REVIEW OF BUSINESS, PRINCIPAL ACTIVITIES AND RESULTS
This is contained within pages 2 to 29.

DIVIDENDS

An interim dividend of 5.95p net per Ordinary share was paid on 20 August 1999. A second interim dividend of 9.10p net per Ordinary share, in lieu of the final dividend, will be paid on 6 April 2000 to Ordinary shareholders on the register on 24 December 1999.

DIRECTORS

Directors' responsibilities
Directors are required by the Companies Act 1985 to ensure that financial statements for each financial year are prepared which give a true and fair view of the state of the Company and the Group as at the end of the financial year and of the profit or loss for that period. In preparing the financial statements, the directors confirm that suitable accounting policies have been used and applied consistently; reasonable and prudent judgements and estimates have been made; and the financial statements have been drawn up on a going concern basis. Applicable accounting standards have been followed.

It is also the directors' responsibility to ensure that adequate accounting records are maintained; to safeguard the assets of the Company and the Group; to maintain a system of internal financial control; and to prevent and detect fraud and other irregularities.

Board of directors
The Company ensures that it recruits to the Board only individuals of sufficient calibre, knowledge and experience to fulfil the duties of a director appropriately. All directors are given appropriate briefing on appointment and individual training needs are met as required. The Carlton Board currently comprises the Chairman, the Chief Executive, two other executive directors and six non-executive directors. The biographies of the current directors on page 30 illustrate their range of experience, which ensures an effective board to lead and control the Company. All the directors served on the Board for the whole year under review except S A Cain, who joined the Board on 18 January 1999, and J F de Moller who served as Group Managing Director until her retirement on 31 January 1999. S A Cain will be leaving the Company on 31 January 2000.

The Board meets regularly, normally eight times throughout the year. It retains full and effective control over the Company and monitors the executive management. The Board is supplied in a timely manner with information in a form and of a quality appropriate to enable it to discharge its duties. Board meetings follow a formal agenda and the Board has a formal schedule of matters specifically reserved to it for decision. The Company Secretary and Finance Director are responsible for ensuring that applicable rules and regulations are complied with and that Board procedures are followed. All directors have access to the advice and services of the Company Secretary and, if required, external professional advice at the Company's expense.

All directors are subject to election by shareholders at the first opportunity after their appointment. Pursuant to the Company's Articles, currently the nearest number to but not exceeding one third of the Board must retire each year by rotation. In practice, all directors are required to offer themselves for re-election at least every three years and, as part of the changes to be made to the Company's Articles at this year's Annual General Meeting, this practice will be reflected in the Articles.

A D A W Forbes, M P Green and Sir Sydney Lipworth will retire by rotation and offer themselves for re-election at this year's Annual General Meeting. A D A W Forbes and Sir Sydney Lipworth are non-executive directors. A D A W Forbes is a member of the audit, nomination and remuneration committees.

M P Green is an executive director and Chairman of the nomination committee. Sir Sydney Lipworth is Chairman of the audit committee and a member of the nomination and remuneration committees. None of the retiring directors has a service contract with the Company. Profiles of the directors offering themselves for re-election at this year's AGM appear on page 30.

Non-executive directors
The six non-executive directors carry significant influence in Board decisions. With their differing backgrounds, they bring a wide range of experience and expertise to the Company's affairs and an independent judgement on issues of strategy, performance and resources. Appointments are normally for an initial term of three years, which may be extended by mutual consent for additional periods. Given the calibre and experience of the non-executive directors, the Board does not consider it currently necessary to appoint a senior independent non-executive director. Of the non-executive directors, Sir Derek Birkin, A D A W Forbes, Sir Sydney Lipworth and Sir Brian Pitman would all be considered as independent under the provisions of the Combined Code.

Directors' interests
Details of the directors' interests in the Company's Ordinary shares are as follows:

	1 October 1998*	30 September 1999 & 31 December 1999
M P Green	13,336,376	13,339,623
Sir Derek Birkin	2,500	2,564
S A Cain	-	10,000
B A Cragg	15,381	17,293
A D A W Forbes	6,250	6,250
D B Green	12,507,174	12,522,299
L F Hill	79,889	79,889
Sir Sydney Lipworth	30,453	31,240
Sir Brian Pitman	-	1,082
N N Walmsley	105,686	161,401

*or date of apppointment
 

1. The Company established an employee share ownership plan (ESOP) in 1991 and a Qualifying Employee Share Ownership Trust ("Quest") in 1998. Pursuant to the requirements of the Companies Act 1985, each executive director is deemed to be interested in the shares held for the purposes of the ESOP and the Quest. These interests have not been included in the above figures. The number of shares held for the purposes of the ESOP was 542,614 Ordinary shares on 1 October 1998 and 2,380,522 Ordinary shares on 30 September 1999 and 31 December 1999. The number of Ordinary shares held for the purposes of the Quest was Nil on 1 October 1998 and 30 September 1999 and 1,074,371 Ordinary shares on 31 December 1999.
2. The interests of M P Green and D B Green include a holding of 11,204,330 Ordinary shares in the name of Tangent Industries Limited, a company controlled by M P Green.

Audit committee
The audit committee is comprised solely of non-executive directors: Sir Sydney Lipworth (Chairman of the committee), Sir Derek Birkin, A D A W Forbes and L F Hill.

The Company's audit committee meets at least four times a year to monitor the accounting policies, internal controls and financial reporting of the Group. The duties of the audit committee also include keeping under review the scope and costs of audit and the nature and extent of non-audit services provided by the auditors. The external auditor attends all the meetings and has direct access to the committee Chairman.

Nomination committee
A nomination committee, consisting of three non-executive directors and the Company's Chairman, is responsible for reviewing and making recommendations to the Board on the appointment of directors. The members of the nomination committee are: M P Green (Chairman of the committee), A D A W Forbes, Sir Sydney Lipworth and Sir Brian Pitman. During the year the members of the nomination committee, together with Sir Derek Birkin, interviewed candidates and recommended S A Cain for appointment as Chief Executive. The full Board approved the nomination committee's recommendation.

Remuneration committee
The remuneration committee is comprised solely of the following non-executive directors: Sir Derek Birkin (Chairman of the committee), A D A W Forbes and Sir Sydney Lipworth. It deals with the remuneration of the executive directors on behalf of the Board.

The Company's Chairman and Chief Executive assist the committee except in relation to matters specifically concerning their own remuneration. The committee does not retain a firm of remuneration consultants, but seeks professional advice on an ad hoc basis.

The remuneration report of the Board can be found on pages 35 to 40.

CORPORATE GOVERNANCE

Carlton recognises the importance of strong corporate governance and fully endorses the Principles of Good Governance and Code of Best Practice encompassed in the Combined Code ("the Code") issued by the London Stock Exchange in June 1998.

Throughout the accounting period the Company has complied fully with the provisions set out in Section 1 of the Code, other than in respect of the appointment of a senior independent non-executive director and the notice period for one of the directors. The ways in which the Company applies the principles of the Code, together with explanations for the two areas of non-compliance, are described in the Directors' report including the remuneration report.

Internal financial controls
The Turnbull Committee issued final guidance in September 1999 on how companies should comply with the Code provision to review their company's internal control system as a whole. Companies are required to have put in place the procedures necessary to comply with the new guidance by the end of the first accounting period ending on or after 23 December 1999. The Board will ensure that such minor modifications to the Company's current internal control system as are necessary to meet this requirement will be implemented. In the meantime, as allowed by the London Stock Exchange, the Directors have continued to report below on their review of internal financial controls. The Company has established a system of financial and managerial procedures. Such a system can only provide reasonable and not absolute assurance against any misstatement or loss. These procedures can be summarised as follows:

Control environment - clear management responsibilities are established for the executive directors and the directors of each of the operating companies. These are laid down in the Company's Management Policies.

Risk management - operating company management have a clear responsibility for the identification of risks facing each of the businesses, and for putting in place procedures to mitigate and monitor risks. Each operating company is required to prepare a risk assessment which is reviewed by the internal audit function. The executive directors together with the rest of the Board monitor this process.

Information and control systems - the Group has a comprehensive process of annual budgets and detailed monthly reporting together with weekly cash reporting. The annual budget of each operating company is reviewed by the executive directors and the Board approves the overall Group budget as part of its normal responsibilities.

Monitoring system - the financial controls are monitored by management review, the internal audit function and by the audit committee. All operating companies are required to certify to the Board that a comprehensive system of financial controls was in place throughout the period.

The audit committee has reviewed the effectiveness of the internal financial controls of the Group for the period from 1 October 1998 to 30 September 1999.

GOING CONCERN

Based on normal business planning and control procedures, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. For this reason, the directors continue to adopt the going concern basis in preparing the accounts.

SHAREHOLDER MATTERS

Relations with shareholders
The Company maintains good communications with shareholders. Senior executives of the Company, including the Chairman, Chief Executive, Finance Director and Head of Corporate Affairs, meet frequently with representatives of institutional shareholders to discuss their views and to ensure that the strategies and objectives of the Company are well understood.

Substantial shareholdings
As at 31 December 1999, the Company had been notified of the following interests held, directly or indirectly, in 3% or more of the Company's issued Ordinary share capital: Norwich Union PLC - 23,194,605 shares DC Thomson & Co. Ltd. - 24,250,000 shares

Conversion of Preference shares
During the year, the Company repurchased 11,023,570 non-voting deferred shares. These shares were issued upon the conversion of Preference shares and were immediately repurchased by the Company and cancelled. Further details are set out in note 25 on pages 62 and 63.

Annual General Meeting
Full details of the resolutions to be proposed are set out in the Notice of Annual General Meeting, enclosed with this document, and a summary can be found on page 76. Carlton encourages the participation of all investors at its Annual General Meetings. Procedures at the Company's Annual General Meeting will continue to be in compliance with the Code.

AUDITORS

A resolution to reappoint PricewaterhouseCoopers as auditors will be proposed at the Annual General Meeting.

CREDITOR PAYMENT POLICY

The Group does not follow any particular code on payment practice. Operating businesses are responsible for agreeing the terms and conditions under which business transactions with their suppliers are conducted and making those suppliers aware of the terms of payment. It is Group policy that payments to all suppliers are made in accordance with the agreed terms, provided that the supplier is also complying with all relevant terms and conditions.

Trade creditor days of the Company for the year ended 30 September 1999 were 19 days, based on the ratio of Company trade creditors at the year-end to the amounts invoiced during the year by trade creditors.

DONATIONS

The Group made charitable donations of £1.4m in the year but no political donations.

NO MATERIAL CHANGE

In the context of the proposed merger of the company with United News & Media plc, as at 4 January 2000 (being the latest practicable date prior to the publication of this document), there have been no material changes in any information published by, or on behalf of, the Company on or after 26 November 1999, save as disclosed in this document.