the FTTH trial in York. As a result, the Company is now exploring opportunities todeploy FTTT and FTTH in more UK towns and cities, and is progressing commercial negotiations with mobileoperators and major Channel Partners accordingly.

CityFibre has engaged in commercial discussions with major ISPs and a number of smaller ISPs, to secureChannel Partner relationships intended to provide full fibre broadband services to consumers using CityFibre’sfuture FTTH infrastructure. These discussions are advanced and may or may not lead to binding agreements indue course.

The Group has engagement with Channel Partners across all four primary market verticals, supported by marketdemands for fibre connectivity and policies that encourage the deployment of full fibre and 5G infrastructure tomany homes and businesses. The Directors believe that CityFibre is well positioned to exploit these opportunitiesand to continue to expand its operations.

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6. Structure and principal terms and conditions of the Capital Raising

6.1 Structure of the Capital Raising

Introduction

The Company proposes to raise gross proceeds of approximately £200 million by way of the Placing and up to£15 million by way of the Offer for Subscription. The decision to structure the Capital Raising by way of acombination of a Placing and an Offer for Subscription takes into account a number of factors, including the totalnet proceeds to be raised. The Board believes that the Placing, as part of the Capital Raising enables theCompany to satisfy demand from new investors as well as current Shareholders wishing to increase theirpositions combined with the ability for Shareholders (along with other investors) to participate in the Offer forSubscription in order to mitigate the effect of the dilution arising from the Placing. Shareholders’ approval isrequired for the Capital Raising including the Placing and the Offer for Subscription, by way of a specialresolution.

Pricing

The Offer Price represents a 9.09 per cent. discount to the Closing Price of 60.50 pence on 4 July 2017 (being thelast Business Day before the announcement of the Capital Raising). The Offer Price (including the size of thediscount) has been determined, following discussions with both existing Shareholders and Placees, to be at thelevel which the Board considers appropriate to ensure the success of the Capital Raising.

Dilution

The Placing will: (i) result in 363,636,364 Placing Shares being issued and the number of Ordinary Shares beingincreased from a total of 265,672,644 Ordinary Shares (as at the Reference Date) to a total of 629,309,008Ordinary Shares, representing an increase of 136.9 per cent.; and (ii) reduce the proportional ownership andvoting interest in the Ordinary Shares of the Shareholders (as at the Reference Date) by 57.8 per cent.. The Offerfor Subscription will result in up to 27,272,727 Offer for Subscription Shares being issued and the number ofOrdinary Shares being increased (assuming the Offer for Subscription is taken up in full) from a total of: (i)265,672,644 Ordinary Shares to a total of 292,945,371 Ordinary Shares (disregarding the issue of the PlacingShares), representing an increase of 10.3 per cent.; or (ii) 629,309,008 Ordinary Shares (taking into account theissue of the Placing Shares) to a total of 656,581,735 Ordinary Shares, representing an increase of 147.1 per cent.

Following completion of the Capital Raising, Shareholders who do not (or cannot) participate in the Placing willsuffer a dilution of approximately 57.8 per cent. (excluding the impact of the Offer for Subscription) or 59.5 percent. (assuming full take up under the Offer for Subscription).

6.2 The Placing

Under the Placing, the Underwriters have agreed to procure Placees for an aggregate of 363,636,364 PlacingShares at the Offer Price. The Placing is expected to raise gross proceeds of £200 million.

The Placing is fully underwritten by the Underwriters on the terms and conditions of the UnderwritingAgreement, details of which are set out in section 18.2 of Part 10 of this document.

The Placing is conditional upon (among other things): (i) the Resolutions being passed at the General Meeting;(ii) the Underwriting Agreement having become unconditional in all respects (save for the condition relating toAdmission); and (iii) Admission becoming effective by not later than 8.00 a.m. on 28 July 2017 (or such laterdate as the Company and the Underwriters may agree). If the conditions are not satisfied then Capital Raisingwill not proceed. In those circumstances, the Entanet Acquisition will also not proceed.

An application will be made to the London Stock Exchange for the Placing Shares to be admitted to AIM. It isexpected that Admission will become effective and dealings in the Placing Shares will commence at 8.00 a.m. on28 July 2017.

The Placing Shares will, when issued, rank pari passu in all respects with, and will carry the same voting anddividend rights as, the Existing Ordinary Shares and the Offer for Subscription Shares.

6.3 The Offer for Subscription

Up to 27,272,727 Offer for Subscription Shares are being made available under the Offer for Subscription at theOffer Price (representing 10.3 per cent. of the Company’s existing issued share capital and 4.2 per cent. of theCompany’s enlarged issued share capital following completion of the Capital Raising, assuming in both casesthat the Offer for Subscription is taken up in full). The terms and conditions of application under the Offer forSubscription are set out in Part 2 of this document and an Application Form is set out at the end of this document.Application for Offer for Subscription Shares must be for at least the Minimum Subscription. Applications for

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less than the Minimum Subscription will be rejected. The terms and conditions should be read carefully before anapplication is made. Investors should consult their respective stockbroker, bank manager, solicitor, accountant orother financial adviser if they are in any doubt about the contents of this document.

In order to apply for Offer for Subscription Shares, the Application should be completed in accordance with theinstructions set out on it and returned with the appropriate remittance, by post to Computershare, CorporateActions Projects, Bristol BS99 6AH or by hand (during normal business hours only) to Computershare, ThePavilions, Bridgwater Road, Bristol BS13 8AE, together, in each case, with payment in full, so as to be receivedno later than 11:00 a.m. on 26 July 2017.

The Offer for Subscription is not an open offer or rights issue and Shareholders will not have an automaticentitlement to subscribe for any or a pro rata number of shares. Shareholders and other investors may apply forsuch number of Offer for Subscription Shares in multiples of 2,000 (over the Minimum Subscription) as theywish, up to the full number of 27,272,727 Offer for Subscription Shares available in the Offer for Subscription. Ifvalid applications are received under the Offer for Subscription for more than the maximum number of Offer forSubscription Shares available, applications shall be allocated in such manner as the Directors may determine, intheir absolute discretion, although the Directors anticipate such allocations will take into account applicationsmade by existing Shareholders applying for Offer for Subscription Shares.

The Offer for Subscription is not underwritten by the Underwriters or by anyone else.

The Offer for Subscription is conditional upon (among other things) (i) the Resolutions being passed at theGeneral Meeting; (ii) the Underwriting Agreement having become unconditional in all respects (save for thecondition relating to Admission) and (iii) Admission becoming effective by not later than 8.00 a.m. on 28 July2017 (or such later date as the Company and the Underwriters may agree).

An application will be made to the London Stock Exchange for the Offer for Subscription Shares to be admittedto trading on AIM. It is expected that Admission will become effective and that dealings in the Offer forSubscription Shares will commence at 8.00 a.m. on 28 July 2017.

The Offer for Subscription Shares will, when issued and fully paid, rank pari passu in all respects with, and willcarry the same voting and dividend rights as, the Existing Ordinary Shares and the Placing Shares.

Overseas Persons should refer to section 5 of Part 2 of this document for further information regarding theirability to participate in the Offer for Subscription.

Some questions and answers on the Offer for Subscription (and the Placing) are set out at pages 33 to 36 of thisdocument (Questions and Answers about the Capital Raising). Details of further terms and conditions of theOffer for Subscription (and the Placing) are set out in Part 2 of this document and, where relevant, will also beset out in the Application Form.

7. Admission and Settlement

Application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted to tradingon AIM. Admission is expected to take place at 8.00 a.m. on 28 July 2017.

To be traded on AIM, securities must be eligible for electronic settlement. Following Admission, the NewOrdinary Shares will be eligible for CREST settlement. CREST is a paperless settlement system enablingsecurities to be evidenced otherwise than by a certificate and transferred otherwise than by a written instrumentin accordance with the CREST Regulations.

Accordingly, following Admission, settlement of transactions in the New Ordinary Shares may take place withinthe CREST system if a Shareholder so wishes. CREST is a voluntary system and Shareholders who wish toreceive and retain share certificates are able to do so.

For more information concerning CREST, Shareholders should contact their brokers or Euroclear at 33 CannonStreet, London EC4M 5SB or by telephone on +44 (0) 207 849 0000.

The ISIN number of the Ordinary Shares will remain GB00BH581H10. The TIDM code will remain CITYfollowing Admission.

8. Dividend Policy

The objective of the Directors is to achieve capital growth for Shareholders through the continued expansion ofCityFibre’s fibre infrastructure and the growth of revenue and profits generated from the use of the infrastructure.Consequently, they do not anticipate that the Company will pay dividends to Shareholders in the short to mediumterm.

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As the Company’s strategy is for the realisation of yield generating infrastructure, the Directors will keep thisposition under review and would intend, at an appropriate stage in the future, to pay a proportion of profits ineach year to Shareholders by way of dividend. Pursuant to the Act, a dividend may only be paid if the Directorsare satisfied that the Company has distributable profits pursuant to section 830 of the Act and, as it is a publiclimited company, its net assets exceed the aggregate of its called up share capital and distributable reservespursuant to section 831 of the Act.

9. General Meeting

A notice convening a general meeting of the Company to be held at CMS Cameron McKenna Nabarro OlswangLLP, Cannon Place, 78 Cannon St, London EC4N 6AF at 11.30 a.m. on 27 July 2017 is set out at the end of thisdocument. The General Meeting is being held for the purpose of considering and, if thought fit, passing theResolutions. The Resolutions to be proposed at the General Meeting are as follows:

Resolution 1

Resolution 1 will be proposed as an ordinary resolution requiring a simple majority of votes in favour.

Resolution 1 proposes that the Directors be generally and unconditionally authorised to allot shares in theCompany up to a nominal amount of (i) £3,909,090.91 pursuant to, or in connection with, the Capital Raising. Ifgranted this authority will apply until the conclusion of the annual general meeting of the Company to be held in2018 or, if earlier, on 31 May 2018.

Resolution 2

Resolution 2 will be proposed as a special resolution requiring at least 75 per cent. of votes in favour.

Resolution 2 proposes that, subject to and conditional upon Resolution 1 being duly passed, the Directors begiven power to allot equity securities as set out in that Resolution as if section 561 of the Act did not apply. Thenumber of New Ordinary Shares to be issued if the Resolutions are passed will represent 136.9 per cent. of theCompany’s issued ordinary share capital as at the Reference Date (assuming nil take up under the Offer forSubscription) and 147.1 per cent. of the Company’s issued ordinary share capital as at the Reference Date(assuming full take up under the Offer for Subscription). If granted, this authority will apply until the conclusionof the annual general meeting of the Company to be held in 2018 or, if earlier, on 31 May 2018.

If any of the above Resolutions are not passed, the Capital Raising will not proceed.

10. Action to be taken

In respect of the General Meeting

You will find enclosed with this document a Form of Proxy for use at the General Meeting or at anyadjournment thereof. Whether or not you propose to attend the meeting in person, you are requested tocomplete the Form of Proxy in accordance with the instructions printed on it and to return it as soon aspossible, by post to Computershare Investor Services PLC, Corporate Action Projects, Bristol BS996AH or by hand to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, BristolBS13 8AE, by no later than 11.30 a.m. on 25 July 2017. If you hold your Ordinary Shares in CREST,you may appoint a proxy by completing and transmitting a CREST proxy instruction form so that it isreceived by Computershare (under CREST participant ID 3RA50) by no later than 11.30 a.m. on 25July 2017. The time of receipt will be taken to be the time from which Computershare is able to retrievethe message by enquiry to CREST in the manner prescribed by CREST. The completion and return of aForm of Proxy or completion and transmission of a CREST proxy instruction will not prevent you fromattending the General Meeting and voting in person if you wish to do so.

In respect of the Offer for Subscription

Your attention is drawn to section 2 of Part 2 of this document which explains the actions to be taken inrespect of the Offer for Subscription.

11. Irrevocable undertaking

CityFibre has received an irrevocable undertaking from Woodford Investment Management Ltd agreeing toattend (or appoint a proxy to attend) the General Meeting and vote in favour of the Resolutions.

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The irrevocable undertaking is given in terms such that it will cease to be binding and lapse at the earlier of31 August 2017 and the date on which the Shareholders are notified that completion of the Capital Raising willnot occur or a public announcement is made to this effect.

12. Related Party Transactions

Woodford Investment Management Ltd is a related party of the Company for the purposes of the AIM Rules byvirtue of its status as “substantial shareholder” (as such term is defined in the AIM Rules) as it beneficially ownsor controls, directly or indirectly, 10 per cent. or more of the Existing Ordinary Shares. Woodford InvestmentManagement Ltd has agreed to subscribe for 65,454,545 Placing Shares, conditional on Admission. Taking intoaccount the related party transactions noted above, the Directors consider, having consulted with the Company’snominated advisor, finnCap, that the terms of the Placing with Woodford Investment Management Ltd is fair andreasonable insofar as the Company’s shareholders are concerned.

13. Overseas Persons

The attention of Overseas Persons who have registered addresses outside the United Kingdom, or who arecitizens or residents of, or are located in, countries other than the United Kingdom, is drawn to the information insection 5 of Part 2 of this document.

Notwithstanding any other provision of this document or the Application Form, the Company reserves the rightto permit any applicant to participate in the Offer for Subscription if the Company in its sole and absolutediscretion is satisfied that the transaction in question will not violate applicable laws.

14. Taxation

Certain information about UK and US taxation in relation to the Capital Raising is set out in Part 8 of thisdocument. If you are in any doubt as to your tax position, or you are subject to tax in a jurisdiction other than theUnited Kingdom and the United States, you should consult your own independent tax adviser without delay.

15. Further Information and Risk Factors

Your attention is drawn to the further information set out in Part 2 to Part 14 (inclusive) of this document and, inparticular, to the risk factors on pages 15 to 26 of this document.

16. Directors’ Recommendation and Intentions

The Board is fully supportive of the Capital Raising. I, Chris Stone, have agreed to subscribe for 1,181,818Placing Shares at the Offer Price. Although I am a related party to the Company by virtue of being a Director, mysubscription is not of sufficient size to constitute a related party transaction.

The Board believes that the Capital Raising is in the best interests of the Company and the Shareholders as a whole.Accordingly, the Board unanimously recommends that you vote in favour of all of the Resolutions to be proposed atthe General Meeting in order to effect the Capital Raising, as they intend to do in respect of their own beneficialshareholdings held at the time of the General Meeting, amounting to 4,469,398 Ordinary Shares in aggregate as atthe Reference Date (representing approximately 1.68 per cent. of the Company’s existing issued ordinary sharecapital).

Yours sincerely

Chris StoneChairman11 July 2017

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PART 2TERMS AND CONDITIONS OF THE OFFER FOR SUBSCRIPTION

1. Introduction

The Company is proposing to offer up to 27,272,727 Ordinary Shares pursuant to the Offer for Subscription toraise gross proceeds of up to approximately £15 million.

Subject to the fulfilment of the conditions of the Underwriting Agreement, the Offer for Subscription Shares willbe offered under the Offer for Subscription at a price of 55 pence per Offer for Subscription Share (being theOffer Price).

The Offer for Subscription Shares will, when issued, rank pari passu in all respects with the Existing OrdinaryShares and the Placing Shares, including the right to any future dividends or other distributions made, paid ordeclared after the date of their issue.

Application will be made to the London Stock Exchange for the Offer for Subscription Shares to be admitted totrading on AIM. It is expected that Admission will become effective, and that dealings in the Offer forSubscription Shares will commence on the London Stock Exchange, at 8.00 a.m. on 28 July 2017.

The Offer for Subscription (like the Placing) is conditional upon (among other things) (i) the Resolutions beingpassed at the General Meeting, (ii) the Underwriting Agreement having become unconditional in all respects(other than in respect of Admission), and (iii) Admission becoming effective by no later than 8.00 a.m. on28 July 2017, (or such later date as the Company and the Underwriters may agree). If these conditions are notsatisfied the Capital Raising (including the Offer for Subscription) will not proceed.

The Underwriting Agreement may be terminated by the Underwriters prior to Admission upon the occurrence ofcertain specified events, in which case the Capital Raising (including the Offer for Subscription) will notproceed. The Underwriting Agreement is not capable of termination following Admission. A summary of theprincipal terms of the Underwriting Agreement is set out in section 18.2 of Part 10 of this document.

The Company reserves the right to decide not to proceed with the Capital Raising (including the Offer forSubscription) at any time prior to Admission and commencement of dealings in the Offer for SubscriptionShares.

The attention of all Shareholders and any other person (including, without limitation, custodians,nominees and trustees) who has a contractual or other legal obligation to forward this document into ajurisdiction other than the United Kingdom is drawn to section 5 of this Part 2.

The Existing Ordinary Shares are already admitted to CREST. No further application for admission to CREST isrequired for the Offer for Subscription Shares and all of the Offer for Subscription Shares when issued may beheld and transferred by means of CREST.

All cheques and banker’s drafts posted by applicants in order to participate in the Offer for Subscription will beposted at their own risk.

The Offer for Subscription

Subject to, amongst other things, the terms and conditions set out below, Shareholders and other investors arebeing given the opportunity to apply for Offer for Subscription Shares on the terms and conditions as set out inthis Part 2 and in the Application Form.

The Offer for Subscription is to be made in respect of up to 27,272,727 Offer for Subscription Shares at the OfferPrice of 55 pence per Offer for Subscription Share, which represents a 9.09 per cent. discount to the ClosingPrice of 60.50 pence on 4 July 2017 (being the last Business Day prior to announcement of the Capital Raising).

The Minimum Subscription represents the minimum subscription per application being 2,000 Offer forSubscription Shares (equivalent to £1,100). Any application for less than the Minimum Subscription will berejected. No applicant may subscribe for Offer for Subscription Shares in excess of the £15 million maximum.

The Offer Price in respect of the Offer for Subscription is payable in full on application and free of all expenses.

The Offer for Subscription (if taken up in full) will, therefore, raise gross proceeds of up to £15 million.

The Offer for Subscription Shares are being offered only in transactions exempt from, or not subject to, theregistration requirements of the US Securities Act.

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Multiple applications may be submitted. The Offer for Subscription is not an open offer or rights issue andShareholders will not have an automatic entitlement to subscribe for any or a pro-rata number of OrdinaryShares. Applicants may apply for such number of Offer for Subscription Shares in multiples of 2,000 (over theMinimum Subscription) as they wish, up to the full number of 27,272,727 Offer for Subscription Shares availablein the Offer for Subscription. If valid applications are received under the Offer for Subscription for more than themaximum number of Offer for Subscription Shares available, applications shall be allocated in such manner asthe Directors may determine, in their absolute discretion, although the Directors anticipate such allocations willtake into account applications made by existing Shareholders applying for Offer for Subscription Shares.

Shareholders should be aware that the Offer for Subscription is not a rights issue. As such, Shareholdersshould note that Application Forms are not negotiable documents and cannot be traded. A Shareholderthat does not subscribe for any Offer for Subscription Shares will suffer a dilution of approximately 59.5per cent. as a result of the Capital Raising (if the Offer for Subscription is taken up in full). Offer forSubscription Shares which are not taken up under the Offer for Subscription will not be sold in the marketfor the benefit of those who do not apply under the Offer for Subscription and Shareholders who do notapply to subscribe for Offer for Subscription Shares will have neither rights under the Offer forSubscription nor receive any proceeds from it.

The Ordinary Shares are already admitted to CREST. Accordingly, no further application is required for theOffer for Subscription Shares to be admitted to CREST. All Offer for Subscription Shares, when issued and fullypaid, may be held and transferred by means of CREST.

The Offer for Subscription Shares will, when issued, be credited as fully paid and will rank pari passu in allrespects with the Existing Ordinary Shares including the Placing Shares. The Offer for Subscription Shares willnot be made available in whole or in part to the public except under the terms of the Offer for Subscription.

Shareholders and other investors who are allocated Offer for Subscription Shares under the Offer forSubscription will, subject to the Company’s ability to pay a dividend, and provided the Directors consider itappropriate to declare a dividend, receive dividends on the Offer for Subscription Shares in the same manner asthey receive dividends on their Ordinary Shares.

If the Directors consider it appropriate in the circumstances, options and awards under the Share IncentiveArrangements may be adjusted to take account of the Offer for Subscription. If this is the case, participants willbe contacted separately.

If the Underwriting Agreement does not become unconditional and the Capital Raising is terminated, anyapplications for Offer for Subscription Shares will be rejected. In these circumstances, application moniesreceived by the Receiving Agent in respect of Offer for Subscription Shares will be returned (at the applicant’ssole risk), without payment of interest, as soon as reasonably practicable thereafter.

Please see section 18.2 of Part 10 of this document for a summary of the material terms of the UnderwritingAgreement. Termination cannot occur after dealings in the Offer for Subscription Shares have begun.

No temporary documents of title will be issued in respect of Offer for Subscription Shares held in uncertificatedform. Definitive certificates in respect of Offer for Subscription Shares subscribed for are expected to be postedto those applicants who have validly elected to hold their Offer for Subscription Shares in certificated form on oraround 11 August 2017. In respect of those applicants who validly elect to hold their Offer for SubscriptionShares in uncertificated form, the Offer for Subscription Shares are expected to be credited to their stockaccounts maintained in CREST by 8.00 a.m. on 28 July 2017.

All monies received by the Receiving Agent in respect of Offer for Subscription Shares will be placed on depositin a non-interest bearing account by the Receiving Agent.

If for any reason it becomes necessary to adjust the expected timetable as set out in this document, the Companywill make an appropriate announcement via a Regulatory Information Service giving details of the revised dates.

2. Action to be taken

2.1 General

Subject as provided in section 5 of this Part 2 in relation to Overseas Persons, Shareholders and other investorsmay use the Application Form attached at the end of this document to apply for Offer for Subscription Shares.Applicants may apply for such number of Offer for Subscription Shares in multiples of 2,000 (over the MinimumSubscription) as they wish, up to the full number of 27,272,727 Offer for Subscription Shares available in theOffer for Subscription by completing Boxes 1 and 2 of the Application Form. The Application Form also sets outinstructions regarding payment.

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The instructions and other terms set out in the Application Form form part of the terms of the Offer forSubscription.

2.2 Application Forms

Applications to acquire Offer for Subscription Shares may only be made on the Application Form. ApplicationForms may not be assigned, transferred or split. The Application Form is not a negotiable document and cannotbe separately traded. The Application Form should not be forwarded to or transmitted in or into any of theExcluded Territories.

2.3 Excess Applications

Shareholders and other investors may apply for any number Offer for Subscription Shares up to the maximumavailable under the Offer for Subscription. However, the total number of Offer for Subscription Shares is fixedand will not be increased in response to excess applications under the Offer for Subscription. If valid applicationsare received under the Offer for Subscription for more than the maximum number of Offer for SubscriptionShares available, applications shall be allocated in such manner as the Directors may determine, in their absolutediscretion, although the Directors anticipate such allocations will take into account applications made by existingShareholders for Offer for Subscription Shares. No assurance can be given that applications will be met in full orin part or at all. Excess monies in respect of applications which are not met in full will be returned to theapplicant (at the applicant’s risk) without interest as soon as practicable thereafter by way of cheque or CRESTpayment, as appropriate.

2.4 Application procedures

Shareholders and other investors wishing to apply to acquire Offer for Subscription Shares under the Offer forSubscription should complete the Application Form in accordance with the instructions printed on it. CompletedApplication Forms should be returned to the Receiving Agent, Computershare Investor Services PLC, CorporateAction Projects, Bristol BS99 6AH or by hand to Computershare Investor Services PLC, The Pavilions,Bridgwater Road, Bristol BS13 8AE (during normal office hours only), so as to be received by the ReceivingAgent by no later than 11.00 a.m. on 26 July 2017, after which time, subject to the limited exceptions below,Application Forms will not be valid. Application Forms delivered by hand will not be checked upon delivery andno receipt will be provided. Within the United Kingdom, Applicants should note that applications, once made,will be irrevocable and receipt thereof will not be acknowledged. If an Application Form is being sent by first-class post in the UK or using the reply-paid envelope included with the Application Form in the UK, Applicantsare recommended to allow at least four business days for delivery.

Completed Application Forms should be returned with a cheque or banker’s draft drawn in pounds sterling on abank or building society in the UK which is either a member of the Cheque and Credit Clearing CompanyLimited or the CHAPS Clearing Company Limited or which has arranged for its cheques and banker’s drafts tobe cleared through facilities provided by any of those companies. Such cheques or banker’s drafts must bear theappropriate sort code in the top right hand corner and must be for the full amount payable on application.

Cheques should be drawn on a personal account in respect of which the applicant has sole or joint title to thefunds and should be made payable to “CIS PLC RE: CityFibre Infrastructure Holdings plc Offer forSubscription” and crossed “A/C Payee only”. Third party cheques (other than building society cheques orbanker’s drafts where the building society or bank has confirmed that the relevant applicant has title to theunderlying funds) will be subject to the Money Laundering Regulations which would delay or prevent successfulapplicants receiving their Offer for Subscription Shares (please see section 4 below). All documents and chequessent through the post by applicants will be sent at their own risk and any cheques not received by the ReceivingAgent will need to be re-issued and resent by the applicant. Payments via CHAPS, BACS or electronic transferwill not be accepted.

Cheques and banker’s drafts will be presented for payment on receipt and it is a term of the Offer forSubscription that cheques and banker’s drafts will be honoured on first presentation. The Company may elect totreat as valid or invalid any applications made by applicants in respect of which cheques are not so honoured.Should such cheques or banker’s drafts not be so honoured, the Company may undertake any action to recoverthe value of the application and any costs associated with such recovery (including the forfeiture and sale of anyOffer for Subscription Shares allotted pursuant to such an application). If cheques or banker’s drafts arepresented for payment before the conditions of the Offer for Subscription are fulfilled, the application monieswill be kept in a separate bank account, with interest, if any, being retained for the Company until all conditionsare met. If the Offer for Subscription does not become unconditional, no Offer for Subscription Shares will beissued and all monies will be returned (at the applicant’s sole risk), without payment of interest, to applicants assoon as reasonably practicable following the lapse of the Offer for Subscription.

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Subject to the provisions of the Underwriting Agreement, the Company may in its sole discretion, but shall notbe obliged to, treat an Application Form as valid and binding on the person by whom or on whose behalf it islodged, even if not completed in accordance with the relevant instructions or not accompanied by a valid powerof attorney where required, or if it otherwise does not strictly comply with the terms and conditions of the CapitalRaising. The Company further reserves the right (but shall not be obliged) to accept either:

(i) Application Forms received after 11.00 a.m. on 26 July 2017; or

(ii) applications in respect of which remittances are received before 11.00 a.m. on 26 July 2017from authorised persons (as defined in the FSMA) specifying the Offer for Subscription Sharesapplied for and undertaking to lodge the Application Form in due course but, in any event,within two business days.

Multiple applications will not be accepted. All documents and remittances sent by post by or to an applicant (oras the applicant may direct) will be sent at the applicant’s own risk.

If Offer for Subscription Shares have already been allotted to an applicant and such applicant’s cheque orbanker’s draft is not honoured upon first presentation or such application is subsequently otherwise deemed to beinvalid, the Company shall be authorised (in its absolute discretion as to manner, timing and terms) to makearrangements, on behalf of the applicant, for the sale of such applicant’s Offer for Subscription Shares. None ofthe Receiving Agent or any of the Bookrunners or the Company, nor any other person, shall be responsible for,or have any liability for, any loss, expense or damage suffered by such applicant as a result.

2.5 Effect of application

By completing and delivering an Application Form, the applicant:

(i) represents and warrants to the Company, the Underwriters and the Receiving Agent that he orshe has the right, power and authority, and has taken all action necessary, to make theapplication under the Offer for Subscription and to execute, deliver and exercise his or herrights and perform his or her obligations under any contracts resulting therefrom and that he orshe is not a person otherwise prevented by legal or regulatory restrictions from applying forOffer for Subscription Shares or acting on behalf of any such person on a non-discretionarybasis;

(ii) agrees with the Company and the Underwriters that all applications under the Offer forSubscription and contracts resulting therefrom shall be governed by and construed inaccordance with the laws of England;

(iii) confirms to the Company and the Underwriters that in making the application he or she is notrelying on (and irrevocably waives any right he or she may have in respect of) any informationor representation in relation to the Group other than that contained in this document, and theapplicant accordingly agrees that no person responsible solely or jointly for this document orany part thereof, or involved in the preparation thereof, shall have any liability for any suchinformation or representation not so contained and further agrees that, having had theopportunity to read this document, he or she will be deemed to have had notice of allinformation in relation to the Group contained in this document (including informationincorporated by reference);

(iv) confirms to the Company and the Underwriters that in making the application he or she is notrelying and has not relied on the Underwriters or any person affiliated with the Underwriters inconnection with any investigation of the accuracy of any information contained in thisdocument or his or her investment decision;

(v) confirms to the Company and the Underwriters that no person other than the Company hasbeen authorised to give any information or to make any representation concerning theCompany, or its subsidiaries, or the Offer for Subscription Shares (other than as contained inthis document) and, if given or made, any such other information or representation should notbe relied upon as having been authorised by the Company or the Underwriters;

(vi) requests that the Offer for Subscription Shares to which he or she will become entitled beissued to him on the terms set out in this document and the Application Form subject to theArticles;

(vii) represents and warrants to the Company, the Underwriters and the Receiving Agent that he orshe is not, nor is he or she applying on behalf of any person who is resident or is located in the

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United States or a citizen or resident, or which is a corporation, partnership or other entitycreated or organised in or under any laws of, any of the Excluded Territories or any jurisdictionin which the application for Offer for Subscription Shares by such person is prevented by lawand he or she is not applying with a view to re-offering, re-selling, transferring or deliveringany of the Offer for Subscription Shares which are the subject of his or her application to, orfor the benefit of, a person who is a citizen or resident or which is a corporation, partnership orother entity created or organised in or under any laws of, or any of the Excluded Territories orany jurisdiction in which the application for Offer for Subscription Shares by such person isprevented by law (except where proof satisfactory to the Company has been provided that he orshe is able to accept the invitation by the Company free of any requirement which it (in itsabsolute discretion) regards as unduly burdensome), nor acting on behalf of any such person ona nondiscretionary basis nor (a) person(s) otherwise prevented by legal or regulatoryrestrictions from applying for Offer for Subscription Shares under the Offer for Subscription;

(viii) represents and warrants to the Company, the Underwriters and the Receiving Agent that he orshe is not, and nor is he or she applying as nominee or agent for, a person who is or may beliable to notify and account for tax under the Stamp Duty Reserve Tax Regulations 1986 at anyof the increased rates referred to in sections 67, 70, 93 or 96 (depository receipts and clearanceservices) of the Finance Act 1986 (a “Specified Person”) and that if any stamp duty, stampduty reserve tax, or any other transfer, issuance tax or related interest and penalties (“StampTax”) arises in connection with his or her acquisition of the Offer for Subscription Shares orany subsequent transfer by him, or his or her agent, of such shares to a Specified Person or anominee or agent for such person, he or she agrees that he or she will pay and bear, or procurethe payment of, the cost of such Stamp Tax.

All enquiries in connection with the procedure for application and completion of the Application Formshould be addressed to the Receiving Agent, Computershare Investor Services PLC, Corporate ActionsProject, Bridgwater Road, Bristol BS99 6AH (telephone 0370 707 1168 from within the UK, or+44 370 707 1168 if calling from overseas). Please note that the Receiving Agent cannot provide financialadvice on the merits of the Capital Raising or as to whether Shareholders or other investors should applyfor Offer for Subscription Shares under the Offer for Subscription.

Shareholders who do not want to apply for Offer for Subscription Shares under the Offer for Subscriptionshould take no action and should not complete or return the Application Form.

3. Withdrawal rights

Persons wishing to exercise or direct the exercise of statutory withdrawal rights pursuant to section 87Q(4) of theFSMA after the issue by the Company of a prospectus supplementing this document must do so by lodging awritten notice of withdrawal within two business days of the date on which the supplementary prospectus ispublished. The withdrawal notice must include the full name and address of the person wishing to exercisestatutory withdrawal rights. The notice of withdrawal must be delivered by post or by hand (during normalbusiness hours only) to the Receiving Agent, Computershare Investor Services PLC, Corporate Action Projects,Bristol BS99 6AH (please call Computershare Investor Services PLC on 0370 707 1168 (if calling from withinthe United Kingdom, or on +44 370 707 1168 (if calling from overseas) between the hours of 8.30 a.m. and 5.30p.m. for further details) so as to be received before the end of the withdrawal period. The notice of withdrawalwill be deemed to be received upon posting to or deposit with the Receiving Agent. Notice of withdrawal givenby any other means or which is deposited with the Receiving Agent after such expiry of such period will notconstitute a valid withdrawal. The Company will not permit the exercise of withdrawal rights after payment bythe relevant person for the Offer for Subscription Shares to which they are entitled in full, and the allotment ofsuch Offer for Subscription Shares to such person becoming unconditional, save to the extent required by statute.In such event, such persons are advised to seek independent legal advice.

4. Money Laundering Regulations

To ensure compliance with the Money Laundering Regulations, the Receiving Agent may require, at its absolutediscretion, verification of the identity of the person by whom or on whose behalf an Application Form is lodgedwith payment (which requirements are referred to below as the “verification of identity requirements”). If theApplication Form is submitted by a UK regulated broker or intermediary acting as agent, and which is itselfsubject to the Money Laundering Regulations, any verification of identity requirements are the responsibility ofsuch broker or intermediary and not of the Receiving Agent. In such case, the lodging agent’s stamp should beinserted on the Application Form.

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The person lodging the Application Form with payment, and in accordance with the other terms as describedabove (the acceptor), including any person who appears to the Receiving Agent to be acting on behalf of someother person, accepts the Offer for Subscription in respect of such number of Offer for Subscription Shares as isreferred to therein (for the purposes of this section 4, the “relevant Offer for Subscription Shares”) and shallthereby be deemed to agree to provide the Receiving Agent with such information and other evidence as theReceiving Agent may require to satisfy the verification of identity requirements.

If the Receiving Agent determines that the verification of identity requirements apply to any acceptor orapplication, the relevant Offer for Subscription Shares (notwithstanding any other term of the Offer forSubscription) will not be issued to the relevant acceptor unless and until the verification of identity requirementshave been satisfied in respect of that acceptor or application. The Receiving Agent is entitled, in its absolutediscretion, to determine whether the verification of identity requirements apply to any acceptor or application andwhether such requirements have been satisfied, and neither the Receiving Agent nor the Company will be liableto any person for any loss or damage suffered or incurred (or alleged), directly or indirectly, as a result of theexercise of such discretion.

If the verification of identity requirements apply, failure to provide the necessary evidence of identity within areasonable time may result in delays in the despatch of share certificates or in crediting CREST accounts. If,within a reasonable time following a request for verification of identity and, in any case by 26 July 2017, theReceiving Agent has not received evidence satisfactory to it as aforesaid, the Company may, in its absolutediscretion, treat the relevant application as invalid, in which event the monies payable on acceptance of the Offerfor Subscription will be returned (at the acceptor’s risk) without interest to the account of the bank or buildingsociety on which the relevant cheque or banker’s draft was drawn.

Submission of an Application Form with the appropriate remittance will constitute a warranty from the applicantthat the Money Laundering Regulations will not be breached by application of such remittance.

The verification of identity requirements will not usually apply:

(a) if the applicant is an organisation required to comply with the Money Laundering Directive(the Council Directive on prevention of the use of the financial system for the purpose ofmoney laundering (no. 91/308/EEC));

(b) if the acceptor is a regulated United Kingdom broker or intermediary acting as agent and isitself subject to the Money Laundering Regulations;

(c) if the applicant (not being an applicant who delivers his or her application in person) makespayment by way of a cheque drawn on an account in the applicant’s name; or

(d) if the aggregate price for the Offer for Subscription Shares is less than Euro 15,000 (or itssterling equivalent).

In other cases the verification of identity requirements may apply. Satisfaction of these requirements may befacilitated in the following ways:

(i) if payment is made by cheque or banker’s draft in pounds sterling drawn on a branch in theUnited Kingdom of a bank or building society which bears a UK bank sort code number in thetop right hand corner the following applies. Cheques should be made payable to “CIS PLC RE:CityFibre Infrastructure Holdings plc Offer for Subscription A/C” in respect of an applicationand crossed “A/C Payee Only”. Third party cheques may not be accepted with the exception ofbuilding society cheques or banker’s drafts where the building society or bank has confirmedthe name of the account holder by stamping or endorsing the cheque/banker’s draft to sucheffect. The account name should be the same as that shown on the Application Form; or

(ii) if the Application Form is lodged with payment by an agent which is an organisation of the kindreferred to in (a) above or which is subject to anti-money laundering regulation in a countrywhich is a member of the Financial Action Task Force (the non-European Union members ofwhich are Argentina, Australia, Brazil, Canada, China, Gibraltar, Hong Kong, Iceland, Japan,Mexico, New Zealand, Norway, Russian Federation, Singapore, South Africa, Switzerland,Turkey, UK Crown Dependencies and the US and, by virtue of their membership of the GulfCo-operation Council, Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United ArabEmirates), the agent should provide, with the Application Form, written confirmation that it hasthat status and a written assurance that it has obtained and recorded evidence of the identity of theperson for whom it acts and that it will on demand make such evidence available to the ReceivingAgent. If the agent is not such an organisation, it should contact the Receiving Agent atComputershare Investor Services PLC, Corporate Actions Project, Bridgwater Road, BristolBS99 6AH.

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To confirm the acceptability of any written assurance referred to in (ii) above, or in any other case, theacceptor should contact the Receiving Agent. The telephone number of the Receiving Agent is 0370 7071168 (if calling from within the United Kingdom, or +44 370 707 1168 (if calling from overseas), betweenthe hours of 8.30 a.m. and 5.30 p.m. on any business day.

If the Application Form(s) is/are in respect of Offer for Subscription Shares with an aggregate price of Euro15,000 (or the Sterling equivalent) or more and is/are lodged by hand by the acceptor in person, or if theApplication Form(s) in respect of Offer for Subscription Shares is/are lodged by hand by the acceptor and theaccompanying payment is not the acceptor’s own cheque, he or she should ensure that he or she has with him orher evidence of identity bearing his or her photograph (for example, his or her passport) and separate evidence ofhis or her address.

If, within a reasonable period of time following a request for verification of identity, and in any case by no laterthan 26 July 2017, the Receiving Agent has not received evidence satisfactory to it as aforesaid, the ReceivingAgent may, at its discretion, as agent of the Company, reject the relevant application, in which event the moniessubmitted in respect of that application will be returned without interest to the account at the drawee bank fromwhich such monies were originally debited (without prejudice to the rights of the Company to undertakeproceedings to recover monies in respect of the loss suffered by it as a result of the failure to produce satisfactoryevidence as aforesaid).

5. Overseas Persons

This document has been approved by the FCA, being the competent authority in the UK.

The making of the Offer for Subscription to persons located or resident in, or who are citizens of, or who have aregistered address in, countries other than the UK may be affected by the laws of the relevant jurisdiction. Thecomments set out in this section 5 are intended as a general guide only and any Overseas Persons who are in anydoubt as to their position should consult their professional advisers without delay.

5.1 General

The distribution of this document and the making of the Offer for Subscription to persons who have registeredaddresses in, or who are located, resident or ordinarily resident in, or citizens of, or which are corporations,partnerships or other entities created or organised under the laws of countries other than the United Kingdom orto persons who are nominees of or custodians, trustees or guardians for citizens or residents in or nationals of,countries other than the United Kingdom, may be affected by the laws or regulatory requirements of the relevantjurisdictions. Those persons should consult their professional advisers as to whether they require anygovernmental or other consents or need to observe any applicable legal requirements or other formalities toenable them to apply for Offer for Subscription Shares under the Offer for Subscription.

No action has been or will be taken by the Company, the Underwriters, or any other person, to permit a publicoffering or, subject to certain exceptions, distribution of this document (or any other offering or publicitymaterials or application form(s) relating to the Offer for Subscription Shares) in any jurisdiction where action forthat purpose may be required, other than in the United Kingdom.

Receipt of this document and/or an Application Form will not constitute an invitation or offer of securities forsubscription, sale, acquisition or purchase in those jurisdictions in which it would be illegal to make such aninvitation or offer and, in those circumstances, this document and/or the Application Form must be treated as sentfor information only and should not be copied or redistributed.

No person receiving a copy of this document and/or an Application Form in any territory other than the UnitedKingdom may treat the same as constituting an invitation or offer to him or her, nor should he or she in any eventuse any such Application Form unless, in the relevant territory, such an invitation or offer could lawfully bemade to him or her and such Application Form could lawfully be used, and any transaction resulting from suchuse could be effected, without contravention of any registration or other legal or regulatory requirements. Incircumstances where an invitation or offer would contravene any registration or other legal or regulatoryrequirements, this document and/or the Application Form must be treated as sent for information only and shouldnot be copied or redistributed.

It is the responsibility of any person (including, without limitation, custodians, agents, nominees and trustees)outside the United Kingdom wishing to apply for Offer for Subscription Shares under the Offer for Subscriptionto satisfy himself or herself as to the full observance of the laws of any relevant territory in connection therewith,including obtaining any governmental or other consents that may be required, observing any other formalitiesrequired to be observed in such territory and paying any issue, transfer or other taxes due in such territory.

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Persons (including, without limitation, custodians, agents, nominees and trustees) receiving a copy of thisdocument and/or an Application Form, in connection with the Offer for Subscription or otherwise, should notdistribute or send either of those documents in or into any jurisdiction where to do so would or might contravenelocal securities laws or regulations. If a copy of this document and/or an Application Form is received by anyperson in any such territory, or by his or her custodian, agent, nominee or trustee, he or she must not seek toapply for Offer for Subscription Shares unless the Company determines that such action would not violateapplicable legal or regulatory requirements. Any person (including, without limitation, custodians, agents,nominees and trustees) who does forward a copy of this document and/or an Application Form into any suchterritory, whether pursuant to a contractual or legal obligation or otherwise, should draw the attention of therecipient to the contents of this Part 2 and specifically the contents of this section 5.

Subject to sections 5.2 to 5.7 below, any person (including, without limitation, custodians, agents, nominees andtrustees) outside the United Kingdom wishing to apply for Offer for Subscription Shares must satisfy himself orherself as to the full observance of the applicable laws of any relevant territory, including obtaining any requisitegovernmental or other consents, observing any other requisite formalities and paying any issue, transfer or othertaxes due in such territories.

None of the Company, the Underwriters, nor any of their respective representatives, is making any representationto any offeree of the Offer for Subscription Shares regarding the legality of an investment in the Offer forSubscription Shares by such offeree under the laws applicable to such offeree.

The Company reserves the right, but shall not be obliged, to treat as invalid, and will not be bound to allot orissue any Offer for Subscription Shares in respect of, any application or purported application for Offer forSubscription Shares that appears to the Company or its agents to have been executed, effected or despatchedfrom any of the Excluded Territories or in a manner that may involve a breach of the laws or regulations of anyjurisdiction or if the Company or its agents believe that the same may violate applicable legal or regulatoryrequirements or if it provides an address for delivery of the share certificates of Offer for Subscription Shares orto a stock account in CREST, to a CREST member whose registered address would be, in any of the ExcludedTerritories or any other jurisdiction outside the United Kingdom in which it would be unlawful to deliver suchshare certificates or make such a credit.

The attention of Overseas Persons is drawn to sections 5.2 to 5.7 below.

Notwithstanding any other provision of this document or the Application Form, the Company reserves the rightto permit any person to apply for Offer for Subscription Shares if the Company and the Underwriters are satisfiedthat the transaction in question is exempt from, or not subject to, the legislation or regulations giving rise to therestrictions in question.

Overseas Persons who wish, and are permitted, to apply for Offer for Subscription Shares should note thatpayment must be made in pounds sterling denominated cheques or banker’s drafts through CREST.

Due to restrictions under the securities laws of the Excluded Territories, and subject to certain exceptions,persons who have registered addresses or are located in the United States, or who are resident or ordinarilyresident in, or citizens of, any Excluded Territories will not qualify to participate in the Offer for Subscription.

The Offer for Subscription Shares have not been and will not be registered under the relevant laws of any of theExcluded Territories or any state, province or territory thereof and may not be offered, sold, resold, delivered ordistributed, directly or indirectly, in or into any of the Excluded Territories or for the account of any person witha registered address in, or located in, the United States, or any person who is resident or ordinarily resident in, ora citizen of, any of the Excluded Territories except pursuant to an applicable exemption.

No public offer of Offer for Subscription Shares is being made by virtue of this document or the ApplicationForms into any of the Excluded Territories. Receipt of this document and/or an Application Form will notconstitute an invitation or offer of securities for subscription, sale, acquisition or purchase in those jurisdictionsin which it would be illegal to make such an invitation or offer and, in those circumstances, this document and/orthe Application Form must be treated as sent for information only and should not be copied or redistributed.

5.2 Offering restrictions relating to the United States

The New Ordinary Shares have not been and will not be registered under the US Securities Act or under anyrelevant securities laws of any state or other jurisdiction of the United States and may not be offered, sold,pledged, taken up, exercised, resold, renounced, transferred or delivered, directly or indirectly, into or within theUnited States absent registration or pursuant to an exemption from, or in a transaction not subject to, theregistration requirements of the US Securities Act and in compliance with any applicable state securities laws.The New Ordinary Shares have not been approved or disapproved by the SEC, any state securities commission in

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the United States or any other US regulatory authority, nor have any of the foregoing authorities passed upon orendorsed the merits of the offering of the Placing Shares and/or the Offer for Subscription Shares, or theaccuracy or adequacy of this document. Any representation to the contrary is a criminal offence in the UnitedStates.

Prospective investors are hereby notified that sellers of the New Ordinary Shares may be relying on theexemption from registration provisions under section 5 of the Securities Act provided by Rule 144A thereunder.Accordingly, subject to certain exceptions, the Placing and the Offer for Subscription is not being made in theUnited States and neither this document nor the Application Form constitutes or will constitute an offer, or aninvitation to apply for, or an offer or an invitation to subscribe for or acquire any Placing Shares or Offer forSubscription Shares in the United States.

Subject to certain limited exceptions, envelopes containing Application Forms should not be postmarked in theUnited States or otherwise despatched from the United States, and all persons subscribing for or acquiring NewOrdinary Shares and wishing to hold such shares in certificated form must provide an address for registration ofthe New Ordinary Shares issued upon exercise thereof outside the United States.

Subject to certain limited exceptions, any person who subscribes for or acquires Placing Shares or Offer forSubscription Shares will be deemed to have declared, warranted and agreed, by accessing this document oraccepting delivery of the Application Form and delivery of the Placing Shares or Offer for Subscription Shares(i) that it is not, and that at the time of subscribing for or acquiring the Placing Shares or Offer for SubscriptionShares it will not be, in the United States or (ii) that it is a QIB.

The Company and the Underwriters reserve the right to treat as invalid any Application Form: (a) that appears tothe Company, the Underwriters or their respective agents to have been executed in or despatched from the UnitedStates or that provides an address in the United States for applications under the Offer for Subscription Shares,(b) that does not include the relevant warranty set out in the Application Form headed “Overseas Persons” to theeffect that the person applying under the Application Form does not have a registered address and is not locatedin the United States and is not subscribing for or acquiring, Offer for Subscription Shares with a view to theoffer, sale, resale, transfer, delivery or distribution, directly or indirectly, of any such Placing Shares or Offer forSubscription Shares in the United States, or (c) where the Company and the Underwriters believe acceptance ofsuch Application Form may infringe applicable legal or regulatory requirements, and the Company and theUnderwriters shall not be bound to allot (on a non-provisional basis) or issue any Offer for Subscription Shares,in respect of any such Application Form.

Any person in the United States who obtains a copy of this document and/or on Application Form and who is nota QIB is required to disregard them.

Until 40 days after the commencement of the Offer for Subscription, any offer, sale or transfer of the PlacingShares or Offer for Subscription Shares, within the United States by a dealer (whether or not participating in theOffer for Subscription) may violate the registration requirements of the US Securities Act.

5.3 US transfer restrictions

Any person within the United States that acquires or subscribes for Placing Shares or Offer for SubscriptionShares must meet certain requirements by accepting delivery of this document and will be deemed to haverepresented, acknowledged and agreed that it has received a copy of this document and such other information asit deems necessary to make an investment decision and as follows (terms defined in Rule 144A or Regulation Sshall have the same meaning in this section):

(a) it is a QIB and, if it is subscribing for or acquiring the Placing Shares or Offer for SubscriptionShares as a fiduciary or agent for one or more investor accounts, (i) each such account is a QIB,(ii) it has investment discretion with respect to each such account, and (iii) it has full power andauthority to make the representations, warranties, agreements and acknowledgements in thisdocument on behalf of each such account;

(b) to the extent it is an existing shareholder of the Company, it is the beneficial holder of and/orexercises full investment discretion with respect to its Ordinary Shares, as applicable;

(c) it is aware and understands that an investment in Placing Shares and/or Offer for SubscriptionShares involves a considerable degree of risk and no US federal or state or non US regulatoryauthority has made any finding or determination as to the fairness for investment or anyrecommendation or endorsement of any such investment;

(d) it will base its investment decision solely on this document. It acknowledges that none of theCompany, any of its affiliates or any other person (including the Underwriters or any of their

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respective affiliates) has made any representations, express or implied, to it with respect to theCompany, the Placing, the Offer for Subscription, the Placing Shares or the Offer forSubscription Shares or the accuracy, completeness or adequacy of any financial or otherinformation concerning the Company, the Placing, the Offer for Subscription, the PlacingShares or the Offer for Subscription Shares, other than (in the case of the Company and itsaffiliates only) the information contained in this document. It acknowledges and agrees that itwill not hold the Underwriters or any of their affiliates or any person acting on their behalfresponsible or liable for any misstatements in or omissions from any publicly availableinformation relating to the Company. It acknowledges that it has not relied on any investigationthat the Underwriters or any person acting on their behalf may or may not have conducted, norany information contained in any research reports prepared by the Underwriters or any of theirrespective affiliates, and it has relied solely on its own judgment, examination and duediligence of the Company, and the terms of the transaction, including the merits and risksinvolved, and not upon any view expressed by or information provided by, or on behalf of, theUnderwriters or any of their respective affiliates. It understands that this document has beenprepared in accordance with the Prospectus Rules of the Financial Conduct Authority of theUnited Kingdom, which differ from US disclosure requirements. In particular, but withoutlimitation, the financial information contained in this document has been prepared inaccordance with IFRS as adopted in the European Union, and thus may not be comparable withfinancial statements of US companies prepared in accordance with US GAAP as adopted bythe Public Company Accounting Oversight Board. It agrees that it will not distribute, forward,transfer or otherwise transmit this document, or any other presentational or other materialsconcerning the Placing or the Offer for Subscription (including electronic copies thereof) toany person within the United States (other than a QIB on behalf of which it acts), and it has notdistributed, forwarded, transferred or otherwise transmitted any such materials to any person(other than a QIB on behalf of which it acts). It acknowledges that it has read and agreed to thematters set forth under section 5 of this Part 2;

(e) it is aware and each beneficial owner of the New Ordinary Shares has been advised that thesale of the New Ordinary Shares to them is being made in reliance on an exemption from, or ina transaction not subject to, the registration requirements of the US Securities Act;

(f) it acknowledges that its purchase of any New Ordinary Shares is subject to and based upon allthe terms, conditions, representations, warranties, acknowledgements, agreements andundertakings and other information contained in this document. It agrees that it (i) has no needfor liquidity with respect to its investment in the New Ordinary Shares and (ii) has no reason toanticipate any change in its circumstances, financial or otherwise, which may cause or requireany sale or distribution by it of all or any part of the New Ordinary Shares;

(g) it is an institution which (i) invests in or purchases securities similar to the New OrdinaryShares in the normal course of business, (ii) has such knowledge and experience in financialand business matters that it is capable of evaluating the merits and risks of its investment in theNew Ordinary Shares, and (iii) is, and any accounts for which it is acting are, able to bear theeconomic risk, and sustain a complete loss, of such investment in the New Ordinary Shares foran indefinite period of time. It agrees that it will not look to the Underwriters or any of theirrespective affiliates for all or part of any loss it may suffer;

(h) it has made its own independent investigation and appraisal of the business, results, financialcondition, prospects, creditworthiness, status and affairs of the Company, and it has made itsown investment decision to subscribe for or acquire the New Ordinary Shares. It understandsthat there may be certain consequences under US and other laws, including applicable tax laws,resulting from an investment in the New Ordinary Shares, including that it must bear theeconomic risk of an investment in the New Ordinary Shares for an indefinite period of time,and it will make such investigation and consult such tax, legal, and/or other advisers withrespect thereto as it deems appropriate, and that it possesses such knowledge and experience infinancial and business matters that it is capable of evaluating the merits and risks of itsinvestment in the New Ordinary Shares;

(i) any New Ordinary Shares that it subscribes for or acquires will be for its own account (or forthe account of a QIB as to which it exercises sole investment discretion and has authority tomake these statements) for investment purposes, and not with a view to distribution within themeaning of the US securities laws, subject to the understanding that the disposition of itsproperty shall at all times be and remain within its control;

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(j) it acknowledges and agrees that it is not subscribing for or acquiring New Ordinary Shares as aresult of any general solicitation or general advertising (within the meaning of Regulation Dunder the US Securities Act) or directed selling efforts (as that term is defined in RegulationS);

(k) it acknowledges that the New Ordinary Shares will be “restricted securities” within themeaning of Rule 144(a)(3) under the US Securities Act and agrees that for so long as such NewOrdinary Shares are “restricted securities” (as so defined), they may not be deposited into anyunrestricted depositary facility established or maintained by any depositary bank;

(l) it, and each other QIB, if any, for whose account it is acquiring New Ordinary Shares has beenadvised, understands and has acknowledged that the New Ordinary Shares are being offered ina transaction not involving any public offering in the United States within the meaning of theUS Securities Act and that the New Ordinary Shares are not being and will not be registeredunder the US Securities Act or with any securities regulatory authority of any state or otherjurisdiction of the United States and may not be offered or sold in the United States except intransactions exempt from, or not subject to, the registration requirement of the US SecuritiesAct and in accordance with the applicable securities law of any securities regulatory authorityof any state or other jurisdiction of the United States. As long as the New Ordinary Shares are“restricted securities” within the meaning of Rule 144(a)(3) under the US Securities Act, it willnot offer, sell, pledge or otherwise transfer the New Ordinary Shares except (i) outside theUnited States, in an offshore transaction in accordance with Rule 903 or Rule 904 ofRegulation S, (ii) in the United States, to a QIB in a transaction meeting the requirements ofRule 144A, or (iii) pursuant to another exemption from, or in a transaction not subject to, theregistration requirements of the US Securities Act, in each case in accordance with anyapplicable securities laws of any state or other jurisdiction of the United States. It understandsthat no representation has been made as to the availability of Rule 144 of the US Securities Actor any other exemption under the US Securities Act or any state securities laws for the offer,resale, pledge or transfer of the New Ordinary Shares;

(m) it acknowledges that, to the extent the New Ordinary Shares are delivered in certificated form,the certificate delivered in respect of the New Ordinary Shares will bear a legend substantiallyto the following effect for so long as the securities are “restricted securities” within themeaning of Rule 144(a)(3) under the US Securities Act:

THE ORDINARY SHARES REPRESENTED HEREBY HAVE NOT BEEN AND WILLNOT BE REGISTERED UNDER THE US SECURITIES ACT, OR WITH ANYSECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHER JURISDICTIONOF THE UNITED STATES, AND MAY NOT BE OFFERED, SOLD, PLEDGED OROTHERWISE TRANSFERRED EXCEPT (A) IN AN OFFSHORE TRANSACTION INACCORDANCE WITH RULE 903 OR RULE 904 OF REGULATION S UNDER THE USSECURITIES ACT, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN ATRANSACTION MEETING THE REQUIREMENTS OF RULE 144A UNDER THESECURITIES ACT, OR (C) IN A TRANSACTION PURSUANT TO ANOTHEREXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THEREGISTRATION REQUIREMENTS OF THE US SECURITIES ACT, AND IN EACH CASEIN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OROTHER JURISDICTION OF THE UNITED STATES. NO REPRESENTATION CAN BEMADE AS TO THE AVAILABILITY OF THE EXEMPTION PROVIDED BY RULE 144UNDER THE US SECURITIES ACT FOR RESALES OF THE ORDINARY SHARESREPRESENTED HEREBY. NOTWITHSTANDING ANYTHING TO THE CONTRARY INTHE FOREGOING, THE ORDINARY SHARES MAY NOT BE DEPOSITED INTO ANYUNRESTRICTED DEPOSITARY RECEIPT FACILITY MAINTAINED BY ADEPOSITARY BANK. EACH HOLDER, BY ITS ACCEPTANCE OF THESE SHARES,REPRESENTS THAT IT UNDERSTANDS AND AGREES TO THE FOREGOINGRESTRICTIONS.

It will notify any person to whom it subsequently reoffers, resells, pledges or otherwisetransfers the New Ordinary Shares of the foregoing restrictions on transfer;

(n) it acknowledges and agrees that the Company shall not have any obligation to recognise anyoffer, resale, pledge or other transfer made other than in compliance with the restrictions on

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transfer set forth and described in this section and that the Company may make notations on itsrecords or give instructions to any transfer agent of the New Ordinary Shares in order toimplement such restrictions;

(o) it confirms that, to the extent it is purchasing New Ordinary Shares for the account of one ormore persons, (i) it has been duly authorised to make the confirmations, acknowledgementsand agreements set forth herein on their behalf and (ii) these provisions constitute legal, validand binding obligations of it and any other persons for whose account it is acting;

(p) it acknowledges and agrees that the Company, its affiliates, the Underwriters, their respectiveaffiliates, the Registrar and others will rely upon the truth and accuracy of the foregoingwarranties, acknowledgements, representations and agreements. It agrees that if any of therepresentations, warranties, agreements and acknowledgements deemed to be made cease to beaccurate, it shall promptly notify the Company and the Underwriters;

(q) it hereby represents and warrants that all necessary actions have been taken to authorise thepurchase by it of the New Ordinary Shares;

(r) it and any person acting on its behalf have all necessary consents and authorities to enable it toenter into the transactions contemplated hereby and to perform its obligations in relationthereto; and

(s) it understands that the foregoing acknowledgements, representations, warranties andagreements are required in connection with US securities laws and that the Company, theUnderwriters and their respective affiliates will rely upon the truth and accuracy of theforegoing acknowledgements, representations, warranties and agreements, and it irrevocablyauthorises the Company and the Underwriters to produce the Application Form and thisdocument to any interested party in any administrative or legal proceedings or official inquirywith respect to the matters covered herein.

Prospective purchasers are hereby notified that sellers of the New Ordinary Shares may be relying on theexemption from the registration requirements of the US Securities Act provided by Rule 144A.

5.4 Other Excluded Territories

Due to restrictions under the securities laws of the Excluded Territories (other than the US) and subject to certainexceptions, persons who have registered addresses in, or who are located, resident or ordinarily resident in, orcitizens of, any such Excluded Territories will not qualify to participate in the Offer for Subscription and will notbe sent an Application Form.

The Offer for Subscription Shares have not been, and will not be, registered under the relevant laws of anyExcluded Territories (other than the US) or any state, province or territory thereof and may not be offered, sold,resold, delivered or distributed, directly or indirectly, in or into any such Excluded Territories or to, or for theaccount or benefit of, any person with a registered address in, or who is located, resident or ordinarily resident in,or a citizen of, any such Excluded Territories except pursuant to an applicable exemption.

Subject to certain exceptions, no offer of Offer for Subscription Shares is being made by virtue of this documentor the Application Forms into any Excluded Territories (other than the US). Accordingly, except as set outbelow, the Company reserves the right to treat as invalid any Application Form which does not make therepresentations and warranties set out in section 2.5 of this Part 2.

The attention of persons holding for the account of persons located in any of the Excluded Territories is directedto such paragraphs.

5.5 Jurisdictions other than Excluded Territories

Overseas Persons in jurisdictions other than any Excluded Territories may, subject to the laws of their relevantjurisdiction, acquire Offer for Subscription Shares under the Offer for Subscription in accordance with theinstructions set out in this document and, if relevant, the Application Form.

Prospective applicants for Offer for Subscription Shares who have registered addresses in or who are located orresident in, or who are citizens of, countries other than the United Kingdom should consult their professionaladvisers as to whether they require any governmental or other consents or need to observe any other formalitiesto enable them to apply for Offer for Subscription Shares in respect of the Offer for Subscription.

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5.6 Member States of the EEA (other than the United Kingdom)

In relation to each Member State of the EEA which has implemented the Prospectus Directive (as defined below)(except the United Kingdom) (each a “Relevant Member State”), with effect from and including the date onwhich the Prospectus Directive is implemented in that Relevant Member State, none of the Offer for SubscriptionShares may be offered or sold to the public in that Relevant Member State prior to the publication of thisProspectus in relation to the Offer for Subscription Shares, which has been approved by the competent authorityin that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified tothe competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, otherthan the offers contemplated in this document in a Relevant Member State after the date of such publication ornotification, and except that an offer of shares may be made to the public in that Relevant Member State:

(a) to any legal entity which is a qualified investor as defined in the Prospectus Directive;

(b) fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the2010 PD Amending Directive (as defined below), 150 natural or legal persons (other thanqualified investors as defined in the Prospectus Directive), as permitted under the ProspectusDirective for any such offer; or

(c) in any other circumstances falling within article 3(2) of the Prospectus Directive, provided thatno such offer of Offer for Subscription Shares shall require CityFibre to publish a prospectuspursuant to article 3 of the Prospectus Directive or any measure implementing the ProspectusDirective in a Relevant Member State and each person who initially acquires any Offer forSubscription Shares or to whom any offer is made under the Capital Raising will be deemed tohave represented, acknowledged and agreed that it is a “qualified investor” within the meaningof article 2(1)(e) of the Prospectus Directive.

For the purposes of this selling restriction, the expression an “offer of shares to the public” in relation to anyOffer for Subscription Shares in any Relevant Member State means the communication in any form and by anymeans of sufficient information on the terms of the offer and the Offer for Subscription Shares, to be offered soas to enable an investor to decide to acquire the Offer for Subscription Shares,, as the same may be varied in thatRelevant Member State, and the expression “Prospectus Directive” means Directive 2003/71/EC (andamendments thereto, including the 2010 PD Amending Directive, to the extent implemented by the RelevantMember State) and includes any relevant implementing measure in the Relevant Member State, and theexpression “2010 PD Amending Directive” means Directive 2010/73/EU.

In the case of the Offer for Subscription Shares being offered to a financial intermediary, as that term is used inarticle 3(2) of the Prospectus Directive, such financial intermediary will also be deemed to have represented,acknowledged and agreed that the Offer for Subscription Shares acquired by it have not been acquired on anon-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, personsin circumstances which may give rise to an offer of any Offer for Subscription Shares to the public other thantheir offer or resale in a Relevant Member State to “qualified investors” within the meaning of article 2(1)(e) ofthe Prospectus Directive. CityFibre, the Underwriters and their respective affiliates will rely upon the truth andaccuracy of the foregoing representation, acknowledgement and agreement.

If you are in any doubt as to your eligibility to accept the offer of Offer for Subscription Shares, youshould contact your appropriate professional adviser immediately.

5.7 Representations and warranties relating to overseas territories

Any person requesting registration of interests in Offer for Subscription Shares comprised therein represents andwarrants to the Company and the Underwriters that, except where proof has been provided to the satisfaction ofthe Company and the Underwriters that such person’s effecting of an instruction will not result in thecontravention of any applicable legal requirement in any jurisdiction: (i) such person is not requestingregistration of the relevant Offer for Subscription Shares or giving such instruction from a registered address, noris it located or resident in the United States or any of the other Excluded Territories; (ii) such person does nothold a registered address, nor is located or resident in any territory in which it is unlawful to make or accept anoffer to subscribe for Offer for Subscription Shares in any manner in which such person has used or will use it orto give instructions; (iii) such person is not acting on a non-discretionary basis for, or on behalf of, or for theaccount or benefit of a person located within the United States or any other Excluded Territory or any territoryreferred to in (ii) above at the time the instruction to accept or renounce was given; and (iv) such person is notsubscribing for Offer for Subscription Shares with a view to the offer, sale, pledge, resale, transfer, delivery ordistribution, directly or indirectly, of any such Offer for Subscription Shares into the United States or any otherExcluded Territory or any territory referred to in (ii) above.

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The Company and the Underwriters may treat as invalid any acceptance or purported acceptance of the allotmentof Offer for Subscription Shares if it: (i) appears to the Company and the Underwriters to have been executed inor despatched from the United States or any other Excluded Territory or otherwise in a manner which mayinvolve a breach of the laws of any jurisdiction or if they believe the same may violate any applicable legal orregulatory requirement; (ii) provides an address in the United States or any other Excluded Territory for deliveryof definitive share certificates for Offer for Subscription Shares (or any jurisdiction outside the United Kingdomin which it would be unlawful to deliver such certificates); or (iii) purports to exclude the warranty required bythis section.

5.8 Waiver

The provisions of this section 5 and of any other terms of the Offer for Subscription relating to Overseas Personsmay be waived, varied or modified as regards specific persons or on a general basis by the Company, in itsabsolute discretion (but subject to the provisions of the Underwriting Agreement). Subject to this, the provisionsof this section 5 supersede any terms of the Offer for Subscription inconsistent herewith. References in thissection 5 to the Shareholders shall include references to the person or persons executing an Application Formand, in the event of more than one person executing an Application Form, the provisions of this section 5 shallapply to them jointly and to each of them.

6. Admission to trading

The result of the Offer for Subscription is expected to be announced on 27 July 2017. An application will bemade to the London Stock Exchange for the Offer for Subscription Shares to be admitted to trading on AIM. It isexpected that Admission will become effective and that dealings in the New Ordinary Shares will commence at8.00 a.m. on 28 July 2017.

The Ordinary Shares are already admitted to CREST. No further application for admission to CREST isaccordingly required for the Offer for Subscription Shares. All such shares, when issued and fully paid, may beheld and transferred by means of CREST.

Notwithstanding any other provision of this document, the Company reserves the right to allot and/or issue anyOffer for Subscription Shares in certificated form. In normal circumstances, this right is only likely to beexercised in the event of any interruption, failure or breakdown of CREST (or of any part of CREST) or on thepart of the facilities and/or systems operated by the Receiving Agent in connection with CREST.

For applicants who have applied for Offer for Subscription Shares to be issued to them in certified form, sharecertificates in respect of any Offer for Subscription Shares allocated to them are expected to be despatched bypost on or around 11 August 2017. No temporary documents of title will be issued and, pending the issue ofdefinitive certificates, transfers will be certified against the UK share register of the Company. For applicantswho have applied for Offer for Subscription Shares to be issued to them in uncertificated form, any Offer forSubscription Shares allocated to them are expected to be credited to their stock accounts maintained in CRESTby 8.00 a.m. on 28 July 2017. All documents or remittances sent by or to applicants, or as they may direct, willbe sent through the post at their own risk.

For more information as to the procedure for application, prospective applicants are referred to section 2.1 of thisPart 2 and the Application Form.

7. Taxation

Certain statements regarding taxation in respect of the Capital Raising for Shareholders and Placees resident inthe United Kingdom or the United States for tax purposes are set out in Part 8 (Taxation) of this document.Persons who are in any doubt as to their tax position in relation to applying for Offer for Subscription Sharesunder the Offer for Subscription or who may be subject to tax in any jurisdiction other than the United Kingdomor the United States are strongly recommended to consult an appropriate professional adviser immediately.

8. Times and dates

The Company shall, in agreement with the Underwriters and after consultation with its financial and legaladvisers, be entitled to amend the dates that Application Forms are despatched or amend or extend the latest datefor acceptance under the Offer for Subscription, and all related dates set out in this document, and in suchcircumstances shall notify the UK Listing Authority, and make an announcement on a Regulatory InformationService and, if appropriate, Shareholders. Shareholders may not receive any further written communication.

If a supplementary prospectus is issued by the Company two or fewer business days prior to the latest time anddate for acceptance and payment under the Offer for Subscription specified in this document, the latest date for

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acceptance under the Offer for Subscription shall be extended to the date that is three business days after the dateof issue of the supplementary prospectus (and the dates and times of principal events due to take place followingsuch date shall be extended accordingly).

9. Share Incentive Arrangements

The Company shall separately advise participants in the Share Incentive Arrangements of adjustments (if any) tobe made to their awards or other rights as a result of the Capital Raising.

10. Governing law

The terms and conditions of the Offer for Subscription as set out in this document and the Application Form andany non-contractual obligations related thereto shall be governed by, and construed in accordance with, the lawsof England and Wales (including, without limitation, any non-contractual obligations arising out of or inconnection with the Offer for Subscription and, where appropriate, the Application Form).

11. Jurisdiction

The courts of England and Wales are to have exclusive jurisdiction to settle any dispute which may arise out ofor in connection with the Offer for Subscription, this document or the Application Form (including, withoutlimitation, disputes relating to any non-contractual obligations arising out of or in connection with the Offer forSubscription, this document or the Application Form). By applying for Offer for Subscription Shares under theOffer for Subscription in accordance with the instructions set out in this document, the Application Form, or byotherwise participating in the Offer for Subscription, Shareholders and prospective investors irrevocably submitto the jurisdiction of the courts of England and Wales (including, without limitation, in relation to any disputesrelating to any non-contractual obligations arising out of or in connection with the Offer for Subscription, thisdocument or the Application Form) and waive any objection to proceedings in any such court on the ground ofvenue or on the ground that proceedings have been brought in an inconvenient forum.

12. Further Information

Your attention is drawn to the further information set out in this document and incorporated by reference into thisdocument and also to the terms, conditions and other information printed on the Application Form.

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PART 3INFORMATION ON CITYFIBRE

1. Overview of the Company

CityFibre provides fibre connectivity services through designing, building, owning, and operating fibre opticnetwork infrastructure. The Group is a wholesale operator of fibre networks in towns and cities outside Londonwhich provide open access, shared fibre infrastructure that enables gigabit-capable connectivity for ChannelPartners and mobile network operators, who in-turn deliver digital connectivity solutions to their end customersspanning the public sector, business and residential markets.

CityFibre operates across the UK, and currently has full fibre optic metropolitan area networks in 42 towns andcities including: Aberdeen, Bristol, Coventry, Edinburgh, Glasgow, Manchester, Milton Keynes, Peterborough,and York. Furthermore, the Company owns and operates a long distance fibre-optic network that interconnects22 of its current towns and cities.

CityFibre is a provider of ‘full fibre’ infrastructure, meaning there is no copper or co-axial cable used for theprovision of data connectivity services in CityFibre’s networks. This sets it apart from other infrastructurecompetitors, notably Openreach and Virgin Media, who rely heavily on legacy copper and co-axial cablesconnecting to premises on all but a small percentage of their networks.

The Directors believe that the current policy and regulatory environment in the UK is supportive of full fibreinvestment and an increased level of infrastructure alternatives to Openreach. The Company is well positioned toexpand its operations to more towns and cities as well as deepen the supply of connectivity services in itsexisting footprint.

CityFibre’s network is constructed to provide high capacity fibre infrastructure that serves four primary marketverticals:


Š Business – fibre connections to enterprises and SMEs (often referred to as Fibre to the Premises –FTTP);

Š Mobile operators – fibre connections to mobile base stations and small cells for 4G and future 5Gmobile services (often referred to as Fibre to the Tower – FTTT); and


In relation to public, business and mobile sectors, the Company operates a contract-backed model wherebyinfrastructure construction (or acquisition) is committed to only once the Company has secured contractedrevenues which cover a substantial portion of capital expenditure. This “anchor contract” approach also providesthe basis for further success-based network expansion in a city, which the Directors believe should deliver a highlevel of financial return on incremental investment.

2. Market opportunity

2.1 Demand for digital infrastructure

Global IP traffic is estimated to grow at a compound annual growth rate of 22 per cent. between 2015 and 2020,according to forecasts from Cisco (Source: Cisco Visual Networking Index, June, 2016). The continued growthof broadband adoption, the proliferation of interconnected devices and the advance in internet-delivered servicesand cloud computing is driving the need for increased data capacity in networks. Cisco forecasts anticipate thatby 2019 approximately two-thirds of total IP traffic will originate or terminate within urban networks. To supportthe rapid growth in data traffic, high capacity digital infrastructure is needed in the metropolitan markets,particularly in local access networks (i.e., the ‘last mile’ connections into businesses, schools and homes etc.).

The UK boasts one of the highest levels of internet adoption in the world, with internet-related economic activityaccounting for a larger proportion of Gross Domestic Product than in any other G20 member nation. The sectorcontinues to grow strongly and in 2015 the digital sector represented 7.1 per cent. of UK GVA and accounted for4.4 per cent. of UK jobs and 9.5 per cent. of UK enterprises (Source: Government Response to the Business,Innovation and Skills Committee’s Second Report, 2016-2017). The number of digital technology jobs in the UKhas grown at more than twice the rate of non-digital technology sectors (Source: TechCity conference, 21 March2017).

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As a digital economy, the UK has attracted investment in digital technology, reaching £6.8 billion in 2016. Thiswas more than 50 per cent. greater than the investment in digital technology in any other European country in2016 (Source: Tech Nation 2017 Report, Tech City UK). The Directors believe that the UK government willremain keen to preserve this momentum in order to promote growth in the UK economy. The economiccontribution of the UK digital technology worker is large and growing, almost twice as high as the non-digitaltechnology worker (Source: Tech Nation 2017 Report, Tech City UK).

Data growth in the UK will continue to rise as internet and data communications users continue to adopt digitalapplications. There remains strong demand for digital infrastructure and higher speed connectivity across all fourof CityFibre’s targeted market verticals:

Š Public sector – The use of digital technologies in education and healthcare, for example, means thatpublic services require higher bandwidth connectivity. In a number of CityFibre’s projects with localauthorities, fibre connections are provided to schools, council sites and hospitals. Furthermore, theCompany is supplying full fibre connections for CCTV and other public sector applications.

Š Business – Alongside the development and growth of digital services and the digital economy,businesses’ dependency on digital infrastructure has continued to rise to the point that 94 per cent. ofsmall business owners consider a reliable internet connection critical to the success of their business(Source: Federation of Small Businesses, February 2016). Dependency on inadequate digitalconnectivity remains a major concern for many businesses. According to the figures published by theFederation of Small Businesses, 14 per cent. of small businesses considered lack of reliable and fastbroadband connectivity to be their main barrier to growth and, at the time of the report’s publication inJuly 2014, 45,000 small businesses (1 per cent. of the UK’s 4.5 million small businesses) had to rely ona dial-up connection. In the nation’s business parks, almost half of small businesses are unable toreceive speeds above 10Mbps (Source: Connected Nations Report 2015, Ofcom).

Š Consumer – The use of internet delivered entertainment services such as Netflix, Now TV and AmazonPrime is driving the need for higher bandwidth connection to the home, and demand for fibreconnections will increase, for example, as the adoption of ultra-high definition smart televisionsproliferate. Furthermore, as workers increasingly use their homes as a place of work, broadbandconnections must also support the data needs of accessing a business’s IT systems remotely.

Š Mobile – According to Cisco’s forecasts, global mobile data traffic will increase sevenfold between2016 and 2021, a compound annual growth rate of 47 per cent. The average mobile network connectionwill increase threefold to reach 20.4 Mbps in the same time period. According to UK governmentfigures, this expected growth in mobile data will drive the need for high bandwidth fibre connectivity tomobile base stations and future small cells.

The trend for increasing global data, fuelled by society’s increasing use of the internet for digital applications andcontent alongside the proliferation of connected devices simultaneously connected to the internet, is creating theneed for higher bandwidth connectivity at home, at work and on the move. The Directors believe that thesetrends will drive investment in modern full fibre infrastructure in markets in which the Group operates.

Full fibre infrastructure is capable of supporting significantly increased bandwidth services when compared tolegacy copper or copper-fibre hybrid networks. As data consumption and therefore demand continue to rise, fullfibre’s data transmission capabilities can be easily upgraded by replacing the active electronics attached to eachend of the fibre rather than upgrading the physical infrastructure itself. A further benefit is the reliability of fullfibre networks which significantly exceeds that of other network technologies. Reliability is essential asdependency on infrastructure increases.

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2.2 Supply of fibre-optic infrastructure internationally and in the UK

As a predominately service-based economy, the importance of digital infrastructure to the UK is clear. However,the UK is near the bottom of the full fibre infrastructure league tables amongst OECD nations, as shown in thegraph below.

Fibre coverage to premises in OECD nations, end-2016 (% of premises passed)

0%

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FTTP FTTB/VDSL

(Source: Ofcom, Wholesale Local Access Market Review Initial Consultation, 6 December 2016 based on data providedby Analysys Mason, November 2016)

The investment in, and availability of, fibre to the premises networks to homes and businesses has been a priorityfor many OECD countries, in particular in Asia where, as illustrated in the graph above, Japan and South Koreanow benefit from near ubiquitous coverage of full fibre. In some European countries, major investmentprogrammes by communications providers have resulted in extensive deployments in full fibre broadband. As ofDecember 2016, 79 per cent. of premises in Spain and 70 per cent. of premises in Portugal had access to full fibrebroadband. In contrast, the UK’s coverage of full fibre was approximately 2 per cent. of premises (Source:Ofcom plans for a full-fibre future, Ofcom).

Whereas the UK benefits from a number of competitive fibre suppliers (including Openreach, Virgin Media, ColtTechnology Services Group Limited, CenturyLink Limited, SSE Energy Supply Limited, and Zayo Group LLC)for national long distance networks that connect major cities across the country, at the local access network levelthe market is dominated by the two incumbent operators, Openreach and Virgin Media.

Whilst Openreach and Virgin Media offer some full fibre connectivity in the leased line market, the majority oftheir customers, in particular in the ‘last mile’ local access networks, are served using connectivity to premisesbased on either copper wires or copper co-axial cables.

Openreach

Openreach’s copper network has almost full UK national coverage, and is complemented by a portfolio of fibre-based leased lines. In the consumer broadband market Openreach has progressively upgraded its traditionalcopper based ADSL network to a Fibre-to-the-Cabinet (FTTC) solution, based on a hybrid of fibre fed cabinetsand copper wire connections to premises. Unlike a full fibre connection, this solution is incapable of symmetricalservices and currently only delivers headline download speeds of 76Mbps, and headline upload speeds of19Mbps, with both download and upload speeds degrading over distance. Openreach has a stated goal of takingthis FTTC solution from 90 per cent. to 95 per cent. of UK household coverage during 2017.

In May 2016, Openreach announced plans for further investment in its broadband infrastructure with an ambitionto rollout ‘ultrafast’ broadband (defined as connections greater than 300Mbps) to twelve million premises,comprising ten million premises upgraded to G.Fast, a broadband technology that continues to use copperconnections, and a further two million premises upgraded to full fibre FTTP connections.

In May 2017, Openreach announced a consultation process to engage with other fibre infrastructure builders andChannel Partners to explore opportunities for a collaborative approach to FTTH rollout, with the potential tomake full fibre connections available to 10 million premises by the mid 2020s.

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Virgin Media

Virgin Media’s network covers approximately half of UK households, and is a consolidation of many separatecable companies that undertook the construction of cable TV and telephony networks throughout the 1980s and1990s. Today its broadband services are delivered via a hybrid fibre co-axial (HFC) cable architecture, whichuses copper co-axial cable connections to premises. Virgin Media’s consumer broadband products advertisedownload speeds of up to 300Mbps, although this service is asymmetrical with upload speeds, based on VirginMedia’s own network measurement data, of between 6Mbps and 20Mbps.

Virgin Media has announced ‘Project Lightning’ in which it intends to expand its network to four millionadditional premises, thereby growing its coverage to seventeen million addressable households. Two million ofthese premises will be served with full fibre FTTP connections, with the remaining premises connected byco-axial cables.

UK’s Alternative Network Operators

In recent years a number of businesses have emerged which focus on the deployment of new digital networks incompetition with both BT and Openreach. Known as ‘Altnets’, high-profile examples include: Gigaclear plc,Hyperoptic Ltd, B4RN Limited and Wireless Infrastructure Group Limited. The Altnets provide full fibrenetworks, fixed wireless networks (FWA), hybrid networks and satellite broadband services. They operate inurban and rural areas and have a range of business models, using commercial investment to build brand newnetworks. Altnets already have networks which, in aggregate, pass the boundaries of more than twice as manypremises with full fibre as Openreach (Source: Building Gigabit Britain, September 2016).

Supply of wholesale infrastructure in the UK

In the UK fixed line access market there is a notable absence of any significant wholesale competitor toOpenreach, which is mandated to offer wholesale access in all areas and markets where it is deemed to hold adominant market position.

Whereas London supports a competitive market of alternative fibre infrastructure providers via metropolitan areanetworks, the availability to service providers of alternative wholesale infrastructure outside London is limited.The reasons for this include the following:

1. Virgin Media’s network infrastructure is not generally made available to third party service providerson a wholesale basis, especially to homes and small businesses.

2. Historical network investment by alternative network operators in the UK has been less significant thanin other international markets, resulting in very limited wholesale competition to Openreach outsideLondon.

In recognition of this lack of competitive infrastructure outside the capital, Ofcom applies wholesale accessregulation to Openreach across the UK. Further information regarding the regulatory environment in whichCityFibre operates is set out in section 7 of this Part 3. Openreach’s obligation to make its networks open tocompetition has resulted in a significant growth of Channel Partners that compete with BT, and each other, at aretail level. However, they are largely dependent on the use of Openreach’s networks for connectivity topremises.

As demand for higher speed connectivity increases, the Directors believe the opportunity for CityFibre as analternative wholesale fibre infrastructure provider to UK towns and cities outside London is significant. TheGroup’s current footprint of 42 towns and cities is estimated by the Directors to provide the Group with a totaladdressable market of approximately 43,800 public sector sites, 349,400 businesses, an estimated 7,300 cell sites,and 4.4 million homes.

The Directors further estimate that the proposed expansion of its network to 50 towns and cities would providethe Group with a total addressable market of approximately 52,000 public sector sites, 420,000 businesses, anestimated 8,700 cell sites and 5.2 million homes.

2.3 Government polices to encourage supply of full fibre networks

CityFibre’s market opportunity stems from the current lack of full fibre infrastructure within the UK where, asdescribed above, the UK lags behind nearly all OECD nations in the provision of fibre infrastructure.Furthermore, the full fibre investment plans currently announced by Openreach and Virgin Media targeting, inaggregate, four million premises by 2020 amounts to less than 15 per cent. of total UK premises, lower thancurrent full fibre coverage in Chile, Turkey and Mexico based on OECD figures.

The low coverage of full fibre infrastructure in the UK has triggered a shift towards policies that support greatercompetition and investment in alternative fibre networks.

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In February 2016 the communications regulator, Ofcom, published its Digital Communications Review, outliningits strategy to promote investment in new fibre infrastructure whilst reducing the industry’s dependence onOpenreach. It detailed its proposal on how best to achieve this aim in July 2016 where it stated:

“Network competition is the most effective spur for continued investment in high quality, fibre-basednetworks. At present, about half the country has access to two network providers. We have suggested that agood long-term outcome would be to achieve full competition between three or more networks for around40% of premises, with competition from two providers in many areas beyond that.”

(Source: Strengthening Openreach’s strategic and operational independence, Ofcom, 26 July 2016).

Another key consultation proposal by Ofcom to promote competitive investment in full fibre broadband networkswas to make it easier for competitors to access Openreach’s ducts and poles to expedite and reduce the cost ofconstruction of new fibre networks.

In November 2016, as part of its Autumn Statement, the previous UK government announced its policy for ‘fullfibre and 5G’, pledging £1.14 billion of financial support for competitive fibre infrastructure and 5G projects,comprising:

Š £740 million – to encourage local authorities to support competitive local full fibre and 5G projects. Forexample, the government’s policy for ‘full fibre’ is set to encourage local authorities to aggregatedemand for fibre connectivity to public sector locations with potential for local authorities to anchornew full fibre networks.

Š £400 million – to be invested by the government into a Digital Infrastructure Investment Fund (DIIF),which is intended to be matched by other institutional investors creating a fund of at least £800 millionto be invested into competitive full fibre infrastructure projects.

In the Autumn Statement the government also announced 100 per cent. business rates relief for new full-fibreinfrastructure for a 5 year period from 1 April 2017, which is designed to support full fibre roll out to morehomes and businesses. Furthermore the Conservative Party manifesto for the 2017 general election in the UnitedKingdom contained a pledge to ensure there are major fibre core metro networks in over 100 towns and cities inthe UK by 2022.

CityFibre is well positioned to benefit from these policies. For example, the 5 year business rates relief will applyto new fibre networks built by CityFibre. CityFibre in is discussion with the government to explore opportunitiesfor the DIIF to play a role in supporting CityFibre’s expansion plans in the future.

The Directors believe the changes to regulation to promote fibre infrastructure competition, supported by recentgovernment policies and funding to stimulate further investment in new full fibre infrastructure, provide apositive backdrop for CityFibre to expand its operations to address the supply of fibre infrastructure to servicethe growing demand for high speed fibre connectivity from its Channel Partners.

3. CityFibre’s strengths and its strategy for growth

3.1 Key strengths

As an established wholesale operator, with a focus on building, operating and commercialising full fibrenetworks across the UK, the Group has a number of key strengths that can be summarised as follows:

Š Commitment to full fibre – Full fibre infrastructure has significant performance benefits compared toboth legacy copper and co-axial cable networks. The Group’s focus on this technology choice providesclarity and efficiency to the design, construction and operation of its networks. Full fibre represents asingle solution to the current and future bandwidth requirements of CityFibre’s four primary marketverticals of public sector, business, mobile, and consumer. The Company does not operate any legacycopper network for the provision of data connectivity services.

Š Alignment to government’s policy objectives – The Group’s focus on full fibre investment in townsand cities, coupled with a wholesale approach that is an alternative to Openreach, is aligned to the UKgovernment’s policy goals and Ofcom’s strategic objectives.

Š Established market presence – The Group’s metro infrastructure presence in 42 towns and citiesprovides an established platform from which it can continue to expand to serve customers across thepublic sector, business and mobile operator market verticals. These metro networks also provide thebackbone required to support the rollout of FTTP and FTTH, accelerating CityFibre’s ability toconstruct FTTP and FTTH networks cost effectively.

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Š High quality, diversified customer base and wholesale model – As a wholesale operator, the Grouphas an established and diversified base of Channel Partners including public sector integrators, businessISPs, mobile operators and consumer ISPs. CityFibre currently benefits from relationships with 54Channel Partners. However, as an open access infrastructure provider, there are significant opportunitiesto expand the number of partners and thereby accelerate revenue growth.

Š Proven anchor tenancy approach – The Group’s current national footprint demonstrates its anchortenancy approach that mitigates market entry risks, through securing long term anchor contracts withChannel Partners that cover a substantial portion of capital expenditure prior to constructioncommencing, and by aggregating demand ahead of construction, or through select purchase andleaseback of existing fibre infrastructure. CityFibre’s track record of successful anchor contracts in itsfour primary market verticals positions the Group well to expand to new towns and cities.

Š Cost advantages compared to Openreach and Virgin Media – Compared to traditional copper andcable based networks, a full fibre infrastructure can be expected to benefit from higher reliability and loweroperating costs. Furthermore, as a new provider, CityFibre’s operations are established with platforms thatrun an efficient fibre only network, thus providing cost advantages compared to incumbent operators.

Š Strong management with a proven track-record of entrepreneurship – CityFibre’s managementteam has considerable experience of establishing and developing high growth communicationsinfrastructure based companies. Together with its construction partners, the Group has the expertise inplace to exploit the large scale opportunity for full fibre infrastructure across the UK.

The Directors believe that the Group’s strengths outlined above position the Company well to expand itsoperations and accelerate the construction of its network to new locations. Against the backdrop of legacy copperand cable infrastructure provided by Openreach and Virgin Media, the Group has the potential to exploit thesignificant opportunities for competitive full fibre, in line with recent UK government policy and supported bystrong market demand.

3.2 Strategy for growth

The Group has established a strategy to grow and commercialise its full fibre network as follows:

Š Extend CityFibre’s footprint to more towns and cities – Currently the Group has metro fibrenetworks in 42 UK towns and cities. Market demand for new fibre infrastructure is giving rise to anaccelerated expansion opportunity. In the short to medium term, CityFibre seeks to secure anchorcontracts to support entry into no less than eight new towns and cities, bringing the total footprint to noless than 50 UK towns and cities by 2020. CityFibre believes that there is a longer term opportunity toexpand its footprint to approximately 100 towns and cities.

Š Increasing returns from existing assets – Working in collaboration with its growing portfolio ofChannel Partners, CityFibre intends to increase the amount of network in its footprint, expandingconnectivity to more end customer sites in its four primary market verticals and increasing returns fromits existing assets.

Š Increase metro connectivity within CityFibre’s footprint – CityFibre will seek to increase the supplyof full fibre connectivity across its four primary market verticals. For example, the Group has securedpublic sector contracts in nine of its current 42 towns and cities. The recent UK government policydirection for full fibre connected public sector sites presents the opportunity to expand coverage throughmore local authority contracts. Furthermore, enterprise and SME users located in business parks remainunderserved by legacy networks, and this is providing an opportunity for the Group to rollout full fibreinfrastructure to approximately 500 business parks that are located near to CityFibre’s metro networksin its current metro footprint.

Š Commence rollout of Fibre to the Home (FTTH) – The deployment of FTTH has been a key elementof government policy on communications infrastructure. The Group’s successful FTTH trial in Yorkdemonstrated the ability to expand CityFibre’s metro infrastructure to full fibre connections to homesand CityFibre’s ability to deploy FTTH connectivity cost effectively. The Channel Partners were able tooffer full fibre broadband to their customers at attractive retail prices, thereby demonstrating thepropensity for consumers to switch to FTTH connections. Based on the success of the York trial, theGroup now intends to commence the construction of fibre infrastructure to residential households in aselect number of towns and cities within CityFibre’s current footprint. Further information on the FTTHtrial in York is set out in section 5.2 of this Part 3.

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Š Secure opportunities for Fibre to the Tower (FTTT) – Fibre connectivity to mobile base stations isreferred to as Fibre to the Tower (FTTT), or ‘mobile backhaul’. Growth in mobile data is influencingoperators to seek higher bandwidth fibre connections to base stations with further demand to connect alarge number of ‘small cells’ over time as mobile operators prepare for 5G services by 2020. As FTTTcan be provided using the same high capacity metro infrastructure deployed for public sector andbusiness market verticals, CityFibre is well positioned to serve the connectivity of mobile operators,having demonstrated its FTTT capabilities in the successful pilot in Hull for MBNL, Three and EE. TheGroup continues actively to explore opportunities with mobile operators that seek a transition to darkfibre based FTTT connections within CityFibre’s existing or expanded city footprint.

The execution of the above strategy is expected to enable CityFibre to grow its full fibre footprint into new townsand cities, as well as expand penetration and yield across its footprint. In support of the Group’s strategy, theCompany further plans to:

Š Increase Channel Partners – As a wholesale provider, CityFibre expects to expand the number ofChannel Partners as well as invest in IT platforms to support Channel Partners. Currently the Group has54 Channel Partners that use CityFibre’s fibre infrastructure. The Entanet Acquisition gives CityFibreaccess to new Channel Partners due to Entanet’s existing position as a wholesale provider withapproximately 1,500 Channel Partners having conducted business with Entanet in the 12 months ended31 December 2016. This represents a significant increase in CityFibre’s indirect routes to market.

Š Expand Ethernet product portfolio – CityFibre will develop its portfolio of connectivity servicesthrough the introduction of wholesale Ethernet products that complement existing dark fibre services.This is expected to widen the addressable market for the use of CityFibre’s infrastructure across itscurrent and expanded footprint and open up the opportunity to attract national Channel Partners whoseek city-to-city Ethernet services. Entanet’s national network supports end-to-end Ethernet capabilitiesthat are required as part of CityFibre’s product development. The acquisition significantly acceleratesboth the timescale and scope of CityFibre’s Ethernet strategy, enabling faster take up of the Group’sfibre connectivity by national Channel Partners in all four primary market verticals.

Š Ensure efficient network design – The Group seeks to optimise network design through accuratedemand mapping, in order to design a high capacity fibre architecture that will efficiently support bothcurrent and future demand across all four primary market verticals, including FTTH.

Š Exploit third party duct infrastructure where appropriate – Where available on beneficial terms,CityFibre will seek to make use of third party duct infrastructure where appropriate. For example,CityFibre has made use of local authority owned ducts in some of its existing towns and cities.Furthermore, the use of Openreach ducts and poles for some parts of the deployment (as proven by theGroup’s trial in Southend-on-Sea) provides the opportunity to lower FTTH construction costs.

Š Develop partnerships with key suppliers and civil engineering contractors – The Group’s strategyto accelerate its expansion will be supported by CityFibre’s management capabilities and relationshipswith suppliers and civil engineering contractors. The Group has proven its capabilities to co-ordinateand manage fibre infrastructure construction, as demonstrated in the construction and expansion ofmetro networks in 42 towns and cities. The Group will increase the number of employees only whereessential, and it will continue to work with select engineering partners to deliver and operate CityFibre’snational infrastructure.

Š Pursue select acquisitions of fibre infrastructure assets and complementary businesses – Whereappropriate to the acceleration of its strategy, the Group will consider growth opportunities throughacquisition of fibre assets (similar to its past acquisitions of KCOM’s national infrastructure andRedcentric Solutions Limited’s metro fibre assets), or complementary businesses (for example, theEntanet Acquisition which is described in more detail in Part 6 of this document).

The Directors believe that the Group’s strategy will enable the Group to accelerate its growth and respond to themarket opportunity for full fibre across the UK. This strategy is also expected to establish CityFibre as a leadingalternative wholesale full fibre network provider to Openreach in its chosen markets, with a large footprint oflong term yield generating fibre network assets.

4. CityFibre’s Network, Wholesale Products and Customers

In line with the Group’s strategy, CityFibre’s networks are full fibre networks that do not use any copper wires orco-axial cables for the provision of data connectivity services. Wholesale connectivity services provided byCityFibre to its Channel Partners are provided across its fibre infrastructure, enabling end-to-end fibreconnectivity and the delivery of the fibre optic connection all the way to the premises.

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4.1 Overview of the Network

As at 31 December 2016, CityFibre operated 2,244 kilometres of metro local access duct and fibre networksacross 42 towns and cities, as well as a 1,139 kilometre national long distance network connecting 22 towns andcities to data centres in London and the UK regions, as illustrated in the map below.

Figure 4.1 – Map showing the location of CityFibre’s national fibre infrastructure

CityFibre’s typical metro local access network comprises two or four 90 millimetre ducts, each capable ofhousing four or more sub-ducts. The ducts and sub-ducts house fibre optic cables that provide fibre connectivity.CityFibre’s metro local access networks are a combination of assets acquired in 2011, 2014, and 2016, as well asnetwork constructed by CityFibre.

In both the networks it has built and those it has acquired, CityFibre typically enjoys significant underutilisedduct capacity in the metro local access networks, meaning that the infrastructure can be upgraded to highercapacity by installing new fibre cables in empty duct space. This is a standard process in the operation of fibreoptic infrastructure for wholesale fibre services to multiple customer segments.

The national long distance network, acquired in January 2016, was built between 2000 and 2001 and has a“figure of 8” configuration, stretching from Manchester and Leeds in the north to Bristol and London in thesouth. The long distance network generally consists of two 90 millimetre ducts, each of which has capacity forfour sub-ducts. Current utilisation of the long distance network is low, so this offers significant incrementalcapacity which CityFibre will seek to exploit in capturing emerging opportunities with mobile operators andother Channel Partners seeking city-to-city, regional, or national dark fibre connectivity.

4.2 Expansion of Local Access Networks to Address Demand

CityFibre’s typical strategy is to enter a town or city through the construction or acquisition of a core metroinfrastructure, and then expand the network to address incremental demand from its wholesale Channel Partners.To illustrate CityFibre’s network expansion methodology, the following is an overview of its networkdeployment in Peterborough:

Š New anchor network construction - The original 90 kilometre anchor network was designed and builtby CityFibre in response to an initial anchor contract with Serco Plc (the IT provider to PeterboroughCity Council) to connect 106 public sector sites in Peterborough. Construction was completed in March2015.

Š Incremental business demand and network extension – As the anchor network was underconstruction, CityFibre and its Channel Partners serving the business market began a demandaggregation campaign, which is ongoing. As at 28 February 2017, this activity generated the sale of 258new business connections on the network, which necessitated incremental network construction toexpand the network to new areas of the city. The cost of this incremental construction is recovered inpart through connection charges, and in part through monthly rental charges.

Š Incremental public sector demand and further network extension - In 2016 CityFibre secured afurther public sector contract to connect 220 CCTV and traffic control sites in the city to full fibre. Thisrequires an additional 24 kilometres of network extension.

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CityFibre’s design methodology is to construct its network most effectively and efficiently to service itscustomers across all four primary market verticals. In the case of Peterborough, the configuration of the networkbuilt for the public sector anchor contract was constructed to take it close to areas of business demand, in turnenabling CityFibre and its partners to connect businesses efficiently. Additionally, the CCTV network extensiontakes the CityFibre network into business districts previously unserved by CityFibre, effectively supporting thecost of building closer to new potential business customers.

Through optimising network design and extension in this manner, CityFibre’s incremental costs to connectcustomers continually reduce over time as the networks become denser, thus offering a lower cost to connect newcustomers. Furthermore, expansion in this manner takes into account future FTTT connectivity to mobile basestations as well as future capacity requirement to support FTTH.

4.3 CityFibre’s Wholesale Fibre Connectivity Products

CityFibre offers a range of full fibre-based connectivity products for service providers, carriers, systemsintegrators, mobile operators and data centres, covering both passive and active services. Active services is aterm used to describe the provision or sale of any services in which the electronics and ability to transmit data areincluded alongside access to the fibre optic cable, typically enabling Ethernet connectivity and access to Internetservices. Passive services is the term used to describe the provision or sale of access to a raw, un-lit fibre opticcable. When purchasing a passive service, a Channel Partner is required to add their own electronics to either endof the fibre in order to enable the transmission of data and the provision of services to their end customer.Traditionally, most service providers have purchased an active service in the form of a managed service-basedleased line from a wholesale provider. Such active services incorporate both the physical infrastructure (fibre)and the service component (electronics and software) into a standardised product, which presents no flexibility tothe service provider. However, in recent years Channel Partners increasingly prefer a dark fibre solution.

Dark fibre is the raw unlit fibre and offers very high bandwidth capacity to the service provider, as the onlyconstraints in data transmission relate to the electronic equipment used at either end of the fibre strand. Thisfeature allows the service provider to provision services specific to its customers’ needs, while maintainingvisibility of cost in the underlying infrastructure. Recognising that the market comprises Channel Partners whorequire both active and dark fibre services, the Group’s product portfolio accommodates both.

Passive dark fibre connectivity products comprise:

Š Metro point-to-point dark fibre – CityFibre’s metro dark fibre networks provide abundant capacity fordata transmission and are based on a ducted/sub-ducted ring architecture, with Points-of-Presence(PoPs) across its towns and cities. This allows a variety of uses, including bespoke private fibre rings,connections between internet exchanges, business connectivity and the connections for public sectorsites such as schools and hospitals.

Š FTTT point-to-point dark fibre – This is essentially the same product as metro dark fibre but isprovided to mobile operators to enable fibre connectivity to base stations and small cells. Dark fibre isincreasingly important for mobile operators who are seeking to migrate away from traditional incumbentleased line circuits or restricted capacity microwave connections.

Š Long distance dark fibre – CityFibre’s 1,139 kilometre national long distance network provides a darkfibre option for carriers or service providers looking for intercity or regional fibre connectivity or whowish to construct their own active long distance networks. The ducted and sub-ducted network connectsCityFibre’s metro network in 22 of its towns and cities to strategic data centres in London and the UKregions.

Active Ethernet based fibre connectivity products:

Š Metro GIG Connect – Ethernet based internet connectivity circuits at either 500 Mbps or 1 Gbps.These are suited to high bandwidth applications, such as cloud computing, that require IP transitcapabilities and direct connectivity to the internet.

Š Metro GIG Hub – This is an aggregation solution which allows CityFibre’s service provider partners toconnect multiple local access circuits (such as the GIG Connect products mentioned above) into a single1Gbps or 10Gbps circuit. This allows for the aggregation of traffic to a remote handover point up to20 kilometres away, and potentially further. This is a valuable tool for service providers looking tomigrate clusters of customers from legacy services and onto CityFibre’s network, or alternatively todrive geographically targeted customer acquisition programmes.

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4.4 CityFibre’s Customers

CityFibre is a provider of wholesale connectivity services. CityFibre does not provide retail services to end users,but instead provides full fibre connectivity in a wholesale model to Channel Partners, who in turn use theGroup’s fibre infrastructure to provide solutions to their customers.

CityFibre currently has active relationships with 54 Channel Partners, encompassing national and internationalcarriers serving the enterprise market, national and local service providers catering to the needs of small andmedium-sized businesses, systems integrators and ICT specialists serving the public sector, mobile carriers andmobile infrastructure operators, and consumer ISPs. CityFibre’s market is divided into the four primary marketverticals detailed below.

Public Sector

When CityFibre commenced business in 2011, it was almost exclusively focused on the suppliers of ICT servicesto the public sector. The public sector remains a key market vertical for CityFibre, comprising approximately 30per cent. of connected customer premises, and approximately 25 per cent. of new connections sold in the year to31 December 2016. Key Channel Partners in the public sector market vertical include Pinacl Solutions UK Ltd,Serco Limited, Interoute Communications Limited, Logicalis UK Ltd, Commsworld Limited and Exa NetworksLimited.

Contracts with suppliers to the public sector typically range in duration from seven to as long as 20 years. As at31 December 2016, CityFibre had significant public sector contracts in nine towns and cities, including bothdelivered connections and contractually committed connections.

Business Sector

CityFibre has commercial relationships with a wide range of Channel Partners who serve the business marketwithin its network. These range from highly localised providers such as Triangle Networks Limited or Betweenthe Lines Communication Ltd, to regional players such as Commsworld Limited and Exa Networks Limited, tonational operators such as Onecom Limited and Gamma Telecom Ltd. CityFibre typically provides thesecustomers with either an active product or dark fibre solution, depending on the preferences of the ChannelPartner. Contracts with business Channel Partners typically range from three to six years and are usually paid inmonthly instalments. CityFibre currently has contracts with Channel Partners to provide fibre connectivity tobusinesses in 25 of the 42 towns and cities within its existing footprint.

In some circumstances, CityFibre has partnered with business Channel Partners who have provided acommitment to use CityFibre’s network in a town or city, once constructed by CityFibre. For example, inAberdeen and Edinburgh, CityFibre’s initial networks were constructed in response to aggregated demand frombusiness Channel Partners, and once built the networks benefited from subsequent orders from the public sector.

Mobile Operators

In 2014 CityFibre signed a framework agreement with Three, EE and MBNL to provide dark fibre-basedbackhaul connectivity to mobile base stations. The first deployment was completed in Hull in early 2016,connecting 37 macro cell sites to a 56 kilometre dark fibre network, the first of its kind in the UK. Three UKsubsequently reported a 380 per cent. increase in data throughput when the network was launched into service.

CityFibre has established active dialogue with mobile network operators in the UK, who are evaluating theirfuture network architecture and connectivity needs in light of high mobile data growth from 4G and futuredeployments of 5G and small cells. The Directors believe it is likely that dark fibre connectivity will be preferredfor FTTT applications and the Group is confident that its network of fibre infrastructure in its 42 towns and citiesprovides an attractive platform for mobile operators evaluating migration to an alternative network based on darkfibre.

Consumer FTTH

As further described in section 5 of this Part 3, in 2014 CityFibre entered into a joint venture with Sky andTalkTalk to construct an FTTH network in York. Having successfully completed the trial, the Directors believethere is significant opportunity to deploy FTTH infrastructure effectively and efficiently in selected towns andcities where CityFibre has an extensive metro network. Following the success of the York trial, CityFibre is nowengaged in active dialogue with a number of consumer focused Channel Partners who are keen to take advantageof near gigabit speed broadband delivered on CityFibre’s full fibre infrastructure.

5. Expansion Strategy

The demand for digital infrastructure, coupled with proposals for full fibre and greater network levelcompetition, is providing an environment in which the Group can consider its expansion strategy. Having

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established a presence in 42 towns and cities, and undertaken successful trials of FTTT and FTTH, theCompany’s network growth plan is based on expansion of its metro presence, as well as extension of the metroinfrastructure toward FTTH for consumers.

5.1 Metro expansion, including FTTT for mobile

CityFibre’s expansion strategy is to accelerate the rollout of CityFibre’s metro fibre infrastructure to no less than50 towns and cities by 2020. Therefore, CityFibre will target expansion of its metro network presence to no lessthan eight new towns and cities supported by anchor contracts to support this expansion. These anchor contractswill be targeted from one or more of the three primary market verticals linked to metro connectivity: publicsector, business and FTTT mobile connectivity.

FTTT uses the metro fibre infrastructure to connect to mobile stations and is a standard metro network product.Contracts with mobile operators for FTTT connectivity may result in CityFibre providing connectivity within itsexisting footprint as well as expansion to new towns and cities.

In considering metro expansion to new towns and cities, CityFibre’s management intends to maintain itsestablished financial discipline for anchor contracts, in particular its focus on targeting gross margins in excessof 90 per cent. and an initial contract value that covers a substantial proportion of the network construction costs.

5.2 FTTH expansion to consumers

CityFibre’s FTTH rollout strategy is to deploy fibre to homes as an extension of its metro infrastructure. Forexample, the metro duct infrastructure is constructed or adapted to take into account the future fibre capacity forFTTH and also the locations of FTTH street cabinets that will be located on or near to the metro network. Themetro network itself is used to carry FTTH fibre cables from centrally located points of presence (POPs) within acity to the FTTH street cabinets located in residential areas.

Compared to greenfield network construction, the presence of CityFibre’s metro infrastructure provides time andcost benefits to its planned FTTH rollout. This results from a proportion of the network infrastructure requiredfor FTTH already being established through the metro infrastructure in the 42 towns and cities where CityFibrehas a presence.

CityFibre’s strategy for FTTH rollout is based on the deployment of cabinets, connected to the metroinfrastructure, that are capable of providing fibre connectivity to 350 to 450 premises per cabinet. The number ofpremises in a city will dictate the maximum number of FTTH cabinets required, although in order to optimise theeconomics of any deployment, CityFibre will retain flexibility to determine the speed of rollout and the areaswhere FTTH infrastructure will be deployed.

The York Trial

In 2014, CityFibre announced the formation of a joint venture with Sky and TalkTalk, YorkCo, to deploy anFTTH network in York. This trial aimed to demonstrate the suitability of CityFibre’s metro infrastructure tosupport the expansion of full fibre connectivity to homes. CityFibre’s existing metro network in York was aresult of CityFibre’s anchor contract on behalf of the City of York Council for 105 council sites and schools.CityFibre subsequently added 175 net incremental public sector and business connections to its York metronetwork and as at 31 December 2016, CityFibre’s metro network infrastructure in York comprised more than 125kilometres of network, connecting 280 council sites and businesses. Construction of the FTTH network, passing13,582 homes, supervised by CityFibre’s technical teams, was completed by 31 May 2017.

The project demonstrated CityFibre’s approach to constructing an FTTH network through the incorporation ofCityFibre’s existing metro infrastructure. The FTTH network in York was expanded at a cost of less than £500per home whose boundary was passed by the network. The Directors estimate that the use of CityFibre’s existingmetro network delivered cost savings of 20 to 25 per cent. (compared to constructing all the network includingthe metro element) and reduced the time to construct the network by 12 to 18 months.

Furthermore, the trial demonstrated demand from Channel Partners to offer near gigabit speed FTTH services, aswell as the propensity for consumers to switch to FTTH connections. The York trial demonstrates thecommercial viability of FTTH in the UK. CityFibre’s Channel Partners in York offer connection speeds of up to940Mbps for prices ranging from £21.70 to £48.99 per month. By comparison, BT’s Unlimited Infinity 2 FTTCproduct available in York has a maximum advertised download speed of 76Mbps and a 19Mbps upload speed ata price of £44.99 per month. Virgin Media’s coaxial cable-based 300Mbps product offers a maximum advertiseddownload speed of 300Mbps and a 20Mbps upload speed at a price of £47 per month.

The differentiated and competitively priced CityFibre FTTH product has been well-received in the York market.As at 31 May 2017, of the 13,582 homes in York whose boundaries are passed by the FTTH network constructed

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by YorkCo, 3,684, being more than 27 per cent., had subscribed for an internet service from Sky or TalkTalk onthe new network, with the highest cabinet penetration now exceeding 40 per cent.. The graph below illustratesthe percentage of serviceable premises in York that have subscribed for FTTH services from Sky or TalkTalk.

0.00%2.00%4.00%6.00%8.00%

10.00%12.00%14.00%16.00%18.00%20.00%22.00%24.00%26.00%28.00%30.00%

York FTTH Percentage of Homes Taking Services

The YorkCo joint venture agreement contained a restriction on CityFibre, preventing it from participating in anytrial or rollout of FTTH services to residential customers in any other part of the UK. This restriction applied for12 months after the commercial launch of the York fibre network. The restriction has now expired.

International Benchmarks

FTTH deployments in Europe demonstrate fast growth in user subscriptions to full fibre broadband services.According to the FTTH Council Europe, there will be more than 36 million FTTH connections in use acrossEurope by 2019, with penetration expected to exceed 40 per cent. of homes passed in several countries whichwere early adopters of FTTH. For example, household penetration in Latvia is expected to reach 60 per cent. by2019, followed by Sweden (51 per cent.), Spain (50 per cent.), Norway (49 per cent.), Romania (48 per cent.),and Portugal (46 per cent.). Altnet fibre builders will deliver the highest proportion of FTTH lines. (Source:‘FTTH in Europe Forecast 2016-2019: Behind The Numbers’, FTTH Council Europe, 16th May 2017).

Regulated Duct and Pole Access

Ofcom’s consultation on proposed changes to duct and pole access regulations, announced in April 2017, isdesigned to encourage the use of Openreach’s physical infrastructure in the deployment of competitive full fibrenetworks. In 2016, CityFibre commenced its deployment of full fibre infrastructure in Southend-on-Sea, trialingthe use Openreach ducts for part of the network construction to lower construction costs. Construction of theSouthend network substantially completed in March 2017 and demonstrated a 27 per cent. reduction in forecastcapital expenditure resulting from the selected use of Openreach duct for parts of the network construction.

The Directors believe that incorporating the use of Openreach ducts and poles in selected parts of theconstruction of CityFibre’s infrastructure will lead to a reduction in FTTH network construction costs.Accordingly, the Group’s planned rollout of FTTH infrastructure will be optimised through infrastructureconstructed by CityFibre that is supplemented in part with use of Openreach ducts and poles where appropriate.

CityFibre’s Planned FTTH Rollout

Following the success of the York and Southend trials the Directors believe there is an opportunity to deployFTTH infrastructure effectively and efficiently in towns and cities where CityFibre has an extensive metrofootprint. In this regard, and following the Capital Raising, it is the Group’s intention to commence a larger scaleFTTH deployment.

Following detailed planning of the FTTH infrastructure, CityFibre expects that construction will commence infive to ten towns and cities within its existing or expanded metro footprint during 2018 delivering approximately300 to 400 FTTH cabinets by the end of 2018. The construction period will depend on the number of premises ineach town or city, with an average duration expected to be in the region of 20 months to 24 months per town orcity.

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CityFibre intends to work with Channel Partners to secure commitments to use its FTTH network, or to procureregistrations of interest on a street or neighbourhood basis, hence mitigating deployment risks by ensuring thereis sufficient demand ahead of construction.

Following the expiry of the restrictions in the YorkCo joint venture agreement, CityFibre has engaged incommercial discussions with major ISPs and a number of smaller ISPs to secure Channel Partner relationshipsthat are intended to provide full fibre broadband services to consumers using CityFibre’s future FTTHinfrastructure. These discussions are advanced and may or may not lead to a binding agreement in due course.Such agreements potentially will include exclusivity for a period of time or other preferential terms in responseto penetration commitments that may be made by Channel Partners.

If entered into, these agreements would be consistent with CityFibre’s strategy. If CityFibre gains firmcommitments from Channel Partners supporting FTTH expansion beyond the plans outlined in this document, theCompany could be required to raise further debt or equity capital in the longer term.

Illustrative Economics of the FTTH Rollout

CityFibre will rollout FTTH on a cabinet by cabinet basis. Each FTTH street cabinet is capable of providing fibreconnectivity to 350 to 450 premises per cabinet, being approximately 90 per cent. homes and approximately 10per cent. SME businesses per cabinet. The total capital expenditure, based on self-build and the selected use ofOpenreach duct and pole access, is estimated by the Directors to be approximately £170,000 to £200,000 percabinet (net of up-front fees paid by customers for fibre connections), being approximately 75 to 85 per cent.fixed capital expenditure (enabling construction of the FTTH infrastructure to the boundary of all premisesserved by the cabinet) and 15 to 25 per cent. success based capital expenditure (for construction from theboundary into the premises that have subscribed for an FTTH connection).

CityFibre expects that the wholesale price charged to its Channel Partners will be competitive in the context ofthe range of 40 Mbps to 300 Mbps wholesale broadband products provided by Openreach. Assuming earlysubscriber penetration growing in line with the York FTTH trial and international benchmarks the Directorsestimate subscriber penetration to reach at least 50 per cent. within five years, with payback per cabinet (beingthe period of time it takes to generate gross margin from connections equal to the net capital expenditure requiredto construct the FTTH cabinet) targeted to occur within seven to nine years of the start of construction. Therevenue yield on net capital expenditure is targeted to be approximately 18 per cent. to 22 per cent. per cabinet atmaturity, being five to seven years following cabinet construction. Revenue yield is defined as the recurringannual revenue generated per cabinet, measured against the capital expenditure per cabinet, net of up-front feespaid by the customers for fibre connections.

CityFibre expects that construction will commence in five to ten towns and cities within its existing or expandedmetro footprint during 2018. An illustrative city rollout will deliver approximately 200 cabinets over a 20 to 24month period that pass approximately 80,000 premises. CityFibre expects to invest approximately £35 to£40 million of aggregate net capital expenditure (net of up-front fees paid by customers for fibre connections)until maturity of the illustrative city, being within five to seven years after the commencement of the first cabinetconstruction.

The Directors believe that the construction of FTTH will enable CityFibre to scale its customer base more rapidlythan a metro-only offering and will enhance the Company’s barriers to entry in its chosen markets. In additionthe Directors believe that an FTTH revenue stream, derived from strong relationships with Channel Partners,would further enable the Company to target re-financing of its existing debt facilities in 2018 with a higher levelof leverage, in order to optimise its capital structure to fund its future growth.

As the FTTH network deploys a near ubiquitous fibre infrastructure over time throughout the relevant town orcity, there are potential cost efficiencies for CityFibre’s broader portfolio of metro fibre products delivered tolocations in or near residential areas in all four primary market verticals: public sector, business, mobile andconsumer.

6. History and Recent developments

CityFibre is a company incorporated in England and Wales and is the holding company of the Group. The Groupowns and operates over 3,300 route kilometres of local access fibre networks serving over 3,900 customerlocations in 42 towns and cities in the UK.

In the period prior to the 2014 Admission, the Group was engaged in developing its business following theacquisition of assets from i3 Group Limited (known as Earlestown Technology Limited as of 10 May 2011) andH2O Networks Limited in 2011. In this period, the construction of the York network was completed and theGigler service was launched in Bournemouth as a limited provider of FTTH services. In November 2013 CFHLsecured an anchor contract with Serco Limited to deploy a 90 kilometre fibre optic network in Peterborough.

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CityFibre’s Ordinary Shares were admitted to trading on AIM on 17 January 2014 with an associated placing ofOrdinary Shares raising £16.5 million (before expenses). The Group subsequently raised an additional£30 million (before expenses) pursuant to a placing in June 2014.

In April 2014, CityFibre announced a joint venture with Sky and TalkTalk, to develop a trial FTTH network inYork. The joint venture, which is owned 33.3 per cent. equally by the three partners, has successfully completedthe trial deployment, passing 13,582 homes in one section of York by 31 May 2017. Sky and TalkTalkcommenced marketing of FTTH broadband services under the proposition brand of Ultra Fibre Optic (UFO), in2016.

The Peterborough project commenced construction in April 2014 and was completed in March 2015. Networkroute length is approximately 90 kilometres serving more than 250 customer sites.

In June 2014 the Group completed the acquisition of the Coventry metro network asset from Coventry CityCouncil, a network asset of approximately 180 kilometres.

In November 2014, CityFibre entered into a national framework agreement with major mobile operators ThreeUK and EE, along with their infrastructure joint venture MBNL, to supply dark fibre FTTT for backhaulconnectivity to mobile base stations. Approximately 56 kilometres of network has been built in Hull, connecting37 sites for MBNL.

In March 2015, CityFibre entered into an anchor contract in Edinburgh for 50 kilometres of network connecting200 business sites. This was supplemented in September 2015 by a further contract to connect 294 local authoritysites with an additional 100 kilometres of network, taking the total in Edinburgh to 150 kilometres.

In October 2015, CityFibre entered into the first contract under a Master Services Agreement with Vodafone,utilising its existing York network asset.

In November 2015, CityFibre signed an anchor contract with ISP HighNet to construct a new fibre network inGlasgow. The network will initially comprise approximately 30 kilometres serving 100 customers.

In January 2016, CityFibre completed the acquisition of certain national network infrastructure assets fromKCOM Group Plc, for cash consideration of £90 million. The acquisition of these assets from KCOM did notconstitute the acquisition of a business and therefore the relevant financial information is included byincorporation in the 2016 accounts. At the same time the Company raised £80 million (before expenses) through aplacing of Ordinary Shares and entered into a £100 million debt facility. The acquisition constituted a reversetakeover for the purposes of the AIM Rules, and accordingly the Company’s entire issued share capital wasre-admitted to AIM on 18 January 2016. The network assets acquired consisted of approximately 2,200 routekilometres of ducted infrastructure together with fibre optic cable, access chambers and other assets. Thiscomprised 1,100 kilometres of network in 24 towns and cities across the UK (the metropolitan networks), togetherwith a 1,100 kilometre national “figure of eight” Long Distance Network (LDN) that interconnects 22 of the 24metropolitan networks.

CityFibre also entered into a network access and maintenance agreement with KCOM as the anchor contract forthe acquisition of the KCOM network assets. The 15-year national framework agreement governs KCOM’scontinued use of the network assets.

In March 2016, CityFibre announced a contract with Southend-on-Sea Borough Council to build a 50 kilometrenetwork connecting 120 public sector sites throughout the town. The network was constructed using Openreachducts for some of the build.

In July 2016, CityFibre entered into a 20-year agreement for the connection of an additional 220 locations inPeterborough, comprising high definition closed circuit television and urban traffic control sites. CityFibre willextend its existing 90 kilometre Peterborough network by a further 24 kilometres.

In August 2016, CityFibre announced a six-year contract under its existing national framework with ExaNetworks, to connect 250 schools and businesses in Sheffield, Doncaster and Rotherham.

In September 2016, CityFibre announced a five-year agreement with national business ISP Onecom, to deliver150 business connections on the Group’s network under construction in Southend. In October 2016, CityFibreannounced a five-year contract with Onecom, to provide 300 business connections on its Coventry, Leicester andNottingham assets.

In September 2016, CityFibre announced the acquisition of the metro fibre network assets of RedcentricSolutions Limited, for a cash consideration of £5 million. The acquisition of these assets from RedcentricSolutions Limited did not constitute the acquisition of a business and therefore the relevant financial informationis included by incorporation in the 2016 accounts. The assets comprise 137 kilometres of ducted network

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principally in Cambridge, Portsmouth and Southampton, with complementary partial network footprints inexisting CityFibre towns and cities. Under the terms of the acquisition, CityFibre will continue to provideservices to 188 Redcentric connections under a 10-year leaseback arrangement.

In December 2016, CityFibre signed a 25-year national dark fibre core network migration agreement withGamma, utilising the Company’s national long-distance network and metro interconnects to provide a 1,300kilometre national route connecting 15 data centres and Openreach exchanges in London and the UK regions.

In January 2017, CityFibre announced a seven-year contract with managed service provider MLL Telecom toconnect 33 council sites on a newly constructed network in Stirling, followed in March 2017 with anchorcontracts in the business market vertical to construct new networks in Cheltenham and Gloucester, two locationslocated near to the Company’s national long distance network.

In rolling out its Ethernet services to the business market vertical, CityFibre intends to enter into launch partnercontracts with Channel Partners to provide fibre connectivity to more businesses in its existing footprint. In April2017 CityFibre announced contracts to support rollout to Slough, Maidenhead and Wakefield, followed in May2017 with contracts to rollout to Plymouth and Exeter. These launch partner contracts demonstrate that CityFibreis making further progress to commercialise the network assets acquired from KCOM and Redcentric SolutionsLimited in 2016.

7. Regulation and Government Policy

The Group operates within a UK market that the Directors believe is widely regarded as having an advanced andsophisticated regulatory and policy environment for telecommunications and broadband. A recent focus ofgovernment and regulatory policy has been to accelerate both the capability and the speed of construction of fullfibre networks by promoting effective competition, accompanied by targeted public intervention.

Ofcom’s strategy, as set out in its Digital Communications Review (DCR) of 2016, is to transition the marketfrom dependence on the legacy network of Openreach towards a ‘full fibre’ future spearheaded by competitiveFTTP investment. CityFibre is a potential beneficiary of this change of approach.

It remains the case, however, that Ofcom regulation, governed by the EU Common Regulatory Framework, is atpresent largely focused on interventions that mandate access to incumbents’ legacy networks. Ofcom conductsperiodic market reviews to determine potential competition issues, and in particular the market dominance ofincumbent networks. In the UK context, Ofcom continues to find that Openreach has Significant Market Power(SMP) and in order to protect against potential abuse of its SMP position, the regulator imposes access conditionsand price regulation, in particular to the local access networks operated by Openreach.

The periodic market reviews that are relevant to CityFibre are the Business Connectivity Market Review(BCMR) and the Wholesale Local Access Market Review (WLAMR).

Business Connectivity Market Review

The BCMR, which analyses the availability of networks and competition in the leased lines market, concluded in2016 and is based on analysis largely conducted before publication of Ofcom’s strategic change in direction tocompetitive fibre, which was announced in Ofcom’s DCR. As a result, the BCMR continued to focus almostexclusively on regulating access to Openreach’s existing network, with mandated price reductions toOpenreach’s portfolio of Ethernet leased line products together with the obligation for Openreach to introduce alocal access dark fibre product from October 2017.

BT, TalkTalk and CityFibre have each lodged appeals relating to different parts of the new BCMR regulationwith the Competition Appeal Tribunal. CityFibre’s appeal is further described in section 15 of Part 10 of thisdocument.

Wholesale Local Access Market Review

The WLAMR, published in March 2017, aligns more closely with the policy direction of the DCR. In particular,it signals future deregulation of broadband markets as a spur to market participants to build or buy access to fullfibre networks of the kind that CityFibre constructs. In this regard, Ofcom proposes new price regulation forOpenreach’s entry level 40Mbps broadband product and allows Openreach price freedom on broadband productsabove 40Mbps. Ofcom’s strategy, as stated in the WLAMR, is to encourage service providers to make decisionsto move away from the continued use of Openreach access infrastructure, and in turn construct or consumealternative full fibre infrastructure.

Revised Duct and Pole Access Regulations

As part of the WLAMR, Ofcom has also published consultation proposals to reduce construction costs for newFTTH networks by mandating access to Openreach’s existing ducts and overhead poles (DPA). It is expected that

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the new regulation will lift some current usage restrictions such that DPA can be used for leased lines andbroadband connections, and that there will be improvements to information sharing that make it easier for BT’scompetitors to construct new full fibre networks. CityFibre is expected to be a beneficiary of the revised DPAregulations.

The Common Regulatory Framework

The Common Regulatory Framework is itself under review with a re-orientation of the draft legislation designedto encourage FTTP/FTTH construction. The current draft of the revision, published in October 2016 and nowcalled the Electronic Communications Code, includes a presumption against regulation of open access fibrenetworks as in CityFibre’s business model, along with stronger incentives to invest in FTTP/FTTH.

Government Policy

The previous UK government announced that £1.14 billion of public money will be used to promote faster andmore widespread construction, adoption and use of ‘full fibre’ networks. This includes the establishment of aDigital Infrastructure Investment Fund for new FTTH projects, to encourage public procurement of full fibrebased services and vouchers for businesses who wish to purchase full fibre connectivity. Digital infrastructure isat the heart of a new, proactive industrial strategy set out by the government in March 2017. The Directorsbelieve that CityFibre is well positioned to be a beneficiary of these measures.

The previous government also introduced revisions to legislation that allow the government to set out its ‘fullfibre’ strategy in a way that requires Ofcom to take account of the government’s strategy in exercising itsfunctions and duties. CityFibre considers that this signalled the government’s intention to ensure that regulationand industrial strategy are fully aligned behind the ‘full fibre’ policy goal.

The Directors believe this strategy will continue under the current Conservative government following the 8 June2017 general election in the UK.

8. Organisational and management structure

The Company is the holding company of various principal subsidiaries listed in section 19 of Part 10 of thisdocument. The principal businesses operated by those subsidiaries are also listed in section 19 of Part 10. TheCompany’s management structure is headed by the Directors.

9. Directors and corporate governance

Directors

The names, business experience and principal business activities outside the Group of each of the Directors areset out below:

Chris Stone, aged 54 (Non-Executive Chairman)

Chris was appointed Non-Executive Chairman of the Group on 27 February 2017. Chris has a background in thetechnology and services industry. He was responsible for leading the transformation of Northgate InformationSolutions (formerly known as McDonnell Douglas Information Systems) between 1999 to 2011 to become theworld’s second largest specialist HR technology and services business and the leading provider of software andservices to the UK public sector. Chris is currently a Non-Executive Director (formerly Chief Executive Officer)of Radius Worldwide, which provides accounting, HR, legal, tax and compliance support to companies’international operations. He led the business during its successful acquisition by private equity firm, HG Capital,in August 2013. Chris has also previously held senior roles at Accenture, Electronic Data Systems, DigitalEquipment Company, Fitness First and CSR, where he served as Non-Executive Director and Chairman of theRemuneration Committee.

Greg Mesch, aged 57 (Chief Executive Officer)

Greg is co-founder of CityFibre with over 25 years of experience designing, building and operating fibreinfrastructure, and has grown five companies from start-up. Greg was a founding member and Chief OperatingOfficer of ESAT Telecom in Ireland (which listed on NASDAQ and was subsequently purchased by BT for over€1 billion) and a founding member and Chief Operating Officer of Versatel Telecom NV, building one of thelargest fibre based infrastructures in the Dutch and German markets. Versatel listed on the NASDAQ and theDutch AEX exchange and was purchased by Tele2 and Apax for over $1.5 billion. Greg was also Non-ExecutiveDirector of EU Networks from 2009 to 2011. Greg Mesch’s brother, Gary Mesch, is a non-executive director.

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Mark Collins, aged 49 (Director, Public Policy)

Mark is co-founder of CityFibre with over 20 years of experience in the telecoms sector, specialising incompetition strategy and regulation. Mark founded Equador Consulting, a firm specialising in the developmentof early stage telecoms companies including Virgin Media, Sprint, ESAT Telecom, Versatel Telecom, Completeland others. Equador was recognised in 2000 by the Sunday Times Fast-track 100 awards as the UK’s fastestgrowing TMT firm, and was sold to CH2M-HILL in 2002. Mark was founder and CEO of the mobile media firmMuzicall, recognised in 2009 as the UK’s second fastest growing mobile media firm. He holds a degree inelectronics and telecommunications gained as a sponsored student of GEC Telecommunications.

Terry Hart, aged 51 (Chief Financial Officer)

Terry has over 25 years of financial and operations experience, and since 2000 has specialised in telecoms andtechnology. As UK Finance Director of Easynet Group plc, he provided the financial leadership to manage thebusiness through high growth, including the first national roll-out of unbundled broadband. Terry later becameUK managing director of Easynet and managed its successful sale to BSkyB. More recently Terry was CEO ofTelstra International EMEA. Terry was Finance Director of Serco Aviation and trained as a CharteredAccountant with BDO.

Leo van Doorne, aged 57 (Non-Executive Director)

Leo is the former managing director of NeSBIC venture funds. NeSBIC was the founding venture investor inVersatel Telecom NV where Leo was Chairman through the firm’s rapid growth. Previously, he held the office ofRegional Director at Banque de Suez Nederland NV and numerous directorships, including Van OmmerenShipping Holding BV, Seed Capital Investments BV, Pallieter Holding BV, Koninklijke Verenigde Leder BVand OTB Group. He holds a Law Degree from the University of Utrecht.

Gary Mesch, aged 64 (Non-Executive Director)

Gary Mesch has been the founder and Managing Director of several successful data and telecom companiesoperating in the US and Europe. He founded Versatel telecom in 1995 in Amsterdam and served as CEO andthen Chairman until 2002. Versatel grew to become an infrastructure-based telecoms operator throughout theNetherlands, Belgium, and Germany. In 2005, Versatel was purchased by Tele2 of Sweden and Apax for over€1.5 billion. Prior to Versatel, Gary was managing director of Open Skies Inc., a consulting company based inAmsterdam. Gary Mesch is the brother of Greg Mesch (Chief Executive Officer).

Sally Davis, aged 63 (Non-Executive Director)

Sally brings over 25 years of telecommunications and media experience from both Europe and North Americaand has served as a non-executive director for a number of FTSE and NASDAQ quoted companies. Sally hasbeen voted one of the top 100 Global Telecoms executives in Global Telecoms Business. Sally joined CityFibrehaving previously been CEO of BT Wholesale (2007-2011), a division within BT which generated revenues ofover £4bn in 2011. She held a number of roles whilst at BT, including President of Global product (2001-05) andDirector, Group Internet & Multimedia (1999-2001).

Prior to BT, Sally worked in the telecoms industry and her experience includes NYNEX/Bell/Verizon (1993-99),where she worked both in the UK and US, Cable London and Mercury Communications. Sally is currently anon-executive director of Logitech, a Swiss computer peripherals company, quoted on both NASDAQ and theSIX Swiss Exchange, and Telenor, the major Norwegian telecoms operator with significant mobile operations in13 markets (including India, Thailand and Malaysia).

Steve Charlton, aged 59 (Non-Executive Director)

Steve, a chartered accountant, has more than 30 years of experience in the financial and investment arena,encompassing accounting, investment management, banking, equity and debt capital markets, real estate andprivate equity.

From 2004 to 2014, Steve was a managing director within a subsidiary of Fortress Investment Group, adiversified global investment manager. During his career, Steve held CFO and CEO positions within two ofFortress Investment Group’s listed portfolio companies, Gagfah S.A. and Eurocastle Investment Limited, where

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he oversaw debt financing/re-financing totalling more than €10 billion and equity raises within the publicmarkets of €1.5 billion, as well as creating efficient capital structures with low cost of capital. Immediately priorto joining Fortress, Steve spent almost ten years as CFO of Gordian Knot, a UK investment manager.

Steve is currently CFO of PEAC (UK) Limited, an independent European asset finance leasing business.

Corporate Governance

As detailed below, the Board has an audit committee (the “Audit Committee”), a remuneration committee (the“Remuneration Committee”) and a risk and strategy committee (the “Risk and Strategy Committee”). TheBoard meets at least eight times per year and may meet at other times at the request of any Director. EachDirector has one vote but, in the case of equality of votes, the Chairman of the meeting has a casting vote.

The Articles contain procedures to deal with any conflict of interest that may arise in the proceedings of theBoard. Each Director is required to disclose to the Board any interest that the Director has in any proceedings ofthe Board and, except as otherwise provided by the Articles, the Director shall not vote at a meeting of the Boardor a committee of the Board on any resolution concerning any contracts, arrangements or other proposals inwhich he or she has an interest.

The Board recognises the importance of good corporate governance and has sought to comply with a number ofthe provisions of the QCA Guidelines in so far as it considers them appropriate for a company of its size andnature.

The Board consists of eight directors comprising three Executive Directors (Greg Mesch, Mark Collins and TerryHart), and five Non-Executive Directors (Chris Stone, Leo van Doorne, Gary Mesch, Sally Davis and SteveCharlton). Details of the Board members’ beneficial interests in Ordinary Shares and options are set out insection 4.4 of Part 10 of this document. The Directors understand their obligation to comply with MAR relatingto Directors’ dealings and will take all reasonable steps to ensure compliance by employees of the Company, andtheir Persons Closely Associated, to whom MAR applies. The Company has, in addition, adopted a share dealingcode pursuant to and in accordance with Rule 21 of the AIM Rules.

The Audit Committee is comprised of Steve Charlton and Leo van Doorne. The Audit Committee’sresponsibilities include making recommendations to the Board on the appointment of the Company’s auditors,approving the auditor’s fees, reviewing the findings of the audit and monitoring and reviewing effectiveness ofthe Company’s internal audit function. The Audit Committee is also responsible for monitoring the integrity ofthe financial statements of the Company, including its annual and half yearly reports and interim managementstatements. Steve Charlton will continue to chair the Audit Committee following Admission.

The Remuneration Committee is comprised of Sally Davis and Steve Charlton. The Remuneration Committee’sresponsibilities include determining the remuneration of the Executive Directors, reviewing the design of allshare incentive plans and determining in each year whether awards will be made, and if so, the overall amount ofsuch awards, the individual awards to Executive Directors and the performance targets to be used. Sally Daviswill continue to chair the Remuneration Committee following Admission.

The Risk and Strategy Committee is comprised of Gary Mesch and Sally Davis. Mark Collins also attends, andprovides materials for, the Risk and Strategy Committee meetings, but he is not a member of the committee. TheRisk and Strategy Committee’s responsibilities include the review of external risk factors that the Group facesthrough changes in policy and regulation, as well as changes in the competitive market.

The Board has determined that it is appropriate for matters that would normally be delegated to a nominationcommittee to be deferred to the full Board. The Board, acting as Nomination Committee, meets as appropriate tocarry out the selection process for new Board members and to proposed any new appointments to the Board,whether executive or non-executive.

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PART 4SELECTED FINANCIAL AND OTHER INFORMATION

The selected consolidated financial information below should be read in conjunction with the information inPart 5 and Part 11 of this document.

The selected historical financial information relating to the Group set out below has been extracted withoutmaterial adjustment from the audited reports and accounts of the Group prepared under IFRS for the financialyears ended 31 December 2014, 31 December 2015 and 31 December 2016:

1. Consolidated income statement

Year ended 31 December

2014 2015 2016£000 £000 £000

Revenue 3,844 6,408 15,363

Cost of sales (568) (888) (1,827)

Gross profit (loss) 3,276 5,520 13,536


Operating (loss) (7,450) (6,159) (5,141)


Finance charges (344) (278) (7,341)

Share of results from associates and joint ventures (42) (126) (147)

(Loss) before taxation (7,057) (6,393) (12,584)

Taxation 31 31 -

(Loss) for the year (7,026) (6,362) (12,584)

Loss per share £(0.09) £(0.06) £(0.05)

2. Consolidated balance sheet

As at 31 December

2014 2015 2016£000 £000 £000

Assets

Non-current assets 33,160 45,501 156,803

Current assets 36,989 15,915 28,778

Total assets 70,149 61,416 185,581

Liabilities

Non-current liabilities (12,343) (10,194) (66,821)



Net assets 49,863 43,809 108,544

Share capital 1,111 1,113 2,713

Share premium 63,243 63,243 137,943

Share warrant reserve 85 85 85

Share based payments reserve 773 1,081 2,100

Merger reserve 331 331 331

Retained earnings (15,680) (22,044) (34,628)

Total equity 49,863 43,809 108,544

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3. Consolidated statement of cash flows


2014 2015 2016£000 £000 £000

Net cash utilised in operating activities (3,552) (5,360) (2,367)

Net cash (utilised in)/from investing activities (34,336) 13,782 (115,027)

Net cash from/(utilised in) financing activities 41,788 (2,877) 124,385


Cash and cash equivalents at the beginning of the year 286 4,186 9,731


4. Key Performance Indicators (1)

The following table sets out certain measures considered by the Directors to be key operational and financialmeasures for the Group. These are non-IFRS financial measures and operating metrics, and are not audited.


2014 2015 2016

CityFibre towns and cities 12 16 42

Orders

Order book - initial contract value (“ICV”) (£m) 11 23 76

Cumulative ICV (£m) 29 52 128

Unrealised ICV (£m) 22 42 106

Channel Partners 25 41 54

Customer connections sold (cumulative)

Public sector sites 941 1,429 1,888

Business 330 991 5,595

Mobile 37 37 37

Total customer connections sold 1,308 2,457 7,520

Total connected customer premises

Public sector sites 735 857 1,189

Business 150 327 2,738

Mobile - 16 35

FTTH - 208 2,852

Total sites delivered (excluding FTTH) 885 1,200 3,962

Network assets

Metro network length (km) at period end 543 743 2,244

Long distance network length (km) at period end - - 1,139

Connections sold per metro kilometre 2.4 3.3 3.4

Connections delivered per metro kilometre 1.6 1.6 1.8

Total cumulative metro network capital expenditure (£m) 34.9 48.7 131.2

Average cost per metre of metro network construction (£) 64.3 65.6 58.5

Human resources – employees at year end 76 105 143

(1) Further information about the key performance indicators set out in this table is provided at section 4 of Part 5 of this document.

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PART 5OPERATING AND FINANCIAL REVIEW OF CITYFIBRE

The following discussion of the Group’s financial condition and results of operations should be read in conjunctionwith the Group’s historical financial information as at and for the years ended 31 December 2014, 2015 and 2016and the accompanying notes included in Part 11 of this document. The discussion includes forward-lookingstatements that reflect the current view of the Group’s management and involve risks and uncertainties. TheGroup’s actual results could differ materially from those contained in any forward-looking statements as a result offactors discussed below and elsewhere in this document, particularly in the sections headed “Risk Factors” and“Presentation of Information—Forward-looking statements”. Shareholders and prospective investors should readthe whole of this document and not just rely on summarised information set out in this Part 5.

1. Overview

CityFibre provides fibre connectivity services through designing, building, owning, and operating fibre opticnetwork infrastructure. The Group is a wholesale operator of fibre networks in towns and cities outside Londonwhich provide open access, shared fibre infrastructure that enables gigabit-capable connectivity for ChannelPartners and mobile network operators, who in turn deliver digital connectivity solutions to their end customersspanning the public sector, business and residential markets.

In relation to public, business and mobile sectors CityFibre operates a contract-backed model, wherebyinfrastructure construction (or acquisition) is committed to only once the Company has secured contractedrevenues which cover a substantial portion of capital expenditure. This “anchor contract” approach also providesthe basis for further success-based network expansion in a city, which the Directors believe should deliver a highlevel of financial return on incremental investment.

The Group’s total assets as at 31 December 2016 were £185.6 million and on a pro forma basis after giving effectto the Entanet Acquisition the Group’s total assets were £203.1 million excluding goodwill. The Group’s revenuefor the financial year ended 31 December 2016 was £15.4 million and on a pro forma basis after giving effect tothe Entanet Acquisition the Group’s revenue was £51.1 million. The Group had a loss for the year of£12.6 million and on a pro forma basis after giving effect to the Entanet Acquisition had a loss for the year of£12.8 million (before adjustments).

2. Business model characteristics

CityFibre operates a business model whereby it seeks to enter a town or city via an anchor contract with aChannel Partner that serves the public sector or business market verticals, a mobile operator or via an acquisition.Its strategy is to build or acquire an anchor metro network to service the initial contract and then expand thenetwork through the provision of fibre connectivity to more premises in its three primary metro market verticals:public sector, business and mobile. Once deployed, the metro network may be expanded to FTTH, serving afourth market vertical, consumer, as described below. Through its strategy to enter and grow metro networks,CityFibre typically seeks:

Š customer contract value from the initial contract to cover a substantial proportion of the capitalexpenditure to either construct or acquire the network;

Š targeted gross margins of approximately 90 per cent. on subsequent incremental business;

Š capital expenditure on incremental connections in the town or city having a targeted payback of lessthan three years (“payback” being the period of time it takes to generate gross margin on an incrementalconnection equal to the net capital expenditure required to connect it);

Š targeted recurring revenue yield (net of upfront fees paid by customers for the fibre connection) on netcapital expenditure in a town or city in excess of 25 per cent. at maturity (being approximately 5 to 7years after first cabinet construction); and

Š targeted recurring revenue yield on anchor contracts of approximately 10 per cent..

Following construction or acquisition of the anchor network, through further densification of the networkCityFibre seeks to lower its average capital cost per additional connection, and provide additional yield on capitalemployed in the town or city.

The Directors expect most Channel Partner contracts for fibre connectivity will renew at the end of their initialterm with low rates of churn. Contract renewals typically do not require further expenditure by CityFibre.

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CityFibre’s business model in relation to new towns and cities anchored through FTTT connections to mobilebase stations, or for the rollout of FTTH to consumers, is expected to follow a similar approach:

FTTT

Š Anchor contracts with mobile operators for FTTT will be pursued where the contract value, to cover aproportion of the capital expenditure associated with network construction, is deemed acceptable by theDirectors.

Š Consideration may include a combination of up-front connection fees and ongoing rental fees, withCityFibre having flexibility to tailor the commercial structure of contracts.

FTTH

Š Construction of FTTH is expected to commence in five to ten towns and cities within CityFibre’sexisting or expanded metro footprint in 2018, based on the delivery of approximately 300 to 400 FTTHcabinets served by CityFibre’s existing metro infrastructure by the end of 2018.

Š In undertaking its FTTH plan, CityFibre intends to work with Channel Partners to secure commitmentsto use its FTTH network, or to procure registrations of interest on a street or neighbourhood basis, hencemitigating deployment risks by ensuring there is sufficient demand ahead of construction.

3. Key factors affecting the Group’s results of operation

The Directors believe the results of the Group’s operations have been, and will continue to be, affected by manyfactors, some of which are beyond the Group’s control, including the following key factors affecting the Group’sresults of operations:

Š relationships with Channel Partners;Š public sector procurement;Š contract value added and customer connections sold;Š management of growth;Š commercialisation of acquired assets;Š FTTH trial and FTTT projects;Š changes in the cost of infrastructure construction; andŠ changes in regulatory environment.

Relationships with Channel Partners

CityFibre’s revenues in large part depend on both new and existing relationships with Channel Partners. TheGroup currently has 54 Channel Partners in its wholesale channel, covering a diverse range from small localoperators to leading national and international carriers and systems integrators.

The Group’s infrastructure is principally used by Channel Partners and, therefore, revenues depend on ChannelPartner relationships; however, many Channel Partners have existing and well-established long-termrelationships with existing network providers such as Openreach. Although the Directors believe the Group’sfibre infrastructure providing gigabit speed connectivity is attractive to its diversified portfolio of ChannelPartners, if the Group is unable to secure and/or maintain satisfactory relationships with Channel Partners, it maybe unable to implement its business plan in full.

The Entanet Acquisition, given Entanet’s established wholesale platforms and relationships with ChannelPartners, is a key accelerator of CityFibre’s strategy to grow its channels to market.

Public sector procurement

CityFibre’s revenues also in part depend on contracts with Channel Partners that serve local councils and otherpublic bodies. CityFibre’s strategy in the public sector market vertical involves, in addition to developingrelationships with Channel Partners, the development of close relationships with local and regional authorities,chambers of commerce and key stakeholders in the local economy. Whilst the Group has to date been successfulin forming partnerships and framework agreements with leading suppliers to the public sector, a delay or failureto win public sector contracts may have an adverse effect on the Group’s plans to expand to no less than 50towns and cities by 2020. However, proposed government stimulus to encourage local authorities to anchor newfull fibre metro networks has the potential to accelerate public sector opportunities for the Group.

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Contract value added

The Group added £75.5 million in new initial contract value sold during 2016, an improvement of 225.4 per cent.from 2015, reflecting both strong organic and inorganic growth. The long-term nature of contracts entered intomeans that CityFibre has a significant amount of unrealised contract value to recognise as revenue over theduration of the contract terms (approximately £106 million at 31 December 2016). The Directors believe thevisibility of future years’ earnings gives a degree of assurance over expectations of performance.

The Group’s metro business plan is dependent on achieving a target level of market penetration across three ofthe Group’s primary market verticals: public sector, business and mobile operators. Whilst the Board is pleasedwith sales trends achieved to date within the Company’s operational markets, there is no guarantee that thetargeted levels of market penetration will necessarily be achieved.

The Directors believe that the Group’s future revenue growth is dependent on its ability to provide customerswith quality service that not only meets the Group’s stated commitments, but meets and then exceeds customerservice expectations.

Customer connections

Customer connections are the key driver of business growth for CityFibre. The volume of delivered connectionsdrives the Group’s revenues and gross profit growth.

The following table sets out certain data relating to delivered connections as at the dates indicated.

Year ended 31 December2016 2015 2014

Connected customer premises 3,962 1,200 885Towns and cities connected(1) 22 8 4

Metro local access duct and fibre (km) 2,244 743 543National long distance network (km) 1,139 - -

Total network length (km) 3,383 743 543

(1) Represents towns and cities connected to key locations and data centres in London and the UK regions.

Revenue in relation to these contracts is also driven by the contracted pricing obtained by CityFibre, which isbenchmarked to competitive Openreach and BT Wholesale products. Openreach products are subject to regulatedprice reductions on a 3 year review cycle, which has resulted in price decreases to some products which arerelevant to CityFibre’s market. While CityFibre adapts its commercial propositions to the evolving market, pricedecreases do not impact CityFibre’s income statement immediately because customers are on long-term contractswhich typically have a fixed term of 3 or more years.

Management of growth

The ability of the Group to implement its strategy requires effective planning and management of controlsystems. The Directors believe the experience of the Group’s executives, management and employees enable it tobecome a significant force in the rapidly evolving fibre infrastructure arena. Senior management have experiencein growing businesses and scaling resources.

Commercialisation of acquired assets

The Group pursues a strategy of network footprint expansion via a combination of acquisitions, organic new citygrowth and incremental sales on existing and acquired assets. Accordingly, the Group’s results of operations willdepend in part on the Group’s ability successfully to commercialise the assets it acquires.

Entanet Acquisition

The Directors believe that the Entanet Acquisition will impact the Group’s results of operations in several waysgoing forward. The principal effects on results of operations are expected to be:

Š A significantly increased customer base. On a pro forma basis, the Enlarged Group would have annualrevenues in excess of £50 million as at 31 December 2016, had the Entanet Acquisition occurred then

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(see part 7 of this document for further explanation of the pro forma information). The Group will haveaccess to a significant number of new Channel Partners that will be able to order services overCityFibre’s existing networks.

Š Cost and operational synergies to be realised during the first three years which the Directors believe willimprove both annual revenues and net profitability.

KCOM Acquisition

The national infrastructure acquired by CityFibre through the KCOM Acquisition comprised 1,156 routekilometres of ducted metro fibre assets in 24 towns and cities, 21 of which were new markets for the Group, anda national long distance network totalling approximately 1,139 route kilometres of two-way ducting and fibrethat connects 22 towns and cities to data centres in London and the UK regions. The Directors estimated that thecash consideration paid of £90 million represented a 45 per cent. discount to the cost of constructing anequivalent network to the KCOM network acquired. The acquisition of these assets from KCOM did notconstitute the acquisition of a business and therefore the relevant financial information is included byincorporation in the 2016 accounts.

Under the terms of the KCOM Acquisition, CityFibre agreed to provide KCOM with access to the acquiredinfrastructure for a term of up to 15 years, subject to a minimum term of five years and minimum revenue of£5 million per annum for those five years. Since the KCOM Acquisition completed on 18 January 2016,CityFibre has successfully completed agreements with Channel Partners on 17 of the acquired metro networks,including Bristol, Leeds, Bradford, Milton Keynes, Northampton, Reading, Bracknell, Sheffield, Rotherham,Doncaster, Leicester, Nottingham, Maidenhead, Slough and Wakefield. This equates to 2,120 connections soldand total initial contract value of £27.1 million.

The Group has seen interest from carriers in its acquired 1,139 kilometre national network. In April 2016 theGroup signed a £2.3 million regional capacity agreement with SSE Enterprise Telecoms for a connectionbetween Reading and Slough, and in December it signed a 25-year national dark fibre core network migrationagreement with Gamma Telecom, utilising the Company’s national long-distance network and metroinfrastructure to provide a 1,300 kilometre national route connecting 15 data centres and Openreach exchanges inLondon and the UK regions.

The Directors believe the national network to be an important strategic asset for the Group, with the potential toaccelerate commercial opportunities in the national carrier and mobile arenas, and in the metro networksthemselves.

Redcentric Acquisition

On 26 September 2016, the Group announced the acquisition of the entire portfolio of metro fibre network assetsof Redcentric Solutions Limited, for a cash consideration of £5 million. The assets comprise 137 kilometres ofduct and fibre networks serving 188 Redcentric customer connections, with principal footprints coveringCambridge, Portsmouth, and Southampton, along with complementary incremental coverage in the existingCityFibre footprints of Nottingham, Derby and Northampton. The acquisition of these assets from RedcentricSolutions Limited did not constitute the acquisition of a business and therefore the relevant financial informationis included by incorporation in the 2016 accounts.

Under the terms of the acquisition, Redcentric Solutions Limited agreed to a lease-back revenue commitment of£4.5 million over 10 years, for the ongoing delivery of service to its existing customers.

FTTH trial and FTTT project

FTTH

The Group completed construction of the YorkCo FTTH trial network in 2016. The use of CityFibre’s existingmetro infrastructure in constructing the FTTH network, delivered both costs savings and reduced the time tomarket. As at 31 May 2017, of the 13,582 homes in York whose boundaries are passed by the FTTH networkconstructed by YorkCo, 3,684, being more than 27 per cent., had subscribed for an internet service from Sky orTalkTalk on the new network, with the highest cabinet penetration now exceeding 40 per cent.

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FTTT

In July 2016, the final sites went live on CityFibre’s 56 kilometre Hull network, constructed on behalf of MBNL,Three UK and EE. Three UK subsequently reported a 380 per cent. increase in data throughput on the newnetwork. The Directors estimate that CityFibre’s existing footprint is capable of addressing an estimated 7,300macro cell sites, and the Company anticipates that the number of small cells required under the future 5Gspecification will be significantly higher than the number of macro sites in service today.

Changes in the cost of infrastructure construction

CityFibre’s cost base is highly dependent upon the execution of large-scale civil engineering projects. CityFibre hasa number of partnerships with mid-tier civil engineering contractors with relevant experience and capability tocomplete the construction of new networks. Nevertheless, there is potential for construction cost overruns in largescale network construction. CityFibre seeks to mitigate this risk by agreeing a schedule of rates with contractors inadvance of a significant network construction. In addition, CityFibre has a team of experienced project supervisorswho work closely with contractors, regularly reviewing and certifying work done. These supervisors approvechanges to contracted scopes of work and additional cost in accordance with the Group’s delegated authorityprocedures.

Fluctuations in third-party contractor labour costs are also a risk. CityFibre agrees labour rates at the outset of aconstruction contract to protect against short-term fluctuations. Over time, the Directors believe it is likely thatthere will be upward pressure on labour rates. However, as CityFibre’s business grows in scale there should be anincreased ability to agree volume-related discounts with construction partners.

It is anticipated that access to Openreach’s existing ducts and overhead poles will provide an opportunity toreduce network costs and speed up the deployment of network infrastructure (as demonstrated by the Group’strial in Southend-on-Sea).

The Directors will also continue to consider, on a case-by-case basis, the purchase of network infrastructureassets where they believe a compelling commercial opportunity is present.

Changes in regulatory environment

The UK communications market is regulated by Ofcom in line with a regulatory framework set by the EuropeanCommission. Two specific segments of regulation particularly affect the services provided by CityFibre:

Š the Business Connectivity Market Review (BCMR, for point-to-point fibre connections to enterprisecustomers), and

Š the Wholesale Local Access Market Review (WLAMR, for broadband connections to homes and smallbusinesses).

In both cases, regulation is imposed on Openreach as the only operator deemed by Ofcom’s analysis to havesignificant market power in the UK (outside the Hull area). BCMR and WLAMR regulation is set and reviewedperiodically, with the objective of promoting effective competition through access to Openreach infrastructure atregulated prices.

Price regulation can affect the commercial offerings of Openreach’s competitors, including CityFibre. Forexample, revenue growth in the communications sector might lead to reductions in regulated prices. The 2016-2019 BCMR led to Ofcom imposing annual price reductions on Openreach in the range of 6 per cent. to 12 percent., resulting in some price reductions of CityFibre’s connectivity services. The 2018-2021 WLAMR could seesimilar price reductions to certain Openreach products in the broadband market. To counteract the effects of pricereduction imposed on Openreach, Ofcom is seeking to lower construction costs incurred by Openreach’scompetitors, including CityFibre, by promoting access to Openreach’s ducts and poles.

CityFibre constantly reviews changes to regulation and where necessary seeks to adapt products, pricing oroperating models to mitigate against any adverse effects.

4. Key operational and financial measures

In addition to revenue, gross margin, EBITDA and Adjusted EBITDA (having the meanings described below),the Directors consider the following to be the key operational and financial measures of the Group.

Š Order book - initial contract value (“ICV”) sold. This is the total contracted customer revenuesreceivable up to the first contract break point, i.e., when the contract terminates or may be terminated by thecustomer, sold during a financial period. CityFibre also reports cumulative ICV as at the end of the financialperiod.

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Š Unrealised ICV. This is the total contracted customer revenues, receivable up to the first contractbreak point, not yet recognised in the income statement as at the end of the financial period.

Š Customer connections sold. CityFibre reports on connections sold during a financial period includingby reference to public sector sites, business sites and mobile sites.

Š Total connected customer premises. CityFibre reports the number of unique customer premisesconnected to its network and receiving services during a financial period including by reference topublic sector sites, business sites, mobile sites and FTTH sites.

Š Total metro network route fibre kilometers. This is the distance of the duct network owned byCityFibre in the towns and cities in which it operates at the end of a financial period plus its longdistance network.

Š Customer premises connected per kilometre of metro network. CityFibre employs this as a measureof network utilisation and density.

Š Total cumulative metro network capital expenditure and average cost per metre of metro networkconstruction. This is the expenditure required to construct a network and the average cost per metre ofsuch construction.

Š Yield on net capex. This is the recurring annual revenue generated in a town or city, measured againstthe cumulative capital expenditure in that town or city, net of connection fees paid by the customer.

5. Alternative Performance Measures

CityFibre presents EBITDA and Adjusted EBITDA as alternative performance measures to enhance theinvestor’s and analysts’ understanding of CityFibre’s operating results. EBITDA and Adjusted EBITDA are notmeasures of performance under IFRS and should not be considered by prospective investors and analysts asalternatives to (i) operating loss; (ii) loss for the period; (iii) cash flow from operating activities; or (iv) any othermeasure of performance under IFRS. The Directors believe that EBITDA and Adjusted EBITDA are meaningfulmeasures of CityFibre’s operating performance because they should assist investors in evaluating CityFibre’scash flows from operations, for comparing CityFibre’s operating performance with that of other companies thathave different capital structures and for evaluating CityFibre’s capital expenditure and working capitalrequirements. Other companies may not calculate similarly named measures on a basis consistent with that usedby CityFibre. Accordingly, prospective investors should not place undue reliance on EBITDA, AdjustedEBITDA or any other non-IFRS measure contained in this document.

CityFibre defines EBITDA as earnings before interest, tax, depreciation and amortisation. CityFibre’s definitionof Adjusted EBITDA is EBITDA excluding share-based payments and significant non-recurring expenses.

The table below provides a reconciliation of reported operating loss to EBITDA and Adjusted EBITDA for 2014,2015 and 2016.


Operating loss (as reported) (5,141) (6,159) (7,450)Add back:Depreciation 3,572 1,707 1,393Amortisation 358 233 114

EBITDA (1,211) (4,219) (5,943)

Fees in connection with regulatory review 904 220 -Share-based payments charge 908 343 1,393Operational and financing costs in respect of the KCOM acquisition 1,884 - -Operational and financing costs in respect of the KCOM acquisition and the JointVenture - 736 -One off bonuses - - 585One off costs relating to fundraising activities - - 322

Adjusted EBITDA 2,485 (2,920) (3,643)

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6. Effects of non-recurring costs on comparability of results for the years ended 31 December 2014,2015 and 2016

During the years ended 31 December 2014, 2015 and 2016 the results of CityFibre have included somesignificant non-recurring items in connection with strategic decisions taken by CityFibre. In recent years theseexpenses have included costs associated with the KCOM Acquisition, costs of the 2014 Admission andregulatory costs.

These non-recurring expenses incurred are reported within administrative expenses. In the relevant alternativeperformance measure used by CityFibre they appear below Adjusted EBITDA.

The table below shows these non-recurring costs:


Regulatory fees 904 220 -Operating and finance costs for KCOM Acquisition 1,884 536 -Operational costs in respect of YorkCo - 200 -One-off 2014 Admission bonus - - 585Costs relating to 2014 Admission fundraising activities - - 322

Total non-recurring costs 2,788 956 907

7. Description of Key Components of the Group’s Income Statement

The following is a brief description of the principal income statement line items of the Group.

Revenue

Revenue principally represents network lease sales and installation sales to external customers. Where revenuearising from installation and connection services is separable from network lease services, these elements arerecognised as if they were separate contracts.

Network lease revenue is recognised evenly over the period to which the services are provided, and is recognisedfrom the date at which the network service becomes available for use by the customer.

Installation revenue is recognised on a percentage completion basis over the period of construction of the asset,from post-contract signature mobilisation to customer handover. Management apply a straight-line basis as thisclosely approximates revenue recognised on a stage of completion basis and the effort required to deliverservices to customers.

Revenue attributable to infrastructure sales in the form of indefeasible-rights-of-use (“IRUs”) with characteristicswhich qualify the transaction as an outright sale, or transfer of title agreements, are recognised at the later ofdelivery or acceptance by the customer.

Costs of sales

Costs of sales comprise costs incurred which are directly attributable to the operation and maintenance of thenetworks over which services are delivered. These include third party network rentals, colocation, backhaul,repairs and maintenance costs.

Administrative expenses

Administrative expenses comprise staff costs and other general administrative costs, which include marketing,property, legal and professional, travel and IT costs, as well as depreciation and amortisation expenses.

The Group’s income statement does not include capitalised staff costs. Staff costs are capitalised when work isperformed to bring an asset into use and are subsequently depreciated over the useful economic life of the asset.Typically this is for network assets constructed, though some costs are capitalised for bringing software systemsinto use.

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Depreciation

As noted above, CityFibre reports depreciation within its administrative expenses. Depreciation is incurred on allassets that have been brought into use and charged to the income statement on a straight-line basis. With respectto network assets, duct assets are depreciated over 40 years, while cabling is depreciated over 20 years.

The Group conducted a review of its network asset depreciation policy during 2016. Duct assets are typically thelongest-lived assets in telecommunications networks, with asset lives now typically assessed by companies in theindustry to be of the order of 40 years. Taking into account these assets are relatively new, have a long life andthere is now enhanced evidence of the durability of these assets, CityFibre updated its accounting estimateaccordingly. If this change in useful economic life had not been made depreciation for 2016 would have been£6.6 million, £3 million greater than the actual charge for the year.

Finance cost

Finance costs primarily relate to interest payable with respect to the Facility Agreement entered into in December2015 and first drawn upon in January 2016. Prior to that time, finance costs principally related to interest on bankloans.

Share of post-tax losses of equity accounted joint venture

This represents the Group’s share of the total recognised gains and losses of its YorkCo joint venture using theequity method, from the date that significant influence commenced, based on present ownership interests, lessany impairment losses.

Income tax

The standard rate of corporation tax in the United Kingdom was 20 per cent. in 2016, 20.25 per cent. in 2015 and21.5 per cent. in 2014. The standard rate of corporation tax in the United Kingdom reduced with effect from1 April 2017 to 19 per cent.. The Group’s losses in each of the years under review, has meant the Group’seffective tax rate has been less than 1 per cent..

8. Results of Operations

The following table sets out selected information from the Group’s consolidated statement of comprehensiveincome for each of the years ended 2014, 2015 and 2016 as set out in Part 11 of this document.


Revenue 15,363 6,408 3,844Cost of sales (1,827) (888) (568)

Gross profit 13,536 5,520 3,276


Operating loss (5,141) (6,159) (7,450)

Finance income 45 170 779Finance cost (7,341) (278) (344)Share of post-tax losses of equity accounted joint venture (147) (126) (42)

Loss on ordinary activities before taxation (12,584) (6,393) (7,057)Income tax - 31 31

Loss for the year and total comprehensive income (12,584) (6,362) (7,026)

Loss per share

Basic and diluted loss per share(1) £(0.05) £(0.06) £(0.09)

(1) Potentially issuable shares are not considered to be dilutive because the Group made a loss in 2014, 2015 and 2016. Options, sharesand warrants referred to in notes 5, 16 and 17 of the Group’s financial statements, as set out in Part 11 of this document, as at andfor the years ended 31 December 2015 and 2016 may have an effect on future reported earnings.

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Comparison of the years ended 31 December 2016 and 2015

Revenue

Revenue increased by £9 million (139.7 per cent.) to £15.4 million in 2016 from £6.4 million in 2015. Thisincrease was driven by organic growth (that is, the continued expansion in CityFibre’s footprint and incrementalrevenues from both existing and new towns and cities), and contributions from the KCOM and RedcentricSolutions Limited leaseback agreements, as shown in the table below.

Year ended 31 December2016 2015£000 £000

Organic revenue growth 10,436 6,408KCOM and Redcentric leaseback agreements 4,927 -

Total revenue 15,363 6,408

Excluding the contributions from KCOM and Redcentric Solutions Limited, organic revenue growth was 62.9per cent.. Key drivers of organic revenue growth (which includes anchor and other revenue) included a greatercontribution from the Edinburgh project, which was completed in 2016, as well as continued strong incrementalsales on existing assets, including launch partner revenue from those assets acquired during the year.

Gross profit and gross margin

Gross profit increased by £8 million (145.2 per cent.) to £13.5 million in 2016, from £5.5 million in 2015. Grossmargin increased by two percentage points, to 88.1 per cent., from 86.1 per cent. in 2015, reflecting thecontinuing addition of more profitable incremental new business on the assets during the period. The KCOMcommitment had a direct gross margin of 83 per cent..

Administrative costs

Administrative costs increased by £7 million (59.9 per cent.) to £18.7 million in 2016, from £11.7 million in2015. Excluding non-recurring costs, depreciation and amortisation, and share-based payments charges,underlying administrative costs were £11.1 million, representing growth of 30.9 per cent. from £8.4 million inthe prior year.

The following table sets out the components of the Group’s administrative expenses for 2015 and 2016. Thecomponents are shown net of non-recurring costs, which are separately presented in the table.


Staff costs, excluding share-based payments 7,877 6,059Depreciation 3,572 1,707Other general administrative expenses 3,174 2,381Non-recurring costs(1) 2,788 956Share-based payments 908 343Amortisation 358 233

Administrative expenses 18,677 11,679

(1) For an explanation of non-recurring costs, see section 6 of this Part 5 above.

Staff costs, excluding share-based payments and the one-off bonuses paid with respect to work performed on theKCOM transaction, increased by 30 per cent. to £7.9 million in 2016, up from £6.1 million in 2015. Averageheadcount was 116 staff, up from 83 in 2015. The increase is primarily due to the addition of engineering andoperational staff, reflecting the expanded number of projects under way on the organic and acquired networkfootprints.

Other general administrative expenses increased by £0.8 million as a result of the expanded number of new andcurrent projects.

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Total non-recurring costs, depreciation and amortisation, and share-based payments charges were £7.6 million in2016, up from £3.2 million in 2015 and are detailed below:

Š Depreciation increased by £1.9 million, to £3.6 million, due to the substantial increase in the asset basethrough acquisitions and completed construction projects. As described above, this followed a change inthe Company’s depreciation policy. If this change had not been made depreciation would have been£6.6 million.

Š During the year the Group incurred acquisition and integration costs totalling £1.9 million. These costswere incurred primarily to execute the KCOM Acquisition.

Š Non-recurring costs also included £0.9 million of legal and professional fees in connection withregulatory issues. During 2016, Ofcom published its Digital Communications Review (which included areview of the structure of BT and Openreach) and the Business Connectivity Market Review (whichincluded consideration of availability and pricing of fibre products). Fees included work required inrelation to a referral to the Competition Appeal Tribunal (‘CAT’) following on from the Group’soriginal appeal. The Group will continue to engage advisors and take actions necessary to ensure itsposition is properly presented and protected.

Š Share-based payment charges increased to £0.9 million, up from £0.3 million in 2015 due to an LTIPaward in the year and a full year’s charge for share options awarded in the prior year. CityFibre grantsshare options under its long term incentive plan over no more than 1.5 per cent. of the Company’s sharecapital per annum (save in exceptional circumstances such as recruitment). Option grants in the periodwere in line with such parameters.

Š The amortisation charge for the year increased to £0.4 million (2015: £0.2 million), reflecting furtherdevelopment of the Group’s network and financial management systems.

Operating loss

Reflecting the above factors, operating loss improved to £5.1 million in 2016 from £6.2 million in 2015, largelydriven by increased gross profit of £13.5 million from £5.5 million in 2015.

Finance costs

Finance costs increased to £7.3 million in 2016 from £278,000 in 2015. Additional financing costs were incurreddue to the Group entering into the Facility Agreement. A £35 million term loan facility was drawn under theFacility Agreement to partly fund the KCOM Acquisition. During 2016, a further £24.8 million was drawn tofinance permitted growth capital expenditure by reference to contracted revenues under customer contracts andpermitted acquisitions.


CityFibre’s share of post-tax losses of the equity accounted YorkCo joint venture increased by £21,000 to£147,000 in 2016 from £126,000 in 2015, reflecting an increase in project activities compared with the prioryear.

Loss for the year

Reflecting the above factors, the Group’s net loss for the year increased by 97.8 per cent. to £12.6 million in2016, from £6.4 million in 2015.

Comparison of the years ended 31 December 2015 and 2014

Revenue

Revenue increased by £2.6 million (66.7 per cent.) to £6.4 million in 2015 from £3.8 million in 2014. Thisincrease was driven by organic growth (that is, the continued expansion in CityFibre’s footprint along with thedelivery of incremental revenues from both existing and new towns and cities). Revenues from the businessmarket vertical improved by £1 million. The Group has been growing business revenues on new networks sincethe second half of 2014 when it started commercialising constructed and acquired networks of scale in additionto its York network. Significant growth and geographical diversification of these revenues occurred in 2015.

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Gross profit and gross margin

Gross profit increased by £2.2 million (68.5 per cent.) to £5.5 million in 2015, from £3.3 million in 2014. Grossmargin increased by 0.9 percentage points, to 86.1 per cent., from 85.2 per cent. in 2014, reflecting the slightlyhigher profitability of new business added during the period.

Administrative expenses

Administrative expenses increased by £1 million (8.9 per cent.) to £11.7 million in 2015, from £10.7 million in2014.

The following table sets out the components of the Group’s administrative expenses for 2014 and 2015. Thecomponents are shown net of the non-recurring costs, which are separately presented in the table.


Staff costs, excluding share-based payments 6,059 4,702Depreciation 1,707 1,393Other general administrative expenses 2,381 2,217Non-recurring costs (1) 956 907Share-based payments 343 1,393Amortisation 233 114

Administrative expenses 11,679 10,726

(1) For an explanation of non-recurring costs, see section 6 of this Part 5 above.

The movements between 2014 and 2015 include:

Š Staff costs excluding share-based payments increased to £6.1 million from £4.7 million in 2014. Thisincluded non-recurring costs of £0.6 million in relation to the KCOM Acquisition and non-recoverableoperational costs in respect to the York FTTH trial. Average headcount was 83 staff, up from 46 in2014, largely as a result of the full year effect of an expansion through the second half of 2014. Theincrease was primarily due to the addition of operational staff, reflecting the expanded number ofprojects under way.

Š Other general administrative expenses increased by £0.2 million as a result of the expanded number ofnew and current projects.

Š Share-based payment charges reduced by £1.1 million to £0.3 million. The prior year includedexceptional share option awards associated with the 2014 Admission and placing of Ordinary Shares bythe Company in June 2014.

Š Depreciation increased by £0.3 million as new assets were brought into service.

Š Total non-recurring costs were £1 million in 2015 and are detailed below:

- Non-recurring costs in the period totalled £1 million. During the year the Group made an additionalinvestment in resources of £0.6 million, primarily to execute the KCOM Acquisition, but also toestablish an enlarged organisational structure to enable the business successfully to integrate andcommercialise the assets. In addition certain non-recoverable operational costs were incurred inrespect to the York FTTH trial.

- Costs included £0.2 million of legal and professional fees in relation to regulatory issues. During2016, Ofcom published its Digital Communications Review (which included a review of thestructure of BT and Openreach) and the Business Connectivity Market Review (which includedconsideration of availability and pricing of fibre products).

- Other non-recurring costs related to the KCOM Acquisition.

Excluding non-recurring costs, depreciation and amortisation, and share-based payments charges, underlyinggrowth in administrative expenses was 22 per cent..

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Operating loss

Reflecting the above factors, operating loss improved to £6.2 million in 2015 from £7.5 million in 2014.

Finance costs

Finance costs decreased to £278,000 in 2015 from £344,000 in 2014.


CityFibre’s share of post-tax losses of the equity accounted YorkCo joint venture increased by £84,000 to£126,000 in 2015 from £42,000 in 2014. This reflected an increase in project activities compared with the prioryear. The YorkCo joint venture commenced operations in April 2014.

Loss for the year

Reflecting the above factors, the Group’s net loss for the year decreased to £6.4 million in 2015, from £7 millionin 2014.

9. Liquidity and Capital Resources

Overview

The Group’s primary sources of liquidity for its operations are the cash flows generated from its operations,along with drawdowns under the Facility Agreement.

As at 31 December 2016, the Group’s cash and cash equivalents were £16.7 million and the Group had£40.2 million in undrawn credit, of which £30 million is a revolving credit facility under the Facilities.

The Group’s cash is typically held in demand and short-term bank deposits at financial institutions deemed to beinvestment grade by reference to the major credit rating agencies, being Moody’s S&P, Fitch and approved byCityFibre’s audit committee. In order of priority the objectives used in determining the investment policy are:

Š Safety and preservation of capital;Š Liquidity to meet projected and contingent cash needs; andŠ Yield to be consistent with safety, liquidity and diversification of counterparty risk.

Cash flows

The table below sets out summary of cash flow information for the three years ending 31 December 2016.


Cash flows from operating activities (2,367) (5,360) (3,552)Cash flows from investing activities (115,027) 13,782 (34,336)Cash flows from financing activities 124,385 (2,877) 41,788


Cash and cash equivalents at end of period 16,722 9,731 4,186

Cash flows from operating activities

Cash flows from operating activities for the 2016 period showed a net outflow of £2.4 million, compared to a netoutflow of £5.4 million in 2015 and £3.6 million in 2014.

After excluding the £3.6 million classification of network assets acquired from KCOM as inventory in 2016, theadjusted net inflow of £1.2 million in 2016 reflects a £6.6 million improvement against the prior year on a likefor like basis. £2.4 million of this improvement relates to phasing of construction projects spanning the 2015 year

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end which led to a working capital requirement not replicated in 2016. £4.2 million relates to a reduction in theEBITDA loss from 2015 after adjusting for share based payments and transaction costs, which was driven by the139.7 per cent. increase in revenues.

The increase in net cash outflows from operating activities of £1.8 million between 2014 and 2015 was driven bya £2.5 million increase in working capital requirements in 2015 in relation to an expanded number ofconstruction projects spanning the 2015 year as noted above and £700,000 related to a reduction in the EBITDAloss from 2014 after adjusting for share based payments, which was driven by a 66.7 per cent. increase inrevenues.

Cash flows from investing activities

Cash flows from investing activities for the 2016 period showed a net outflow of £115 million, compared to a netinflow of £13.8 million in 2015 and net outflow of £34.3 million in 2014.

The movement in cash flows from investing activities of £128.8 million between the £13.8 million inflow in2015 and the £115 million outflow in 2016 was largely driven by the £97.9 million increase in acquisitions ofproperty plant and equipment (“PPE”) . This increase was a result of the £91.8 million of PPE acquired fromKCOM and Redcentric Solutions Limited, with the remainder relating to increases in organic PPE additions forthe Group’s Hull, Kirklees, Aberdeen, Edinburgh and Glasgow projects. The remaining movement of£30.9 million in cash flows from investing activities was predominantly driven by the £29 million receipt of cashfrom short term deposits reaching maturity in 2015. No such inflow occurred in 2016.

The movement in cash flows from investing activities of £48.1 million between the £34.3 million outflow in2014 and the £13.8 million inflow in 2015 was largely driven by a £58 million fluctuation in cash flows as aresult of the £29 million invested in short term deposits in 2014 which was subsequently received back in 2015.The remaining movement of £9.9 million in cash flows from investing activities was mainly driven by£10.1 million of PPE additions and capitalised labour costs in relation to construction of the Group’sPeterborough, Hull, Kirklees, Aberdeen, Edinburgh and Glasgow projects, together with additional constructionto support new customer connections in existing towns and cities.

Cash flows from financing activities

Cash flows from financing activities for the 2016 period showed a net inflow of £124.4 million, compared to anet outflow of £2.9 million in 2015 and net inflow of £41.8 million in 2014.

The movement in cash flows from financing activities of £127.3 million between the £2.9 million outflow in2015 and the £124.4 million inflow in 2016 was largely driven by an £80 million equity placing of 160,000,000new Ordinary Shares at 50p per Ordinary Share, along with committed debt facilities of £59.8 million drawndown under the Facility Agreement. This financing was utilised to fund the KCOM Acquisition and RedcentricSolutions Limited asset acquisition along with continued organic network development. These financing optionsalso incurred transaction costs of £8.9 million for a net impact from the above funding of £130.9 million cashinflow from financing. The remaining movement of £3.6 million relates to an increase of £6.3 million in interestpaid for 2016 as a result of drawdown under the Facility Agreement, being offset by a £2.6 million loanrepayment to Citibank in 2015. This loan was repaid in full in 2015 prior to the KCOM Acquisition.

The movement in cash flows from financing activities of £44.7 million between the £41.8 million inflow in 2014and the £2.9 million outflow in 2015 was largely driven by a net cash inflow from the issue of Ordinary Sharesraising £43.7 million in 2014. The remaining movement of £1 million was due to an increase in loan repaymentsto Citibank of £1.7 million in 2015. This was then offset by the repayment of a £700,000 share warrant in 2014 inadvance of the 2014 Admission.

Borrowings

On 14 December 2015, CityFibre Limited (as borrower) entered into the Facility Agreement with ProventusCapital Partners III AB (as agent and security agent). The Lenders are funds managed by Proventus CapitalManagement AB or Proventus Capital Partners III and affiliated funds.

The Facility Agreement comprises three main facilities (the “Facilities”):

Š a £35 million term loan facility (the “Acquisition Facility”) which was drawn down in full uponcompletion of the KCOM Acquisition;

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Š a £35 million term loan facility (the “Capex Facility” together with the Acquisition Facility the “TermFacilities”) which will be used to finance permitted growth capital expenditure by reference tocontracted revenues under customer contracts and permitted acquisitions, and which is available for twoyears from the date of the agreement; and

Š a £30 million super senior revolving credit facility (the “RCF”) which is made available for the samepurposes as the Capex Facility and up to £5 million towards general corporate and working capitalpurposes, and which is available for five years and 11 months years from the date of the agreement.

In addition, the Facility Agreement contains a £65 million accordion facility which may be made available by theLender under the Term Facilities at its discretion to refinance the loans under the RCF, provided that drawdownunder any use of this facility occurs before January 2020.

The Term Facilities carry a margin of 10 per cent. above LIBOR, and the RCF carries a margin of 4.5 per cent.above LIBOR. A ratchet mechanism based on leverage levels may bring these margins down to 8 per cent. and4 per cent. respectively.

The Term Facilities do not amortise and are payable in full seven years from the date of the Facility Agreement.The RCF will terminate six years from the date of the Facility Agreement.

The Term Facilities may be drawn subject to certain ratios relating to capex coverage and yield, such that theGroup may only make use of the facilities to fund projects with expected returns above the set hurdle rates. TheFacility Agreement has certain covenants which relate to the leverage, interest cover and ratio of net debt to PPEof CityFibre, as well as the cash balance at a Group level. These covenants are tested quarterly and must becomplied with during the life of the Facilities.

As at 31 December 2016, the Group had drawn down £59.8 million from its senior secured credit facilities underthe Facility Agreement.

From 2012 until 2015 the Group had a loan facility with Citibank which was used to fund working capitalrequirements. Prior to entering into the Facility Agreement in December 2015 the Group made a payment of£1.7 million to Citibank to repay the remaining balance outstanding on its loan facility.

10. Contractual commitments

CityFibre has various contractual and commercial commitments to make future payments, including debtobligations, capital commitments, lease obligations and trade payables. The table below sets out CityFibre’scontractual obligations as at 31 December 2016.

Carryingamount

Contractualcash flow

< 1 year 1-5 years > 5 years

£000 £000 £000 £000 £000

Interest bearing loans 55,280 59,800 - - 59,800Interest payable on loans - 45,512 7,645 30,578 7,289Capital commitments - 33,242 19,945 13,297 -Operating lease commitments - 1,241 547 576 118Trade and other payables 7,352 7,352 6,807 545 -

62,632 147,147 34,944 44,996 67,207

Interest bearing loans and interest payable on loans relate to CityFibre’s debt facilities under the FacilityAgreement. The difference between carrying and contractual amounts relates to capitalised finance costs.

Capital commitments include amounts in relation to sales contracts signed in 2016 for which construction willtake place after the balance sheet date.

11. Off balance sheet arrangements

As at 31 December 2016, the Group had no significant off balance sheet arrangements.

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12. Market risks

In the normal course of business CityFibre is exposed to financial and market risks related to interest rates,liquidity and credit.

Interest rates and liquidity

Any significant rise in LIBOR would increase the amount of interest payable in the relevant period, thusnegatively impacting Group liquidity. The Group monitors covenant compliance on an ongoing basis and hasimplemented an interest rate hedging policy to mitigate this risk.

Credit

Counterparty risk exists on cash and deposits held by CityFibre with counterparty banks. This risk is mitigated byselecting counterparties of respectable creditworthiness as approved by CityFibre’s audit committee and inaccordance with the Group’s credit policy, so there is no concentration of credit risk.

13. Critical accounting policies involving uncertainty

The preparation of the Group’s financial statements in conformity with IFRS requires management to makejudgements, estimates and assumptions that affect application of policies and reported amounts in the financialstatements. Matters involving a higher degree of judgement or complexity, or where assumptions or estimates aresignificant to the financial statements include:

Š Assessment of useful economic lives of property, plant and equipment;Š Impairment of non-current assets;Š Classification of network assets as inventory; andŠ Revenue recognition of installation revenues.

For further information regarding these matters, see note 1 to the Group’s financial statements as at and for theyear ended 31 December 2016, as set out in Part 11 of this document.

14. Adoption of new and revised standards

New standards and amendments to existing standards that have been published and are mandatory for the firsttime for the financial year beginning 1 January 2016 have been adopted but had no significant impact on theGroup.

New standards, amendments to standards and interpretations which have been issued but are not yet effective(and in some cases had not been adopted by the EU) for the financial year beginning 1 January 2016 have notbeen adopted in preparing these financial statements. The implications of these new accounting standards on theGroup have not yet been fully evaluated. The main accounting standards which may be relevant to the Group areset out in note 1 to the Group’s financial statements as at and for the year ended 31 December 2016 as set out inPart 11 of this document.

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15. Capitalisation and net indebtedness statement(1)

The table below sets out the capitalisation and indebtedness of the Group as at 31 December 2016 and 30 April2017 respectively.

(Unaudited)£000

Total current debtGuaranteed -Secured -Unguaranteed/unsecured -

Total non-current debt (excluding current portion of long term debt)Guaranteed -Secured 63,300Unguaranteed/unsecured -

Total indebtedness 63,300

Shareholders’ equityIssued capital 2,713Share premium 137,943Share-based payment reserve 2,100Share warrant reserve 85Merger reserve 331

Total capitalisation 143,172

The table below sets out the net financial indebtedness of the Group as at 30 April 2017.

(Unaudited)£000

Cash and cash equivalents 13,559Investment in short-term deposits -

Liquidity 13,559

Current financial receivables -

Current bank debt -Other current financial debt -Current financial debt -

Net current financial indebtedness 13,559

Non-current bank loans (63,300)Other non-current loans -

Non-current financial indebtedness (63,300)

Net financial indebtedness (49,741)

As of 30 April 2017, the Group had no material contingent or indirect indebtedness.

(1) Notes to the capitalisation and net indebtedness statement

(a) The Shareholders’ equity, which relates solely to the Company, is extracted without material adjustment from theaudited financial statements of the Group for the year ended 31 December 2016. Capitalisation does not includeprofit and loss reserve in accordance with the ESMA update of the CESR recommendations for the consistentimplementation of the European Commission’s Regulation on Prospectuses No. 809/2004.

(b) There has been no material change in the capitalisation of the Group since 31 December 2016 to the date of thisdocument.

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PART 6INFORMATION ON ENTANET

1. Entanet Acquisition

The Company has agreed to purchase the entire issued share capital of Entanet for a cash consideration of£29 million (on a debt free and cash free basis and subject to adjustments). The Company proposes to finance theEntanet Acquisition by utilising part of the net proceeds of the Placing. Further information on the terms of theEntanet Acquisition is set out in section 18.1 of Part 10 of this document.

In addition to the growth opportunities presented by the Entanet Acquisition, the Directors believe that theacquisition will enable the Group to benefit from over £3 million of annual cost synergies within three years.

1.1 Background and Description of Entanet

Entanet is a wholesale communications provider, delivering and supporting Channel Partners with a wide rangeof connectivity and telecommunication products and services, including broadband, Ethernet, private and widearea networks, IP telephony, colocation, hosting and associated services.

Entanet provides its services on networks owned by other suppliers, such as Openreach, Virgin Media and ColtTechnology, from whom it leases capacity on such networks.

The Directors believe the Entanet Acquisition will bring together two complementary wholesale capabilities:CityFibre’s wholesale fibre infrastructure with Entanet’s established wholesale product portfolio and commercialrelationships with an extensive number of Channel Partners. Entanet would, following the acquisition, become aprimary route for CityFibre to market its full fibre connectivity services through Entanet’s network of ChannelPartners.

Entanet’s strategy is focused on the development and growth of wholesale communications services. It packagesdata communications products, including broadband and leased line internet connectivity, IP telephony andhosting services and makes these products and services available nationally, with approximately 1,500 ChannelPartners that serve the business and consumer connectivity markets having conducted business with Entanet inthe 12 months ended 31 December 2016.

1.2 Reasons for the Entanet Acquisition and Future Strategy

The Directors believe that the Entanet Acquisition is aligned with the Group’s strategy set out in section 3 of Part3 of this document. By combining CityFibre’s fibre infrastructure with Entanet’s wholesale connectivityproducts, systems and relationships with Channel Partners the Group expects to realise the following benefits:

Š Increase Relationships with Channel Partners – the acquisition is expected to give CityFibre accessto new Channel Partners due to Entanet’s existing position as a wholesale provider, with approximately1,500 Channel Partners having conducted business with Entanet in the 12 months ended 31 December2016. This represents a significant potential increase in CityFibre’s indirect routes to market.

Š Trading and Support Interfaces – the acquisition is expected to give CityFibre access to Entanet’swholesale systems that provide a layer of automated order and billing capabilities as well as customerportals and support systems.

Š Complementary Products – the acquisition is expected to enable CityFibre to utilise Entanet’swholesale product portfolio enhancing CityFibre’s own wholesale fibre capabilities.

Š National Ethernet Capability – the national networks leased by Entanet from other suppliers supportend-to-end Ethernet capabilities that are required as part of CityFibre’s product development. Theacquisition is expected to accelerate both the timescale and scope of CityFibre’s Ethernet strategy,enabling faster take up of the Group’s fibre connectivity by national Channel Partners.

Once integrated, the acquisition will enhance CityFibre’s strategy to become the leading alternative wholesalefull fibre network provider to Openreach. By combining CityFibre’s full fibre networks and products withEntanet’s trading interfaces and mature sales channels, the Group will be able to provide a broader range ofwholesale capabilities. The acquisition enhances CityFibre’s ability to realise its strategy for full fibre wholesaleinfrastructure and serving the four primary market verticals of public sector, mobile, business and consumer.

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1.3 Cost Synergies

Cost synergies mainly constitute migration benefits that arise from the opportunity to migrate third partyconnectivity onto CityFibre’s full fibre networks. Currently Entanet’s services operate on the networks of anumber of suppliers, including BT Wholesale, Openreach, Virgin Media, Colt Technology and Vodafone. Itcurrently services over 45,000 broadband connections and over 3,500 leased lines, with approximately 50 percent. of Entanet’s revenue for the year ended 31 December 2016 derived from these leased lines. Approximately25 per cent. of these connections originate and/or terminate in CityFibre’s existing or expanded city footprint,giving rise to the opportunity to migrate these connections to the Company’s fibre infrastructure over time.

The Directors believe there is the possibility of obtaining costs synergies of more than £3 million per annumwithin three years of completing the Entanet Acquisition. The plan for delivering these synergies is expected tocomprise a combination of:

Š migrating existing Entanet leased lines from current third party networks onto CityFibre’s infrastructurein its current 42 towns and cities;

Š migrating existing Entanet leased lines from current third party networks onto CityFibre’s infrastructureas CityFibre expands to its target new towns and cities in response to current anchor tenancy contracts,and where Entanet’s existing leased lines act as an anchor in their own right;

Š delivering Entanet leased line sales onto CityFibre’s infrastructure in accordance with the proportion ofEntanet sales in 2015 and 2016 that would have been within CityFibre’s existing footprint; and

Š operational and back office synergies.

In addition to migration synergies, the Directors believe CityFibre may achieve significant supplementarysavings and future potential revenue and cost avoidance measures. The Directors believe these could be deliveredthrough a combination of:

Š migrating existing Entanet leased lines from current third party networks onto CityFibre’s infrastructureby selling customers superior products to those they already use;

Š improving Entanet’s leased line pipeline sales conversion within CityFibre’s footprint by directing sales,marketing and promotional activity towards CityFibre’s network footprint;

Š migrating a small proportion of Entanet broadband customers onto CityFibre’s fibre infrastructure;

Š accelerating leased line sales in new public sector or mobile anchored towns and cities over and abovethose currently targeted; and

Š migrating Entanet existing broadband and leased lines from third party infrastructure onto CityFibre’sfibre infrastructure as the FTTH network is constructed.

The execution plan for integrating Entanet has already been developed. The Directors believe that the acquisitionwill significantly enhance the Group’s wholesale fibre capability and accelerate its future growth.

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2. Result of Operations

The following table sets out selected data extracted without material adjustment from Entanet’s historicalfinancial information set out in Part 12 of this document.

Year ended31 December

Period ended31 December

2016 2015 2014£000 £000 £000

Revenue 35,754 31,887 25,753Cost of sales (28,637) (24,075) (19,650)

Gross profit 7,117 7,812 6,103Administrative expenses (6,403) (4,405) (5,298)

Underlying EBITDA excluding exceptional items 2,041 3,120 2,034Depreciation (810) (692) (460)Amortisation (517) (890) (769)Exceptional items - 1,869 -

Operating profit 714 3,407 805Finance income 15 13 15Finance cost (1,136) (1,087) (1,987)

(Loss)/profit on ordinary activities before taxation (407) 2,333 (1,167)Income tax 144 298 27

(Loss)/profit for the year/period and total comprehensive income (263) 2,631 (1,140)

2.1 Comparison of results for the year-ended 31 December 2016 to the results for the year ended31 December 2015

Turnover grew during the year to £35.8 million. The growth was largely driven by demand for Ethernet circuits,both in standalone connectivity and in IP based network solutions. There was also significant growth in Entanet’sbroadband base as a result of strong demand from a large consumer-focused Channel Partner

Gross profit reduced to £7.1 million for the year, representing a 19.9 per cent. gross margin. The fall in grossmargin, from 24.5 per cent. in 2015, was driven predominantly by the direct acquisition cost of the growth in theconsumer broadband base.

Underlying administrative expenses increased by 2.1 per cent. to £6.4 million. These costs consist primarily ofstaff, office costs, back office systems, depreciation and amortisation. Headcount investments were made toensure service quality continuity and customer satisfaction as Entanet grows.

The reduction in gross margin and increased investment in operational and developmental resources led to areduction in underlying EBITDA excluding exceptional items to £2 million.

2.2 Comparison of results for the year-ended 31 December 2015 to the results for the eleven monthsended 31 December 2014

Turnover grew to £31.9 million. The majority of growth was driven by increasing demand for Ethernet circuits,either as standalone connectivity or as the backbone of wider network solutions. Broadband services also sawgrowth, with a number of wholesale partners increasing their customer bases and resellers benefitting from salesof Entanet’s broadband packages to end-users.

Gross profit, which excludes core network costs, represents a 24.5 per cent. gross margin. Although this was animprovement on the prior year there was an increase in margin pressure over the year arising from aggressivepricing by competitors, continued price deflation particularly in smaller capacity circuits and the increasing easewith which customers can obtain online quotes for circuits from competing wholesalers. With this trend expectedto continue Entanet strategically focused on accelerating its investment in expanding and developing highermargin products and services.

Administrative expenses primarily relate to staff and office costs. Investment in headcount continued in a numberof departments during the year to deliver and support the increase in business levels as well as continuing todevelop and improve partner portals and back office systems.

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During the year, an exceptional item of £1.9 million income was recognised within administrative expenses,being the settlement of certain claims against a former shareholder and certain parties connected to thatshareholder.

Underlying EBITDA excluding exceptional items increased to £3.1 million at a similar margin to the prior year.

3. Factors affecting the result of operations

3.1 Exceptional items

During 2016 Entanet International settled certain claims against Entanet International and the Entanet Group alsoconcluded claims it had against a former shareholder of Entanet International and certain parties connected tothat shareholder. The financial impact of the claims is reflected in the 2015 results and resulted in a charge to theincome statement of £1.4 million.

3.2 Liquidity and cash flow

Entanet’s primary sources of liquidity for its operations are the cash flows generated from its operations and debtin the form of loans with fixed rates of interest and bullet redemption premiums.

3.3 Loan covenants and maturity

Loans of £9.8 million at 31 December 2016 are repayable in more than two but less than five years and aresecured by a fixed and floating charge over the assets of Entanet. The loans include £3.5 million (2015: £3.5million) attracting interest at 6 per cent. and other loans with a carrying value of £4.2 million with an interest rateof 15.87 per cent. and a bullet redemption premium at the end of the term of £2.6 million.

4. Principal risks

Entanet is subject to the risks common to other wholesale communication providers who provide their serviceson networks on networks owned by third parties, including but not limited to:

• Establishing and maintaining relationships with Channel Partners and infrastructure providers, as wellas the common risks inherent in any such relationships,

• Changes to industry-specific government regulations as well as applicable law more generally;

• Changes in the markets Entanet serves as the well as the level of demand of customers in thosemarkets;

• The impact of technological evolution on Entanet’s business;

• The adverse effect of any economic downturn in the markets Entanet serves;

• Increased competition in locations where Entanet operates; and

• Risks associated with legal proceedings, regulatory disputes or similar claims.

While not intended to be an exhaustive list or explanation of all the risks Entanet faces, the Directors believe inparticular the following are the principal risks in relation to Entanet’s business.

4.1 Cyber Security

Entanet’s core network provides customers with access to the internet, presenting a risk of cyber threat. This riskis mitigated through procedures for identifying and neutralising such threats, including the constant monitoringof unusual traffic patterns by sophisticated applications.

4.2 Competition

Competition in the UK wholesale supply market remains strong, with continued merger and acquisition activityas key players seek ways to grow their customer and revenue base. This has given rise to further pricecompetition, often at the expense of service quality. Entanet counters these risks by offering quality products andservices to Channel Partners, implementing new supplier relationships, supply contract negotiation and alsoleveraging and improving on its relationships with key partners and resellers.

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4.3 Network performance

Entanet operates a core leased network which customers depend on for speed, capacity and reliability. Anyinterruption in network performance may have a detrimental effect on customers. The core network is designedto be fully resilient, so that should part of the network be interrupted, traffic is routed through alternative paths.

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PART 7UNAUDITED PRO-FORMA FINANCIAL INFORMATION OF THE ENLARGED

GROUP

Section A: Unaudited pro forma income statement

The following unaudited pro forma income statement of the Enlarged Group has been prepared to illustrate theeffect of the acquisition of Entanet and the Placing as if they had occurred at the start of the last reported period,1 January 2016.

The unaudited pro forma income statement has been prepared for illustrative purposes only and, because of itsnature, addresses a hypothetical situation and does not, therefore, represent the Enlarged Group’s actual financialposition or results nor is it indicative of the results that may or may not be expected to be achieved in the future.

The unaudited pro forma income statement is based on the consolidated results of the Group for the year ended31 December 2016 as set out in the financial statements of the Group for the year ended 31 December 2016 setout in Part 11 of this document and the results of Entanet for the year ended 31 December 2016 as set out in thefinancial information on Entanet for the year ended 31 December 2016 set out in Part 12 of this document, andhas been prepared in a manner consistent with the accounting policies adopted by the Company in preparing suchinformation and on the basis set out in the notes set out below.

BDO LLP’s report on the unaudited pro forma information is set out in Section C of this Part 7.

Pro forma income statement

Adjustments

Year ended31 December 2016

The Group Entanet Otheradjustments

Pro forma earnings of theEnlarged Group

(note 1) (note 2) (note 3)£000 £000 £000 £000

Revenue 15,363 35,754 - 51,117

Cost of sales (1,827) (28,637) - (30,464)

Gross profit 13,536 7,117 - 20,653

Total administrative expenses (18,677) (6,403) (4,987) (30,067)

Operating (loss) profit (5,141) 714 (4,987) (9,414)

Finance income 45 15 - 60

Finance cost (7,341) (1,136) - (8,477)Share of post-tax losses of equity accountedJoint Venture (147) - - (149)

Loss before taxation (12,584) (407) (4,987) (17,978)

Income tax - 144 - 144

Loss for the year and total comprehensiveincome (12,584) (263) (4,987) (17,834)

Notes:

1. The results of the Group for the year ended 31 December 2016 have been extracted without material adjustment from thefinancial statements of the Group for the year ended 31 December 2016 set out in Part 11 of this document.

2. The results of Entanet have been extracted without material adjustment from the financial information on Entanet for theyear ended 31 December 2016, set out in Part 12 of this document.

3. This adjustment comprises the estimated costs of the Entanet Acquisition and the estimated costs of the Placing thatcannot be set off against the share premium account.

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4. No account has been taken of the effects of any synergies and of the costs for measures taken to achieve those synergiesthat may have arisen had the acquisition occurred on 1 January 2016 and that may subsequently have affected theresults of the Enlarged Group in the year ended 31 December 2016.

5. No account has been taken of the trading performance of either the Group or Entanet since 31 December 2016 nor ofany other event save as disclosed above.

6. Save for the costs of the Entanet Acquisition and the Placing, the pro forma income statement adjustments are expectedto have a continuing effect on the Enlarged Group.

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Section B: Unaudited pro forma statement of net assets

The following unaudited pro forma statement of net assets of the Enlarged Group has been prepared to illustratethe effect of the Entanet Acquisition and the Placing as if they had occurred on 31 December 2016.

The unaudited pro forma statement of net assets has been prepared for illustrative purposes only and, because ofits nature, addresses a hypothetical situation and does not, therefore, represent the Enlarged Group’s actualfinancial position or results.

The unaudited pro forma statement of net assets is based on the net assets of the Group as at 31 December 2016,as set out in the financial statements of the Group for the year ended 31 December 2016 set out in Part 11 of thisdocument and the net assets of Entanet as at 31 December 2016, as set out in the financial information on Entanetfor the year ended 31 December 2016 set out in Part 12 of this document and has been prepared in a mannerconsistent with the accounting policies adopted by the Company in preparing such information and on the basisset out in the notes set out below.

BDO LLP’s report on the unaudited pro forma information is set out in Section C of this Part 7.

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Pro forma statement of net assets

Adjustments

As at 31 December 2016The Group Entanet Entanet

AcquisitionNet Placing

proceedsPro forma net assets of the

Enlarged Group

(note 1) (note 2) (note 3) (note 4)£000 £000 £000 £000 £000

Assets

Non-current assetsProperty, plant andequipment

155,159 2,684 - - 157,843

Intangible assets 1,211 6,537 15,859 - 23,607Investment in JointVenture 433 - - - 433

156,803 9,221 15,859 - 181,883

Current assetsInventory 3,986 - - - 3,986Trade and otherreceivables 8,070 5,883 - - 13,953Cash and cashequivalents 16,722 2,174 (29,000) 191,013 180,909

Total current assets 28,778 8,057 (29,000) 191,013 198,848

Total assets 185,581 17,278 (13,141) 191,013 380,731

Liabilities

Non-currentliabilitiesInterest bearingloans andborrowings (55,280) (10,186) 10,186 - (55,280)Deferred revenue (11,091) - - - (11,091)Deferredconsideration (450) - - - (450)Deferred tax - (133) - - (133)

Total non-currentliabilities

(66,821) (10,319) 10,186 - (66,954)

Current liabilitiesInterest bearingloans andborrowings - (467) 467 - -Deferred revenue (2,864) - - - (2,864)Trade and otherpayables

(7,352) (4,004) - - (11,356)

Total currentliabilities

(10,216) (4,471) 467 - (14,220)

Total liabilities (77,037) (14,790) 10,653 - (81,174)

Net assets 108,544 2,488 (2,488) 191,013 299,557

Notes:

1. The net assets of the Group at 31 December 2016 have been extracted without material adjustment from the financialstatements of the Group for the year ended 31 December 2016 set out in Part 11 of this document.

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Adjustments

2. The net assets of Entanet have been extracted without material adjustment from the financial information on Entanetfor the year ended 31 December 2016, set out in Part 12 of this document.

3. An adjustment has been made to reflect the estimated intangible assets arising on the Entanet Acquisition.

For the purposes of this pro forma information, no adjustment has been made to the separate assets and liabilities ofEntanet to reflect their fair value. The difference between the net assets of Entanet as stated at their book value at31 December 2016 and the estimated consideration has therefore been presented as a single value in “Intangibleassets”. The net assets of Entanet will be subject to a fair value restatement as at the effective date of the transaction.Actual intangible assets included in the Group’s next published financial statements may therefore be materiallydifferent from those included in the pro forma statement of net assets.

The estimated consideration for Entanet is approximately £29 million (on a cash free debt free basis and subject toadjustments), of which a proportion will be used to repay Entanet’s indebtedness. It has been assumed that all of thedeferred consideration will be payable in cash.

£000Consideration payable in cash 29,000Repayment of debt (10,653)

Consideration for Entanet’s equity 18,347Book value of net assets of Entanet as at 31 December 2016 (2,488)

Estimated intangible assets arising on the transaction 15,859

The repayment of debt is based on the balance outstanding at 31 December 2016. The actual balance repaid is likely todiffer from this amount.

4. The Placing is estimated to raise net proceeds of £191 million (£200 million gross proceeds less estimated expenses of£9 million). No account has been taken of any proceeds from the Offer for Subscription.

5. No account has been taken of the financial performance of the Group or Entanet since 31 December 2016 nor of anyother event save as disclosed above.

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Section C: Reporting Accountant’s report on the unaudited pro forma financial information of theEnlarged Group

BDO LLP

55 Baker Street

London

W1U 7EU

The DirectorsCityFibre Infrastructure Holdings plc15 Bedford Street,LondonWC2E 9HE

11 July 2017

finnCap Limited60 New Broad StreetLondonEC2M 1JJ

Dear Sirs and Madam

CityFibre Infrastructure Holdings plc (the “Company”)

Pro forma financial information

We report on the unaudited pro forma income statement and statement of net assets (the “Pro Forma FinancialInformation”) set out in Part 7 of the prospectus dated 11 July 2017 (the “Prospectus”) which has been preparedon the basis described, for illustrative purposes only, to provide information about how the acquisition of EntanetHoldings Limited and the proceeds of the placing and offer for subscription might have affected the financialinformation presented on the basis of the accounting policies adopted by the Company in preparing its financialstatements for the year ended 31 December 2016.

This report is required by item 20.2 of Annex I of the Commission Regulation (EC) No. 809/2004 (the “PDRegulation”) and is given for the purpose of complying with that item and for no other purpose.

Responsibilities

It is the responsibility of the directors of the Company (the “Directors”) to prepare the Pro Forma FinancialInformation in accordance with item 20.2 of Annex I of the PD Regulation.

It is our responsibility to form an opinion, as required by item 7 of Annex II of the PD Regulation, as to theproper compilation of the Pro Forma Financial Information and to report that opinion to you.

Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent thereprovided, to the fullest extent permitted by the law we do not assume any responsibility and will not accept anyliability to any other person for any loss suffered by any such other person as a result of, arising out of, or inconnection with this report or our statement, required by and given solely for the purposes of complying withitem 23.1 of Annex I of the PD Regulation, consenting to its inclusion in the Prospectus.

In providing this opinion we are not updating or refreshing any reports or opinions previously made by us on anyfinancial information used in the compilation of the Pro Forma Financial Information, nor do we acceptresponsibility for such reports or opinions beyond that owed to those to whom those reports or opinions wereaddressed by us at the dates of their issue.

Basis of opinion

We conducted our work in accordance with the Standards for Investment Reporting issued by the AuditingPractices Board in the United Kingdom. The work that we performed for the purpose of making this report,

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which involved no independent examination of any of the underlying financial information, consisted primarilyof comparing the unadjusted financial information with the source documents, considering the evidencesupporting the adjustments and discussing the Pro Forma Financial Information with the Directors.

We planned and performed our work so as to obtain the information and explanations which we considerednecessary in order to provide us with reasonable assurance that the Pro Forma Financial Information has beenproperly compiled on the basis stated and that such basis is consistent with the accounting policies of theCompany.

Our work has not been carried out in accordance with auditing or other standards and practices generallyaccepted in the United States or other jurisdictions outside the United Kingdom and accordingly should not berelied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion:

(a) the Pro Forma Financial Information has been properly compiled on the basis stated; and

(b) such basis is consistent with the accounting policies of the Company.

Declaration

For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus anddeclare that we have taken all reasonable care to ensure that the information contained in this report is, to the bestof our knowledge, in accordance with the facts and contains no omission likely to affect its import. Thisdeclaration is included in the Prospectus in compliance with item 1.2 of Annex I of the PD Regulation.

Yours faithfully

BDO LLP

Chartered Accountants

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127)

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PART 8TAXATION

Section A: United Kingdom

1. General

The following statements:

(a) do not constitute tax advice and are intended to apply only as a general guide to the position under currentUK tax law and the published practice of HMRC as at the Reference Date, either of which is subject tochange at any time (possibly with retrospective effect);

(b) relate only to certain limited aspects of the UK taxation treatment of Shareholders and are intended to applyonly to Shareholders who:

(i) are resident in (and only in) the UK for UK tax purposes (unless the context otherwise requires) and towhom split-year treatment does not apply;

(ii) hold their Existing Ordinary Shares as investments (and the Existing Ordinary Shares are not heldthrough an individual saving account or a self-invested personal pension); and

(iii) are the direct absolute beneficial owners of their Existing Ordinary Shares; and

(c) may not apply to certain classes of Shareholders such as, for example, dealers in securities, insurancecompanies, collective investment schemes and Shareholders who have (or who are deemed to have)acquired their Existing Ordinary Shares by virtue of an office or employment.

Any person who is in any doubt as to his or her tax position or who may be subject to tax in any jurisdiction otherthan the United Kingdom should consult an appropriate professional tax adviser without delay.

2. Taxation of chargeable gains

UK taxation of chargeable gains in respect of Ordinary Shares

2.1 Offer for Subscription Shares acquired pursuant to the Offer for Subscription

No liability to UK taxation on chargeable gains should arise in respect of the issue of Offer forSubscription Shares to the extent that a Shareholder subscribes for any Offer for Subscription Shares.

The issue of Offer for Subscription Shares to UK tax resident Shareholders pursuant to the Offer forSubscription will not be regarded as a reorganisation of the share capital of the Company for thepurposes of UK taxation of chargeable gains.

The acquisition of Offer for Subscription Shares pursuant to the Offer for Subscription will, for thepurposes of UK taxation of chargeable gains, be treated as acquired as part of a separate acquisition ofOrdinary Shares when computing any gain or loss on any subsequent disposal. When computing anygain or loss on a disposal of Ordinary Shares, for UK chargeable gains purposes, HMRC’s shareidentification provisions will need to be taken into consideration.

2.2 Placing Shares acquired pursuant to the Placing

The issue of Placing Shares under the Placing which are not subject to the Offer for Subscription willnot constitute a reorganisation of share capital for the purposes of the UK taxation of chargeable gainsand, accordingly, any Placing Shares acquired pursuant to the Placing will be treated as acquired as partof a separate acquisition of Ordinary Shares.

2.3 Subsequent Disposals of New Ordinary Shares

(A) Individual Shareholders

A disposal or deemed disposal of New Ordinary Shares may, depending on the circumstancesand subject to any available exemption or relief, give rise to a chargeable gain (or an allowableloss) for the purposes of UK taxation of chargeable gains.

An individual Shareholder who is resident in the UK for UK tax purposes and whose totaltaxable gains and income in a given tax year, including any gains made on the disposal ordeemed disposal of his New Ordinary Shares, are less than or equal to the upper limit of theincome tax basic rate band applicable in respect of that tax year (the “Band Limit”) willgenerally be subject to UK capital gains tax at the flat rate of 10 per cent. (for the tax year2017/18) in respect of any gain arising on a disposal or deemed disposal of his New OrdinaryShares.

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An individual Shareholder who is resident in the UK for UK tax purposes and whose totaltaxable gains and income in a given tax year, including any gains made on the disposal ordeemed disposal of his New Ordinary Shares, are more than the Band Limit will generally besubject to UK capital gains tax at the flat rate of 10 per cent. in respect of any gain arising on adisposal or deemed disposal of his New Ordinary Shares to the extent that, when added to theShareholder’s other taxable gains and income in that tax year, the gain is less than or equal tothe Band Limit and at the flat rate of 20 per cent. (for the tax year 2017/18) in respect of theremainder.

No indexation allowance will be available to an individual Shareholder in respect of anydisposal or deemed disposal of New Ordinary Shares. However, each individual has an annualexemption, such that UK capital gains tax is chargeable only on gains arising from all sourcesduring the tax year in excess of this figure. The annual exemption is £11,300 for the tax year2017/18.

Shareholders who are not resident in the United Kingdom for tax purposes will not, dependingon their personal circumstances, be liable to UK taxation on chargeable gains arising from thesale or other disposal of their Ordinary Shares (including New Ordinary Shares acquiredpursuant to the Offer for Subscription or the Placing) unless they carry on a trade, profession orvocation in the United Kingdom through a branch or agency with which their Ordinary Sharesare connected or, in the case of a corporate Shareholder, through a permanent establishment inconnection with which the Ordinary Shares are held.

Individual Shareholders who are temporarily not UK resident and who dispose of all or part oftheir Ordinary Shares during that period may be liable to UK capital gains tax on chargeablegains realised on their return to the United Kingdom, subject to any available exemptions orreliefs.

Shareholders who are resident for tax purposes outside the United Kingdom may be subject toforeign taxation on capital gains depending on their circumstances.

(B) Corporate Shareholders

Where a Shareholder is within the charge to UK corporation tax, a disposal or deemed disposalof New Ordinary Shares may, depending on the circumstances and subject to any availableexemption or relief, give rise to a chargeable gain (or an allowable loss) for the purposes of UKcorporation tax. UK corporation tax is charged on chargeable gains at the rate of corporationtax applicable to that Shareholder. It should be noted that, for the purposes of calculating anyindexation allowance available on a disposal of New Ordinary Shares, generally theexpenditure incurred in acquiring the New Ordinary Shares will be treated as incurred onlywhen the Shareholder made, or became liable to make, payment, and not at the time thoseshares are otherwise deemed to have been acquired.

3. Taxation of dividends

The Company is not required to withhold tax at source from dividend payments that it makes.

3.1 Individuals

A Shareholder who is an individual resident in the UK for UK tax purposes and who receives a dividend from theCompany may, depending on the circumstances and subject to any available exemption or relief, be subject toUK income tax on the amount of the cash dividend received.

Such a Shareholder will pay no tax on the first £5,000 of dividend income received in the tax year 2017/18 (the“dividend allowance”). The government has announced its intention to reduce the dividend allowance to £2,000with effect from (and including) the tax year 2018/19. The rates of income tax on dividends received above thedividend allowance for the tax year 2017/18 are: (a) 7.5 per cent. for dividends taxed in the basic rate band; (b)32.5 per cent. for dividends taxed in the higher rate band; and (c) 38.1 per cent. for dividends taxed in theadditional rate band.

Dividend income that is within the dividend allowance counts towards an individual’s basic or higher rate limitsand may therefore affect the rates and allowances to which both the remainder of the dividend income (if any)and any other income is subject. In calculating into which tax band any dividend income over the £5,000allowance falls, dividend income is treated as the top slice of an individual’s income.

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3.2 Companies

A Shareholder within the charge to UK corporation tax which is a “small company” (for the purposes of UKtaxation of dividends) will not generally be subject to UK tax on dividends from the Company, provided certainconditions are met.

Other Shareholders within the charge to UK corporation tax will not be subject to UK tax on dividends from theCompany so long as the dividends fall within an exempt class and do not fall within certain specified anti-avoidance provisions and the Shareholder has not elected for the dividends not to be exempt. Each Shareholder’sposition will depend on its own individual circumstances, although it would normally be expected that dividendspaid by the Company would fall within an exempt class. Examples of dividends that are within an exempt classare dividends in respect of portfolio holdings, where the recipient owns less than 10 per cent. of the issued sharecapital, assets and profits of the payer (or any class of that share capital).

4. Stamp duty and SDRT

The following statements are intended as a general and non-exhaustive guide to the current UK stamp duty andSDRT position and apply regardless of whether or not a Shareholder is resident in the UK for UK tax purposes.

On the basis of current law, dealings in New Ordinary Shares will be exempt from UK stamp duty and SDRT ifand for as long as: (i) the New Ordinary Shares are admitted to trading on AIM; (ii) AIM is a recognised growthmarket for the purposes of UK stamp duty and SDRT; and (iii) the New Ordinary Shares are not listed on arecognised stock exchange for the purposes of UK stamp duty and SDRT.

AIM is currently a recognised growth market for the purposes of UK stamp duty and SDRT.

Companies whose shares are traded on AIM are required to submit a self-certification to Euroclear that the aboveconditions apply to its shares; otherwise SDRT will continue to be applied on dealings in the company’s shares(although it may then be possible for the purchaser to claim a refund from HMRC of this SDRT). The Companyhas made this submission and Euroclear now treats its shares as benefiting from the exemption.

(A) Issue of New Ordinary Shares

No stamp duty or SDRT will generally be payable on the issue of definitive share certificates,or on the issue in uncertificated form of New Ordinary Shares.

Where New Ordinary Shares are registered in the name of the Shareholder entitled to suchshares on issue, or where New Ordinary Shares are credited in uncertificated form to anaccount in CREST, no liability to stamp duty or SDRT will generally arise.

Following the decision of the ECJ in HSBC Holdings and Vidacos Nominees (Case 569/07) andthe First-tier Tax Tribunal decision in HSBC Holdings and The Bank of New York Mellon,HMRC has confirmed that SDRT is no longer payable when new shares are issued into aclearance service or depositary receipt service. The effect of the UK’s anticipated exit from theEU on the applicability of this decision is not yet known, but any such change in law is likelyto take effect after the Placing and Offer for Subscription. In any case, for as long as the AIMmarket exemption mentioned above continues to apply to the Company’s shares, SDRT willnot be payable if New Ordinary Shares are issued into a clearance service or depositary receiptservice.

(B) Subsequent dealings in New Ordinary Shares

For as long as the AIM market exemption mentioned above continues to apply to theCompany’s shares, no stamp duty or SDRT will be payable on any subsequent dealings in NewOrdinary Shares.

If the AIM market exemption mentioned above ceases to apply to the Company’s shares, then,except in relation to depositary receipt systems and clearance services (to which the specialrules outlined below will apply), any subsequent dealings in New Ordinary Shares will besubject to stamp duty or SDRT in the normal way. Subject to an exemption for certain lowvalue transactions, the transfer on sale of New Ordinary Shares effected outside CREST willgenerally be liable to stamp duty at the rate of 0.5 per cent. of the amount or value of theconsideration payable (rounded up to the nearest multiple of £5) or, if an unconditionalagreement to transfer the New Ordinary Shares is not completed by a duly stamped transfer

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within 6 years of the date of the agreement becoming unconditional, or where the transfer iseffected in CREST, SDRT at the rate of 0.5 per cent. of the amount or value of theconsideration payable. Stamp duty and SDRT are normally payable by the purchaser.

Where New Ordinary Shares are transferred: (a) to, or to a nominee or an agent for, a personwhose business is or includes the provision of clearance services; or (b) to, or to a nominee oran agent for, a person whose business is or includes issuing depositary receipts, stamp duty orSDRT will generally be payable at the higher rate of 1.5 per cent. of the amount or value of theconsideration given or, in certain circumstances, the value of the New Ordinary Shares. Thereis an exception from the 1.5 per cent. charge on the transfer to, or to a nominee or agent for, aclearance service where the clearance service has made and maintained an election undersection 97A(1) of the Finance Act 1986, which has been approved by HMRC. In thesecircumstances, SDRT at the rate of 0.5 per cent. of the amount or value of the considerationpayable for the transfer will arise on any transfer of shares in the Company into such anaccount and on subsequent agreements to transfer such shares within such account. Anyliability for stamp duty or SDRT in respect of a transfer into a clearance service or depositaryreceipt system, or in respect of a transfer within such a service, which does arise will strictly beaccountable by the clearance service or depositary receipt system operator or their nominee, asthe case may be, but will, in practice, be payable by the participants in the clearance service ordepositary receipt system.

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Section B: Certain US Federal Income Tax Considerations

1. General

The following summary describes certain US federal income tax consequences relating to the purchase,ownership and disposition of Placing Shares and Offer for Subscription Shares (collectively, the “SubjectShares”) as of the date of this document. Except where noted, this discussion deals only with holders whopurchase the Company’s Subject Shares in connection with the Placing and/or the Offer for Subscription, as thecase may be, and hold the Company’s Subject Shares as capital assets for US federal income tax purposes(generally, property held for investment). This summary is not directed to a holder of Subject Shares that issubject to special treatment under the US federal income tax laws, including, without limitation:

(a) a dealer or trader in securities;

(b) a bank or other financial institution;

(c) a regulated investment company;

(d) a real estate investment trust;

(e) an insurance company;

(f) a tax-exempt entity (including an “individual retirement account”);

(g) a person holding the Company’s Subject Shares as part of a hedging transaction, wash sale, conversiontransaction, a constructive sale or a straddle;

(h) a person who owns 10 per cent. or more (directly, indirectly or through application of certain constructiveownership rules) of the voting stock or value of the Company;

(i) US expatriates and former long-term residents of the United States; or

(j) a US Holder (as defined below) whose “functional currency” is not the US dollar.

As used herein, “US Holder” means a holder of the Company’s Subject Shares that is for US federal income taxpurposes a beneficial owner of Subject Shares and is (i) an individual citizen or resident of the United States,(ii) a corporation (or other entity classified as a corporation), created or organised in or under the laws of theUnited States, any state therein or the District of Columbia; (iii) an estate the income of which is subject to USfederal income taxation regardless of its source; or (iv) a trust if a court within the United States is able toexercise primary supervision over its administration and one or more United States persons have the authority tocontrol all substantial decisions of the trust (or otherwise if the trust has a valid election in effect under currentTreasury regulations to be treated as a United States person). A “Non US Holder” is a beneficial owner of theCompany’s Subject Shares that is an individual, corporation, estate or trust and is not a US Holder.

If an entity that is classified as a partnership for US federal income tax purposes holds the Subject Shares, the USfederal income tax treatment of a partner will generally depend on the status of the partner and the activities ofthe partnership. Partnerships holding the Subject Shares and partners in such partnerships should consult their taxadvisers as to the particular US federal income tax consequences of holding and disposing of the Subject Shares.

The discussion below is based upon the provisions of the US Internal Revenue Code of 1986, as amended (the“Code”), and final, temporary and proposed regulations (the “Regulations”), rulings and judicial decisionsthereunder as of the date of this document, and treaties as of the date of this document, including the ConventionBetween the Government of the United States of America and the Government of the United Kingdom of GreatBritain and Northern Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion withRespect to Taxes on Income and on Capital Gains of 24 July 2001, as amended (the “Treaty”), and suchauthorities may be replaced, revoked or modified (possibly with retroactive effect) or subject to differinginterpretations so as to result in US federal income tax consequences different from those discussed below. Inaddition, this discussion does not address the US federal estate, gift or alternative minimum tax consequences, orany state, local or non US tax consequences of the acquisition, ownership and disposition of the Subject Shares.US Holders should consult their tax advisers concerning the US federal, state, local and non US tax consequencesof acquiring, owning and disposing of the Subject Shares based on their particular circumstances.

No advance rulings have been or will be sought from the US Internal Revenue Service (“IRS”) regarding anymatter discussed herein. Counsel to the Company has not rendered any legal opinion regarding any US federalincome tax consequences relating to the Company or an investment in the Company’s Subject Shares. Noassurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to anyof the tax aspects set forth below.

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If you are considering the purchase, ownership or disposition of the Company’s Subject Shares, youshould consult your own tax advisers concerning the US federal income tax consequences to you in light ofyour particular situation as well as any consequences arising under the laws of any other taxingjurisdiction.

2. The Company

The Company is a public limited company organised under the laws of England and Wales, and will be treated asa corporation for US federal income tax purposes. As such, for US federal income tax purposes, subject to thediscussion at section 5.2 below, the income, gains, losses, deductions, and expenses of the Company will not bepassed through to holders of the Company’s Subject Shares, and all distributions by the Company to the USHolders generally will be treated as dividends, return of capital and/or gains, as described below. The Companyis expected to be operated in a manner that it will not be deemed to be engaged in a trade or business in theUnited States, and as a result, it is expected that the Company will not be subject to US federal income tax on anet basis.

3. Taxation of Dividends

Subject to the discussion in section 5 below, distributions on the Company’s Subject Shares, other than certainpro rata distributions of Subject Shares to all shareholders, received by a US Holder on Subject Shares, includingany amounts withheld in respect of any UK withholding tax thereon, will be taxable as dividends to the extentpaid out of the Company’s current or accumulated earnings and profits as determined under US federal incometax principles measured at the end of the tax year in which such distribution is actually or constructivelyreceived. Distributions in excess of such earnings and profits will be applied against and will reduce the USHolder’s tax basis in its Subject Shares and, to the extent in excess of such basis, will be treated as long-termcapital gain if the US Holder held its Subject Shares for more than one year, and as short-term capital gain if theUS Holder held its Subject Shares for one year or less. Since the Company does not maintain calculations of itsearnings and profits for US federal income tax purposes, it is expected that any distribution on the Company’sSubject Shares will be reported to US Holders as a dividend for US federal income tax purposes. Such dividendsare not expected to be eligible for the dividends received deduction allowed to corporations.

3.1 Currency Gain or Loss on Dividends

The US dollar value of any distribution on the Company’s Subject Shares made in Sterling should be calculatedby reference to the exchange rate between the US dollar and the Sterling in effect on the date of receipt of suchdistribution by the US Holder, regardless of whether the Sterling amount so received is in fact converted into USdollars. If the Sterling amount so received is converted into US dollars on the date of receipt, such US Holdergenerally should not recognise foreign currency gain or loss on such conversion. If it is not converted into USdollars on the date of receipt, such US Holder will have a basis in such Sterling equal to the US dollar value onthe date of receipt. Any gain or loss on a subsequent conversion or other disposition of such Sterling generallywill be treated as ordinary income or loss to such US Holder and generally will be income or loss from sourceswithin the United States for US foreign tax credit purposes.

3.2 Qualified Dividends for Individuals

Distributions treated as dividends that are received by certain non-corporate US Holders (including individuals)from “qualified foreign corporations” generally qualify for preferential rates so long as certain holding periodand other requirements are met. A non US corporation (other than a corporation that was treated as a passiveforeign investment company (as described in section 5 below) with respect to a US Holder in the year in whichthe dividends are paid, or in the year prior to the year in which the dividends are paid) generally will beconsidered to be a qualified foreign corporation if it is eligible for the benefits of a comprehensive income taxtreaty with the United States. The Company expects to be considered a qualified foreign corporation for thispurpose.

3.3 Foreign Tax Credits and Sourcing

Subject to certain conditions and limitations, any non-refundable UK taxes withheld from dividends on theCompany’s Subject Shares at a rate not exceeding the rate provided in the Treaty (if applicable) may be treatedas foreign taxes eligible for a credit against the US federal income tax liability of a US Holder. This US foreigntax credit is subject to numerous complex limitations that must be determined and applied on an individual basis.In applying this limitation, a US Holder’s various items of income and deduction must be classified, undercomplex rules, as either “foreign source” or “US source.” Generally, the credit cannot exceed the proportionateshare of a US Holder’s US federal income tax liability that such US Holder’s foreign source taxable incomebears to such US Holder’s worldwide taxable income. In addition, this limitation is calculated separately withrespect to specific categories of income. For purposes of calculating this limitation, dividends paid on Subject

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Shares generally will be treated as income from sources outside the United States and will generally constitutepassive category income. Further, in certain circumstances, if a US Holder that holds its Subject Shares for lessthan a specified minimum period, the US Holder will not be allowed a foreign tax credit for foreign taxesimposed on dividends paid on its Subject Shares. US Holders should consult their own tax advisers regarding theavailability of the foreign tax credit under their particular circumstances.

4. Sale or Other Disposition of Shares

Subject to the discussion in section 5 below, for US federal income tax purposes, a US Holder will recognisetaxable gain or loss on any sale, exchange or other disposition of its Subject Shares in an amount equal to thedifference between the amount realised and such US Holder’s tax basis in the Subject Shares. Such gain or losswill generally be capital gain or loss. Capital gains of non-corporate shareholders derived with respect to capitalassets held for more than one year are eligible for reduced rates of taxation. The deductibility of capital losses issubject to limitations under the Code. Any gain or loss recognised on a disposition by a US Holder of its SubjectShares generally will be treated as US source gain or loss. The tax basis of Placing Shares will be the amountpaid by the holder for such shares and the holding period will start on the acquisition date of such shares.

4.1 Currency Gain or Loss on Disposition of Shares

In the case of a US Holder that receives non US currency from a sale, exchange or other disposition of theCompany’s Subject Shares, the amount realised will be equal to the US dollar value of such non US currency onthe date of disposition of the Subject Shares. However, if the Subject Shares are treated as being “traded on anestablished securities market,” a cash basis or electing accrual basis taxpayer will determine the US dollar valueof the amount realised by translating such amount at the spot rate on the settlement date of the sale. If an accrualbasis US Holder makes the election described above, it must be applied consistently from year to year and cannotbe revoked without the consent of the IRS. A US Holder will have a tax basis in any non US currency received inrespect of the sale, exchange or other disposition of its Subject Shares equal to its US dollar value calculated atthe exchange rate in effect on the date of such sale, exchange or other disposition (or in the case of a cash basis orelecting accrual basis taxpayer the exchange rate in effect on the date of settlement). Any gain or loss recognisedupon a subsequent disposition of non US currency will be treated as ordinary income or loss to such US Holderand generally will be income or loss from sources within the United States for US foreign tax credit purposes.

5. Passive Foreign Investment Company

In general, a non US corporation will be classified as a Passive Foreign Investment Company (“PFIC”) for anytaxable year if at least (i) 75 per cent. of its gross income for that year is classified as “passive income” or (ii)50 per cent. of the value of its assets (determined on the basis of a quarterly average for that year) produce or areheld for the production of passive income. For these purposes, passive income generally includes, among otherthings, dividends, interest, rents, royalties and the excess of gains over losses from the disposition of assets thatproduce passive income. In making this determination, the non US corporation is treated as earning itsproportionate share of any income and owning its proportionate share of any assets of any corporation in which itdirectly or indirectly holds 25 per cent. or more (by value) of the stock.

The Company has not determined whether it was a PFIC for any taxable year. Such determination is madeannually after the close of the relevant taxable year, is highly fact specific and will depend in particular on thecomposition of the Company’s income and assets, the market price of the Company’s Subject Shares, and theactual amount and timing of the use of the proceeds from the Placing and the Offer for Subscription (includingthe timing of the planned Entanet Acquisition). Accordingly, while the Company does not believe it should be aPFIC for the taxable year ending 31 December 2017, no assurance can be given that the Company will not be aPFIC for such taxable year or any future taxable year.

If the Company is considered a PFIC at any time that a US Holder holds the Company’s Subject Shares, any gainrecognised by the US Holder on a sale or other disposition of the Subject Shares, as well as the amount of an“excess distribution” (defined below) received by such holder, would be allocated rateably over the US Holder’sholding period for the Subject Shares. The amounts allocated to the taxable year of the sale or other disposition(or the taxable year of receipt, in the case of an excess distribution) and to any year before the Company becamea PFIC would be taxed as ordinary income. The amount allocated to each other taxable year also is taxed asordinary income and the tax imposed will be the “deferred tax amount” (an amount calculated by multiplying theamount allocated to each prior year by the highest rate of tax in effect for individuals or corporations, asappropriate, for that taxable year, together with an interest charge). For purposes of these rules, an “excessdistribution” is the amount by which any distribution received by a US Holder on its Subject Shares in a taxableyear exceeds 125 per cent. of the average of the annual distributions on the Subject Shares received during thepreceding three years or the US Holder’s holding period, whichever is shorter. Certain elections may be availablethat would result in alternative treatments (such as an election for mark-to-market treatment or to be treated as aqualified electing fund, each as discussed below) of the Subject Shares.

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Under the PFIC rules, if the Company were considered a PFIC at any time that a US Holder holds the Company’sSubject Shares, the Company would continue to be treated as a PFIC with respect to such US Holder’sinvestment unless (i) the Company ceases to be a PFIC and (ii) the US Holder has made a “deemed sale” electionunder the PFIC rules.

If the Company is treated as a PFIC with respect to a US Holder for any taxable year, a US Holder will also bedeemed to own a proportionate interest in any of the Company’s subsidiaries that are also PFICs, if any. Specialrules apply with respect to the application of the PFIC rules with respect to indirect distributions from, or indirectdispositions of, such a subsidiary that is a PFIC. An election for mark-to-market treatment would likely not beavailable with respect to any such subsidiaries.

If a US Holder owns the Company’s Subject Shares during any year in which the Company is a PFIC, the USHolder generally must file an IRS Form 8621 with respect to the Company, generally with the US Holder’s USfederal income tax return for that year. US Holders should consult their tax advisers regarding whether theCompany is a PFIC and the potential application of the PFIC rules.

5.1 Mark-to-market Election

To mitigate the application of the PFIC rules discussed above, a US Holder may make an election to include gainor loss on the Subject Shares as ordinary income or loss under a mark-to-market method, provided that theSubject Shares are regularly traded on a qualified exchange. Application has been made for the Subject Shares tobe listed on AIM, which the Company expects to be a qualified exchange. However, no assurance can be giventhat the Subject Shares will be “regularly traded” as defined by the Code for purposes of the mark-to-marketelection.

If a US Holder makes an effective mark-to-market election, the US Holder will include in each year as ordinaryincome the excess of the fair market value of its Subject Shares at the end of the year over its adjusted tax basisin the Subject Shares. The US Holder will be entitled to deduct as an ordinary loss each year the excess of itsadjusted tax basis in the Subject Shares over their fair market value at the end of the year, but only to the extentof the net amount previously included in income as a result of the mark-to-market election. A US Holder’sadjusted tax basis in the Subject Shares will be increased by the amount of any income inclusion and decreasedby the amount of any deductions under the mark-to-market rules. In addition, gains from an actual sale or otherdisposition of Subject Shares will be treated as ordinary income, and any losses will be treated as ordinary lossesto the extent of any mark-to-market gains for prior years.

If a US Holder makes a mark-to-market election, it will be effective for the taxable year for which the election ismade and all subsequent taxable years unless the Subject Shares are no longer regularly traded on a qualifiedexchange or the IRS consents to the revocation of the election.

5.2 Qualified Electing Fund Election

To mitigate the application of the PFIC rules discussed above, a US Holder may make an election to treat theCompany as a qualified electing fund (“QEF”) for US federal income tax purposes. A US Holder of a QEF isrequired for each taxable year to include in income a pro rata share of the ordinary earnings of the QEF asordinary income and a pro rata share of the net capital gain of the QEF as capital gain and pay tax thereon,regardless of whether the Company has distributed such earnings or gain, subject to a separate election to deferpayment of taxes. Such deferral is subject to an interest charge. If the Company later were to distribute theincome or gain on which the US Holder has already paid taxes, amounts so distributed to the US Holder wouldnot be further taxable to the US Holder. A US Holder’s tax basis in the Company’s Subject Shares would beincreased by the amount so included and decreased by the amount of non-taxable distributions. To make a QEFelection, the Company must provide US Holders with information compiled according to US federal income taxprinciples. The Company currently does not intend to compile such information for US Holders, and therefore itis expected that this election will be unavailable.

6. Non US Holders

A Non US Holder generally should not be subject to US federal income or withholding tax on any distributionsmade on the Company’s Subject Shares or gain from the sale, exchange or other disposition of the Company’sSubject Shares unless: (i) that distribution and/or gain is effectively connected with the conduct by that Non USHolder of a trade or business in the United States; or (ii) in the case of any gain realised on the sale or exchangeof Subject Shares by an individual Non US Holder, that Non US Holder is present in the United States for 183days or more in the taxable year of the sale, exchange or retirement and certain other conditions are met.

7. Medicare Tax

A US Holder that is an individual or estate, or a trust that does not fall into a special class of trusts that is exemptfrom such tax, generally will be subject to a 3.8 per cent. tax, referred to as the Medicare tax, on the lesser of

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(1) the US Holder’s “net investment income” (or, in the case of a US Holder that is an estate or trust, the USHolder’s “undistributed net investment income”) for the relevant taxable year and (2) the excess of the USHolder’s modified adjusted gross income for the taxable year over a certain threshold (which in the case ofindividuals will be between US$125,000 and US$250,000, depending on the individual’s tax return filing status).The net investment income of a US Holder generally will include dividend income and any net gains from thedisposition of Subject Shares, unless such dividend income or net gains are derived in the ordinary course of theconduct of a trade or business (other than a trade or business that consists of certain passive trading activities).US Holders should consult their tax advisers regarding the applicability of the Medicare tax to their income andgains in respect of their investment in the Company.

8. Information Reporting and Backup Withholding

8.1 Investment in Subject Shares

Under the Code and Regulations, certain categories of US persons must file information returns with respect totheir investment in the equity interests of a non US corporation. A US Holder that purchases for cash theCompany’s Subject Shares will be required to file IRS Form 926 or a similar form if the transfer of cash to theCompany, when aggregated with all transfers made by such person (or any related person) to the Companywithin the preceding 12-month period, exceeds US$100,000. In the event a US Holder fails to file any suchrequired form, the US Holder could be required to pay a penalty equal to 10 per cent. of the gross amount paidfor such Subject Shares up to a maximum penalty of US$100,000.

8.2 Dividends and Dispositions

In general, information reporting will apply to dividends in respect of the Company’s Subject Shares and theproceeds from the sale, exchange or other disposition of the Company’s Subject Shares that are paid within theUnited States (and in certain cases, outside the United States), unless a holder establishes that it is an exemptrecipient (such as a corporation). Backup withholding (currently at a rate of 28 per cent.) may apply to suchpayments if a holder fails to provide a taxpayer identification number and a duly executed IRS Form W-9 orotherwise establishes an exemption. Any amounts withheld under the backup withholding rules will be allowedas a credit or a refund against the holder’s US federal income tax liability provided the required information istimely furnished to the IRS.

8.3 Reportable Transactions

A US Holder participating in a “reportable transaction” within the meaning of the Regulations is required to fileIRS Form 8886 with their US federal income tax return, and submit a copy of IRS Form 8886 with the Office ofTax Shelter Analysis of the IRS. Reportable transactions subject to this disclosure requirement could include,among other things, the recognition of losses exceeding certain thresholds upon a disposition of Subject Sharesor the recognition of foreign currency exchange losses exceeding certain thresholds. A significant penalty isimposed on taxpayers who fail to make the required disclosure. US Holders are urged to consult their own taxadvisers concerning the application of these reporting obligations to their specific situations and the penaltydiscussed above.

9. Foreign Financial Asset Reporting

Certain US Holders may be subject to substantial penalties if they fail to comply with special informationreporting requirements with respect to their ownership of the Company’s Subject Shares, unless the SubjectShares are held in accounts at certain financial institutions. In particular, US Holders may be required to file anFBAR (“Report of Foreign Bank and Financial Account”) with the US Department of the Treasury with respectto a foreign financial account holding their investment in the Company.

Certain US Holders also will be required to attach IRS Form 8938 to their US federal income tax returns for anyyear in which the aggregate value of all “specified foreign financial assets” held by such US Holder exceedscertain specified thresholds (generally, US$50,000 on the last day of the taxable year or US$75,000 at any timeduring the taxable year (higher thresholds apply for certain married individuals filing joint returns)). A “specifiedforeign financial asset” generally includes, among other things, stock issued by a non US corporation that is heldfor investment and not held in an account at a financial institution. Penalties may be imposed for the failure todisclose such information regarding specified foreign financial assts.

US Holders should consult their tax advisers regarding the potential application of these reporting requirementsto their interest in the Company.

The above summary is not intended to constitute a complete analysis of all US federal income tax consequencesrelating to the acquisition, holding and disposition of the Subject Shares. Prospective purchasers of the ordinarySubject Shares should consult their own tax advisers concerning the tax consequences based on their particularsituations.

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PART 9INFORMATION CONCERNING THE NEW ORDINARY SHARES

1. Description of the type and class of securities being offered

The New Ordinary Shares will have a nominal value of 1 pence each. The rights of the New Ordinary Shares areset out in the Articles of Association, a summary of which is set out in section 10 of Part 10 of this document.

The ISIN code for the New Ordinary Shares, when issued, will be GB00BH581H10, being the same ISIN code asfor the Existing Ordinary Shares.

The New Ordinary Shares will be issued credited as fully paid and free from all liens, equities, charges,encumbrances and other interests, and will rank in full for all dividends and distributions on the ordinary sharecapital of the Company declared, made or paid after their issue and otherwise pari passu in all respects with theExisting Ordinary Shares.

2. Legislation under which the New Ordinary Shares will be created

The New Ordinary Shares will be created under the Act.

3. Admission to trading

An application will be made to the London Stock Exchange for the New Ordinary Shares to be admitted totrading on AIM. It is expected that Admission will become effective and that dealings in the New OrdinaryShares will commence on the London Stock Exchange at 8.00 a.m. on 28 July 2017.

The admission to trading of the New Ordinary Shares is not being sought on any stock exchange other than AIM,on which the Existing Ordinary Shares are admitted to trading.

4. Form and currency of the New Ordinary Shares

The New Ordinary Shares will, when issued, be in registered form and will be capable of being held incertificated and uncertificated form.

Title to certificated New Ordinary Shares will be evidenced by entry in the register of members of the Companyand title to uncertificated New Ordinary Shares will be evidenced by entry in the operator register maintained byEuroclear (which forms part of the register of members of the Company).

No share certificates will be issued in respect of the New Ordinary Shares in uncertificated form. If any suchOrdinary Shares are converted to be held in certificated form, share certificates will be issued in respect of thoseOrdinary Shares in accordance with applicable legislation.

The New Ordinary Shares will be denominated in Sterling.

5. Rights attached to the New Ordinary Shares

Each New Ordinary Share will rank, when issued and fully paid, pari passu in all respects with each ExistingOrdinary Share and will have the same rights (including voting and dividend rights and rights on a return ofcapital and restrictions as each Existing Ordinary Share, as set out in the Articles of Association.

All registered holders of Ordinary Shares have the right to attend and vote at general meetings of the Company orto appoint a proxy to attend and vote at such meetings on their behalf. At general meetings, resolutions will bedetermined by a show of hands or by poll. On a poll, every Shareholder present in person or by proxy will haveone vote for every share that he holds.

Subject to the Act, any equity securities issued by the Company for cash must first be offered to Shareholders inproportion to their holdings of Ordinary Shares. The Act allows for the disapplication of pre-emption rights,which may be waived by a special resolution of the Shareholders, either generally or specifically for a maximumperiod not exceeding five years.

Except in relation to dividends which have been declared and rights on a liquidation of the Company, theShareholders have no rights to share in the profits of the Company.

The New Ordinary Shares are not redeemable. The Company may purchase or contract to purchase any of theOrdinary Shares on or off market, subject to the Act. The Company may purchase Ordinary Shares only out ofdistributable reserves or the proceeds of a new issue of shares made to fund the repurchase.

Further details of the rights attached to the New Ordinary Shares in relation to attendance and voting at generalmeetings, entitlements on a winding up of the Company and transferability of shares are set out in section 10 ofPart 10 of this document.

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6. Description of restrictions on free transferability

Save as set out below and in section 10 of Part 10 of this document, the New Ordinary Shares will be freelytransferable.

The Company may, under the Act, send out statutory notices to those it knows or has reasonable cause to believehave an interest in its shares, asking for details of those who have an interest and the extent of their interest in aparticular holding of shares. When a person receives a statutory notice and fails to provide any informationrequired by the notice within the time specified in it, the Company can apply to the court for an order directing,among other things, that any transfer of shares, which are the subject of the statutory notice, is void.

7. Mandatory bids, squeeze-out and sell-out rules relating to the New Ordinary Shares

Please see section 26 of Part 10 of this document for information relating to mandatory bids, squeeze-out andsell-out rules which are relevant to holders of Ordinary Shares.

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PART 10ADDITIONAL INFORMATION

1. Responsibility

The Company and the Directors accept responsibility for all the information contained in this document. To thebest of the knowledge and belief of the Company and the Directors (who have taken all reasonable care to ensurethat such is the case), the information contained in this document is in accordance with the facts and does notomit anything likely to affect the import of such information.

2. Incorporation and Registered Office

The Company was incorporated on 13 November 2013 and registered as a private company limited by shares inEngland and Wales under the name Newincco 1269 Limited. On 11 December 2013, the Company changed itsname to CityFibre Limited. On 10 January 2014, the Company was re-registered as a public company limited byshares pursuant to Part 7 of the Act and changed its name to CityFibre Infrastructure Holdings plc. TheCompany’s registration number is 8772997. On 17 January 2014, the Company’s entire issued share capital wasadmitted to trading on AIM. On 14 January 2016 the Company’s entire issued share capital was re-admitted toAIM following the KCOM Acquisition which constituted a reverse takeover for the purposes of the AIM Rules.

The liability of the members of the Company is limited to the amount paid up or to be paid up on their shares.The principal legislation under which the Company operates is the Act.

The registered office of the Company is at 15 Bedford Street, London, WC2E 9HE and will remain so onAdmission. The Company is domiciled in the United Kingdom.

The principal place of business of the Group is at 15 Bedford Street, London, WC2E 9HE. The telephone numberof the Company at its principal place of business is 0845 293 0774. The Group’s website is: www.cityfibre.com.

The Company is a holding company and its principal activity is that of a holding company. It is the ultimateparent company of the Group comprising the Company and the subsidiary undertakings set out in section 19below.

The Company’s accounting reference date is 31 December.

The auditor of the Company and its subsidiaries is BDO LLP of 55 Baker Street, London W1U 7EU, which is amember firm of the Institute of Chartered Accountants in England and Wales.

The Company was inserted as a new holding company of the Group by way of a share for share exchange withthe shareholders of CFHL to acquire all the issued share capital of CFHL in consideration for the Companyallotting and issuing new shares in the Company to all the existing shareholders of CFHL, which completed on9 January 2014.

3. The Company’s Share Capital

3.1 Share Capital

On the date of incorporation, the issued share capital of the Company was £1.00, divided into one ordinary shareof £1.00, which share was in issue fully paid to the subscriber to the Company’s memorandum of association,being Olswang Nominees Limited.

The following changes in the share capital of the Company have taken place between incorporation and the dateof this document:

(a) on 10 December 2013 the subscriber share was transferred from Olswang Nominees Limited toGreg Mesch;

(b) on 9 January 2014 the Company subdivided the sole issued share of £1.00 in the capital of theCompany into two shares of £0.50 each;

(c) on 9 January 2014 the Company issued 115,383 new ordinary shares of £0.50 each in thecapital of the Company in connection with the share for share exchange described in section 2of this Part 10;

(d) on 10 January 2014 the Company subdivided and redesignated each of its existing ordinaryshares of £0.50 into one ordinary share of £0.01 and 49 Deferred Shares;

(e) on 17 January 2014 the Company issued 52,119,263 new ordinary shares of £0.01 each in thecapital of the Company;

(f) on 12 May 2014 the Company issued 338,583 new ordinary shares of £0.01 each in the capitalof the Company;

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(g) on 26 May 2014 the Company issued 5,577,085 new ordinary shares of £0.01 each in thecapital of the Company;

(h) on 9 June 2014 the Company issued 47,207,584 new ordinary shares of £0.01 each in thecapital of the Company;

(i) on 22 July 2014 the Company issued 2,963 new ordinary shares of £0.01 each in the capital ofthe Company in respect of the exercise of warrants;

(j) on 22 January 2015 the Company issued 231,781 new ordinary shares of £0.01 each in thecapital of the Company to the CityFibre Employee Benefit Trust in respect of options grantedto Stephen Charlton; and

(k) on 12 January 2016 the Company issued 160,000,000 new ordinary shares of £0.01 each in thecapital of the Company in connection with the underwritten placing by finnCap and Liberum,pursuant to the underwriting agreement dated 14 December 2015 (as set out in section 18.10 ofPart 10 of this document).

The following table sets out the issued share capital of the Company as at the Reference Date:

Number ofDeferred

Shares at thedate of this document

AggregateNominal Value of Deferred

Shares at the date of thisdocument

Number ofOrdinary Sharesat the date of this

document

AggregateNominal Value of

Ordinary Sharesat the date of this

document

5,653,865 56,538.65 265,672,644 £2,656,726.44

The number of Deferred Shares in issue following Admission will not change.

The New Ordinary Shares will rank pari passu in all respects with the Existing Ordinary Shares and shall rankpari passu for all dividends or other distributions hereafter declared, paid or made on Existing Ordinary Shares.

The Deferred Shares have no voting or economic rights as described in section 10.11 of this Part 10. Noapplication will be made for the Deferred Shares to be admitted to trading on AIM or any other market.

3.2 Share Awards

As at the Reference Date there were approximately 20,300,356 Ordinary Shares under option or awards under theShare Incentive Arrangements. These options or awards were awarded under the Option Schemes described insection 11 of this Part 10. In addition, the total number of Ordinary Shares that the Company may be required toissue in respect of all options outstanding under the Pre-Admission Option Plans is 3,682,320.

3.3 Warrants

On 13 January 2014, the Company executed a warrant instrument pursuant to which the Company issuedwarrants to certain persons who had previously held loan notes in CFHL and which entitled such persons tosubscribe for 635,536 Ordinary Shares (with a value of £381,322.20 at the issue price (being £0.60)). Theexercise price is equal to such issue price. The warrants may be exercised at any time prior to 17 January 2019(and otherwise they lapse on such date). No application has been or will be made for the warrants to be listed ortraded. As at the Reference Date, warrants in respect of 632,973 Ordinary Shares remain unexercised. TheCompany shall separately advise holders of warrants of adjustments (if any) to be made to the warrants as aresult of the Capital Raising.

3.4 Existing Shareholder Authorities

At the annual general meeting of the Company held on 15 June 2017:

(a) an ordinary resolution was passed by the members of the Company generally andunconditionally authorising the Directors under section 551 of the Act to exercise all thepowers of the Company to allot shares in the Company or grant rights to subscribe for, or toconvert any security into, shares in the Company (“Rights”):

(i) up to an aggregate nominal amount of £885,575.48; and

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(ii) comprising equity securities (as defined in section 560(1) of the Act 2006), up to a furtheraggregate nominal amount of £885,575.48 in connection with an offer by way of a rightsissue to:

1. ordinary shareholders in proportion (as nearly as may be) to their existing holdings;and

2. holders of other equity securities, if this is required by the rights of those securitiesor, if the Directors consider it necessary as permitted by the rights of thosesecurities,

but subject to such exclusions and other arrangements as the Directors may considernecessary or appropriate in relation to fractional entitlements, record dates, treasuryshares or any legal, regulatory or practical problems under the laws of any territory(including the requirements of any regulatory body or stock exchange) or any othermatter,

such authorities to expire (unless previously revoked by the Company) at the conclusion of thenext annual general meeting of the Company (or, if earlier, on 15 September 2018) save that, ineach case, during such period the Company may make an offer or agreement which would ormight require shares to be allotted or Rights to be granted after the authority has expired andthe Directors may allot shares or grant Rights in pursuance of any such offer or agreementnotwithstanding that this authority has expired. All previous authorities to allot shares or grantRights, to the extent unused, were revoked; and

(b) a special resolution was passed by the members of the Company authorising the Directorsunder section 570 of the Act to allot equity securities (as defined in Section 560 of the Act) forcash under the authority referred to in section (a) above as if section 561 of the Act did notapply to the allotment provided that such power be limited to:

(i) the allotment of equity securities in connection with an offer or issue of equity securities(but in the case of the authority referred to in section (a)(i) above, by way of a rights issueonly) to:

1. ordinary shareholders in proportion (as nearly as may be) to their existing holdings;and

2. holders of other equity securities, if this is required by the rights of those securitiesor, if the Directors consider it necessary as permitted by the rights of thosesecurities,

but subject to such exclusions and other arrangements as the Directors may considernecessary or appropriate in relation to fractional entitlements, record dates, treasuryshares or any legal, regulatory or practical problems under the laws of any territory(including the requirements of any regulatory body or stock exchange) or any othermatter; and

(ii) the allotment of equity securities (otherwise than under the authority referred to in thissection (i)) up to an aggregate nominal amount of £265,672.64;

such power to expire when the authority referred to under section (a) is revoked or expires(save that, during such period the Company may make an offer or agreement which would ormight require equity securities to be allotted after this authority expires and the Directors mayallot equity securities in pursuance of that offer or agreement notwithstanding that the authorityhas expired).

3.5 Proposed Shareholder Authorities

At the General Meeting, the following resolutions are proposed in addition to all existing authorities:

(a) that the Directors be generally and unconditionally authorised to allot shares in the Companyup to an aggregate nominal amount of £3,909,090.91 pursuant to or in connection with theCapital Raising such authorities to expire on the conclusion of the annual general meeting ofthe Company to be held in 2018 or, if earlier, on 31 May 2018; and

(b) that subject to the passing of the above resolution, the Directors be given power to allot suchequity securities as if section 561 of the Act did not apply. The number of New Ordinary

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Shares to be issued if the Resolutions are passed will represent 136.9 per cent. of theCompany’s issued ordinary share capital as at the Reference Date (assuming nil take up underthe Offer for Subscription) and 147.1 per cent. of the Company’s issued ordinary share capitalas at the Reference Date (assuming full take up under the Offer for Subscription). If granted,this authority will apply until the conclusion of the annual general meeting of the Company tobe held in 2018 or, if earlier, on 31 May 2018.

3.6 General

The provisions of section 570 of the Act (which confers on shareholders rights of pre-emption in respect of theallotment of equity securities which are, or are to be, paid up in cash) will apply to unissued share capital of theCompany which is not the subject of the disapplications referred to above.

The legislation under which the Ordinary Shares have been, and the New Ordinary Shares will be created is theAct and regulations made under the Act. The Ordinary Shares are, and the New Ordinary Shares will bedenominated in Sterling. The ISIN of the Ordinary Shares will remain GB00BH581H10, and the New OrdinaryShares will be, GB00BH581H10.

The Ordinary Shares and the New Ordinary Shares will be in registered form. They will be capable of being heldin certificated form or in uncertificated form and traded on CREST. The records in respect of the Ordinary Sharesand New Ordinary Shares held in uncertificated form will be maintained by Computershare.

Except as described in this section 3 of Part 10 of this document, no alterations to the Company’s issued ordinaryshare capital have occurred prior to publication of this document. The Company does not have any shares notrepresenting capital.

There is no class of shares in issue other than Ordinary Shares and Deferred Shares and no Ordinary Shares orDeferred Shares have been issued other than as fully paid.

The Ordinary Shares are freely transferable provided that they are fully paid.

Following completion of the Capital Raising, the New Ordinary Shares will have the same rights in all respectsas the Existing Ordinary Shares (including the right to receive all dividends or other distributions declared afterthe date of issue of the New Ordinary Shares).

Save as set out in this Part 10, as at the Reference Date the Company does not hold any of its own OrdinaryShares as treasury shares and none of the Company’s subsidiaries hold any Ordinary Shares.

4. Directors of the Company

4.1 Directors

The following table sets out information relating to each of the Directors of the Company:

Directors Role

Chris Stone (Non-Executive Chairman)

Greg Mesch (Chief Executive Officer)

Mark Collins (Director, Public Policy)

Terry Hart (Chief Financial Officer)

Leo van Doorne (Non-Executive Director)

Gary Mesch (Non-Executive Director)

Sally Davis (Non-Executive Director)

Steve Charlton (Non-Executive Director)

The company secretary for the Group is Christopher Gawn.

The service address of each of the Directors is CityFibre Infrastructure Holdings plc, 15 Bedford Street, LondonWC2E 9HE.

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4.2 Directorships and Partnerships of the Directors

Save as set out below, none of the Directors has either (i) held a directorship of any company, other than thosecompanies in the Group, or (ii) been a partner in a partnership at any time within the past five years prior to thedate of this document:

As at the Reference DateDuring the five years

preceding the date of this document

Name ofDirector Directorship

Partnership orother interest Directorship

Partnership orother interest

Chris Stone Event Rider MastersLimitedHatch Farm LandLimitedHatch Farm TradingLimitedNCC Group plcQorex LtdRadius Worldwide(trading as HSPInternational Inc.)Rebus HR GroupLimitedTattleton ServicesLimitedZighy HoldingsLimited

CSR Limited

Radius BidcoLimitedRadius DebtcoLimitedRadius HoldcoLimitedRadius MidcoLimitedRadius PledgecoLimited

Greg Mesch H2O Networks Ltd FibreCity DundeeLtdOpencity MediaLimited

Mark Collins H2O NetworksLtd

Lodgfield Estate Ltd(secretary)

Bolt Pro TemLimitedFibreCity Dundee LtdOpencity MediaLimitedPerspect ConsultingLimited

Terry Hart - -

Leo vanDoorne Ballast Nedam NV

MuziekgebouwEindhoven

Contateq BVDiana CapitalSGECR, SAEindhoven 365(EHV365)Foundation Thomasvan VillanovA.Innovalens BVKimardo II BVKimardoManagement BVOptics InnovationGroupPallieter Reneff BVShanxi Guangyu LEDLighting Co., Ltd.Verder Group BV

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As at the Reference DateDuring the five years

preceding the date of this document

Name ofDirector Directorship

Partnership orother interest Directorship

Partnership orother interest

Sally Davis Arqiva BroadcastFinance PLC

Business DisabilityForum

Arqiva BroadcastHoldings LimitedArqiva BroadcastIntermediate LimitedArqiva BroadcastParent LimitedArqiva FinancingNo 1 LimitedArqiva FinancingNo 2 LimitedArqiva FinancingNo 3 PLCArqiva FinancingPLCArqiva GroupHoldings LimitedArqiva GroupIntermediate LimitedArqiva GroupLimitedArqiva GroupParent LimitedArqiva HoldingsLimitedArqiva InternationalHoldings LimitedArqiva LimitedArqiva PPFinancing PLCArqiva SeniorFinance LimitedArqiva ServicesLimitedArqiva SmartFinancing LimitedArqiva SmartHoldings LimitedArqiva SmartMetering LimitedArqiva Smart ParentLimitedArqiva TelecomsInvestment LimitedArqiva UK BroadcastHoldings LimitedLeonard CheshireDisability

Gary Mesch - -

SteveCharlton

PEAC (UK)Limited

Fortress InvestmentGroup (UK) Ltd

Trehurst ConsultingLimited

Save as set out below in this section 4.2, none of the Directors has:

(a) any unspent criminal convictions in relation to indictable offences;

(b) had a bankruptcy order made against him or her or entered into any form of individualvoluntary arrangements;

(c) been a director of a company which has been placed in receivership, compulsory liquidation,creditors’ voluntary liquidation, administrations, company voluntary arrangement or anycomposition or arrangement with its creditors generally or any class of its creditors of any companywhere he or she was a director at that time of or within the 12 months preceding such events;

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(d) been a partner in a firm which has been placed in compulsory liquidation or administration orwhich has entered into a partnership voluntary arrangement whilst he or she was at the firm atthat time or within the 12 months preceding such events;

(e) had any asset belonging to him or her placed in receivership or been a partner in a partnershipwhose assets have been placed in receivership whilst he or she was a partner of that firm orwithin the 12 months preceding such events; or

(f) been the subject of any public criticisms by any statutory or regulatory authorities (includingrecognised professional bodies) nor disqualified by a court from acting as a director of acompany or from acting in the management or conduct of the affairs of any company.

Greg Mesch and Mark Collins were directors of: (i) Opencity Media Limited (both appointed 13 January 2011);and (ii) Fibrecity Dundee Limited (both appointed 27 January 2011). These companies went into creditors’voluntary liquidation and were dissolved on 8 September 2012 and 22 July 2013 respectively. This was aconsequence of a restructuring of the Group following the acquisition of those companies on 13 January 2011.

Greg Mesch and Mark Collins are directors of H2O Networks Limited (both appointed 13 January 2011). H2ONetworks Limited went into administration on 18 April 2011 and subsequently entered into creditors’ voluntaryliquidation on 3 April 2012. It is currently in liquidation.

Gary Mesch was a director of MicroPhage, Inc. which declared bankruptcy in December 2012, was liquidated inJune 2013 and subsequently wound up.

4.3 Directors Conflicts of interest

None of the Directors is considered to be subject to any conflicts of interest between his duties to the Companyand his private interests or other duties.

No Director has been interested in any transaction with the Company that was unusual in its nature or conditionsor was significant to the business of the Company taken as a whole and which was effected by the Companysince its incorporation and which at the date of this document remains outstanding or unperformed.

As at the Reference Date, there were no outstanding loans granted by any member of the Group to any Director,nor by any Director to any member of the Group, nor was any guarantee which had been provided by anymember of the Group for the benefit of any Director, or by any Director for the benefit of any member of theGroup, outstanding.

4.4 Directors’ interests in shares and share options

Save as disclosed in sections (A) to (C) below, none of the Directors have any interests, beneficial ornon-beneficial, in the share capital of the Company or any of its subsidiaries.

(A) Issued share capital

Set out below are the interests (all of which are beneficial unless otherwise stated), as at the ReferenceDate, of the Directors (as well as their immediate families) in the share capital of the Company or (so faras is known or could with reasonable due diligence be ascertained by the relevant Director) interests ofany person connected (within the meaning of section 252-255 of the Act) with a Director and theexistence of which was known to or could, with reasonable due diligence, be ascertained by the relevantDirector as at the Reference Date. The table also sets out the expected interests of the Directors in theissued share capital of the Company following Admission, taking into account Chris Stone’s proposedparticipation in the Placing.

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Table A

As at the Reference Date Immediately following Admission

Name of Director Number of OrdinaryShares

per cent. of totalnumber of issuedOrdinary Shares

Number of OrdinaryShares

per cent. of totalnumber of issued

Ordinary Shares (1)

Greg Mesch (2) 572,803 0.2 572,803 0.09Mark Collins (2) 162,987 0.06 162,987 0.03Terry Hart (2) 43,007 0 43,007 0.01Leo van Doorne(via Kimardo II B.V.) (2) (4) 3,727,767 1.4 3,727,767 0.59Gary Mesch (2) (5) 1,166,831 0.4 1,166,831 0.19Sally Davis (2) 14,910 0 14,910 –Steve Charlton (2) – – – –Chris Stone (3) – – 1,181,818 0.19

(1) Assuming no take up under the Offer for Subscription and that no new Ordinary Shares (other than the New Ordinary Shares) are issuedfrom the Reference Date until Admission.(2) Excludes interests in Ordinary Shares pursuant to Share Incentive Arrangements, as set out in section 4.4(B) of this Part 10 and interestsin Ordinary Shares pursuant to warrants, as set out in section 4.4(C) of this Part 10.(3) Chris Stone has agreed to subscribe for 1,181,818 Placing Shares at the Offer Price. Chris Stone will not be applying for any Offer forSubscription Shares. The number of shares do not include the shares to be awarded to Chris Stone under the Non-Employee LTIP as set outin section 4.4(B) of this Part 10.(4) The Shares are held by Kimardo II B.V. a company controlled by Leo van Doorne (within the meaning of section 252 and 255 of the Act).(5) 1,080,151 of the Ordinary Shares are held by TJL Investment Corporation, a company which Gary Mesch and persons connected with himhave an interest in and 59,590 of the Ordinary Shares are held by persons connected with Gary Mesch.

Table B

(B) Share Incentive Arrangements

As at the Reference Date, the following awards over Ordinary Shares have been granted to thefollowing Directors:

Name ofDirector

Number ofOrdinary

Shares overwhichaward

was granted

Date ofgrant

Type ofaward

Shareprice at

grant(pence)

Exerciseprice/

hurdle(pence)

Exerciseperiod

Expiry /lapse date

Totalnumber of

OrdinarySharesunder

outstandingawards as at

ReferenceDate

GregMesch

462,962 16/1/14 Pre-Admission

Option Plan(EMI

option)

– 60 From16/01/2015

10th

anniversaryfrom date of

grant

462,962

1,405,306 23/5/14 EmployeeJSOP

77 60 From16/01/2015

10th


grant

1,405,306


77 60 In linewith

vesting

10th


grant

1,868,269


74.75 70 In linewith

vesting

10th


grant

2,006,039

1,610,000 17/2/16 EmployeeLTIP

51 Nil In linewith

vesting

10th


grant

1,610,000

TerryHart


Option Plan(EMI

option)

– 60 From16/01/2015

10th


grant

462,962

70,829 23/5/14 EmployeeJSOP

77 60 From16/01/2015

10th


grant

70,829

131

Name ofDirector

Number ofOrdinary


was granted

Date ofgrant

Type ofaward

Shareprice at

grant(pence)

Exerciseprice/

hurdle(pence)

Exerciseperiod

Expiry /lapse date

Totalnumber of

OrdinarySharesunder


ReferenceDate


77 60 In linewith

vesting

10th


grant

533,791



vesting

10th


grant

696,760

950,000 17/2/16 EmployeeLTIP

51 Nil In linewith

vesting

10th


grant

950,000

MarkCollins


Option Plan(EMI option)

– 60 From16/01/2015

10th


grant

462,962


77 60 From16/01/2015

10th


grant

204,276


77 60 In linewith

vesting

10th


grant

667,239



vesting

10th


grant

429,865

690,000 17/2/16 EmployeeLTIP

51 Nil In linewith

vesting

10th


grant

690,000

GaryMesch


Option Plan(unapproved

option)

– 60 From16/01/2017

10th


grant

160,137

71,644 9/6/14 Non-Employee

OptionScheme


vesting

10th


grant

71,644

Leo vanDoorne


Option Plan(unapproved

option)

– 60 From16/01/2017

10th


grant

160,137


OptionScheme


vesting

10th


grant

71,644

SallyDavis

160,137 23/05/14 Non-Employee

JSOP

77 65.5 9 June2017

10th


grant

160,137


JSOP


vesting

10th


grant

71,644

132

Name ofDirector

Number ofOrdinary


was granted

Date ofgrant

Type ofaward

Shareprice at

grant(pence)

Exerciseprice/

hurdle(pence)

Exerciseperiod

Expiry / lapsedate

Totalnumber of

OrdinarySharesunder


ReferenceDate

SteveCharlton

231,781 22/1/15 Non-Employee

JSOP

66 66 In linewith

vesting

10th anniversaryfrom date of

grant

231,781

As at the Reference Date, the Trustee is the registered owner of 10,159,308 Ordinary Shares, ofthese, 8,847,402 relate to outstanding awards under the JSOPs. In addition, the total number ofOrdinary Shares that the Company may be required to issue in respect of all the outstandingoptions under the Option Schemes, the Employee LTIP and the Pre-Admission Option Plans is11,452,954. Following Admission, it is also proposed that awards to subscribe for up to 2 percent. of the existing issued share capital in total will be granted under the Employee LTIP.

If Chris Stone acquires the number of Ordinary Shares as set out in Table A in section 4.4(A)of this Part 10 above (“Investment Shares”), the Company will, in accordance with the terms ofits offer of appointment to Chris Stone as Non-Executive Director, grant Chris Stone aMatching Award under the terms of the Non-Employee LTIP (as described in section 11.2 ofthis Part 10). The Matching Award will be over the same number of Ordinary Shares asrepresent the number of Investment Shares. In order to grant the Matching Award, theCompany intends to adopt the Non-Employee LTIP as soon as reasonably practicablefollowing Admission.

(C) Warrants

As at the Reference Date, the following warrants over Ordinary Shares had been granted to thefollowing Directors in accordance with the warrant instrument described in section 3.3 of thisPart 10:

Table C

Director Number ofWarrants

granted overOrdinary Shares

Date granted Exercise Period ExercisePrice

per Warrant(pence)

Expiry/lapse date

Greg Mesch 173,301 23/01/2014 Five years from17/01/2014

60 16/01/2019

Mark Collins 74,272 23/01/2014 Five years from17/01/2014

60 16/01/2019

Leovan Doorne(1)

45,000 23/01/2014 Five years from17/01/2014

60 16/01/2019

(1)The warrants are held by Kimardo II B.V. a company controlled by Leo van Doorne (within the meaning of section252 and 255 of the Act).

(D) General

None of the Directors have shareholders’ voting rights which are different to any other holdersof Ordinary Shares.

Except as disclosed in this section 4.4 of this Part 10, none of the Directors, nor any member oftheir respective immediate families, nor any person connected with them (within the meaningof sections 252 to 255 of the Act), has any interest in the share capital of the Company.

None of the Directors or persons connected with them within the meaning of sections 252 to255 of the Act has a related financial product (as defined in the AIM Rules) referenced to theOrdinary Shares.

5. Remuneration and terms and conditions of appointment of the Directors

Information on the current employment and remuneration arrangements for the Directors and the arrangements inplace during the year ended 31 December 2016 is set out below. The Directors have each entered into a servicecontract or, as appropriate, a letter of appointment, with the Company relating to their appointment to the Board,which are summarised below.

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5.1 Directors’ remuneration for the financial year ended 31 December 2016

Salary Benefits Pension Bonus Total£000 £000 £000 £000 £000

Executive DirectorsGreg Mesch 290 11 - 377 678Terry Hart 195 10 8 238 451Mark Collins 170 10 - 109 289Non-Executive DirectorsPeter Manning(1) 60 - - - 60Gary Mesch 20 - - - 20Leo van Doorne 20 - - - 20Sally Davis 35 - - - 35Steve Charlton 35 - - - 35Chris Stone(2) - - - - -

Total 825 31 8 724 1,588

(1) In addition to the base Non-Executive Director fees, the Company paid £12,000 (2015: £29,000) to BJC Networks Ltd, a company ownedand controlled by Peter Manning, the former chairman, in respect of consultancy fees.

(2) Chris Stone was not appointed until February 2017

5.2 Service Agreements of the Executive Directors

On 13 January 2014, the Company entered into a service contract with Greg Mesch. The contract provides forGreg Mesch to act as the Chief Executive Officer of the Company with a salary of £240,000 per annum. GregMesch’s salary was subsequently increased to £290,000 which was effective from 1 July 2015. Greg Meschcommenced in that office for CFHL on 13 January 2011 and, accordingly, has served in that office for six yearsand 5 months. The agreement has no fixed term and is terminable by 12 months’ notice in writing by either party.Under the agreement, Greg Mesch is entitled to 25 paid working days holiday each year and to the benefit ofprivate health insurance. He is subject to non-competition and non-solicitation covenants for a period of six and12 months respectively following termination of his employment with the Company and to a confidentialityundertaking that is without limit in time. Greg Mesch’s service contract also provides that if, within six monthsfollowing a change of control of the Company, either directly or indirectly in connection with it, the Companyterminates Greg Mesch’s employment in breach of the terms of his service agreement, or Greg Mesch terminatesdue to a fundamental breach of contract by the Company, the Company shall pay an amount equal to the grossvalue of two years’ basic salary within one month following termination.

On 13 January 2014, the Company entered into a service contract with Mark Collins on terms identical to thoseof Greg Mesch set out in section 5.2 of this Part 10 save that Mark Collins was appointed as the Director ofPolicy Regulation of the Company with a salary of £170,000 per annum. Mark Collins commenced in that officefor CFHL on 1 May 2012 and, accordingly, has served in that office for 5 years and 1 month. In addition to theaforementioned differences, the change of control provisions contained in Mark Collins’ service agreementprovide that Mark Collins will receive an amount equal to the gross value of one years’ basic salary.

On 13 January 2014, the Company entered into a service contract with Terry Hart on terms identical to those ofGreg Mesch set out in section 5.2 of this Part 10 save that Terry Hart was appointed as the Chief FinancialOfficer of the Company with a salary of £165,000 per annum. Terry Hart’s salary was subsequently increased to(i) £175,000 which was effective on 1 April 2015 and (ii) £215,000 which was effective 1 July 2016. Terry Hartcommenced in that office for CFHL on 1 January 2012 and, accordingly, has served in that office for 5 years and6 months. In addition to the aforementioned differences, the change of control provisions contained in TerryHart’s service agreement provide that Terry Hart will receive an amount equal to the gross value of one years’basic salary in relation to a change of control of the Company.

5.3 Non-Executive Directors

On 27 February 2017, Chris Stone was engaged by the Company as a Non-Executive Director and independentChairman on the terms of a letter of appointment for no fixed term and terminable on not less than 30 days’notice from either party. Chris Stone receives a fee of £100,000 per annum for attendance at a monthly boardmeeting and for serving as independent Chairman to the Company, and is subject to confidentiality undertakings.Chris Stone has agreed to subscribe for 1,181,818 Placing Shares at the Offer Price (“Investment Shares”).Chris Stone will not be applying for any Offer for Subscription Shares. The Company has committed to grant aMatching Award to Chris Stone (as described in section 4.4(B) of this Part 10) to acquire the same number ofOrdinary Shares as represent the number of Investment Shares.

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On 13 January 2014, Gary Mesch was engaged by the Company as a Non-Executive Director on the terms of aletter of appointment for no fixed term and terminable on not less than 30 days’ notice from either party. GaryMesch receives a fee of £20,000 per annum, and is subject to confidentiality undertakings.

On 13 January 2014, Leo van Doorne was engaged by the Company as a Non-Executive Director on the terms ofa letter of appointment for no fixed term and terminable on not less than 30 days’ notice from either party. Leovan Doorne receives a fee of £20,000 per annum, and is subject to confidentiality undertakings.

On 12 February 2014, Sally Davis was engaged by the Company as a Non-Executive Director on the terms of aletter of appointment for no fixed term and terminable on not less than 30 days’ notice from either party. SallyDavis receives a fee of £35,000 per annum, and is subject to confidentiality undertakings.

On 18 November 2014, Steve Charlton was engaged by the Company as a Non-Executive Director on the termsof a letter of appointment for no fixed term and terminable on not less than 30 days’ notice from either party.Steve Charlton receives a fee of £35,000 per annum, and is subject to confidentiality undertakings.

Save as set out above, there are no existing or proposed service agreements between any of the Directors and theCompany or any other member of the Group and there are no existing or proposed service contracts between anyof the Directors and the Company or any other member of the Group which provide for benefits upon terminationof employment.

Save as disclosed above, there are no service agreements between any Director and any member of the Group.

6. Aggregate remuneration and pension benefits granted to the Directors

The aggregate amount of remuneration paid (including contingent or deferred compensation), and benefitsin-kind granted, by the Group to the Directors for the year ended 31 December 2016 was £1,588,000. Benefitsfor each Executive Director include a car allowance, private medical cover, life assurance, income protection andaccess to a number of salary exchange schemes.

No amount has been set aside or accrued by the Group to provide pension, retirement or similar benefits for theDirectors.

7. Employees

In the financial year ended 31 December 2016 the Group employed on average 116 employees (including theDirectors). In each of the last three financial years, the Group’s average number of employees (all of which werelocated in the United Kingdom) was as follows:

7.1 In the year to 31 December 2014, the Company employed 46 employees as follows:

Category of activity Number of permanentemployees

Geographic location

Head office and administration 11 London (11)

Sales and marketing12

From home (7) Warrington (1)and London (4)

Operations 23 London (3) Home (6) Warrington (8)Bournemouth (3) Peterborough (2)

and Coventry (1)

Total 46 46

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Geographic location


Sales and marketing 14 From home (10) London (4)

Operations 54 From Home (19), London (15),Warrington (10), Peterborough (2),

Coventry (2), Bournemouth (2),Huddersfield (1), Aberdeen (1),

Edinburgh (1) and Hull (1)

Total 83 83



Geographic location


Sales and marketing 16 From home (11) and London (5)

Operations 78 From London (19), Warrington (23),Peterborough (7), Edinburgh (7),

Hull (5), Glasgow (4), Bournemouth(3), Coventry (2), Aberdeen (2),

Southend-on-Sea (2), Cambridge(2) and Bristol (2)

Total 116 116

8. Material Properties

The properties occupied by CityFibre and/or its subsidiaries which are material to the business of the Group are:

Address Annual Rent Tenure & Term Use

15 Bedford Street, London WC2E 9HE £193,635 5 year term, expiring16/01/2019

Office premises

Suite 1A, Rutherford House, Warrington Road,Birchwood, Warrington WA3 6ZH

£ 43,430 5 year term, expiring01/11/2020 (with abreak at 02/11/18)

Office premises

The properties occupied by Entanet and/or its subsidiaries which are material to the business of Entanet are:

Address Annual Rent Tenure & Term Use

Stafford Park 6, Telford, Shropshire TF3 3AT £62,700 fifteen year term,expiring

19 February 2029

Office premises

9. Material tangible fixed assets

The Group owns network assets (including ducts, sub-ducts and cable) in the United Kingdom which constitutetangible fixed assets material to the Group. These assets comprise the networks which the Company leases tocommunication providers and mobile operators. The annual reports and audited consolidated accounts of theGroup for the year ended 31 December 2016 record that these network assets accounted for £153.9 million oftotal property plant and equipment of £155.2 million.

The Group has granted fixed and floating charges over certain of its network assets in favour of the Lendersunder the terms of the Facility Agreement.

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Insofar as the Directors are aware, there are no environmental issues or, other than as set out above, majorencumbrances that may affect the Group’s utilisation of the tangible fixed assets.

10. Articles of Association

The following is a summary of the Company’s Articles of Association, which are available for inspection as setout in section 27 of this Part 10.

10.1 Objects

The Articles contain no specific restrictions on the Company’s objects and therefore, by virtue of section 31(1) ofthe Act the Company’s objects are unrestricted.

10.2 Voting Rights

Subject to section 10.7 below, and to any special rights or restrictions attached to any share, on a vote on aresolution (whether on a show of hands or on a poll) every member who, being an individual, is present in personor by proxy or, being a corporate member, is present by a duly appointed representative, shall have one vote forevery ordinary share in the capital of the Company held by him, except that on a vote on a resolution on a showof hands at a meeting a proxy has one vote for and one vote against the resolution if the proxy has been dulyappointed by more than one member entitled to vote on the resolution and the proxy has been instructed by oneor more of those members to vote in one way and is given discretion as to how to vote by one or more other ofthose members and wishes to use that discretion to vote in the other way. A proxy need not be a member of theCompany.

10.3 Variation of rights

If at any time the share capital of the Company is divided into different classes of shares, all or any of the rightsattached to any class of share may be varied or abrogated in such manner as is provided for in the Act andotherwise with the written consent of the holders of not less than three-quarters in nominal value of the issuedshares of that class (excluding any treasury shares) or with the authority of a special resolution passed at aseparate general meeting of the holders of the shares of that class. The quorum at any such meeting shall be twopersons holding or representing by proxy at least one-third in nominal value of the issued shares of that class(excluding any treasury shares).

10.4 Alteration of capital

The Company may, subject to the Act, increase its share capital, consolidate and divide all or any of its sharecapital into shares of a larger nominal value, sub-divide all or any of its shares into shares of a small nominalvalue and cancel any shares not taken, or agreed to be taken, by any person.

10.5 Transfer of shares

A member may transfer all or any of his shares (1) in the case of certificated shares by instrument in writing inany usual or common form, or in any form approved by the Directors and (2) in the case of uncertificated shares,through any relevant system in which the shares are participating securities (in accordance with the provisions ofthe CREST Regulations), in accordance with and subject to the requirements of the relevant system concerned.The instrument of transfer of a certificated share shall be executed by or on behalf of, the transferor and (exceptin the case of fully paid shares) by or on behalf of the transferee. The Directors may refuse to register anytransfer of a certificated share which is not a fully paid share provided that in the case of any class of shareswhich is admitted to trading on AIM the refusal could not prevent the shares from continuing to be admitted totrading on AIM. The operator of the relevant system may also refuse to register any transfer of an uncertificatedshare in the circumstances set out in the CREST Regulations. The Directors may also refuse to register a transferof the shares if the transfer is in favour of more than four persons jointly. Subject to that and to section 10.7below, the Articles contain no restrictions on the free transferability of fully paid shares provided that the transferis in respect of only one class of share, (except where the shares are registered in the name of a market nomineeand no certificate has been issued for them) is accompanied (in the case of a certificated share) by the relevantshare certificate and any other evidence of title required by the Directors and that the provisions in the Articlesrelating to the deposit of instruments for transfer has been complied with.

10.6 Dividends

The Company may, by ordinary resolution, declare dividends in accordance with the respective rights of themembers, and may fix the time for payment of such dividends, but no dividend shall exceed the amountrecommended by the directors. The Directors may pay interim dividends (including any dividend payable at afixed rate) if it appears to the Directors that they are justified by the financial position of the Company.

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Subject to the rights attached to, or the terms of issue of, any share, and subject to section 10.7 below, alldividends shall be apportioned and paid pro rata according to the amounts paid on the shares during any portionor portions of the period in respect of which the dividend is paid (provided that, no amount paid on a share inadvance of calls shall be treated as paid on that share).

The Directors may, with the authority of an ordinary resolution of the Company, offer any holders of anyparticular class of shares (excluding the Company as holder of treasury shares) the right to elect to receive furthershares (whether or not of that class), credited as fully paid instead of cash in respect of all (or some part) of anydividend specified by the ordinary resolution. The Directors may decide that the right of election shall not bemade available to any members with registered addresses in any territory where, in the opinion of the directors,this would be unlawful or compliance with local laws or regulations would be unduly onerous.

Any dividend unclaimed after a period of 12 years from the date when it became due for payment shall, if theDirectors so resolve, be forfeited and shall cease to remain owing by the Company.

10.7 Suspension of rights

If the holder of, or any other person appearing to be interested in, any share has been given notice under section793 of the Act and that holder or other such person has, at the end of the period of 14 days from service of thatnotice (or such longer period as may be specified by the Company), failed to give the Company the informationrequired by that notice in relation to that share or made a statement which is false or inadequate in any materialparticular in relation to that share, such member shall not be entitled to vote at any general meeting or at anyseparate meeting of the holders of that class of shares or to exercise any other right conferred by membership inrelation to general meetings in respect of the shares which are the subject of such notice. Where the interestrepresents 0.25 per cent. or more in nominal value of the issued shares of their class (excluding any treasuryshares), the payment of dividends may be withheld, and no transfer of any shares held by the member shall beregistered except as provided for in the Articles.

10.8 Return of capital

If the Company is being wound up the liquidator may, with the authority of a special resolution and any othersanction required by the Act divide among the members in specie the whole or any part of the assets of theCompany (whether they shall consist of property of the same kind or not) and may for that purpose value anyassets and determine how such division shall be carried out as between the members or different classes ofmembers. The liquidator may also vest the whole or any part of the assets in trustees upon such trusts for thebenefit of members as the liquidator, with the like authority, shall think fit but so that no member shall becompelled to accept any assets in respect of which there is any liability.

10.9 Pre-emption rights

There are no rights of pre-emption under the Articles in respect of transfers of issued Ordinary Shares. In certaincircumstances, the Company’s shareholders may have statutory pre-emption rights under the Act in respect of theallotment of new shares in the Company. These statutory pre-emption rights would require the Company to offernew shares for allotment to existing shareholders on a pro rata basis before allotting them to other persons. Insuch circumstances, the procedure for the exercise of such statutory pre-emption rights would be set out in thedocumentation by which such shares would be offered to the Company’s shareholders.

10.10 Shareholder meetings

Annual general meetings must be held within the time periods specified by the Act. Other general meetings maybe convened by the board whenever it thinks fit or when one has been requisitioned in accordance with the 2006Act or the Articles. The quorum requirements in section 318 of the Act shall apply to the Company, except that aperson shall not count as a “qualifying person” for this purpose unless (in addition to satisfying the requirementsof the 2006 Act) he is entitled to vote on the business to be transacted at the meeting.

Save as permitted or required by the Act, an annual general meeting shall be called by notice of at least 21 days,exclusive of the day on which the notice is served or deemed to be served and the day on which the meeting is tobe held. In the case of any other general meeting, at least 14 days’ notice shall be given, exclusive of the day onwhich the notice is served or deemed to be served and the day on which the meeting is to be held. A generalmeeting may be called on shorter notice as permitted by the Act.

Every notice calling a meeting of the Company must state the time and date of the meeting and the place of thatmeeting including identification of the principal venue, and any other place at which the meeting is to be held inaccordance with the Articles. The notice shall also include details of any arrangements, for persons entitled toattend a general meeting, to be able to view and hear the proceedings of, and to speak at, that meeting from alocation which is not classified as a meeting place (making clear that participation in these arrangements will not

138

amount to attendance at the meeting to which the notice relates). The Directors may also make sucharrangements for limiting the level of attendance at any general meeting or alternative viewing location but sucharrangements must allow any members and proxies excluded from attendance at the principal venue to attend atone of the other venues.

10.11 Deferred Shares

Notwithstanding any other provision of the Articles to the contrary, the Deferred Shares shall not entitle theholders (in that capacity) to receive notice of or to attend or vote at any general meeting of the Company, notentitle the holders (in that capacity) to participate in any profits or assets of the Company, whether by dividend orupon any return of capital (whether on a winding up or otherwise), nor be capable of transfer except with thewritten consent of all of the directors, or as outlined in article 6.

Each holder of Deferred Shares shall be deemed to have conferred irrevocable authority on the Company at anytime to appoint any person, for and on behalf of such holder, to receive notice of, attend and vote at any meeting ofthe class of Deferred Shares, agree and execute any transfer of (and any agreement to re-purchase transfer orotherwise dispose of) some or all of the Deferred Shares to such persons as the Company may determine (including,without limitation, the Company itself), agree to sell or cancel all of the Deferred Shares then in issue for not morethan one penny for all such Deferred Shares, and/or receive any consideration payable upon a transfer orre-purchase made pursuant to the above, in each case without obtaining the sanction of the holders, of such DeferredShares, and in respect of any transfer and/or purchase; and to retain the certificate(s) for such Deferred Shares.

The Company may at its option re-purchase all of the Deferred Shares then in issue, at a price not exceeding onepenny (in aggregate) for all such Deferred Shares purchased at any one time.

Notwithstanding any other provisions of the Articles, entering into a contract to purchase, and the purchase of,Deferred Shares shall not require the sanction of a resolution passed at a meeting of the holders of the DeferredShares or any other consent of such holders.

In the event of any conflict or inconsistency in the Articles, the provisions of article 6 as summarised by thissection 10.11 shall prevail in respect of any matter relating to the Deferred Shares.

10.12 Directors

Unless otherwise determined by ordinary resolution of the Company, the number of Directors shall not be lessthan 2 nor more than 10.

Subject to the provisions of the Articles, the Company may by ordinary resolution appoint a person who iswilling to act as a director to fill a vacancy or as an additional director of the Company. The Directors mayappoint a person who is willing to act as a Director, either to fill a vacancy or as an additional director, providedthe appointment does not cause the number of directors of the Company to exceed any number fixed by or inaccordance with the Articles as the maximum number of Directors. A Director so appointed shall hold officeonly until the next following annual general meeting when he shall retire from office and be eligible forreappointment. If not reappointed at such annual general meeting, he shall vacate office at its conclusion.

At each annual general meeting one-third of the Directors or, if their number is not three or an integral multipleof three, the number nearest to but not exceeding one-third, shall retire from office. Notwithstanding anythingelse in the Articles, each Director must retire at the third annual general meeting following his appointment orre-appointment in a general meeting.

In addition to any power of removal conferred by the Act, the Company may by ordinary resolution of itsshareholders, or a unanimous resolution of its Directors, remove any Director of the Company before theexpiration of his period of office. Such removal shall be without prejudice to any claim such Director may havefor damages for breach of any contract of service between him and the Company.

A Director shall not vote (or be counted in the quorum at a meeting) in respect of any resolution concerning hisown appointment (including fixing or varying the terms of appointment), or the termination of his ownappointment, as the Director of, or the holder of any other office or place of profit with, the Company or anyundertaking in which the Company is interested. However, where proposals for such resolutions relate to two ormore Directors, those proposals may be divided and a resolution may be put in relation to each Directorseparately and in such case each of the Directors concerned (if not otherwise debarred from voting) shall beentitled to vote (and be counted in the quorum) in respect of each resolution, except that concerning him.

Save as otherwise provided in the Articles, a Director shall not vote (or be counted in the quorum) in respect ofany transaction or arrangement or any other proposal in which he (or any person connected with him) has aninterest which may reasonably be regarded as likely to give rise to a conflict of interest and, if he purports to doso, his vote shall not be counted.

139

The Directors may, to the fullest extent permitted by law in accordance with the Articles, authorise a Director tobe involved in any matter which would otherwise constitute or give rise to a breach by a Director of his dutyunder the Act to avoid a situation in which he has, or can have, a direct or indirect interest that conflicts orpossibly may conflict with the interests of the Company (including a breach which would arise by virtue of hisappointment as director).

A Director may (unless otherwise prohibited under the Articles) vote and be counted in the quorum in respect ofany resolution concerning any of the following matters:

(a) any transaction, arrangement or proposal in which he is interested by virtue of an interest inshares, debentures or other securities of the Company or otherwise in or through the Company;

(b) the giving of any guarantee, security or indemnity in respect of:

(i) money lent or obligations incurred by him or by any other person at the request of, or forthe benefit of, the Company or any of its subsidiary undertakings; or

(ii) a debt or obligation of the Company or any of its subsidiary undertakings for which hehimself has assumed responsibility (in whole or in part and whether alone or jointly withothers) under a guarantee or indemnity or by the giving of security;

(c) any arrangement, transaction or proposal concerning the issue or offer of shares, debentures orother securities of or by the Company or any of its subsidiary undertakings for subscription orpurchase, in respect of which he is or may be entitled to participate in his capacity as a holderof any such securities or as an underwriter or sub-underwriter;

(d) any transaction, arrangement or proposal concerning any other company in which he isinterested, directly or indirectly, and whether as an officer or shareholder or otherwise,provided that he (together with persons connected with him) does not hold an interestrepresenting one per cent. or more of any class of the equity share capital of such company (orof any third company through which his interest is derived) or of the voting rights available tomembers of the relevant company;

(e) any transaction or arrangement for the benefit of employees of the Company or of any of itssubsidiary undertakings which does not accord to him any privilege or benefit not generallyaccorded to the employees to whom the transaction or arrangement relates;

(f) the purchase or maintenance of insurance either for or for the benefit of any Director or personswho include Directors;

(g) the giving of any indemnity against liability incurred by him in connection with his duties,powers or office in relation to the Company or any of its subsidiary undertakings, where allother Directors are also offered indemnities on substantially the same terms; and

(h) any transaction, arrangement or proposal relating to the funding of expenditure incurred by himin defending proceedings in connection with his duties, powers or office in relation to theCompany or any of its subsidiary undertakings (or enabling him to avoid incurring suchexpenditure), where all other Directors are also offered a transaction, arrangement or proposalon substantially the same terms.

To the extent permitted by the Act, and provided that he has declared the nature and extent of his interest:

(a) a Director may hold any other office or place of profit with the Company (except that ofauditor) in conjunction with his office of director for such period and on such terms (as toremuneration or otherwise) as the Directors may decide;

(b) a Director may enter into any transaction or arrangement with the Company with regard to histenure of any office or position in the management, administration or conduct of its business oras vendor, purchaser or otherwise;

(c) a Director may act by himself or by his firm in a professional capacity for the Company (exceptas auditor) and he or his firm shall be entitled to remuneration for professional services as if hewere not a Director.

140

No Director shall, by reason of his holding office be liable to account to the Company for any remuneration,profit or benefit received as a result of any aforementioned permitted interest and no transaction or arrangementshall be avoided by reason of any Director having any such permitted interested.

The fees of the Directors (other than any Director who holds an executive office or employment with theCompany or any subsidiary of the Company) for their services as directors shall not exceed in aggregate£250,000 per annum (or such higher amount as the Company may decide to set by ordinary resolution). Subjectto this limit, a director shall be paid a fee (to accrue from day to day) at such rate as the Directors may decide.

Any Director who holds any executive office (including the office of chairman or deputy chairman whether ornot such office is held in an executive capacity) or who serves on any committee or who acts as trustee of aretirement benefits scheme or employees’ share scheme or who otherwise performs services which, in theopinion of the Directors are beyond the ordinary duties of a Director may be paid such extra remuneration byway of salary, commission or otherwise as the Directors may decide in accordance with the Articles.

The Company will pay to any Director all proper and reasonable expenses incurred by him in attending andreturning from meetings of the board or of any committee or general meetings or otherwise in connection withthe business of the Company or in the performance of his duties as a Director.

10.13 Borrowing powers

The Articles contain no restrictions on the borrowings of the Company.

10.14 Notices

Any notice or other document to be sent or given pursuant to the Articles shall be in writing except that a noticecalling a meeting of the directors of the Company need not be in writing. Any such notice or other document maybe sent using electronic communications to such address (if any) as may for the time being be notified for thatpurpose to the person sending the notice or other document by or on behalf of the person to whom the notice ordocument is sent. The Directors may from time to time specify the form and manner in which a notice may begiven by or to the Company by electronic communications.

The Company may give any notice in writing, document or other communication to a member:

(a) personally;

(b) by sending it by post in a prepaid envelope addressed to the member at his address in theRegister;

(c) by leaving it at that address; or

(d) by sending it using electronic communication to such address (if any) as may for the time beingbe notified to the Company by or on behalf of the member for that purpose.

In the case of joint holders of a share, all notices and other documents shall be given to the joint holder whosename stands first in the Register in respect of the joint holding and notice so given shall be sufficient notice to allthe joint holders.

A member whose address in the register is not within the United Kingdom and who gives to the Company apostal address within the United Kingdom at which notices may be given to him shall be entitled to have noticesgiven to him at that postal address, but otherwise no such member shall be entitled to receive any notice from theCompany throughout the postal system.

11. Share Incentive Arrangements

11.1 General

All of the Share Incentive Arrangements are discretionary share plans.

The Employee Option Schemes, the Employee LTIP and the Employee JSOP are administered by theRemuneration Committee. The Non-Employee Option Scheme, the Non-Employee JSOP and the Non-EmployeeLTIP are administered by the Board.

With the exception of the persons to whom awards may be granted (see “Eligibility” below), the commercialterms of the Non-Employee Option Scheme broadly mirror those of the Employee Option Scheme, thecommercial terms of the Non-Employee JSOP broadly mirror those of the Employee JSOP and the commercialterms of the Non-Employee LTIP broadly mirror those of the Employee LTIP. Where the terms differ, thedifference is explained below.

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The Qualifying Employee Option Scheme is registered with HMRC as a Schedule 4 CSOP scheme (as defined inthe Income Tax (Earnings and Pensions) Act 2003).

11.2 Awards

Awards under the Option Schemes take the form of options to acquire Ordinary Shares. The exercise price perOrdinary Share payable under an option is determined by the Remuneration Committee (or the Board, as the casemay be) at the time of grant of an option. Options granted pursuant to the Qualifying Employee Option Schememay not have an exercise price that is less than the market value of an Ordinary Share as at the date of grant.

Awards granted under the LTIPs take the form of options with a nil or nominal exercise price, contingent rightsto acquire Ordinary Shares for no consideration or awards of restricted shares for no consideration. In general,and unless there are legal and/or tax reasons for doing otherwise, awards take the form of options with anexercise price of nil which are usually capable of exercise, once vested, at any time before the tenth anniversaryof their date of grant. Contingent awards and options granted under the Non-Employee LTIP may be granted inconnection with the acquisition by an eligible participant of Ordinary Shares, either by way of subscription fromthe Company or by purchase from an existing Shareholder or Shareholders (“Matching Award”).

Awards granted under the JSOPs are structured as an interest in Ordinary Shares, jointly owned with the Trustee(“JSOP Awards”). An award holder’s interest in Ordinary Shares pursuant to a JSOP Award is a beneficialinterest in the value of each of the Ordinary Shares above a specified “hurdle”. The hurdle of a JSOP Award isdetermined by the Remuneration Committee (or the Board, as the case may be) at the time of grant of the award.

In conjunction with a JSOP Award, the Committee (or the Board, as the case may be) has discretion to grantrights to receive a cash payment to participants. The intention is to use these cash awards to supplement JSOPAwards in the event that the “hurdle” set on the JSOP Award is greater than the prevailing market value of anOrdinary Share on the date of grant of JSOP Award (or greater than such other ‘strike price’ that the Committeeor Board, as the case may be, wishes to establish).

11.3 Eligibility

All employees (including executive directors) of the Group may be granted awards under the Employee OptionSchemes, the Employee LTIP and/or the Employee JSOP.

Non-Executive Directors and other non-employees of the Group may be granted awards under theNon-Employee Option Scheme, the Non-Employee JSOP and/or the Non-Employee LTIP.

11.4 Grant of Awards

The Committee (or, in the case of the Non-Employee Option Scheme, the Non-Employee JSOP and theNon-Employee LTIP, the Board) has absolute discretion to select the persons to whom awards may be grantedand, subject to the limits set out below, in determining the number of Ordinary Shares to be subject to eachaward.

Awards may ordinarily be granted during the period of 42 days commencing on: (a) the date of the preliminaryannouncement of the Company’s annual results or the announcement of its half-yearly results in any year; or(b) any other time fixed by the Committee (or, as the case may be, the Board) where, in its discretion,circumstances are considered to be exceptional so as to justify the grant of awards.

No award will be granted after the tenth anniversary of the date on which the relevant Share IncentiveArrangement was adopted by the Company.

11.5 Plan limits

On a given date, the total number of Ordinary Shares issued or transferred from treasury (or capable of issue ortransfer from treasury) in respect of awards granted under the Option Schemes or the JSOPs, when added to allother awards or rights granted in the preceding ten year period under any share incentive scheme operated by theCompany enabling Executive or Non-Executive Directors, employees or consultants of any Company in theGroup to acquire Ordinary Shares (“Other Share Scheme”) will not exceed 16,500,000 (“16,500,000 Limit”).

On a given date, the total number of Ordinary Shares issued or transferred from treasury (or capable of issue ortransfer from treasury) in respect of awards granted under the Employee LTIP or the Non-Employee LTIP, whenadded to all other awards or rights granted in the preceding ten year period under any Other Share Scheme, will notexceed 12.5 per cent. of the ordinary share capital of the Company in issue at that time (“LTIP Plan Limits”).

Ordinary Shares subject to awards granted under the Pre-Admission Option Plans prior to 17 January 2014 (being thedate on which the Company was originally admitted to trading on AIM) do not count towards the LTIP Plan Limits.A further 5,416,948 Ordinary Shares issued in respect of JSOP Awards (being awards which were granted asreplacement awards for awards granted prior to 17 January 2014) also do not count towards the LTIP Plan Limits.

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Ordinary Shares previously issued pursuant to a JSOP Award which has been released or cancelled (so that theOrdinary Shares are solely held by the Trustee) continue to be counted for the purposes of applying the16,500,000 Limit and the LTIP Plan Limits.

11.6 Individual limits

Each individual’s participation in the Qualifying Employee Option Scheme will be limited so that the aggregatemarket value of Ordinary Shares subject to all options (calculated as at the date of grant of each option) held bythat individual and granted under the Qualifying Employee Option Scheme or any other Schedule 4 CSOPscheme operated by the Company or any associated company will not exceed £30,000 (or such other amount asmay be permitted under the Schedule 4 of the Income Tax (Earnings and Pensions) Act 2003 from time to time).

Each individual’s participation in the Employee LTIP will be limited so that, in any one financial year of theCompany, the aggregate market value of Ordinary Shares subject to all awards (calculated as at the date of grantof each award) granted to the individual under the LTIP in that financial year shall not exceed 100 per cent. ofthe individual’s base salary at the date of grant. This individual limit can be exceeded (up to an absolute limit of200 per cent. of the individual’s base salary) in circumstances that the Committee considers to be exceptional.

11.7 Performance conditions

The vesting of awards may be made conditional on the achievement of objective performance conditions, and/orthe passage of time, set at the time of grant. The vesting of awards under the LTIPs will be subject toperformance conditions measured over a period of at least three years.

After an award has been granted, the Committee (or the Board, as the case may be) may vary a performancecondition if anything happens which causes the Committee (or the Board, as the case may be) to consider itappropriate to do so provided that any amended condition is not materially more difficult and is no lesschallenging to satisfy than the original performance condition was intended to be when originally set.

11.8 Dividends

If during the vesting period of an award granted under a LTIP the Company pays any dividends then, on thevesting of the award, the award shall vest as to a number of additional Ordinary Shares that have a value equal tototal value of the dividends that would have been paid during the vesting period on the Ordinary Shares in respectof which the award vests. Alternatively, the Committee may determine to settle in cash the value of the dividendsthat would have been paid during the vesting period on the Ordinary Shares in respect of which the award vests.

The Trustee and the relevant award holder are required to waive their entitlement to receive dividends in respect ofjointly owned Ordinary Shares under the JSOPs and to abstain from casting votes attaching to such Ordinary Shares.

11.9 Cessation of employment

An award will normally lapse upon the holder of the award ceasing to be employed by (or holding office with)the Group. If, however, an award holder’s employment ceases:

(a) due to injury, ill-health or disability; or

(b) in the case of awards granted pursuant to the Employee Option Schemes, the Employee LTIPor the Employee JSOP, due to retirement, redundancy or upon the transfer out of the Group ofa company or business by which the award holder is employed; or

(c) in any other circumstance determined by the Committee (or the Board, as the case may be) tobe one in which it is fair that an award should be retained,

an award held by that individual will not lapse. Instead:

(a) options granted under the Option Schemes may be exercised, and Ordinary Shares under aJSOP Award may be drawn down at any time within the 90 day period commencing on the dateof cessation of employment (or office), but only to the extent that it has vested at such time (orto such further extent as permitted by the Committee (or the Board, as the case may be) in itsabsolute discretion); and

(b) awards granted under a LTIP may be retained and will vest at the end of the usual vestingperiod subject to:

(i) the extent to which the performance conditions are met; and

(ii) unless the Committee in its discretion determines otherwise, being scaled back to reflectthe proportion of the usual vesting period which had expired before the cessation ofemployment.

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Where an award holder dies, the estate shall normally benefit from the awards. The Committee (or the Board, asthe case may be) may waive any outstanding vesting conditions and/or apply performance conditions on suchmodified basis as it considers appropriate. Any option granted under the Option Schemes must be exercised, andany Ordinary Shares under a JSOP Award must be drawn down, within 12 months of the date of death.

11.10 Lapse of Matching Awards

It is intended that if, before a Matching Award granted under the Non-Employee LTIP vests, the holder of theMatching Award sells or otherwise disposes of any of the Ordinary Shares in connection with which theMatching Award was granted to the award holder (“Investment Shares”), the Matching Award will immediatelylapse as to such proportion of the Ordinary Shares under the Matching Award as is equal to the proportion of theInvestment Shares sold or disposed of on that occasion (unless the Board in its discretion determines otherwise).

11.11 Takeover events

In the event of a takeover or scheme of arrangement of the Company:

(a) options granted under the Option Schemes may be exercised, and Ordinary Shares under aJSOP Award may be drawn down, but only to the extent that they have vested at such time (orto such further extent as permitted by the Committee (or the Board, as the case may be) in itsabsolute discretion); and

(b) awards granted under a LTIP will vest early subject to:

(i) the extent to which the performance conditions have been met (assessed on such modifiedbasis as the Committee determines to be appropriate); and

(ii) unless the Committee in its discretion determines otherwise, being scaled back to reflectthe proportion of the usual vesting period which had expired before the takeover, schemeof arrangement or winding-up of the Company.

In the event of a voluntary winding up of the Company:

(a) options granted under the Option Schemes may be exercised, and Ordinary Shares under aJSOP Award may be drawn down, but only to the extent that they have then vested (or to suchfurther extent as is permitted by the Committee (or the Board, as the case may be) in itsabsolute discretion) and conditional on the passing of the resolution; and

(b) awards granted under the LTIP will vest early on the basis described above in the context of atakeover.

11.12 Other Award terms

Awards granted under the Share Incentive Arrangements are not capable of transfer or assignment. Benefitsobtained under the Share Incentive Arrangements are not pensionable.

11.13 Adjustment of Options and Awards

The number of Ordinary Shares under an award, their nominal value and, in the case of options granted under theOption Schemes, the exercise price of an option may be adjusted by the Committee or the Board, as the case may be,in the event of any alteration to the share capital of the Company, a rights issue, a demerger or a special dividend.

JSOP Awards may be adjusted by the Committee (or the Board, as the case may be) in the event of any alterationto the share capital of the Company, a rights issue, a demerger or a special dividend. In the event of a rights issue,the Trustee and a JSOP Award holder must sell sufficient of the nil paid rights on the jointly owned OrdinaryShares to fund the exercise of the balance of such rights. Additional Ordinary Shares acquired pursuant to therights issue are added to and held on the same terms as the original jointly owned Ordinary Shares.

11.14 LTIP Clawback

The rules of the LTIPs include ‘clawback’ provisions that apply where it is discovered (within three yearsfollowing the vesting of an award) that there has been a material misstatement in the financial results of theCompany, an error in the assessment of any performance condition or an act of gross misconduct on the part ofthe award holder prior to the vesting of an award, and such misstatement, error or unknown conduct has resultedin an award under the LTIPs vesting to a greater extent than it otherwise should have done.

In these circumstances, the Committee may make reductions to other awards held by the award holder inquestion which would otherwise vest under the LTIPs, make reductions to other awards held by the award holdergranted pursuant to share incentive arrangements adopted in the future and/or require the award holder inquestion to pay an amount equal to the value of the amount of an award which has not otherwise been recovered.

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11.15 Administration and amendment

The Committee (or the Board, as the case may be) may amend the provisions of the Share IncentiveArrangements. The rules of the Share Incentive Arrangements that relate to:

(a) the persons to whom awards may be granted;

(b) the limits on the number of Ordinary Shares that may be issued;

(c) the maximum entitlement of any award holder; and

(d) the basis for determining an award holder’s entitlement to Ordinary Shares or awards and forthe adjustment thereof or of an award holder’s interest in Ordinary Shares following anyincrease or variation in the share capital of the Company,

cannot be amended to the advantage of any award holder or potential award holder without the prior approval ofthe Company in general meeting except for minor amendments to benefit the administration of the ShareIncentive Arrangements, to take account of any change in legislation or to obtain or maintain favourable tax,exchange control or regulatory treatment for award holders, the Company or any subsidiary of the Company.

12. Significant Shareholders

As at the Reference Date, and so far as is known to the Company by virtue of the notifications made to itpursuant to the Act, the name of each person (other than any Director) who, directly or indirectly, is interested inthree per cent. or more of the Company’s share capital (the “Significant Shareholders”), and the amount of suchperson’s interest, is set out in the table below:

Name of shareholder

As at the Reference Date Immediately following AdmissionNumber of Ordinary

SharesPer cent. of total

number of issuedOrdinary Shares

Number of OrdinaryShares

Per cent. of totalnumber of issued

Ordinary Shares (1)

Woodford InvestmentManagement(2) 48,218,276 18.15 113,672,821 18.06Odey AssetManagement 38,882,000 14.64 48,882,000 7.77Jupiter AssetManagement 25,536,485 9.61 47,354,666 7.52Close Brothers AssetManagement 10,320,527 3.88 11,065,981 1.76Employee BenefitTrust 10,159,308 3.82 10,159,308 1.61Otus CapitalManagement 8,828,344 3.32 10,101,071 1.61Herald InvestmentManagement Ltd 8,369,048 3.15 10,187,229 1.62

(1) Assuming no take up under the Offer for Subscription and that no new Ordinary Shares (other than the New Ordinary Shares) are issuedfrom the Reference Date until Admission.(2) Woodford Investment Management Ltd is interested in these shares as agent and discretionary manager of certain discretionary managedfunds. The shares are held by the funds via their respective nominees.

The Significant Shareholders do not have different voting rights from any of the Company’s other Shareholders.

As at the Reference Date, the Company is not aware of any person who, directly or indirectly, jointly orseverally, exercises or could exercise control over the Company nor is it aware of any arrangements the operationof which may at a subsequent date result in a change in control of the Company.

13. Working capital statement

The Company is of the opinion that, after taking account of the net proceeds of the Placing and the existingavailable facilities to the Group (but excluding any proceeds of the Offer for Subscription), the Enlarged Grouphas sufficient working capital for its present requirements, that is, for at least the next twelve months from thedate of this document.

For the purposes of the AIM Rules, the Directors are of the opinion, having made due and careful enquiry that,after taking into account the net proceeds of the Placing and the existing available facilities to the Group, (butexcluding any proceeds of the Offer for Subscription) the working capital available to the Enlarged Group will besufficient for its present requirements, that is for the period of at least 12 months from the date of Admission.

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14. Significant change

There has been no significant change in the Group’s financial or trading position since 31 December 2016, the dateof the last annual report and audited consolidated accounts of the Group, contained in Part 11 of this document.

There has been no significant change in Entanet’s financial or trading position since 31 December 2016, the dateof the last annual report and audited accounts of Entanet, contained in Part 12 of this document.

15. Litigation

15.1 CityFibre

Save as set out below, there are no governmental, legal or arbitration proceedings (including any suchproceedings which are pending or threatened of which the Company is aware) during the 12 months precedingthe date of this document which may have, or have had in the recent past a significant effect on the Company’sand/or the Group’s financial position or profitability.

Business Connectivity Market Review

In its BCMR, Ofcom reviewed competition in the provision of leased lines to businesses in the UK (being high-quality, dedicated, point-to-point data transmission services used by businesses and providers of communicationsservices of relevance to many business information and communication technology services and mobile andresidential broadband services). As part of the review, Ofcom set out its analysis of the relevant markets,identified any provider with significant market powers within those markets, and set out remedies to addresscompetition issues which might otherwise arise from significant market power.

As a result of the review, Ofcom imposed (i) a dark fibre access remedy on Openreach, requiring it provide unlitstrands of optical fibre to other communication providers; and (ii) a price cap on leased line services.

CityFibre submitted an appeal against certain aspects of the BCMR in June 2016, challenging Ofcom’s conclusionsas to (i) its definition of the relevant product and geographic markets; (ii) its design of the leased lines price cap andrelated pricing methodologies adopted by Ofcom; and (iii) the suitability of Ofcom’s proposed remedies. Certainmatters in respect of CityFibre’s appeal were submitted to the Competition and Markets Authority, whichdetermined that Ofcom was not wrong in its choice of pricing methodology for leased lines; the remainder ofCityFibre’s appeal is on-going in the Competition Appeals Tribunal and is being considered alongside appealssubmitted by BT and TalkTalk against certain aspects of the BCMR. CityFibre’s appeal relates to certainconclusions of the BCMR, and as such, is not a claim for damages which can be quantified.

Should the challenges brought by CityFibre, BT and TalkTalk prove unsuccessful, the BCMR will remainunchanged.

15.2 Entanet

Save as set out below, there are no governmental, legal or arbitration proceedings (including any suchproceedings which are pending or threatened of which the Company is aware) during the 12 months precedingthe date of this document which may have, or have had in the recent past a significant effect on the EntanetGroup’s financial position or profitability.

In November 2016 Entanet International (a wholly owned subsidiary of Entanet) settled a claim from theliquidator of Changtel Solutions UK Limited (“Changtel”), a company previously associated with EntanetInternational. This related to certain loan repayments received by Entanet International from Changtel in 2013which were subject to a claim by the liquidators of Changtel under s127 of the Insolvency Act 1986 (concerningdispositions of a company’s property after commencement of its winding up).

In connection with the above matter, in September 2016, the Entanet Group settled claims it had against a formershareholder of Entanet International and certain parties connected to that shareholder. The claims were inconnection with dividends previously paid by Entanet International and claims made in connection with the sharepurchase agreement under which Entanet acquired Entanet International in 2014.

As part of the settlement with the former shareholder of Entanet International and certain parties connected tothat shareholder, it was also agreed that the 300,000 F ordinary shares in Entanet that were issued as part of thepurchase consideration, would be repurchased by Entanet at their nominal value of £0.30.

16. Research and Development

The Company does not undertake significant research and development activities and has not operated formalresearch and development policies for the financial years ended 31 December 2014, 2015 and 2016.

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17. Intellectual Property

The Company’s business is not dependent to a material extent on any intellectual property rights, however theGroup’s trademarks, domain names and other intellectual property rights are important to its success.

18. Material contracts

Set out below is a summary of each contract (not being a contract entered into in the ordinary course of business)entered into by the Company or any member of the Group (i) within the two years immediately preceding thedate of this document and which are or may be material to the Group; or (ii) which contain any provision underwhich any member of the Group has any obligation or entitlement which is material to the Group as at theReference Date.

18.1 Entanet Acquisition Agreement

On 5 July 2017, the Company entered into a share purchase agreement pursuant to which the Company agreed,conditionally, to purchase the entire issue share capital of Entanet from Yun-Ju Elsa Chen and others (the“Sellers”). The consideration of £29 million (on a debt free and cash free basis and therefore subject toadjustments, plus a daily rate of £5,518 for each day between signing and completion) is payable in cash oncompletion, other than £4.65 million which is deferred (the “Deferred Consideration”). £1.65 million of theDeferred Consideration which is due to certain of the Sellers (being the “Management Sellers”) shall bedeferred for up to 12 months and may be forfeited if a Management Seller is deemed to be a bad leaver duringthat period. Subject to the relevant Management Seller not being a bad leaver, a Management Seller may elect,on or prior to the date falling 12 months after completion of the Entanet Acquisition, to apply any or all of hisentitlement to £1.65 million of the Deferred Consideration in subscribing for shares in the Company. Pursuant tothe terms of the restricted share agreement which shall be entered into in the event of such an election by aManagement Seller, any such shares subscribed for will be subject to a lock-in for the earlier of (i) the firstanniversary of the subscription date; or (ii) the date falling 18 months after completion of the Entanet Acquisitionand will be forfeit if such Management Seller is deemed to be a bad leaver prior to the expiry of the 12 monthperiod. £3 million of the Deferred Consideration which is due to all Sellers shall be deferred for up to 24 monthsand only payable to the extent there are no indemnity claims or claims which are not covered by the warranty andindemnity insurance policy (the “W&I Policy”).

The Entanet Acquisition Agreement is conditional upon, inter alia, (i) the approval by the Shareholders of theResolutions numbered 1 and 2 at the General Meeting; (ii) the Underwriting Agreement becoming unconditionalin accordance with its terms; and (iii) the admission of the New Ordinary Shares to trading on AIM becomingeffective in accordance with the AIM Rules. Completion of the Entanet Acquisition is expected to occur, subjectto satisfaction of the conditions, within two business days following Admission. Under the terms of the EntanetAcquisition Agreement warranties and indemnities and a tax covenant have been given by certain of the sellers,and a W&I Policy has been taken out by the Company in respect of potential future claims made under thewarranties and tax covenant (subject to market standard exclusions). In the event that the conditions in theEntanet Acquisition Agreement are not satisfied, the Company has agreed to cover the Sellers’ non-contingentlegal and financial professional fees up to an agreed cap.

The Sellers’ liability under the Entanet Acquisition Agreement is limited in time and amount and does not exceedthe amount of consideration (including Deferred Consideration (if any)) paid to the relevant Seller and is furtherlimited where such claims are covered by the W&I Policy to £290,000 in aggregate. Where claims are notcovered by the W&I Policy, liability for breach of warranty or the tax covenant is capped at £600,000 inaggregate. Any claims under the non-tax warranties must be notified within 18 months of completion of theEntanet Acquisition and any claims under the tax warranties or tax covenant must be notified on or before thedate falling 40 Business Days after the sixth anniversary of the end of the accounting period of Entanet current atcompletion of the Entanet Acquisition.

The Entanet Acquisition Agreement is capable of termination by the Company following signing but prior tocompletion of the Entanet Acquisition if the Company becomes aware of: (i) any breach of any of the title andcapacity warranties; (ii) any facts or matters which would constitute a breach of any of the title and capacitywarranties if they were repeated at completion of the Entanet Acquisition; (iii) any disposal or grant of anyencumbrance over the shares to be sold pursuant to the Entanet Acquisition; (iv) any sale or disposal of anymaterial assets by Entanet or the Entanet Group without the prior written consent of the Company; and (v) amaterial adverse change.

18.2 Underwriting Agreement

On 5 July 2017 the Company and the Underwriters entered into an Underwriting Agreement in connection withthe proposed Placing of the Placing Shares by way of a firm placing to raise gross proceeds of £185 million

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(the “Firm Placing”) and an additional placing to raise further gross proceeds of £15 million by way of anaccelerated book build (the “ABB Placing”). Under the terms and conditions of the Underwriting Agreement,each of the Underwriters severally agreed to use reasonable endeavours to procure placees to subscribe for thePlacing Shares at the Offer Price and to the extent placees are not procured, to subscribe themselves in theirrelevant proportion for any of the 336,363,636 Placing Shares to be issued for cash pursuant to the Firm Placing(the “Firm Placing Shares”) at the Offer Price. In addition to the extent that any placee procured by theUnderwriters fails to subscribe for all or any of the New Ordinary Shares which have been allocated to it in theABB Placing and for which it has agreed to subscribe (the “ABB Defaulted Shares”), each of the Underwritersseverally agreed to subscribe themselves in their relevant proportion for the ABB Defaulted Shares at the OfferPrice.

The Placing is conditional, inter alia, upon: (i) the Underwriting Agreement having become unconditional in allrespects (save for the condition relating to Admission) and not having been terminated in accordance with itsterms; (ii) Admission becoming effective by not later than 8.00 a.m. on 28 July 2017 (or such later date as theCompany may agree with the Underwriters); and (iii) the passing, without material amendment, of theResolutions.

The Company has given certain market standard warranties and indemnities to the Underwriters concerning,among other things, the accuracy of the information contained in this document. The Underwriters have the rightto terminate the Underwriting Agreement in certain circumstances prior to Admission, including, in particular, inthe event of a breach of the warranties. Subject to the Underwriting Agreement becoming unconditional and notbeing terminated in accordance with its terms, the Underwriters shall be entitled to a commission (to be sharedamongst them in agreed proportions), together with any VAT chargeable thereon, equal to:

a) 1.25 per cent. of the product of the Offer Price and total number of New Ordinary Sharesissued in the Capital Raising;

b) 0.25 per cent. of the product of the Offer Price and the total number of Firm Placing Sharesissued to Placees who are not current shareholders; and

c) a discretionary commission of up to 0.5 per cent. of the product of the Offer Price and the totalnumber of Firm Placing Shares issued;

d) a discretionary commission of up to 1.75 per cent. of the product of the Offer Price and thetotal number of New Ordinary Shares issued in the ABB Placing; and

e) a discretionary commission of up to 1.75 per cent. of the product of the Offer Price and thetotal number of Offer for Subscription Shares issued in the Offer for Subscription.

18.3 Redcentric Acquisition Agreement

On 23 September 2016 Redcentric Solutions Limited, Redcentric Managed Solutions Limited, Redcentric MSLimited, Redcentric Communications Limited, CityFibre Limited and CityFibre Metro Networks Limited enteredinto an asset purchase agreement pursuant to which CityFibre Limited agreed to purchase 137 kilometres ofducted network (located, inter alia, in Cambridge, Portsmouth, Southampton and Nottingham) from RedcentricSolutions Limited. The consideration was £5 million (together with VAT of £1 million) payable in cash oncompletion of the acquisition, which completed on 23 September 2016.

The acquisition agreement contained certain warranties given by Redcentric Solutions Limited in relation to theacquired assets, subject to certain limitations as to quantum. The time period for bringing claims under thewarranties expires 18 months from completion of the acquisition.

18.4 Redcentric Network Access and Maintenance Agreement

On 23 September 2016 CityFibre Limited and Redcentric Solutions Limited entered into a Network Access andMaintenance Agreement under which CityFibre Limited granted rights to Redcentric Solutions Limited to useCityFibre’s passive fibre networks which in turn allowed Redcentric to provide services to its customers.

These rights include: (i) the right for Redcentric Solutions Limited to continue to use fibre contained withincertain network assets acquired by CityFibre from Redcentric Solutions Limited and (ii) to deliver services tocertain connected sites in Cambridge and Portsmouth.

Redcentric Solutions Limited has agreed to pay to CityFibre Limited no less than £4,540,800 over an initial10-year period for these connections (as they may be replaced in line with the terms of the agreement from timeto time). The right to use these connections may continue beyond this initial 10 year term unless terminated byeither party.

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18.5 KCOM Acquisition Agreement

On 11 December 2015 KCOM, Affiniti Integrated Solutions Limited, CityFibre Limited, CityFibre MetroNetworks Limited and the Company entered into an asset purchase agreement pursuant to which CityFibreLimited agreed, conditionally, to purchase the network assets from KCOM and Affiniti Integrated SolutionsLimited. The consideration was £90 million (together with VAT of £18 million) payable in cash on completionof the KCOM Acquisition.

Completion of the KCOM Acquisition took place on 18 January 2016.

The KCOM Acquisition Agreement contained certain warranties given by KCOM in relation to the Assets,subject to certain limitations as to quantum. The time period for bringing claims under the warranties expires18 months from completion of the acquisition.

The Company agreed to procure the performance by CityFibre Limited and CityFibre Metro Networks Limitedof all of their obligations under the KCOM Acquisition Agreement pursuant to the terms of a parent companyguarantee, further described in section 18.7 of this Part 10.

18.6 KCOM Network Access and Maintenance Agreement

On 11 December 2015 CityFibre Limited and KCOM entered into a Network Access and MaintenanceAgreement (the “NAA”). Under the NAA, CityFibre Limited grants to KCOM rights to use CityFibre’s passivefibre networks (including network assets acquired by CityFibre Limited under the KCOM AcquisitionAgreement) which in turn allows KCOM to provide services to its customers.

The NAA has an initial term of 15 years and may continue in effect after this period unless either party decides toterminate it. KCOM also benefits from a break clause that allows it to terminate the NAA for convenience on sixmonths’ notice, with effect on the fifth (or any subsequent) anniversary of commencement. KCOM has variousother termination rights, including for CityFibre Limited’s insolvency or material breach, specific types ofdefault or if CityFibre Limited persistently fails to meet the agreed service levels. Following termination,CityFibre Limited must continue to support KCOM for up to 24 months while KCOM puts in place alternativearrangements.

KCOM agreed to meet a minimum financial commitment of £5 million per year for the first five years. After thefirst five years, KCOM has the right to benchmark the services being provided by CityFibre Limited, whichcould cause the charges under the NAA to decrease (or potentially to increase).

CityFibre Limited has committed to specific service levels in relation to the time taken to fix any faults that occuron the network. Certain events that are outside CityFibre Limited’s control do not count towards CityFibreLimited’s satisfaction of the service levels. Failure to meet a service level will result in CityFibre Limited beingrequired to pay service credits to KCOM, subject to an annual cap of £560,000 (with certain exceptions).

CityFibre Limited’s general liability under the NAA is subject to a cap of £3 million in respect of any one claim,an annual liability cap of 125 per cent. of any amounts payable by KCOM in that year and an aggregate liabilitycap over the 15 year term of £25 million (subject to certain exceptions). CityFibre Limited has a separate liabilitycap of £10 million in respect of loss or damage to property.

18.7 Parent Company Guarantee

On 11 December 2015 the Company and KCOM entered into a parent company guarantee in relation to the NAA(as defined in section 18.6 of this Part 10) (the “PCG”). Under the PCG, the Company guaranteed all ofCityFibre Limited’s obligations under the NAA and indemnified KCOM in respect of any loss or damage causedby CityFibre Limited’s failure to perform its obligations under the NAA. KCOM is obliged to exercise itsremedies against CityFibre Limited under the NAA before claiming under the PCG. The PCG continues until thedate of termination of the NAA or (if later) until the end of any termination assistance period under the NAA.The Company’s liability under the PCG shall not in any circumstances be greater than CityFibre Limited’sliability under the NAA.

18.8 Management Services Agreement

On 11 December 2015 CFHL and CityFibre Limited entered into a management services agreement pursuant towhich CFHL agreed to provide a variety of services such as general office and administrative functions,accounting, pricing, engineering, maintenance work and customer care (the “Services”), to enable CityFibreLimited to operate a number of contracts which were assigned to CityFibre Limited pursuant to an intra-grouptransfer agreement dated 11 December 2015 between CFHL, CityFibre Networks Limited and CityFibre Limited.Under the management services agreement CityFibre Limited has agreed to pay CFHL a monthly fee of 12.5 percent. of revenue plus any capitalised labour costs incurred by CFHL during the provision of the Services.

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The agreement will terminate on the termination of the Facility Agreement or may be terminated by CityFibreLimited by providing 30 days’ notice.

18.9 Facility Agreement

On 14 December 2015, CityFibre Limited as borrower entered into a facilities agreement (the “FacilityAgreement”) with Proventus Capital Partners III AB (publ.) as agent and security agent (“PCP”). The lendersare funds managed by Proventus Capital Management AB or Proventus Capital Partners III and affiliated funds(“Lender(s)”).

The Facility Agreement comprises three main facilities (the “Facilities”):

(a) a £35 million term loan facility (the “Acquisition Facility”) which was drawn down on18 January 2016 and used towards financing the purchase price for the KCOM Acquisition;

(b) a £35 million term loan facility (the “Capex Facility” together with the Acquisition Facility,the “Term Facilities”) which is made available to finance permitted growth capitalexpenditure by reference to contracted revenues under customer contracts and permittedacquisitions and which is available for two years from the date of the Facility Agreement; and

(c) a £30 million super senior revolving credit facility (the “RCF”) which is made available for thesame purposes as the Capex Facility and up to £5 million towards general corporate andworking capital purposes and which is available for five years and 11 months years from thedate of the Facility Agreement.

In addition, the Facility Agreement contains a £65 million accordion facility which may be made available byany Lender under the Term Facilities at its discretion to refinance loans under the RCF, provided that drawdownunder any use of this facility occurs before January 2020.

CityFibre Limited agreed to pay the following:

(a) interest at a rate of 10 per cent. for the Term Facilities and 4.5 per cent. for the RCF, in eachcase over LIBOR. A ratchet mechanism based on leverage levels may bring these marginsdown to 8 per cent. and 4 per cent. respectively. Additional default interest of 2 per cent. willaccrue on unpaid sums;

(b) commitment fees of 45 per cent. of the applicable margin in relation to the Capex Facility andthe RCF payable quarterly in arrears;

(c) an arrangement fee of 3.5 per cent. on the amount of the Facilities, which was payable ondrawdown of the Acquisition Facility;

(d) agency fees of £20,000 per annum payable to PCP as agent and £10,000 per annum payable toPCP as security agent; and

(e) prepayment fee: equal 1.36 times the amount of the Term Facilities. The prepayment fee is dueon certain prepayments with some limited exclusions. The prepayment fee is payable on thefinal discharge date and its amount is calculated on that date.

The Term Facilities do not amortise and are payable in full seven years from the date of the Facility Agreement.The RCF will terminate six years from the date of the Facility Agreement.

The Facility Agreement contains customary prepayment events including (i) upon change of control of CityFibreor a sale of all or substantially all of the assets of the CFHL Group; (ii) upon receipt of proceeds of disposals ofcertain assets, certain insurance claims and certain claims under the acquisition documents and related reports,together with customary covenants which are tested quarterly.

In connection with the Facilities, CFHL, CityFibre Networks Limited, CityFibre Limited, Fibrecity HoldingsLimited and CityFibre Metro Networks Limited gave guarantees and security over their assets. In addition,CityFibre granted security over (i) the entire issued share capital of CFHL; and (ii) its interest in shareholder loanagreements between itself and CFHL. Pursuant to these collateral arrangements CFHL, CityFibre Networks

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Limited and CityFibre Limited assigned by way of security in favour of PCP all of their respective rights andinterests under the acquisition of the KCOM assets and all customer contracts to which those companies areparties.

18.10 2015 Underwriting Agreement

On 14 December 2015 the Company, finnCap and Liberum entered into an Underwriting Agreement, pursuant towhich finnCap and Liberum agreed to use their reasonable endeavours to procure placees for new OrdinaryShares to be issued pursuant to the an underwritten placing of 160 million Ordinary Shares. finnCap and Liberumagreed to underwrite the issue of all of the new Ordinary Shares severally in certain proportions.

The agreement contained certain warranties from the Company in favour of finnCap and Liberum. In addition,the Company agreed to indemnify finnCap and Liberum in respect of certain liabilities they may have incurred inrespect of the placing and re-admission to AIM of the Company’s share capital.

The Company agreed to pay a broking commission shared between finnCap and Liberum (proportionate to theirrespective underwriting commitments) and a base commission apportioned equally between finnCap andLiberum.

18.11 Joint Venture Agreement

On 14 April 2014 the Company, CFHL, Sky, TalkTalk and YorkCo entered into a joint venture agreementpursuant to which Sky, TalkTalk and CFHL each agreed to subscribe for one third of the shares in YorkCo andagreed that YorkCo would conduct a trial of fibre network services in the city of York (the “York FibreNetwork”) (the “JVA”). CFHL was issued its third of the shares in YorkCo at nominal value in exchange forCFHL granting YorkCo a licence to use its metro network ring of ducting and passive fibre infrastructure in York(“Metro Ring Right of Use Agreement”).

The parties agreed to enter into the JVA to give effect to various matters in respect of such joint venturegoverning: (i) the provision of assets and finance to YorkCo; (ii) the management and activities of YorkCo; and(iii) the respective interests of the parties. The Company was a party to the JVA to procure that certainobligations of CFHL and other members of the group were satisfied and to give certain warranties and covenants,together with CFHL, in favour of Sky and TalkTalk.

The JVA contains compulsory transfer provisions pursuant to which CFHL shall be obliged to sell its shares inYorkCo to the other shareholders (pro-rata) if it (i) commits a material breach of the agreement, (ii) commits amaterial breach of the Metro Ring Right of Use Agreement or (iii) if it is unable to pay its debts as they fall dueor in the event that insolvency proceedings are brought against it. The JVA also contains a change of controlprovision whereby if CFHL (or any permitted transferee) is subject to a change of control, CFHL (or anypermitted transferee) shall be obligated to offer its shares in YorkCo to Sky and TalkTalk (pro rata).

The JVA contains drag along rights pursuant to which CFHL may be obliged to sell its shares in YorkCo in theevent that a third party offers to purchase such equal proportion of both Sky and TalkTalk’s shares in anaggregate amount of not less than 50 per cent. of the total issued share capital of YorkCo. Tag along rights alsoprovide that in the event Sky and TalkTalk agree to transfer any of their shares to a third party, CFHL shall havethe option to require Sky and TalkTalk to procure that the third party makes an offer to purchase a pro rataamount of CFHL’s shares on the same terms and conditions and for the same price.

Under the JVA both the Company and CFHL undertook to Sky, TalkTalk and YorkCo that during the TrialPeriod (i.e. the period commencing on 14 April 2014 and ending on the expiry of 12 months after commerciallaunch of the York Fibre Network) they shall not, and they shall procure that members of the Group shall notdiscuss, conduct or participate in any trial or rollout of fibre access services for the supply of FTTH broadbandservices to residential customers in York or in any other part of the United Kingdom or FTTP broadband servicesin York. The Trial Period has now come to an end.

The liability of CFHL under the agreement is limited to £5 million (which may be reduced in accordance with theagreement but will not fall below £1 million).

18.12 Security in respect of the Joint Venture

On 6 February 2015, as part of the joint venture arrangements detailed above in section 18.11 above CityFibreNetworks Limited and CFHL granted a first ranking fixed charge to YorkCo over the assets known as the YorkMetro Ring (being the then existing passive ducting, chambers, joint chambers, sub-ducts and dark fibre networkowned and maintained by each of CityFibre Networks Limited and CFHL in York). This was to secure allobligations, undertakings and liabilities of CityFibre Networks Limited and CFHL to YorkCo under the MetroRight of Use Agreement (described in section 18.14 below) and the fixed charge.

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18.13 Passive Services Agreement

On 14 April 2014 CFHL, CityFibre Metro Networks Limited and YorkCo entered into a passive servicesagreement that allows CFHL and CityFibre Metro Networks Limited to provide certain services to YorkCo. Aspart of this CFHL and CityFibre Metro Networks Limited have been granted a licence to use and operate theYorkCo network to fulfil its obligations under the agreement and to do anything in respect of the YorkConetwork that requires the use of Code Powers.

The term of the agreement is unlimited unless terminated by either party on six months’ written notice providingsuch notice does not expire before 31 December 2016 or with immediate effect where one or more of the otherjoint venture agreements are terminated.

Pursuant to the agreement all charges are on a pass through or open book cost plus basis.

18.14 Metro Ring Right of Use Agreement

On 14 April 2014 CFHL, CityFibre Networks Limited, the Company and YorkCo entered into a metro ring rightof use agreement for the existing CityFibre network in York (the “Metro Ring”). The agreement gives YorkCoan irrevocable, perpetual and unconditional right to use the Metro Ring and allows it to access, connect and usethe Metro Ring. CFHL also has the right to access the assets in YorkCo’s passive ducting and dark fibre feederand distribution network in York for the purpose of maintaining or repairing the Metro Ring.

The agreement contains a warranty by CFHL that the Metro Ring shall be fit for purpose and shall comply withthe specification set out in the agreement for a period of twenty-five years (regardless of the length of theagreement).

The agreement is for an unlimited term. YorkCo has the right to terminate at any time on six months’ notice inwriting to all the agreement counterparties.

19. Subsidiary undertakings

The Company is the holding company of the Group and has the following subsidiary undertakings each of whichis directly or indirectly wholly-owned by the Company. In each case, the issued share capital of each is fullypaid. The country of incorporation of each of the companies is stated in the second column below.


Percentage owned Principal Activities

CityFibre Holdings Limited England and Wales 100% by theCompany

Holding company


England and Wales 100% by theCompany

Provision oftelecommunicationsnetwork

FibreCity Holdings Ltd England and Wales 100% by theCompany

Holding Company

Gigler Limited England and Wales 100% by theCompany

Provision of InternetServices inBournemouth

CityFibre Metro NetworksLimited


Holding Company

FibreCity Bournemouth Ltd England and Wales 100% by theCompany

Provision oftelecommunicationsnetwork inBournemouth

CityFibre Limited England and Wales 100% by theCompany


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Save for the material subsidiaries disclosed in this section 19, and YorkCo, as described in section 18.11, theCompany does not hold capital in any other undertakings that have a significant effect on the assessment of theCompany’s assets and liabilities, financial position or profits and losses.

20. Related party transactions

31 December 2014

For the year ended 31 December 2014, the Company had entered into the following material transactions withrelated parties:

The Company has a related party relationship with its subsidiaries, its associates, its directors and the directors ofits subsidiaries.

Subsidiaries

The subsidiary undertakings of the company at 31 December 2014 were as follows:



CityFibre Holdings Limited England and Wales 100% by theCompany

Holding company




FibreCity Holdings Ltd England and Wales 100% by theCompany

Holding Company

Gigler Limited(formerly known asFibrecity Wessex Limited)


Provision of InternetServices inBournemouth



Holding Company

FibreCity Bournemouth Ltd England and Wales 100% by theCompany

Provision oftelecommunicationsnetwork inBournemouth

All transactions with subsidiary undertakings in the year eliminate on consolidation.

Transactions with key management personnel

The directors are considered to be the key management personnel.

Key management compensation was as follows:

Year ended 31 December 2014

Directors2014

Directors2013

Highest paiddirector 2014


£000 £000 £000 £000

Fees 728 607 240 240

Benefits in kind 31 18 11 10

Pension contributions 7 - - -

Bonus 618 - 297 -

1,384 625 548 250

Share based payments 1,098 - 556 -

2,482 625 1,104 250

Social security costs 186 84 74 33

Total directors’ emoluments 2,668 711 1,178 283

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Bonuses paid in 2014 included one-off amounts in respect of performance leading up to the 2014 Admission, aswell as a bonus in respect of work performed in 2014. In respect of the highest paid director, the one-off bonuswas £168,000. No bonuses were paid in 2013.

During the year, the Group was charged £18,000 (up from £14,500 in 2013) by BJC Networks Ltd, a companyowned and controlled by Peter Manning, the former chairman, in respect of consultancy fees. Of this, £2,000 wasowed at the year-end. No money had been owed at the year-end in 2013.

At 31 December 2014 the directors did not consider there to be an ultimate controlling party. In 2013 the ultimatecontrolling party was considered to be Greg Mesch.

During the year the Group charged YorkCo, an associate of CFHL, £343,000 in respect of services provided. Allof this balance was outstanding at the year end. No charge was made in 2013.

Loan notes

At 31 December 2014 no loan notes, including accrued interest, had been issued to related parties. At31 December 2013 loan notes of £7.717 million, including accrued interest had been issued to related parties.

31 December 2015



Subsidiaries

The subsidiary undertakings of the Company at 31 December 2015 were as follows:



CityFibre Holdings Limited England and Wales 100% by the Company Holding company


England and Wales 100% by the Company Provision oftelecommunicationsnetwork

FibreCity Holdings Ltd England and Wales 100% by the Company Holding Company

Gigler Limited England and Wales 100% by the Company Provision of InternetServices inBournemouth


England and Wales 100% by the Company Holding Company

FibreCity Bournemouth Ltd England and Wales 100% by the Company Provision oftelecommunicationsnetwork inBournemouth

CityFibre Limited England and Wales 100% by the Company Provision oftelecommunicationsnetwork



The key management personnel are the directors and members of the executive management team.

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Year ended 31 December 2015Key

managementpersonnel 2015

Keymanagement

personnel 2014



£000 £000 £000 £000

Fees 1,502 1,213 265 240

Benefits in kind 50 48 11 11

Pension contributions 22 17 - -

Bonus 566 912 181 297

Share based payments 282 1,193 94 556

2,422 3,383 551 1,104


Total emoluments 2,707 3,676 614 1,178

Bonuses paid in 2014 included one-off amounts in respect of the 2014 Admission, as well as a bonus in respectof work performed in 2014.

During the year, the Group was charged £29,000, compared to £18,000 in 2014, by BJC Networks Ltd, acompany owned and controlled by Peter Manning, the former chairman, in respect of consultancy fees. Of this,£20,000 was owed at the year-end, compared to £2,000 in 2014.

During the year, the Group was charged £255,000, compared to £216,000 in 2014, by Teleconsult (2011) Ltd, acompany owned and controlled by Seamus Given, a member of key management personnel during the year, inrespect of consultancy fees. Of this, £17,000 was owed at the year-end. £17,000 had also been owed at the year-end in 2014.

At 31 December 2015 and 31 December 2014 the directors did not consider there to be an ultimate controllingparty.

During the year the Group charged YorkCo, an associate of CFHL, £610,000 in respect of services provided, anincrease from £343,000 in 2014. Of this, £102,000 was as receivable at the year-end, compared to £343,000 in2014.

31 December 2016



155

Subsidiaries


Company Country ofincorporation

Principal activities % holding ofordinary sharecapital

CityFibre Holdings Limited UK Provision of telecommunicationnetworks

100

CityFibre Networks Limited UK Provision of telecommunicationnetworks

100

Fibrecity Holdings Limited UK Holding company 100

Gigler Limited UK Provision of internet services inBournemouth

100

CityFibre Metro Networks Limited UK Holding company 100

Fibrecity Bournemouth Limited UK Provision of telecommunicationnetworks within Bournemouth

100

CityFibre Limited UK Provision of telecommunicationnetworks

100





Keymanagement

personnel 2016

Keymanagement

personnel 2015



£000 £000 £000 £000

Fees 1,459 1,502 290 265Benefits in kind 55 50 11 11Pension contributions 19 22 - -Bonus 1,253 566 377 181Termination fees 70 - - -Share based payments 548 282 180 94

3,404 2,422 858 551


Total emoluments 3,772 2,707 950 614

Bonuses paid in 2016 included one-off amounts in respect of the KCOM Acquisition, as well as a bonus inrespect of work performed in 2016.

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During the year, the Group was charged £12,000 by BJC Networks Ltd, a company owned and controlled byPeter Manning, the former chairman, in respect of consultancy fees. This compared to £29,000 in 2015. Of this,£1,000 was owed at the year-end, compared to £20,000 in 2015.

During the year, the Group was charged £89,000 compared to £255,000 in 2015 by Teleconsult (2011) Ltd, acompany owned and controlled by Seamus Given, a member of key management personnel during the year, inrespect of consultancy fees. Of this, £nil was owed at the year-end, compared to £17,000 in 2015.


During the year the Group charged YorkCo, an associate of CFHL, £756,000 compared to £610,000 in 2015, inrespect of services provided. Of this, £91,000 was receivable at the year-end, compared to £102,000 in 2015.

31 December 2016 – Reference Date

For the period from 31 December 2016 to 31 May 2017, the Company had entered into the following materialtransactions with related parties:


Subsidiaries

The subsidiary undertakings of the Company at the Reference Date were as follows:




100


100


Gigler Limited UK Provision of internet services inBournemouth

100



100


100




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2017 to Reference DateKey

managementpersonnel

Highest paiddirector

£000 £000

Fees 684 145.2Benefits in kind 31.2 4.8Pension contributions 12 -Bonus - -Termination fees - -Share based payments 364.8 124.8

1,446 412.8

Social security costs 139.2 39.6

Total emoluments 1,585.2 452.4

During the period, the Group was charged £1,000 by BJC Networks Ltd, a company owned and controlled byPeter Manning, the former chairman, in respect of consultancy fees.

During the period the Group charged YorkCo, an associate of CityFibre Holdings Ltd, £242,000 in respect ofservices provided.

21. Consents and related matters

Citi, whose address is Citigroup Centre, Canada Square, Canary Wharf, London, E14 5LB United Kingdom, hasgiven and not withdrawn its written consent to the issue of this document with references to its name beingincluded in the form and context in which they appear.

finnCap, whose address is 60 New Broad Street, London, EC2M 1JJ, has given and not withdrawn its writtenconsent to the issue of this document with references to its name being included in the form and context in whichthey appear.

Liberum, whose address is Ropemaker Place, Level 12, 25 Ropemaker Street London, EC2Y 9LY, has given andnot withdrawn its written consent to the issue of this document with references to its name being included in theform and context in which they appear.

Macquarie Capital (Europe) Limited whose address is Ropemaker Place, 28 Ropemaker Street, London, EC2Y9HD, has given and not withdrawn its written consent to the issue of this document with references to its namebeing included in the form and context in which they appear.

Rothschild, whose address is New Court, St Swithin’s Lane, London, EC4N 8AL, has given and not withdrawnits written consent to the issue of this document with references to its name being included in the form andcontext in which they appear.

BDO LLP, whose address is at 55 Baker Street, London, W1U 7EU, has given and not withdrawn its writtenconsent to the inclusion of its reports set out in Part 7, Part 12 and Part 13 of this document in the form andcontext in which they appear and has authorised the contents of those reports for the purposes of Rule5.3.3R(2)(f) of the Prospectus Rules.

22. Expenses

The total costs and expenses of the Capital Raising (assuming full take up under the Offer for Subscription),including FCA fees, LSE fees, commissions and fees payable to advisers and printing and distribution costs areestimated to amount to approximately £9.2 million (exclusive of VAT).

23. Registrar

The registrar of the Company is Computershare, The Pavilions, Bridgwater Road, Bristol BS13 8AE and will inrelation to Ordinary Shares in certificated form be responsible for keeping the Company’s share records.

24. Third party information

Where information contained in this document originates from a third party source, it is identified where itappears in this document together with the name of its source. Such third party information has been accurately

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reproduced and, so far as CityFibre is aware and is able to ascertain from information published by the relevantthird party, no facts have been omitted which would render the reproduced information inaccurate or misleading.

25. Announcement of results of the Capital Raising

CityFibre will make an appropriate announcement to a Regulatory Information Service giving details of theresults of the Capital Raising.

26. Takeover bids

26.1 Mandatory bids

The Takeover Code applies to the Company. Under the Takeover Code, if an acquisition of interests in theCompany’s Ordinary Shares were to increase the aggregate holding of an acquirer and persons acting in concertwith it to an interest in the Company’s Ordinary Shares carrying 30 per cent. or more of the voting rights in theCompany, the acquirer and, depending upon the circumstances, persons acting in concert with it, would berequired (except with the consent of The Panel on Takeovers and Mergers) to make a cash offer for theoutstanding Ordinary Shares. A similar obligation to make such a mandatory offer would also arise on theacquisition of an interest in Ordinary Shares by a person holding (together with persons acting in concert with it)an interest in Ordinary Shares carrying between 30 per cent. and 50 per cent. of the voting rights in the Companyif the effect of such acquisition were to increase that person’s percentage of the voting rights.

26.2 Squeeze-out

Under the Act, if a “takeover offer” (as defined in section 974 of the Act) is made for the Company’s OrdinaryShares and the offeror were to acquire, or unconditionally contract to acquire, not less than 90 per cent. in valueof the shares to which the offer relates (the “Offer Shares”) and not less than 90 per cent. of the voting rightsattached to the Offer Shares, within three months of the last day on which its offer can be accepted, it couldacquire compulsorily the remaining 10 per cent. It would do so by sending a notice to outstanding Shareholderstelling them that it will acquire compulsorily their Offer Shares and then, six weeks later, it would execute atransfer of the outstanding Offer Shares in its favour and pay the consideration to the Company, which wouldhold the consideration on trust for outstanding Shareholders. The consideration offered to the Shareholderswhose Offer Shares are acquired compulsorily under the Act must, in general, be the same as the considerationthat was available under the takeover offer.

26.3 Sell-out

The Act also gives minority Shareholders a right to be bought out in certain circumstances by an offeror who hasmade a takeover offer. If a takeover offer related to all the Ordinary Shares and at any time before the end of theperiod within which the offer could be accepted the offeror held or had agreed to acquire not less than 90 percent. of the Ordinary Shares to which the offer relates, any holder of Ordinary Shares to which the offer relatedwho had not accepted the offer could by a written communication to the offeror require it to acquire thoseOrdinary Shares. The offeror is required to give any Shareholder notice of its right to be bought out within onemonth of that right arising. The offeror may impose a time limit on the rights of the minority Shareholders to bebought out, but that period cannot end less than three months after the end of the acceptance period. If aShareholder exercises his or her rights, the offeror is bound to acquire those Ordinary Shares on the terms of theoffer or on such other terms as may be agreed.

26.4 Takeover bids

No public takeover bid has been made in relation to the Company during the last financial year or the currentfinancial year.

27. Documents available for Inspection

Copies of the following documents may be physically inspected at the London offices of the Company at15 Bedford Street, London WC2E 9HE during usual business hours on any weekday (Saturdays, Sundays andpublic holidays excepted) from the date of this document up to and including the date of Admission:

(a) the Articles of Association;

(b) the annual reports and audited consolidated accounts of the Group as at, and for the three financial yearsended 31 December 2014, 2015 and 2016;

(c) the consent letters referred to in section 21 of this Part 10;

(d) the audited accounts of Entanet for the three financial years ended 31 December 2014, 2015 and 2016;

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(e) the reports by BDO LLP on (i) the unaudited pro forma financial information set out at Part 7 of thisdocument, and (ii) the financial information on Entanet set out in Part 12 of this document and (iii) thehistorical financial information on Entanet International for the seven weeks ended 20 February 2014 setout in Part 13 of this document; and

(f) this document.

Copies of this document are also available for inspection at the National Storage Mechanism athttp://www.morningstar.co.uk//uk/nsm. In addition this document will be published in electronic form andavailable on the Company’s website at www.cityfibre.com, subject to certain access restrictions.

Date: 11 July 2017

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PART 11HISTORICAL FINANCIAL INFORMATION OF THE GROUP

Annual report and accounts for the year ended 31 December 2014

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF CITYFIBRE INFRASTRUCTUREHOLDINGS PLC

We have audited the financial statements of CityFibre Infrastructure Holdings plc for the year ended31 December 2014 which comprise the consolidated and company statements of financial position, theconsolidated statement of comprehensive income, the consolidated and company statements of cash flows, theconsolidated and company statements of changes in equity and the related notes. The financial reportingframework that has been applied in their preparation is applicable law and International Financial ReportingStandards (IFRSs) as adopted by the European Union and as regards the parent company financial statements, asapplied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has been undertaken so that we might state to the company’s membersthose matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other than the company and thecompany’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of directors and auditors

As explained more fully in the statement of directors’ responsibilities, the directors are responsible for thepreparation of the financial statements and for being satisfied that they give a true and fair view. Ourresponsibility is to audit and express an opinion on the financial statements in accordance with applicable lawand International Standards on Auditing (UK and Ireland). Those standards require us to comply with theFinancial Reporting Council’s (FRC’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements

A description of the scope of an audit of financial statements is provided on the FRC’s website atwww.frc.org.uk/auditscopeukprivate.

Opinion on financial statements

In our opinion:

Š the financial statements give a true and fair view of the state of the group’s and the parent company’s affairsas at 31 December 2014 and of the group’s loss for the year then ended;

Š the group financial statements have been properly prepared in accordance with IFRSs as adopted by theEuropean Union;

Š the parent company financial statements have been properly prepared in accordance with IFRSs as adoptedby the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

Š the financial statements have been prepared in accordance with the requirements of the Companies Act2006.

Opinion on other matters prescribed by the Companies Act 2006

In our opinion the information given in the strategic report and directors’ report for the financial year for whichthe financial statements are prepared is consistent with the financial statements.

1. Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us toreport to you if, in our opinion:

Š adequate accounting records have not been kept by the parent company, or returns adequate for our audithave not been received from branches not visited by us; or

Š the parent company financial statements are not in agreement with the accounting records and returns; or

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Š certain disclosures of directors’ remuneration specified by law are not made; or

Š we have not received all the information and explanations we require for our audit.

Julian Frost (senior statutory auditor)For and on behalf of BDO LLP, statutory auditorLondonUnited Kingdom

20 March 2015

BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the Year Ended 31 December 2014

Note 2014 2013£000 £000

Revenue (2) 3,844 1,874Cost of sales (568) (365)Gross profit 3,276 1,509Total administrative expenses (10,726) (5,713)Operating loss (3) (7,450) (4,204)Finance income (6) 779 1Finance cost (7) (344) (2,115)Share of post-tax losses of equity accounted Joint Venture (42) -Loss on ordinary activities before taxation (7,057) (6,318)Income tax (8) 31 31Loss for the year and total comprehensive income (7,026) (6,287)

Loss per share 2014 2013Basic and diluted loss per share (27) £(0.09) £(55.60)

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CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Company number 08772997

As at 31 December 2014Note 2014 2013

£000 £000AssetsNon-current assetsProperty, plant and equipment (9) 31,778 19,254Intangible assets (10) 535 325Investment in Joint Venture (11) 847 -

33,160 19,579Current assetsInventory (12) 83 122Trade and other receivables (13) 3,720 1,677Investment in short-term deposits 29,000 -Cash and cash equivalents 4,186 286Total current assets 36,989 2,085Total assets 70,149 21,664

EquityIssued capital (16) 1,111 -Share Premium (17) 63,243 389Warrant reserve (18) - 700Share warrant reserve (19) 85 -Share-based payments reserve 773 -Merger reserve 331 -Retained Earnings (15,680) (2,054)

Total equity 49,863 (965)

LiabilitiesNon-current liabilitiesInterest bearing loans and borrowings (20) 1,814 2,447Deferred revenue (21) 10,083 597Deferred consideration (15) 415 -Deferred tax (14) 31 62Total non-current liabilities 12,343 3,106Current liabilitiesInterest bearing loans and borrowings (20) 790 15,729Deferred revenue (21) 2,023 939Trade and other payables (22) 5,130 2,855Total current liabilities 7,943 19,523Total liabilities 20,286 22,629

Total equity and liabilities 70,149 21,664

These financial statements were approved by the Board of Directors and authorised for issue on20 March 2015. They were signed on its behalf by:

W G MeschDirector

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CONSOLIDATED STATEMENT OF CHANGES IN EQUITY


Sharecapital

SharePremium

Warrantreserve

Sharewarrantreserve

Shares to beissued

reserve

Share- basedpayments

reserve

Mergerreserve

Retainedearnings

Total

£000 £000 £000 £000 £000 £000 £000 £000 £000

Balance at 1 January 2013 - - 700 - 382 - - 4,233 5,315

Comprehensive incomeLoss and total comprehensiveincome for the year - - - - - - - (6,287) (6,287)

Transactions with ownersShares to be issued - - - - 7 - - - 7Shares issued - 389 - - (389) - - - -

Balance at 31 December 2013 - 389 700 - - - - (2,054) (965)

Balance at 1 January 2014 - 389 700 - - - - (2,054) (965)

Comprehensive incomeLoss and total comprehensiveincome for the year - - - - - - - (7,026) (7,026)

Transactions with ownersNew ordinary shares issued 1,050 65,985 - - - - - - 67,035Issue of shares held by JSOP - - - - - - - (6,600) (6,600)Cost of issuing new ordinaryshares - (2,948) - - - - - - (2,948)Share warrant charge - - - 289 - - - - 289Exercise of share warrants 3 206 - (204) - - - - 5Share-based payments - - - - - 773 - - 773Group reconstruction 58 (389) - - - - 331 - -Discharge of warrant reserve - - (700) - - - - - (700)

Balance at 31 December 2014 1,111 63,243 - 85 - 773 331 (15,680) 49,863

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CONSOLIDATED STATEMENT OF CASH FLOWS


2014 2013£000 £000

Cash flows from operating activitiesLoss before tax (7,057) (6,318)Amortisation of intangibles 114 108Share based payments 1,393 7Finance income (779) (1)Finance costs 344 2,115Depreciation 1,393 1,108Profit on disposal of PPE (62) -Right of use income (161) -Decrease/(Increase) in inventory 21 (87)Increase in receivables (1,946) (857)Increase in payables 3,146 1,786Share of loss from associated company 42 -

(3,552) (2,139)Tax paid - -

Net cash utilised in operating activities (3,552) (2,139)

Cash flows from investing activitiesInterest received 31 1Investment in short-term deposits (29,000) -Acquisition of intangible assets (324) (13)Acquisition of property, plant and equipment (4,499) (532)Capitalised staff costs (544) -

Net cash utilised in investing activities (34,336) (544)

Cash flows from financing activitiesProceeds from the issue of share capital 46,523 -Costs of issuing share capital (2,839) -Proceeds from issue of loan stock and debentures - 3,645Repayment of borrowings (940) (568)Repayment of warrant reserve (700) -Interest paid (256) (348)

Net cash from financing activities 41,788 2,729

Net increase in cash and cash equivalents 3,900 46Cash and cash equivalents at beginning of period 286 240

Cash and cash equivalents at end of period 4,186 286

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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

The principal accounting policies applied in the preparation of these consolidated financial statements aresummarised below. They have all been applied consistently throughout the year and preceding period.

Nature of Group

CityFibre Infrastructure Holdings plc (the “Company”) is a company registered in England and Wales. Theconsolidated financial statements for the year ended 31 December 2014 comprise the Company and itssubsidiaries (together referred to as the “Group”).

Basis of accounting

The financial statements of the Company have been prepared on a going concern basis and in accordance withInternational Financial Reporting Standards (“IFRS”) and their interpretations issued by the InternationalAccounting Standards Board (“IASB”), as adopted by the European Union. These are the Group’s first financialstatements. They have also been prepared with those parts of the Companies Act 2006 applicable to companiesreporting under IFRS.

The Group has not adopted any Standards or Interpretations in advance of the required implementation dates. It isnot expected that adoption of Standards or Interpretations which have been issued by the IASB but are not yeteffective will have a material impact on the financial statements.

Basis of consolidation

The consolidated financial statements incorporate the results of CityFibre Infrastructure Holdings plc and all ofits subsidiary undertakings as at 31 December 2014. The results of subsidiary undertakings are included from thedate of acquisition.

CityFibre Infrastructure Holdings plc was incorporated on 13 November 2013, and on 9 January 2014 it acquiredthe issued share capital of CityFibre Holdings Limited by way of a share-for-share exchange. The latter had fivewholly owned subsidiaries: CityFibre Networks Limited, Fibrecity Holdings Limited, Gigler Limited, CityFibreMetro Networks Limited and Fibrecity Bournemouth Limited. The consideration for the acquisition was satisfiedby the issue of 115,383 Ordinary Shares in CityFibre Infrastructure Holdings plc to the shareholders of CityFibreHoldings Limited.

The accounting treatment in relation to the addition of CityFibre Infrastructure Holdings plc as a new UK holdingCompany of the Group falls outside the scope of the IFRS 3 ‘Business Combinations’. The share schemearrangement constituted a combination of entities under common control as CityFibre Infrastructure Holdingsplc, due to all shareholders of CityFibre Holdings Limited being issued shares in the same proportion, and thecontinuity of ultimate controlling parties. The reconstructed Group was consolidated using merger accountingprinciples as outlined in Financial Reporting Standard 6 (“FRS”) Acquisitions and Mergers (UK) and treated thereconstructed group as if it had always been in existence. Any difference between the nominal value of sharesissued in the share exchange and the book value of the shares obtained is recognized in a merger reserve.

The Company has taken advantage of merger relief available under Companies Act 2006 in respect of the sharefor share exchange as the issuing company has secured more than 90 per cent. equity in the other entity. Thecarrying value of the investment is carried at the nominal value of the shares issued.

Joint ventures

Joint ventures are joint arrangements whereby the parties that have joint control of the arrangement have rights tothe net assets of the arrangement.

These consolidated financial statements include the Group’s share of the total recognised gains of a JV using theequity method, from the date that significant influence commenced, based on present ownership interests. Underthe equity method, investments in JVs are carried in the Consolidated Statement of Financial Position at cost asadjusted for post-acquisition changes in the Group’s share of the net assets of the JV, less any impairment in thevalue of the investment and the Group’s share of any gain on contribution of assets to the JV.

Initially, the investment in the JV is recognised at the fair value of the assets contributed and the servicesprovided by the Group to the JV. Subsequently a share of the profits, made on services provided and disposal ofproperty, plant and equipment to the JV, are eliminated against the value of the investment; the share of profits isdetermined by the Group’s share of ownership of the JV.

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Revenue

Revenue represents network lease sales and installation sales to external customers, sales of internet services toresidential customers, and recharge of work performed for the JV at invoiced amounts less value added tax orlocal taxes on sales. Where revenue arising from installation and connection services is separable from networklease services, these elements are recognised as if they were separate contracts.

Network lease revenue is recognised evenly over the period to which the invoicing relates, and is recognisedfrom the date at which the network service becomes available for use by the customer.

Installation revenue is recognised on a straight line basis over the period of construction of the asset, from post-contract signature mobilisation to customer handover. Management believes this is the best reflection of theeffort required to deliver services to customers.

Revenue from internet services provided to residential customers is recognised on a monthly basis, commencingwhen services are provided.

Revenue from work performed for the JV is recognised during the period to which the work related.The Group has provided the JV with a right-of-use over certain network assets in York; revenue is recognised tothe extent that this relates to the provision of services to the JV. The assets contributed under the right-of-use aretreated as being disposed of by the Group.

All revenue streams are wholly attributable to the principal activity of the group and arise solely within theUnited Kingdom.

Property, plant and equipment

Property, plant and equipment are stated at cost, net of depreciation and any provisions for impairment. Wherenetwork assets are acquired as part of a contract including a provision of services, the asset is initially recognisedat fair value to include the value of these services. Depreciation is calculated so as to write off the cost of anasset, less its estimated residual value, over the useful economic life of that asset as follows:

Leasehold property 5 yearsNetwork assets 20 yearsPlant and machinery 5 yearsFixtures and fittings 3 yearsMotor vehicles 3 years

Useful economic lives and residual values are assessed annually. Any impairment in value is charged to thestatement of comprehensive income.

Intangible assets

Customer contracts, which have arisen through business combinations, are assessed by reviewing their netpresent value of future cash flows. Customer contracts are amortised over their useful life, not exceeding sixyears.

Internally generated website costs that are directly attributable to websites controlled by the Group arerecognised as intangible assets and the costs are amortised over their useful lives, not exceeding three years.Amortisation is included in general administrative costs in the statement of comprehensive income.

Impairment of non-current assets

Whenever events or changes in circumstance indicate that the carrying amount of an asset may not berecoverable an asset is reviewed for impairment. An asset’s carrying value is written down to its estimatedrecoverable amount (being the higher of the fair value less costs to sell and value in use) if that is less than theasset’s carrying amount.

Inventory

Inventory is stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in,first out basis. Inventory includes equipment necessary to install fibre optic networks.

Net realisable value is based on estimated selling price less additional costs to completion and disposal.

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Finance costs

Finance costs are charged to profit over the term of the debt so that the amount charged is at a constant rate onthe carrying amount. Finance costs include issue costs, which are initially recognised as a reduction in theproceeds of the associated capital instrument.

Operating leases

Rentals paid under operating lease commitments are charged to income on a straight line basis over the leaseterm.

Financial liabilities and equity

Most of the Group’s financial liabilities, including its trade payables, bank loans and the host debt element of itsconvertible loans are initially recognised at their fair value, net of any issue costs, and subsequently measured atamortised cost using the effective interest method. All related interest charges on loans are recognised as anexpense in ‘finance cost’ in the statement of comprehensive income. The conversion option embedded into theGroup’s convertible debt is classified as a financial liability. The conversion option derivative is initially andsubsequently measured at its fair value with changes in that fair value recognised in ‘finance income/cost’ in thestatement of comprehensive income.

Upon conversion of the instrument the embedded derivative, the value of the loan, and any accumulated financecosts are extinguished and converted into share capital and share premium.

Financial instruments issued by the Group are classified as equity only to the extent that they do not meet thedefinition of a financial liability. The Group’s ordinary shares are classified as equity instruments. Incrementalcosts directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any taxeffects.

Financial assets

Trade and other receivables are initially recorded at their fair value and subsequently carried at amortised cost,less provision for impairment.

A provision for impairment of trade receivables is established when there is objective evidence that the Groupwill not be able to collect all amounts due according to the original terms of the receivable. Bad debts are writtenoff when identified.

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and cash in hand and short-term highly liquid investments withan original maturity of three months or less.

Short-term investments

Short-term investments are amounts held on cash deposit at financial institutions.

Share based payments

The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based paymentsare measured at fair value at the date of the grant. The fair value at the grant date is determined using twodifferent models. For share options that include market-based vesting criteria, the Monte Carlo model has beenused, with the expense recognised over the expected life of the options. For all other options the Black-Scholesmodel has been used, with the calculated value expensed over the vesting period. The value of the expense isdependent upon certain key assumptions including the expected future volatility of the Group’s share price at thedate of the grant.

The Group also issues cash-settled share-based payments to certain employees. The payments are measured atfair value at the date of the grant, and are subsequently revalued at each balance sheet date, using the MonteCarlo model.

All goods and services received in exchange for the grant of any share warrants are measured at their fair values.In the absence of information on the fair value of the services provided, the fair value of services received inreturn for the warrant issued is measured by reference to the fair value of the warrant issued. The fair value of thewarrant was estimated by management using the Black-Scholes model.

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Taxation

Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have beenenacted or substantively enacted by the date of the statement of financial position.

Deferred taxation is the tax expected to be payable or recoverable on differences between the carrying amountsof assets and liabilities in the financial statements and corresponding tax bases used in the computation of taxableprofit, and is accounted for using the balance sheet liability method.

Deferred taxation liabilities are recognised on all taxable temporary differences. Deferred taxation assets arerecognised to the extent that it is probable that taxable profits will be available against which deductibletemporary differences can be utilised.

Deferred taxation is calculated at the tax rates that are expected to apply in the period when the liability is settledor the asset is realised based on tax laws and rates that have been enacted at the statement of financial positiondate. The carrying value of deferred taxation assets is reviewed at each statement of financial position date andreduced to the extent that it is no longer probable that sufficient taxable profits will be available against whichtaxable temporary differences can be utilised. Deferred tax is charged or credited to the statement ofcomprehensive income, except when it relates to items charged or credited directly to equity, in which case thedeferred tax is also dealt with in equity.

Pension Costs

Contributions to the group’s defined contribution pension scheme are charged to the statement of comprehensiveincome in the period in which they become payable.

Joint Share Ownership Plan (JSOP)

As the company is deemed to have control of its JSOP trust, it is treated as a subsidiary and consolidated for thepurposes of the consolidated financial statements. The JSOP’s assets (other than investments in the company’sshares), liabilities, income and expenses are included on a line-by-line basis in the consolidated financialstatements. The ESOP’s investment in the company’s shares is deducted from equity in the consolidatedstatement of financial position as if they were treasury shares.

Key judgments and sources of estimation uncertainty

The preparation of the financial statements in conformity with IFRS requires management to make judgements,estimates and assumptions that affect application of policies and reported amounts in the financial statements.The areas involving a higher degree of judgement or complexity, or where assumptions or estimates aresignificant to the financial statements are detailed below.

The Group depreciates the PPE, using the straight-line method, over their estimated useful lives. The estimateduseful life reflects management’s estimate of the period that the Group intends to derive future economic benefitsfrom the use of the Group’s PPE. Changes in the expected level of usage and technological developments couldaffect the useful economic lives of these assets which could then consequentially impact future depreciationcharges. The carrying amounts of the Group’s and the Company’s PPE at 31 December 2014 are disclosed inNote 9 to the financial statements.

Installation revenue, which is deemed separately identifiable from network lease revenue, is recognised on astraight line basis over the period of construction of the asset, from post-contract signature mobilisation tocustomer handover. Installation revenues are a proportion of the total contract value; management assess this andgive appropriate consideration to a range of factors in determining installation revenues on a contract by contractbasis. Factors include contract length, technical challenges in delivering the contract and assessment of anyassociated local economic issues.

The value of network assets acquired from third parties are recorded at fair value. This is assessed with referenceto a range of factors, including original cost, market value and services provided over the network. In the currentyear this relates solely to the Coventry MAN acquisition.

The value of the investment in the JV is calculated based on the market value of an equivalent share in the JV.The value of assets contributed to the JV has been calculated based on the proportion of the network that is to beused by the JV.

Significant customer contracts for network lease sales have been deemed to be service contracts, with revenuerecognised as per the revenue recognition policy. Management do not consider the nature of the contracts to bean indefeasible right of use (IRU).

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2. SEGMENTAL REPORTING

The Group’s operations relate to the management of transformational fibre optic infrastructure and as such theGroup has only one segment.

All turnover from operations, non-current assets and liabilities arose in the United Kingdom.

During the year the entity received revenues of £667,000 and £525,000 (£2013: £600,000 and £nil) from twomajor customers arising in the Group’s only identified segment.

3. OPERATING LOSS

Operating loss is after charging/(crediting):

2014 2013£000 £000

Operating lease income (1,876) (1,798)Depreciation of property, plant and equipment 1,393 1,108Amortisation of intangibles 114 108Staff costs (note 4) 6,095 2,526One-off fundraising costs 322 -Operating lease costs

Land and buildings 317 330Others 132 132

The analysis of auditor’s remuneration is as follows:

2014 2013£000 £000

Fees payable to the Group’s auditor for the audit of the Group’sannual financial statements 136 80

Total audit fees 136 80

Tax services 28 96Assurance services 81 -Corporate finance services - 210

Total non-audit services 109 306

Total fees 245 386

4. STAFF COSTS

The average number of staff employed (including directors) by the company during the financial year amountedto:

2014 2013£000 £000

Sales 12 9Operations 23 12Administration 11 11

46 32

The aggregate payroll costs of the above were:

2014 2013£000 £000

Wages and salaries 4,136 2,228Social security costs 517 269Other pension costs 49 29Share-based payments 1,393 -

6,095 2,526

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Wages and salaries for 2014 include one-off bonuses totaling £585,000 in respect of work performed leading upto the IPO. No bonuses were paid in 2013.

5. SHARE BASED PAYMENTS

During the year the Company granted share options to key personnel to purchase shares in the entity.

The number and weighted average exercise prices of share options are as follows:

2014 2013Weighted

averageexercise

price

Numberof options

Weightedaverageexercise

price

Numberof options

Outstanding at the beginning of the period - -Granted during the period £0.63 15,579,902 - -Forfeited during the period £0.60 (371,588) - -

Outstanding at the end of the period £0.63 15,208,314 - -

The options outstanding at 31 December 2014 have an exercise price in the range of £0.60 to £0.70 and aweighted average remaining contractual life of 9.3 years.

At 31 December 2014, 1,107,616 of the options had vested, but were not exercisable as the options are onlyexercisable 12 months after the vesting date.

Details of movements in share options in 2014 are as follows:

Number of options Exercisable periodOutstandingat beginningof period

Granted Forfeited/exercised

Outstandingat end of

period

Exercisableat end of

period

Exerciseprice

Grant date Expiry date

- 2,129,732 (371,588) 1,758,144 - £0.60 16 January 2014 16 January 2024- 1,388,886 - 1,388,886 - £0.60 16 January 2014 16 January 2024- 1,361,166 - 1,361,166 - £0.60 16 January 2014 16 January 2024- 2,606,335 - 2,606,335 - £0.60 23 May 2014 23 May 2024- 160,137 - 160,137 - £0.655 23 May 2014 23 May 2024- 667,238 - 667,238 - £0.60 23 May 2014 23 May 2024- 1,680,411 - 1,680,411 - £0.60 23 May 2014 23 May 2024- 3,069,299 - 3,069,299 - £0.60 23 May 2014 23 May 2024- 1,259,599 - 1,259,599 - £0.70 09 June 2014 09 June 2024- 3,863,434 - 3,863,434 - £0.70 09 June 2014 09 June 2024

- 15,579,902 (371,588) 15,208,314 -

The fair value of services received in return for share options granted are measured by reference to the fair valueof share options granted. The estimate of the fair value of the services received is measured based on two models:the Black-Scholes model and the Monte Carlo Model. The Monte Carlo model is used to value share options thatinclude market-based vesting conditions, while the Black-Scholes model is used to value all other options. Theexpected life of the option (4 years) is used as an input into both of these models; expectations of early exerciseare incorporated into both models.

Fair value of share options and assumptions 2014 2013

Weighted average fair value of options granted during the year £0.11 -Weighted average share price £0.71 -Weighted average exercise price £0.63 -Expected volatility (expressed as weighted average volatility) 30% -Option life 4 -Expected dividends - -Risk-free interest rate (based on national government bonds) 0.5% -

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These assumptions are used in both the Black-Scholes and Monte Carlo models. These assumptions are also usedfor the calculation of the fair value of the share warrants.

The expected volatility is based on the historic volatility of the share price (calculated based on the weightedaverage remaining life of the share options), adjusted for any expected changes to future volatility due to publiclyavailable information.

2014 2013£000 £000

Total expense recognised as employee and consultants costs 1,393 -

Total liability recognised on cash-settled elements of share option awards 620 -

6. FINANCE INCOME

2014 2013£000 £000

Interest on bank deposits 140 1Gain on conversion of loan notes 639 -

779 1

The gain on conversion of loan notes arose when the finance costs of the loan notes were reduced in advance ofthe conversion in January 2014. As the final loan note balance, including interest, converted was lower than theoriginal carrying amount and interest to be extinguished, a gain was recognised.

7. FINANCE COSTS

2014 2013£000 £000

Interest on bank loans 325 405Interest on other loans 19 -Interest on loan notes - 1,710

344 2,115

8. TAXATION

2014 2013£000 £000

Current taxUK corporation tax based on the results for the year at 21.5%(2013: 23.25%) - -

Total current tax - -Deferred taxTemporary differences on which deferred tax has been recognised 24 24Effect of change in tax rates 7 7

Tax on loss on ordinary activities 31 31

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Factors affecting current tax credit

The tax assessed for the year differs from the standard rate of corporation tax in the UK of 21.5 per cent. (2013:23.25 per cent.) as follows:

2014 2013£000 £000

Loss on ordinary activities before taxation (7,057) (6,318)Tax on loss on ordinary activities at standard rate (1,517) (1,469)Factors affecting chargeEffect of change in tax rates 7 7Expenses not deductible for tax purposes 180 502Origination of temporary differences on which no deferred tax

has been recognised 257 107Effect of tax losses not recognised 1,104 884

Total tax 31 31

Factors that may affect future tax charges

The standard rate of UK corporation tax will reduce to 20 per cent. effective 1 April 2015.

9. PROPERTY, PLANT AND EQUIPMENT

Leaseholdproperty

Networkassets

Plant andmachinery

Fixturesand

fittings

Motorvehicles

Total

£000 £000 £000 £000 £000 £000

CostAt 1 January 2013 99 20,487 366 34 20 21,006Additions - 651 4 - - 655At 31 December 2013 99 21,138 370 34 20 21,661At 1 January 2014 99 21,138 370 34 20 21,661Additions - 13,925 46 109 - 14,080Disposals - (162) (1) - - (163)At 31 December 2014 99 34,901 415 143 20 35,578Accumulated depreciationAt 1 January 2013 38 1,069 152 26 14 1,299Charge in the period 21 986 89 7 5 1,108At 31 December 2013 59 2,055 241 33 19 2,407At 1 January 2014 59 2,055 241 33 19 2,407Charge in the year 20 1,271 84 17 1 1,393At 31 December 2014 79 3,326 325 50 20 3,800Net book valueAt 31 December 2014 20 31,575 90 93 - 31,778At 31 December 2013 40 19,083 129 1 1 19,254

Included in network assets above are network assets under construction and not yet depreciated which are held ata cost of £4,454,000 (2013: £1,131,000) at the date of the statement of financial position.

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10. INTANGIBLE ASSETS

Website costsCustomercontracts Software costs Total

£000 £000 £000 £000

CostAt 1 January 2013 19 580 - 599Additions 13 - - 13At 31 December 2013 32 580 - 612At 1 January 2014 32 580 - 612Additions 22 - 302 324At 31 December 2014 54 580 302 936Accumulated amortisationAt 1 January 2013 2 177 - 179Amortisation 7 101 - 108At 31 December 2013 9 278 - 287At 1 January 2014 9 278 - 287Amortisation 13 101 - 114At 31 December 2014 22 379 - 401Net book valueAt 31 December 2014 32 201 302 535

At 31 December 2013 23 302 - 325

11. INVESTMENT IN JOINT VENTURE

The following entity has been included in the consolidated financial statements using the equity method:

Name Country of incorporation Proportion of ownershipinterest held

YorkCo UK 33%

2014£000

Investment in JV 1,000

Elimination of profit (111)

Share of comprehensive loss for the year of the equity accounted JV (42)

As at 31 December 2014 847

The original investment value was derived from the market value of an equivalent investment in the JV.Subsequently a share of the profits, made on services provided and disposal of PPE to the JV, are eliminatedagainst the value of the investment; the share of profits is determined by the Group’s share of ownership of theJV.

The summarised financial information for the JV is as follows:

Period ended31 December

2014£000

Loss from continuing operations 126Other comprehensive income -Total comprehensive loss 126

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12. INVENTORY

2014 2013£000 £000

Raw materials and consumables 83 122

83 122

Inventory is stated net of an impairment provision of £nil (2013 - £nil).

13. TRADE AND OTHER RECEIVABLES

2014 2013£000 £000

Trade receivables 2,247 497Other debtors 329 1,040Prepayments and accrued income 1,144 140

3,720 1,677

Trade receivables are stated net of a doubtful debt provision of £26,000 (2013 – £37,000).

14. DEFERRED TAX

2014 2013£000 £000

Balance at start of period 62 93Credit for the period (31) (31)

Balance at end of period 31 62

Deferred tax assets have not been recognised in respect of the following items:

2014 2013£000 £000

Difference of taxation allowances over depreciation on fixed assets 581 477Tax losses available 3,202 2,053Other temporary differences 53 53

3,836 2,583

Deferred tax assets have not been recognised on the basis that it is uncertain that future taxable profits will beavailable against which the Group can utilise the benefits there from.

15. DEFERRED CONSIDERATION

£000

Balance at start of period -Recognition of deferred consideration 396Release to income statement – unwinding of discount 19

415

Deferred consideration arose on the acquisition of the Coventry MAN network. This balance has been discountedover the three year period until the consideration is payable.

16. CALLED UP SHARE CAPITAL

2014 2013£000 £000

Authorised, called up, allotted and fully paid105,440,863 (2013:115,385) ordinary shares of £0.01 (2013: £0.001) each 1,054 -5,653,865 (2013: Nil) deferred ordinary shares of £0.01 57 -

1,111 -

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2014No.

Balance at start of period 115,38517/01/2014 – on conversion of loan notes 24,545,98717/01/2014 – for cash of £0.60 per share 26,732,98117/01/2014 – for cash of £0.48 per share 539,74717/01/2014 – for cash of £0.54 per share 380,54812/05/2014 – for cash of £0.01 on exercise of warrants 338,58326/05/2014 – issued to JSOP at £0.01 per share 827,37526/05/2014 – issued to JSOP at £0.77 per share 4,749,71009/06/2014 – for cash of £0.70 per share 42,857,14209/06/2014 – issued to JSOP at £0.75 per share 3,920,57709/06/2014 – issued to JSOP at £0.01 per share 429,86522/07/2014 – for cash of £0.60 on exercise of warrants 2,963

Balance at end of period 105,440,863

On 17 January 2014, the Company was admitted to trading on AIM via an IPO, which generated gross proceedsof £16.5 million (£14.9 million net proceeds) from the issue of 26,732,981 new ordinary shares at 60p per share,539,747 new ordinary shares at 48p per share, and 380,548 new ordinary shares at 54p per share. As part of thisprocess, the loan note investments in CityFibre Holdings Limited were hived up into CityFibre InfrastructureHoldings plc. The loan notes, together with accrued interest and applicable discounts converted into 24,545,987ordinary shares, valued at £14.7 million, at the IPO placing price of 60p per share.

On 9 June 2014, the Company generated gross proceeds of £30 million (£28.7 million net proceeds) via the issueof 42,857,142 new ordinary shares at a placing price of 70p per ordinary share.

During the period, the Company has issued share options, of which 9,927,527 have been issued to an employeebenefit trust by way of a joint share ownership plan. On 26 May 2014, 827,375 shares were issued at the nominalprice of 1p per share, while 4,749,710 ordinary shares were issued at a value of 77p per share. A further issuetook place on 9 June 2014, with 429,865 shares issued at the nominal price of 1p per share, while 3,920,577ordinary shares were issued at a value of 75p per share.

On 12 May 2015, 338,583 share warrants were exercised at their nominal value of 1p per share. On 22 July 2014,a further 2,963 share warrants were exercised at 60p per ordinary share issued.

17. SHARE PREMIUM

During the year costs of £2,948 million were incurred in relation to the issue of new share capital; these weredebited to the share premium account.

£000

Share premium at start of period 389Group reconstruction (389)Gross share premium on new shares issued in the year 66,191Costs of issuing new share capital (2,948)Share premium at end of period 63,243

18. WARRANT RESERVE

2014 2013£000 £000

Warrant reserve balance - 700

On 18 April 2011 the company issued a warrant to subscribe for such number of Ordinary Shares at par value aswould be equal to 5 per cent. of the fully diluted equity share capital of the Company from time to time. The fairvalue of the warrant was estimated by management based on the estimate of the company’s value and length ofthe warrant. The fair value of services received in return for the warrant issued is measured by reference to thefair value of the warrant issued in the absence of information on the fair value of the services provided. Thewarrant reserve was settled in cash on 29 January 2014 for the fair value of £700,000.

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19. SHARE WARRANT RESERVE

2014 2013£000 £000

Share warrant reserve 85 -

This relates to warrants issued to certain investors in CityFibre Holdings Limited to acquire shares in theCompany at an exercise price of £0.60 per share. The valuation of this reserve was calculated using a Black-Scholes model; details of this are included in note 5.

20. INTEREST BEARING LOANS AND BORROWINGS

2014 2013£000 £000

Bank loan 2,604 3,325

Loans - 143

Loan notesEquity conversion option liability

--

13,0921,616

2,604 18,176

Due within one year 790 15,729

Due after one year 1,814 2,447

2,604 18,176

On 14 April 2011 the Company issued up to £5 million secured convertible loan notes. These were fullysubscribed during 2011. The loan notes carried an interest rate of 15 per cent. and were converted into10,478,917 Ordinary shares on 17 January 2014.

On 16 April 2012 the Company issued up to £10 million secured convertible loan notes. Of these, £6.4 million ofconvertible loan notes were subscribed at 31 December 2013. The loan notes carried an interest rate of 15 percent. up to the date of the first anniversary, 20 per cent. between the first and second anniversaries and 25 percent. from the second anniversary onwards. The loan notes were converted into 14,067,070 Ordinary shares on17 January 2014.

The Group received a bank loan of £4.5 million during 2012. The bank loan carries interest at 7.5 per cent. overLIBOR and is repayable in quarterly installments over five years with a balancing payment due on 31 March2017. The bank loan is secured on certain long-term revenues and the assets of the group.

The bank loan is stated net of unamortised finance costs of £181,000 (2013: £257,000). The group has chargedthe Consolidated statement of comprehensive income issue costs of £76,000 (2013 - £76,000) in respect to thesefacilities. These costs are allocated to the income statement over the term of the facility at a constant rate on thecarrying amount.

Maturity analysis

2014 2013£000 £000

Bank and other loansIn one year or less or on demand 790 1,021In more than one year but not more than two years 888 697In more than two years but not more than five years 926 1,750

2,604 3,468

Loan notesIn one year or less or on demand - 13,092

- 13,092

Equity conversion option liabilityIn one year or less or on demand - 1,616

- 1,616

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21. DEFERRED REVENUE

Maturity analysis

2014 2013£000 £000

Deferred revenueIn one year or less or on demand 2,023 939In more than one year but not more than two years 841 121In more than two years but not more than five years 2,470 280In more than five years 6,772 196

12,106 1,536

22. TRADE AND OTHER PAYABLES

2014 2013£000 £000

Trade payables 1,273 1,164Other taxation and social security 258 76Other creditors 274 675Share-based payments liability (note 5) 620 -Accruals 2,705 940

5,130 2,855

23. OPERATING LEASES

Leases as lessor

The Group leases its network assets under operating leases which give the lessee the right to control the use ofthe asset. The leases are for period of between 1 and 20 years.

At the end of the reporting period, the future minimum lease payments receivable under non-cancellableoperating leases are receivable as follows:

2014 2013£000 £000

Within one year 1,636 1,511In two and five years 5,042 4,980After five years 984 1,719

7,662 8,210

Leases as lessee

At the end of the reporting period, the future minimum lease payments under non-cancellable operating leasesare payable as follows.

Land and buildings Other items2014 2013 2014 2013£000 £000 £000 £000

Within one year 275 83 117 131In two to five years 453 243 326 443After five years 96 154 - -

824 480 443 574

24. CAPITAL COMMITMENTS

2014 2013£000 £000

Contracted but not provided for 12,183 4,265

12,183 4,265

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Capital commitments include amounts in relation to sales contracts signed in 2014 for which construction willtake place in 2015.

25. FINANCIAL INSTRUMENTS

The Group’s financial instruments comprise borrowings, cash and cash equivalents and various items such astrade receivables and payables that arise directly from its operations. The main purpose of these instruments is toraise finance for operations. The Group has not entered into derivatives transactions nor does it trade in financialinstruments as a matter of policy. The main risks arising from the Group’s financial instruments are interest raterisk, liquidity risk and credit risk. Management’s policy on each is described in Note 1. Operations are financedthrough working capital management and external loan funding.

Liquidity risk

In order to maintain liquidity to ensure that sufficient funds are available for ongoing operations and futuredevelopments, the Group uses long-term finance in the form of a bank loan. This loan carries covenants thatrelate to the leverage, debt service cover and expenditure of CityFibre Networks Limited.

The Group’s trade payables, other payables and accrued expenses are generally due between one and threemonths and the Group’s other financial liabilities are due as follows:

Interest bearing loans and borrowings – gross payments2014 2013£000 £000

Due within one year 866 15,705Due within one to two years 964 773Due within two to three years 955 828Due within three to four years - 1,027Due within four to five years - -

2,785 18,333

Interest rate risk

Interest rate risk arising from borrowing at variable rates is not hedged as management do not consider the risk tobe significant

Interest rate risk showing a 1 per cent. increase on floating rate liabilities is as follows:

2014 2013£000 £000

1 per cent increase in interest rates 23 33

Credit risk

The Group’s principal financial assets are bank balances and cash, trade and other debtors and investments, TheGroup’s credit risk is primarily attributable to its trade receivables. The amounts presented in the statement offinancial position are net of allowances for doubtful debts. The Group has no significant concentration of creditrisk, with exposure spread over a large number of counterparties and customers.

Trade receivable ageing2014 2013£000 £000

Under 30 days overdue 1,723 445Between 31 to 60 days overdue 316 15Between 61 to 90 days overdue 38 9Over 90 days overdue 170 28

2,247 497

A provision of £8,000 was made against doubtful receivables during the year and the balance of the provisionwas £26,000 at 31 December 2014 (2013: £37,000).

Cash and cash equivalents are held in Sterling in UK banks.

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Financial assets

The floating rate financial assets comprise interest earning bank deposits at rates set by reference to theprevailing LIBOR or equivalent to the relevant country. At 31 December 2014, the Group had invested£29 million in short-term deposits, which yield a fixed interest rate.

Fair values

In management’s opinion there is no material difference between the book value and fair value of any of theGroup’s financial instruments.

Classes of financial instruments

The classes of financial instruments are the same as the line items included on the face of the statement offinancial position and have been analysed in more detail in the notes to the accounts. All the Group’s financialassets are categorised as loans and receivables and all financial liabilities are measured at amortised cost.

26. RELATED PARTY TRANSACTIONS


Subsidiaries

The subsidiary undertakings of the company at 31 December 2014 were as follows:


Principal activities % holding ofordinary share

capital

CityFibre Holdings Limited UK Holding company 100


100


Gigler Limited (formerly known as FibrecityWessex Limited)

UK Provision of internet services inBournemouth

100



100



The directors are considered to be the key management personnel.


Year ended 31 December 2014Directors

2014Directors

2013Highest paiddirector 2014


£000 £000 £000 £000

Fees 728 607 240 240Benefits in kind 31 18 11 10Pension contributions 7 - - -Bonus 618 - 297 -

1,384 625 548 250Share based payments 1,098 - 556 -

2,482 625 1,104 250Social security costs 186 84 74 33

Total directors’ emoluments 2,668 711 1,178 283

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Bonuses paid in 2014 included one-off amounts in respect of performance leading up to the IPO, as well as abonus in respect of work performed in 2014. In respect of the highest paid director, the one-off bonus was£168,000. No bonuses were paid in 2013.

During the year, the Group was charged £18,000 (2013: £14,500) by BJC Networks Ltd, a company owned andcontrolled by Peter Manning, the former chairman, in respect of consultancy fees. Of this, £2,000 (2013: £nil)was owed at the year-end.

At 31 December 2014 the directors did not consider there to be an ultimate controlling party. In 2013 the ultimatecontrolling party was considered to be W G Mesch.

During the year the Group charged YorkCo, an associate of CityFibre Holdings Ltd, £343,000 (2013: £nil) inrespect of services provided. All of this balance was outstanding at the year end.

Loan notes

At 31 December 2014 no loan notes (2013: £7,717,000), including accrued interest, had been issued to relatedparties.

27. EARNINGS PER SHARE

Basic earnings per share

The calculation of basic earnings per share is based on the loss attributable to ordinary shareholders and theweighted average number of Ordinary Shares outstanding during the year calculated as follows:

Loss attributable to ordinary shareholders

2014 2013

Loss for the period attributable to ordinary shareholders used in basic anddiluted earnings per share £ (7,026,000) £(6,287,000)

Weighted average number of shares used in basic and diluted earnings pershare 74,312,769 113,077

Basic and diluted earnings per share £(0.09) £(55.60)

Potentially issuable shares are not considered to be dilutive because the group made a loss in 2014 and 2013.Shares, options and warrants referred to in notes 5, 16, and 19 could have an effect on future reported earningsper share.

28. PENSIONS

A defined contribution pension scheme is operated by the group on behalf of the employees of the company andthe subsidiary undertakings. The assets of the scheme are held separately from those of the company in anindependently administered fund. The pension charge represents contributions payable by the group to the fundand amounted to £49,000 (2013: £29,000). Contributions totalling £5,000 (2013: £2,000) were payable to thefund at the period end and are included in creditors.

29. SUBSEQUENT EVENTS

On 22 January 2015, the Company issued 231,781 ordinary shares to the Nedgroup Trust (Jersey) Limited (the“Trustee”), in its capacity as the trustee of the CityFibre Employee Benefit Trust. The JSOP Shares will be heldby the Trustee for the joint benefit of itself and Stephen Charlton, Non-Executive Director, with Mr. Charltonbeing beneficially interested in any value in each of the JSOP Shares above 100p.

182


183


We have audited the financial statements of CityFibre Infrastructure Holdings plc for the year ended31 December 2015 which comprise the consolidated and parent company statements of financial position, theconsolidated statement of comprehensive income, the consolidated and parent company statements of cash flows,the consolidated and parent company statements of changes in equity and the related notes. The financialreporting framework that has been applied in their preparation is applicable law and International FinancialReporting Standards (IFRSs) as adopted by the European Union and as regards the parent company financialstatements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has been undertaken so that we might state to the company’s members thosematters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other than the company and the company’smembers as a body, for our audit work, for this report, or for the opinions we have formed.




A description of the scope of an audit of financial statements is provided on the FRC’s website at www.frc.org.uk/auditscopeukprivate.


In our opinion:

• the financial statements give a true and fair view of the state of the group’s and the parent company’s affairsas at 31 December 2015 and of the group’s loss for the year then ended;

• the group financial statements have been properly prepared in accordance with IFRSs as adopted by theEuropean Union;

• the parent company financial statements have been properly prepared in accordance with IFRSs as adoptedby the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act2006.


In our opinion the information given in the strategic report and directors’ report for the financial year for whichthe financial statements are prepared is consistent with the financial statements.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report toyou if, in our opinion:

• adequate accounting records have not been kept by the parent company, or returns adequate for our audithave not been received from branches not visited by us; or

• the parent company financial statements are not in agreement with the accounting records and returns; or

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• certain disclosures of directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

Julian Frost (senior statutory auditor)For and on behalf of BDO LLP, statutory auditorLondonUnited Kingdom

15 April 2016


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Note 2015 2014£000 £000

Revenue (2) 6,408 3,844Cost of sales (888) (568)

Gross profit 5,520 3,276Total administrative expenses (11,679) (10,726)

Operating loss (3) (6,159) (7,450)Finance income (6) 170 779Finance cost (7) (278) (344)Share of post-tax losses of equity accounted Joint Venture (126) (42)

Loss on ordinary activities before taxation (6,393) (7,057)Income tax (8) 31 31

Loss for the year and total comprehensive income (6,362) (7,026)

Loss per share Note 2015 2014

Basic and diluted loss per share (26) £ (0.06) £(0.09)

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As at 31 December 2015

Note 2015 2014£000 £000

AssetsNon-current assets

Property, plant and equipment (9) 43,987 31,778Intangible assets (10) 905 535Investment in Joint Venture (11) 609 847

45,501 33,160

Current assetsInventory (12) 190 83Trade and other receivables (13) 5,994 3,720Investment in short-term deposits - 29,000Cash and cash equivalents 9,731 4,186

Total current assets 15,915 36,989


EquityIssued capital (16) 1,113 1,111Share Premium (17) 63,243 63,243Share warrant reserve (18) 85 85Share-based payments reserve 1,081 773Merger reserve 331 331Retained Earnings (22,044) (15,680)

Total equity 43,809 49,863


Note 2015 2014£000 £000

Non-current liabilitiesInterest bearing loans and borrowings (19) - 1,814Deferred revenue (20) 9,746 10,083Deferred consideration (15) 448 415Deferred tax (14) - 31

Total non-current liabilities 10,194 12,343

Current liabilitiesInterest bearing loans and borrowings (19) - 790Deferred revenue (20) 2,152 2,023Trade and other payables (21) 5,261 5,130

Total current liabilities 7,413 7,943

Total liabilities 17,607 20,286


These financial statements were approved by the Board of Directors and authorised for issue on 15 April 2016.They were signed on its behalf by:

W G MeschDirector

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Sharecapital

SharePremium

Warrantreserve

Sharewarrantreserve

Share-based

paymentsreserve

Mergerreserve

RetainedEarnings

Total

£000 £000 £000 £000 £000 £000 £000 £000

Balance at 1 January 2014 - 389 700 - - - (2,054) (965)

Comprehensive incomeLoss and total comprehensive

income for the year - - - - - - (7,026) (7,026)

Transactions with ownersNew ordinary shares issued 1,050 65,985 - - - - - 67,035Issue of share held by JSOP - - - - - - (6,600) (6,600)Cost of issuing new ordinary shares - (2,948) - - - - - (2,948)Share warrant charge - - - 289 - - - 289Exercise of share warrants 3 206 - (204) - - - 5Share-based payments - - - - 773 - - 773Group reconstruction 58 (389) - - - 331 - -Discharge of warrant reserve - - (700) - - - - (700)

Balance at 31 December 2014 1,111 63,243 - 85 773 331 (15,680) 49,863


income for the year - - - - - - (6,362) (6,362)Transactions with ownersNew ordinary shares issued 2 - - - - - - 2Issue of share held by JSOP - - - - - - (2) (2)Share-based payments - - - - 308 - - 308

Balance at 31 December 2015 1,113 63,243 - 85 1,081 331 (22,044) 43,809

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2015 2014£000 £000

Cash flows from operating activitiesLoss before tax (6,393) (7,057)Amortisation of intangibles 233 114Share based payments 343 1,393Finance income (170) (779)Finance costs 278 344Depreciation 1,707 1,393Profit on disposal of PPE - (62)Right of use income (224) (161)(Increase)/decrease in inventory (107) 21Increase in receivables (1,990) (1,946)Increase in payables 837 3,146Share of loss from associated company 126 42

(5,360) (3,552)Tax paid - -


Cash flows from investing activitiesInterest received 222 31Investment in short-term deposits - (29,000)Receipts from short-term deposits 29,000 -Acquisition of intangible assets (350) (324)Acquisition of property, plant and equipment (12,703) (4,499)Proceeds on disposal of property, plant and equipment 17 -Capitalised labour costs (2,404) (544)

Net cash from/(utilised in) investing activities 13,782 (34,336)

Cash flows from financing activitiesProceeds from the issue of share capital - 46,523Costs of issuing share capital - (2,839)Repayment of borrowings (2,604) (940)Repayment of warrant reserve - (700)Interest paid (273) (256)

Net cash (utilised in)/from financing activities (2,877) 41,788

Net increase in cash and cash equivalents 5,545 3,900Cash and cash equivalents at beginning of period 4,186 286


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Nature of Group


Basis of accounting

The financial statements of the Company have been prepared on a going concern basis and in accordance withInternational Financial Reporting Standards (“IFRS”) and their interpretations issued by the InternationalAccounting Standards Board (“IASB”), as adopted by the European Union. They have also been prepared withthose parts of the Companies Act 2006 applicable to companies reporting under IFRS.

The Group has not adopted any Standards or Interpretations in advance of the required implementation dates. Thedirectors note that the following accounting standards will take effect for future accounting periods:

- IFRS 15 Revenue from Contracts with Customers (effective in 2018)- IFRS 9 Financial Instruments (effective in 2018)- IFRS 16 Leases (effective in 2019)

The Group intends to examine the potential impact of the adoption of these standards for the Group during 2016.It is not expected that adoption of other Standards or Interpretations which have been issued by the IASB but arenot yet effective will have a material effect on the financial statements.


The consolidated financial statements incorporate the results of CityFibre Infrastructure Holdings PLC and all ofits subsidiary undertakings as at 31 December 2015. The results of subsidiary undertakings are included from thedate of acquisition.

CityFibre Infrastructure Holdings plc was incorporated on 13 November 2013, and on 11 January 2014 itacquired the issued share capital of CityFibre Holdings Limited by way of a share-for-share exchange. The latterhad five wholly owned subsidiaries: CityFibre Networks Limited, Fibrecity Holdings Limited, Gigler Limited,CityFibre Metro Networks Limited and Fibrecity Bournemouth Limited. The consideration for the acquisitionwas satisfied by the issue of 115,383 Ordinary Shares in CityFibre Infrastructure Holdings plc to the shareholdersof CityFibre Holdings Limited.

The accounting treatment in relation to the addition of CityFibre Infrastructure Holdings plc as a new UK holdingCompany of the Group falls outside the scope of the IFRS 3 ‘Business Combinations’. The share schemearrangement constituted a combination of entities under common control as CityFibre Infrastructure Holdingsplc, due to all shareholders of CityFibre Holdings Limited being issued shares in the same proportion, and thecontinuity of ultimate controlling parties. The reconstructed Group was consolidated using merger accountingprinciples as outlined in Financial Reporting Standard 6 (“FRS”) Acquisitions and Mergers (UK) and treated thereconstructed Group as if it had always been in existence. Any difference between the nominal value of sharesissued in the share exchange and the book value of the shares obtained is recognized in a merger reserve.

The Company has taken advantage of merger relief available under Companies Act 2006 in respect of the sharefor share exchange as the issuing company has secured more than 90 per cent. equity in the other entity.

Joint ventures


These consolidated financial statements include the Group’s share of the total recognised gains and losses of ajoint venture using the equity method, from the date that significant influence commenced, based on presentownership interests, less any impairment losses. Under the equity method, investments in joint ventures arecarried in the Consolidated Statement of Financial Position at cost as adjusted for post-acquisition changes in theGroup’s share of the net assets of the associate, less any impairment in the value of the investment and theGroup’s share of any gain on contribution of assets to the joint venture.

190


Revenue

Revenue represents network lease sales and installation sales to external customers, sales of internet services toresidential customers, and recharge of work performed for the joint venture at invoiced amounts less value addedtax or local taxes on sales. Where revenue arising from installation and connection services is separable fromnetwork lease services, these elements are recognised as if they were separate contracts.


Installation revenue is recognised on a percentage completion basis over the period of construction of the asset,from post-contract signature mobilization to customer handover. Management apply a straight line basis as thisclosely approximates revenue recognised on a stage of completion basis and the effort required to deliverservices to customers.

Accrued income is recognised when services are provided in advance of the customer being invoiced.

Deferred revenue is recognised when services are invoiced in advance of the period over which the services areprovided.


Revenue from work performed for the JV is recognised during the period to which the work relates.

All revenue streams are wholly attributable to the principal activity of the Group and arise solely within theUnited Kingdom.



Leasehold property 5 years

Network assets 20 years

Plant and machinery 5 years

Fixtures and fittings 3 years

Motor vehicles 3 years


Intangible assets

Customer contracts, which have arisen through business combinations, are assessed by reviewing their netpresent value of future cash flows. Customer contracts are amortised over their useful life not exceeding sixyears.

Software costs that are directly attributable to IT systems controlled by the Group are recognised as intangibleassets and the costs are amortised over their useful lives not exceeding three years. Amortisation is included ingeneral administrative costs in the statement of comprehensive income.



Inventory

Inventory is stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in,first out basis. Inventory includes equipment necessary to install fibre optic networks.

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Finance costs

Finance costs are charged to profit over the term of the debt so that the amount charged is at a constant rate onthe carrying amount. Finance costs include issue costs, which are initially recognized as a reduction in theproceeds of the associated capital instrument.

Operating leases



Financial liabilities, including trade payables, bank loan and convertible instruments, are recognised when theGroup becomes party to the contractual arrangements of the instrument and are recorded at amortised cost usingthe effective interest method. All related interest charges on loans are recognised as an expense in ‘finance cost’in the statement of comprehensive income.

Financial liabilities and equity are classified according to the substance of the financial instrument’s contractualobligations, rather than the financial instrument’s legal form.


Financial assets





Short-term investments

Short-term investments are amounts held on cash deposit, at financial institutions, which mature in periodsexceeding 3 months.


The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based paymentsare measured at fair value at the date of the grant. The fair value at the grant date is determined using twodifferent models. For share options that include market-based vesting criteria, the Monte Carlo model has beenused, with the expense recognised over the expected life of the options. For all other options the Black-Scholesmodel has been used, with the calculated value expensed over the vesting period. The value of the expense isdependent upon certain key assumptions including the expected future volatility of the Group’s share price at thedate of the grant.


All goods and services received in exchange for the grant of any share warrants are measured at their fair values.In the absence of information on the fair value of the services provided, the fair value of services received inreturn for the warrant issued is measured by reference to the fair value of the warrant issued. The fair value of thewarrant was estimated by management using the Black-Scholes model.

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Taxation





Pension Costs

Contributions to the Group’s defined contribution pension scheme are charged to the statement of comprehensiveincome in the period in which they become payable.



Assessment of useful economic lives of property, plant and equipment

The Group depreciates the property, plant and equipment, using the straight-line method, over their estimateduseful lives. The estimated useful life reflects management’s estimate of the period that the Group intends toderive future economic benefits from the use of the Group’s property, plant and equipment. Changes in theexpected level of usage and technological developments could affect the useful economic lives of these assetswhich could then consequentially impact future depreciation charges. The carrying amounts of the Group’s andthe Company’s property, plant and equipment at 31 December 2015 are disclosed in Note 9 to the financialstatements.


Property, plant and equipment is recorded at historical cost less accumulated depreciation and any accumulatedimpairment losses. Network assets comprises assets purchased at cost and fair value and built at cost, togetherwith capitalised labour directly attributable to the cost of construction.

The carrying values of property, plant and equipment and intangible assets other than goodwill, within a cashgenerating unit, are reviewed for impairment only when events indicate the carrying value may be impaired.Impairment indicators include both internal and external factors. Examples of internal factors include analysingperformance against budgets and assessing absolute financial measures for indicators of impairment. Examplesof external considerations assessed for indications of impairment include wider economic factors.

Where impairment indicators are present, the recoverable amounts of assets are measured. Asset recoverabilityrequires assessment as to whether the carrying value of assets can be supported by the net present value of futurecash flows derived from such assets, using cash flow projections which have been discounted at an appropriaterate. In calculating the net present value of the future cash flows, certain assumptions are required to be made inrespect of uncertain matters. In particular, management has regard to assumptions in respect of revenue mix andgrowth rates.

Revenue recognition of installation revenues

Installation revenues are a proportion of the total contract value; management assess this and give appropriateconsideration to a range of factors in determining installation revenues on a contract by contract basis. Factors

193


include contract length, technical challenges in delivering the contract and assessment of any associated localeconomic issues.




During the year the entity received revenues of £772,000 and £729,000 (2014: £667,000 and £525,000) from twomajor customers arising in the Group’s only identified segment.

3. OPERATING LOSS


2015 2014£000 £000

Operating lease income (2,374) (1,876)Depreciation of property, plant and equipment 1,707 1,393Amortisation of intangibles 233 114One-off fundraising costs - 322Operating lease costs

Land and buildings 407 317Others 132 132

The analysis of auditor’s remuneration is as follows: 2015 2014£000 £000

Fees payable to the Group’s auditor for the audit of the Group’s annual financialstatements 135 136


Tax services 81 28Assurance services 2 81Corporate finance services 28 -


Total fees 246 245

4. STAFF COSTS

The average number of staff employed (including directors) by the Group during the financial year amounted to:

2015 2014No. No.


83 46

The aggregate payroll costs of the above were: 2015 2014£000 £000

Wages and salaries 5,131 4,136Social security costs 809 517Other pension costs 119 49Share-based payments 343 1,393

6,402 6,095

The analysis of payroll costs above includes only expensed costs. Capitalised staff costs for 2015 are £1,468,000(2014: £418,000).

Wages and salaries for 2014 include one-off bonuses totaling £585,000 in respect of work performed for the IPO.

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price 2015

Numberof options 2015


price 2014

Numberof options 2014

Outstanding at the beginning of the period £0.63 15,208,314 - -Granted during the period £0.07 2,344,670 £0.63 15,579,902Forfeited during the period £0.61 (248,480) £0.60 (371,588)

Outstanding at the end of the period £0.56 17,304,504 £0.63 15,208,314

The options outstanding at 31 December 2015 have an exercise price in the range of £nil to £0.70 and a weightedaverage remaining contractual life of 8.5 years.

At 31 December 2015, 2,122,428 of the options had vested, but were not exercisable as the options are onlyexercisable 12 months after the vesting date (2014: 1,107,616).


Number of optionsOutstandingat beginning

of period



period


period

Exerciseprice £


1,758,144 - (219,909) 1,538,235 - £0.60 16 January 2014 16 January 20241,388,886 - - 1,388,886 1,388,886 £0.60 16 January 2014 16 January 20241,361,166 - - 1,361,166 340,292 £0.60 16 January 2014 16 January 2024

160,137 - - 160,137 - £0.66 23 May 2014 23 May 2024667,238 - - 667,238 - £0.60 23 May 2014 23 May 2024

1,680,411 - - 1,680,411 1,680,411 £0.60 23 May 2014 23 May 20243,069,299 - - 3,069,299 767,324 £0.60 23 May 2014 23 May 20241,259,599 - (28,571) 1,231,028 - £0.70 09 June 2014 09 June 20243,863,434 - - 3,863,434 - £0.70 09 June 2014 09 June 2024

- 231,781 - 231,781 - £0.66 22 January 2015 22 January 2025- 2,112,889 - 2,112,889 - £nil 21 December 2015 21 December 2025

15,208,314 2,344,670 (248,480) 17,304,504 4,176,913



Weighted average fair value of options granted during the year £0.50 £0.11Weighted average share price £0.65 £0.71Weighted average exercise price £0.56 £0.63Expected volatility (expressed as weighted average volatility) 30% 30%Option life 4 4Expected dividends - -Risk-free interest rate (based on national government bonds) 0.5% 0.5%

These assumptions are used in both the Black-Scholes and Monte Carlo models.

195



2015 2014£000 £000

Total expense recognised as employee and consultants costs 343 1,393Total liability recognised on cash-settled elements of share option awards 654 620

6. FINANCE INCOME

2015 2014£000 £000

Interest on bank deposits 170 140Gain on conversion of loan notes - 639

170 779

The gain on conversion of loan notes arose when the finance costs of the loan notes were reduced in advance ofthe conversion. As the total loan converted was lower than the original carrying amount and interest to beextinguished, a gain was recognised.

7. FINANCE COSTS

2015 2014£000 £000

Interest on bank loans 245 325Other interest 33 19

278 344

8. TAXATION

2015 2014£000 £000

Current taxUK corporation tax based on the results for the year at 20.25 per cent.

(2014: 21.5 per cent.) - -Total current tax - -Deferred taxTemporary differences on which deferred tax has been recognised 29 24Effect of change in tax rates 2 7Tax on loss on ordinary activities 31 31


The tax assessed for the year differs from the standard rate of corporation tax in the UK of 20.25 per cent.(2014: 21.5 per cent.) as follows:

2015 2014£000 £000

Loss on ordinary activities before taxation (6,393) (7,057)Tax on loss on ordinary activities at standard rate (1,295) (1,517)Factors affecting chargeEffect of change in tax rates 2 7Expenses not deductible for tax purposes 102 180Origination of temporary differences on which no deferred tax has been recognised 337 257Effect of tax losses not recognised 885 1,104

Total tax 31 31

196


Factors that may affect future tax charges

The standard rate of UK corporation tax will reduce to 19 per cent. effective 1 April 2017.


LeaseholdProperty

Networkassets

Plant andMachinery

Fixturesand

fittings

Motorvehicles

Total

£000 £000 £000 £000 £000 £000

CostAt 1 January 2014 99 21,138 370 34 20 21,661Additions - 13,925 46 109 - 14,080Disposals - (162) (1) - - (163)

At 31 December 2014 99 34,901 415 143 20 35,578

At 1 January 2015 99 34,901 415 143 20 35,578Additions 2 13,828 64 39 - 13,933Disposals - (17) - - (8) (25)

At 31 December 2015 101 48,712 479 182 12 49,486

Accumulated depreciationAt 1 January 2014 59 2,055 241 33 19 2,407Charge in the year 20 1,271 84 17 1 1,393

At 31 December 2014 79 3,326 325 50 20 3,800

At 1 January 2015 79 3,326 325 50 20 3,800Charge in the year 17 1,609 61 20 - 1,707Disposals - - - - (8) (8)

At 31 December 2015 96 4,935 386 70 12 5,499

Net book valueAt 31 December 2015 5 43,777 93 112 - 43,987At 31 December 2014 20 31,575 90 93 - 31,778

Included in network assets above are network assets under construction and not yet depreciated which are held ata cost of £8,537,000 (2014: £4,454,000) at the date of the statement of financial position.


Website costs Customercontracts

Software costs Total

£000 £000 £000 £000CostAt 1 January 2014 32 580 - 612Additions 22 - 302 324

At 31 December 2014 54 580 302 936

At 1 January 2015 54 580 302 936Additions 14 - 589 603

At 31 December 2015 68 580 891 1,539

Accumulated amortisationAt 1 January 2014 9 278 - 287Amortisation 13 101 - 114

At 31 December 2014 22 379 - 401

At 1 January 2015 22 379 - 401Amortisation 25 90 118 233

At 31 December 2015 47 469 118 634

Net book valueAt 31 December 2015 21 111 773 905At 31 December 2014 32 201 302 535

197





YorkCo UK 33%

The summarised financial information is as follows:

Year ended31 December 2015

£000

Loss from continuing operations (378)

Other comprehensive income -

Total comprehensive income (378)

2015£000

Investment in Joint VentureAs at 1 January 2015 847Elimination of related party profit (112)Share of comprehensive loss for the year of the equity accounted JV (126)


12. INVENTORY

2015 2014£000 £000


190 83

Inventory is stated net of an impairment provision of £nil (2014: £nil).


Trade receivables are stated net of a doubtful debt provision of £28,000 (2014: £26,000).

14. DEFERRED TAX

2015 2014£000 £000

Balance at start of period 31 62Credit for the period (31) (31)Balance at end of period - 31


2015 2014£000 £000

Difference of taxation allowances over depreciation on fixed assets 793 581Tax losses available 4,022 3,202Other temporary differences - 53

4,815 3,836

198




£000

Balance at start of period 415Recognise through income statement 33

448


2015 2014£000 £000

Authorised, called up, allotted and fully paid

105,672,644 (2014:105,440,863) ordinary shares of £0.01 each 1,056 1,054

5,653,865 (2014: 5,653,865) deferred ordinary shares of £0.01 each 57 57

1,113 1,111

2015(No.)

Balance at start of period 105,440,863

22/01/2015 – issued to JSOP at £0.01 per share 231,781

Balance at end of period 105,672,644

On 17 January 2014, the Company was admitted to trading on AIM via an IPO, which generated gross proceedsof £16.5 million (£14.8 million net proceeds) from the issue of 26,732,981 new ordinary shares at 60p per share,539,747 new ordinary shares at 48p per share, and 380,548 new ordinary shares at 54p per share. As part of thisprocess, the loan note investments in CityFibre Holdings Limited were hived up into CityFibre InfrastructureHoldings plc. The loan notes, together with accrued interest and applicable discounts converted into 24,545,987ordinary shares, valued at £14.7 million, at the IPO placing price of 60p per share.

On 9 June 2014, the Company generated gross proceeds of £30 million (£28.7 million net proceeds) via the issueof 42,857,142 new ordinary shares at a placing price of 70p per ordinary share.

During the prior period, the Company issued share options, of which 9,927,527 were issued to an employeebenefit trust by way of a joint share ownership plan. On 26 May 2014, 827,375 shares were issued at the nominalprice of 1p per share, while 4,749,710 ordinary shares were issued at a value of 77p per share. A further issuetook place on 9 June 2015, with 429,865 shares issued at the nominal price of 1p per share, while 3,920,577ordinary shares were issued at a value of 75p per share.

On 12 May 2014, 338,583 share warrants were exercised at their nominal value of 1p per share. On 22 July 2014,a further 2,963 share warrants were exercised at 60p per ordinary share issued.

On 22 January 2015, the Company issued 231,781 ordinary shares to an employee benefit trust by way of a jointshare ownership plan. The shares were issued at the nominal price of 1p per share.

17. SHARE PREMIUM

During the year no costs were incurred in relation to the issue of new share capital.

£000

Share premium at start and end of period 63,243

2015 2014£000 £000

Share warrant reserve 85 85

This relates to warrants issued to certain investors in CityFibre Holdings Limited to acquire shares in theCompany.

199



2015 2014£000 £000

Bank loan - 2,604

- 2,604

Due within one year - 790Due after one year - 1,814

- 2,604

The Group received a bank loan of £4.5 million during 2012. The bank loan carried interest at 7.5 per cent. overLIBOR and was repayable in quarterly installments. The bank loan was repaid in full on 11 December 2015.

Maturity analysis2015 2014£000 £000

Bank and other loansIn one year or less or on demand - 790In more than one year but not more than two years - 888In more than two years but not more than five years - 926

- 2,604


Period of performance obligation2015 2014£000 £000

Deferred revenueIn one year or less or on demand 2,152 2,023In more than one year but not more than two years 982 841In more than two years but not more than five years 2,393 2,470In more than five years 6,371 6,772

11,898 12,106


2015 2014£000 £000

Trade payables 1,880 1,273Other taxation and social security 270 258Other creditors 1,127 274Share-based payments liability (note 5) 654 620Accruals 1,330 2,705

5,261 5,130


Leases as lessor


200


At the end of the reporting period, the future minimum lease payments receivable under non-cancellableoperating leases are receivable as follows

2015 2014£000 £000

Within one year 2,024 1,636In two and five years 5,753 5,042After five years 277 984

8,054 7,662

Leases as lessee

At the end of the reporting period, the future minimum lease payments under non-cancellable operating leasesare payable as follows.

Land and buildings Other items

2015 2014 2015 2014£000 £000 £000 £000

Within one year 315 275 117 117In two to five years 369 453 209 326After five years - 96 - -

684 824 326 443


2015 2014£000 £000

Contracted but not provided for 21,010 12,18321,010 12,183



The Group’s financial instruments comprise borrowings, cash and cash equivalents and various items such astrade receivables and payables that arise directly from its operations. The main purpose of these instruments is toraise finance for operations. The Group has not entered into derivatives transactions nor does it trade in financialinstruments as a matter of policy. The main risks arising from the Group’s financial instruments are interest raterisk, liquidity risk and credit risk. Managements’ policy on each is described in Note 1. Operations are financedthrough working capital management and external loan funding.

Liquidity risk

In order to maintain liquidity to ensure that sufficient funds were available for ongoing operations and futuredevelopments, the Group used long-term finance in the form of a bank loan. This loan carried covenants thatrelate to the leverage, debt service cover and expenditure of CityFibre Networks Limited. This bank loan wasrepaid in full on 11 December 2015.

201


The Group’s trade payables, other payables and accrued expenses are generally due between one and threemonths and the Company’s other financial liabilities were due as follows:

Interest bearing loans and borrowings – gross payments2015 2014£000 £000

Due within one year - 866Due within one to two years - 964Due within two to three years - 955Due within three to four years - -Due within four to five years - -

- 2,785

Interest rate risk

As at 31 December 2015 the Group does not have any financial instruments subject to material interest rate risk.

Credit risk

The Group’s principal financial assets are bank balances and cash, trade and other debtors and investments, TheGroup’s credit risk is primarily attributable to its trade receivables. The amounts presented in the statement offinancial position are net of allowances for doubtful debts. The Group has no significant concentration of creditrisk, with exposure spread over a large number of counterparties and customers.

Trade receivable ageing2015 2014£000 £000

Under 30 days overdue 169 1,723Between 31 to 60 days overdue 296 316Between 61 to 90 days overdue 163 38Over 90 days overdue 172 170

800 2,247



Financial assets

The floating rate financial assets comprise interest earning bank deposits at rates set by reference to theprevailing LIBOR or equivalent to the relevant country. At 31 December 2015, the Group had no investments(2014: £29 million) in short-term deposits that yield a fixed interest rate.

Fair values






202


Subsidiaries





100

CityFibre Networks Limited UK Provision oftelecommunication networks

100


Gigler Limited UK Provision of internet servicesin Bournemouth

100


Fibrecity Bournemouth Limited UK Provision oftelecommunication networkswithin Bournemouth

100

CityFibre Limited UK Provision oftelecommunication networks

100





Year ended 31 December 2015Key

managementpersonnel 2015

Keymanagement

personnel 2014


2015


2014£000 £000 £000 £000

Fees 1,502 1,213 265 240Benefits in kind 50 48 11 11Pension contributions 22 17 - -Bonus 566 912 181 297Share based payments 282 1,193 94 556

2,422 3,383 551 1,104


Total emoluments 2,707 3,676 614 1,178

Bonuses paid in 2014 included one-off amounts in respect of the IPO, as well as a bonus in respect of workperformed in 2014.

During the year, the Group was charged £29,000 (2014: £18,000) by BJC Networks Ltd, a company owned andcontrolled by Peter Manning, the former chairman, in respect of consultancy fees. Of this, £20,000 (2014:£2,000) was owed at the year-end.

During the year, the Group was charged £255,000 (2014: £216,000) by Teleconsult (2011) Ltd, a companyowned and controlled by Seamus Given, a member of key management personnel during the year, in respect ofconsultancy fees. Of this, £17,000 (2014: £17,000) was owed at the year-end.


During the year the Group charged YorkCo, an associate of CityFibre Holdings Ltd, £610,000 (2014: £343,000)in respect of services provided. Of this, £102,000 (2014: £343,000) was receivable at the year-end.

203





Loss attributable to ordinary shareholders 2015 2014

Loss for the period attributable to ordinary shareholders used in basic and dilutedearnings per share (6,362,000) (7,026,000)

Weighted average number of shares used in basic and diluted earnings per share 105,656,134 74,312,769


Potentially issuable shares are not considered to be dilutive because the Group made a loss in 2015 and 2014.Options, shares and warrants referred to in notes 5, 16, and 18 could have an effect on future reported earningsper share.

26. PENSIONS

A defined contribution pension scheme is operated by the Group on behalf of the employees of the Group. Theassets of the scheme are held separately from those of the Group in an independently administered fund. Thepension charge represents contributions payable by the Group to the fund and amounted to £119,000 (2014:£49,000). Contributions totalling £15,000 (2014: £5,000) were payable to the fund at the period end and areincluded in creditors.


On 18 January 2016 the Group completed the acquisition of certain network assets from KCOM Group plc. Theacquisition constituted a reverse takeover under Rule 14 of the AIM Rules for Companies, requiring de-listingand readmission, which occurred on 14 January 2016.

The acquisition of network assets for £90 million will result in CityFibre adding network assets and a negligibleamount of stock onto its balance sheet.

The acquisition was funded by an £80 million placing of new equity at 50p per share and a loan facility of£100 million with Proventus Capital Partners III AB, of which £35 million was utilised in the asset purchase, thebalance of £65 million being available as a working capital facility for capital projects.

The Group is treating this transaction as an acquisition of assets, as per IAS 16, rather than a businesscombination as per IFRS 3. Completion occurred on 18 January 2016, therefore this acquisition will berecognised in 2016.

204


205


We have audited the financial statements of CityFibre Infrastructure Holdings plc for the year ended31 December 2016 which comprise the consolidated and parent company statements of financial position, theconsolidated statement of comprehensive income, the consolidated and parent company statements of cash flows,the consolidated and parent company statements of changes in equity and the related notes. The financialreporting framework that has been applied in their preparation is applicable law and International FinancialReporting Standards (IFRSs) as adopted by the European Union and as regards the parent company financialstatements, as applied in accordance with the provisions of the Companies Act 2006.

This report is made solely to the company’s members, as a body, in accordance with Chapter 3 of Part 16 of theCompanies Act 2006. Our audit work has been undertaken so that we might state to the company’s membersthose matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone other than the company and thecompany’s members as a body, for our audit work, for this report, or for the opinions we have formed.




A description of the scope of an audit of financial statements is provided on the FRC’s website atwww.frc.org.uk/auditscopeukprivate.


In our opinion:

Š the financial statements give a true and fair view of the state of the group’s and the parent company’s affairsas at 31 December 2016 and of the group’s loss for the year then ended;

Š the group financial statements have been properly prepared in accordance with IFRSs as adopted by theEuropean Union; and

Š the parent company financial statements have been properly prepared in accordance with IFRSs as adoptedby the European Union and as applied in accordance with the provisions of the Companies Act 2006; and

Š the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.


In our opinion, based on the work undertaken in the course of the audit:

Š the information given in the strategic report and directors’ report for the financial year for which the financialstatements are prepared is consistent with the financial statements; and

Š the strategic report and directors’ report have been prepared in accordance with applicable legalrequirements.

Matters on which we are required to report by exception

In the light of the knowledge and understanding of the group and the parent company and its environmentobtained in the course of the audit, we have not identified material misstatements in the strategic report or thedirectors’ report.

We have nothing to report in respect of the following matters where the Companies Act 2006 requires us toreport to you if, in our opinion:

Š adequate accounting records have not been kept by the parent company, or returns adequate for our audithave not been received from branches not visited by us; or

Š the parent company financial statements are not in agreement with the accounting records and returns; or

206

Š certain disclosures of directors’ remuneration specified by law are not made; or

Š we have not received all the information and explanations we require for our audit.

Nicole Martin (senior statutory auditor)

For and on behalf of BDO LLP, statutory auditor

London

United Kingdom

Date 24 April 2017


207



Note 2016 2015£000 £000

Revenue (2) 15,363 6,408Cost of sales (1,827) (888)

Gross profit 13,536 5,520Total administrative expenses (18,677) (11,679)

Operating loss (3) (5,141) (6,159)Finance income (6) 45 170Finance cost (7) (7,341) (278)Share of post-tax losses of equity accounted Joint Venture (11) (147) (126)

Loss on ordinary activities before taxation (12,584) (6,393)Income tax (8) - 31

Loss for the year and total comprehensive income (12,584) (6,362)

Basic and diluted loss per share (25) £(0.05) £(0.06)

208



As at 31 December 2016

Note 2016 2015£000 £000

Assets

Non-current assets

Property, plant and equipment (9) 155,159 43,987

Intangible assets (10) 1,211 905

Investment in Joint Venture (11) 433 609

156,803 45,501

Current assets

Inventory (12) 3,986 190

Trade and other receivables (13) 8,070 5,994

Cash and cash equivalents 16,722 9,731

Total current assets 28,778 15,915


Equity

Issued capital (16) 2,713 1,113

Share premium 137,943 63,243

Share warrant reserve (17) 85 85

Share-based payments reserve 2,100 1,081

Merger reserve 331 331

Retained earnings (34,628) (22,044)

Total equity 108,544 43,809

Liabilities

Non-current liabilities

Interest bearing loans and borrowings (18) 55,280 -

Deferred revenue (19) 11,091 9,746

Deferred consideration (15) 450 448

Total non-current liabilities 66,821 10,194

Current liabilities

Deferred revenue (19) 2,864 2,152

Trade and other payables (20) 7,352 5,261

Total current liabilities 10,216 7,413

Total liabilities 77,037 17,607


These financial statements were approved by the Board of Directors and authorised for issue on 24 April 2017

They were signed on its behalf by:

W G Mesch

Director

209



Sharecapital

Sharepremium

Share warrantreserve

Share-basedpayments

reserve

Mergerreserve

Retainedearnings

Total

£000 £000 £000 £000 £000 £000 £000

Balance at 1 January 2015 1,111 63,243 85 773 331 (15,680) 49,863


income for the year - - - - - (6,362) (6,362)

Transactions with ownersNew ordinary shares issued 2 - - - - - 2

Issue of share held by JSOP - - - - - (2) (2)

Share-based payments - - - 308 - - 308

Balance at 31 December 2015 1,113 63,243 85 1,081 331 (22,044) 43,809


income for the year - - - - - (12,584) (12,584)

Transactions with ownersNew ordinary shares issued 1,600 78,400 - - - - 80,000

Cost of issuing new ordinaryshares - (3,700) - - - - (3,700)

Share-based payments - - - 1,019 - - 1,019

Balance at 31 December 2016 2,713 137,943 85 2,100 331 (34,628) 108,544

210



2016 2015£000 £000

Cash flows from operating activitiesLoss before tax (12,584) (6,393)Amortisation of intangibles 358 233Share based payments 908 343Finance income (45) (170)Finance costs 7,341 278Depreciation 3,572 1,707Right of use income 29 (224)Increase in inventory (3,797) (107)Increase in receivables (3,023) (1,990)Increase in payables 4,145 837Transaction costs 582 -Share of loss from associated company 147 126

(2,367) (5,360)

Tax paid - -


Cash flows from investing activitiesInterest received 73 222Receipts from short-term deposits - 29,000Acquisition of intangible assets (517) (350)Acquisition of property, plant and equipment (110,560) (12,703)Costs of acquiring property, plant and equipment (1,077) -Proceeds on disposal of property, plant and equipment - 17Capitalised labour costs (2,946) (2,404)

Net cash from investing activities (115,027) 13,782

Cash flows from financing activitiesProceeds from the issue of share capital 80,000 -Costs of issuing share capital (3,562) -Debt finance costs paid (5,320) -Drawdown of borrowings 59,800 -Repayment of borrowings - (2,604)Interest paid (6,533) (273)

Net cash utilised in financing activities 124,385 (2,877)

Net increase in cash and cash equivalents 6,991 5,545Cash and cash equivalents at beginning of period 9,731 4,186


Notes 1 to 27 form part of these financial statements.

211




Nature of Group


Basis of accounting

The financial statements have been prepared on a going concern basis and in accordance with InternationalFinancial Reporting Standards (“IFRS”) and their interpretations issued by the International AccountingStandards Board (“IASB”), as adopted by the European Union. They have also been prepared with those parts ofthe Companies Act 2006 applicable to companies reporting under IFRS.

Adoption of new and revised standards

New standards and amendments to existing standards that have been published and are mandatory for the firsttime for the financial year beginning 1 January 2016 have been adopted but had no significant impact on theGroup and Company. New standards, amendments to standards and interpretations which have been issued butare not yet effective (and in some cases had not been adopted by the EU) for the financial year beginning1 January 2016 have not been early adopted in preparing these financial statements. The implications of thesenew accounting standards on the Group and Company have not yet been fully evaluated. The main accountingstandards which may be relevant to the Group are set out below:

IFRS 9 “Financial Instruments”- (effective for 2019 financial report)

IFRS 9 is applicable retrospectively and includes revised requirements for the classification and measurement offinancial instruments, as well as recognition and de-recognition requirements for financial instruments. Keychanges to accounting requirements under IFRS 9 which may be relevant to the Group and Company include therequirement to apply a new impairment model based on expected loss in recognising impairment of financialassets including current receivables and loans to related parties. This may result in the recognition of additionalimpairment losses against the carrying values of these financial assets, at a point in time which is earlier thanunder the current accounting policies.

IFRS 15 “Revenue from Contracts with Customers”- (effective for 2018 financial report)

IFRS 15 was issued in May 2014 and establishes a five step model to account for revenue arising from contractswith customers. Under IFRS 15, revenue is recognised at an amount that reflects the consideration to which anentity expects to be entitled in exchange for transferring goods or services to a customer.

In applying IFRS 15, the Company’s initial views on the key changes to accounting requirements under IFRS 15which may be relevant to the Group include:

(a) Sale of goodsIn relation to IRU contracts with customers in which sale of inventory assets are the only performance obligation,revenue recognition under IFRS 15 is likely to occur at a point in time when control of the asset has transferredto the customer; this generally occurs on execution of the IRU contracts with customers. This would not be amaterial change from the current accounting treatment.

(b) Installation servicesContracts with customers in which installation services are provided over the period of construction of the assetcould be subject to future changes in accounting treatment. The Group considers these revenues would continueto be recognised over time under IFRS 15. Further analysis needs to be performed on the appropriate timing ofrevenue recognition.

(c) Network lease servicesContracts with customers in which network lease services are provided to customers are likely to be recognisedover time under IFRS 15 from the time that the network service becomes available for use by the customer. Thiswould not be a material change from the current accounting treatment.

212


(d) Finance costs on upfront payments from customers

Deferred revenue is currently recognised within liabilities when customers are invoiced by the Group in advanceof services being provided. Under IFRS 15, there may be a requirement to recognise a finance cost in connectionwith payments received up front from customers ahead of services being provided.

IFRS 16 “Leases” – (effective for 2019 financial report)

IFRS 16 will require the Group to recognise leases on its premises as both an asset and a rental commitment in itsconsolidated statement of financial position, but is not expected to have material effect on the Group’s results.

The implications of these accounting standards on CityFibre Infrastructure Holdings plc are expected to beevaluated in more detail during the financial year 2017.


The consolidated financial statements incorporate the results of CityFibre Infrastructure Holdings plc and all ofits subsidiary undertakings as at 31 December 2016. The results of subsidiary undertakings are included from thedate of acquisition.

CityFibre Infrastructure Holdings plc was incorporated on 13 November 2013, and on 11 January 2014 itacquired the issued share capital of CityFibre Holdings Limited by way of a share-for-share exchange. The latterhad five wholly owned subsidiaries: CityFibre Networks Limited, Fibrecity Holdings Limited, Gigler Limited,CityFibre Metro Networks Limited and Fibrecity Bournemouth Limited. The consideration for the acquisitionwas satisfied by the issue of 115,383 Ordinary Shares in CityFibre Infrastructure Holdings plc to the shareholdersof CityFibre Holdings Limited.

The accounting treatment in relation to the addition of CityFibre Infrastructure Holdings plc as a new UK holdingCompany of the Group falls outside the scope of the IFRS 3 ‘Business Combinations’. The share schemearrangement constituted a combination of entities under common control. The reconstructed Group wasconsolidated using merger accounting principles as outlined in Financial Reporting Standard 6 (“FRS”)Acquisitions and Mergers (UK) and treated the reconstructed Group as if it had always been in existence. Anydifference between the nominal value of shares issued in the share exchange and the book value of the sharesobtained is recognised in a merger reserve.

The Company has taken advantage of merger relief available under Companies Act 2006 in respect of the sharefor share exchange as the issuing company has secured more than 90 per cent. equity in the other entity.

Joint ventures


These consolidated financial statements include the Group’s share of the total recognised gains and losses of ajoint venture using the equity method, from the date that significant influence commenced, based on presentownership interests, less any impairment losses. Under the equity method, investments in joint ventures arecarried in the Consolidated Statement of Financial Position at cost as adjusted for post-acquisition changes in theGroup’s share of the net assets of the associate, less any impairment in the value of the investment and theGroup’s share of any gain on contribution of assets to the joint venture.

Revenue

Revenue represents network lease sales and installation sales to external customers, sales of internet services toresidential customers, and recharge of work performed for the joint venture at invoiced amounts less value addedtax or local taxes on sales. Where revenue arising from installation and connection services is separable fromnetwork lease services, these elements are recognised as if they were separate contracts.


Installation revenue is recognised on a percentage completion basis over the period of construction of the asset,from post-contract signature mobilisation to customer handover. Management apply a straight line basis as thisclosely approximates revenue recognised on a stage of completion basis and the effort required to deliverservices to customers.

213


It is considered by management that the above revenue recognition policies are suitable for recognising revenuearising from the Group’s key market verticals.

Revenue attributable to infrastructure sales in the form of Indefeasible-Rights-of-Use (“IRUs”) withcharacteristics which qualify the transaction as an outright sale, or transfer of title agreements, are recognised atthe later of delivery or acceptance by the customer.

Accrued income is recognised when services are provided in advance of the customer being invoiced.

Deferred revenue is recognised when services are invoiced in advance of the period over which the services areprovided.


Revenue from work performed for the JV is recognised during the period to which the work relates.

All revenue streams are wholly attributable to the principal activity of the Group and arise solely within theUnited Kingdom.



Leasehold property 5 years

Network assets - Duct 40 years

Network assets – Cabling 20 years

Plant and machinery 5 years

Fixtures and fittings 3 years

Motor vehicles 3 years


During the year the estimated useful economic life of Duct was changed from 20 years to 40 years, asmanagement considered this to be a better reflection of the period over which economic benefit is derived fromthe assets. Taking into account these assets are relatively new, have a long life and there is now enhancedevidence of the durability of these assets, CityFibre updated its accounting estimate during the year. Using theprevious useful economic life, the depreciation for the year would have been £6,595,000, which is £3,023,000greater than the depreciation recognised during the year.

Intangible assets

Customer contracts, which have arisen through business combinations, are assessed by reviewing their netpresent value of future cash flows. Customer contracts are amortised over their useful life not exceeding sixyears.

Software costs that are directly attributable to IT systems controlled by the Group are recognised as intangibleassets and the costs are amortised over their useful lives not exceeding three years. Amortisation is included ingeneral administrative costs in the statement of comprehensive income.



214


Inventory

Inventory is stated at the lower of cost and net realisable value. Cost is based on the cost of purchase on a first in,first out basis. Inventory includes equipment necessary to install fibre optic networks and also includes the costof specific network assets allocated for sale under indefeasible right of use (IRU) agreements.


Certain network assets were classified as inventory assets during the year. The Group intends to sell thesenetwork capacity assets on a regular basis where it is considered to be a strategically viable product.

Finance costs

Finance costs are charged to profit over the term of the debt so that the amount charged is at a constant rate onthe carrying amount. Finance costs include issue costs, which are initially recognised as a reduction in theproceeds of the associated capital instrument.

Operating leases



Financial liabilities, including trade payables and bank loans, are recognised when the Group becomes party tothe contractual arrangements of the instrument and are recorded at amortised cost using the effective interestmethod. All related interest charges on loans are recognised as an expense in ‘finance cost’ in the statement ofcomprehensive income.

Financial liabilities and equity are classified according to the substance of the financial instrument’s contractualobligations, rather than the financial instrument’s legal form.


Financial assets






The Group issues equity-settled share-based payments to certain employees. Equity-settled share-based paymentsare measured at fair value at the date of the grant. The fair value at the grant date is determined using twodifferent models. For share options that include market-based vesting criteria, the Monte Carlo model has beenused, with the expense recognised over the expected vesting period of the options. For all other options theBlack-Scholes model has been used, with the calculated value expensed over the vesting period. The value of theexpense is dependent upon certain key assumptions including the expected future volatility of the Group’s shareprice at the date of the grant.


215


Taxation





Pension Costs

Contributions to the Group’s defined contribution pension scheme are charged to the statement of comprehensiveincome in the period in which they become payable.



Assessment of useful economic lives of property, plant and equipment

The Group depreciates the property, plant and equipment, using the straight-line method, over their estimateduseful lives. The estimated useful life reflects management’s estimate of the period that the Group intends toderive future economic benefits from the use of the Group’s property, plant and equipment. Changes in theexpected level of usage and technological developments could affect the useful economic lives of these assetswhich could then consequentially impact future depreciation charges. The carrying amounts of the Group’sproperty, plant and equipment at 31 December 2016 are disclosed in note 9 to the financial statements.


Property, plant and equipment is recorded at historical cost less accumulated depreciation and any accumulatedimpairment losses. Network assets comprises assets purchased at cost and fair value and built at cost, togetherwith capitalised labour directly attributable to the cost of construction.

The carrying values of property, plant and equipment and intangible assets other than goodwill, within a cashgenerating unit, are reviewed for impairment only when events indicate the carrying value may be impaired.Impairment indicators include both internal and external factors. Examples of internal factors include analysingperformance against budgets and assessing absolute financial measures for indicators of impairment. Examplesof external considerations assessed for indications of impairment include wider economic factors.

Where impairment indicators are present, the recoverable amounts of assets are measured. Asset recoverabilityrequires assessment as to whether the carrying value of assets can be supported by the net present value of futurecash flows derived from such assets, using cash flow projections which have been discounted at an appropriaterate. In calculating the net present value of the future cash flows, certain assumptions are required to be made inrespect of uncertain matters. In particular, management has regard to assumptions in respect of revenue mix andgrowth rates.

Classification of network assets as inventory

Certain network assets have been classified as inventory assets during the year. Management believes thisclassification performed is appropriate given that the Group intends to sell network capacity assets on a regularbasis where it is considered to be a strategically viable product.

216


Revenue recognition of installation revenues

Installation revenues are a proportion of the total contract value; management assess this and give appropriateconsideration to a range of factors in determining installation revenues on a contract by contract basis. Factorsinclude contract length, technical challenges in delivering the contract and assessment of any associated localeconomic issues.

In addition to the above matters, refer to note 28 for the accounting treatment for the KCOM asset acquisition.




During the year the entity received revenues of £4,906,000 and £1,539,000 (2015: £772,000 and 729,000) fromtwo major customers arising in the Group’s only identified segment.

3. OPERATING LOSS


2016 2015£000 £000

Operating lease income (8,915) (2,374)Depreciation of property, plant and equipment 3,572 1,707Amortisation of intangibles 358 233One-off transaction costs (see note 27) 1,884 -Operating lease costs

Land and buildings 328 407

Others 1,024 132

The analysis of auditor’s remuneration is as follows:2016 2015£000 £000

Fees payable for the audit of the Group’s annual financial statements 35 35Fees payable for the audit of the Group’s subsidiaries’ financial statements 121 100


Tax services 48 81Assurance services 5 2Corporate finance services - 28


Total fees 209 246

4. STAFF COSTS

The average number of staff employed (including directors) by the Group during the financial year amounted to:

2016 2015No. No.


116 83

217


The aggregate payroll costs of the above were:2016 2015£000 £000

Wages and salaries 7,351 5,131Social security costs 1,117 809Other pension costs 270 119Share-based payments 908 343

9,646 6,402

The analysis of payroll costs above includes only expensed costs. Capitalised staff costs for 2016 are £2,201,000(2015: £1,468,000).

Wages and salaries for 2016 include one-off bonuses totaling £861,000 in respect of work performed for theKCOM asset acquisition.





price2016

Numberof options

2016


price2015

Numberof options

2015

Outstanding at the beginning of the period £0.56 17,304,504 £0.63 15,208,314Granted during the period £0.00 5,052,857 £0.07 2,344,670Forfeited during the period £0.54 (987,670) £0.61 (248,480)

Outstanding at the end of the period 21,369,691 £0.56 17,304,504

The options outstanding at 31 December 2016 have an exercise price in the range of £nil to £0.70 and a weightedaverage remaining contractual life of 7.9 years.

At 31 December 2016, 1,226,391 of the options had vested, but were not exercisable as the options are onlyexercisable 12 months after the vesting date (2015: 2,122,428).


Number of optionsOutstandingat beginning

of period



period


period

Exerciseprice £


1,538,235 - (152,245) 1,385,990 885,494 £0.60 16 January 2014 16 January 20241,388,886 - - 1,388,886 1,388,886 £0.60 16 January 2014 16 January 20241,361,166 - (453,722) 907,444 226,861 £0.60 16 January 2014 16 January 2024

160,137 - - 160,137 84,517 £0.66 23 May 2014 23 May 2024667,238 - - 667,238 352,153 £0.60 23 May 2014 23 May 2024

1,680,411 - - 1,680,411 1,680,411 £0.60 23 May 2014 23 May 20243,069,299 - - 3,069,299 767,324 £0.60 23 May 2014 23 May 20241,231,028 - - 1,231,028 615,514 £0.70 09 June 2014 09 June 20243,863,434 - (243,590) 3,619,844 - £0.70 09 June 2014 09 June 2024

231,781 - - 231,781 70,822 £0.66 22 January 2015 22 January 20252,112,889 - (138,113) 1,974,776 - £ nil 21 December 2015 21 December 2025

- 5,052,857 - 5,052,857 - £ nil 17 February 2016 17 February 2026

17,304,504 5,052,857 (987,670) 21,369,691 6,071,982

218




Weighted average fair value of options granted during the year £0.34 £0.50Weighted average share price £0.59 £0.65Weighted average exercise price £0.43 £0.56Expected volatility (expressed as weighted average volatility) 30% 30%

Option life 4 4Expected dividends - -Risk-free interest rate (based on national government bonds) 0.5% 0.5%

These assumptions are used in both the Black-Scholes and Monte Carlo models.


2016 2015£000 £000

Total expense recognised as employee and consultants costs 908 343

Total liability recognised on cash-settled elements of share option awards 545 654

6. FINANCE INCOME

2016 2015£000 £000

Interest on bank deposits 45 170

45 170

7. FINANCE COSTS

2016 2015£000 £000

Interest on bank loans 7,339 245Other interest 2 33

7,341 278

219


8. TAXATION

2016 2015£000 £000

Current taxUK corporation tax based on the results for the year at 20 per cent. (2015: 20.25

per cent.) - -

Total current tax - -

Deferred taxTemporary differences on which deferred tax has been recognised - 29Effect of change in tax rates - 2Tax on loss on ordinary activities - 31


The tax assessed for the year differs from the standard rate of corporation tax in the UK of 20 per cent. (2015:20.25 per cent.) as follows:

2016 2015£000 £000

Loss on ordinary activities before taxation (12,584) (6,393)Tax on loss on ordinary activities at standard rate (2,517) (1,295)Factors affecting chargeEffect of change in tax rates (3) 2Expenses not deductible for tax purposes 375 102Origination of temporary differences on which no deferred tax has been

recognised2,030 337

Effect of tax losses not recognised - 885Property, plant and equipment differences 114 -

Total tax - 31

Factors that may affect future tax chargesThe standard rate of UK corporation tax will reduce to 19 per cent. effective 1 April 2017.

220



Leaseholdproperty

Networkassets

Plant andmachinery

Fixturesand

fittings

Motorvehicles

Total

£000 £000 £000 £000 £000 £000

CostAt 1 January 2015 99 34,901 415 143 20 35,578Additions 2 13,828 64 39 - 13,933Disposals - (17) - - (8) (25)

At 31 December 2015 101 48,712 479 182 12 49,486

At 1 January 2016 101 48,712 479 182 12 49,486Additions - 113,821 941 23 - 114,785Recategorisation - (340) 340 - - -Disposals - (41) - - - (41)

At 31 December 2016 101 162,152 1,760 205 12 164,230

Accumulated depreciationAt 1 January 2015 79 3,326 325 50 20 3,800Charge in the year 17 1,609 61 20 - 1,707Disposals - - - - (8) (8)

At 31 December 2015 96 4,935 386 70 12 5,499

At 1 January 2016 96 4,935 386 70 12 5,499Charge in the year 2 3,342 196 32 - 3,572Recategorisation - (2) 2 - - -At 31 December 2016 98 8,275 584 102 12 9,071

Net book valueAt 31 December 2016 3 153,877 1,176 103 - 155,159

At 31 December 2015 5 43,777 93 112 - 43,987

Included in network assets above are network assets under construction and not yet depreciated which are held ata cost of £733,000 (2015: £8,537,000) at the date of the statement of financial position.

Impairment reviews were carried out on the Group’s network assets at 31 December 2016. Recoverable valuesfor the city network assets and the network asset acquired from KCOM were determined using value in use(VIU) models which calculated the net present value of the future cash flows from the network assets over theuseful economic lives of the assets. Assumptions have been made in the VIU models regarding future annualgrowth rates in revenues over years 1 to 5. The revenue forecasts are based on management approved budgetsuntil 2022 which reflect increases in revenues associated with the commercialisation of a major asset acquired inthe year and the Group’s other assets which are newly built assets. Management have assessed that therecoverable values of the network assets exceed their carrying amounts at 31 December 2016. In performingsensitivity analysis on the forecasts, revenue forecasts were adjusted downwards by 10 per cent. and recoverablevalues were such that no impairment would occur.

221





£000 £000 £000 £000

CostAt 1 January 2015 54 580 302 936Additions 14 - 589 603

At 31 December 2015 68 580 891 1,539

At 1 January 2016 68 580 891 1,539Additions 30 - 649 679Disposals (35) - - (35)

At 31 December 2016 63 580 1,540 2,183



£000 £000 £000 £000

Accumulated amortisationAt 1 January 2015 22 379 - 401Amortisation 25 90 118 233

At 31 December 2015 47 469 118 634

At 1 January 2016 47 469 118 634Amortisation 6 101 251 358Disposals (20) - - (20)

At 31 December 2016 33 570 369 972

Net book valueAt 31 December 2016 30 10 1,171 1,211

At 31 December 2015 21 111 773 905




YorkCo UK 33%

The summarised financial information is as follows:

Year ended 31 December 2016 2016£000

Loss from continuing operations (442)

Other comprehensive income -

Total comprehensive income (442)

2016£000

Investment in Joint Venture

As at 1 January 2016 609

Elimination of related party profit (29)

Share of comprehensive loss for the year of the equity accounted JV (147)


222


12. INVENTORY

2016 2015£000 £000

Completed assets held-for-sale 3,583 -


3,986 190

Inventory is stated net of an impairment provision of £nil (2015: £nil).


2016 2015£000 £000

Trade receivables 2,828 800Other debtors 974 2,862Prepayments 433 311Accrued income 3,835 2,021

8,070 5,994

Trade receivables are stated net of a doubtful debt provision of £29,000 (2015: £28,000).

14. DEFERRED TAX

2016 2015£000 £000

Balance at start of period - 31Credit for the period - (31)

Balance at end of period - -


2016 2015£000 £000

Difference of taxation allowances over depreciation on fixed assets 682 793Tax losses available 4,956 4,022

5,638 4,815



£000

Balance at start of period 448Recognised through income statement 2

450

Deferred consideration arose on the acquisition of the Coventry MAN network. This balance has been discountedover the three year period until the consideration is payable.

223



2016 2015£000 £000

Authorised, called up, allotted and fully paid265,672,644 ordinary shares of £0.01 each (2015:105,672,644) 2,656 1,0565,653,865 deferred ordinary shares of £0.01 each (2015: 5,653,865) 57 57

2,713 1,113

Number 2016No.

Ordinary shares (issued)Balance at start of period 105,672,64414/01/2016 – New ordinary shares issued for cash of £0.50 per share 160,000,000Balance at end of period 265,672,644

On 22 January 2015, the Company issued 231,781 ordinary shares to an employee benefit trust by way of a jointshare ownership plan. The shares were issued at the nominal price of 1p per share.

On 14 January 2016, the Company generated gross proceeds of £80 million (£76.3 million net proceeds) via theissue of 160,000,000 new ordinary shares at a placing price of 50p per ordinary share.

17. RESERVES

Share premium

This relates to the excess of consideration received for ordinary share capital issued above the nominal value ofthe shares.

Share based payments reserve

This relates to the accumulated share based payments costs recognised through profit and loss for equity settledfinancial instruments (share options) which have not vested prior to the reporting date.

Retained earnings/accumulated losses

This relates to the accumulated retained earnings/accumulated losses for the current year and prior years.

Share warrant reserve

This relates to warrants issued to certain investors in CityFibre Holdings Limited to acquire shares in theCompany.


2016 2015£000 £000

Bank loan 55,280 -

55,280 -

Due within one year - -Due after one year 55,280 -

55,280 -

The Group received a gross bank loan of £59.8 million during 2016. The bank loan carries interest at 10 per cent.over LIBOR, LIBOR having a floor of 1 per cent., and has a term of 7 years.

This loan carries covenants that relate to the leverage, interest cover and ratio of net debt to PPE of CityFibreLimited and CityFibre Networks Limited, as well as the cash balance of CityFibre Holdings Limited. The Groupis in compliance with its covenants for the year, and is forecast to remain in compliance with its covenants forfuture periods to 30 April 2018.

224


Maturity analysis2016 2015£000 £000

Bank and other loansIn one year or less or on demand - -In more than one year but not more than two years - -In more than two years but not more than five years - -

55,280 -

55,280 -


Period of performance obligation

2016 2015£000 £000

Deferred revenueIn one year or less or on demand 2,864 2,152In more than one year but not more than two years 1,251 982In more than two years but not more than five years 3,176 2,393In more than five years 6,664 6,371

13,955 11,898


2016 2015£000 £000

Trade payables 1,091 1,880Other taxation and social security 302 270Other creditors 2,027 1,127Share-based payments liability (note 5) 545 654Accruals 3,387 1,330

7,352 5,261


Leases as lessor


At the end of the reporting period, the future minimum lease payments receivable under non-cancellableoperating leases are receivable as follows:

2016 2015£000 £000

Within one year 8,496 2,024In two and five years 24,026 5,753After five years 2,034 277

34,556 8,054

225


Leases as lessee

At the end of the reporting period, the future minimum lease payments under non-cancellable operating leasesare payable as follows:

Land and buildings Other items2016 2015 2016 2015£000 £000 £000 £000

Within one year 271 315 276 117In two to five years 303 369 274 209After five years - - 118 -

574 684 668 326


2016 2015£000 £000

Contracted but not provided for 33,242 21,010

33,242 21,010



The Group’s financial instruments comprise borrowings, cash and cash equivalents and various items such astrade receivables and payables that arise directly from its operations. The main purpose of these instruments is toraise finance for operations. The Group has not entered into derivatives transactions during the year; the Groupregularly reviews hedging and treasury requirements. The main risks arising from the Group’s financialinstruments are interest rate risk, liquidity risk and credit risk. Operations are financed through working capitalmanagement and external loan funding.

Liquidity risk

In order to maintain liquidity to ensure that sufficient funds were available for ongoing operations and futuredevelopments, the Group uses long-term finance in the form of a bank loan. This loan carries covenants thatrelate to the leverage, interest cover and ratio of net debt to PPE of CityFibre Limited and CityFibre NetworksLimited, as well as the cash balance of CityFibre Holdings Limited.

The Group’s trade payables, other payables and accrued expenses are generally due between one and threemonths and the Company’s other financial liabilities were due as follows:

Interest bearing loans and borrowings - gross payments 2016 2015£000 £000

Due within one year 7,645 -Due within one to two years 7,645 -Due within two to three years 7,645 -Due within three to four years 7,645 -Due within four to five years 7,645 -Due within five to six years 67,089 -

105,314 -

Future payments of interest have been calculated based on the principal at 31 December 2016 and the prevailinginterest rate. Future payments do not reflect either reductions in interest rates as the Group deleverages or is ableto borrow at more favourable rates.

226


Interest rate risk

As at 31 December 2016 the bank loan is the only financial instrument subject to interest rate risk; managementdo not consider this risk to be material.

Credit risk

The Group’s principal financial assets are bank balances and cash, trade and other receivables and investments,The Group’s credit risk is primarily attributable to its trade receivables. The amounts presented in the statementof financial position are net of allowances for doubtful debts. The Group has no significant concentration ofcredit risk, with exposure spread over a large number of counterparties and customers.

Trade receivable ageing 2016 2015£000 £000

Under 30 days overdue 1,576 169Between 31 to 60 days overdue 446 296Between 61 to 90 days overdue 497 163Over 90 days overdue 309 172

2,828 800



Fair values






Subsidiaries





100


100

Fibrecity Holdings Limited UK Holding company 100Gigler Limited UK Provision of internet services in

Bournemouth100

CityFibre Metro Networks Limited UK Holding company 100Fibrecity Bournemouth Limited UK Provision of telecommunication

networks within Bournemouth100


100

All subsidiaries are registered at the following address: 15 Bedford Street, London, WC2E 9HE.

227






Keymanagement

personnel 2016

Keymanagement

personnel 2015


2016


2015£000 £000 £000 £000

Fees 1,459 1,502 290 265Benefits in kind 55 50 11 11Pension contributions 19 22 - -Bonus 1,253 566 377 181Termination fees 70 - - -Share based payments 548 282 180 94

3,404 2,422 858 551


Total emoluments 3,772 2,707 950 614

Bonuses paid in 2016 included one-off amounts in respect of the KCOM Group plc transaction, as well as abonus in respect of work performed in 2016.

During the year, the Group was charged £12,000 (2015: £29,000) by BJC Networks Ltd, a company owned andcontrolled by Peter Manning, the former chairman, in respect of consultancy fees. Of this, £1,000 (2015:£20,000) was owed at the year-end.

During the year, the Group was charged £89,000 (2015: £255,000) by Teleconsult (2011) Ltd, a company ownedand controlled by Seamus Given, a member of key management personnel during the year, in respect ofconsultancy fees. Of this, £nil (2015: £17,000) was owed at the year-end.


During the year the Group charged YorkCo, an associate of CityFibre Holdings Ltd, £756,000 (2015: £610,000)in respect of services provided. Of this, £91,000 (2015: £102,000) was receivable at the year-end.




Loss attributable to ordinary shareholders

2016 2015

Loss for the period attributable to ordinary shareholders used in basic and dilutedearnings per share (12,584,000) (6,362,000)

Weighted average number of shares used in basic and diluted earnings per share 259,989,584 105,656,134


Potentially issuable shares are not considered to be dilutive because the Group made a loss in 2016 and 2015.Options, shares and warrants referred to in notes 5, 16, and 17 could have an effect on future reported earningsper share.

228


26. PENSIONS

A defined contribution pension scheme is operated by the Group on behalf of the employees of the Group. Theassets of the scheme are held separately from those of the Group in an independently administered fund. Thepension charge represents contributions payable by the Group to the fund and amounted to £270,000 (2015:£119,000). Contributions totalling £29,000 (2015: £15,000) were payable to the fund at the period end and areincluded in creditors.

27. ADJUSTED EBITDA

In addition to measuring total performance in the consolidated statement of comprehensive income, the Groupdiscloses additional analysis which the directors believe enhances the understanding of the underlying operatingresults of the Group. Items which are excluded from underlying operating results are as follows:

Exceptional items are one off costs or income and not expected to recur in future periods.

Share based payments are non-cash costs relating to remuneration of staff and the directors.

Depreciation is a non-cash cost relating to the amortisation of property plant and equipment.

Amortisation and impairment charges are non-cash costs relating to the amortisation and impairment ofgoodwill and intangible assets.

The following table shows the calculations of EBITDA and adjusted EBITDA:

Year to Year to31 Dec

201631 Dec

2015£000 £000

Operating loss per accounts (5,141) (6,159)Add back:Depreciation 3,572 1,707Amortisation 358 233

EBITDA (1,211) (4,219)

Fees in connection with regulatory review 904 220Share-based payments charge 908 343Operational and financing costs in respect of the Acquisition 1,884 536Operational and financing costs in respect of the Joint Venture - 200

Adjusted EBITDA 2,485 (2,920)

28. ACQUISITION OF NETWORK FROM KCOM

On 18 January 2016 the Group completed the acquisition of certain network assets from KCOM Group plc. Theacquisition constituted a reverse takeover under Rule 14 of the AIM Rules for Companies, requiring de-listingand readmission, which occurred on 14 January 2016.

The acquisition of assets for £90 million resulted in CityFibre adding network assets and inventory onto itsbalance sheet.

The acquisition was funded by an £80 million placing of new equity at 50p per share and a loan facility of£100 million with Proventus Capital Partners III AB, of which £35 million was utilised in the asset purchase, thebalance of £65 million has been made available as a working capital facility for capital projects.

The Group treated this transaction as an acquisition of assets, as per IAS 16, rather than a business combinationas per IFRS 3. Completion occurred on 18 January 2016, therefore this acquisition was recognised in 2016.


No material subsequent events have occurred subsequent to the reporting date.

229

PART 12HISTORICAL FINANCIAL INFORMATION ON ENTANET

Section A – Reporting Accountant’s report on the historical financial information of Entanet

BDO LLP55 Baker StreetLondonW1U 7EU

The DirectorsCityFibre Infrastructure Holdings plc15 Bedford Street,LondonWC2E 9HE

11 July 2017


Dear Sirs and Madam

CityFibre Infrastructure Holdings plc (the “Company”) and its subsidiaries (together, the “Group”):

Entanet Holdings Limited

Introduction

We report on the financial information set out in Section B of Part 12 of the prospectus dated 11 July 2017 ofCityFibre Infrastructure Holdings plc (the “Prospectus”). This financial information has been prepared forinclusion in the Prospectus on the basis of the accounting policies set out in note 2 to the financial information ofEntanet in Section B of Part 12 of the Prospectus. This report is required by item 20.1 of annex I of theCommission Regulation (EC) No. 809/2004 (the “PD Regulation”) and is given for the purpose of complyingwith that item and for no other purpose.

Responsibilities

The Directors of the Company are responsible for preparing the financial information in accordance withInternational Financial Reporting Standards as adopted by the European Union.

It is our responsibility to form an opinion on the financial information and to report our opinion to you.

Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent thereprovided, to the fullest extent permitted by the law we do not assume any responsibility and will not accept anyliability to any other person for any loss suffered by any such other person as a result of, arising out of, or inconnection with this report or our statement, required by and given solely for the purposes of complying withitem 23.1 of annex I of the PD Regulation, consenting to its inclusion in the Prospectus.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing PracticesBoard in the United Kingdom. Our work included an assessment of evidence relevant to the amounts anddisclosures in the financial information. It also included an assessment of significant estimates and judgementsmade by those responsible for the preparation of the financial information and whether the accounting policiesare appropriate to the entity’s circumstances, consistently applied and adequately disclosed.

230

We planned and performed our work so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance that the financialinformation is free from material misstatement whether caused by fraud or other irregularity or error.

Our work has not been carried out in accordance with auditing or other standards and practices generallyaccepted in the United States or other jurisdictions outside the United Kingdom and accordingly should not berelied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view of thestate of affairs of Entanet Holdings Limited as at 31 December 2014, 31 December 2015 and 31 December 2016and of its results, cash flows, changes in equity for the period ended 31 December 2014 and the years ended31 December 2015 and 2016 in accordance with International Financial Reporting Standards as adopted by theEuropean Union.

Declaration

For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus anddeclare that we have taken all reasonable care to ensure that the information contained in this report is, to the bestof our knowledge, in accordance with the facts and contains no omission likely to affect its import. Thisdeclaration is included in the Prospectus in compliance with item 1.2 of annex I of the PD Regulation.

Yours faithfully

BDO LLP



231

Section B – Financial information on Entanet

CONSOLIDATED INCOME STATEMENT

For the eleven month period ended 31 December 2014 and the years ended 31 December 2015 and31 December 2016

Note 2014 2015 2016£ £ £

Revenue (4) 25,752,890 31,887,336 35,753,801Cost of sales (19,650,358) (24,075,078) (28,636,797)

Gross profit 6,102,532 7,812,258 7,117,004Administrative expenses – exceptional items (7) - (1,269,876) -Administrative expenses – other (4,069,826) (4,690,882) (5,076,254)Depreciation (13) (459,625) (692,336) (809,943)Amortisation (12) (768,323) (890,280) (516,556)Exceptional items – reduction in purchase consideration (7) - 3,138,706 -

Operating profit (6) 804,758 3,407,590 714,251

Finance income (8) 14,726 13,392 15,125Finance charges (8) (1,986,666) (1,087,673) (1,136,285)

(Loss)/profit before taxation (1,167,182) 2,333,309 (406,909)Taxation (10) 27,017 298,047 143,972

(Loss)/profit for the period/year (1,140,165) 2,631,356 (262,937)

Other comprehensive income - - -

Total comprehensive (loss)/profit for the period/year (1,140,165) 2,631,356 (262,937)

(Loss)/earnings per share attributable to the ordinary equity holders of EntanetBasic and diluted (loss)/earnings per share (11) (0.51) 1.11 (0.13)

232

CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 31 December 2014, 31 December 2015 and 31 December 2016

Note 2014 2015 2016£ £ £

AssetsNon-current assetsIntangible assets (12) 7,726,933 6,836,653 6,536,756Property, plant and equipment (13) 1,852,631 2,230,759 2,684,193

Total non-current assets 9,579,564 9,067,412 9,220,949

Current assetsTrade and other receivables (14) 3,399,740 7,310,815 5,673,270Current tax receivable 20,832 329,508 210,000Cash and cash equivalents (15) 1,644,306 2,579,021 2,173,559

Total current assets 5,064,878 10,219,344 8,056,829

Total assets 14,644,442 19,286,756 17,277,778

Equity and liabilitiesEquityIssued share capital (19) 25,202 25,202 25,201Share premium (20) 624,800 624,800 624,800Merger reserve (20) 300,000 - -Retained losses (20) (530,482) 2,100,874 1,837,937

Total equity 419,520 2,750,876 2,487,938

Non-current liabilitiesBorrowings and loans (17) 9,661,309 9,848,396 10,186,370Deferred tax (10) 413,809 265,129 132,721Provisions (18) - 1,431,173 -

Total non-current liabilities 10,075,118 11,544,698 10,319,091

Current liabilitiesBorrowings and loans (17) 249,114 314,460 466,936Trade and other payables (16) 3,900,690 4,676,722 4,003,813

Total current liabilities 4,149,804 4,991,182 4,470,749

Total liabilities 14,224,922 16,535,880 14,789,840

Total equity and liabilities 14,644,442 19,286,756 17,277,778

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Sharecapital

SharePremium

MergerReserve

Retained(losses)/

profitTotal

equity£ £ £ £ £

Balance at 1 February 2014 1,800 1,599,200 - (587,317) 1,013,683

Comprehensive IncomeLoss for the period - - - (1,140,165) (1,140,165)

Transactions with ownersShares issue during period 25,002 225,000 300,000 - 550,002Shares redeemed during the period (1,600) (2,400) - - (4,000)Transfer from share premium account toretained losses - (1,197,000) - 1,197,000 -

Balance at 31 December 2014 25,202 624,800 300,000 (530,482) 419,520

Balance at 1 January 2015 25,202 624,800 300,000 (530,482) 419,520

Comprehensive IncomeProfit for the year - - - 2,631,356 2,631,356Transactions with ownersReduction arising from settlement - - (300,000) - (300,000)

Balance at 31 December 2015 25,202 624,800 - 2,100,874 2,750,876

Balance at 1 January 2016 25,202 624,800 - 2,100,874 2,750,876

Comprehensive IncomeLoss for the year - - - (262,937) (262,937)

Transactions with ownersReduction arising from repurchase andcancellation of shares (1) - - - (1)

Balance at 31 December 2016 25,201 624,800 - 1,837,937 2,487,938

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CONSOLIDATED STATEMENT OF CASH FLOWSFor the eleven month period ended 31 December 2014 and the years ended 31 December 2015 and31 December 2016

Note 2014 2015 2016£ £ £

Cash flows from operating activities(Loss)/profit before taxation (1,167,182) 2,333,309 (406,909)Adjustments for non-cash/non-operating items:Depreciation (13) 459,625 692,336 809,943Amortisation (12) 768,323 890,280 516,556Reduction in purchase consideration - (3,138,705) -Interest received (8) (14,726) (13,392) (15,125)Interest paid (8) 1,986,666 1,087,673 1,136,285

2,032,706 1,851,501 2,040,750Changes in working capital:Decrease/(increase) in trade and other receivables 88,738 (911,908) 1,637,545(Decrease)/increase in trade and other payables (781,153) 786,876 (672,911)Increase/(decrease) in provisions (18) - 1,269,879 (1,431,173)

Cash inflow from operations 1,340,291 2,996,348 1,574,211Taxation paid (204,249) (158,477) 131,072

Net cash inflow from operating activities 1,136,042 2,837,871 1,705,283

Cash flows from investing activitiesPurchase of property, plant and equipment (627,212) (574,738) (563,771)Purchase of subsidiary undertaking (5,162,772) - -Cash acquired 2,686,605 - -Purchase of intangible assets - - (216,659)Interest received 14,726 13,392 15,125Sale of unlisted investments 4,007,254 - -

Net cash inflow/(outflow) from investing activities 918,601 (561,346) (765,305)

Cash flows from financing activitiesIssue of ordinary shares 2,055,000 - -Redemption of ordinary shares (4,000)Proceeds from shareholder’s loans 3,006,105 3,407,245 -Repayment of bank borrowings (3,497,990) (3,500,000) -Repayment of capital element of finance lease contracts (148,660) (353,923) (432,839)Interest paid (1,826,406) (895,132) (912,601)

Net cash outflow from financing activities (415,951) (1,341,810) (1,345,440)

Net increase/(decrease) in cash and cash equivalents 1,638,692 934,715 (405,462)

Cash and cash equivalents beginning of period 5,614 1,644,306 2,579,021

Cash and cash equivalents at end of period (15) 1,644,306 2,579,021 2,173,559

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NOTES TO THE CONSOLIDATED HISTORICAL FINANCIAL INFORMATION

1. GENERAL INFORMATION

Entanet Holdings Limited (“Entanet”) is a private company incorporated in England and Wales. Entanet isdomiciled in England and the registered office is Stafford Park 6, Telford, Shropshire, TF3 3AT.

Entanet is the parent company of Entanet International Limited (collectively, the “Entanet Group”). Theprincipal activity of the Entanet Group is a wholesale communications provider, delivering and supporting achannel of partners and resellers with range of connectivity and telecommunication products and services,including broadband, Ethernet, private and wide area networks, IP and PSTN telephony, colocation, hostingand associated services. Details of Entanet’s subsidiaries are included in note 21.

The Entanet Group’s historical consolidated financial information is presented for the eleven months ended31 December 2014 and the years ended 31 December 2015 and 31 December 2016.

The subsidiary of the Entanet Group is 100 per cent. owned within the Entanet Group and has been includedin the historical consolidated financial information with effect from 20 February 2014 in the periods of thehistorical financial information presented.

The subsidiary included is Entanet International Limited.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

This historical financial information presents the financial track record of the Entanet Group for the twoyears ended 31 December 2015 and 2016 and the eleven-month period ended 31 December 2014. Thisfinancial information has been prepared in accordance with International Financial Reporting Standards asadopted by the European Union (“IFRS”), and with those parts of the Companies Act 2006 as applicable tocompanies reporting under IFRS.

This historical financial information is prepared in accordance with IFRS under the historical costconvention, as modified by the use of fair value for financial instruments measured at fair value. Thehistorical financial information is presented in pounds sterling (“£”) except where otherwise indicated.

The Entanet Group has applied IFRS for the first time from 1 February 2014. The principles andrequirements for first time adoption of IFRS are set out in IFRS 1. IFRS 1 allows certain exemptions in theapplication of particular standards to prior periods in order to assist companies with the transition process.The Entanet Group did not make any acquisitions prior to 1 February 2014.

The principal accounting policies adopted in the preparation of the historical financial information are setout below. The policies have been consistently applied to all the years presented, unless otherwise stated.

(b) Going concern

This historical financial information relating to the Entanet Group has been prepared on the going concernbasis.

The directors of Entanet (the “Entanet Directors”) have a reasonable expectation that the Entanet Grouphas adequate resources to continue in operational existence for the foreseeable future and for at least oneyear from the date of this historical financial information. For these reasons, they continue to adopt thegoing concern basis in preparing the Entanet Group’s historical financial information.

(c) New standards, amendments and interpretations

The following new standards have not been early adopted in this historical financial information:

- IFRS 9 “Financial instruments” effective 1 January 2018;

- IFRS 15 “Revenue from contracts with customers”, effective 1 January 2018; and

- IFRS 16 “Leases”, effective 1 January 2019.

The Entanet Group notes IFRS15 Revenue from Contracts with Customers which is to be adopted for allaccounting periods beginning on or after 1 January 2018. At this time, it is not practical to provide areasonable estimate in relation to the effect of IFRS15 until a detailed review has been completed.

In assessing any impact during the detailed review the Entanet Group will consider the revenue streams andcurrent recognition policies, as disclosed in note 2 (e) below, in relation to the move from the recognition ofrevenue on the transfer of risks and rewards to the transfer of control.

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The Entanet Group also notes IFRS16 Leases which takes effect and will be adopted in 2019. This IFRSwill require the Entanet Group to recognise the lease on its premises as both an asset and a rentalcommitment in its consolidated statement of financial position. Details of the Entanet Group’s futureobligations are disclosed in note 22(b). The directors have yet to assess the impact of IFRS 16 on theEntanet Group’s financial information.

IFRS 9 is applicable retrospectively and includes revised requirements for the classification andmeasurement of financial instruments, as well as recognition and de-recognition requirements for financialinstruments. Key changes to accounting requirements under IFRS 9 which may be relevant to the groupinclude the requirement to apply a new impairment model based on expected loss in recognising impairmentof financial assets including Trade and Other Receivables This may result in the recognition of additionalimpairment losses against the carrying values of these financial assets, at a point in time which is earlierthan under the current accounting policies.

(d) Basis of consolidation

Subsidiaries

Subsidiaries are all entities (including structured entities) over which the Entanet Group has control. TheEntanet Group controls an entity when the Entanet Group is exposed to, or has rights to, variable returnsfrom its involvement with the entity and has the ability to affect those returns through its power to direct theactivities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred tothe Entanet Group. They are deconsolidated from the date that control ceases. The Entanet Group appliesthe acquisition method to account for business combinations. The consideration transferred for theacquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the formerowners of the acquiree and the equity interests issued by the Entanet Group. The consideration transferredincludes the fair value of any asset or liability resulting from a contingent consideration arrangement.Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination aremeasured initially at their fair values at the acquisition date.

Transactions eliminated on consolidation

Intra-group balances, and any gains and losses or income and expenses arising from intra-grouptransactions, are eliminated in preparing the historical financial information. Losses are eliminated in thesame way as gains, but only to the extent that there is no evidence of impairment.

(e) Revenue recognition

Revenues generated from ADSL network services (including broadband connections) and leased linenetwork services (including ethernet, private and wide area networks) are recognised on a straight line basisover the period of the services rendered. Billings in advance for future periods after the reporting date aredeferred and recognised as deferred income on the balance sheet. Revenues generated from call charges arerecognised on an accruals basis in the reporting period in which the calls are made. Revenues generatedfrom excess usage (overage) are recognised on an accruals basis in the reporting period in which usage hasbeen exceeded by customers.

Revenue is measured as the fair value of the consideration received or receivable, excluding discounts,rebates, value added tax and other sales taxes. The following criteria must also be met before revenue isrecognised:

Rendering of services

Revenue from a contract to provide services is recognised in the period in which the services are provided inaccordance with the stage of completion of the contract when all the following conditions are satisfied:

Š the amount of revenue can be measured reliably;

Š is it probable that the Entanet Group will receive the consideration due under the contract;

Š the stage of completion of the contract at the end of the reporting period can be measured reliably,and;

Š the costs incurred and the costs to complete the contract can be measured reliably.

(f) Segmental reporting

The Entanet Group has one single business segment and operates in a single geographical market in the UK.This is consistent with the internal reporting provided to the chief operating decision-maker. The chiefoperating decision-maker, who is responsible for allocating resources and assessing performance, has been

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identified as the management team comprising the Executive Directors of Entanet who make strategicdecisions.

(g) Property, plant and equipment

Owned assets

Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation andimpairment losses. Cost includes the original purchase price of the asset and the costs attributable tobringing the asset to its working condition for its intended use. When parts of an item of property, plant andequipment have different useful lives, those components are accounted for as separate items of property,plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow to theEntanet Group and the cost of the item can be measured reliably.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and arerecognised in the income statement.

Depreciation

Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each partof an item of property, plant and equipment. The estimated useful lives are as follows:

Š Plant, machinery and motor vehicles – 20 per cent. straight line

Š Fixtures, fittings and equipment – 20 per cent. straight line

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, or ifthere is an indication of a significant change since the last reporting date.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and arerecognised within ‘other operating income’ in the Consolidated Statement of Comprehensive Income.

(h) Intangible Assets

Goodwill

Goodwill arising on consolidation represents the excess of the cost of acquisition over the Entanet Group’sinterest in the fair value of the identifiable assets and liabilities of a subsidiary, at the date of acquisition.Goodwill is initially recognised as an asset at cost and is subsequently measured at cost less anyaccumulated impairment losses. Goodwill which is recognised as an asset is reviewed for impairment atleast annually. Any impairment is recognised immediately in profit or loss.

For the purpose of impairment testing, goodwill is allocated to each of the Entanet Group’s cash generatingunits expected to benefit from the synergies of the combination. Cash generating units to which goodwillhas been allocated are tested for impairment annually, or more frequently when there is an indication thatthe unit may be impaired. If the recoverable amount of the cash generating unit is less than the carryingamount of the unit, the impairment loss is allocated first to reduce the carrying amount of any goodwillallocated to the unit and then to the other assets of the unit pro rata on the basis of the carrying amount ofeach asset in the unit. Any impairment loss recognised for goodwill is not reversed in a subsequent period.

Other Intangible assets

Customer contracts, which have arisen through a business combination, are assessed by reviewing their netpresent value of future cash flows. Customers contracts are amortised over their useful life, not exceeding 5years.

Software costs that are directly attributable to IT systems controlled by the Entanet Group are recognised asIntangible Assets and the costs are amortised over their useful lives not exceeding 5 years.

(i) Impairment of non-financial assets

Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. An impairment loss is recognised for the amount by which theasset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’sfair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped atthe lowest levels for which there are separately identifiable cash flows (cash-generating units).

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Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of theimpairment at each reporting date.

(j) Financial assets

Classification

The Entanet Group classifies its financial assets as loans and receivables, or as available-for-sale financialassets. The classification depends on the purpose for which the investments were acquired. Managementdetermines the classification of its investments at initial recognition.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments. They areinitially recognised at fair value, and are subsequently stated at amortised cost using the effective interestmethod.

Impairment of financial assets

Impairment provisions are recognised when there is objective evidence (such as significant financialdifficulties on the part of the counterparty or default or significant delay in payment) that the Entanet Groupwill be unable to collect all of the amounts due under the terms receivable, the amount of such a provisionbeing the difference between the net carrying amount and the present value of the future expected cashflows associated with the impaired asset.

(k) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with an original maturity of threemonths or less.

(l) Trade and other payables

Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost.Accounts payable are classified as current liabilities if payment is due within one year or less. If not, theyare presented as non-current liabilities.

(m) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) andthe redemption value is recognised in the income statement over the period of the borrowings using theeffective interest method.

Borrowings are de-recognised from the balance sheet when the obligation specified in the contract isdischarged, is cancelled or expires. The difference between the carrying amount of a financial liability thathas been extinguished or transferred to another party and the consideration paid, including any non-cashassets transferred or liabilities assumed, is recognised in profit or loss as other operating income or financecosts.

Borrowings are classified as current liabilities unless the Entanet Group has an unconditional right to defersettlement of the liability for at least 12 months after the reporting period.

(n) Employee benefits: Pension obligations

The Entanet Group operates a defined contribution plan. A defined contribution plan is a pension plan underwhich the Entanet Group pays fixed contributions into a separate entity. The Entanet Group has no legal orconstructive obligations to pay further contributions if the fund does not hold sufficient assets to pay allemployees the benefits relating to employee service in the current and prior periods.

The Entanet Group has no further payment obligations once the contributions have been paid. Thecontributions are recognised as employee benefit expense when they are due. Prepaid contributions arerecognised as an asset to the extent that a cash refund or a reduction in the future payments is available.

(o) Provisions

A provision is recognised in the balance sheet when the Entanet Group has a present legal or constructiveobligation as a result of a past event, and it is probable that an outflow of economic benefits will be requiredto settle the obligation. If the effect is material, provisions are determined by discounting the expected futurecash flows at a pre-tax rate that reflects current market assessments of the time value of money and, whenappropriate, the risks specific to the liability. The increase in the provision due to the passage of time isrecognised in finance costs.

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(p) Share capital

Ordinary shares are classified as equity. There are various classes of ordinary shares in issue, as detailed innote 20. Incremental costs directly attributable to the issue of new shares are shown in share premium as adeduction from the proceeds.

(q) Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the Entanet Group at their fair value or, if lower,at the present value of the minimum lease payments, each determined at the inception of the lease. Thecorresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Leasepayments are apportioned between finance expenses and reduction of the lease obligation so as to achieve aconstant rate of interest on the remaining balance of the liability. Finance expenses are recognisedimmediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they arecapitalised in accordance with the Entanet Group’s general policy on borrowing costs (see below).Contingent rentals are recognised as expenses in the periods in which they are incurred.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. The total costs associated with operating leases are taken to the incomestatement on an accruals basis over the period of the lease.

(r) Net finance costs

Finance costs

Finance costs comprise interest payable on borrowings, and direct issue costs, and are expensed in theperiod in which they are incurred.

Finance income

Finance income comprises interest receivable on funds invested. Interest income is recognised in profit orloss as it accrues using the effective interest method.

(s) Income tax

Income tax for the years presented comprises current and deferred tax. Income tax is recognised in profit orloss except to the extent that it relates to items recognised directly in other comprehensive income or inequity, in which case it is recognised in other comprehensive income or in equity, respectively. Current taxis the expected tax payable on the taxable income for the year, using tax rates enacted or substantivelyenacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilitiesand their carrying amounts.

The following temporary differences are not recognised if they arise from a) the initial recognition ofgoodwill, and b) for the initial recognition of other assets or liabilities in a transaction other than a businesscombination that at the time of the transaction affects neither accounting nor taxable profit or loss. Theamount of deferred tax provided is based on the expected manner of realisation or settlement of the carryingamount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will beavailable against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is nolonger probable that the related tax benefit will be realised.

Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset currenttax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate toincome taxes levied by the same taxation authority on either the taxable entity or different taxable entitieswhere there is an intention to settle the balances on a net basis.

3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the Entanet Group’s historical financial information under IFRS as endorsed by the EUrequires the Entanet directors to make estimates and assumptions that affect the reported amounts of assetsand liabilities and the disclosure of contingent assets and liabilities. Estimates and judgements arecontinually evaluated and are based on historical experience and other factors including expectations offuture events that are believed to be reasonable under the circumstances. Actual results may differ fromthese estimates.

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The Entanet directors consider that the following estimates and judgements are likely to have the mostsignificant effect on the amounts recognised in the consolidated financial information.

Carrying value of intangible assets and property, plant and equipment

In determining whether there are indicators of impairment of the Entanet Group’s non-current assets, theEntanet directors take into consideration various factors including the economic viability and expectedfuture financial performance of the asset and when it relates to the intangible assets arising on a businesscombination, the expected future performance of the business acquired.

Contingent asset

In determining the accounting treatment for the Contingent Asset (refer to note 26), the directors haveassessed that, as at 31 December 2016, Ofcom’s investigation was in progress and had not yet beenconcluded. At this time, it was uncertain whether the group would be entitled to compensation and therefore,a receivable was not recognised. Following receipt of the offer of compensation subsequent to the year end,there may be some upside associated with the amount which will be recognised as an asset and exceptionalincome during the next financial period. The final settlement amount is subject to final agreement betweenEntanet’s management and its supplier, and therefore the impact of this matter on the group’s results for thenext financial period is dependent on future events.

4. REVENUE

The Entanet Group’s revenue arises entirely from the rendering of services and in the geographical marketof the United Kingdom.

5. EMPLOYEES AND DIRECTORS

(a) Staff costs for the Entanet Group were as follows:

2014 2015 2016£ £ £

Wages and salaries 2,372,612 3,109,467 3,420,829Social security costs 229,580 314,147 345,059Other pension costs 28,475 46,127 48,750

2,630,667 3,469,741 3,814,638

Average monthly number of people (including executive directors) employed by activity:

2014 2015 2016No. No. No.

Management and administration 57 78 88Marketing and sales 14 14 15

71 92 103

(b) Directors’ emoluments2014 2015 2016

£ £ £

Salaries and fees 301,253 309,364 266,699Post-employment benefits 5,590 8,612 11,039Amounts paid to third parties for Directors’ services 49,065 36,000 36,000

355,908 353,976 313,738

Two of Entanet’s directors were in Entanet’s defined contribution pension scheme during the periods above.

Highest paid director2014 2015 2016

£ £ £

Salaries and fees 136,761 178,446 150,072Post-employment benefits 3,203 5,727 6,513

139,964 184,173 156,585

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(c) Key management compensation

The following table details the aggregate compensation paid in respect of the members of the Board ofdirectors.

2014 2015 2016£ £ £

Salaries and fees 301,253 309,364 266,699Post-employment benefits 5,590 8,612 11,039Amounts paid to third parties for Directors’ services 49,065 36,000 36,000

355,908 353,976 313,738

Key management personnel include all directors who together have authority and responsibility forplanning, directing, and controlling the activities of the Entanet Group. Two directors were in the EntanetGroup’s defined contribution pension scheme during the periods above.

6. OPERATING PROFIT

Operating profit is stated after charging/(crediting):2014 2015 2016

£ £ £

Depreciation-Owned plant and equipment 308,688 474,120 571,006-Leased plant and equipment 150,937 218,216 238,937Amortisation of other intangible assets 768,323 890,280 516,556Operating lease costs 9,025,505 10,878,243 12,501,494Exceptional items (note 7):-Provision for liabilities and claims - 1,269,876 --Reduction in purchase consideration - (3,138,706) -Auditor remuneration (note 9) 27,250 46,280 37,080

7. EXCEPTIONAL ITEMS

Exceptional items as disclosed in the consolidated income statements are as follows:

2014 2015 2016£ £ £

Provision for liabilities and claims - 1,269,876 -Reduction in purchase consideration - (3,138,706) -

During 2016, the Entanet Group settled a claim from the liquidator of Changtel Limited, a companypreviously associated with the Entanet Group. This related to certain loan repayments received in the normalcourse of business by the Entanet Group in 2013 which were subject to a claim under S127 of theInsolvency Act notified in 2016.

An exceptional charge of £1,269,879 was recorded in 2015 in respect of the provision that was made for thecost of settlement together with associated legal costs. All claims have been settled in full during 2016 at theamounts provided and there is no further liability in this regard.

In 2016, the Entanet Group successfully concluded claims against a former shareholder of EntanetInternational and certain related parties connected to that shareholder in connection with dividendspreviously paid by Entanet International and warranty claims under the Sale and Purchase Agreement inconnection with the amount paid by Entanet as consideration for the acquisition of Entanet International in2014. A receivable was recognised in 2015 within other debtors for the amount of the settlementrecoverable. The corresponding credit has been recognised as an exceptional gain on the basis the creditrepresents consideration falling outside of the period 12 months after the acquisition date.

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8. NET FINANCE COSTS2014 2015 2016

£ £ £

Interest income 14,726 13,392 15,125

Total finance income 14,726 13,392 15,125

Finance lease interest payable 5,010 2,310 31,192Loan stock – early redemption premium(1) 998,010 - -Finance costs on loans 983,646 1,085,363 1,105,093

Total finance costs 1,986,666 1,087,673 1,136,285

(1) Loan stock – early redemption premium relates to loans classified as liabilities held at fair valuethrough profit or loss that were redeemed early in 2014.

9. AUDITOR REMUNERATION

The Entanet Group obtained the following services from Entanet’s auditors at costs as detailed below:

2014 2015 2016£ £ £

Fee payable to Entanet’s auditor and its associates forthe audit of consolidated financial statements 25,150 37,800 28,600Fees payable to Entanet’s auditor and its associates fortaxation compliance and financial reporting services 2,100 8,480 8,480

27,250 46,280 37,080

10. TAXATION

Analysis of charge in year 2014 2015 2016£ £ £

Current tax charge on profits for the period/year 51,734 - -Adjustments in respect of prior periods - (149,367) (11,564)

Income tax charge/(credit) 51,734 (149,367) (11,564)

Deferred taxOrigination and reversal of temporary differences (78,751) (127,348) (131,685)Adjustments in respect of prior years - - (978)Changes to tax rates - (21,332) 255

Taxation credit on (loss)/profit from ordinaryactivities (27,017) (298,047) (143,972)

The standard rate of corporation tax in the UK changed from 24 per cent to 23 per cent with effect from1 April 2013 then to 21 per cent. with effect from 1 April 2014, and subsequently to 20 per cent. with effectfrom 1 April 2015. The Entanet Group’s profits for the years ended 31 December 2014, 31 December 2015and 31 December 2016 are taxed at an effective rate of 21.50 per cent., 20.25 per cent. and 20 per cent.respectively.

In September 2016, the UK government passed legislation that resulted in the substantively enacted tax ratesin the UK being 19 per cent. from 1 April 2017 and 17 per cent. from 1 April 2020. This has had asubsequent effect on the Entanet Group deferred tax asset being recognised.

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The tax charge for the year differs from the standard rate of corporation tax in the UK of 20 per cent. (2015:20.25 per cent., 2014: 21.50 per cent.). The differences are explained below:

2014 2015 2016£ £ £

(Loss)/profit on ordinary activities before tax (1,167,182) 2,333,309 (406,909)

(Loss)/profit on ordinary activities multiplied by therate of corporation tax in the UK as above (250,944) 472,495 (81,382)Effects of:Expenses not deductible 457 367 2,035Adjustments to tax charge in respect of prior years - (149,367) (12,542)Utilisation of brought forward losses - - (28,248)Unrelieved tax losses carried forward 240,659 - -Deferred tax not recognised 2,568 64,315 -Tax credits - (22,308) (29,210)Deferred tax rate adjustment 5,995 (27,958) 5,375Exceptional gain – purchase consideration claim(non-taxable) - (635,591) -Other items (25,752) - -

Total taxation credit (27,017) (298,047) (143,972)

Deferred tax assets and liabilities are offset where the Entanet Group has a legally enforceable right to doso. The following is an analysis of the deferred tax balances for financial reporting purposes.

2014 2015 2016£ £ £

Capital allowances 56,091 (2,599) 19,056Tax losses carried forward 6,900 6,210 14,292Arising on intangible from business combination (476,800) (268,740) (166,069)

(413,809) (265,129) (132,721)

11. (LOSS)/EARNINGS PER SHARE

The basic earnings/(loss) per share is based on a profit/(loss) for the period/year attributable to equityholders of the parent company of (£262,937), (2015: £2,631,356, 2014: (£1,140,165)) and the weightedaverage number of ordinary shares in issue for the year of 2,074,980 (2015: 2,374,980, 2014: 2,237,983).

There are no instruments in issue that would give rise to the above earnings per share being diluted.

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Trademarks Developmentcosts

Customercontracts

Softwareand

technology

Goodwill Total

£ £ £ £ £ £

Cost or deemed costAt 1 February 2014 - - - - - -Acquired in business

combination 364 - 2,702,988 448,750 5,343,154 8,495,256

At 31 December 2014 364 - 2,702,988 448,750 5,343,154 8,495,256

Accumulated amortisation

At 1 February 2014 - - - - - -Amortisation 90 - 690,778 77,455 - 768,323

At 31 December 2014 90 - 690,778 77,455 - 768,323

Net book amountAt 31 December 2014 274 - 2,012,210 371,295 5,343,154 7,726,933

CostAt 1 January 2015 and

31 December 2015 364 - 2,702,988 448,750 5,343,154 8,495,256

Accumulated amortisationAt 1 January 2015 90 - 690,778 77,455 - 768,323Amortisation 105 - 800,425 89,750 - 890,280

At 31 December 2015 195 - 1,491,203 167,205 - 1,658,603

Net book amountAt 31 December 2015 169 - 1,211,785 281,545 5,343,154 6,836,653

Cost or deemed cost

At 1 January 2016 364 - 2,702,988 448,750 5,343,154 8,495,256

Additions at cost - 216,659 - - - 216,659

At 31 December 2016 364 216,659 2,702,988 448,750 5,343,154 8,711,915

Accumulated amortisation

At 1 January 2016 195 - 1,491,203 167,205 - 1,658,603

Amortisation 105 - 426,702 89,749 - 516,556

At 31 December 2016 300 - 1,917,905 256,954 - 2,175,159

Net book amount

At 31 December 2016 64 216,659 785,083 191,796 5,343,154 6,536,756

The goodwill relates to the acquisition of the business of Entanet International on 20 February 2014, and hasnot been impaired since acquisition. The goodwill fully relates to the one cash generating unit (CGU).

The Entanet Group estimates the recoverable amount of the CGU using fair value less costs to sellmethodology using a valuation multiple of earnings in transactions involving comparable businesses tomeasure fair value.

The total recoverable amount in respect of goodwill as assessed by the management of the Entanet Groupusing the above assumptions is greater than the carrying amount and therefore no impairment charge hasbeen booked in each period. The Entanet Group management consider that it is not reasonably possible forthe assumptions to change so significantly as to eliminate the excess.

245


Motorvehicles

Fixtures,fittings andequipment

Total

£ £ £

CostAt 1 February 2014 - - -Additions - 994,386 994,386On acquisition of subsidiary 3,258 1,314,612 1,317,870

At 31 December 2014 3,258 2,308,998 2,312,256

DepreciationAt 1 February 2014 - - -Charge for the period/year 1,835 457,790 459,625

At 31 December 2014 1,835 457,790 459,625

Net book amountAt 31 December 2014 1,423 1,851,208 1,852,631

CostAt 1 January 2015 3,258 2,308,998 2,312,256Additions - 1,070,464 1,070,464

At 31 December 2015 3,258 3,379,462 3,382,720

DepreciationAt 1 January 2015 1,835 457,790 459,625Charge for the period 1,423 690,913 692,336

At 31 December 2015 3,258 1,148,703 1,151,961

Net book amountAt 31 December 2015 - 2,230,759 2,230,759

CostAt 1 January 2016 3,258 3,379,462 3,382,720Additions - 1,263,377 1,263,377Disposals - (148,867) (148,867)

At 31 December 2016 3,258 4,493,972 4,497,230

DepreciationAt 1 January 2016 3,258 1,148,703 1,151,961Charge for the period - 809,943 809,943Disposals - (148,867) (148,867)

At 31 December 2016 3,258 1,809,779 1,813,037

Net book amountAt 31 December 2016 - 2,684,193 2,684,193

The net book value of assets held under hire purchase contracts was as follows:

2014 2015 2016£ £ £

Fixtures, fittings and equipment 660,517 899,572 1,257,347


2014 2015 2016£ £ £

Amounts falling due within one year:Trade receivables 2,336,672 2,460,968 3,519,328Other receivables 528,206 4,225,134 1,503,699Prepayments and accrued income 534,862 624,713 650,243

3,399,740 7,310,815 5,673,270

246

The Entanet Group has no receivables past due or considered to be impaired at the balance sheet date.

All receivables are denominated in Sterling.

15. CASH AND CASH EQUIVALENTS

2014 2015 2016£ £ £

Cash at bank and in hand 1,644,306 2,579,021 2,173,559

1,644,306 2,579,021 2,173,559

All bank balances are denominated in Sterling.


2014 2015 2016£ £ £

Trade payables 1,555,676 2,272,332 1,724,156Taxation and social security 239,655 309,139 303,977Accruals 924,746 969,692 649,414Deferred income 1,180,613 1,125,559 1,326,266

3,900,690 4,676,722 4,003,813

Trade and other payables comprise amounts outstanding for trade purchases and on-going costs. All tradeand other payables are due in less than 1 year. All balances are denominated in Sterling.

17. BORROWINGS AND LOANS

2014 2015 2016£ £ £

Non-currentShareholder loan notes 9,459,001 9,569,631 9,793,314Obligations under finance lease and hire purchase contracts 202,308 278,765 393,056

9,661,309 9,848,396 10,186,370

CurrentObligations under finance lease and hire purchase contracts 249,114 314,460 466,936

Total borrowings and loans 249,114 314,460 466,936

The Entanet directors consider the carrying value of all financial liabilities to be equivalent to their fairvalue.

Details of the various borrowings shown above are given below:

Shareholder loans

The Entanet Group maintains loans with various shareholders. The loans are repayable in more than two butless than five years and are secured by a fixed and floating charge over the assets of the Entanet Group. Theloans attract interest ranging between 6 per cent. and 15.87 per cent. per annum. The loans with an interestrate of 15.87 per cent. include a bullet premium on redemption of £2.6 million, the interest charge isdetermined on the amortised cost basis as set out in the accounting policies.

Obligations under finance lease and hire purchase contracts

The Entanet Group has taken out various hire purchase contracts on the purchase of property, plant andequipment. Obligations under hire purchase contracts are secured on the related fixed asset. Thearrangements attract interest ranging from 6 per cent. to 8 per cent., are repayable over periods rangingbetween one year and three years and are secured on the assets to which they relate.

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18. PROVISIONS

Provisions for liabilities and claims2014 2015 2016

£ £ £

At beginning of period - - 1,431,173Charge in the year - 1,269,879 -Provision for costs attributed to cost of acquisition - 161,294 -Utilised in the year - - (1,431,173)

At end of period - 1,431,173 -

During 2016, the Entanet Group settled a claim from the liquidator of Changtel Limited, a companypreviously associated with the Entanet Group. This related to certain loan repayments received in the normalcourse of business by the Entanet Group in 2013 which were subject to a claim under S127 of theInsolvency Act notified in 2016.

An exceptional charge of £1,269,879 was recorded in 2015 in respect of the provision that was made for thecost of settlement together with associated legal costs. All claims have been settled in full during 2016 at theamounts provided and there is no further liability in this regard.


2014 2015 2016No. No. No.

Allotted, called up and fully paid‘A’ ordinary shares of £0.01 each 20,000 20,000 20,000‘B’ ordinary shares of £0.000001 each 450,000 450,000 450,000‘C’ ordinary shares of £0.000001 each 1,350,000 1,350,000 1,350,000‘D’ ordinary shares of £0.000001 each 5,000 5,000 5,000‘E1’ ordinary shares of £0.10 each 120,000 119,990 119,990‘E2’ ordinary shares of £0.10 each 130,000 129,990 129,990‘F’ ordinary shares of £0.000001 each 300,000 300,000 -

2014 2015 2016£ £ £

Allotted, called up and fully paid‘A’ ordinary shares of £0.01 each 200 200 200‘B’ ordinary shares of £0.000001 each 1 1 1‘C’ ordinary shares of £0.000001 each 1 1 1‘D’ ordinary shares of £0.000001 each 1 1 1‘E1’ ordinary shares of £0.10 each 11,999 11,999 11,999‘E2’ ordinary shares of £0.10 each 12,999 12,999 12,999‘F’ ordinary shares of £0.000001 each 1 1 -

25,202 25,202 25,201

During 2016, 300,000 F ordinary shares were bought back and cancelled by Entanet as part of the settlementclaims detailed in note 7.

In addition to the allotted share capital the authorised share capital of Entanet includes 53,571 G ordinaryshares of £0.000001 each that are authorised but not issued.

Voting rights

The holders of A and C ordinary shares and D preferred ordinary shares do not carry any voting rights. Theholders of E1 and E2 shares are in aggregate entitled to 25 per cent. of votes at a general meeting. Theholders of B, F and G shares are entitled to one voting right, such votes in aggregate carrying a percentageright in proportion to the remaining votes after E share votes divided by the total votes of all classes ofshare.

248

Dividends

The D preferred ordinary share are, from the 2019 financial year, entitled to dividends out of the profits ofEntanet available for distribution at an amount of 20 per cent. of net profit of the Entanet Group beforeamortisation costs, less any dividends paid to B ordinary shareholders. The E ordinary shares in aggregateshall be entitled to 25 per cent. of dividends declared to ordinary shareholders The B, F and G ordinaryshares rank pari passu in the entitlement to 75 per cent. of dividends declared to ordinary shareholders. TheA and C ordinary shares have no dividend rights.

Capital

The A and C ordinary shares have a fixed capital value in aggregate of £1,000 and £16,250 respectively.The D preferred ordinary shares have a fixed value of £5,000 in aggregate. The E ordinary shares areentitled in aggregate to 25 per cent. of the capital of the Entanet Group. The B, F and G ordinary shares rankequally in the entitlement to 75 per cent. of the capital of Entanet.

20. RESERVES

Share premium

Includes all current and prior period premiums on shares allotted.

Merger reserve

The merger reserve relates to the differences between the issue value and nominal value of equity sharesthat are issued in connection with the acquisition of the share capital of another company, where theacquisition meets the merger relief conditions of the Companies Act.

As part of the settlement with the former shareholders in 2015, it was agreed that 300,000 F ordinary sharesthat were issued as part of the purchase consideration would be repurchased by the company at theirnominal value of £0.30. The value of £0.3 million that was originally attributed to these shares as part of thepurchase consideration, and which was reflected in the merger reserve in the 2014 balance sheet, wassimilarly credited to the income statement as an exceptional item.

Retained losses

Includes all current and prior period retained profits and losses.

21. INVESTMENTS IN SUBSIDIARIES

Principal subsidiary undertakings of Entanet

Entanet substantially owns directly or indirectly the whole of the issued and fully paid ordinary share capitalof its subsidiary undertakings.

Subsidiary undertakings of Entanet are presented below:

Subsidiary

%

Country ofincorporation

Proportion ofordinary

shares held byparent

Proportion ofordinary shares

held by the EntanetGroup

RegisteredAddress

Entanet International UK 100% 100% Stafford Park,Telford,

ShropshireTF3 3AT

Entanet is the parent company of Entanet International Limited. The principal activity of the Entanet Groupis a wholesale communications provider, delivering and supporting a channel of partners and resellers withrange of connectivity and telecommunication products and services, including broadband, Ethernet, privateand wide area networks, IP and PSTN telephony, colocation, hosting and associated services. The results ofall companies are included within the consolidated financial statements. All Group companies preparefinancial statements to 31 December.

There are no restrictions on Entanet’s ability to access or use the assets and settle the liabilities of Entanet’ssubsidiaries.

249

22. COMMITMENTS AND CONTINGENCIES

(a) Capital commitments

There were no capital commitments at 31 December 2016, 31 December 2015 or 31 December 2014.

(b) Operating lease commitments

The Entanet Group has leased various properties under non-cancellable operating lease agreements.

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

2014 2015 2016£ £ £

Within 1 year 5,174,179 5,016,903 7,256,533Later than 1 year and less than 5 years 6,368,736 5,061,869 7,962,736After 5 years 689,700 627,000 438,900

12,232,615 10,705,772 15,658,169

The operating lease commitment for the rental of the property is calculated on a straight-line basis over thelength of the lease.

23. FINANCIAL INSTRUMENTS – CLASSIFICATION AND MEASUREMENT

Financial assets

Financial assets measured at amortised cost comprise cash, trade receivables and other receivables, asfollows:

2014 2015 2016£ £ £

Trade receivables 2,336,672 2,460,968 3,519,328Other receivables 528,206 4,225,134 1,503,699Cash at bank 1,644,306 2,579,021 2,173,559

4,509,184 9,265,123 7,196,586

Financial liabilities

Financial liabilities measured at amortised cost comprise trade payables, accruals, other loans andobligations under finance leases and hire purchase contracts as follows:

2014 2015 2016£ £ £

Trade payables 1,555,676 2,272,332 1,724,156Accruals 924,746 969,692 649,414Other loans 9,459,001 9,569,631 9,793,314Obligations under finance leases and hire purchase

contracts 451,422 593,225 859,992

12,390,845 13,404,880 13,026,876

24. FINANCIAL INSTRUMENTS – RISK MANAGEMENT

Financial risk management

The Entanet Group’s activities expose it to a variety of financial risks: market risk (including cash flowinterest rate risk), credit risk and liquidity risk.

Risk management is carried out by the board of directors. The Entanet Group uses financial instruments toprovide flexibility regarding its working capital requirements and to enable it to manage specific financialrisks to which it is exposed.

250

(a) Market risk

i. Interest rate risk

The interest rate profile of the Entanet Group’s borrowings is shown below:

Interest rate profile of interest bearing borrowings

2014 2015 2016Debt

£Interest

rateDebt

£Interest

rateDebt

£Interest

rate

Fixed rate borrowingsShareholder loans

9,459,0016% to15.87% 9,659,631

6% to15.87% 9,793,314

6% to15.87%

Hire purchase contracts451,422

6% to8% 593,225

6% to8% 859,992

6% to8%

Weighted average cost offixed rate borrowings 12% 12% 12%

Details of the above borrowings can be found in note 17 above.

Interest rate sensitivity analysis

As the interest rates on shareholder loans and hire purchase contracts are fixed, interest rate risk isconsidered to be very low.

(b) Liquidity risk

A maturity analysis of the Entanet Group’s Shareholder borrowings is shown below:

2014 2015 2016£ £ £

Less than one year 881,400 881,400 881,400One to two years 1,762,800 1,762,800 881,400Two to five years 10,550,401 9,779,631 10,003,314

Total including interest cash flows 13,194,601 12,423,831 11,766,114

Less: interest cash flows (3,735,600) (2,854,200) (1,972,800)

Total principal cash flows 9,459,001 9,569,631 9,793,314

A maturity analysis of the Entanet Group’s hire purchase contracts is shown below:

2014 2015 2016£ £ £

Less than one year 249,114 340,788 484,114One to two years 228,636 275,943 413,621

Total including interest cash flows 477,750 616,731 897,735

Less: interest cash flows (26,328) (43,506) (37,743)

Total principal cash flows 451,422 573,225 859,992

Capital risk management

The Entanet Group is both equity and debt funded and these two elements combine to make up the capitalstructure of the business. Equity comprises share capital, share premium and retained losses and is equal tothe amount shown as ‘Equity’ in the balance sheet. Debt comprises various items which are set out in furtherdetail above and in note 17.

The Entanet Group’s current objectives when maintaining capital are to:

• Safeguard the Entanet Group’s ability as a going concern so that it can continue to pursue its growthplans;

251

• Provide a reasonable expectation of future returns to shareholders; and

• Maintain adequate financial flexibility to preserve its ability to meet financial obligations, both currentand long term.

The Entanet Group sets the amount of capital it requires in proportion to risk. The Entanet Group managesits capital structure and makes adjustments to it in the light of changes in economic conditions and the riskcharacteristics of underlying assets. In order to maintain or adjust the capital structure, the Entanet Groupmay issue new shares or sell assets to reduce debt.

During the periods ended 31 December 2014, 31 December 2015 and 31 December 2016 the EntanetGroup’s strategy remained unchanged.

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting infinancial loss to the Entanet Group. In order to minimise the risk, the Entanet Group endeavours only to dealwith companies which are demonstrably creditworthy and this, together with the aggregate financialexposure, is continuously monitored. The maximum exposure to credit risk is the value of the outstandingamount.

The directors do not consider that there is any concentration of risk within either trade or other receivables.There are no impairments to trade or other receivables in each of the years presented.

Credit risk on cash and cash equivalents is considered to be very low as the counterparty is a major UKlisted bank.

25 RELATED PARTY TRANSACTIONS

Loans and transactions concerning directors and officers of Entanet

During the financial period 31 December 2014, Elsa Chen acquired 130,000 £0.10 E2 ordinary shares inEntanet for a consideration of £130,000.

During the financial period ended 31 December 2014, Ian Brewer acquired 35,000 £0.10 E1 ordinary sharesin Entanet for a consideration of £35,000.

During the financial period ended 31 December 2014, Richard Atkins acquired 50,000 £0.10 E1 ordinaryshares in Entanet for cash consideration of £50,000 and £50,000 loan notes in Entanet for cash considerationof £50,000 which were still outstanding at that period end. Interest amounting to £6,000 (2015: £6,000;period ended 31 December 2014: £5,178) was paid to him during the year ended 31 December 2016 inrespect of these loan notes.

Shares were acquired at a market rate in arms’ length transactions.

26 CONTINGENT ASSET

Ofcom announced on 6 November 2015 that it had opened up an own-initiative investigation into whetherone of the group’s telecommunications supplier’s use of deemed consent over the period from 1 September2012 to 31 December 2014 in relation to the provision of certain Ethernet Services was in accordance withthe relevant regulatory obligations. On 27 March 2017, Ofcom’s investigation was concluded. Ofcomdetermined that the supplier had, on various occasions, breached its regulatory obligations which applied tothe provision of the services and had failed to pay compensation in the event of the late delivery of thoseservices.

Subsequent to the 2016 year-end balance sheet date, the company is in receipt of a settlement offer dated 19May 2017 from the supplier. The company is not at liberty to disclose the nature and amount of the offer asat 31 December 2016 as this could be seriously prejudicial to the position of the company. The settlementoffer represents a minimum compensation value and the precise terms are legally required to remainconfidential until the final settlement has been agreed; breaching the confidentiality agreement wouldprejudice the Entanet Group’s position in terms of negotiating the final settlement amount. The directorsanticipate that settlement will be reached within four months of the offer date. As at 31 December 2016, thisrepresents a contingent asset.

252

27 ACQUISITION OF ENTANET INTERNATIONAL

The 2014 results of Entanet International Limited prior to and subsequent to its acquisition by EntanetHoldings on 20 February 2014 and for the year ended 31 December 2014 were as follows:

INCOME STATEMENT

1 January 2014to

20 February 2014

21 February 2014to

31 December 2014

1 January 2014to

31 December 2014£ £ £

Revenue 4,071,914 25,752,890 29,824,804Cost of sales (2,985,260) (19,650,358) (22,635,618)

Gross profit 1,086,654 6,102,532 7,189,186Administrative expenses (479,090) (3,876,377) (4,355,467)Depreciation (65,226) (459,630) (524,856)Amortisation (15) (90) (105)

Operating profit 542,323 1,766,435 2,308,758

Finance income 1 19,145 19,146Finance charges - (5,010) (5,010)

Profit before taxation 542,324 1,780,570 2,322,894Taxation (124,747) 29,943 (94,804)

Profit and total comprehensive income forthe year 417,577 1,810,513 2,228,690

The net assets acquired, and the resulting goodwill were as follows:

Fair valueAssets £

Property, plant and equipment 1,317,870Intangibles 3,152,102Trade and other receivables 3,672,422Cash and bank balances 2,686,605

Total assets 10,828,999

LiabilitiesTrade and other payables 5,079,381Deferred tax liability 630,000

Total liabilities 5,709,381

Net assets acquired 5,119,618

ConsiderationCash consideration 5,162,772Loan notes issued 5,000,000Shares issued 300,000

10,462,772

Goodwill on acquisition 5,343,154

28. TRANSITION TO IFRS

The Entanet Group’s effective IFRS transition date for the purposes of this financial information was1 February 2014. The effects of transition to IFRS on the balance sheets at 1 February 2014, 31 December2014, 31 December 2015 and 31 December 2016, and the income statements for the period ended31 December 2014, year ended 31 December 2015 and year ended 31 December 2016, are shown below.

The adjustments required on applying IFRS, as numbered in the tables below, were:

1) Removal of amortisation of Goodwill from 1 February 2014 onwards;

2) Moving the adjustment for the reduction in consideration from Goodwill to Exceptional Items; and

3) Moving the acquisition costs resulting from the 20 February 2014 acquisition from Goodwill to theIncome Statement.

253

Balance sheets at 1 Febuary 2014 and 31 December 2014

Note As at1 February**

2014UK GAAPpreviously

reported

As at31 December

2014FRS 102*previously

reported

Transitionadjustments

As at31 December

2014IFRS

£ £ £ £

AssetsNon-current assetsIntangible assets (1,3) - 7,011,530 715,403 7,726,933Property, plant and equipment - 1,852,631 - 1,852,631

Total non-current assets - 8,864,161 715,403 9,579,564

Current assetsInvestments (4) 4,007,254 - - -Trade and other receivables - 3,399,740 - 3,399,740Current tax receivable - 20,832 - 20,832Cash and cash equivalents 5,614 1,644,306 - 1,644,306

Total current assets 4,012,868 5,064,878 - 5,064,878

Total assets 4,012,868 13,929,039 715,403 14,644,442

Equity and liabilitiesEquityIssued share capital 1,800 25,202 - 25,202Share premium 1,599,200 624,800 - 624,800Merger reserve - 300,000 - 300,000Retained (losses)/profit (587,317) (1,245,885) 715,403 (530,482)

Total equity 1,013,683 (295,883) 715,403 419,520

Non-current liabilitiesBorrowings and loans (5) 2,997,990 9,661,309 - 9,661,309Deferred tax - 413,809 - 413,809

Total non-current liabilities 2,997,990 10,075,118 - 10,075,118

Current liabilitiesBorrowings and loans - 249,114 - 249,114Trade and other payables 1,195 3,900,690 - 3,900,690

Total current liabilities 1,195 4,149,804 - 4,149,804

Total liabilities 2,999,185 14,224,922 - 14,224,922

Total equity and liabilities 4,012,868 13,929,039 715,403 14,644,442

* The Entanet Group adopted FRS 102 for the first time for the year ended 31 December 2015. The previously reportednumbers above reflect the adjustments to the comparatives within the 31 December 2015 FRS 102 accounts.

** There are no transitional adjustments to the opening balance sheet at 1 February 2014.

As at1 February 2014

£

(4) Investments (at cost)Other investments 4,007,254

(5) Borrowings and loansOther loans – due to shareholders 2,997,990

254

Income statement for the period ended 31 December 2014

Note FRS 102*previously

reported


IFRS

£ £ £

Revenue 25,752,890 - 25,752,890Cost of sales (19,650,358) - (19,650,358)

Gross profit 6,102,532 - 6,102,532Administrative expenses (3) (3,820,583) (248,557) (4,069,140)Depreciation (459,625) - (459,625)Amortisation (1) (1,732,969) 963,960 (769,009)

Operating profit 89,355 715,403 804,758

Finance income 14,726 - 14,726Finance charges (1,986,666) - (1,986,666)

Loss before taxation (1,882,585) 715,403 (1,167,182)Taxation 27,017 - 27,017

Loss for the period (1,855,568) 715,403 (1,140,165)

Other comprehensive income - - -

Total comprehensive loss for the period (1,855,568) 715,403 (1,140,165)

* The Entanet Group adopted FRS 102 for the first time for the year ended 31 December 2015. The previously reportednumbers above reflect the adjustments to the comparatives within the 31 December 2015 FRS 102 accounts.

255

Balance sheet at 31 December 2015

Note FRS 102previously

reported


IFRS

£ £ £

AssetsNon-current assetsIntangible assets (1,2) 2,622,895 4,213,758 6,836,653Property, plant and equipment 2,230,759 - 2,230,759


Current assetsTrade and other receivables 7,310,815 - 7,310,815Current tax receivable 329,508 - 329,508Cash and cash equivalents 2,579,021 - 2,579,021

Total current assets 10,219,344 - 10,219,344

Total assets 15,072,998 4,213,758 19,286,756

Equity and liabilitiesEquityIssued share capital 25,202 - 25,202Share premium 624,800 - 624,800Retained (losses)/profit (2,112,884) 4,213,758 2,100,874

Total equity (1,462,882) 4,213,758 2,750,876

Non-current liabilitiesBorrowings and loans 9,848,396 - 9,848,396Deferred tax 265,129 - 265,129Provisions 1,431,173 - 1,431,173

Total non-current liabilities 11,544,698 - 11,544,698

Current liabilitiesBorrowings and loans 314,460 - 314,460Trade and other payables 4,676,722 - 4,676,722

Total current liabilities 4,991,182 - 4,991,182

Total liabilities 16,535,880 - 16,535,880


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reported


IFRS

£ £ £


Gross profit 7,812,258 - 7,812,258Administrative expenses (4,690,882) - (4,690,882)Depreciation (692,336) - (692,336)Amortisation (1) (1,249,929) 359,649 (890,280)Exceptional items (2) (1,269,876) 3,138,706 1,868,830

Operating (loss)/profit (90,765) 3,498,355 3,407,590


(Loss)/profit before taxation (1,165,046) 3,498,355 2,333,309Taxation 298,047 - 298,047

(Loss)/profit for the year (866,999) 3,498,355 2,631,356Other comprehensive income - - -

Total comprehensive (loss)/profit for the year (866,999) 3,498,355 2,631,356

257

Balance sheet at 31 December 2016


reported


IFRS

£ £ £

AssetsNon-current assetsIntangible assets (1) 1,963,349 4,573,407 6,536,756Property, plant and equipment 2,684,193 - 2,684,193


Current assetsTrade and other receivables 5,673,270 - 5,673,270Current tax receivable 210,000 - 210,000Cash and cash equivalents 2,173,559 - 2,173,559

Total current assets 8,056,829 - 8,056,829

Total assets 12,704,371 4,573,407 17,277,778

Equity and liabilitiesEquityIssued share capital 25,201 - 25,201Share premium 624,800 - 624,800Retained (losses)/profit (2,735,470) 4,573,407 1,837,937

Total equity (2,085,469) 4,573,407 2,487,938

Non-current liabilitiesBorrowings and loans 10,186,370 - 10,186,370Deferred tax 132,721 - 132,721Provisions - - -

Total non-current liabilities 10,319,091 - 10,319,091

Current liabilitiesBorrowings and loans 466,936 - 466,936Trade and other payables 4,003,813 - 4,003,813

Total current liabilities 4,470,749 - 4,470,749

Total liabilities 14,789,840 - 14,789,840


258



reported


IFRS

£ £ £


Gross profit 7,117,004 - 7,117,004Administrative expenses (5,076,254) - (5,076,254)Depreciation (809,943) - (809,943)Amortisation (1) (876,205) 359,649 (516,556)

Operating profit 354,602 359,649 714,251


Loss before taxation (766,558) 359,649 (406,909)Taxation 143,972 - 143,972

Loss for the year (622,586) 359,649 (262,937)Other comprehensive income - - -

Total comprehensive loss for the year (622,586) 359,649 (262,937)

259

PART 13HISTORICAL FINANCIAL INFORMATION ON ENTANET INTERNATIONAL

FOR THE SEVEN WEEKS ENDED 20 FEBRUARY 2014

Section A – Accountant’s Report

BDO LLP55 Baker StreetLondonW1U 7EU

The DirectorsCityFibre Infrastructure Holdings plc15 Bedford Street,LondonWC2E 9HE 11 July 2017


Dear Sirs and Madam

CityFibre Infrastructure Holdings plc (the “Company”) and its subsidiaries (together, the “Group”):

Entanet International Limited

Introduction

We report on the financial information set out in Section B of Part 13. This financial information has beenprepared for inclusion in the prospectus dated 11 July 2017 of CityFibre Infrastructure Holdings plc (the“Prospectus”) on the basis of the accounting policies set out in note 2 to the financial information. This report isrequired by item 20.1 of annex I of the Commission Regulation (EC) No. 809/2004 (the “PD Regulation”) and isgiven for the purpose of complying with that item and for no other purpose.

Responsibilities

The directors of the Company are responsible for preparing the financial information in accordance withInternational Financial Reporting Standards as adopted by the European Union.

It is our responsibility to form an opinion on the financial information and to report our opinion to you.

Save for any responsibility arising under Prospectus Rule 5.5.3R(2)(f) to any person as and to the extent thereprovided, to the fullest extent permitted by the law we do not assume any responsibility and will not accept anyliability to any other person for any loss suffered by any such other person as a result of, arising out of, or inconnection with this report or our statement, required by and given solely for the purposes of complying withitem 23.1 of annex I of the PD Regulation, consenting to its inclusion in the Prospectus.

Basis of opinion

We conducted our work in accordance with Standards for Investment Reporting issued by the Auditing PracticesBoard in the United Kingdom. Our work included an assessment of evidence relevant to the amounts anddisclosures in the financial information. It also included an assessment of significant estimates and judgements

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made by those responsible for the preparation of the financial information and whether the accounting policiesare appropriate to the entity’s circumstances, consistently applied and adequately disclosed.

We planned and performed our work so as to obtain all the information and explanations which we considerednecessary in order to provide us with sufficient evidence to give reasonable assurance that the financialinformation is free from material misstatement whether caused by fraud or other irregularity or error.

Our work has not been carried out in accordance with auditing or other standards and practices generallyaccepted in the United States of America or other jurisdictions outside the United Kingdom and accordinglyshould not be relied upon as if it had been carried out in accordance with those standards and practices.

Opinion

In our opinion, the financial information gives, for the purposes of the Prospectus, a true and fair view of thestate of affairs of Entanet International Limited as at 20 February 2014 and as at 31 December 2014 and of itsresults, cash flows and changes in equity for the periods ended 28 February 2014 and 31 December 2014 inaccordance with International Financial Reporting Standards as adopted by the European Union.

Declaration

For the purposes of Prospectus Rule 5.5.3R(2)(f) we are responsible for this report as part of the Prospectus anddeclare that we have taken all reasonable care to ensure that the information contained in this report is, to the bestof our knowledge, in accordance with the facts and contains no omission likely to affect its import. Thisdeclaration is included in the Prospectus in compliance with item 1.2 of annex I of the PD Regulation.

Yours faithfully

BDO LLP



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Section B – Financial Information on Entanet International

INCOME STATEMENT

For the period ended 20 February 2014 and period ended 31 December 2014

Note For the periodended

20 February 2014

For the periodended

31 December 2014£ £

Revenue (4) 4,071,914 25,752,890Cost of sales (2,985,260) (19,650,358)

Gross profit 1,086,654 6,102,532Administrative expenses (479,090) (3,876,377)Depreciation (12) (65,226) (459,630)Amortisation (11) (15) (90)

Operating profit (6) 542,323 1,766,435

Finance income (7) 1 19,145Finance expense (7) - (5,010)

Profit before taxation 542,324 1,780,570Taxation (9) (124,747) 29,943

Profit for the period 417,577 1,810,513Other comprehensive income - -

Total comprehensive profit for the period 417,577 1,810,513

Earnings per share attributable to the ordinary equity holders of the company

Basic and diluted earnings per share (10) £2.09 £9.05

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STATEMENT OF FINANCIAL POSITION

As at 20 February 2014 and as at 31 December 2014

Note As at20 February 2014

As at31 December 2014

£ £

AssetsNon-current assetsIntangible assets (11) 364 274Property, plant and equipment (12) 1,317,870 1,852,631

Total non-current assets 1,318,234 1,852,905

Current assetsTrade and other receivables (13) 3,371,810 3,416,670Corporation tax recoverable - 1,633,870Deferred tax asset (9) 137,840 62,991Cash and cash equivalents (14) 2,686,605 1,599,554

Total current assets 6,196,255 6,713,085

Total assets 7,514,489 8,565,990

Equity and liabilitiesEquityIssued share capital (17) 200,100 200,100Retained profits (18) 2,235,007 4,045,520

Total equity 2,435,107 4,245,620

Non-current liabilitiesBorrowings and loans (16) - 202,308

Total non-current liabilities - 202,308

Current liabilitiesBorrowings and loans (16) 232,908 249,114Trade and other payables (15) 4,552,030 3,868,948Corporation tax payable 294,444 -

Total current liabilities 5,079,382 4,118,062

Total liabilities 5,079,382 4,320,370

Total equity and liabilities 7,514,489 8,565,990

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STATEMENT OF CHANGES IN EQUITY

Sharecapital

Retainedprofits

Totalequity

£ £ £

Balance at 1 January 2014 200,100 2,131,906 2,332,006

Comprehensive IncomeProfit for the period to 20 February 2014 - 417,577 417,577Transactions with ownersDividends - (314,476) (314,476)

Balance at 20 February 2014 200,100 2,235,007 2,435,107

Balance at 20 February 2014 200,100 2,235,007 2,435,107

Comprehensive IncomeProfit for the period to 31 December 2014 - 1,810,513 1,810,513

Balance at 31 December 2014 200,100 4,045,520 4,245,620

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STATEMENT OF CASH FLOWS

For the period ended 20 February 2014 and period ended 31 December 2014

Note For theperiod ended20 February

2014

For theperiod ended31 December

2014£ £

Cash flows from operating activitiesProfit before taxation 542,324 1,780,570Adjustments for non-cash/non-operating items:Depreciation (12) 65,226 459,630Amortisation (11) 15 90Interest paid (7) - 5,010Interest received (7) (1) (19,145)

607,564 2,226,155Changes in working capital:Increase in trade and other receivables (317,000) (1,573,938)Increase/(decrease) in trade and other payables 1,737,211 (683,082)

Cash inflow from operations 2,027,775 (30,865)Taxation paid - (294,444)

Net cash inflow/(outflow) from operating activities 2,027,775 (325,309)

Cash flows from investing activitiesPurchase of property, plant and equipment (44,046) (627,217)Interest received 1 19,145

Net cash outflow from investing activities (44,045) (608,072)

Cash flows from financing activitiesRepayment of capital element of hire purchase contracts (29,114) (148,660)Interest paid - (5,010)Dividends paid (314,476) -

Net cash outflow from financing activities (343,590) (153,670)

Net increase/(decrease) in cash and cash equivalents 1,640,140 (1,087,051)Cash and cash equivalents beginning of period 1,046,465 2,686,605

Cash and cash equivalents at end of period (14) 2,686,605 1,599,554

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NOTES TO THE HISTORICAL FINANCIAL INFORMATION

1. GENERAL INFORMATION

Entanet International Limited (“Entanet International”) is a private company incorporated in England andWales. The company is domiciled in England and the registered office is Stafford Park 6, Telford,Shropshire, TF3 3AT.

The principal activity of the company is as a wholesale communications provider, delivering and supportinga channel of partners and resellers with range of connectivity and telecommunication products and services,including broadband, Ethernet, private and wide area networks, IP and PSTN telephony, colocation, hostingand associated services. The company has no subsidiaries.

The company’s historical financial information is presented for the seven-week period ended 20 February2014 and the forty-five-week period from 21 February 2014 to 31 December 2014 (“the period ended31 December 2014”).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Basis of preparation

The financial information contained in this document includes the statement of total comprehensive income,cash flow statement, statement of financial position and related notes for Entanet International.

The historical financial information has been prepared in accordance with International Financial ReportingStandards as adopted by the European Union (“IFRS as adopted by the EU”).

The Company has applied IFRS for the first time from 1 January 2014. The principles and requirements forfirst time adoption of IFRS are set out in IFRS 1. IFRS 1 allows certain exemptions in the application ofparticular standards to prior periods in order to assist companies with the transition process.

This historical financial information is prepared in accordance with IFRS under the historical costconvention, as modified by the use of fair value for financial instruments measured at fair value. Thehistorical financial information is presented in sterling (“£”) except where otherwise indicated.

The principal accounting policies adopted in the preparation of the historical financial information are setout below. The policies have been consistently applied to all the years presented, unless otherwise stated.

(b) Going concern

This historical financial information relating to the company has been prepared on the going concern basis.

The directors have a reasonable expectation that the company has adequate resources to continue inoperational existence for the foreseeable future and for at least one year from the date of this historicalfinancial information. For these reasons, they continue to adopt the going concern basis in preparing thecompany’s historical financial information.

(c) New standards, amendments and interpretations

The following new standards have not been early adopted in this historical financial information:

- IFRS 9 “Financial instruments” effective 1 January 2018;

- IFRS 15 “Revenue from contracts with customers”, effective 1 January 2018; and

- IFRS 16 “Leases”, effective 1 January 2019.

The company notes IFRS15 Revenue from Contracts with Customers which is to be adopted for allaccounting periods beginning on or after 1 January 2018. At this time, it is not practical to provide areasonable estimate in relation to the effect of IFRS15 until a detailed review has been completed.

In assessing any impact during the detailed review the company will consider the revenue streams andcurrent recognition policies, as disclosed in note 2 (e) below, in relation to the move from the recognition ofrevenue on the transfer of risks and rewards to the transfer of control.

The company also notes IFRS16 Leases which takes effect and will be adopted in 2019. This IFRS willrequire the company to recognise the lease on its premises as both an asset and a rental commitment in itsstatement of financial position. Details of the company’s future obligations under its operating leases aredisclosed in note 19(b). The directors have yet to assess the impact of IFRS 16 on the company’s financialinformation.

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IFRS 9 is applicable retrospectively and includes revised requirements for the classification andmeasurement of financial instruments, as well as recognition and de-recognition requirements for financialinstruments. Key changes to accounting requirements under IFRS 9 which may be relevant to the companyinclude the requirement to apply a new impairment model based on expected loss in recognising impairmentof financial assets including Trade and Other Receivables This may result in the recognition of additionalimpairment losses against the carrying values of these financial assets, at a point in time which is earlierthan under the current accounting policies.

(d) Revenue recognition

Revenues generated from ADSL network services (including broadband connections) and leased linenetwork services (including ethernet, private and wide area networks) are recognized on a straight-line basisover the period of the services rendered. Billings in advance for future periods after the reporting date aredeferred and recognized as deferred income on the balance sheet. Revenues generated from call charges arerecognized on an accruals basis in the reporting period in which the calls are made. Revenues generatedfrom excess usage (overage) is recognized on an accruals basis in the reporting period in which usage hasbeen exceeded by customers.

Revenue is measured as the fair value of the consideration received orreceivable, excluding discounts,rebates, value added tax and other sales taxes. The following criteria must also be met before revenue isrecognised:

Rendering of services

Revenue from a contract to provide services is recognised in the period in which the services are provided inaccordance with the stage of completion of the contract when all the following conditions are satisfied:

Š the amount of revenue can be measured reliably;

Š is it probable that the company will receive the consideration due under the contract;

Š the stage of completion of the contract at the end of the reporting period can be measured reliably, and;

Š the costs incurred and the costs to complete the contract can be measured reliably.

(e) Segmental reporting

The company has one single business segment and operates in a single geographical market in the UK. Thisis consistent with the internal reporting provided to the chief operating decision-maker. The chief operatingdecision-maker, who is responsible for allocating resources and assessing performance, has been identifiedas the management team comprising the Executive Directors who make strategic decisions.

(f) Property, plant and equipment

Owned assets

Items of property, plant and equipment are stated at cost or deemed cost less accumulated depreciation andimpairment losses. Cost includes the original purchase price of the asset and the costs attributable tobringing the asset to its working condition for its intended use. When parts of an item of property, plant andequipment have different useful lives, those components are accounted for as separate items of property,plant and equipment.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, asappropriate, only when it is probable that future economic benefits associated with the item will flow to thecompany and the cost of the item can be measured reliably.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and arerecognised in the income statement.

Depreciation

Depreciation is charged to profit or loss on a straight-line basis over the estimated useful lives of each partof an item of property, plant and equipment. The estimated useful lives are as follows:

Š Plant, machinery and motor vehicles – 20% straight line

Š Fixtures, fittings and equipment – 20% straight line

The residual values, useful lives and depreciation methods are reviewed, and adjusted if appropriate, or ifthere is an indication of a significant change since the last reporting date.

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(g) Intangible Assets

Trademarks are assessed by reviewing their net present value of future cash flows, and are amortised overtheir useful life, not exceeding 10 years.

(h) Impairment of non-financial assets

Non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate thatthe carrying amount may not be recoverable. An impairment loss is recognised for the amount by which theasset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’sfair value less costs to sell and value in use. For the purposes of assessing impairment, assets are grouped atthe lowest levels for which there are separately identifiable cash flows (cash-generating units).

Non-financial assets that have suffered impairment in prior periods are reviewed for possible reversal of theimpairment at each reporting date.

(i) Financial assets

Classification

The company classifies its financial assets as loans and receivables, or as available-for-sale financial assets.The classification depends on the purpose for which the investments were acquired. Managementdetermines the classification of its investments at initial recognition.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments. They areinitially recognised at fair value, and are subsequently stated at amortised cost using the effective interestmethod.

Impairment of financial assets

Impairment provisions are recognised when there is objective evidence (such as significant financialdifficulties on the part of the counterparty or default or significant delay in payment) that the company willbe unable to collect all of the amounts due under the terms receivable, the amount of such a provision beingthe difference between the net carrying amount and the present value of the future expected cash flowsassociated with the impaired asset.

(j) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and call deposits with an original maturity of threemonths or less.

(k) Trade and other payables

Trade and other payables are initially recognised at fair value and subsequently measured at amortised cost.Accounts payable are classified as current liabilities if payment is due within one year or less. If not, theyare presented as non-current liabilities.

(l) Borrowings

Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings aresubsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) andthe redemption value is recognised in the income statement over the period of the borrowings using theeffective interest method.

Borrowings are de-recognised from the balance sheet when the obligation specified in the contract isdischarged, is cancelled or expires. The difference between the carrying amount of a financial liability thathas been extinguished or transferred to another party and the consideration paid, including any non-cashassets transferred or liabilities assumed, is recognised in profit or loss as other operating income or financecosts.

Borrowings are classified as current liabilities unless the company has an unconditional right to defersettlement of the liability for at least 12 months after the reporting period.

(m) Employee benefits: Pension obligations

The company operates a defined contribution plan. A defined contribution plan is a pension plan underwhich the company pays fixed contributions into a separate entity. The company has no legal or constructiveobligations to pay further contributions if the fund does not hold sufficient assets to pay all employees thebenefits relating to employee service in the current and prior periods.

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The company has no further payment obligations once the contributions have been paid. The contributionsare recognised as employee benefit expense when they are due. Prepaid contributions are recognised as anasset to the extent that a cash refund or a reduction in the future payments is available.

(n) Provisions

A provision is recognised in the balance sheet when the company has a present legal or constructiveobligation as a result of a past event, and it is probable that an outflow of economic benefits will be requiredto settle the obligation. If the effect is material, provisions are determined by discounting the expected futurecash flows at a pre-tax rate that reflects current market assessments of the time value of money and, whenappropriate, the risks specific to the liability. The increase in the provision due to the passage of time isrecognised in finance costs.

(o) Share capital

Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares areshown in share premium as a deduction from the proceeds.

(p) Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks andrewards of ownership to the lessee. All other leases are classified as operating leases.

Assets held under finance leases are recognised as assets of the company at their fair value or, if lower, atthe present value of the minimum lease payments, each determined at the inception of the lease. Thecorresponding liability to the lessor is included in the balance sheet as a finance lease obligation. Leasepayments are apportioned between finance expenses and reduction of the lease obligation so as to achieve aconstant rate of interest on the remaining balance of the liability. Finance expenses are recognisedimmediately in profit or loss, unless they are directly attributable to qualifying assets, in which case they arecapitalised in accordance with the company’s general policy on borrowing costs (see below). Contingentrentals are recognised as expenses in the periods in which they are incurred.

Leases in which a significant portion of the risks and rewards of ownership are retained by the lessor areclassified as operating leases. The total costs associated with operating leases are taken to the incomestatements on a straight line basis over the period of the lease.

(q) Net finance costs

Finance costs

Finance costs comprise interest payable on borrowings, direct issue costs, and are expensed in the period inwhich they are incurred.

Finance income

Finance income comprises interest receivable on funds invested, and foreign exchange gains. Interestincome is recognised in profit or loss as it accrues using the effective interest method.

(r) Income tax

Income tax for the periods presented comprises current and deferred tax. Income tax is recognised in profitor loss except to the extent that it relates to items recognised directly in other comprehensive income orequity, in which case it is recognised in other comprehensive income or equity, respectively. Current tax isthe expected tax payable on the taxable income for the year, using tax rates enacted or substantively enactedat the balance sheet date, and any adjustment to tax payable in respect of previous years.

Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilitiesand their carrying amounts.

The following temporary differences are not recognised if they arise from a) the initial recognition ofgoodwill, and b) for the initial recognition of other assets or liabilities in a transaction other than a businesscombination that at the time of the transaction affects neither accounting nor taxable profit or loss. Theamount of deferred tax provided is based on the expected manner of realisation or settlement of the carryingamount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will beavailable against which the asset can be utilised. Deferred tax assets are reduced to the extent that it is nolonger probable that the related tax benefit will be realised.

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Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset currenttax assets against current tax liabilities and when the deferred income taxes assets and liabilities relate toincome taxes levied by the same taxation authority on either the taxable entity or different taxable entitieswhere there is an intention to settle the balances on a net basis.

3. CRITICAL ACCOUNTING JUDGEMENTS AND ESTIMATES

The preparation of the company’s historical financial information under IFRS as endorsed by the EUrequires the directors to make estimates and assumptions that affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities. Estimates and judgements are continuallyevaluated and are based on historical experience and other factors including expectations of future eventsthat are believed to be reasonable under the circumstances. Actual results may differ from these estimates.

The directors consider that the following estimates and judgements are likely to have the most significanteffect on the amounts recognised in the financial information.

Carrying value of property, plant and equipment

In determining whether there are indicators of impairment of the company’s non-current assets, the directorstake into consideration various factors including the economic viability and expected future financialperformance of the asset and when it relates to the intangible assets arising on a business combination, theexpected future performance of the business acquired.

Impairment testing requires estimates and judgements to be made in respect of future performance anddiscount rates.

4. REVENUE

The company’s revenue arises entirely from the rendering of services and in the geographical market of theUnited Kingdom.

5. EMPLOYEES AND DIRECTORS

(a) Staff costs for the company during the period:

For theperiod ended20 February

2014


2014£ £

Wages and salaries 345,268 2,396,417Social security costs 36,342 228,951Other pension costs 2,666 30,239

384,276 2,655,607

Average monthly number of people (including executive directors) employed by activity:


2014


2014No. No.

Management and administration 61 66Marketing and sales 17 16

78 82

(b) Directors’ emoluments


2014


2014£ £

Salaries and fees 19,465 122,628Post-employment benefits 494 3,114

19,959 125,742

There were two directors in the company’s defined contribution pension scheme during the periods above.

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Highest paid director


2014


2014£ £


16,972 105,882

(c) Key management compensation

The following table details the aggregate compensation paid in respect of the members of the Board ofdirectors.


2014


2014£ £


19,959 125,742

Key management personnel include all directors who together have authority and responsibility forplanning, directing, and controlling the activities of the company. Two directors were in the company’sdefined contribution pension scheme during the periods above.

6. OPERATING PROFIT

Operating profit is stated after charging:


2014


2014£ £

Depreciation-Owned plant and equipment 51,222 322,697-Leased plant and equipment 20,676 130,261Amortisation of other intangible assets (note 11) 15 90Auditor remuneration (note 8) 3,185 20,065

7. NET FINANCE COSTS


2014


2014£ £

Interest income 1 19,145

Total finance income 1 19,145

Interest payable - 5,010

Total finance costs - 5,010

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8. AUDITOR REMUNERATION

The company obtained the following services from its auditors at costs as detailed below:


2014


2014£ £

Fee payable to the company’s auditor and its associates for the audit offinancial statements 2,897 18,253Fees payable to the company’s auditor and its associates for tax complianceservices: 288 1,812

3,185 20,065

9. TAXATION

Analysis of charge in the period


2014


2014£ £

Current tax charge on profits for the period 124,747 51,734Adjustments in respect of prior periods - (156,526)

Income tax charge/ (credit) 124,747 (104,792)

Deferred taxOrigination and reversal of temporary differences - 74,849

124,747 (29,943)

The standard rate of corporation tax in the UK changed from 24% to 23% with effect from 1 April 2013,then to 21% with effect from 1 April 2014, and subsequently to 20% with effect from 1 April 2015.Accordingly, the company’s profits for the period ended 20 February 2014 and 31 December 2014 are taxedat an effective rate of 21.50%.

In September 2016, the UK Government passed legislation that resulted in the substantively enacted taxrates in the UK being 19% from 1 April 2017 and 17% from 1 April 2020. This has had a subsequent effecton the company deferred tax asset being recognised.

The tax charge for the period differs from the standard rate of corporation tax in the UK of 21.50%. Thedifferences are explained below:


2014


2014£ £

Profit on ordinary activities before tax 542,324 1,780,570Profit on ordinary activities multiplied by the rate of corporation tax in theUK as above 116,599 382,823Effects of:Expenses not deductible - 457Adjustment to tax charge in respect of previous periods - (156,526)Group relief claimed - (243,025)Other items 8,148 (13,672)

Total taxation charge 124,747 (29,943)

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Deferred tax assets and liabilities are offset where the company has a legally enforceable right to do so. Thefollowing is an analysis of the deferred tax balances for financial reporting purposes.


2014


2014£ £

Capital allowances 132,240 56,091Sundry temporary differences 5,600 6,900

137,840 62,991


The basic earnings per share is based on a profit for the period attributable to equity holders of the companyof £417,577, (period ended 31 December 2014: £1,810,513) and the weighted average number of ordinaryshares in issue for the period of 200,100 (period ended 31 December 2014: 200,100).

There are no instruments in issue that would give rise to the above earnings per share being diluted.


Trademarks Total£ £

Cost or deemed costAt 1 January 2014 1,050 1,050Additions - -

At 20 February 2014 1,050 1,050

Accumulated amortisationAt 1 January 2014 671 671Amortisation 15 15

At 20 February 2014 686 686

Net book amountAt 20 February 2014 364 364

Cost or deemed costAt 20 February 2014 1,050 1,050Additions - -

At 31 December 2014 1,050 1,050

Accumulated amortisationAt 20 February 2014 686 686Amortisation 90 90

At 31 December 2014 776 776

Net book amountAt 31 December 2014 274 274

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Motorvehicles

Fixtures,fittings andequipment Total

£ £ £

CostAt 1 January 2014 10,668 8,281,071 8,291,739Additions - 44,046 44,046

At 20 February 2014 10,668 8,325,117 8,335,785

DepreciationAt 1 January 2014 7,112 6,945,577 6,952,689Charge for the period 298 64,928 65,226

At 20 February 2014 7,410 7,010,505 7,017,915

Net book amountAt 20 February 2014 3,258 1,314,612 1,317,870

CostAt 20 February 2014 10,668 8,325,117 8,335,785Additions - 994,391 994,391Disposals - (5,382,906) (5,382,906)

At 31 December 2014 10,668 3,936,602 3,947,270

DepreciationAt 20 February 2014 7,410 7,010,505 7,017,915Charge for the period 1,835 457,795 459,630Disposals - (5,382,906) (5,382,906)

At 31 December 2014 9,245 2,085,394 2,094,639

Net book amountAt 31 December 2014 1,423 1,851,208 1,852,631

The net book value of assets held under hire purchase contracts was as follows:

As at20 February

2014

At at31 December

2014£ £

Fixtures, fittings and equipment 423,605 660,517


As at20 February

2014

As at31 December

2014£ £

Amounts falling due within one year:Trade receivables 2,490,078 2,336,672Other receivables 11,388 555,694Prepayments and accrued income 870,344 524,304

3,371,810 3,416,670

The company has no receivables past due or considered to be impaired at the balance sheet date.

All receivables are denominated in Sterling.

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14. CASH AND CASH EQUIVALENTS

As at20 February

2014

As at31 December

2014£ £

Cash at bank and in hand 2,686,605 1,599,554

All bank balances are denominated in Sterling.


As at20 February

2014

As at31 December

2014£ £

Trade payables 2,491,719 1,555,676Taxation and social security 156,518 239,655Accruals 956,511 893,004Deferred income 947,282 1,180,613

4,552,030 3,868,948

Trade and other payables comprise amounts outstanding for trade purchases and on-going costs. All tradeand other payables are due in less than 1 year. All balances are denominated in Sterling.

16. BORROWINGS AND LOANS

As at20 February

2014

As at31 December

2014£ £

Non-currentObligations under finance lease and hire purchase contracts - 202,308

- 202,308

CurrentObligations under finance lease and hire purchase contracts 232,908 249,114

Total borrowings and loans 232,908 249,114

The directors consider the carrying value of all financial liabilities to be equivalent to their fair value.

Details of the various borrowings shown above are given below:

Obligations under finance lease and hire purchase contracts

The company has taken out various hire purchases contracts on the purchase of property, plant andequipment. Obligations under hire purchase contracts are secured on the related fixed asset. Thearrangements attract interest ranging from 6% to 8%, are repayable over periods ranging between 1 year and3 years and are secured on the assets to which they relate.


As at20 February

2014

As at31 December

2014£ £

Allotted, called up and fully paid200,100 ordinary shares of £1 each 200,100 200,100

18. RESERVES

Retained profits

Includes all current and prior period retained profits and losses.

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19. COMMITMENTS AND CONTINGENCIES

(a) Capital commitments

There were no capital commitments at 20 February 2014 or 31 December 2014.

(b) Operating lease commitments

The company has leased various properties under non-cancellable operating lease agreements.

The future aggregate minimum lease payments under non-cancellable operating leases are as follows:

As at20 February

2014

As at31 December

2014£ £

Within 1 year 671,389 729,072Later than 1 year and less than 5 years 3,189,808 3,635,749After 5 years 62,700 122,258

3,923,897 4,487,079

The operating lease commitment for the rental of the property is calculated on a straight-line basis over thelength of the lease.

20. FINANCIAL INSTRUMENTS – CLASSIFICATION AND MEASUREMENT

Financial assets

Financial assets measured at amortised cost comprise cash, trade receivables and other receivables, asfollows:

As at20 February

2014

As at31 December

2014£ £

Trade receivables 2,490,078 2,336,672Other receivables 11,388 555,694Cash at bank 2,686,605 1,599,554

5,188,071 4,491,920

Financial liabilities

Financial liabilities measured at amortised cost comprise trade payables, accruals and obligations underfinance leases and hire purchase contracts as follows:

As at20 February

2014

As at31 December

2014£ £

Trade payables 2,491,719 1,555,676Accruals 956,511 893,004Obligations under finance leases and hire purchase contracts 232,908 451,422

3,681,138 2,900,102

21. FINANCIAL INSTRUMENTS – RISK MANAGEMENT

Financial risk management

The company’s activities expose it to a variety of financial risks: market risk (including cash flow interestrate risk), credit risk and liquidity risk.

Risk management is carried out by the board of directors. The company uses financial instruments toprovide flexibility regarding its working capital requirements and to enable it to manage specific financialrisks to which it is exposed.

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(a) Market risk

Interest rate risk

The interest rate profile of the company’s borrowings is shown below:

Interest rate profile of interest bearing borrowings

As at 20 February2014

As at 31 December2014

Debt£

Interestrate

Debt£

Interestrate

Fixed rate borrowingsHire purchase contracts 232,908 6% to 8% 451,422 6% to 8%

Weighted average cost of fixed rate borrowings 7% 7%

Details of the above borrowings can be found in note 16 above.

As the interest rates on hire purchase contracts are fixed, interest rate risk is considered to be very low.

(b) Liquidity risk

A maturity analysis of the company’s hire purchase contracts is shown below:

As at20 February

2014

As at31 December

2014£ £

One to two years 259,236 249,114Two to five years - 228,636

Total including interest cash flows 259,236 477,750

Less: interest cash flows (26,328) (26,328)

Total principal cash flows 232,908 451,422

Capital risk management

The capital structure of the business is entirely equity. Equity comprises share capital and retained profitsand is equal to the amount shown as ‘Equity’ in the balance sheet.

The company’s current objectives when maintaining capital are to:

Safeguard the company’s ability as a going concern so that it can continue to pursue its growth plans.

Provide a reasonable expectation of future returns to shareholders

Maintain adequate financial flexibility to preserve its ability to meet financial obligations, both current andlong term.

The company sets the amount of capital it requires in proportion to risk. The company manages its capitalstructure and makes adjustments to it in the light of changes in economic conditions and the riskcharacteristics of underlying assets. In order to maintain or adjust the capital structure, the company mayissue new shares or sell assets to reduce debt.

During the periods ended 20 February 2014 and 31 December 2014 the company’s strategy remainedunchanged.

(c) Credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting infinancial loss to the company. In order to minimise the risk, the company endeavours only to deal withcompanies which are demonstrably creditworthy and this, together with the aggregate financial exposure, iscontinuously monitored. The maximum exposure to credit risk is the value of the outstanding amount.

The company does not consider that there is any concentration of risk within either trade or otherreceivables. There are no impairments to trade or other receivables in each of the years presented.

Credit risk on cash and cash equivalents is considered to be very low as the counterparty is a major UKlisted bank.

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There are no related party transactions to disclose for the period to 20 February 2014 or the period to31 December 2014.

23. TRANSITION TO IFRS

The company’s effective IFRS transition date for the purposes of this financial information was 1 January2014. There were no transition adjustments to the numbers previously reported under UK GAAP. Thebalance sheet at 1 January 2014 was as follows:

Note

As at1 January

2014£

AssetsNon-current assetsIntangible assets 379Property, plant and equipment 1,339,050

Total non-current assets 1,339,429

Current assetsTrade and other receivables (1) 3,054,810Deferred tax asset 137,840Cash and cash equivalents 1,046,465

Total current assets 4,239,115

Total assets 5,578,544

Equity and liabilitiesEquityIssued share capital 200,100Retained profits 2,131,906

Total equity 2,332,006

Non-current liabilitiesBorrowings and loans -

Total non-current liabilities -

Current liabilitiesBorrowings and loans -Trade and other payables (2) 3,076,841Corporation tax payable 169,697

Total current liabilities 3,246,538

Total liabilities 3,246,538

Total equity and liabilities 5,578,544

Notes:

As at1 January

2014

£

(1) Trade and other receivablesTrade receivables 2,289,156Other receivables 765,654

3,054,810

(2) Trade and other payablesTrade payables 457,207Other payables 2,619,634

. . 3,076,841

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PART 14DEFINITIONS

The following definitions apply throughout this document, unless the context otherwise requires:

“ABB Placing” the placing by way of an accelerated bookbuild

“Act” the Companies Act 2006 (as amended)

“Admission” admission of the New Ordinary Shares to trading on AIM and suchadmission becoming effective in accordance with the AIM Rules

“AIM” the market of that name operated by the London Stock Exchange

“AIM Rules” the rules for companies whose securities are admitted to trading onAIM, as published by the London Stock Exchange from time to time

“AIM Rules for Nominated Advisers” the rules setting out the eligibility requirements, ongoing obligationsand certain disciplinary matters in relation to nominated advisers, aspublished by the London Stock Exchange from time to time

“Application Form” the application form on which Shareholders and other investors mayapply for Offer for Subscription Shares under the Offer forSubscription and which is set out at the end of this document

“Articles” or “Articles of Association” the articles of association of the Company, which are summarised insection 10 of Part 10 of this document

“BCMR” Business Connectivity Market Review published by Ofcom on28 April 2016

“Board” the board of directors of the Company as constituted from time to time

“BT” BT Group plc

“BT Wholesale” the BT Wholesale and Ventures division of BT providing networkproducts and services to client communication providers

“Business Day” any day (other than a Saturday or Sunday or public holiday) on whichbanks are open for business in London

“Canada” Canada, its possessions and territories and all areas subject to itsjurisdiction or any political subdivision thereof

“Capital Raising” the Placing and the Offer for Subscription

“certificated” or “in certificated form” where a share or other security is not in uncertificated form (that is,not in CREST)

“CFHL” CityFibre Holdings Limited

“CFHL Group” CFHL and its subsidiaries from time to time

“Channel Partners” internet service providers, connectivity resellers and serviceintegrators

“Citi” Citigroup Global Markets Limited

“CityFibre” or “Company” CityFibre Infrastructure Holdings plc (registered number 08772997)of 15 Bedford Street, London WC2E 9HE

“Closing Price” the closing middle market quotation of an Existing Ordinary Share asderived from the Daily Official List

“Code Powers” powers granted by Ofcom pursuant to the Electronic CommunicationsCode set out in schedule 2 to the Telecommunications Act 1984, asamended by Schedule 3 to the Communications Act 2003

“CREST” the relevant system, as defined in the CREST Regulations (in respectof which Euroclear is the operator as defined in the CRESTRegulations)

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“CREST Manual” the rules governing the operation of CREST, consisting of the CRESTReference Manual, CREST International Manual, CREST CentralCounterparty Service Manual, CREST Rules, Registrars ServiceStandards, Settlement Discipline Rules, CCSS Operations Manual,Daily Timetable, CREST Application Procedure and CRESTGlossary of Terms (all as defined in the CREST Glossary of Termspromulgated by Euroclear on 15 July 1996, as amended)

“CREST member” a person who has been admitted to Euroclear as a system member (asdefined in the CREST Regulations)

“CREST Regulations” the Uncertificated Securities Regulations 2001 (SI 2001 No. 3755), asamended

“CREST sponsor” a CREST participant admitted to CREST as a CREST sponsor

“CREST sponsored member” a CREST member admitted to CREST as a sponsored member

“Daily Official List” the daily official list of the London Stock Exchange

“Deferred Shares” deferred shares of £0.01 each in the capital of the Company

“Digital Communications Review” the report, Initial Conclusions from the Strategic Review of DigitalCommunications, published by Ofcom on 25 February 2016

“Directors” the directors of the Company, whose names are set out in Part 10 ofthis document, and “Director” means any one of them

“Disclosure Guidance andTransparency Rules”

the Disclosure Guidance and Transparency Rules published by theFCA

“EBITDA” earnings before interest, taxes, depreciation and amortisation

“EE” EE Limited

“EEA” the European Economic Area first established by the agreementsigned at Oporto on 2 May 1992

“EEA State” a state which is a contracting party to the agreement on the EEAsigned at Oporto on 2 May 1992, as it has effect for the time being

“Employee Benefit Trust” the CityFibre Employee Benefit Trust, established by the Companyfor the benefit of employees of the Group

“Employee JSOP” the CityFibre Employee Joint Share Ownership Plan

“Employee LTIP” the CityFibre Employee Long Term Incentive Plan

“Employee Option Schemes” the CityFibre Qualifying Employee Share Option Scheme and theCityFibre Non-Qualifying Employee Share Option Scheme

“Employee Share IncentiveArrangements”

the Employee Option Schemes, the LTIP and the Employee JSOP

“Enlarged Group” the Company and its subsidiaries following completion of the EntanetAcquisition

“Enlarged Share Capital” the entire issued ordinary share capital of the Company immediatelyfollowing Admission comprising the Existing Ordinary Shares andthe New Ordinary Shares issued pursuant to the Capital Raising

“Entanet Acquisition” the Company’s proposed acquisition of the entire issued share capitalof Entanet pursuant to the Entanet Acquisition Agreement

“Entanet Acquisition Agreement” the agreement dated 5 July 2017 between Yun-Ju Elsa Chen andothers and the Company relating to the Entanet Acquisition, details ofwhich are set out in section 18.1 of Part 10 of this document

“Entanet” or “Entanet Group” Entanet Holdings Limited, a company incorporated in England andWales with registered number 07902027 and whose registered officeis at Stafford Park 6, Telford, Shropshire, TF3 3AT and, where thecontext requires, its subsidiary undertaking Entanet International

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“Entanet International” Entanet International Limited, a company incorporated in Englandand Wales with registered number 03274237 and whose registeredoffice is at Stafford Park 6, Telford, Shropshire, TF3 3AT, being awholly owned subsidiary of Entanet

“EU” or “European Union” the European Union first established by the treaty made at Maastrichton 7 February 1992

“Euro” the currency introduced at the start of the third stage of the EuropeanEconomic and Monetary Union pursuant to the Treaty establishingthe European Union, as amended from time to time

“Euroclear” Euroclear UK and Ireland Limited, a company incorporated under thelaws of England and Wales under number 2872738, which operatesCREST

“Excluded Territories” Australia, Canada, Japan, New Zealand, the United States and anyother jurisdiction where the extension or availability of the CapitalRaising (and any other transaction contemplated thereby) wouldbreach any applicable law or regulation

“Executive Directors” Greg Mesch, Terry Hart and Mark Collins, being the executivedirectors of the Company, whose details are set out in Part 3 of thisdocument, and “Executive Director” means any one of them

“Existing Ordinary Shares” the 265,672,644 Ordinary Shares in issue as at the Reference Date

“Facilities” those facilities made available by the Lenders under the FacilityAgreement as more particularly described in section 18.9 of Part 10of this document

“Facility Agreement” the facility agreement dated 14 December 2015 between, amongstothers, (1) CFHL, (2) CityFibre Limited, (3) Proventus CapitalPartners III AB (publ.), (4) the Lenders and (5) other companieswithin the Group (acting as guarantors) comprising two £35 millionterm loan facilities, a £30 million super senior revolving creditfacility and up to a £65 million uncommitted accordion facility,details of which are set out in section 18.9 of Part 10 of this document

“Financial Conduct Authority” or“FCA”

the Financial Conduct Authority of the United Kingdom

“financial year” for a particular year, the financial year of the Company ending on31 December in such year and in respect of which audited accountshave been prepared

“finnCap” finnCap Ltd

“Firm Placing” the placing of Firm Placing Shares by way of a firm placing

“Firm Placing Shares” the Placing Shares to be placed pursuant to the Firm Placing

“Form of Proxy” the form of proxy for use at the General Meeting which accompaniesthis document

“FSMA” the Financial Services and Markets Act 2000 (as amended)

“General Meeting” the general meeting of the Company to be held at CMS CameronMcKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon St,London EC4N 6AF at 11.30 a.m. on 27 July 2017, notice of which isset out at the end of this document

“gross dividend” the aggregate of the cash dividend and the tax credit

“Group” or “CityFibre Group” the Company, its subsidiaries and subsidiary undertakings, and“member of the Group” shall be construed accordingly

“group” in relation to any person, means that person and any companies whichare holding companies, subsidiaries or subsidiary undertakings of it orof any such holding company

281

“HMRC” Her Majesty’s Revenue & Customs and. where relevant, anypredecessor body which carried out part of its functions andreferences to any approval by HMRC shall, where appropriate,include approval by any officer of Her Majesty’s Revenue & Customs

“ISIN” International Securities Identification Number

“IFRS” International Financial Reporting Standards

“Joint Bookrunners” Citi, finnCap, Liberum and Macquarie

“JSOPs” the Employee JSOP and the non-Employee JSOP

“KCOM” KCOM Group plc

“KCOM Acquisition” the Company’s acquisition on 18 January 2016 of certain of thenational network infrastructure assets of KCOM pursuant to theKCOM Acquisition Agreement

“KCOM Acquisition Agreement” the agreement dated 11 December 2015 between (1) KCOM,(2) Affiniti Integrated Solutions Limited, (3) CityFibre Limited,(4) CityFibre Metro Networks Limited and (5) the Company relatingto the KCOM Acquisition, details of which are set out in section 18.5of Part 10 of this document

“Lenders” funds managed by Proventus Capital Management AB or ProventusCapital Partners III and affiliated funds

“Liberum” Liberum Capital Limited

“London Stock Exchange” London Stock Exchange plc, together with any successors thereto

“Macquarie” Macquarie Capital (Europe) Limited

“MAR” the EU Market Abuse Regulation (EU/596/2014)

“Matching Award” has the meaning given in section 11.2 of Part 10 of this document

“MBNL” Mobile Broadband Network Limited

“Minimum Subscription” a minimum of 2,000 Offer for Subscription Shares, which at the OfferPrice, represents an application for a minimum consideration of£1,100

“Money Laundering Regulations” the Money Laundering, Terrorist financing and Transfer of Funds(Information on the Payer) Regulations 2017 (SI 2017 No. 692)

“MTM” Many-to-Many

“New Ordinary Shares” the new Ordinary Shares to be issued by the Company pursuant to theCapital Raising

“Non-Employee JSOP” the CityFibre Non- Employee Joint Share Ownership Plan

“Non-Employee LTIP” the CityFibre Non-Employee Long Term Incentive Plan

“Non-Employee Option Scheme” the CityFibre Non-Employee Share Option Scheme

“Non-Executive Directors” Chris Stone, Gary Mesch, Leo Van Doorne, Sally Davis and SteveCharlton, being the non-executive directors of the Company, whosedetails are set out in Part 3 of this document

“Notice of General Meeting” the notice convening the General Meeting set out at the end of thisdocument

“OECD” the Organisation for Economic Co-operation and Development

“Ofcom” the independent regulator and competition authority for the UKcommunications industries

“Offer for Subscription” the invitation to subscribe for the Offer for Subscription Shares at theOffer Price on the terms and subject to the conditions set out in thisdocument and the Application Form

282

“Offer for Subscription Shares” the New Ordinary Shares to be issued by the Company pursuant to theOffer for Subscription

“Offer Price” 55 pence per New Ordinary Share

“Official List” the official list of the UK Listing Authority

“Openreach” the infrastructure division of BT Group plc that will be incorporatedinto a new legal entity within BT Group plc in accordance withundertakings agreed with Ofcom

“Option Schemes” the Employee Options Schemes and the Non-Employee OptionsSchemes

“Ordinary Shares” the ordinary shares of 1 pence each in the share capital of theCompany

“Overseas Person” an Overseas Shareholder or other investor with a registered addressoutside the United Kingdom or who is a citizen or resident of acountry outside the United Kingdom

“Overseas Shareholder” a Shareholder with a registered address outside the United Kingdomor who is a citizen or resident of a country outside the UnitedKingdom

“PD Amending Directive” directive 2010/73/EU of the European Parliament and of the Council

“Persons Closely Associated” has the meaning given in Article 3 MAR

“Placees” the persons with whom Placing Shares are placed

“Placing” the placing of Placing Shares pursuant to the Firm Placing and theABB Placing as described in this document

“Placing Shares” the New Ordinary Shares to be issued by the Company pursuant to thePlacing at the Offer Price

“Pre-Admission Option Plans” the share option plans implemented by the Company for itsemployees, key contractors and Non-Executive Directors prior to itsadmission to AIM in 2014

“Prospectus” this document

“Prospectus Directive” Directive 2003/71/EC of the European Parliament and of the Councilof the European Union on the prospectus to be published whensecurities are to be offered to the public or admitted to trading, asamended (including pursuant to the PD Amending Directive)

“Prospectus Rules” the rules for the purposes of Part VI of FSMA in relation to offers forsecurities to the public and the admission of securities to trading on aregulated market

“QCA Guidelines” Quoted Companies Alliance published Corporate GovernanceGuidelines for smaller quoted companies

“QIB” a “qualified institutional buyer” within the meaning of Rule 144A

“Receiving Agent”, “Registrar” or“Computershare”

Computershare Investor Services PLC

“Reference Date” 10 July 2017, being the last practicable date prior to the date of thisdocument

“Register” the register of members of the Company, maintained by the Registrar

“Regulation S” Regulation S under the US Securities Act

“Regulatory Information Service” one of the regulatory information services authorised by the FinancialConduct Authority to receive, process and disseminate regulatoryinformation in respect of listed companies

“Remuneration Committee” the Company’s remuneration committee, further details of which areset out in section 9 of Part 3 of this document

“Resolutions” the resolutions to be proposed at the General Meeting, as set out inthe Notice of General Meeting

283

“Rothschild” N M Rothschild & Sons Limited

“Rule 144A” Rule 144A under the US Securities Act

“Securities Act” the US Securities Act of 1933, as amended

“SDRT” stamp duty reserve tax

“SEC” the US Securities and Exchange Commission

“Shareholder(s)” holder(s) of Ordinary Shares

“Share Incentive Arrangements” the Employee Option Scheme and the Non-Employee OptionScheme; the Employee Long Term Incentive Plan and the Non-Employee Long Term Incentive Plan; and the Employee Joint ShareOwnership Plan and the Non-Employee Joint Share Ownership Plan,details of which are set out in section 11 of Part 10 of this document

“Significant Shareholders” a person (other than a Director) directly or indirectly interested inthree per cent. or more of the Company’s share capital, details ofwhom are set out in section 12 of Part 10 of this document

“Sky” Sky UK Limited

“sterling” or “pounds sterling” the lawful currency of the United Kingdom

“stock account” an account within a member account in CREST to which a holding ofa particular share or other security in CREST is credited

“subsidiary” or “subsidiaryundertaking” or “undertaking”

each have the meanings given by the Act

“TalkTalk” TalkTalk Telecom Group plc

“Term Facilities” the two £35 million term loan facilities made available under theFacility Agreement, details of which are set out in section 18.9 of Part10 of this document

“TIDM” Tradable Instrument Display Mnemonic

“Three” Hutchinsom 3G UK Limited

“Trustee” the trustee of the CityFibre Employee Benefit Trust for the time being

“UK” or “United Kingdom” the United Kingdom of Great Britain and Northern Ireland

“UK Listing Authority” the FCA acting in its capacity as competent authority for the purposesof FSMA

“uncertificated” or “inuncertificated form”

recorded on the register of members of CityFibre as being held inuncertificated form in CREST and title may be transferred by meansof CREST

“Underwriters” or“Joint Underwriters”

Citi, finnCap, Liberum and Macquarie

“Underwriting Agreement” the conditional underwriting agreement dated 5 July 2017 betweenthe Company and the Underwriters in relation to the Capital Raising,further details of which are set out in section 18.2 of Part 10 of thisdocument

“US” or “United States” the United States of America, its territories and possessions, any Stateof the United States and the District of Columbia and all other areassubject to its jurisdiction

“US Exchange Act” the US Securities Exchange Act of 1934, as amended, and the rulesand regulations promulgated under such Act

“US GAAP” generally accepted accounting principles in the United States

“US Securities Act” the US Securities Act of 1933, as amended, and the rules andregulations promulgated under such Act

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“VAT” value added tax

“Virgin Media” Virgin Media Limited

“YorkCo” Bolt Pro Tem Limited, the joint venture company established byCityFibre, Sky and TalkTalk for the York FTTH trial

“2014 Admission” the original admission of the Company’s entire issued share capital totrading on AIM in accordance with the AIM Rules on 17 January2014

All references to legislation in this document are to the legislation of England and Wales unless the contrary isindicated. Any reference to any provision of any legislation shall include any amendment, modification, re-enactment or extension thereof.

Words importing the singular shall include the plural and vice versa, and words importing the masculine gendershall include the feminine or neutral gender.

References to “£”, “Sterling”, “p”, “penny” and “pence” are to the lawful currency of the United Kingdom,References to time are to London time.

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PART 15GLOSSARY OF TECHNICAL TERMS

The following technical terms apply throughout this document, unless the context requires otherwise:

“backhaul” the obligation of a service provider to provide data to or from a corenetwork

“colocation” means a facility to locate equipment in a data centre or exchangebuilding such that the equipment to be installed is located near to oradjacent to another party’s equipment enabling interconnectionbetween the two parties’ equipment

“duct(s)” utility strength plastic ducts that are laid beneath the streets orpavements and act as conduits for fibre optic cables. The ducts maycontain sub-ducts

“Ethernet” a link layer protocol describing how networked devices can formatdata for transmission to other network devices on the same networksegment, and how to put that data out on the network connectionoperating in local and wide area networks at a variety of speeds up to100Gbps

“fibre optic” a method of transmitting information at very high speed from oneplace to another by sending pulses of light through an optical fibre

“Fibre Exchange” a physical building, similar to a data centre, where optical fibresterminate and where service providers locate optical equipment that isused to transmit and receive digital data transmitted via the opticalfibres

“Fibre to the Home”/“FTTH” an optical fibre connection between a Fibre Exchange and residentialhome set small businesses within residential areas that is used byservice providers to provide ultrafast broadband, entertainment andcommunication services to consumers and small businesses

“Fibre to the Premises”/“FTTP” an optical fibre connection between a Fibre Exchange and a businessoffice that is used by service providers to provide ultrafast broadband,internet and communications services to businesses

“Fibre to the Tower”/“FTTT” an optical fibre connection between a Fibre Exchange or data centreand a mobile communications tower or mast that is used by mobileoperators to provide fibre optic connectivity to mobile cells for highspeed mobile data

“G.FAST” a type of digital subscriber line

“Gbps” gigabits per second, a data transfer speed measurement for high-speednetworks

“gigabit” broadband speed is typically measured in megabits per second(Mbps), the UK average currently being 12 Mbps. Gigabit, in thiscontext is 1000 Mbps

“GVA” or “gross value added” the measure of the value of goods and services produced in an area,industry or sector of an economy

“ICT” information and communications technology

“IP” internet protocol

“ISP” internet service provider

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“MAN” metro area network

“Mbps” megabit per second

“Megabit” a unit of measurement widely used when referring to data transferrates of computer networks or telecommunications systems

“penetration” market penetration is a measure of the amount of sales or adoption ofa product or service compared to the total addressable market for thatproduct or service. In this document this is the measure ofsubscription to fibre services by customers passed by the network

“PSTN” Public Switched Telephone Network is the method of deliveringtraditional voice services across BT’s copper network

“service provider” a provider of communications services to end-users. The connectivityto provide such services may be provided by CityFibre when a serviceprovider enters into an infrastructure lease

“sub-ducts” small ducts that are deployed inside a duct and act as a conduit for thefibre optic cables

“ultrafast” in the context of broadband, this commonly refers to connectionspeeds of 100 Mbps or greater

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NOTICE OF GENERAL MEETING

CITYFIBRE INFRASTRUCTURE HOLDINGS PLC

(incorporated in England and Wales under the Companies Act 2006 with registered number 08772997)

NOTICE IS HEREBY GIVEN that a GENERAL MEETING of CityFibre Infrastructure Holdings plc (the“Company”) will be held at CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place, 78 Cannon St,London EC4N 6AF on 27 July 2017 at 11.30 a.m. for the purpose of considering and, if thought fit, passing thefollowing resolutions. Resolution 1 will be proposed as an ordinary resolution and Resolution 2 will be proposedas a special resolution.

The results of the voting at the General Meeting will be announced through a Regulatory Information Service andwill appear on the Company’s website www.cityfibre.com.

Resolution 1: Ordinary Resolution

1. THAT the directors of the Company be generally and unconditionally authorised under section 551 of theCompanies Act 2006 to exercise all the powers of the Company to allot shares in the Company and to grantrights to subscribe for, or to convert any security into, shares in the Company (“Rights”) in relation to theCapital Raising (as defined in the prospectus of the Company dated 11 July 2017 of which this noticeforms part) up to an aggregate nominal amount of £3,909,090.91, provided that such authority to expire(unless previously renewed, varied or revoked by the Company) at the conclusion of the next annualgeneral meeting of the Company in 2018 (or, if earlier, on 31 May 2018) save that the Company may,before such expiry, make an offer or agreement which would or might require shares to be allotted orRights to be granted after the authority has expired and the directors may allot shares or grant Rights inpursuance of any such offer or agreement notwithstanding that this authority has expired; and this authorityshall be in addition to all existing authorities under section 551 of the Companies Act 2006.

Resolution 2: Special Resolution

2. THAT subject to the passing of resolution 1, the directors of the Company shall have the power to allotequity securities (within the meaning of section 560 of the Companies Act 2006) for cash under theauthority conferred by resolution 1 as if section 561 of the Companies Act 2006 did not apply to theallotment and this power shall be limited to the allotment of equity securities up to an aggregate nominalamount of £3,909,090.91 pursuant to or in connection with the Capital Raising provided this power shallexpire when the authority given by resolution 1 is revoked or expires but the Company may before expiryof this power make an offer or agreement which would or might require equity securities to be allottedafter such expiry and the directors may allot equity securities in pursuance of that offer or agreementnotwithstanding that the power has expired.

Registered office: By Order of the Board

15 Bedford Street, LondonWC2E 9HE Christopher Gawn

Company SecretaryDated 11 July 2017

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NOTES TO THE NOTICE OF GENERAL MEETING

1. Shareholders are entitled to appoint a proxy to exercise all or any of their rights to attend and to speakand vote on their behalf at the meeting. A shareholder may appoint more than one proxy in relation tothe General Meeting provided that each proxy is appointed to exercise the rights attached to a differentshare or shares held by that shareholder. A proxy need not be a shareholder of the Company. A form ofproxy which may be used to make such appointment and give proxy instructions accompanies thisnotice. If you do not have a form of proxy and believe that you should have one, or if you requireadditional forms, please contact Computershare Investor Services PLC on +44 (0)370 707 1168.

2. To be valid any form of proxy or other instrument appointing a proxy must be received by post toComputershare Investor Services PLC, Corporate Action Projects, Bristol BS99 6AH or by hand toComputershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE, no laterthan 11.30 a.m. on 25 July 2017.

3. The return of a completed form of proxy, other such instrument or any CREST Proxy Instruction (asdescribed in note 6 below) will not prevent a shareholder attending the General Meeting and voting inperson if he/she wishes to do so.

4. To be entitled to attend and vote at the General Meeting (and for the purpose of the determination bythe Company of the votes they may cast), shareholders must be registered in the register of members ofthe Company at 6.00 p.m. on 25 July 2017 (or, in the event of any adjournment, 48 hours before theadjourned meeting). Changes to the Register after the relevant deadline shall be disregarded indetermining the rights of any person to attend and vote at the meeting.

5. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxyappointment service may do so by using the procedures described in the CREST Manual. CRESTPersonal Members or other CREST sponsored members, and those CREST members who haveappointed a voting service provider(s), should refer to their CREST sponsor or voting serviceprovider(s), who will be able to take the appropriate action on their behalf.

6. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriateCREST message (a “CREST Proxy Instruction”) must be properly authenticated in accordance withEuroclear UK & Ireland Limited’s specifications, and must contain the information required for suchinstruction, as described in the CREST Manual (available via www.euroclear.com/CREST). Themessage, regardless of whether it constitutes the appointment of a proxy or is an amendment to theinstruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to bereceived by the issuer’s agent (ID 3RA50) by 11.30 a.m. on 25 July 2017. For this purpose, the time ofreceipt will be taken to be the time (as determined by the timestamp applied to the message by theCREST Applications Host) from which the issuer’s agent is able to retrieve the message by enquiry toCREST in the manner prescribed by CREST. After this time any change of instructions to proxiesappointed through CREST should be communicated to the appointee through other means.

7. CREST members and, where applicable, their CREST sponsors, or voting service providers shouldnote that Euroclear UK & Ireland Limited does not make available special procedures in CREST forany particular messages. Normal system timings and limitations will, therefore, apply in relation to theinput of CREST Proxy Instructions. It is the responsibility of the CREST member concerned to take(or, if the CREST member is a CREST personal member, or sponsored member, or has appointed avoting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) suchaction as shall be necessary to ensure that a message is transmitted by means of the CREST system byany particular time. In this connection, CREST members and, where applicable, their CREST sponsorsor voting system providers are referred, in particular, to those sections of the CREST Manualconcerning practical limitations of the CREST system and timings.

8. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out inRegulation 35(5)(a) of the Uncertificated Securities Regulations 2001.

9. If you wish to attend the General Meeting in person, you will be required to sign a register of entryupon arrival at the General Meeting at CMS Cameron McKenna Nabarro Olswang LLP, Cannon Place,78 Cannon St, London EC4N 6AF.

10. Pursuant to section 319A of the Companies Act 2006 any Shareholder attending the General Meetinghas the right to ask questions relating to the business being dealt with at the meeting. In certaincircumstances prescribed by section 319A, the Company need not answer a question.

11. A copy of this Notice of General Meeting and other information required by section 311A of theCompanies Act 2006 is available at www.cityfibre.com.

289

APPLICATION FORM

CityFibre Infrastructure Holdings plc

(the “Company”)

Please send the completed form by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or by hand (during normalbusiness hours) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE, so as to be received by no later than 11.00 amon 26 July 2017.

Important – Before completing this form, you should read the accompanying notes set out pages 6-7 of this document. All applicants must completeboxes 1 to 4 and box 8 and enclose payment. Box 6 should only be completed if you wish to hold your Offer for Subscription Shares in uncertificatedform. Box 7 should only be completed by joint applicants. If your application is for more than €15,000 (or its Sterling equivalent, beingapproximately £12,500), section 8.1, 8.2 or 8.3 (as appropriate) must also be completed.

If you have a query concerning completion of this Application Form please call Computershare Investor Services PLC on 0370 707 1168 from within the UKor on +44 370 707 1168 if calling from outside the UK. Calls may be recorded and randomly monitored for security and training purposes. Lines are openfrom 8.30 a.m. until 5.30 p.m. (London time) Monday to Friday (excluding UK public holidays). The helpline cannot provide advice on the merits of the offernor give any financial, legal or tax advice.

1. Application

I/We, the person(s) detailed in section(s) 3 and, in the case of joint applicants, 7 below offer to subscribe for the number of fully paid Offer for SubscriptionShares specified in the box below at 55 pence per Offer for Subscription Share subject to the Terms and Conditions of application under the Offer forSubscription set out in the Prospectus dated 11 July 2017 and subject to the Memorandum and Articles of Association of the Company.

(Write in figures, the number of Offer for Subscription Shares that you wish to apply for. The aggregate subscription must not be less than 2,000.Applications in excess of the minimum subscription amount should be in multiples of 2,000.)

Individual Holders – if an existing shareholder please provide yourShareholder Registered Number (SRN) below

Nominees – if application is on behalf of an underlying holder who held shares as at the close ofbusiness on 10 July 2017

Nominees – if application is on behalf of a new underlying holder

2. Amount payable

I/We attach a cheque or banker’s draft for the amount payable of:

(The amount in Box 1 multiplied by the Offer Price, being 55 pence per Offer forSubscription Share)

3. Personal details (PLEASE USE BLOCK CAPITALS)

Mr, Mrs, Miss or Title Forenames (in full)

Surname

Address (in full)

Postcode Daytime telephone no.

4. Signature

I/We hereby confirm that I/We have read the Prospectus and make this application on and subject to the Terms and Conditions of application under the Offerfor Subscription set out in Part 2 of the Prospectus.

Signature Dated 2017

Execution by a Company: This document is executed as a deed on behalf of the Company by two directors OR one director and the company secretary ORone director in the presence of an independent third party witness.

NOTE: The witness must be a person who is over 18 years of age who is not another joint holder and the same witness may witness on behalf of all or any registered holders

Affix CompanySeal Here Signature Name of Director

Signature Name of *Director/Secretary/Witness

*Delete as appropriate

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5. Form of Payment

5.1 Cheque or Banker’s Draft

If you are paying by cheque or banker’s draft, please check the box beside this paragraph 5.1 and pin your cheque or banker’s draft here.

Your cheque or banker’s draft must be for the amount in pounds Sterling equal to the number shown in the box in section 2 above, made

payable to “CIS PLC RE: CityFibre Infrastructure Holdings plc Offer for Subscription A/C” and crossed “A/C Payee”. Your payment must

relate solely to this Application Form. No receipt will be issued. The right is reserved to reject any Application Form in respect of which the

applicant’s cheque or banker’s draft has not been cleared on first presentation.

5.2 Electronic Bank Transfers

For applicants sending subscription monies by electronic bank transfer, (CHAPS) payment must be made for value by 11.00 am on 26 July 2017. Please

contact Computershare Investor Services PLC by email at [email protected] for full bank details. Computershare will then provide you with

a unique reference number which must be used when sending payment. Please enter below the sort code of the bank and branch you will be instructing to make

such payment, together with the name and number of the account to be debited with such payment and the branch contact details.

Sort Code: Account Name:

Account Number:Contact name at branch andtelephone number:

5.3 Delivery Versus Payment Settlement (DVP)

Only complete this section if you choose to settle your application within CREST, that is delivery versus payment (DVP).

Please indicate the CREST Participant ID from which the DEL message will be received by the Receiving Agent for matching, which should match that shownin 6 below, together with the relevant Member Account ID.

CREST Participant ID:(no more than five characters)

CREST Member Account ID:(no more than eight characters)

CREST Participant’s name

You or your settlement agent/custodian’s CREST account must allow for the delivery and acceptance of Offer for Subscription Shares to be made againstpayment at the Offer Price per Offer for Subscription Share, following the CREST matching criteria set below:

– Trade Date: 27 July 2017

– Settlement Date: 28 July 2017

– Company: CityFibre Infrastructure Holdings plc

– Security Description: Offer for Subscription Shares of 1p

– SEDOL: BH581H1

– ISIN: GB00BH581H10

Should you wish to settle DVP, you will need to match your instructions to Computershare Investor Services PLC’s Participant account 8RA21 by not laterthan 1.00 p.m. on 28 July 2017. You must also ensure that you or your settlement agent/custodian have a sufficient ‘‘debit cap’’ within the CREST system tofacilitate settlement in addition to your/their own daily trading and settlement requirements.

6. Offer for Subscription Shares in uncertificated form (CREST)

Complete this section only if you require your Offer for Subscription Shares to be credited to a CREST account in the same name as the applicant.

CREST Participant ID:(no more than five characters)

CREST Member Account ID:(no more than eight characters)

CREST Participant’s name

7. Joint applicants (PLEASE USE BLOCK CAPITALS)

(Box 7 must only be completed by joint applicants (see note 7). Where the application is being made jointly by more than one person, the proposed first namedholder should complete sections 2 and 3 above, and all other applicants (subject to a maximum of three) must complete and sign this section 7)

Mr, Mrs,Miss or Title

Forenames (in full) Surname Address Signature

8. Verification of Identity (If the value of the Offer for Subscription Shares which you are applying for, whether in one or more applications, exceeds €15,000(or its Sterling equivalent, being approximately £12,500), you must ensure that section 8.1, 8.2 or 8.3 (as appropriate) is completed).

8.1 Professional Advisers and Intermediaries (This section 8.1 should be completed if an application for Offer for Subscription Shares is being made on behalfof a client by a stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and Markets Act2000 or, if outside the United Kingdom, another appropriately authorised independent financial adviser).

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(Name of professional adviser or intermediary, in full)

Address (in full)

(Post code)

(Contact name) (Telephone number)

Declaration by the professional adviser or intermediary:

To: CityFibre Infrastructure Holdings plc, Computershare Investor Services plc

We are a financial adviser authorised under the Financial Services and Markets Act 2000 applying for Offer for Subscription Shares on behalf of one or moreclients (“relevant clients”). As such, we hereby undertake to:

8.1.1 complete anti money laundering verification of all relevant clients and to inform you of any unsatisfactory conclusion in respect of any such client;

8.1.2 keep records to verify the name, identity, place of birth, residential address, occupation and signature of each relevant client; and

8.1.3 supply copies of any such records to you as you may require.

We are governed in the conduct of our investment business and in respect of conducting anti money laundering verification by the following regulatory orprofessional body (and our reference or other official number allocated to us by that body is included in the box below).

(Full name and country of operation of regulatory or professional body) (Reference or other official number)

If you require further information about our procedures or any of our relevant clients, please contact the person named as the contact in the first box in this

section 8.1.

(Date) 2017 (Official stamp, if any)

(Signature)

(Full name)

(Title/position)

8.2 Reliable Introducer (If you are not a professional adviser or intermediary to whom section 8.1 applies, completion and signing of declaration in this section

8.2 by a suitable person or institution may avoid presentation being requested of the identity documents detailed in section 8.3 of this form).

The declaration below may only be signed by a person or institution (such as a governmental approved bank, stockbroker or investment firm, financial services

firm or an established law firm or accountancy firm) (the “firm”) which is itself subject in its own country to the operation of “know your customer” and anti

money laundering regulations no less stringent than those which prevail in Guernsey. Acceptable countries include Austria, Belgium, Denmark, Finland,

France, Germany, Gibraltar, Greece, Jersey, Hong Kong, Iceland, Isle of Man, Italy, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore,

South Africa, Spain, Sweden, Switzerland and the United Kingdom.

Declaration by the firm

To: CityFibre Infrastructure Holdings plc, Computershare Investor Services plc

With reference to the applicant(s) detailed in section(s) 3 and, in the case of joint applicants, 7 above, all persons signing sections 4 and 7 above and the payor

identified in section 5.3 above if not also an applicant holder (collectively the “relevant persons”), we hereby declare that:

8.2.1 we operate in one of the above mentioned countries and our firm is subject to money laundering regulations under the laws of that country which, to the

best of our knowledge, are no less stringent than those which prevail in Guernsey;

8.2.2 we are regulated in the conduct of our business and in the prevention of money laundering by the regulatory authority identified below;

8.2.3 each of the relevant persons is known to us in a business capacity and we hold valid identity documentation on each of them and we undertake to

immediately provide to you copies thereof on demand;

8.2.4 we confirm the accuracy of the names and residential/business address(es) of the applicant(s) named in sections 3 and, in the case of joint applicants, 7

above and, if details of a CREST account are included in section 6 above, that the owner thereof is the applicant named in section 3 above;

8.2.5 having regard to all local money laundering regulations we are, after enquiry, satisfied as to the source and legitimacy of the monies being used to

subscribe for the Offer for Subscription Shares to which this application relates; and

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8.2.6 where the payor and applicant(s) are different persons we are satisfied as to the relationship between them and the reason for the payor being different tothe applicant(s). The above information is given in strict confidence for your own use only and without any guarantee, responsibility or liability on the part ofthe firm or its officials.

(Date) 2017 (Official stamp, if any)

(Signature)

(Full name)

(Title/position)

having authority to bind the firm, the details of which are set out below:

(Name of firm, in full)

Address (in full)

(Post code)

(Contact name) (Telephone number)

(Full name of firm’s regulator authority)

(Website address or telephone number of regulatory authority) (Firm’s registered, licence or other official number)

8.3 Applicant identity information (Only complete this section 8.3 if your application has a value greater than €15,000 (or its Sterling equivalent, beingapproximately £12,500) and neither of sections 8.1 and 8.2 can be completed).

In accordance with internationally recognised standards for the prevention of money laundering, the relevant documents and information listed below must beprovided (please note that the Company and the Receiving Agent reserve the right to ask for additional documents and information).

Tick here for documents provided

ApplicantPayor

1 2 3 4

A. For each applicant who is an individual enclose:

(i) a certified clear photocopy of one of the following identification documents which bears both aphotograph and the signature of the person: (a) current passport; (b) Government or Armed Forcesidentity card; or (c) driving licence; and

(ii) certified copies of at least two of the following documents which purport to confirm that theaddress(es) given in section 3 and, in the case of joint applicants, section 7 is the applicant’s residentialaddress: (a) a recent gas, electricity, water or telephone (not mobile) bill; (b) a recent bank statement;(c) a council tax bill; or (d) similar bill issued by a recognised authority; and

(iii) if none of the above documents show their date and place of birth, enclose a note of suchinformation; and

(iv) details of the name and address of their personal bankers from which the Receiving Agent or theCompany may request a reference, if necessary

B. For each holder being a company (a “holder company”) enclose:

(i) a certified copy of the certificate of incorporation of the holder company; and

(ii) the name and address of the holder company’s principal bankers from which the Receiving Agent orthe Company may request a reference, if necessary; and

(iii) a statement as to the nature of the holder company’s business, signed by a director; and

(iv) a list of the names and residential addresses of each director of the holder company; and

(v) for each director provide documents and information similar to that mentioned in A above; and

(vi) a copy of the authorised signatory list for the holder company; and

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Tick here for documents provided

ApplicantPayor

1 2 3 4

(vii) a list of the names and residential/registered addresses of each ultimate beneficial owner interestedin more than 5% of the issued share capital of the holder company and, where a person is named, alsoenclose the documents and information referred to in C below and, if another company is named(a “beneficiary company”), also complete D below. If the beneficial owner(s) named do not directly ownthe holder company but do so indirectly via nominee(s) or intermediary entities, provide details of therelationship between the beneficial owner(s) and the holder company.

C. For each individual named in B(vii) as a beneficial owner of a holder company enclose for each such person documents and information similarto that mentioned in A(i) to (iv)

D. For each beneficiary company named in B(vii) as a beneficial owner of a holder company enclose:

(i) a certificated copy of the certificate of incorporation of that beneficiary company; and

(ii) a statement as to the nature of that beneficiary company’s business signed by a director; and

(iii) the name and address of the beneficiary company’s principal bankers from which the ReceivingAgent or the Company may request a reference, if necessary; and

(iv) enclose a list of the names and residential/registered address of each beneficial owner owning morethan 5% of the issued share capital of that beneficiary company.

E. If the payor is not an applicant and is not a bank providing its own cheque or banker’s payment on the reverse of which is shown details of theaccount being debited with such payment enclose:

(i) if the payor is a person, for that person the documents mentioned in A(i) to (iv); or

(ii) if the payor is a company, for that person the documents mentioned in B(i) to (vii); and

(iii) an explanation of the relationship between the payor and the applicant(s).

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NOTES ON HOW TO COMPLETE THE APPLICATION FORM

Applications should be returned so as to be received by 11.00 am on 26 July 2017.

All Applicants should read Notes 1-5. Note 6 should be read by applicants who wish to hold their Offer for Subscription Shares in uncertificated form. Note 7 should be read by jointapplicants.

1. Application

Fill in (in figures) the aggregate number for which your application for Offer for Subscription Shares is made. Your application must be for a minimum of 2,000 Offer forSubscription Shares or, if for more than 2,000, in multiples of 2,000.

2. Amount payable

Fill in (in figures) the total amount payable for the Offer for Subscription Shares for which your application is made which is the amount in Box 1 multiplied by the Offer Price, being55 pence per Offer for Subscription Share.

3. Personal details

Fill in (in block capitals) your full name, address and daytime telephone number. If this application is being made jointly with other persons, please read Note 7 before completingBox 3.

If you are making this application on behalf of another person or a corporation, that person’s or corporation’s details should be filled in (in block capitals) in Box 3.

4. Signature

The applicant named in Box 3 must date and sign Box 4.

The Application Form may be signed by another person on your behalf if that person is duly authorised to do so under a power of attorney. The power of attorney (or a copy dulycertified as true by a solicitor or a bank) must be enclosed for inspection. A corporation should sign under the hand of a duly authorised official whose representative capacity shouldbe stated.

5. Cheque/banker’s draft details

Attach a cheque or banker’s draft for the exact amount shown in Box 2 to your completed Application Form. Your cheque or banker’s draft must be made payable to “CIS PLC RE:CityFibre Infrastructure Holdings plc Offer for Subscription A/C” and crossed “a/c payee”.

Your payment must relate solely to this application. No receipt will be issued. Your cheque or banker’s draft must be drawn in Sterling on an account where you have sole or jointtitle to the funds held at a bank branch in the United Kingdom, the Channel Islands or the Isle of Man and must bear a United Kingdom bank sort code number.

6. Electronic Payment

To make payment electronically please contact Computershare at [email protected]. Computershare will provide you with the necessary details to make paymentin this way.

Applications with a value of €15,000 (or its Sterling equivalent, being approximately £12,500) or greater, which are to be settled by way of a third party payment (e.g. banker’s draftor building society cheque) will be subject to the verification of identity requirements which are contained in the Money Laundering Regulations 2007, the Money LaunderingDirective (Council Directive No. 91/308/EEC), the Criminal Justice (Proceeds of Crime) (Financial Services Businesses) (Bailiwick of Guernsey) Regulations 2007 and theHandbook of Financial Services Business (together referred to as the “Money Laundering Regulations”) (in each case as amended) and any other regulations applicable thereto.This may involve verification of names and addresses (only) through a reputable agency.

If satisfactory evidence of identity has not been obtained within a reasonable time, and in any event (unless the Offer for Subscription is extended) by 11.00 am on 26 July 2017, yourapplication may not be accepted. Certificates, cheques and all other correspondence will be sent to the address in Box 3.

7. Crest Settlement

The Application Form contains details of the information which Computershare will require from you in order to settle your application within CREST, if you so choose. If you donot provide any CREST details or if you provide insufficient CREST details for Computershare to match to your CREST account, Computershare will deliver your Offer forSubscription Shares in certificated form provided payment has been made in terms satisfactory to the Company.

The right is reserved to issue your Offer for Subscription Shares in certificated form should the Company, having consulted with Computershare, consider this to be necessary ordesirable. This right is only likely to be exercised in the event of any interruption, failure or breakdown of CREST or any part of CREST or on the part of the facilities and/or systemoperated by Computershare in connection with CREST.

The person named for registration purposes in your Application Form (which term shall include the holder of the relevant CREST account) must be: (i) the person procured by you tosubscribe for or acquire the relevant Offer for Subscription Shares; or (ii) yourself; or (iii) a nominee of any such person or yourself, as the case may be. Neither Computershare northe Company will be responsible for any liability to stamp duty or stamp duty reserve tax resulting from a failure to observe this requirement.

Computershare, on behalf of the Company, will input a DVP instruction into the CREST system according to the booking instructions provided by you in your Application Form.The input returned by you or your settlement agent/custodian of a matching or acceptance instruction to our CREST input will then allow the delivery of your Offer for SubscriptionShares to your CREST account against payment of the Offer Price per Offer for Subscription Share through the CREST system upon the Settlement Date.

By returning the Application Form you agree that you will do all things necessary to ensure that you or your settlement agent/custodian’s CREST account allows for the delivery andacceptance of Offer for Subscription Shares to be made prior to 8.00 a.m. on 28 July 2017 against payment of the Offer Price per Offer for Subscription Share. Failure by you to doso will result in you being charged interest at a rate equal to the London Inter-Bank Offered Rate for seven day deposits in sterling plus two per cent. per annum.

To ensure that you fulfil this requirement it is essential that you or your settlement agent/custodian follow the CREST matching criteria set out below:

– Trade Date: 27 July 2017– Settlement Date: 28 July 2017– Company: CityFibre Infrastructure Holdings plc– Security Description: Offer for Subscription Shares of 1p– SEDOL: BH581H1– ISIN: GB00BH581H10

Should you wish to settle DVP, you will need to match your instructions to Computershare’s Participant account 8RA21 by no later than 1.00 p.m. on 28 July 2017. You must alsoensure that you or your settlement agent/custodian has a sufficient “debit cap” within the CREST system to facilitate settlement in addition to your/its own daily trading andsettlement requirements.

6

In the event of late CREST settlement, the Company, after having consulted with Computershare, reserves the right to deliver Offer for Subscription Shares outside CREST incertificated form provided payment has been made in terms satisfactory to the Company and all other conditions in relation to the Offer for Subscription have been satisfied.

8. Offer for Subscription Shares in uncertificated form (CREST)

If you wish your Offer for Subscription Shares to be issued in uncertificated form you should complete Box 6 in addition to the other parts of the Application Form.

9. Joint applicants

If you make a joint application, you will not be able to transfer your Offer for Subscription Shares into an ISA. If you are interested in transferring your Offer for Subscription Sharesinto an ISA, the application should be made by you (or on your behalf) in your name only. If you do wish to apply jointly, you may do so with up to three other persons. Boxes 3 and4 must be completed by one applicant. All other persons who wish to join in the application must complete and sign Box 7.

Another person may sign on behalf of any joint applicant if that other person is duly authorised to do so under a power of attorney. The power of attorney (or a copy duly certified astrue by a solicitor or a bank) must be enclosed for inspection.

Certificates, cheques and all other correspondence will be sent to the address in Box 3.

10. Verification of identity

Section 8 of the Application Form only applies if the aggregate value of the Offer for Subscription Shares which you are applying for, whether in one or more applications, exceeds€15,000 (or its Sterling equivalent, being approximately £12,500). If section 8 applies to your application, you must ensure that section 8.1, 8.2 or 8.3 (as appropriate) is completed.

10.1 Professional adviser or intermediary

You should complete section 8.1 of the Application Form if you are a stockbroker, bank manager, solicitor, accountant or other independent financial adviser authorised under theFinancial Services and Markets Act 2000 or, if outside the United Kingdom, another appropriately authorised independent financial adviser acting on behalf of a client.

10.2 Reliable introducer

If you are not a professional adviser or intermediary and the value of your application(s) exceed(s) €15,000 (or its Sterling equivalent, being approximately £12,500), you will berequired to provide the verification of identity documents listed in section 8.3 of the Application Form unless you can have the declaration set out in section 8.2 of the ApplicationForm given and signed by a firm acceptable to the Receiving Agent and the Company. Section 8.2 of the Application Form details those firms acceptable to the Receiving Agent andthe Company for signing the declaration. In order to ensure their Application Forms are processed timely and efficiently, all applicants who are not professional advisers orintermediaries and to whose applications section 8 of the Application Form applies are strongly advised to have the declaration set out in section 8.2 of the Application Formcompleted and signed by a suitable firm where possible.

10.3 Applicant identity information

Section 8.3 of the Application Form need only be completed where the aggregate value of the Offer for Subscription Shares which you are applying for exceeds €15,000 (or itsSterling equivalent, being approximately £12,500) and neither sections 8.1 nor 8.2 of the Application Form can be completed.

Notwithstanding that the declaration set out in section 8.2 of the Application Form has been completed and signed, the Receiving Agent, the Underwriters and the Company reservethe right to request of you the identity documents listed in section 8.3 of the Application Form and/or to seek verification of identity of each holder and payor (if necessary) from youor their bankers or from another reputable institution, agency or professional adviser in the applicable country of residence.

If satisfactory evidence of identity has not been obtained within a reasonable time, your application might be rejected or revoked.

Where certified copies of documents are requested in section 8.3 of the Application Form, such copy documents should be certified by a senior signatory of a firm which is either agovernmental approved bank, stockbroker or investment firm, financial services firm or an established law firm or accountancy firm which is itself subject to regulation in theconduct of its business in its own country of operation and the name of the firm should be clearly identified on each document certified.

11. Instructions for delivery of completed Application Forms

Completed Application Forms should be returned by post to Computershare Investor Services PLC, Corporate Actions Projects, Bristol BS99 6AH or by hand (duringnormal business hours) to Computershare Investor Services PLC, The Pavilions, Bridgwater Road, Bristol BS13 8AE so as to be received by no later than 11.00 am on26 July 2017, together in each case with payment in full in respect of the application. If you post your Application Form, you are recommended to use first class post and toallow sufficient time for it to be delivered. Application Forms received after this date may be returned.

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