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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-K



Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934



For the fiscal year ended December 31, 2004



| |  |                                   |  | 
| |  | --------------------------------- |  | 
| |  | Commission file numbers 333-33540 |  | 
| |  | 333-33540-1                       |  | 



Insight Midwest,
L.P.

Insight Capital, Inc.

(Exact name of registrants as specified in their charters)



|                                                              |  |                                     
|------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                      |  | 13-4079232                          
|Delaware                                                      |  | 13-4079679                          
|(State or other jurisdiction ofincorporation or organization) |  | (I.R.S. EmployerIdentification Nos.)



c/o Insight
Communications Company, Inc.

810 Seventh Avenue

New York, New York, 10019

(Address of principal executive offices)



Registrants telephone number, including area code: (917) 286-2300



Securities registered pursuant to Section 12(b) of the
Act: None



Securities registered pursuant to Section
12(g) of the Act: None



Indicate by check mark whether each
registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes x No ̈



Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K. Not Applicable



Indicate by check mark whether the
registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes ̈No x



State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrants: Not Applicable



Indicate the number of shares outstanding of the registrants common stock: Not Applicable



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Table of Contents



|           |  |                                                                                                              |  |     
|---------- |  | ------------------------------------------------------------------------------------------------------------ |  | ----
|           |  |                                                                                                              |  | Page
|PART I     |  |                                                                                                             
|           |  |                                                                                                             
|Item 1.    |  | Business                                                                                                     |  | 1   
|Item 2.    |  | Properties                                                                                                   |  | 27  
|Item 3.    |  | Legal Proceedings                                                                                            |  | 27  
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 28  
|           | 
|PART II    |  |                                                                                                             
|           |  |                                                                                                             
|Item 5.    |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 29  
|Item 6.    |  | Selected Financial Data                                                                                      |  | 29  
|Item 7.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 32  
|Item 7A.   |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 48  
|Item 8.    |  | Financial Statements and Supplementary Data                                                                  |  | 49  
|Item 9.    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 49  
|Item 9A.   |  | Controls and Procedures                                                                                      |  | 49  
|Item 9B.   |  | Other Information                                                                                            |  | 49  
|           | 
|PART III   |  |                                                                                                             
|           |  |                                                                                                             
|Item 10.   |  | Directors and Executive Officers of the Registrant                                                           |  | 50  
|Item 11.   |  | Executive Compensation                                                                                       |  | 52  
|Item 12.   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 52  
|Item 13.   |  | Certain Relationships and Related Transactions                                                               |  | 52  
|Item 14.   |  | Principal Accountant Fees and Services                                                                       |  | 54  
|           | 
|PART IV    |  |                                                                                                             
|           |  |                                                                                                             
|Item 15.   |  | Exhibits and Financial Statement Schedules                                                                   |  | 54  
|           | 
|SIGNATURES |  |                                                                                                             



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FORWARD-LOOKING STATEMENTS



Some of the information in this report contains
forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as may, will, expect, anticipate, believe,
estimate and continue or similar words. You should read statements that contain these words carefully because they:



| |  |  | discuss our future expectations;
| | - |  | --------------------------------



| |  |  | contain projections of our results of operations or financial condition; or
| | - |  | ---------------------------------------------------------------------------



| |  |  | state other forward-looking information.
| | - |  | ------------------------------------------



We believe it is important to communicate our expectations to our investors. However, there may be events in the future that we are not able to accurately
predict or over which we have no control. The risk factors listed in this report, as well as any other cautionary language in this report, provide examples of risks, uncertainties and events that may cause our actual results to differ materially
from the expectations we describe in our forward-looking statements. Examples of these risks include our history and expectation of future net losses, our substantial debt, changes in laws and regulations, increasing programming costs and
competition. You should be aware that the occurrence of the events described in these risk factors and elsewhere in this report could have a material adverse effect on our business, operating results and financial condition.



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PART I



|Item 1. | Business
|------- | --------



In this report, we rely on and refer to information and statistics regarding the cable television industry and our market share in the sectors in which we
compete. We obtained this information and statistics from various third-party sources, discussions with our customers and our own internal estimates. We believe that these sources and estimates are reliable, but we have not independently verified
them and cannot guarantee their accuracy or completeness.



Our Manager



Insight Communications Company, Inc. is the ninth largest
cable television system operator in the United States based on customers served. Insight Communications currently serves our approximately 1.3 million customers, all of which are concentrated in the four contiguous states of Indiana, Kentucky,
Illinois and Ohio. Our manager offers its customers an array of broadband products and services, including analog and digital video, high-speed Internet access and telephone services.



Insight Midwest



We are owned 50% by our manager and 50% by an indirect subsidiary of Comcast Cable Holdings, LLC, which is a subsidiary of Comcast Corporation. Our
manager serves as our general partner and as the manager of each of our systems.



Our principal offices are located at c/o Insight Communications Company, Inc., 810 Seventh Avenue, New York, New York 10019, and our telephone number is (917) 286-2300.



Insight Capital, Inc.



Insight Capital, Inc. (the Company), a Delaware corporation, was formed on September 23, 1999, for the sole
purpose of being a co-issuer with Insight Midwest, L.P. (Insight Midwest) of senior notes which allows certain investors the ability to be holders of the debt. The Company has no operations. The outstanding shares of the Company are
owned by Insight Midwest.



Recent Developments



On March 7, 2005, our manager received a proposal from Sidney R. Knafel and
Michael Willner, together with certain related and other parties (the Controlling Shareholders), and The Carlyle Group to acquire all of our managers outstanding, publicly-held Class A common stock. Our managers Board of
Directors has appointed a special committee of independent directors to review this proposal. The proposal specifically states that the Controlling Shareholders will roll over a substantial majority of their ownership in our manager and will retain
control.



Strategy



Our strategy is to be a full-service provider of entertainment, information
and communications services. This strategy is centered on offering attractive products and services which will be valued by our customers, and providing the highest level of customer service. We focus on building strong relationships within the
communities in which we operate because we believe our local presence and relationships with our communities and customers distinguishes us from our competitors and results in higher customer satisfaction. In addition, we intend to continue to
leverage the capacity and capability of our upgraded broadband network to develop new and enhanced products and services for our customers.



Deliver excellent customer service and enhance community relations



We believe that our commitment to customers and the communities in which we operate enhances



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our ability to attract and retain customers in a competitive environment. We also believe that providing outstanding customer service and creating a positive
corporate image in our communities enhances our ability to sell new products and services.



We seek to secure a high level of customer satisfaction by employing localized customer care, extensively using market research and providing customers with an attractively priced product offering. A significant
number of our customers visit their local office on a monthly basis, providing us the opportunity to demonstrate and sell our new and enhanced products and services. We believe that these distinct marketing and promotion opportunities are effective
sales channels, providing a competitive advantage as well as enhancing customer loyalty.



In addition, we are dedicated to fostering strong relations in the communities we serve. We sponsor local charities and community causes through staged events and promotional campaigns, including the industrys
Cable in the Classroom program. We believe an emphasis on customer service and strong community involvement leads to higher customer satisfaction, reduced customer churn and excellent franchise relationships. To further strengthen community
relations and differentiate us from direct broadcast satellite television systems and other multichannel video providers, we provide locally produced and oriented programming that offers, among other things, community information, local government
proceedings and local specialty interest shows. In some of our markets, we are the only broadcaster of local high school sporting events, which allows us to provide important programming that builds customer loyalty.



Focus on operating large, tightly-grouped clusters of cable systems in
markets with attractive demographic profiles



In
addition to its geographic concentration, our communications network is tightly-grouped, or clustered, with approximately 97% of our customers served from 14 headends, or an average of approximately 91,000 customers per headend (a
headend processes signals received for distribution to customers over our network). As a result, the amount of capital necessary to deploy new and enhanced products and services is significantly reduced on a per home basis. We believe that the
highly clustered nature of our systems also enables us to more efficiently deploy our marketing dollars and maximizes our ability to enhance customer awareness, increase use of our products and services and build brand support.



Our geographic concentration enables our local management teams to focus on
the customer experience within their communities. We believe that the deployment of these local resources and our local expertise provides us with a significant advantage over our competitors, and is a key component of our operating strategy.



Many communities we serve are characterized by good housing
growth, higher than average household income and low unemployment, and many are centered around large universities and major commercial enterprises. We believe that the demographic profile of our communities make them attractive markets for our
existing and new products.



Leverage our advanced
broadband network to offer bundled services and introduce new and enhanced products



Our advanced broadband network provides significant capacity and flexibility to offer our customers an array of products and services. The capacity of a cable system to offer products and services is determined by its
bandwidth. As of December 31, 2004, we estimate that approximately 97% of our customers were passed by our upgraded network, with a bandwidth capacity of 750 megahertz (MHz) or



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greater. At the end of 2004, digital cable was available to 96% of basic customers passed by our broadband network, high-speed Internet was available to 98%
of homes passed and telephone service was available to 32% of homes passed.



Our marketing strategy is to offer our customers an array of entertainment, information and communications services on a bundled basis. A bundled customer is one who subscribes to two or more of our primary services
(video, high-speed Internet access and telephone). Where available, all of our services are offered on a bundled basis, supported by a single, integrated back-office platform, which allows our customers to make one call to a single customer service
representative regarding any and all of their services and to receive a single bill for all services if they choose. By bundling our products and services, we provide our customers with increased choice in value-added packages, which we believe
results in higher customer satisfaction, increased use of our services and greater customer retention.



Pursue value-enhancing transactions in nearby or adjacent geographies



We will seek to swap or acquire systems that strategically fit our clustering and operating strategy and are accretive to
our value. We do not currently have any agreements, commitments or understandings for any future acquisitions. There is no assurance that any additional acquisitions will be completed. We believe that by acquiring or swapping systems in close
proximity we have the opportunity to improve revenue growth and operating margins. This is achieved through the consolidation of headends, spreading of fixed costs over larger systems and increased operating efficiencies associated with larger
systems.



Technical Overview



We believe that in order to achieve consistently high levels of customer
service, reduce operating costs, maintain a strong competitive position and deploy important new technologies, we need to maintain a state-of-the-art technical platform. The deployment of fiber optic cable which has a capacity for a very large
number of channels, the increase in the bandwidth to 750 MHz or higher, the activation of a two-way communications network and the installation of digital equipment allows us to deliver new and enhanced products and services, including interactive
digital video, high-speed Internet services and telephone services.



As of December 31, 2004, our systems were comprised of approximately 30,200 network miles serving approximately 1.3 million customers and passing approximately 2.4 million homes resulting in a density of approximately 79 homes per mile. As
of that date, our systems were made up of an aggregate of 31 headends, and approximately 97% of our customers were served by 14 headends. As of December 31, 2004, we estimate that approximately 97% of our customers were passed by our upgraded
network.



Our network design calls for an analog and digital
two-way active network with fiber optic cable carrying signals from the headend to the distribution point within our customers neighborhoods. The signals are transferred to our coaxial cable network at the node for delivery to our customers.
We have designed the fiber system to be capable of subdividing the nodes if traffic on the network requires additional capacity.



We believe that active use of fiber optic technology as a supplement to coaxial cable plays a major role in expanding channel capacity and improving the
performance of our systems. Fiber optic strands are capable of carrying hundreds of video, data and voice channels over extended distances without the extensive signal amplification typically required for coaxial cable. We will continue to deploy
fiber optic cable to further reduce amplifier cascades while improving picture quality and system reliability.



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A direct result of this extensive use of fiber optics is an improvement in picture quality and a
reduction of outages because system failures will be both significantly reduced and will impact far fewer customers when they do occur. Our design allows our systems to have the capability to run multiple separate channel line-ups from a single
headend and to insert targeted advertisements into specific neighborhoods.



We are improving the reliability of telephone services by implementing standby powering and status monitoring on our local network as telephone services are deployed in our systems. The existing commercial power
structure deployed in cable networks is subject to potential disruptions in local power utility service. Standby power will provide battery back-up for a limited duration, thereby making both telephone services and other products and services
delivered over our local network more reliable. Status monitoring will enable us to monitor key components of our local network so that we can help reduce and diagnose problems affecting the performance of our local network.



Products and Services



We offer our customers a full array of traditional cable television services and programming offerings. We tailor both our
basic line-up and our additional channel offerings to each regional system in response to demographics, programming preferences, competition and local regulation. We offer a basic level of service which includes up to 28 channels of television
programming. As of December 31, 2004, approximately 91% of our customers chose to pay an additional amount to receive additional channels under our Classic or expanded service. Premium channels, which are offered individually
or in packages of several channels, are optional add-ons to the basic service or the classic service. As of December 31, 2004, premium units as a percentage of basic subscribers was approximately 42%.



As network upgrades were activated, we deployed new and enhanced products and
services in substantially all of our markets, including interactive digital video and high-speed Internet services. In addition, we are offering telephone services to our customers in selected markets.



Analog Video



Our analog cable television service offering includes the following:



| |  |  | Basic Service. All of our video customers receive the basic level of service, which generally consists of over-the-air local broadcast television and local community
programming, including government and public access, and may include a limited number of satellite-delivered channels.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Classic Service or Expanded Service. This expanded level of service includes a group of satellite-delivered or non-broadcast channels such as ESPN, CNN, Discovery Channel and
Lifetime.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Premium Channels. These channels provide unedited, commercial-free movies, sports and other special event entertainment programming such as HBO, Cinemax, Starz! and Showtime.
We offer subscriptions to these channels primarily as a multi-channel digital service, along with subscription video-on-demand services.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Pay-Per-View. These analog channels allow customers with addressable analog or digital set-top boxes to pay to view a one-time special sporting event or music concert on an
unedited, commercial-free basis. Pay-per-view movies are available through our video-on-demand digital service.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Interactive Digital Video



The implementation of interactive digital technology significantly enhances and expands the video and service offerings we
provide to our customers. Because of the significantly increased bandwidth and two-way transmission capability of our state-of-the-art technical platform, we have designed a more extensive digital product that is rich in attractive features and
provides customers with a high degree of interactive capability. Our interactive digital service is designed to exploit the advantages of a broadband network in the existing generation of set-top devices. The digital service encompasses three
interactive applications: (1) an interactive program guide; (2) interactive local information and community guides; and (3) a video-on-demand service.



We have conducted numerous focus groups and commissioned research studies, the findings of which have helped to develop our interactive digital strategy.
We believe that our digital penetration will continue to increase as a result of our differentiated services such as a graphically rich local information network and video-on-demand pay-per-view with full VCR functionality.



We are packaging our digital service under the Insight Digital
brand, which includes the following features:



| |  |  | A digital set-top box and remote control;
| | - |  | -----------------------------------------



| |  |  | An interactive navigational program guide for all analog and digital channels;
| | - |  | ------------------------------------------------------------------------------



| |  |  | A local, interactive Internet-style service;
| | - |  | --------------------------------------------



| |  |  | Access to multi-channel premium service for customers who separately subscribe to premium channels, such as HBO and Showtime, and in some cases with subscription video-on-demand;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Access to video-on-demand;
| | - |  | --------------------------



| |  |  | Mag Rack, a selection of video magazines with video-on-demand functionality; and
| | - |  | --------------------------------------------------------------------------------



| |  |  | A digital 40-channel audio music service.
| | - |  | -----------------------------------------



We offer a high-definition programming service consisting of broadcast networks and premium channels. Digital customers with high-definition television
(HDTV) sets can purchase an HDTV receiver and any high-definition programming that is available from local broadcasters. HDTV customers who have HBO or Showtime would receive any HDTV programs available from these networks as well. We believe that
offering HDTV programming from local broadcasters puts us in a favorable competitive position with the direct broadcast satellite television distributors which have limited HDTV programming due to capacity restrictions.



Through our wholly-owned subsidiary, Insight Interactive, LLC, our
interactive digital platform provides its local, interactive Internet-style service and an interactive program guide. For an additional monthly charge over our Insight Digital price, we also offer a single digital set-top box which integrates our
existing HDTV programming and video-on-demand services with a new digital video recorder (DVR) service. These advanced services are supported by Gemstar-TV Guides interactive program guide.



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Our digital customers are served by a video-on-demand (VOD) infrastructure provided by SeaChange
International, Inc. Customers receive the movies electronically over the network and have full VCR functionality, including pause, play, fast forward and rewind. The movies are delivered with a high quality digital picture and digital sound. Our
video-on-demand product is designed to provide movies at prices comparable to those charged for videotape rentals, pay-per-view and near video-on-demand movies, but with far greater convenience and functionality. Additionally, customers who
subscribe to premium services, such as HBO and Showtime, can access selected movies and original programming from these networks at no additional cost to their regular monthly premium channel fee utilizing our video-on-demand system. Insights
video-on-demand system also provides free content from certain cable networks including the NFL Network, Food Network, DIY Network and the National Geographic Channel to any digital customer with VOD access. As of December 31, 2004, approximately
35% of our customers had access to video-on-demand services.



High-Speed Internet



We offer high-speed
Internet service for personal computers for all of our upgraded systems through our own regional network branded Insight BroadbandSM, except for our Columbus, Ohio system, which utilizes the RoadRunner service. AT&T Corp. provides the IP network backbone for our Insight Broadband service and certain core Internet support functions. As of December 31, 2004,
high-speed Internet services were available in over 2.3 million of our homes and served approximately 330,500 of our customers.



The broad bandwidth of our cable network enables data to be transmitted significantly faster than traditional telephone-based modem technologies, and the
cable connection does not interfere with normal telephone activity or usage. For example, cables on-line customers can download large files from the Internet in a fraction of the time it takes when using any widely available telephone modem
technology. Moreover, surfing the Internet on a high-speed network removes the long delays for Web pages to fully appear on the computer screen, allowing the experience to more closely approximate the responsiveness of changing channels on a
television set. In addition, the cable modem is always on and does not require the customer to dial into an Internet service provider and await authorization. We believe that these factors of speed and easy accessibility will increase the use and
impact of the Internet.



Telephone Services



On December 31, 2004, we acquired from Comcast Cable
and certain of its subsidiaries the circuit-switched telephone business previously operated jointly by us and Comcast Cable in selected markets. Under the joint operating agreement, we leased certain capacity on our local network infrastructure to
Comcast Cable for which we received a fee, and we provided certain services and support for which we received additional payments related to installation, marketing and billing. Comcast Cable provided the necessary switching and transport. Under the
Insight Phone brand, telephone services are currently available in portions of the Louisville, Kentucky, Evansville, Indiana, Lexington, Kentucky, and Columbus, Ohio areas and were available to a total of approximately 768,828 marketable
homes passed, with approximately 64,286 customers as of December 31, 2004. By acquiring ownership of the telephone business from Comcast Cable, we have gained both operational and strategic control over this business.



We intend to offer a phone service delivered over our broadband
communications networks transmitting voice signals in data packets using Internet protocol. We currently anticipate that this service will be made available in almost all of our markets during 2005, with launches within the markets to be made on a
node-by-node basis.



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Business Background of Our Manager



Insight Communications was co-founded in 1985 as a limited partnership under the name Insight Communications Company, L.P.
by Sidney R. Knafel and Michael S. Willner after a previous association with one another at Vision Cable Communications where Mr. Knafel was co-founder and Chairman and Mr. Willner held various operating positions, ultimately holding the position of
Executive Vice President and Chief Operating Officer. Vision Cable was sold to The Newhouse Group Inc. in 1981 and Mr. Willner remained there to run the cable operations until 1985 when he and Mr. Knafel formed Insight Communications.



In addition to many years of conventional cable television experience,
Insight Communications management team has been involved in the development and deployment of full service communications networks since 1989. Through a then related entity, Insight Communications Company UK, L.P., Insight Communications
management and related parties entered the cable television market in the United Kingdom, where today modern networks are widely deployed.



As a result of its managements British experience, Insight Communications recognized that the technology and products developed in the United
Kingdom would migrate to the United States in similar form. Insight Communications focused on planning to upgrade our network promptly after it became clear that the 1996 Telecom Act would encourage competition in the communications industries.
Insight Communications understood, however, that the new products and services available with new technology were best deployed in markets which provided for efficiencies for branding and technical investment. Insight Communications original
acquisition strategy, which focused on customer growth, was very successful. However, Insight Communications management team recognized the opportunity to evolve from our role as a cable television operator providing only home video
entertainment into a full service alternative communications network providing not only standard video services, but also interactive digital video, high-speed Internet access and communications products and services.



Recognizing the opportunities presented by newly available products and
services and favorable changes in the regulatory environment, Insight Communications executed a series of asset swaps, acquisitions and entered into several joint ventures that resulted in its current composition. The largest of these transactions
were the 50/50 joint ventures formed with Comcast Cable (formerly known as AT&T Broadband) and its affiliates in October 1998 with respect to the Indiana systems, in October 1999 with respect to the Kentucky systems and on January 5, 2001 with
respect to the Illinois systems. As of December 31, 1997, Insight Communications systems had approximately 180,000 customers with the two largest concentrations in Utah and Indiana, which together represented less than half of its customers.
Insight Communications believes that it has successfully transformed its assets so that it currently owns, operates and manages a cable television network serving approximately 1.4 million customers, all of which are clustered in the contiguous
states of Indiana, Kentucky, Illinois and Ohio. Insight Communications current assets are reflective of its strategy to own systems that have high ratios of customers to headends.



In July 1999, the holders of the partnership interests of Insight Communications Company, L.P, (Insight LP)
exchanged their respective partnership interests for common stock of Insight Communications. As a result, Insight LP became a wholly-owned subsidiary of Insight Communications. Simultaneous with the exchange, Insight Communications consummated an
initial public offering of 26,450,000 shares of its Class A common stock, raising an aggregate of approximately $650.0 million. Insight Communications Class A common stock is currently listed on The Nasdaq National Market under the symbol
ICCI.



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Our Systems



Our systems in Indiana, Kentucky, Illinois and Ohio serve approximately 1.3 million customers. We are the largest operator of cable systems in Kentucky
and the second-largest in both Indiana and Illinois. Our systems are clustered to serve an average of 91,000 customers per headend.



We are able to realize significant operational synergies due to the size of the clusters in these states and the demographic proximity of all of our
systems. In all of our systems, we have substantially completed upgrading our system infrastructures to enable us to deliver new technologies, products and services to provide our customers with greater value and choices in the face of growing
competition. As network upgrades were activated, we deployed new and enhanced products and services in substantially all of our markets, including interactive digital video and high-speed Internet services. In addition, we are offering telephone
services to our customers in selected markets.



The highly
clustered nature of our systems enables us to (a) more efficiently invest our marketing dollars and maximize our brand awareness, (b) more economically introduce new and enhanced services, and (c) reduce our overall operating and maintenance costs
as a result of our ability to deploy fiber and reduce the number of headends we use throughout our systems. As a result, we believe we are able to achieve improved operating performance on both a combined and system-wide basis. Our relationship with
Comcast Cable provides us with substantial purchasing economies for both our programming and hardware needs.



The East Region



As of December 31, 2004, the East Region passed approximately 815,900 homes and served approximately 409,100 customers. Approximately 98% of our customers
in the East Region are served by eight headends. The East Region, comprised of systems located within the States of Indiana, Kentucky and Ohio, is organized in six management districts:



The Central District



As of December 31, 2004, the Central District passed approximately 148,400 homes and served approximately 79,000 customers, principally in the community
of Bloomington. The City of Bloomington, located 45 miles south of Indianapolis, is the home of Indiana University. Besides the University, major employers include Bloomington Hospital, Cook Incorporated and General Electric.



The Southwest District



As of December 31, 2004, the Southwest District passed approximately 130,000
homes and served approximately 58,800 customers, principally in the communities of Evansville, Boonville, Mt. Vernon, Princeton and Jasper, Indiana, as well as Henderson, Kentucky. Major employers include Alcoa, Whirlpool and Bristol-Myers Squibb.



In January 2003, HDTV was launched in this District. Telephone
service is now fully deployed in Evansville, Boonville and Mt. Vernon, Indiana, as well as in Henderson, Kentucky.



SIGECOM, LLC has overbuilt the City of Evansville, providing cable television, high-speed Internet and telephone services in the City of Evansville and
neighboring areas. We believe the SIGECOM overbuild passed approximately 83,000 homes in our service area as of December 31, 2004.



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The Lexington District



As of December 31, 2004, the Lexington District passed approximately 129,000 homes and served approximately 82,400 customers
from a single headend. Lexington is Kentuckys second largest city, located in the central part of the state. Major employers in the Lexington area include the University of Kentucky, Toyota and Lexmark International.



As of December 31, 2004, over 44% of customers have subscribed to our
interactive Insight Digital service. Approximately 24% of customers have Insight Broadband high-speed Internet service. Our phone service is available in over 92% of Lexington.



The Northern Kentucky District



As of December 31, 2004, the Northern Kentucky District passed approximately 155,800 homes and served approximately 80,700
customers from a single headend primarily in the City of Covington. Covington is Kentuckys fifth largest city. Major employers in the Covington area include Delta Airlines, Toyota, Citicorp, DHL, Ashland, Inc., Fidelity Investments, BICC
General Cable Corporation, Omnicare, COMAIR, Levis Strauss, Gap, Inc., Mazak Corp. and R.A. Jones, Inc.



The Bowling Green District



As of December 31, 2004, the Bowling Green District passed approximately 37,000 homes and served approximately 23,600 customers from a single headend.
Bowling Green is located 120 miles south of Louisville, 110 miles southwest of Lexington and 70 miles north of Nashville, Tennessee. Bowling Green is the fourth largest city in Kentucky and is the home of Western Kentucky University. Major employers
in the Bowling Green area include General Motors, Fruit of the Loom, Commonwealth Health Corporation, DESA International and Houchens Industries.



The Columbus District



As of December 31, 2004, the Columbus District passed approximately 215,200 homes and served approximately 84,500 customers from a single headend. The
District serves the eastern portion of the City of Columbus and adjacent suburban communities within eastern Franklin County and the contiguous counties of Delaware, Licking, Fairfield and Pickaway. The City of Columbus is the 34th largest
designated market area, the capital of Ohio and the home of Ohio State University. In addition to the state government and university, the Columbus economy is well diversified with the significant presence of prominent companies such as The Limited,
Merck, Wendys, Nationwide Insurance, JP Morgan Chase Bank and Worthington Industries.



As of December 31, 2004, approximately 36,800 of customers have subscribed to our interactive Insight Digital service, representing a penetration of nearly 48% in areas where digital service is available. The
RoadRunner high-speed Internet service, launched in 2000, has achieved a penetration of approximately 15% as of December 31, 2004 in areas where service is available. We have launched a telephone service alternative to SBC (Ameritech) in the
Columbus District. In addition, the Columbus District provides exclusive local sports and entertainment programming, featuring a variety of sporting events from area high schools and the Ohio State University to Columbus Clippers baseball and
Columbus Crew major league soccer.



In 1996, Ameritech obtained
a citywide cable television franchise for the City of Columbus and most other suburban communities in Franklin County. WideOpenWest acquired the assets of Ameritech in December 2001, and has built its system, both in our service area and in the Time
Warner service area on the west side of Columbus. The areas of the Columbus District served by both us and WideOpenWest



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pass approximately 130,800 homes, representing 61% of the Columbus Districts total homes passed as of December 31, 2004.



The West Region



As of December 31, 2004, the West Region passed approximately 1,011,300
homes and served approximately 591,700 customers. Approximately 95% of our customers in the West Region are served by five headends. The West Region, comprised of systems located within the States of Indiana and Illinois, is organized in six
management districts:



The Northwest District



As of December 31, 2004, the Northwest District passed
approximately 107,700 homes and served approximately 68,300 customers, principally in the communities of Lafayette and Kokomo. The City of Lafayette is the home of Purdue University. Besides Purdue University, major employers include Eli Lilly,
Subaru, Caterpillar, Great Lakes Chemical, Lafayette Life Insurance, Delphi Electronics and Chrysler.



The Northeast District



As of December 31, 2004, the Northeast District passed approximately 206,000 homes and served approximately 118,000 customers in Richmond as well as in
the suburban communities near Indianapolis, including Noblesville and extending north to Anderson and east to Richmond, Indiana. Indianapolis is the state capital of Indiana and is the twelfth largest city in the United States. Major employers
include General Motors and Eli Lilly



The Northern Illinois
District



As of December 31, 2004, the Northern Illinois
District, which is comprised of Rockford and Dixon, Illinois, passed approximately 203,800 homes and served approximately 117,300 customers. Rockford is Illinois second largest city. Major employers in the Rockford metropolitan area include
Chrysler Corporation, Rockford Health System, Sundstrand Corporation and Swedish American Health Systems.



Dixon customers are principally in the communities of Rock Falls, Peru and Dixon. Dixon is located in the north/central part of the State of Illinois.
Major employers in the Dixon area include the State of Illinois, Raynor Manufacturing Company and Borg Warner Automotive.



Approximately 95% of the Northern Illinois District currently operates with a network of 750 MHz or higher. As of December 31, 2004, the district achieved
penetration levels for its digital service of approximately 30% in areas where the service is available.



The Peoria District



As of December 31, 2004, the Peoria District passed approximately 203,900 homes and served approximately 123,000 customers, principally in the communities
of Bloomington and Peoria, Illinois. Bloomington is located in the north central part of the state. The Bloomington system is home to Illinois State University with over 19,800 students and Illinois Wesleyan University with over 2,100 students. The
major employers in Bloomington are State Farm Insurance and Mitsubishi Motor Company of America. Peoria is the fifth largest city in Illinois, located in the north central part of the state. The Peoria system is



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home to Bradley University. Major employers in the Peoria area include the world headquarters of Caterpillar and R.L. Nelson Corp.



The Peoria District completed the upgrade of all but 68 miles of its 2,200
mile network to 750 MHz or higher. As of December 31, 2004, the Peoria District achieved penetration levels for its digital service of approximately 30% in areas where digital service is available. The District has launched high-speed Internet
service and has achieved penetration levels of over 14% as of December 31, 2004 in areas where the service is available. In September 2003, video-on-demand and HDTV services were made available to customers in the Peoria District.



The Springfield District



As of December 31, 2004, the Springfield District passed approximately
189,500 homes and served approximately 114,500 customers, principally in the communities of Decatur and Springfield. Springfield is the capital of Illinois and the sixth largest city in the state, located in the central part of the state. The major
employer in the Springfield area is the State of Illinois.



Approximately 74% of the Springfield District operates with a network which is two-way interactive. As of December 31, 2004, the district achieved penetration levels for its digital service of 32% in the areas where the service is
available. The district has launched Insight Broadband high-speed Internet service and has achieved penetration levels of approximately 13% in areas where the service is available. In September 2003, video-on-demand and HDTV services were made
available to customers in the Springfield District.



The
Champaign District



As of December 31, 2004, the Champaign
District passed approximately 100,300 homes and served approximately 50,600 customers. Champaign/Urbana is located in the eastern central part of the state. The Champaign District is home to the University of Illinois with over 45,000 students.
Major employers in the Champaign and Urbana areas include the University of Illinois, Kraft Foods and the Carle Clinic Association.



The Champaign District serves substantially all of its customers by a two-way, 750 MHz network. The district had approximately 15,700 digital customers as
of December 31, 2004. The Champaign District has launched Insight Broadband high-speed Internet service and as of December 31, 2004 had approximately 16,000 customers.



The South Region



General



As of December 31, 2004, the South Region passed approximately 548,100 homes and served approximately 271,700 customers, principally in the City of
Louisville, Kentucky. This region includes approximately 91,019 homes passed and approximately 41,151 customers served by the Scottsburg, Jeffersonville and New Albany, Indiana systems which are operated by the management of the Louisville, Kentucky
system. Louisville is the 16thlargest city in the United States and is Kentuckys largest city. It is located
in the northern region of the state, bordering Indiana. Louisville is located within a days drive of nearly 50% of the United States population, which makes it an important crossroads for trade and business. Major employers in the Louisville
metropolitan area include Humana, UPS, General Electric and Ford. Knology, Inc. obtained a franchise to provide cable television service in the City of Louisville in September 2000, although it had not commenced building a cable system as of
December 31, 2004.



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The Louisville system serves over 99% of its customers with two-way 750 MHz cable from a single headend.
As of December 31, 2004, approximately 106,000 customers in the Louisville system have subscribed to our interactive Insight Digital service. Our phone service is available in over 75% of Louisville.



Customer Rates



Rates charged to customers vary based on the market served and service selected. As of December 31, 2004, the weighted
average revenue for our monthly combined basic and classic service was approximately $38.11.



A one-time installation fee, which we may reduce during promotional periods, is charged to new customers, as well as reconnected customers. We charge monthly fees for set top boxes and remote control devices. We also
charge administrative fees for delinquent payments for service. Customers are free to discontinue service at any time without additional charge and may be charged a reconnection fee to resume service. Commercial customers, such as hotels, motels and
hospitals, are charged negotiated monthly fees and a non-recurring fee for the installation of service. Multiple dwelling unit accounts may be offered a bulk rate in exchange for single-point billing and basic service to all units.



Sales and Marketing



Our strategy is to improve customer satisfaction and reduce churn in addition to selling video, high-speed Internet and
telephone services to our customers and potential customers, thereby increasing market share. Customers who purchase more than one service may in some cases be eligible for a bundled discount. We regularly use targeted campaigns to sell the
appropriate services to both our existing and our potential customer base. Our customer service representatives are trained and given the support to use their daily contacts with customers as opportunities to sell them additional services.



Due to the nature of the communities we serve, we are able to
market our services in ways not typically used by urban cable operators. We can market products and services to our customers at our local offices where many of our customers pay their monthly cable bills in person. Examples of our in-store
marketing include the promotion of premium services as well as point-of-purchase demonstrations that will allow customers to experience our high-speed Internet service and digital products. We aggressively promote our services utilizing both broad
and targeted marketing tactics, including outdoor billboards, outbound telemarketing, retail partnerships, including Best Buy and H.H. Gregg, direct mail, door-to-door sales, cross-channel promotion, print and broadcast.



We build awareness of the Insight brand through advertising
campaigns and strong community relations. As a result of our branding efforts and consistent service standards, we believe we have developed a reputation for quality and reliability. We also believe that our marketing strategies are particularly
effective due to our regional clustering and market significance, which enables us to reach a greater number of both current and potential customers in an efficient, uniform manner.



Programming Suppliers



Most cable companies purchase their programming product directly from the program networks by entering into a contractual relationship with the program
supplier. The vast majority of these program suppliers offer the cable operator license fee rate cards with size-based volume discounts and other financial incentives, such as launch and marketing support and cross-channel advertising.



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Currently there are over 160 cable networks competing for carriage on our analog and digital platforms.
We have continued to leverage both our systems channel capacity and newly deployed digital services including video-on-demand as an incentive to our suppliers to secure long term programming deals with reasonable price structures and other
creative financial arrangements to offset license fee increases.



Because of our relationship with Comcast Cable, we have the right to purchase certain programming services for our systems directly through Comcast Cables programming supplier Satellite Services, Inc. We believe that Satellite
Services has attractive programming costs. Additionally, given the clustering of our systems in the Midwest, we have been successful in affiliating with regionally based programming products such as sports and news, at lower than average license
fees.



Under the terms of Insight Midwests partnership
agreement, we and Comcast Cable are each required to use commercially reasonable efforts to extend to Insight Midwest all of the programming discounts available to us. Accordingly, we should benefit from both the existing Satellite Services
arrangement as well as additional discounts available to Comcast Cable. However, we cannot predict with certainty when these benefits will occur, or the extent to which they actually will be achieved.



Commitment to Community Relations



We believe that maintaining strong community relations will continue to be
an important factor in ensuring our long-term success. Our community-oriented initiatives include educational programs and the sponsorship of programs and events recognizing local citizens and supporting local charitable organizations. In addition,
members of our management team host community events for political and business leaders as well as representatives of the local media, where they discuss our operations, recent enhancements to our service and recent developments in the
telecommunications industry. We have received numerous awards recognizing our ongoing community relations, and we believe that such initiatives result in consumer and governmental goodwill and name recognition, increasing customer loyalty and likely
facilitating any future efforts to provide new communications services.



We encourage all of our local management teams to take leadership roles in community and civic activities. Over the years, our systems have received various forms of recognition for their support of local causes and charities as well as
their sponsorship of programs that improve the quality of life in the communities they serve.



All of our systems provide ongoing support for Cable in the Classroom, an industry initiative that earns recognition both locally and nationally for its efforts in furthering the education of students. We further
underscore our commitment to education by offering high-speed Internet access to each accredited school in our service area, building upon the cable industrys pledge to provide free high-speed Internet access to eligible local schools and
public libraries. We offer students and teachers the resources of broadband content and robust cable programming to enrich the learning experience.



With cable modems in the classroom, teachers and students alike can benefit from the speedy downloads and access to advanced applications to enhance the
learning experience. In addition to providing this advanced technology free of charge, we intend to continue offering programming enhancements in partnership with various cable networks.



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One of the advantages a local cable operator has over nationally distributed competitors is its ability
to develop local programming. To further strengthen community relations and differentiate us from direct broadcast satellite television systems and other multichannel video providers, we provide locally produced and oriented programming. Several of
our systems have full production capabilities, with in-house and/or mobile production studios to create local content. We offer a broad range of local programming alternatives, including community information, local government proceedings and local
specialty interest shows. In some of our markets, we are the exclusive broadcaster of local college and high school sporting events, which we believe provides unique programming and builds customer loyalty. We believe that our emphasis on local
programming creates significant opportunities for increased advertising revenues. Locally originated programming will also play an integral role in the deployment of our new and enhanced products and services.



Franchises



Cable television systems are constructed and operated under fixed-term non-exclusive franchises or other types of operating
authorities that are granted by either local governmental or centralized state authorities. These franchises typically contain many conditions, such as:



| |  |  | Time limitations on commencement and completion of construction;
| | - |  | ----------------------------------------------------------------



| |  |  | Conditions of service, including the number of channels, the provision of free service to schools and other public institutions;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | The maintenance of insurance and indemnity bonds; and
| | - |  | -----------------------------------------------------



| |  |  | The payment of fees to communities.
| | - |  | -----------------------------------



| |  |  | These local franchises are subject to limits imposed by federal law.
| | - |  | --------------------------------------------------------------------



As of December 31, 2004, we held 547 franchises in the aggregate, consisting of 201 in Indiana, 192 in Kentucky, 125 in Illinois and 29 in Ohio. Many of
these franchises require the payment of fees to the issuing authorities of 3% to 5% of gross revenues, as defined by each franchise agreement, from the related cable system.



The Communications Act of 1934 prohibits franchising authorities from imposing annual franchise fees in excess of 5% of
gross annual revenues from the provision of cable services and also permits the cable television system operator to seek renegotiation and modification of franchise requirements if warranted by changed circumstances that render performance
commercially impracticable.



The following table summarizes
information relating to the year of expiration of our franchises, as of December 31, 2004:



|                             |  |                      |  |                               |   |  |                                   |  |                                |  
|---------------------------- |  | -------------------- |  | ----------------------------- | - |  | --------------------------------- |  | ------------------------------ | -
|Year of Franchise Expiration |  | Number of Franchises |  | Percentage of TotalFranchises |   |  | EstimatedNumber of BasicCustomers |  | PercentageTotal BasicCustomers |  
|Expired*                     |  | 78                   |  | 14.3                          | % |  | 146,268                           |  | 11.5                           | %
|2005                         |  | 38                   |  | 6.9                           | % |  | 29,877                            |  | 2.3                            | %
|2006                         |  | 33                   |  | 6.0                           | % |  | 161,908                           |  | 12.7                           | %
|2007                         |  | 15                   |  | 2.7                           | % |  | 101,648                           |  | 8.0                            | %
|2008                         |  | 34                   |  | 6.2                           | % |  | 75,319                            |  | 5.9                            | %
|After 2008                   |  | 349                  |  | 63.8                          | % |  | 757,503                           |  | 59.5                           | %



|* | Such franchises are operated on a month-to-month basis and are in the process of being renewed.
|- | -----------------------------------------------------------------------------------------------



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The Communications Act provides, among other things, for an orderly franchise renewal process which
limits a franchising authoritys ability to deny a franchise renewal if the incumbent operator follows prescribed renewal procedures. In addition, the Communications Act include comprehensive renewal procedures which require, when properly
elected by an operator, that an incumbent franchisees renewal application be assessed on its own merits and not as part of a comparative process with competing applications.



We believe that our cable systems generally have good relationships with their respective franchise authorities. We have
never had a franchise revoked or failed to have a franchise renewed.



Competition



Cable systems face increasing
competition from alternative methods of receiving and distributing their core video business. Both wireline and wireless competitors have made inroads in competing against incumbent cable operators. The extent to which a cable operator is
competitive depends, in part, upon its ability to provide to customers, at a reasonable price, a greater variety of programming and other communications services than are available off-air or through alternative delivery sources and upon superior
technical performance and customer service.



Congress has
enacted legislation and the FCC has adopted regulatory policies providing a more favorable operating environment for new and existing technologies, in particular direct broadcast satellite television systems operators, that have the potential to
provide increased competition to cable systems. Congress has also enacted legislation which permits direct broadcast satellite companies to retransmit local television signals, eliminating one of the objections of consumers about switching to
satellites.



The 1996 Telecom Act contains provisions designed
to encourage local exchange telephone companies and others to provide a wide variety of video services competitive with services provided by cable systems. Local exchange telephone companies in various states have either announced plans, obtained
local franchise authorizations or are currently competing with our cable communications systems. Certain telephone companies have begun to deploy fiber more extensively in their networks and some have announced plans to deploy broadband services,
including video programming services, using a switched Internet protocol platform or other technologies designed to avoid the same regulatory burdens imposed on our business. New laws or regulations at the federal or state level may clarify the
ability of local telephone companies to provide their services without obtaining state or local cable franchises. If local telephone companies are not required to obtain local cable franchises comparable to ours, it would be adverse to our business.
Local exchange telephone companies and other companies also provide facilities for the transmission and distribution to homes and businesses of interactive computer-based services, including the Internet, as well as data and other non-video
services. The ability of local exchange telephone companies to cross-subsidize video, data and telecommunication services also poses some threat to cable operators.



Franchised cable systems compete with private cable systems for the right to service condominiums, apartment complexes and
other multiple unit residential developments. The operators of these private systems, also known as satellite master antenna television systems, often enter into exclusive agreements with apartment building owners or homeowners associations
that preclude franchised cable television operators from serving residents of such private complexes. However several states, including Illinois and Ohio where we operate, have adopted legislation granting cable operators the right to serve
residents of such private complexes under certain conditions.



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The 1984 Cable Act gives franchised cable operators the right to use existing compatible easements within
their franchise areas on nondiscriminatory terms and conditions. Accordingly, where there are preexisting compatible easements, cable operators may not be unfairly denied access or discriminated against with respect to access to the premises served
by those easements. Conflicting judicial decisions have been issued interpreting the scope of the access right granted by the 1984 Cable Act, particularly with respect to private easements granted to a specific utility and not dedicated
to the public. Moreover, this statutory easement access right does not appear to allow a cable operator to install facilities within a building without permission from the property owner.



The 1996 Telecom Act may exempt some of our competitors from regulation as cable systems. The 1996 Telecom Act amends the
definition of a cable system such that providers of competitive video programming are only regulated and franchised as cable systems if they use public rights-of-way. Thus, a broader class of entities providing video
programming, including operators of satellite master antenna television systems, may be exempt from regulation as cable television systems under the 1996 Telecom Act. This exemption may give these entities a competitive advantage over us.



Cable television systems are operated under non-exclusive
franchises granted by local authorities thereby allowing more than one cable system to be built in the same area. Although the number of municipal and commercial overbuild cable systems is small, the potential profitability of a cable system is
adversely affected if the local customer base is divided among multiple systems. Additionally, constructing a competing cable system is a capital intensive process which involves a high degree of risk. We believe that in order to be successful, a
competitors overbuild would need to be able to serve the homes in the overbuilt area on a more cost-effective basis than we can. Any such overbuild operation would require either significant access to capital or access to facilities already in
place that are capable of delivering cable television programming. As of December 31, 2004, our Evansville, Indiana and Columbus, Ohio systems were overbuilt. As a result, approximately 9% of the total homes passed by our systems were overbuilt as
of such date.



Direct broadcast satellite television systems
use digital video compression technology to increase the channel capacity of their systems. Direct broadcast satellite television systems programming is currently available to individual households, condominiums and apartment and office
complexes through conventional, medium and high-power satellites. High-power direct broadcast satellite television system service is currently being provided by DIRECTV, Inc., EchoStar Communications Corporation and Rainbow DBS. Direct broadcast
satellite television systems have some advantages over cable systems that were not upgraded, such as greater channel capacity and digital picture quality. The recent acquisition of DIRECTV by News Corp. may provide it with access to financial,
programming and other resources that enhance its competitive potential. In addition, legislation has been enacted which permits direct broadcast satellite television systems to retransmit the signals of local television stations in their local
markets. However, direct broadcast satellite television systems have a limited ability to offer locally produced programming, and do not have a significant local presence in the community. In addition, direct broadcast satellite television systems
packages can be more expensive than cable, especially if the subscriber intends to view the service on more than one television in the household. Finally, direct broadcast satellite television systems do not have the same full two-way capability,
which we believe will limit their ability to compete in a meaningful way in interactive television, high-speed Internet and voice communications. Direct broadcast satellite has enjoyed a 23% average penetration nationwide, and we believe that
satellite penetration in our various markets generally is in accordance with such average.



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Several telephone companies are introducing digital subscriber line technology (DSL), which
allows Internet access over traditional phone lines at data transmission speeds greater than those available by a standard telephone modem. Although these transmission speeds are not as great as the transmission speed of a cable modem, we believe
that the transmission speed of DSL technology is sufficiently high that such technology competes with cable modem technology. The FCC is currently considering its authority to promulgate rules to facilitate the deployment of these services and
regulate areas including high-speed Internet and interactive Internet services. We cannot predict the outcome of any FCC proceedings, or the impact of that outcome on the success of our Internet access services or on our operations. In addition to
DSL and dialup modems for providing Internet access, other technologies are entering the marketplace. For example, there is a wireless technology popularly known as Wi-Fi, which is faster than dial-up, but slower than cable modem
technology. In addition, the FCC has recently approved the provision of broadband Internet service to consumers over electronic power lines.



As we expand our offerings to include telephone services, telephone services will be subject to competition from existing providers, including both local
exchange telephone companies and long-distance carriers as well as competing providers using alternative technologies such as voice over Internet protocol (VoIP). The telecommunications industry is highly competitive and many telephone
service providers may have greater financial resources than we have, or have established relationships with regulatory authorities. In addition, new technologies such as VoIP may allow competing telephone providers to offer service in competition
with us over an existing broadband connection (e.g., cable modem or DSL), thereby avoiding significant capital expenditures for a local distribution infrastructure. We cannot predict the extent to which the presence of these competitors will
influence customer penetration in our telephone service areas. While we may add our telephone service offering to various markets, the service has only been launched in selected markets and has not yet achieved material penetration levels.



Other new technologies may become competitive with services
that cable communications systems can offer. Advances in communications technology, as well as changes in the marketplace and the regulatory and legislative environment are constantly occurring. Thus, we cannot predict the effect of ongoing or
future developments on the cable communications industry or on our operations.



Legislation and Regulation



The cable
television industry is regulated by the FCC, some state governments and the applicable local governments. In addition, various legislative and regulatory proposals under consideration from time to time by Congress and various federal agencies have
in the past, and may in the future, materially affect us. The following is a summary of federal laws and regulations materially affecting the growth and operation of the cable television industry and a description of certain state and local laws. We
believe that the regulation of the cable television industry remains a matter of interest to Congress, the FCC and other regulatory authorities. There can be no assurance as to what, if any, future actions such legislative and regulatory authorities
may take or the effect thereof on us.



Federal Legislation



The principal federal statute governing the cable
television industry is the Communications Act. As it affects the cable television industry, the Communications Act has been significantly amended on three occasions, by the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act. The 1996
Telecom Act altered the regulatory structure governing the nations telecommunications providers. It reduced barriers to competition in both the cable television market and the local telephone market. Among other things, it also reduced the
scope of cable rate regulation.



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Federal Regulation



The FCC, the principal federal regulatory agency with jurisdiction over cable television, has adopted regulations covering
such areas as cross-ownership between cable television systems and other communications businesses, carriage of television broadcast programming, cable rates, consumer protection and customer service, leased access, obscene and indecent programming,
programmer access to cable television systems, programming agreements, technical standards, consumer electronics equipment compatibility and consumer education, ownership of home wiring, availability of programming to competitors, equal employment
opportunity, availability of devices to block objectionable programming, origination cablecasting. sponsorship identification, closed captioning, political advertising, advertising limits for childrens programming, signal leakage and frequency
use, maintenance of various records as well as antenna structure notification, marking and lighting. The FCC has the authority to enforce these regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or
the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities often used in connection with cable operations. A brief summary of certain of these federal regulations as
adopted to date follows.



Rate Regulation



The 1984 Cable Act codified existing FCC preemption of rate regulation for
premium channels and optional non-basic program tiers. The 1984 Cable Act also deregulated basic cable rates for cable television systems determined by the FCC to be subject to effective competition. The 1992 Cable Act substantially changed the
previous statutory and FCC rate regulation standards. The 1992 Cable Act replaced the FCCs old standard for determining effective competition, under which most cable television systems were not subject to rate regulation, with a statutory
provision that resulted in nearly all cable television systems becoming subject to rate regulation of basic and cable programming service (expanded basic) tiers. The 1992 Cable Act allows cable operators to obtain deregulation of all rates upon
demonstrating effective competition based on cable system penetration of less than 30%, aggregate penetration by competing providers in excess of 15%, or competition from a municipally-owned provider available to at least 50% of the community.



For cable systems not subject to effective competition, the
1992 Cable Act required the FCC to adopt a formula for franchising authorities to assure that basic cable rates are reasonable; allowed the FCC to review rates for cable programming service tiers, other than per-channel or per-program services, in
response to complaints filed by franchising authorities and/or cable customers; prohibited cable television systems from requiring basic customers to purchase service tiers above basic service in order to purchase premium services if the system is
technically capable of compliance; required the FCC to adopt regulations to establish, on the basis of actual costs, the price for installation of cable service, remote controls, converter boxes and additional outlets; and allowed the FCC to impose
restrictions on the retiering and rearrangement of cable services under certain limited circumstances. The 1996 Telecom Act limited the class of complainants regarding cable programming service tier rates to franchising authorities only, and ended
FCC regulation of cable programming service tier rates on March 31, 1999. The 1996 Telecom Act also relaxed existing uniform rate requirements by specifying that such requirements do not apply where the operator faces effective competition, and by
exempting bulk discounts to multiple dwelling units, although complaints about predatory pricing may be lodged with the FCC. In addition, the 1996 Telecom Act expanded the definition of effective competition to cover situations where a local
telephone company or its affiliate, or any multichannel video provider using telephone company facilities, offers comparable video service by any means except direct broadcast satellite television systems.



The FCCs implementing regulations contain standards for the regulation
of basic service rates. Local franchising authorities are empowered to order a reduction of existing rates which exceed the



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maximum permitted level for basic services and associated equipment, and refunds can be required. The FCC adopted a benchmark price cap system for measuring
the reasonableness of existing basic service rates. The rules also require that charges for cable-related equipment, converter boxes and remote control devices, for example, and installation services be unbundled from the provision of cable service
and based upon actual costs plus a reasonable profit. The regulations also provide that future rate increases may not exceed an inflation-indexed amount, plus increases in certain costs beyond the cable operators control, such as taxes,
franchise fees and increased programming costs. Cost-based adjustments to these capped rates can also be made in the event a cable television operator adds or deletes channels. Alternatively, cable operators have the opportunity to make
cost-of-service showings which, in some cases, may justify rates above the applicable benchmarks. There is also a streamlined cost-of-service methodology available to justify a rate increase on the basic tier for significant system
upgrades.



Carriage of Broadcast Television Signals



The 1992 Cable Act contains signal carriage requirements
which allow commercial television broadcast stations that are local to a cable television system, that is to say that the system is located in the stations Nielsen designated market area, to elect every three years
whether to require the cable television system to carry the station, subject to certain exceptions, or whether the cable television system will have to negotiate for retransmission consent to carry the station. The last election between
must-carry and retransmission consent was October 1, 2002. A cable television system is generally required to devote up to one-third of its activated channel capacity for the carriage of local commercial television stations whether pursuant to
mandatory carriage requirements or the retransmission consent requirements of the 1992 Cable Act. Local non-commercial television stations are also given mandatory carriage rights, subject to certain exceptions, within the larger of: (i) a 50 mile
radius from the station city of license; or (ii) the station Grade B contour, a measure of signal strength. Unlike commercial stations, noncommercial stations are not given the option to negotiate retransmission consent for the carriage
of their signal. In addition, cable television systems have to obtain retransmission consent for the carriage of all distant commercial broadcast stations, except for certain superstations, which are commercial
satellite-delivered independent stations such as WGN. To date, compliance with the retransmission consent and must carry provisions of the 1992 Cable Act has not had a material effect on us, although this result may change in
the future depending on such factors as market conditions, channel capacity and similar matters when such arrangements are renegotiated. The FCC has issued a decision in a rulemaking proceeding dealing with the carriage of television signals in a
digital format, both high definition and standard digital. The rules require carriage of local television broadcast stations that transmit solely in a digital format. In addition, the FCC recently reaffirmed that a station transmitting in both
analog and digital formats during the current several-year transition period is entitled to carriage of only its analog signal and that the mandatory carriage obligation extends only to the primary video signal, and not to multiple services
transmitted by a station over its digital channel.



Deletion
of Certain Programming



Cable television systems that have
1,000 or more customers must, upon the appropriate request of a local television station, delete the simultaneous or nonsimultaneous network programming of distant stations when such programming has also been contracted for by the local station on
an exclusive basis. FCC regulations also enable television stations that have obtained exclusive distribution rights for syndicated programming in their market to require a cable television system to delete or black out such programming
from other television stations which are carried by the cable television system. In addition, the rights holder to a local sports event can prohibit a cable operator from carrying that event on a distant station if the event is not broadcast live by
a local station.



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Franchise Fees



Although franchising authorities may impose franchise fees under the 1984 Cable Act, such payments cannot exceed 5% of a
cable television systems annual gross revenues from the provision of cable services. Under the 1996 Telecom Act, franchising authorities may not exact franchise fees from revenues derived from telecommunications services, although they may be
able to exact some additional compensation for the use of public rights-of-way. The FCC has ruled that franchise fees may not be imposed on revenue from cable modem service. Franchising authorities are also empowered, in awarding new franchises or
renewing existing franchises, to require cable television operators to provide cable-related facilities and equipment and to enforce compliance with voluntary commitments. In the case of franchises in effect prior to the effective date of the 1984
Cable Act, franchising authorities may enforce requirements contained in the franchise relating to facilities, equipment and services, whether or not cable-related. The 1984 Cable Act, under certain limited circumstances, permits a cable operator to
obtain modifications of franchise obligations.



Renewal of
Franchises



The 1984 Cable Act and the 1992 Cable Act
establish renewal procedures and criteria designed to protect incumbent franchisees against arbitrary denials of renewal and to provide specific grounds for franchising authorities to consider in making renewal decisions, including a
franchisees performance under the franchise and community needs. Even after the formal renewal procedures are invoked, franchising authorities and cable television operators remain free to negotiate a renewal outside the formal process.
Nevertheless, renewal is by no means assured, as the franchisee must meet certain statutory standards. Even if a franchise is renewed, a franchising authority may impose new and more onerous requirements such as upgrading facilities and equipment,
although the municipality must take into account the cost of meeting such requirements. Similarly, if a franchising authoritys consent is required for the purchase or sale of a cable television system or franchises, such authority may attempt
to impose burdensome or onerous franchise requirements in connection with a request for such consent. Historically, franchises have been renewed for cable television operators that have provided satisfactory services and have complied with the terms
of their franchises. At this time, we are not aware of any current or past material failure on our part to comply with our franchise agreements. We believe that we have generally complied with the terms of our franchises and have provided quality
levels of service.



The 1992 Cable Act makes several changes to
the process under which a cable television operator seeks to enforce its renewal rights which could make it easier in some cases for a franchising authority to deny renewal. Franchising authorities may consider the level of programming
service provided by a cable television operator in deciding whether to renew. For alleged franchise violations occurring after December 29, 1984, franchising authorities are no longer precluded from denying renewal based on failure to substantially
comply with the material terms of the franchise where the franchising authority has effectively acquiesced to such past violations. Rather, the franchising authority is estopped if, after giving the cable television operator notice and
opportunity to cure, it fails to respond to a written notice from the cable television operator of its failure or inability to cure. Courts may not reverse a denial of renewal based on procedural violations found to be harmless error.



Channel Set-Asides



The 1984 Cable Act permits local franchising authorities to require cable
television operators to set aside certain television channels for public, educational and governmental access programming. The 1984 Cable Act further requires cable television systems with thirty-six or more activated channels to designate a portion
of their channel capacity for commercial leased access by unaffiliated third parties to



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provide programming that may compete with services offered by the cable television operator. The 1992 Cable Act requires leased access rates to be set
according to a formula determined by the FCC.



Ownership



The 1996 Telecom Act repealed the statutory ban against
local exchange carriers providing video programming directly to customers within their local exchange telephone service areas. Consequently, the 1996 Telecom Act permits telephone companies to compete directly with operations of cable television
systems. Under the 1996 Telecom Act and FCC rules adopted to implement the 1996 Telecom Act, local exchange carriers may provide video service as broadcasters, common carriers, or cable operators. In addition, local exchange carriers and others may
also provide video service through open video systems, a regulatory regime that may give them more flexibility than traditional cable television systems. Open video system operators (including local exchange carriers) can, however, be
required to obtain a local cable franchise, and they can be required to make payments to local governmental bodies in lieu of cable franchise fees. In general, open video system operators must make their systems available to programming providers
(other than the incumbent cable operator) on rates, terms and conditions that are reasonable and nondiscriminatory. Where carriage demand by programming providers exceeds the channel capacity of an open video system, two-thirds of the channels must
be made available to programmers unaffiliated with the open video system operator.



The 1996 Telecom Act generally prohibits local exchange carriers from purchasing a greater than 10% ownership interest in a cable television system located within the local exchange carriers telephone service
area, prohibits cable operators from purchasing local exchange carriers whose service areas are located within the cable operators franchise area, and prohibits joint ventures between operators of cable television systems and local exchange
carriers operating in overlapping markets. There are some statutory exceptions, including a rural exemption that permits buyouts in which the purchased cable television system or local exchange carrier serves a non-urban area with fewer than 35,000
inhabitants, and exemptions for the purchase of small cable television systems located in non-urban areas. Also, the FCC may grant waivers of the buyout provisions in certain circumstances.



The 1996 Telecom Act made several other changes to relax ownership
restrictions and regulations of cable television systems. The 1996 Telecom Act repealed the 1992 Cable Acts three-year holding requirement pertaining to sales of cable television systems. The statutory broadcast/cable cross-ownership
restrictions imposed under the 1984 Cable Act were eliminated in 1996, although the parallel FCC regulations prohibiting broadcast/cable common-ownership remained in effect. The U.S. Court of Appeals for the District of Columbia circuit struck down
these rules. The FCCs rules also generally prohibit cable operators from offering satellite master antenna service separate from their franchised systems in the same franchise area, unless the cable operator is subject to effective
competition there.



The 1996 Telecom Act amended the
definition of a cable system under the Communications Act so that competitive providers of video services will be regulated and franchised as cable systems only if they use public rights-of-way. Thus, a broader class of
entities providing video programming may be exempt from regulation as cable television systems under the Communications Act.



The 1996 Telecom Act provides that registered utility holding companies and subsidiaries may provide telecommunications services, including cable
television, notwithstanding the Public Utilities Holding Company Act of 1935, as amended. Electric utilities must establish separate subsidiaries known as exempt telecommunications companies and must apply to the FCC for operating
authority. Due to their resources, electric utilities could be formidable competitors to traditional cable television systems.



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Access to Programming



The 1992 Cable Act imposed restrictions on the dealings between cable operators and cable programmers. Of special
significance from a competitive business posture, the 1992 Cable Act precludes video programmers affiliated with cable companies from favoring their affiliated cable operators and requires such programmers to sell their programming to other
multichannel video distributors. This provision limits the ability of vertically integrated cable programmers to offer exclusive programming arrangements to cable companies. The prohibition on certain types of exclusive programming arrangements was
set to expire on October 5, 2002, but the FCC has determined that a five-year extension of the prohibition is necessary to preserve and protect competition in video programming distribution.



Privacy



The 1984 Cable Act imposes a number of restrictions on the manner in which cable television operators can collect and
disclose data about individual system customers. The statute also requires that the system operator periodically provide all customers with written information about its policies regarding the collection and handling of data about customers, their
privacy rights under federal law and their enforcement rights. In the event that a cable television operator was found to have violated the customer privacy provisions of the 1984 Cable Act, it could be required to pay damages, attorneys fees
and other costs. Under the 1992 Cable Act, the privacy requirements were strengthened to require that cable television operators take such actions as are necessary to prevent unauthorized access to personally identifiable information. Certain of
these requirements were modified by the Electronic Communications Privacy Act of 2001.



Franchise Transfers



The
1992 Cable Act requires franchising authorities to act on any franchise transfer request submitted after December 4, 1992 within 120 days after receipt of all information required by FCC regulations and by the franchising authority. Approval is
deemed to be granted if the franchising authority fails to act within such period.



Technical Requirements



The FCC has imposed technical standards applicable to all classes of channels which carry downstream National Television System Committee video programming. The FCC also has adopted additional standards applicable to cable television
systems using frequencies in the 108 to 137 MHz and 225 to 400 MHz bands in order to prevent harmful interference with aeronautical navigation and safety radio services and has also established limits on cable television system signal leakage.
Periodic testing by cable television operators for compliance with the technical standards and signal leakage limits is required and an annual filing of the results of these measurements is required. The 1992 Cable Act requires the FCC to
periodically update its technical standards to take into account changes in technology. Under the 1996 Telecom Act, local franchising authorities may not prohibit, condition or restrict a cable television systems use of any type of customer
equipment or transmission technology.



The FCC has adopted
regulations to implement the requirements of the 1992 Cable Act designed to improve the compatibility of cable television systems and consumer electronics equipment. These regulations, among other things, generally prohibit cable television
operators from scrambling their basic service tier. The 1996 Telecom Act directs the FCC to set only minimal standards to assure compatibility between television sets, VCRs and cable television systems, and otherwise to rely on the marketplace.
Pursuant to the 1992 Cable Act, the FCC has adopted rules to assure the competitive



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availability to consumers of customer premises equipment, such as converters, used to access the services offered by cable television systems and other
multichannel video programming distributors. Pursuant to those rules, consumers are given the right to attach compatible equipment to the facilities of their multichannel video programming distributors so long as the equipment does not harm the
network, does not interfere with the services purchased by other customers and is not used to receive unauthorized services. As of July 1, 2000, multichannel video programming distributors, other than operators of direct broadcast satellite
television systems, were required to separate security from non-security functions in the customer premises equipment which they sell or lease to their customers and offer their customers the option of using component security modules obtained from
the multichannel video programming distributors with set-top units purchased or leased from retail outlets. As of July 1, 2006, multichannel video programming distributors will be prohibited from distributing new set-top equipment integrating both
security and non-security functions to their customers.



Inside Wiring; Customer Access



FCC rules
require an incumbent cable operator upon expiration of a multiple dwelling unit service contract to sell, abandon, or remove home run wiring that was installed by the cable operator in a multiple dwelling unit building. These inside
wiring rules assist building owners in their attempts to replace existing cable operators with new programming providers who are willing to pay the building owner a higher fee, where such a fee is permissible. The FCC has also issued an order
preempting state, local and private restrictions on over-the-air reception antennas placed on rental properties in areas where a tenant has exclusive use of the property, such as balconies or patios. However, tenants may not install such antennas on
the common areas of multiple dwelling units, such as on roofs. This order limits the extent to which multiple dwelling unit owners may enforce certain aspects of multiple dwelling unit agreements which otherwise would prohibit, for example,
placement of direct broadcast satellite television systems television receiving antennae in multiple dwelling unit areas, such as apartment balconies or patios, under the exclusive occupancy of a renter.



Pole Attachments



The FCC currently regulates the rates and conditions imposed by certain
public utilities for use of their poles unless state public service commissions are able to demonstrate that they adequately regulate the rates, terms and conditions of cable television pole attachments. A number of states and the District of
Columbia have certified to the FCC that they adequately regulate the rates, terms and conditions for pole attachments. Illinois, Ohio, and Kentucky, states in which we operate, have made such a certification. In the absence of state regulation, the
FCC administers such pole attachment and conduit use rates through use of a formula which it has devised. Pursuant to the 1996 Telecom Act, the FCC has adopted a new rate formula for any attaching party, including cable television systems, which
offers telecommunications services. This new formula will result in higher attachment rates that will apply only to cable television systems which elect to offer telecommunications services. Any increases pursuant to this new formula began in 2001,
and will be phased in by equal increments over the five ensuing years. The FCC ruled that the provision of Internet services will not, in and of itself, trigger use of the new formula. The Supreme Court affirmed this decision and also held that the
FCC s authority to regulate rates for attachments to utility poles extended to attachments by cable operators and telecommunications carriers that are used to provide Internet service or for wireless telecommunications service. This
development benefits our business and will place a constraint on the prices that utilities can charge with regard to the cable facilities over which we also provide Internet access service.



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Interactive Television



The FCC has issued a Notice of Inquiry covering a wide range of issues relating to Interactive Television (ITV).
Examples of ITV services are interactive electronic program guides and access to a graphic interface that provides supplementary information related to the video display. In the near term, cable systems are likely to be the platform of choice for
the distribution of ITV services. The FCC has posed a series of questions including the definition of ITV, the potential for discrimination by cable systems in favor of affiliated ITV providers, enforcement mechanisms, and the proper regulatory
classification of ITV service.



Copyright



Cable television systems are subject to federal copyright licensing covering
carriage of broadcast signals. In exchange for making semi-annual payments to a federal copyright royalty pool and meeting certain other obligations, cable television operators obtain a statutory license to retransmit broadcast signals. The amount
of this royalty payment varies, depending on the amount of system revenues from certain sources, the number of distant signals carried, and the location of the cable television system with respect to over-the-air television stations. Any future
adjustment to the copyright royalty rates will be done through an arbitration process to be supervised by the U.S. Copyright Office. Cable television operators are liable for interest on underpaid and unpaid royalty fees, but are not entitled to
collect interest on refunds received for overpayment of copyright fees.



Various bills have been introduced into Congress over the past several years that would eliminate or modify the cable television compulsory license. Without the compulsory license, cable television operators would have to negotiate rights
from the copyright owners for all of the programming on the broadcast stations carried by cable television systems. Such negotiated agreements would likely increase the cost to cable television operators of carrying broadcast signals. The 1992 Cable
Acts retransmission consent provisions expressly provide that retransmission consent agreements between television broadcast stations and cable television operators do not obviate the need for cable operators to obtain a copyright license for
the programming carried on each broadcasters signal.



Copyrighted music performed in programming supplied to cable television systems by pay cable networks, such as HBO, and basic cable networks, such as USA Network, is licensed by the networks through private agreements with performing rights
organizations such as the American Society of Composers and Publishers, generally known as ASCAP, BMI, Inc. and SESAC, Inc. ASCAP and BMI offer through to the viewer licenses to the cable networks which cover the retransmission of the
cable networks programming by cable television systems to their customers.



Licenses to perform copyrighted music by cable television systems themselves, including on local origination channels, in advertisements inserted locally on cable television networks, and in cross-promotional
announcements, must be obtained by the cable television operator from the appropriate performing rights organization.



State and Local Regulation



Cable television systems generally are operated pursuant to nonexclusive franchises, permits or licenses granted by a municipality or other state or local
government entity. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction, and even from city to city within the same state, historically ranging from reasonable to highly restrictive or burdensome. Franchises
generally contain provisions governing fees to be paid to the franchising authority, length of the franchise term, renewal, sale or transfer of the franchise, territory of the franchise, design and technical performance of the system, use and
occupancy of public streets and number and types of cable television services provided. The terms and



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conditions of each franchise and the laws and regulations under which it was granted directly affect the profitability of the cable television system. The
1984 Cable Act places certain limitations on a franchising authoritys ability to control the operation of a cable television system. The 1992 Cable Act prohibits exclusive franchises, and allows franchising authorities to exercise greater
control over the operation of franchised cable television systems, especially in the area of customer service and rate regulation. The 1992 Cable Act also allows franchising authorities to operate their own multichannel video distribution system
without having to obtain a franchise and permits states or local franchising authorities to adopt certain restrictions on the ownership of cable television systems. Moreover, franchising authorities are immunized from monetary damage awards arising
from regulation of cable television systems or decisions made on franchise grants, renewals, transfers and amendments. The 1996 Telecom Act restricts a franchising authority from either requiring or limiting a cable television operators
provision of telecommunications services.



Various proposals
have been introduced at the state and local levels with regard to the regulation of cable television systems, and a number of states have adopted legislation subjecting cable television systems to the jurisdiction of centralized state governmental
agencies, some of which impose regulation of a character similar to that of a public utility. To date, none of the states in which we currently operate has enacted state level regulation.



The foregoing summarizes certain material present and proposed federal, state and local regulations and legislation relating
to the cable television industry. Other existing federal regulations, copyright licensing and, in many jurisdictions, state and local franchise requirements, currently are the subject of a variety of judicial proceedings, legislative hearings and
administrative and legislative proposals which could change, in varying degrees, the manner in which cable television systems operate. Neither the outcome of these proceedings nor their impact upon the cable television industry or us can be
predicted at this time.



Internet Access Service



We offer a service which enables consumers to access the
Internet at high speeds via high capacity broadband transmission facilities and cable modems. We compete with many other providers of Internet access services which are known as Internet service providers (ISPs). ISPs include such
companies as America Online, MSN and Earthlink as well as major telecommunications providers, including AT&T and local exchange telephone companies. A number of local franchising authorities have attempted to require cable companies offering
Internet access service over their broadband facilities to allow access to those facilities on an unbundled basis to other ISPs. To date, all such efforts have been overturned in the courts. However, many ISPs and local franchising authorities have
continued to ask the U.S. Congress and the FCC to mandate such access, or at least to allow local authorities to impose such a requirement. Although the FCC has thus far declined to impose such an access requirement on cable companies, the issue
remains under consideration. The FCC has recently decided that cable Internet service should be classified for regulatory purposes as an information service rather than either a cable service or a telecommunications
service. Concurrently, the FCC has initiated a wide-ranging rulemaking proceeding in which it seeks comment on the regulatory ramifications of this classification. Among the issues to be decided are whether the FCC should permit local
authorities to impose an access requirement, whether local authorities should be prohibited from imposing fees on cable Internet service revenues, and what regulatory role local authorities should be permitted to play. Meanwhile, the U.S. Supreme
Court has agreed to review a ruling by the U.S. Court of Appeals for the Ninth Circuit that cable Internet service includes both information service and telecommunications service components. The outcome of these FCC and
judicial proceedings could have a material impact on our provision of cable Internet service.



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There are currently few laws or regulations which specifically regulate communications or commerce over
the Internet. Section 230 of the Communications Act, added to that act by the 1996 Telecom Act, declares it to be the policy of the United States to promote the continued development of the Internet and other interactive computer services and
interactive media, and to preserve the vibrant and competitive free market that presently exists for the Internet and other interactive computer services, unfettered by federal or state regulation. One area in which Congress did attempt to regulate
content over the Internet involved the dissemination of obscene or indecent materials. The provisions of the 1996 Telecom Act, generally referred to as the Communications Decency Act, were found to be unconstitutional, in part, by the United States
Supreme Court in 1997. In response, Congress passed the Child Online Protection Act. The constitutionality of this act is currently being challenged in the courts. In May 2002, the United States Supreme Court reversed the finding by the Third
Circuit Court of Appeals that the use of contemporary community standards to identify material harmful to minors  was overly broad and therefore violative of the First Amendment. The Supreme Court, however, remanded the
matter to the Third Circuit to determine the validity of other challenges to the constitutionality of the Child Online Protection Act and kept the stay prohibiting government enforcement in place until further action by the lower courts. Finally,
disclosure of customer communications or records is governed by the Electronic Communications Privacy Act of 2001 and the Cable Act, both of which were amended by the USA Patriot Act.



Local Telecommunications Services



The 1996 Telecom Act provides that no state or local laws or regulations may prohibit or have the effect of prohibiting any
entity from providing any interstate or intrastate telecommunications service. States are authorized, however, to impose competitively neutral requirements regarding universal service, public safety and welfare, service quality and
consumer protection. State and local governments also retain their authority to manage the public rights-of-way and may require fair and reasonable, competitively neutral and non-discriminatory compensation for management of the public rights-of-way
when cable operators or others provide telecommunications service using public rights-of-way. State and local governments must publicly disclose required compensation from telecommunications providers for use of public rights-of-way.



Local telecommunications services are subject to regulation by state utility
commissions. Use of local telecommunications facilities to originate and terminate long distance services, a service commonly referred to as exchange access, is subject to regulation both by the FCC and by state utility commissions. As
providers of local exchange service, we are subject to the requirements imposed upon competitive local exchange companies by the 1996 Telecom Act. These include requirements governing resale, telephone number portability, dialing parity, access to
rights-of-way and reciprocal compensation, among others. Although we cannot predict whether and the extent to which a state may seek to regulate us, increased regulation would likely increase our cost of doing business.



Numerous cable operators are either exploring or have commenced offering
voice over Internet protocol (VoIP) as a competitive alternative to traditional circuit-switched telephone service. Various states, including states where we operate, have adopted or are considering differing regulatory treatment for
VoIP, ranging from minimal or no regulation to full-blown common carrier status. The FCC has announced a proceeding to determine any appropriate regulatory obligations for VoIP. While the outcome of this proceeding cannot be predicted and is
expected to address a wide variety of issues, the FCC has issued an initial ruling that finds VoIP to be interstate for judicial purposes, thereby preempting certain state or local regulation.



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Employees



As of December 31, 2004, we employed approximately 3,420 full-time employees and 75 part-time employees. We consider our relations with our employees to
be good.



|Item 2. | Properties
|------- | ----------



A cable television system consists of three principal operating components:



| |  |  | The first component, the signal reception processing and originating point called a headend, receives television, cable programming service, radio and data signals that
are transmitted by means of off-air antennas, microwave relay systems and satellite earth systems. Each headend includes a tower, antennae or other receiving equipment at a location favorable for receiving broadcast signals and one or more earth
stations that receives signals transmitted by satellite. The headend facility also houses the electronic equipment, which amplifies, modifies and modulates the signals, preparing them for passage over the systems network of cables.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The second component of the system, the distribution network, originates at the headend and extends throughout the systems service area. A cable systems distribution
network consists of microwave relays, coaxial or fiber optic cables placed on utility poles or buried underground and associated electronic equipment.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The third component of the system is a drop cable, which extends from the distribution network into each customers home and connects the distribution system to the
customers television set.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



We own and lease
parcels of real property for signal reception sites which house our antenna towers and headends, microwave complexes and business offices which includes our principal executive offices. In addition, we own our cable systems distribution
networks, various office fixtures, test equipment and service vehicles. The physical components of our cable systems require maintenance and periodic upgrading to keep pace with technological advances. We believe that our properties, both owned and
leased, are in good condition and are suitable and adequate for our business operations as presently conducted and as proposed to be conducted.



|Item 3. | Legal Proceedings
|------- | -----------------



In November 2000, we filed a state court action against the City of Louisville for its grant, in September 2000, of a more favorable franchise to Knology
of Louisville, Inc. Upon commencement of this action, the City pursuant to a provision in its franchise agreement with Knology, automatically suspended Knologys franchise pending a final, non-appealable court determination as to whether
Knologys franchise was more favorable than the franchise under which we operated. In November 2000, Knology filed a federal court action against us seeking monetary damages and other relief for alleged violations of federal laws arising out of
our having filed, pursuant to the provisions of our own franchise agreement with the City, the state court action. In March 2001, the federal court preliminary set aside the suspension of Knologys franchise. In March 2002, a state circuit
court ruled against our claim that Knologys franchise was more favorable. We appealed the circuit courts order to the state court of appeals which, in June 2003, upheld the lower court ruling. We filed a motion for discretionary review
of the appeals courts ruling which was denied by the Kentucky Supreme Court.



In May 2003, the federal court granted us summary judgment and dismissed six of Knologys 11 claims. The court granted summary judgment to Knology on three claims, two of which resulted in



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permanently enjoining enforcement of the automatic suspension provision of Knologys franchise agreement and did not involve damages. The third such
claim was for violation of Knologys first amendment rights, which was to proceed to trial solely on the issue of damages, and could have resulted in an award of legal fees and court costs specific to such claim if upheld. The remaining
undecided claims related to allegations of anticompetitive conduct arising from the state court lawsuit and were to proceed to trial on the merits. In August 2003, the court agreed, in part, with our Motion for Reconsideration, that the stay
provision provides no justification for an injunction since the language was severed. Further, the court granted our Motion to Certify Questions for an Immediate Appeal to the Sixth Circuit Court of Appeals. The Sixth Circuit Court of Appeals
granted our Motion to Certify, and ruled in our favor overturning the trial courts rulings in favor of Knology. The Sixth Circuit found that our right to file the state court lawsuit against the City was protected and thus we were immune from
liability arising from that lawsuit. Knology filed a motion for an en banc review by the Sixth Circuit which was denied March 2005. The matter will return to the trial court for final rulings consistent with the Sixth Circuit opinion.



We believe there are no other pending or threatened legal proceedings that,
if adversely determined, would have a material adverse effect on us.



|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



Not applicable.



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PART II



|Item 5. | Market for Registrants Common Stock, Related Stockholder Matters and Issuer Purchases of Equity Securities
|------- | -----------------------------------------------------------------------------------------------------------



There is no public trading market for our equity, all of which is held
equally by our manager, through Insight LP, and Comcast Cable (formerly known as AT&T Broadband), through TCI of Indiana Holdings.



|Item 6. | Selected Financial Data
|------- | -----------------------



In the following table, we provide you with our selected consolidated historical financial and other data as of and for the five years ended December 31,
2004. When you read this selected consolidated historical financial and other data, it is important that you read along with it the historical financial statements and related notes in our consolidated financial statements included in this report,
as well as Managements Discussion and Analysis of Financial Condition and Results of Operations, also included in this report. Certain other prior year amounts have been reclassified to conform to the current years
presentation.



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|                                                                                                                                                                                                                     |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | --------- | ---- |  | - | --------- | - |  | -------- | --------- | - |  | - | --------- | -
|                                                                                                                                                                                                                     |  | Year Ended December 31, |          
|                                                                                                                                                                                                                     |  | 2004                    |           |   | 2003 |   |           | 2002 |  |   | 2001      |   |  | 2000 (1) |          
|                                                                                                                                                                                                                     |  | (dollars in thousands)  |          
|Statement of Operations Data:                                                                                                                                                                                        |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Revenue                                                                                                                                                                                                              |  | $                       | 1,000,814 |   |      | $ | 899,797   |      |  | $ | 808,925   |   |  | $        | 726,663   |   |  | $ | 392,680   |  
|Operating costs and expenses:                                                                                                                                                                                        |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Programming and other operating costs (exclusive of depreciation and amortization) (inclusive of $150,956, $142,387 and $130,507 of
programming expense incurred through related parties during 2004, 2003 and 2002) |  |                         | 342,123   |   |      |   | 327,071   |      |  |   | 281,443   |   |  |          | 261,387   |   |  |   | 133,214   |  
|Selling, general and administrative                                                                                                                                                                                  |  |                         | 202,654   |   |      |   | 165,014   |      |  |   | 153,620   |   |  |          | 134,713   |   |  |   | 72,466    |  
|Management fees                                                                                                                                                                                                      |  |                         | 29,987    |   |      |   | 26,352    |      |  |   | 23,593    |   |  |          | 20,616    |   |  |   | 10,964    |  
|Depreciation and amortization                                                                                                                                                                                        |  |                         | 235,105   |   |      |   | 224,874   |      |  |   | 211,837   |   |  |          | 373,030   |   |  |   | 195,669   |  
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Total operating costs and expenses                                                                                                                                                                                   |  |                         | 809,869   |   |      |   | 743,311   |      |  |   | 670,493   |   |  |          | 789,746   |   |  |   | 412,313   |  
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Operating income (loss)                                                                                                                                                                                              |  |                         | 190,945   |   |      |   | 156,486   |      |  |   | 138,432   |   |  |          | (63,083   | ) |  |   | (19,633   | )
|Other income (expense):                                                                                                                                                                                              |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Gain on cable system exchange                                                                                                                                                                                        |  |                         |          |   |      |   | 27,134    |      |  |   |          |   |  |          |          |   |  |   |          |  
|Gain on settlement of programming contract                                                                                                                                                                           |  |                         |          |   |      |   | 37,742    |      |  |   |          |   |  |          |          |   |  |   |          |  
|Loss from early extinguishments of debt (2)                                                                                                                                                                          |  |                         |          |   |      |   | (10,879   | )    |  |   |          |   |  |          | (10,315   | ) |  |   |          |  
|Interest expense                                                                                                                                                                                                     |  |                         | (177,524  | ) |      |   | (184,499  | )    |  |   | (180,465  | ) |  |          | (188,609  | ) |  |   | (113,054  | )
|Interest income                                                                                                                                                                                                      |  |                         | 368       |   |      |   | 831       |      |  |   | 176       |   |  |          | 809       |   |  |   | 919       |  
|Other                                                                                                                                                                                                                |  |                         | (1,368    | ) |      |   | (591      | )    |  |   | (187      | ) |  |          | (1,998    | ) |  |   | (342      | )
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Total other expense, net                                                                                                                                                                                             |  |                         | (178,524  | ) |      |   | (130,262  | )    |  |   | (180,476  | ) |  |          | (200,113  | ) |  |   | (112,477  | )
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Income (loss) before extraordinary item                                                                                                                                                                              |  |                         | 12,421    |   |      |   | 26,224    |      |  |   | (42,044   | ) |  |          | (263,196  | ) |  |   | (132,110  | )
|Extraordinary item                                                                                                                                                                                                   |  |                         | 15,627    |   |      |   |          |      |  |   |          |   |  |          |          |   |  |   |          |  
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Net income (loss) (3)                                                                                                                                                                                                |  |                         | 28,048    |   |      |   | 26,224    |      |  |   | (42,044   | ) |  |          | (263,196  | ) |  |   | (132,110  | )
|Accrual of preferred interests (4)                                                                                                                                                                                   |  |                         |          |   |      |   | (10,353   | )    |  |   | (20,107   | ) |  |          | (19,432   | ) |  |   |          |  
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Net income (loss) applicable to common interests                                                                                                                                                                     |  | $                       | 28,048    |   |      | $ | 15,871    |      |  | $ | (62,151   | ) |  | $        | (282,628  | ) |  | $ | (132,110  | )
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Other Financial Data:                                                                                                                                                                                                |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Capital expenditures                                                                                                                                                                                                 |  | $                       | 164,720   |   |      | $ | 193,487   |      |  | $ | 280,027   |   |  | $        | 319,956   |   |  | $ | 196,103   |  
|Net cash provided by operating activities                                                                                                                                                                            |  |                         | 280,972   |   |      |   | 211,483   |      |  |   | 170,179   |   |  |          | 161,536   |   |  |   | 60,151    |  
|Net cash used in investing activities                                                                                                                                                                                |  |                         | 162,913   |   |      |   | 220,851   |      |  |   | 290,165   |   |  |          | 399,995   |   |  |   | 199,812   |  
|Net cash (used) provided by financing activities                                                                                                                                                                     |  |                         | (68,260   | ) |      |   | 22,110    |      |  |   | 117,777   |   |  |          | 244,870   |   |  |   | 109,400   |  
|                                                                                                                                                                                                                     |  |                         |           |   |     
|Balance Sheet Data:                                                                                                                                                                                                  |  |                         |           |   |      |   |           |      |  |   |           |   |  |          |           |   |  |   |           |  
|Cash and cash equivalents                                                                                                                                                                                            |  | $                       | 72,476    |   |      | $ | 22,679    |      |  | $ | 9,937     |   |  | $        | 12,146    |   |  | $ | 5,735     |  
|Fixed assets, net                                                                                                                                                                                                    |  |                         | 1,130,600 |   |      |   | 1,198,830 |      |  |   | 1,202,003 |   |  |          | 1,133,627 |   |  |   | 681,490   |  
|Total assets                                                                                                                                                                                                         |  |                         | 3,647,415 |   |      |   | 3,677,353 |      |  |   | 3,626,246 |   |  |          | 3,561,080 |   |  |   | 1,699,547 |  
|Total debt, including preferred interests (4)                                                                                                                                                                        |  |                         | 2,602,379 |   |      |   | 2,669,600 |      |  |   | 2,625,416 |   |  |          | 2,484,075 |   |  |   | 1,347,523 |  
|Partners capital                                                                                                                                                                                                    |  |                         | 827,622   |   |      |   | 796,152   |      |  |   | 763,406   |   |  |          | 820,622   |   |  |   | 236,437   |  



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|                                                |  |                         |   |  |            |   |  |            |   |  |           |  
|----------------------------------------------- |  | ----------------------- | - |  | ---------- | - |  | ---------- | - |  | --------- | -
|                                                |  | As of December 31, 2004 |  
|                                                |  | SouthRegion             |   |  | EastRegion |   |  | WestRegion |   |  | Total     |  
|Technical Data:                                 |  |                         |   |  |            |   |  |            |   |  |           |  
|Network miles                                   |  | 6,800                   |   |  | 10,800     |   |  | 12,600     |   |  | 30,200    |  
|Number of headends                              |  | 2                       |   |  | 11         |   |  | 18         |   |  | 31        |  
|Number of headends serving 97% of our customers |  | 1                       |   |  | 8          |   |  | 5          |   |  | 14        |  
|Operating Data:                                 |  |                         |   |  |            |   |  |            |   |  |           |  
|Homes passed (5)                                |  | 548,100                 |   |  | 815,900    |   |  | 1,011,300  |   |  | 2,375,300 |  
|Basic customers (6)                             |  | 271,700                 |   |  | 409,100    |   |  | 591,700    |   |  | 1,272,500 |  
|Basic penetration (7)                           |  |                         |   |  |            |   |  | 58.5       | % |  |           |  
|                                                |  | 49.6                    | % |  | 50.1       | % |  |            |   |  | 53.6      | %
|Digital ready homes (8)                         |  | 271,700                 |   |  | 389,000    |   |  | 563,400    |   |  | 1,224,100 |  
|Digital customers (9)                           |  | 106,000                 |   |  | 158,600    |   |  | 186,700    |   |  | 451,300   |  
|Digital penetration (10)                        |  |                         |   |  |            |   |  | 33.1       | % |  |           |  
|                                                |  | 39.0                    | % |  | 40.8       | % |  |            |   |  | 36.9      | %
|Premium units (11)                              |  | 142,500                 |   |  | 183,500    |   |  | 207,900    |   |  | 533,900   |  
|Premium penetration (12)                        |  | 52.4                    | % |  | 44.9       | % |  | 35.1       | % |  |           |  
|                                                |  |                         |   |  |            |   |  |            |   |  | 42.0      | %
|High-Speed Internet customers (13)              |  | 68,000                  |   |  | 119,300    |   |  | 143,200    |   |  | 330,500   |  



|(1) | We acquired our Illinois cable systems in January 2001. Accordingly, results for 2000 do not include the results of the Illinois cable systems.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------



|(2) | The Financial Accounting Standards Board has issued SFAS No. 145 which is effective for fiscal years beginning after May 15, 2002 and generally eliminates the classification of
gains and losses from the early extinguishment of debt as extraordinary items. With the adoption of SFAS No. 145, we reclassified $10.3 million recorded in 2001 to results from continuing operations.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | In accordance with the adoption of SFAS No. 142, beginning January 1, 2002, we no longer record amortization expense associated with franchise costs, goodwill and other indefinite
lived intangible assets. This change in accounting would have resulted in a net loss of $72.1 million and $49.4 million for each of the years ended December 31, 2001 and 2000.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | The preferred interests were converted to common interests as of September 26, 2003.
|--- | ------------------------------------------------------------------------------------



|(5) | Homes passed are the number of single residence homes, apartments and condominium units passed by the cable distribution network in a cable systems service area.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Basic customers are customers of a cable television system who receive a package of over-the-air broadcast stations, local access channels and certain satellite-delivered cable
television services, other than premium services, and who are usually charged a flat monthly rate for a number of channels.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Basic penetration means basic customers as a percentage of total number of homes passed.
|--- | ----------------------------------------------------------------------------------------



|(8) | Digital ready homes means the total number of homes passed to which digital service is available.
|--- | -------------------------------------------------------------------------------------------------



|(9) | Customers with a digital converter box.
|--- | ---------------------------------------



|(10) | Digital penetration means digital service units as a percentage of digital ready homes.
|---- | ---------------------------------------------------------------------------------------



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|(11) | Premium units mean the number of subscriptions to premium services, which are paid for on an individual unit basis.
|---- | -------------------------------------------------------------------------------------------------------------------



|(12) | Premium penetration means premium service units as a percentage of the total number of basic customers. A customer may purchase more than one premium service, each of which is
counted as a separate premium service unit. This ratio may be greater than 100% if the average customer subscribes to more than one premium service unit.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(13) | Customers receiving high-speed Internet service.
|---- | ------------------------------------------------



|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



Introduction



Our revenues are earned from customer fees for cable television programming services including premium, digital and pay-per-view services and ancillary
services, such as rental of converters, remote control devices and installations. In addition, we earn revenues from providing high-speed Internet services, selling advertising, facilitating the delivery of telephone services and commissions for
products sold through home shopping networks.



We have
generated increases in revenues for each of the past three fiscal years, primarily through a combination of acquisitions, internal customer growth, increases in monthly revenue per customer, growth in advertising revenue and increasing revenue from
selling new services including high-speed Internet access, interactive digital video and telephone services.



We recorded net losses for the years ended December 31, 2000 through December 31, 2002. Some of the principal reasons for these net losses include
depreciation and amortization associated with our acquisitions and capital expenditures related to the construction and upgrading of our systems, and interest costs on borrowed money. Beginning January 1, 2002, we no longer record amortization
expense associated with goodwill and franchise costs; however, we expect to continue to report net losses for the foreseeable future. We cannot predict what impact, if any, continued losses will have on our ability to finance our operations in the
future.



We face intense competition for our video programming
services, primarily from direct broadcast satellite service, or DBS service providers. In 2004, competitive pressure from the DBS service providers increased when they launched local television channels in markets representing an estimated 37% of
our basic customer base. Since they have been permitted to deliver local television broadcast signals beginning in 1999, DirecTV, Inc. and Echostar Communications Corporation, the two largest DBS service providers, have been increasing the number of
markets in which they deliver these local television signals. These local-into-local launches were typically accompanied by significant marketing and advertising and were a major cause of our loss of basic customers in 2004. As of
December 31, 2004, local television coverage in our markets by one or more DBS service provider represented an estimated 95% of our basic customers.



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The following table is derived for the periods presented from our consolidated financial statements that
are included in this report and sets forth certain statement of operations data for our consolidated operations. Certain prior year amounts have been reclassified to conform to the current years presentation.



|                                          |  |                         |           |   |      |   |          |      |  |   |          |  
|----------------------------------------- |  | ----------------------- | --------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                          |  | Year Ended December 31, |          
|                                          |  | 2004                    |           |   | 2003 |   |          | 2002 | 
|                                          |  | (in thousands)          |          
|Revenue                                   |  | $                       | 1,000,814 |   |      | $ | 899,797  |      |  | $ | 808,925  |  
|Operating costs and expenses:             |  |                         |           |   |      |   |          |      |  |   |          |  
|Programming and other operating costs     |  |                         | 342,123   |   |      |   | 327,071  |      |  |   | 281,443  |  
|Selling, general and administrative       |  |                         | 202,654   |   |      |   | 165,014  |      |  |   | 153,620  |  
|Management fees                           |  |                         | 29,987    |   |      |   | 26,352   |      |  |   | 23,593   |  
|Depreciation and amortization             |  |                         | 235,105   |   |      |   | 224,874  |      |  |   | 211,837  |  
|                                          |  |                         |           |   |      |   |          |      |  |   |          |  
|Total operating costs and expenses        |  |                         | 809,869   |   |      |   | 743,311  |      |  |   | 670,493  |  
|                                          |  |                         |           |   |      |   |          |      |  |   |          |  
|Operating income (loss)                   |  |                         | 190,945   |   |      |   | 156,486  |      |  |   | 138,432  |  
|Operating cash flow                       |  |                         |          |   |      |   | 381,360  |      |  |   | 350,269  |  
|Interest expense                          |  |                         | (177,524  | ) |      |   | (184,499 | )    |  |   | (180,465 | )
|Extraordinary item                        |  |                         | 15,627    |   |      |   |         |      |  |   |         |  
|Net income (loss)                         |  |                         | 28,048    |   |      |   | 26,224   |      |  |   | (42,044  | )
|Net cash provided by operating activities |  |                         | 280,972   |   |      |   | 211,483  |      |  |   | 170,179  |  
|Net cash used in investing activities     |  |                         | 162,913   |   |      |   | 220,851  |      |  |   | 290,165  |  
|Net cash provided by financing activities |  |                         | (68,260   | ) |      |   | 22,110   |      |  |   | 117,777  |  
|Capital expenditures                      |  |                         | 164,720   |   |      |   | 193,487  |      |  |   | 280,027  |  



Use of Operating Income before
Depreciation and Amortization and Free Cash Flow



We
utilize in the following discussion of operating results Operating Income before Depreciation and Amortization, among other measures, to evaluate the performance of our businesses. Operating Income before Depreciation and Amortization is considered
an important indicator of the operational strength of our businesses and is a component of our annual compensation programs. We also use this measure to determine how we will allocate resources and capital. We believe that this measure is also
useful to investors as it is one of the bases for comparing our operating performance with other companies in our industry, although our measure may not be directly comparable to similar measures used by other companies. A limitation of Operating
Income before Depreciation and Amortization, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in generating revenues in our businesses. Management evaluates the costs of such tangible
and intangible assets through other financial measures such as capital expenditures and investment spending. Another limitation of Operating Income before Depreciation and Amortization is that it does not reflect income net of interest expense,
which is a significant expense of our company because of the substantial debt we have incurred to acquire cable television systems and finance capital expenditures for the upgrade of our cable network. Management evaluates the impact of interest
expense through other measures including interest expense itself, Free Cash Flow and debt service covenant ratios under our credit facility.



We utilize in the discussion of liquidity below Free Cash Flow, which is net cash provided by operating activities (as defined by accounting principles
generally accepted in the United States) less capital expenditures and distribution of preferred interests. Free Cash Flow is considered to be an important indicator of our liquidity, including our ability to repay indebtedness.



Both Operating Income before Depreciation and Amortization and Free Cash Flow
should be considered in addition to, not as a substitute for, our Operating Income, Net Income and various cash flow measures (e.g., Net Cash Provided by Operating Activities), as well as other measures of financial performance and liquidity
reported in accordance with accounting principles generally accepted in the United States.



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Reconciliation of Net Income (Loss) to Operating Income before Depreciation and Amortization



The following table reconciles Net Income (Loss) to
Operating Income before Depreciation and Amortization. In addition, the table provides the components from Net Income (Loss) to Operating Income for purposes of the discussions that follow.



|                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|----------------------------------------------------- |  | ----------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                      |  | Year Ended December 31, |        
|                                                      |  | 2004                    |         |   | 2003 |   |         | 2002 | 
|                                                      |  | (in thousands)          |        
|Net income (loss)                                     |  | $                       | 28,048  |   |      | $ | 26,224  |      |  | $ | (42,044 | )
|Extraordinary item, net of tax                        |  |                         | (15,627 | ) |      |   |        |      |  |   |        |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Income (loss) before extraordinary item               |  |                         | 12,421  |   |      |   | 26,224  |      |  |   | (42,044 | )
|Gain on settlement of programming contract            |  |                         |        |   |      |   | (37,742 | )    |  |   |        |  
|Loss from early extinguishments of debt               |  |                         |        |   |      |   | 10,879  |      |  |   |        |  
|Other income (expense):                               |  |                         |        |   |      |   |        |      |  |   |        |  
|Other                                                 |  |                         | 1,368   |   |      |   | 591     |      |  |   | 187     |  
|Interest income                                       |  |                         | (368    | ) |      |   | (831    | )    |  |   | (176    | )
|Interest expense                                      |  |                         | 177,524 |   |      |   | 184,499 |      |  |   | 180,465 |  
|Gain on cable system exchange                         |  |                         |        |   |      |   | (27,134 | )    |  |   |        |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Total other expenses                                  |  |                         | 178,524 |   |      |   | 130,262 |      |  |   | 180,476 |  
|Operating income                                      |  |                         | 190,945 |   |      |   | 156,486 |      |  |   | 138,432 |  
|Depreciation and amortization                         |  |                         | 235,105 |   |      |   | 224,874 |      |  |   | 211,837 |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |         |  
|Operating Income before Depreciation and Amortization |  | $                       | 426,050 |   |      | $ | 381,360 |      |  | $ | 350,269 |  
|                                                      |  |                         |         |   |      |   |         |      |  |   |         |  



Reconciliation
of Net Cash Provided by Operating Activities to Free Cash Flow



The following table provides a reconciliation from net cash provided by operating activities to Free Cash Flow. In addition, the table provides the components from Net Cash Provided by Operating Activities to Operating Income for purposes
of the discussions that follow.



|                                                      |  |                         |          |   |      |   |          |  
|----------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | -
|                                                      |  | Year Ended December 31, |         
|                                                      |  | 2004                    |          |   | 2003 |  
|                                                      |  | (in thousands)          |         
|Operating income                                      |  | $                       | 190,945  |   |      | $ | 156,486  |  
|Depreciation and amortization                         |  |                         | 235,105  |   |      |   | 224,874  |  
|                                                      |  |                         |          |   |      |   |          |  
|Operating Income before Depreciation and Amortization |  |                         | 426,050  |   |      |   | 381,360  |  
|Changes in working capital accounts(1)                |  |                         | 22,524   |   |      |   | (6,420   | )
|Cash paid for interest                                |  |                         | (167,602 | ) |      |   | (163,457 | )
|                                                      |  |                         |          |   |      |   |          |  
|Net cash provided by operating activities             |  |                         | 280,972  |   |      |   | 211,483  |  
|Capital expenditures                                  |  |                         | (164,720 | ) |      |   | (193,487 | )
|Distribution of preferred interests                   |  |                         |         |   |      |   | (11,554  | )
|                                                      |  |                         |          |   |      |   |          |  
|Free Cash Flow                                        |  | $                       | 116,252  |   |      | $ | 6,442    |  
|                                                      |  |                         |          |   |      |   |          |  



|(1) | Changes in working capital accounts is based on the net cash changes in current assets and current liabilities, excluding changes related to interest and taxes and other non-cash
expenses.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Results of Operations



Year Ended December 31, 2004 Compared to Year Ended December 31, 2003



Revenue for the year ended December 31, 2004 totaled $1.0 billion, an increase of 10% over the prior year, due primarily to
customer gains in high-speed Internet and digital services, as well as basic rate increases. High-speed Internet service revenue increased 41% over the prior year, primarily due to an increased customer base. We added a net 100,500 high-speed
Internet customers during the year to end the year at 330,500 customers. Basic cable service revenue increased 7%, primarily due to basic rate increases partially offset by customer losses. Our loss in basic customers resulted primarily from greater
competitive pressures by DBS service providers, particularly in those markets where we experienced their local-to-local launches. To reverse this video customer trend, we are increasing our customer retention efforts and our emphasis on
bundling, enhancing and differentiating our video products and services with video-on-demand, high definition television and digital video recorders. In addition, digital service revenue increased 18% over the prior year, primarily due to an
increased customer base. We added a net 48,400 digital customers during the year to end the year at 451,300 customers.



Revenue by service offering were as follows for the year ended December 31 (dollars in thousands):



|                    |  |                             |           |                   |       |   |      |   |                   |  |       |                    |  |       |   
|------------------- |  | --------------------------- | --------- | ----------------- | ----- | - | ---- | - | ----------------- |  | ----- | ------------------ |  | ----- | --
|                    |  | Revenue by Service Offering |           |                   |       |  
|                    |  | 2004                        |           | % of TotalRevenue |       |   | 2003 |   | % of TotalRevenue |  |       | % Changein Revenue | 
|Basic               |  | $                           | 573,650   |                   | 57.3  | % |      | $ | 537,026           |  | 59.7  | %                  |  | 6.8   | % 
|Digital             |  |                             | 98,797    |                   | 9.9   | % |      |   | 83,471            |  | 9.3   | %                  |  | 18.4  | % 
|High-speed Internet |  |                             | 132,011   |                   | 13.2  | % |      |   | 93,937            |  | 10.4  | %                  |  | 40.5  | % 
|Premium             |  |                             | 57,054    |                   | 5.7   | % |      |   | 57,247            |  | 6.4   | %                  |  | (0.3  | )%
|Telephone           |  |                             | 15,254    |                   | 1.5   | % |      |   | 12,333            |  | 1.4   | %                  |  | 23.7  | % 
|Advertising         |  |                             | 68,415    |                   | 6.8   | % |      |   | 58,832            |  | 6.5   | %                  |  | 16.3  | % 
|Franchise fees      |  |                             | 28,721    |                   | 2.9   | % |      |   | 27,350            |  | 3.0   | %                  |  | 5.0   | % 
|Other               |  |                             | 26,912    |                   | 2.7   | % |      |   | 29,601            |  | 3.3   | %                  |  | (10.0 | )%
|                    |  |                             |           |                   |       |   |      |   |                   |  |       |                    |  |       |   
|Total               |  | $                           | 1,000,814 |                   | 100.0 | % |      | $ | 899,797           |  | 100.0 | %                  |  | 10.1  | % 
|                    |  |                             |           |                   |       |   |      |   |                   |  |       |                    |  |       |   



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Total Customer Relationships were approximately 1,322,700 as of December 31, 2004 compared to 1,327,200
as of December 31, 2003. Total Customer Relationships represent the number of customers who receive one or more of our products (i.e. basic cable, high-speed Internet or telephone) without regard to which product they purchase. Revenue Generating
Units (RGUs), which represent the sum of basic, digital, high-speed Internet and telephone customers, as of December 31, 2004 increased 7% as compared to December 31, 2003. RGUs by category were as follows (in thousands):



|                    |  |                   |  |                  
|------------------- |  | ----------------- |  | -----------------
|                    |  | RGUs by Category 
|                    |  | December 31, 2004 |  | December 31, 2003
|Basic               |  | 1,272.5           |  | 1,293.6          
|Digital             |  | 451.3             |  | 402.9            
|High-speed Internet |  | 330.5             |  | 230.0            
|Telephone           |  | 64.3              |  | 55.4             
|                    |  |                   |  |                  
|Total RGUs          |  | 2,118.6           |  | 1,981.9          
|                    |  |                   |  |                  



Average monthly
revenue per basic customer was $64.85 for the year ended December 31, 2004, compared to $57.86 for the year ended December 31, 2003 primarily reflecting the continued successful rollout of new product offerings in all markets. Average monthly
revenue per basic customer for high-speed Internet and digital service increased to $14.95 for the year ended December 31, 2004, up from $11.41 for the year ended December 31, 2003.



Programming and other operating costs increased $15.1 million, or 5%. Partially offsetting the increase in programming and
other operating costs was the reversal of a $14.7 million accrual for property taxes for the years 1999 through 2004. Excluding the reversal of this accrual, programming and other operating costs increased 9%. Programming costs increased 11%,
primarily as a result of increased programming rates for our classic service and an increase in digital customers served. In addition, programming costs increased due to an increase in high-speed Internet costs driven by the net addition of 100,500
high-speed Internet customers. This increase in high-speed Internet costs was partially offset by more favorable per customer charges under a new agreement with our Internet service provider, beginning July 2004. In addition, programming costs
increased as a result of an increased volume of modems provided to customers under certain marketing campaigns. Excluding the reversal of the property tax accrual, other operating costs increased 3%, primarily attributable to increases in labor
costs, which increased due to a reduction of network rebuild/upgrade activities.



Selling, general and administrative expenses increased $37.6 million, or 23%, primarily due to increased payroll and related costs reflecting salary increases for existing employees and increases in health insurance
costs. In addition, marketing expenses increased to support the continued rollout of high-speed Internet and digital products and to maintain the core video customer base. A decrease in expenses previously allocated to Comcast Cable in connection
with the cable systems we previously managed for a Comcast Cable affiliate also contributed to the increase in selling, general and administrative expenses. As this management arrangement was terminated effective July 31, 2004, the year ended
December 31, 2004 contains only seven months of expense allocations versus a full year for the year ended December 31, 2003. While cost savings have been realized upon termination of the management arrangement, the impact of some of these savings is
reflected in programming and other operating costs. In addition, bad debts and collection costs increased, reflecting an increase in the number of accounts written off combined with a higher balance per average account written off.



Management fees are directly related to revenue as these fees are calculated
as approximately 3% of revenues.



Depreciation and amortization
expense increased $10.2 million, or 4.5%, primarily as a result of additional capital expenditures through December 31, 2004 to extend the plant and continue the rollout of digital, high-speed Internet and telephone services to existing and new
service areas.



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As a result of the factors discussed above, Operating Income before Depreciation and Amortization
increased $44.7 million, or 11%.



Interest expense decreased
$7.0 million, or 4%. The decrease is related to lower interest rates, which averaged 6.7% for the year ended December 31, 2004, compared to 7.3% for the year ended December 31, 2003. For the years ended December 31, 2004 and 2003, our outstanding
debt averaged $2.6 billion and $2.5 billion.



Year Ended
December 31, 2003 Compared to Year Ended December 31, 2002



Revenue for the year ended December 31, 2003 totaled $899.8 million, an increase of 11% over the prior year, due primarily to customer gains in high-speed Internet and digital services as well as basic rate increases. High-speed Internet
service revenue increased 59% over the prior year, primarily due to an increased customer base. We added a net 85,200 high-speed Internet customers during the year to end the year at 230,000 customers. Basic cable service revenue increased 6%,
primarily due to basic rate increases. The average basic rate increase in 2003 was 6%. In addition, digital service revenue increased 26% over the prior year, primarily due to an increased customer base. We added a net 68,200 digital customers
during the year to end the year at 402,900 customers.



Revenue
by service offering were as follows for the year ended December 31 (dollars in thousands):



|                    |  |                             |         |                   |       |   |      |   |                   |  |       |                    |  |      |   
|------------------- |  | --------------------------- | ------- | ----------------- | ----- | - | ---- | - | ----------------- |  | ----- | ------------------ |  | ---- | --
|                    |  | Revenue by Service Offering |         |                   |       |  
|                    |  | 2003                        |         | % of TotalRevenue |       |   | 2002 |   | % of TotalRevenue |  |       | % Changein Revenue | 
|Basic               |  | $                           | 537,026 |                   | 59.7  | % |      | $ | 506,128           |  | 62.6  | %                  |  | 6.1  | % 
|Digital             |  |                             | 83,471  |                   | 9.3   | % |      |   | 66,124            |  | 8.2   | %                  |  | 2.6  | % 
|High-speed Internet |  |                             | 93,937  |                   | 10.4  | % |      |   | 58,968            |  | 7.3   | %                  |  | 5.9  | % 
|Premium             |  |                             | 57,247  |                   | 6.4   | % |      |   | 60,349            |  | 7.4   | %                  |  | (5.1 | )%
|Telephone           |  |                             | 12,333  |                   | 1.4   | % |      |   | 6,274             |  | .8    | %                  |  | 96.6 | % 
|Advertising         |  |                             | 58,832  |                   | 6.5   | % |      |   | 53,415            |  | 6.6   | %                  |  | 10.1 | % 
|Franchise fees      |  |                             | 27,350  |                   | 3.0   | % |      |   | 25,762            |  | 3.2   | %                  |  | 6.1  | % 
|Other               |  |                             | 29,601  |                   | 3.3   | % |      |   | 31,905            |  | 3.9   | %                  |  | (7.2 | )%
|                    |  |                             |         |                   |       |   |      |   |                   |  |       |                    |  |      |   
|Total               |  | $                           | 899,797 |                   | 100.0 | % |      | $ | 808,925           |  | 100.0 | %                  |  | 11.2 | % 
|                    |  |                             |         |                   |       |   |      |   |                   |  |       |                    |  |      |   



Total Customer
Relationships were approximately 1,327,200 as of December 31, 2003 compared to 1,309,600 as of December 31, 2002. RGUs were approximately 1,981,800 as of December 31, 2003 compared to approximately 1,798,900 as of December 31, 2002, an increase of
10%. High-speed Internet net additions were 85,200 digital net additions were 68,200 telephone net additions were 24,800 and net basic customer additions were 4,700.



Average monthly revenue per basic customer, including management fee revenue and Insight Interactive revenue, was $57.86 for
the year ended December 31, 2003, compared to $52.18 for the year ended December 31, 2002 primarily reflecting the continued successful rollout of new product offerings in



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all markets. Average monthly revenue per basic customer for high-speed Internet and digital service increased to $11.41 for the year ended December 31, 2003,
up from $8.07 for the year ended December 31, 2002.



Programming and other operating costs increased $49.7 million or 18%. Programming costs increased 10%, primarily attributable to increased programming rates for our classic service, an increase in digital customers served, and additional
programming in the newly rebuilt systems. These increases were offset by a $3.1 million credit from the settlement of a programming contract. Excluding the settlement of the programming contract, programming costs increased 11%. Other operating
costs increased 40%, primarily attributable to increases in high-speed Internet costs driven by the net addition of 85,200 high-speed Internet customers, and, labor costs, which increased due to the transition from upgrade activities to maintenance
activities. Additionally, we entered into an interim service arrangement with @Home Corporation that required us to pay $10.0 million to @Home to extend high-speed Internet service through February 28, 2002. As a result of this arrangement we
incurred approximately $7.9 million in excess of our original agreed-to cost for such services rendered, of which $4.1 million was incurred in 2002.



Selling, general and administrative expenses increased $11.4 million or 7% primarily as a result of annual salary increases and payroll related costs for
existing employees, some of which are one-time expenses, as well as the addition of new employees. In addition, marketing expenses increased to support the continued roll-out of new products. Legal fees also increased related to ongoing litigation.
Partially offsetting these increases was an increase in marketing support funds (recorded as a reduction to selling, general and administrative expenses) for the promotion of new channel launches.



Management fees are directly related to revenue as these fees are calculated
as approximately 3% of revenue.



Depreciation and amortization
expense increased $13.0 million or 6% primarily as a result of additional capital expenditures through December 31, 2003 to complete the rebuild of our Illinois systems, extend our plant and continue the rollout of digital, high-speed Internet and
telephone services to existing and new service areas. Excluding the write-down of our obsolete video on demand equipment during the year ended December 31, 2002, depreciation and amortization increased $24.2 million or 12%.



As a result of the factors listed above, Operating Income before Depreciation
and Amortization increased $31.1 million or 9%.



Interest
expense remained relatively flat year over year. The increase of $4.0 million or 2% is primarily due to the inclusion of $5.0 million of accruals for preferred interests in accordance with SFAS No. 150, effective July 1, 2003. Previously, the
accrual was treated as a dividend below net income or loss. Additionally, the increase is related to higher outstanding debt, which averaged $2.5 billion for the year ended December 31, 2003, versus $2.4 billion for the year ended December 31, 2002.
These increases were partially offset by a decrease in interest expense due to lower interest rates, which averaged 7.3% for the year ended December 31, 2003, versus 7.6% for the year ended December 31, 2002.



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Liquidity and Capital Resources



Our business requires cash for operations, debt service, capital expenditures and acquisitions. The cable television
business has substantial on-going capital requirements for the construction, expansion and maintenance of its broadband networks and provision of new services. In the past, expenditures have been made for various purposes including the upgrade of
our existing cable network, and in the future will be made for network extensions, new services, converters and, to a lesser extent, network upgrades. Historically, we have been able to meet our cash requirements with cash flow from operations,
borrowings under our credit facilities and issuances of private and public debt and equity.



Cash provided by operations for the years ended December 31, 2004 and 2003 was $281.0 million and $211.5 million. The increase was primarily attributable to an increase in operating income and the timing of cash
receipts and payments related to our working capital accounts.



Cash used in investing activities for the years ended December 31, 2004 and 2003 was $162.9 million and $220.9 million. The decrease was primarily attributable to three factors:



| |  |  | Capital spending decreased by $28.8 million for the year ended December 31, 2004, primarily due to a $20.1 million decrease in rebuild/upgrade costs reflecting the near completion
of our rebuilds.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The swap of our Griffin, Georgia system for the New Albany, Indiana and Shelbyville, Kentucky systems in the first quarter of 2003, for which we paid $26.5 million to acquire cable
systems serving approximately 12,000 additional customers.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The purchase of the Coaxial interests for $10.3 million in September 2003 in connection with the refinancing of our Ohio subsidiary.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



Cash (used in) provided by financing activities for the years ended December
31, 2004 and 2003 was $(68.3) million and $22.1 million. During the year ended December 31, 2004, we:



| |  |  | Made scheduled debt amortization payments related to the A and B Term Loan portions of our credit facility, which totaled $62.3 million; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Repaid $6.0 million of revolver borrowings that were outstanding as of December 31, 2003 and did not need to re-borrow.
| | - |  | -----------------------------------------------------------------------------------------------------------------------



For the years ended December 31, 2004 and 2003, we spent $164.7 million and
$193.5 million in capital expenditures. These expenditures principally constituted network extensions, upgrades to our headends, purchases of customer premise equipment and capitalized labor, all of which is considered necessary in order to maintain
our existing network, to grow our customer base and expand our service offerings. For the year ending December 31, 2005, it is anticipated that we will spend approximately $220.0 million on capital expenditures.



Free Cash Flow for the year ended December 31, 2004 totaled $116.3 million
compared to $6.4 million for the year ended December 31, 2003. The increase was primarily driven by the following:



| |  |  | A $44.7 million increase in Operating Income before Depreciation and Amortization;
| | - |  | ----------------------------------------------------------------------------------



| |  |  | A $22.5 million source of Free Cash Flow for the year ended December 31, 2004 compared to a $6.4 million use for the year ended December 31, 2003 from changes in working capital
accounts; and
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | A $28.8 million decrease in capital expenditures.
| | - |  | -------------------------------------------------



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While we expect to continue to use Free Cash Flow to repay our indebtedness, interest rates have begun to
increase, which could result in higher interest costs.



We have
concluded a number of financing transactions, which fully support our operating plan. These transactions are detailed as follows:



On October 1, 1999, in connection with the formation of Insight Midwest and the acquisition of a 50% interest in the Kentucky systems, Insight Midwest
completed an offering of $200.0 million principal amount of its 9 3⁄4% senior notes due 2009. The net proceeds of the offering were used to repay certain outstanding debt of the Kentucky systems. On November 6, 2000, Insight Midwest completed an
offering of $500.0 million principal amount of its 10 1⁄2% senior notes due 2010. The net proceeds of the offering of $486.0 million were used to repay a portion of the then existing Indiana and Kentucky credit facilities. Interest on the Insight
Midwest 9 3⁄4% senior notes is payable on April 1 and October 1 of each year and interest on the Insight Midwest 10 1⁄2% senior notes is payable on May 1 and November 1 of each year. The indentures relating to these senior notes impose certain
limitations on the ability of Insight Midwest to, among other things, incur debt, make distributions, make investments and sell assets.



On December 17, 2002 Insight Midwest completed a $185.0 million add-on offering under the 93⁄4% senior notes indenture. Insight Midwest received
proceeds of $176.9 million, including $3.8 million of interest accruing from October 1, 2002 through the date of issuance that was repaid to holders of the bonds in the first semi-annual interest payment due on April 1, 2003, and net of an
underwriting fee of $3.1 million and a bond discount of $8.8 million that is being amortized through October 2009. The proceeds of this offering were used to repay a portion of the outstanding revolving loans under the Midwest Holdings credit
facility. Since this add-on offering occurred under the 93⁄4% senior notes indenture, these additional debt securities and the previous 93⁄4% senior notes are considered a single series of senior notes with identical terms.



On December 9, 2003, Insight Midwest completed a $130.0 million add-on
offering under the 101⁄2% senior notes indenture. Insight Midwest received proceeds of $140.9 million, including $1.4 million of interest accruing from November 1, 2003 through the date of issuance that will be repaid to holders of the bonds in
the first semi-annual interest payment due on May 1, 2004 and a bond premium of $11.4 million that is being amortized through November 2010, and net of an underwriting fee of $2.0 million. The proceeds of this offering were used to repay a portion
of the outstanding revolving loans under the Midwest Holdings credit facility. Since this additional add-on offering occurred under the 101⁄2% senior notes indenture, these additional debt securities and the previous 101⁄2% senior notes are
considered a single series of senior notes with identical terms.



On January 5, 2001, in conjunction with a series of transactions with cable subsidiaries of AT&T Broadband (now known as Comcast Cable), Insight Midwest Holdings, LLC, a subsidiary of Insight Midwest which serves as a holding company
for all of Insight Midwests systems, entered into a $1.75 billion credit facility. Insight Midwest Holdings borrowed $663.0 million to repay the then existing Indiana and Kentucky credit facilities and $685.0 million to finance the AT&T
Broadband transactions.



The Insight Midwest Holdings credit
facility permits the distribution of cash from Midwest Holdings subsidiaries to enable Insight Midwest to pay interest on its 93⁄4% senior notes and 101⁄2% senior notes, so long as there exists no default under the credit facility. The
Insight Midwest Holdings credit facility contains covenants restricting, among other things, the ability of Midwest Holdings and its



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subsidiaries to acquire or dispose of assets, make investments and engage in transactions with related parties. The facility also requires compliance with
certain financial ratios and contains customary events of default. As of December 31, 2004, we were in compliance with the credit facilitys covenant requirements. Given current operating conditions and projected results of operations, we
anticipate continued compliance under this credit facility for the foreseeable future.



On March 28, 2002 we borrowed $100.0 million from our manager. Insight Midwest Holdings is permitted to make distributions to us for the purpose of repaying this loan provided that there are no defaults existing under
the credit facility. This loan bears annual interest of 9%, compounded semi-annually, has a scheduled maturity date of January 31, 2011 and permits prepayments.



We have a substantial amount of debt. Our high level of debt could have important consequences for you. Our investments in our operating subsidiaries,
including Insight Midwest, constitute substantially all of our operating assets. Consequently, our subsidiaries conduct all of our consolidated operations and own substantially all of our operating assets. Our principal source of cash we need to pay
our obligations and to repay the principal amount of our debt obligations is the cash that our subsidiaries generate from their operations and their borrowings. Our subsidiaries are not obligated to make funds available to us and are restricted by
the terms of their indebtedness from doing so. Our ability to access the cash flow of our subsidiaries may be contingent upon our ability to refinance the debt of our subsidiaries.



We believe that the Insight Midwest Holdings credit facility, cash on-hand and our cash flow from operations are sufficient
to support our current operating plan. We have the ability to draw upon $374.0 million of unused availability under the Insight Midwest Holdings Credit Facility as of December 31, 2004 to fund any shortfall resulting from the inability of Insight
Midwests cash from operations to fund its capital expenditures, meet its debt service requirements or otherwise fund its operations.



The following table summarizes our contractual obligations and commitments, excluding interest and commitments for programming, as of December 31, 2004,
including periods in which the related payments are due (in thousands):



|                       |  |                |           |                  |   |       |  |   |          
|---------------------- |  | -------------- | --------- | ---------------- | - | ----- |  | - | ---------
|                       |  | Long-Term Debt |           | Operating Leases |   | Total
|2005                   |  | $              | 83,500    |                  | $ | 2,859 |  | $ | 86,359   
|2006                   |  |                | 83,500    |                  |   | 2,301 |  |   | 85,801   
|2007                   |  |                | 83,500    |                  |   | 1,352 |  |   | 84,852   
|2008                   |  |                | 104,750   |                  |   | 952   |  |   | 105,702  
|2009                   |  |                | 1,517,500 |                  |   | 636   |  |   | 1,518,136
|Thereafter             |  |                | 730,000   |                  |   | 1,360 |  |   | 731,360  
|                       |  |                |           |                  |   |       |  |   |          
|Total cash obligations |  | $              | 2,602,750 |                  | $ | 9,460 |  | $ | 2,612,210
|                       |  |                |           |                  |   |       |  |   |          



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Recent Accounting Pronouncements



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both
Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial
instrument that is within its scope as a liability or, in some circumstances, as an asset, with many such financial instruments having been previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified
after May 31, 2003, and otherwise is effective July 1, 2003. SFAS No. 150 is to be implemented by reporting the cumulative effect of a change in an accounting principle for financial instruments outstanding before the issuance date of the Statement
and still existing at July 1, 2003. Restatement is not permitted.



As of July 1, 2003, we had $195.2 million of preferred interests recorded in our balance sheets as temporary equity. These preferred interests were fully accreted to their maturity value of $195.9 million as of August 15, 2003 and were
subsequently converted to common interests in connection with our refinancing of the obligations of Insight Ohio. In connection with the adoption of SFAS No. 150, for the three months ended September 30, 2003, we recorded a $5.0 million accrual of
preferred interests, which has been included in interest expense in our consolidated statements of operations.



In September 2004, the EITF reached a consensus regarding Issue No. 04-1, Accounting for Preexisting Relationships Between the Parties to a Business
Combination.EITF Issue No. 04-1 requires an acquirer in a business combination to evaluate any preexisting relationship with the acquiree to determine if the business combination in effect contains a settlement of the preexisting relationship.
A business combination between parties with a preexisting relationship should be viewed as a multiple element transaction. EITF 04-1 is effective for business combinations after October 13, 2004, but requires goodwill resulting from prior business
combinations involving parties with a preexisting relationship to be tested for impairment by applying the guidance in the consensus. The Company adopted the provisions of EITF 04-1 during the fourth quarter of 2004 in connection with the
acquisition of Comcast Cables telephone business.



Critical Accounting
Policies



The methods, estimates and judgments we use in
applying our most critical accounting policies have a significant impact on the results we report in our consolidated financial statements. We evaluate our estimates and judgments on an on-going basis. We base our estimates on historical experience
and on assumptions that we believe to be reasonable under the circumstances. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual
results may vary from what we anticipate and different assumptions or estimates about the future could change our reported results. We believe the following accounting policies are the most critical to us, in that they are important to the portrayal
of our financial statements and they require our most difficult, subjective or complex judgments in the preparation of our consolidated financial statements.



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Fair Value of Assets Acquired and Liabilities Assumed in Purchase Combinations



The purchase combinations carried out by us require management to estimate
the fair value of the assets acquired and liabilities assumed in the combinations. These estimates of fair value are based on our business plan for the entities acquired including planned redundancies, restructuring, use of assets acquired and
assumptions as to the ultimate resolution of obligations assumed for which no future benefit will be received. We also utilize appraisal reports issued by independent appraisers. Should actual use of assets or resolution of obligations differ from
our estimates, revisions to the estimated fair values would be required. If a change in estimate occurs after one year of the acquisition, the change would be recorded in our statement of operations.



Goodwill and Other Identifiable Intangibles



We assess the impairment of goodwill and other indefinite-lived intangible
assets annually and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Some factors we consider important which could trigger an impairment review include the following:



| |  |  | Significant underperformance relative to expected historical or projected future operating results;
| | - |  | ---------------------------------------------------------------------------------------------------



| |  |  | Significant changes in the manner of our use of the acquired assets or the strategy for our overall business; and
| | - |  | -----------------------------------------------------------------------------------------------------------------



| |  |  | Significant negative industry or economic trends.
| | - |  | -------------------------------------------------



When we determine that the carrying value of goodwill and other indefinite-lived intangibles may not be recoverable based upon the existence of one or
more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be commensurate with the risk inherent in our current business model. With
the adoption of SFAS No. 142, Goodwill and Other Intangible Assets, on January 1, 2002 we ceased amortizing goodwill and franchise costs arising from acquisitions. In lieu of amortization, we perform an annual impairment analysis. If we
determine through the impairment review process that goodwill or franchise costs have been impaired, we would record an impairment charge in our statement of operations.



Fixed Assets



Fixed assets include costs capitalized for labor and overhead incurred in connection with the installation of cable systems and is stated at cost.
Depreciation for buildings, cable system equipment, furniture, fixtures and office equipment is calculated using the straight-line method over estimated useful lives ranging from 2 to 30 years. Leasehold improvements are amortized using the
straight-line method over the shorter of the remaining terms of the leases or the estimated lives of the improvements.



Risk Factors



We have substantial debt and have significant interest payment requirements, which may adversely affect our ability to obtain financing in the
future to finance our operations and our ability to react to changes in our business.



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We have a substantial amount of debt. The following table shows certain important credit statistics about
us.



|                     |  |                         |           |  
|-------------------- |  | ----------------------- | --------- | -
|                     |  | As of December 31, 2004 |          
|                     |  | (dollars in thousands)  |          
|Total debt           |  | $                       | 2,602,379 |  
|Partners capital    |  |                         | 827,622   |  
|Debt to equity ratio |  |                         | 3.1       | x



Our high level of
combined debt could have important consequences for you, including the following:



| |  |  | Our ability to obtain additional financing in the future for capital expenditures, acquisitions, working capital or other purposes may be limited;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We will need to use a large portion of our revenues to pay interest on our borrowings, which will reduce the amount of money available to finance our operations, capital
expenditures and other activities;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Some of our debt has a variable rate of interest, which exposes us to the risk of increased interest rates; and
| | - |  | ---------------------------------------------------------------------------------------------------------------



| |  |  | Our indebtedness may limit our ability to withstand competitive pressures and reduce our flexibility in responding to changing business and economic conditions.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------



We depend upon our operating subsidiaries
for cash to fund our obligations.



As a holding
company, we do not hold any assets other than our investments in our subsidiaries. Consequently, our subsidiaries conduct all of our consolidated operations and own substantially all of our consolidated assets. The only source of the cash we have to
pay interest and principal on our indebtedness is the cash that our subsidiaries generate from their operations and their borrowings. The ability of our operating subsidiaries to generate cash is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond our control. Furthermore, our subsidiaries must make payments to Insight Communications Company, L.P. under their management agreements. Accordingly, we cannot assure you that our
subsidiaries will generate cash flow from operations in amounts sufficient to enable us to pay the principal and interest on our indebtedness.



The terms of the Insight Midwest Holdings credit facility and inability to refinance any borrowings under such facility may limit our ability to
access the cash flow of our subsidiaries.



Our ability
to receive cash from our subsidiaries is restricted by the terms of the Insight Midwest Holdings credit facility. Insight Midwest Holdings credit facility permits it to distribute cash to us, subject to certain limitations, provided that there
is no default under such credit facility. If there is a default under the Midwest Holdings credit facility, we would not have any cash to pay interest on our obligations.



Furthermore, borrowings under the Insight Midwest Holdings credit facility are secured and will mature prior to our
outstanding notes. Accordingly, we may need to refinance all or a portion of our indebtedness on or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.



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The Insight Midwest Holdings credit facility requires us to comply with various financial and
operating restrictions which could limit our ability to compete as well as our ability to expand.



The Insight Midwest Holdings credit facility contains covenants that restrict Insight Midwest Holdings subsidiaries ability to:



| |  |  | distribute funds or pay dividends to us;
| | - |  | ----------------------------------------



| |  |  | incur additional indebtedness or issue additional equity;
| | - |  | ---------------------------------------------------------



| |  |  | repurchase or redeem equity interests and indebtedness;
| | - |  | -------------------------------------------------------



| |  |  | pledge or sell assets or merge with another entity;
| | - |  | ---------------------------------------------------



| |  |  | create liens; and
| | - |  | -----------------



| |  |  | make certain capital expenditures, investments or acquisitions.
| | - |  | ---------------------------------------------------------------



Such restriction could limit our ability to compete as well as our ability to expand. The ability of Insight Midwest Holdings subsidiaries to comply
with these provisions may be affected by events beyond our control. If they were to breach any of these covenants, they would be in default under the credit facility and they would be prohibited from making distributions to us.



We have a history of net losses, and may not be profitable in the
future.



Although we reported net income before
accruals of preferred interests of $28.0 million and $26.2 million for the years ended December 31, 2004 and 2003 primarily due to the extraordinary item from the telephone acquisition and the gain recorded on the settlement of a programming
contract and the swap of our Griffin, Georgia system, we have a history of net losses and expect to incur additional net losses in the future. We incurred a net loss before accruals of preferred interests of $263.2 million for the year ended
December 31, 2001 and $42.0 million for the year ended December 31, 2002.



We have and will continue to have a substantial amount of interest expense in respect of debt incurred and depreciation and amortization expenses relating to acquisitions of cable systems as well as expansion and
upgrade programs. Such expenses have contributed to the net losses we experienced.



Our manager may in the future manage cable systems other than our cable systems, which may divert management resources from the management of our systems and could give rise to conflicts of interest.



Our manager may in the future manage cable systems
other than the cable systems we own. Management of other cable systems would require our manager to devote a significant portion of its personnel and other resources to the management of such other cable systems. As a result, the attention of our
managers senior executive officers and key personnel may be diverted from the management of our cable systems and the allocation of management resources between our cable systems and such new systems could give rise to conflicts of interest.



We could face considerable business and financial risk
in implementing our acquisition strategy.



As part of
our strategy of pursuing value-enhancing transactions, we intend to seek to swap or acquire systems that strategically fit our clustering and operating strategy. Although we regularly engage



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in discussions with respect to possible acquisitions and joint ventures, we do not currently have any understandings, commitments or agreements relating to
any acquisitions. Future acquisitions could result in potentially dilutive issuances of equity securities and the incurrence of debt and contingent liabilities which could have a material adverse effect upon our business, financial condition and
results of operations.



Risks we could face with respect to
acquisitions include:



| |  |  | difficulties in the integration of the operations, technologies, products and personnel of the acquired company;
| | - |  | ----------------------------------------------------------------------------------------------------------------



| |  |  | risks of entering markets in which we have no or limited prior experience;
| | - |  | --------------------------------------------------------------------------



| |  |  | diversion of managements attention away from other business concerns; and
| | - |  | --------------------------------------------------------------------------



| |  |  | expenses of any undisclosed or potential legal liabilities of the acquired company.
| | - |  | -----------------------------------------------------------------------------------



The risks associated with acquisitions could have a material adverse effect upon our business, financial condition and
results of operations. We cannot assure that we will be successful in consummating future acquisitions on favorable terms or at all.



Our programming costs are substantial and they may increase, which could result in a decrease in profitability if we are unable to pass that
increase on to our customers.



In recent years the
cable industry has experienced an escalation in the cost of programming, and sports programming in particular. For 1998 through 2004, programming costs increased significantly. Our cable programming services are dependent upon our ability to procure
programming that is attractive to our customers at reasonable rates. Programming costs may continue to escalate and we may not be able to pass programming cost increases on to our customers. Our financial condition and results of operations could be
negatively affected by further increases in programming costs. Programming has been and is expected to continue to be our largest single expense item and accounted for approximately 45% of the total programming and other operating costs and selling,
general and administrative expenses for our systems for the year ended December 31, 2004.



The competition we face from other cable networks and alternative service providers may cause us to lose market share.



The impact from competition, particularly from direct broadcast satellite television systems and companies that overbuild in
our market areas, has resulted in a decrease in customer growth rates as well as a loss of customers. According to the FCC, the percentage of multichannel video customers served by cable television operators dropped from 73.6% as of June 2003 to
71.6% as of June 2004, while the percentage of customers served nationwide by direct broadcast satellite grew from 22.7% to 25.1% during this same period. This growing competition has negatively impacted our financial performance. Increased
competition may continue to impact our financial performance. Many of our potential competitors have substantially greater resources than we do, and we cannot predict the market share our competitors will eventually achieve, nor can we predict their
ability to develop products which will compete with our planned new and enhanced products and services such as high-speed Internet access, video-on-demand and telephone services.



Direct broadcast satellite service consists of television programming transmitted via high-powered satellites to individual
homes, each served by a small satellite dish. Legislation permitting direct broadcast satellite operators to transmit local broadcast signals was enacted on November 29, 1999. This eliminates a significant competitive advantage that cable system
operators have had over direct broadcast satellite operators. Direct broadcast satellite operators currently deliver local broadcast signals in the largest markets and continue to expand such carriage to additional markets.



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The 1996 Telecom Act contains provisions designed to encourage local exchange telephone companies and
others to provide a wide variety of video services competitive with services provided by cable systems. Local exchange telephone companies in various states have either announced plans, obtained local franchise authorizations or are currently
competing with our cable communications systems. Certain telephone companies have begun to deploy fiber more extensively in their networks and some have announced plans to deploy broadband services, including video programming services, using a
switched Internet protocol platform or other technologies designed to avoid the same regulatory burdens imposed on our business. New laws or regulations at the federal or state level may clarify the ability of local telephone companies to provide
their services without obtaining state or local cable franchises. If local telephone companies are not required to obtain local cable franchises comparable to ours, it would be adverse to our business.



Since our cable systems are operated under non-exclusive franchises,
competing operators of cable systems and other potential competitors, such as municipalities and municipal utility providers, may be granted franchises to build cable systems in markets where we hold franchises. Competition in geographic areas where
a secondary franchise is obtained and a cable network is constructed is called overbuilding. As of December 31, 2004, approximately 9% of the homes passed by our cable systems were overbuilt. As of December 31, 2004, SIGECOM, LLC had
overbuilt our Evansville, Indiana system and passes approximately 83,000 homes also passed by us. Knology, Inc. has obtained a franchise to provide cable television service in the City of Louisville, Kentucky, where we operate a system, although
they have not constructed a cable system. In addition, as of December 31, 2004, WideOpenWest had overbuilt our Columbus, Ohio system and passed approximately 130,800 homes also passed by us. In our Illinois system, the city of Springfield is
considering a municipal overbuild. We cannot predict what effect competition from these or future competitors will have on our business and operations.



We will face competition from providers of alternatives to our Internet and telephone services.



Several telephone companies are offering digital subscriber line technology
(also known as DSL services), which allows Internet access over traditional phone lines at data transmission speeds greater than those available by a standard telephone modem. Although these transmission speeds generally have not been as fast as the
transmission speeds of a cable modem, we believe that the transmission speeds of digital subscriber line technology are sufficiently high that such technology will compete with cable modem technology. We cannot predict the impact DSL technology will
have on our Internet access services or on our operations.



As
we expand our offerings to include telephone services in additional markets, the telephone services we deliver will be subject to competition from existing providers, including both local exchange telephone companies and long-distance carriers as
well as competing providers using alternative technologies such as voice over Internet protocol (VoIP). We cannot predict the extent to which the presence of these competitors will influence customer penetration in our telephone service
areas.



We expect that the most significant competitors for our
Internet access and telephone service offerings will be the existing local exchange telephone companies as well as resellers using the local exchange telephone companies networks. These competitors are currently the predominant providers of
Internet and telephone services in our markets.



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We may be required to provide access to our networks to other Internet service providers, which
could significantly increase our competition and adversely affect our ability to provide new products and services.



The U.S. Congress and the Federal Communications Commission have been asked to require cable operators to provide access over their cable systems to other
Internet service providers. If we are required to provide forced access, it could prohibit us from entering into or limit our existing agreements with Internet service providers, adversely impact our anticipated revenues from high-speed Internet
access services and complicate marketing and technical issues associated with the introduction of these services. To date, the U.S. Congress and the Federal Communications Commission have declined to impose these requirements although the FCC has
recently issued a notice of proposed rulemaking on this matter. This same forced access issue is also being considered by some local franchising authorities and several courts. Based on a finding that it was bound by an earlier decision, the Ninth
Circuit Court of Appeals overturned the FCCs classification and found cable Internet service to include both information service and telecommunications service components. Although the Ninth Circuits decision is
being reviewed by the U.S. Supreme Court, if upheld this decision could increase the risk of forced access obligations. Franchise renewals and transfers could also become more difficult depending upon the outcome of this issue.



Our business has been and continues to be subject to extensive
governmental legislation and regulation, and changes in this legislation and regulation could increase our costs of compliance and reduce the profitability of our business.



The cable television industry is subject to extensive legislation and regulation at the federal and local levels, and, in
some instances, at the state level, and many aspects of such regulation are currently the subject of judicial proceedings and administrative or legislative proposals. Operating in a regulated industry increases the cost of doing business generally.
We may also become subject to additional regulatory burdens and related increased costs. As we continue to introduce additional communications services, we may be required to obtain federal, state and local licenses or other authorizations to offer
such services. We may not be able to obtain such licenses or authorizations in a timely manner, or at all, or conditions could be imposed upon such licenses and authorizations that may not be favorable to us.



|Item 7A. | Quantitative and Qualitative Disclosure About Market Risk
|-------- | ---------------------------------------------------------



Our revolving credit and term loan agreements bear interest at floating rates. Accordingly, we are exposed to potential losses related to changes in
interest rates. We do not enter into derivatives or other financial instruments for trading or speculative purposes. In order to manage our exposure to interest rate risk, we enter into derivative financial instruments, typically interest rate swaps
and collars. The counter-parties to our swap and collar agreements are major financial institutions. As of December 31, 2004, $185.0 million of our interest rate swap and collar agreements expire in November 2005 and $130.0 million expire in
November 2010.



The fair market value and carrying value of our
93⁄4% senior notes and 101⁄2% senior notes was $1.1 billion and $1.0 billion as of December 31, 2004. Additionally, the fair market value of our credit facility borrowings approximate their carrying values as the credit facility borrowings
bear interest at floating rates of interest. As of December 31, 2004, the estimated fair value (cost if terminated) of our interest rate swap and collar agreements was approximately $(1.6) million, which represents the amount required to enter into
offsetting contracts with similar remaining maturities based on quoted market prices and is reflected in our financial statements as other non-current liabilities. Changes in the fair value of derivative financial instruments are either recognized
in income or in stockholders equity as a component of other comprehensive loss depending on whether the derivative financial instruments qualify for hedge accounting.



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##### Table of Contents

|Item 8. | Financial Statements and Supplementary Data
|------- | -------------------------------------------



Reference is made to our consolidated financial statements beginning on page F-1 of this report.



|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|------- | ------------------------------------------------------------------------------------



Not applicable.



|Item 9A. | Controls and Procedures
|-------- | -----------------------



Insight Midwests management carried out an evaluation, with the participation of its Chief Executive Officer and Chief Financial Officer, of the
effectiveness of its disclosure controls and procedures as of December 31, 2004. Based upon that evaluation, its Chief Executive Officer and Chief Financial Officer concluded that (i) its disclosure controls and procedures were effective to ensure
that information required to be disclosed by Insight Midwest in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of
the Securities and Exchange Commission and (ii) its disclosure controls and procedures were designed to ensure that information required to be disclosed by it in reports that it files or submits under the Securities Exchange Act of 1934 is
accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.



There has not been any change in Insight Midwests internal control over financial reporting in connection with the
evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended December 31, 2004 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.



Insight Capitals management carried out an evaluation,
with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of December 31, 2004. Based upon that evaluation, its Chief Executive Officer and Chief Financial
Officer concluded that (i) its disclosure controls and procedures were effective to ensure that information required to be disclosed by Insight Capital in reports that it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission and (ii) its disclosure controls and procedures were designed to ensure that information required to be disclosed
by it in reports that it files or submits under the Securities Exchange Act of 1934 is accumulated and communicated to its management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.



There has not been any change
in Insight Capitals internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended December 31, 2004 that has materially affected, or is
reasonably likely to materially affect, its internal control over financial reporting.



|Item 9B. | Other Information
|-------- | -----------------



Not Applicable



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PART III



|Item 10. | Directors and Executive Officers of the Registrant
|-------- | --------------------------------------------------



Insight LP is our sole general partner. Insight Communications is the sole general partner of Insight LP. The following table sets forth certain
information with respect to the executive officers of us, Insight Capital and Insight Communications. Insight Communications, through Insight LP, serves as our manager.



|                   |  |     |  |                                                                                                                                                                                                                 
|------------------ |  | --- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Name               |  | Age |  | Position                                                                                                                                                                                                        
|Sidney R. Knafel   |  | 74  |  | Chairman of the Board of Insight Communications and Member of the Advisory Committee                                                                                                                            
|                   |  |    
|Michael S. Willner |  | 52  |  | Chairman, President and Chief Executive Officer of Insight Midwest and Insight Capital and Vice Chairman, President and Chief Executive Officer of Insight Communications and Chairman of the
Advisory Committee
|                   |  |    
|Dinni Jain         |  | 41  |  | Executive Vice President and Chief Operating Officer of Insight Midwest, Insight Capital and Insight Communications and Member of the Advisory Committee                                                        
|                   |  |    
|John Abbot         |  | 42  |  | Senior Vice President and Chief Financial Officer of Insight Midwest, Insight Capital and Insight Communications                                                                                                
|                   |  |    
|Elliot Brecher     |  | 39  |  | Senior Vice President and General Counsel of Insight Midwest, Insight Capital and Insight Communications                                                                                                        



Sidney R.
Knafel, a director of Insight Communications, has been Chairman of the Board of Insight Communications since 1985. He was the founder, Chairman and an equity holder of Vision Cable Communications, Inc. from 1971 until its sale in 1981. Mr.
Knafel is presently the managing partner of SRK Management Company, a private investment company. He is a director of General American Investors Company, Inc. and IGENE Biotechnology, Inc., as well as several private companies. Mr. Knafel is a
graduate of Harvard College and Harvard Business School.



Michael S. Willner, a director of Insight Communications, co-founded and has served as Chief Executive Officer since 1985. Mr. Willner has also served as Vice Chairman of Insight Communications since August 2002, served as President
from 1985 to August 2002 and reassumed the position of President in August 2003. Since August 2002, he has served as Chairman of Insight Midwest and Insight Capital. Mr. Willner served as Executive Vice President and Chief Operating Officer of
Vision Cable from 1979 through 1985, Vice President of Marketing for Vision Cable from 1977 to 1979 and General Manager of Vision Cables Bergen County, New Jersey cable television system from 1975 to 1977. He currently serves on the Board of
Directors and Executive Committee of the National Cable & Telecommunications Association. He also serves on the boards of C-SPAN, Women in Cable and Telecommunications, the Cable Center and the Walter Kaitz Foundation, as well as the Executive
Committee of CableLabs. Mr. Willner is a graduate of Boston Universitys College of Communication and serves on the schools Executive Committee.



Dinni Jain has served as Executive Vice President and Chief Operating Officer since October 2003. He joined Insight Communications in January 2002
as Senior Vice President and Chief Financial Officer. From 1994 through 2002, he served in a number of roles in sales, marketing, customer service,



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##### Table of Contents

strategy, corporate development and general management NTLIncorporated, one of Europes leading cable and telecommunications companies. He ultimately
served as Deputy Managing Director of NTLs Consumer Division, overseeing customer and new business growth, as well as the quality of customer satisfaction. He also managed the operations of NTLs Cable and Wireless Consumer Group from
2000 to 2001. He currently serves on the Board of Directors of the Cable & Telecommunication Association for Marketing Foundation.



John Abbothas served as Senior Vice President and Chief Financial Officer since January 2004. From January 1995 to January 2004, Mr. Abbot served
in a number of roles at Morgan Stanley, most recently as Managing Director in the Global Media and Communications Group of its Investment Banking Division. Prior to joining Morgan Stanley, Mr. Abbot worked at Goldman, Sachs & Co. and he also
served six years as a Surface Warfare Officer in the U.S. Navy. Mr. Abbot received a bachelors degree in Systems Engineering from the U.S. Naval Academy, an ME in Industrial Engineering from Pennsylvania State University and an MBA from
Harvard Business School.



Elliot Brecher has
served as Senior Vice President and General Counsel of Insight Communications since January 2000. Previously, he was associated with the law firm Cooperman Levitt Winikoff Lester & Newman, P.C., which served as Insight Communications legal
counsel until July 2000 when it merged with Sonnenschein Nath & Rosenthal, LLP which continues to serve as our legal counsel. He joined that firm in February 1994 and served as a partner from January 1996 until joining Insight Communications.
Prior to that, he was an associate of the law firm Rosenman & Colin from October 1988. Mr. Brecher received his law degree from Fordham University.



Except as described in this report, there are no arrangements or understandings between any Member of the Advisory Committee or executive officer and any
other person pursuant to which that person was elected or appointed to his or her position.



Since we are not a listed company, we are not required to establish an audit committee. Rather, the functions of an audit committee for our company are performed by the audit committee of our manager. The audit
committee of our manager consists of three directors, all of whom are independent directors as defined by the listing standards of the Nasdaq Stock Market. The current members of the audit committee are James S. Marcus (Chairman), Thomas L. Kempner
and David C. Lee. The board of directors of our manager has determined that each of the members of the audit committee meets the SEC definition of an audit committee financial expert.



The board of directors of our manager has adopted a code of ethics applicable to all of our employees, including our chief
executive officer, chief financial officer and chief accounting officer. This code of ethics has been filed as an exhibit to this annual report and can be found on the website of Insight Communications at www.insight-com.com.



Advisory Committee



The Partnership Agreement of Insight Midwest provides for a five member Advisory Committee. Insight Communications, through
Insight LP, is entitled to designate three of the members of the Advisory Committee. The remaining members are designated by an affiliate of Comcast Cable. The Advisory Committee serves in an advisory capacity only. Insight LP is our general partner
and has the exclusive authority to manage our business, operations and affairs, subject to certain approval rights of Comcast Cable.



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|Item 11. | Executive Compensation
|-------- | ----------------------



None of the executive officers of Insight Midwest or Insight Capital are compensated for their services as such officers, but rather receive compensation
from Insight Communications. None of the members of the Advisory Committee of Insight Midwest are compensated for their services as such members, but are entitled to reimbursement for travel expenses.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management
|-------- | --------------------------------------------------------------



Insight Capital is a wholly-owned subsidiary of Insight Midwest.



The following table sets forth information with respect to the beneficial ownership of Insight Midwests partnership interests:



|                                                                                                            |  |                  |  |                                 |  
|----------------------------------------------------------------------------------------------------------- |  | ---------------- |  | ------------------------------- | -
|Name and Address of Beneficial Owner                                                                        |  | Type of Interest |  | Percent of Partnership Interest |  
|Insight Communications Company, L.P. (1)810 Seventh Avenue, New York, NY 10019                              |  | General Partner  |  | 50                              | %
|                                                                                                            |  |                 
|TCI of Indiana Holdings, LLC (2)c/o Comcast Cable Holdings, LLC, 1500 Market Street, Philadelphia, PA 19102 |  | Limited Partner  |  | 50                              | %

---

|(1) | Insight LP is a wholly-owned subsidiary of Insight Communications. The Class A common stock of Insight Communications is quoted on The Nasdaq National Market. Sidney R. Knafel, his
children and trusts for their benefit, and Michael S. Willner, through their ownership of Insight Communications common stock have approximately 61.5% of Insight Communications voting power.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | TCI of Indiana Holdings is an indirect wholly-owned subsidiary of Comcast Cable.
|--- | --------------------------------------------------------------------------------



|Item 13. | Certain Relationships and Related Transactions
|-------- | ----------------------------------------------



Insight Interactive



Our manager is currently providing the interactive services of its wholly-owned subsidiary, Insight Interactive, LLC, including an interactive program
guide and interactive local information and community guides, to customers in some of our systems. For the years ended December 31, 2004, 2003 and 2002, fees for such services totaled $2.5 million, $2.1 million and $1.6 million.



Insight LP



Our manager, Insight LP, receives a management fee for each twelve-month period equal to 3% of substantially all revenue
arising out of or in connection with the operations of our systems. For the years ended December 31, 2004, 2003 and 2002, Insight LP earned management fees of $30.0 million, $26.4 million and $23.6 million. Our manager owns 50% of the partnership
interests in us, and we own 100% of the common stock of Insight Capital. In addition, Sidney Knafel, Michael Willner and Dinni Jain, who are each executive officers of our manager, are members of and collectively constitute a majority of our
advisory committee.



Insight Midwest Holdings



Insight Midwest Holdings is party to a $1.975 billion credit facility. On
March 28, 2002, we borrowed $100.0 million from our manager, $97.0 million of which was contributed to Insight Midwest Holdings in April 2002 for use in paying down the credit facility balance and in funding financing costs



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associated with amendments to the facility, and $3.0 million of which was contributed to Insight Ohio as of March 28, 2002. Insight Midwest Holdings is
permitted to make distributions to us for the purpose of repaying the $100.0 million loan so long as no default exists under the credit facility. This loan, which remained outstanding as of December 31, 2004, bears annual interest of 9%, compounded
semi-annually, has a scheduled maturity date of January 31, 2011 and permits prepayments.



Comcast Cable



We
purchase the majority of our programming through affiliates of Comcast Cable. Charges for such programming, including a 11⁄2% administrative fee, were $151.0 million, $142.4 million and $130.5 million for the three years ended December 31, 2004,
2003 and 2002. As of December 31, 2004 and 2003, $36.8 million and $28.3 million of accrued programming costs were due to affiliates of Comcast Cable. We believe that the programming rates charged through these affiliates are lower than those
available from independent parties.



In October 1999, to
facilitate the administration of our advertising services in our Kentucky Systems, we entered into an agreement with an affiliate of AT&T Broadband (now known as Comcast Cable), which provided for this affiliate to perform all of our Kentucky
advertising sales and related administrative services. Effective September 26, 2004, this agreement was terminated by mutual agreement. We, through our Kentucky Systems, earned advertising revenues through this affiliate of $13.5 million from
January 1, 2004 through September 26, 2004 and $18.5 million and $15.8 million for the years ended December 31, 2003 and 2002. As of December 31, 2004 and December 31, 2003, we had $1.1 million and $9.3 million as a receivable due from this
affiliate. Through September 26, 2004 we paid this affiliate a fixed and variable fee for providing this service based on advertising sales cash flow growth. As of December 31, 2004 and 2003, we had $38,500 and $102,000 recorded as payables to this
affiliate related to such services.



In July 2000, to
facilitate delivery of telephone services we entered into a ten-year agreement with AT&T Broadband (now known as Comcast Cable) that allowed Insight Midwest to deliver to its residential customers, in certain of its service areas, local
telephone service provided by Comcast Cable. Under the terms of the agreement, Insight Midwest leased certain capacity on our local network to Comcast Cable. Revenue earned from leased network capacity used in the provision of telephone services was
$8.5 million, $6.2 million and $2.2 million for the years ended December 31, 2004, 2003 and 2002. In addition, Insight Midwest provided certain services and support for which it received additional payments related to installations, marketing and
billing support.



On July 2, 2004, we entered into an agreement
with Comcast Cable and certain other subsidiaries of Comcast Corporation to acquire the telephone business conducted by Comcast Cable in the markets served under our joint operating agreement. By acquiring ownership of the telephone business from
Comcast Cable, we terminated our pre-existing joint operating agreement with Comcast Cable and have gained both operational and strategic control over this business. The acquisition was completed on December 31, 2004. Comcast Cable paid us
approximately $13 million in cash and transferred to us certain assets and liabilities related to the telephone business.



On March 17, 2000, Insight LP entered into a management agreement with Comcast of Montana/Indiana/Kentucky/Ohio (Comcast) (formerly known as
InterMedia Partners Southeast), an affiliate of Comcast Cable, to provide management services to cable television systems owned by Comcast. These systems served approximately 89,400 customers in the state of Indiana. Certain of our employees
operated these managed systems. Overhead costs we incurred were allocated ratably and charged to Comcast on a monthly basis. Effective July 31, 2004, the management agreement was terminated by mutual agreement.



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|Item 14. | Principal Accountant Fees and Services
|-------- | --------------------------------------



Fees for professional services provided by our independent auditors in each of the last two fiscal years, in each of the following categories are as
follows:



|                   |  |                |       |      |   |      
|------------------ |  | -------------- | ----- | ---- | - | -----
|                   |  | 2004           |       | 2003
|                   |  | (in thousands)
|Audit fees         |  | $              | 376.3 |      | $ | 409.5
|Audit-related fees |  |                |      |      |   |     
|Tax fees           |  |                |      |      |   |     
|All other fees     |  |                |      |      |   |     
|Total              |  | $              | 376.3 |      | $ | 409.5



Fees for audit
services include fees associated with the annual audit, the reviews of our quarterly reports on Form 10-Q, assistance with and review of documents filed with the Securities and Exchange Commission and comfort letters.



The audit committee of our manager has adopted a policy that requires advance
approval of all audit, audit-related, tax services, and other services performed by our independent auditor. The policy provides for pre-approval by the audit committee of specifically defined audit and non-audit services. Unless the specific
service has been previously pre-approved with respect to that year, the audit committee must approve the permitted service before the independent auditor is engaged to perform it.



PART IV



|Item 15. | Exhibits and Financial Statement Schedules
|-------- | ------------------------------------------



(a) Financial Statements:



Our financial statements, as indicated by the Index to Consolidated Financial Statements set forth below, begin on page F-1 of this Form 10-K, and are
hereby incorporated by reference. Financial statement schedules have been omitted because they are not applicable or the required information is included in the financial statements or notes thereto.



INDEX TO CONSOLIDATED FINANCIAL STATEMENTS



|                                                                                                             |  |     
|------------------------------------------------------------------------------------------------------------ |  | ----
|                                                                                                             |  | Page
|Insight Midwest, L.P.                                                                                        |  |     
|                                                                                                             | 
|Report of Independent AuditorsErnst & Young LLP                                                             |  | F-1 
|                                                                                                             | 
|Consolidated Balance Sheets as of December 31, 2004 and 2003                                                 |  | F-2 
|                                                                                                             | 
|Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002                   |  | F-3 
|                                                                                                             | 
|Consolidated Statements of Changes in Partners Capital for the years ended December 31, 2004, 2003 and 2002 |  | F-4 
|                                                                                                             | 
|Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002                   |  | F-5 
|                                                                                                             | 
|Notes to Consolidated Financial Statements                                                                   |  | F-6 
|                                                                                                             | 
|Insight Capital, Inc.                                                                                        |  |     
|                                                                                                             | 
|Report of Independent AuditorsErnst & Young LLP                                                             |  | F-23
|                                                                                                             | 
|Balance Sheets as of December 31, 2004 and 2003                                                              |  | F-24
|                                                                                                             | 
|Statements of Operations for the years ended December 31, 2004, 2003 and 2002                                |  | F-25
|                                                                                                             | 
|Statements of Changes in Shareholders Deficit for the years ended December 31, 2004, 2003 and 2002          |  | F-26
|                                                                                                             | 
|Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002                                |  | F-27
|                                                                                                             | 
|Notes to Financial Statements                                                                                |  | F-28





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(b) Exhibits:



|               |  |                                                                                                                                                                                                                                         
|-------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Exhibit Description                                                                                                                                                                                                                     
|               | 
|3.1            |  | Certificate of Limited Partnership of Insight Midwest (1)                                                                                                                                                                               
|               | 
|3.2            |  | Amended and Restated Limited Partnership Agreement of Insight Midwest, L.P., dated January 5, 2001 (2)                                                                                                                                  
|               | 
|3.2A           |  | First Amendment to Amended and Restated Limited Partnership Agreement of Insight Midwest, L.P., dated September 30, 2002 (3)                                                                                                            
|               | 
|3.3            |  | Restated Certificate of Incorporation of Insight Capital, Inc. (1)                                                                                                                                                                      
|               | 
|3.4            |  | By-laws of Insight Capital, Inc. (1)                                                                                                                                                                                                    
|               | 
|10.1           |  | Amended and Restated Credit Agreement, dated as of August 26, 2003, among Insight Midwest Holdings, LLC, several banks and financial institutions or entities, and The Bank of New York, as
administrative agent (Credit Agreement)(4)
|               | 
|10.1A          |  | Additional Term Loan Supplement to Credit Agreement dated August 26, 2003 (4)                                                                                                                                                           
|               | 
|10.2           |  | Second Amended and Restated Operating Agreement of Insight Communications Midwest, LLC, dated as of January 5, 2001 (5)                                                                                                                 
|               | 
|10.3           |  | Amended and Restated Management Agreement by and between Insight Communications of Indiana, LLC (now known as Insight Communications Midwest, LLC) and Insight Communications Company, L.P.,
dated as of October 1, 1999 (1)            
|               | 
|10.4           |  | First Amendment to Amended and Restated Management Agreement dated as of January 5, 2001, by and between Insight Communications Midwest, LLC and Insight Communications Company, L.P.
(5)                                               
|               | 
|10.5           |  | Amended and Restated Limited Partnership Agreement of Insight Kentucky Partners II, L.P., dated as of October 1, 1999 (5)                                                                                                               
|               | 
|10.6           |  | First Amendment to Amended and Restated Limited Partnership Agreement of Insight Kentucky Partners II, L.P., dated as of January 5, 2001 (5)                                                                                            
|               | 
|10.7           |  | Management Agreement by and between Insight Kentucky Partners II, L.P. and Insight Communications Company, L.P., dated as of October 1, 1999 (1)                                                                                        
|               | 
|10.8           |  | Amended and Restated Operating Agreement of Insight Communications of Central Ohio, LLC, dated as of September 29, 2003 (4)                                                                                                             
|               | 
|10.9           |  | Management Agreement by and between Insight Communications of Central Ohio, LLC and Insight Communications Company, LP dated as of September 29, 2003 (4)                                                                               
|               | 
|10.10          |  | Indenture relating to 9 3⁄4% senior notes of Registrants, dated as of October 1, 1999 (6)                                                                                                                                                 
|               | 
|10.10A         |  | First Supplemental Indenture, dated as of January 14, 2004, relating to 9 3⁄4% senior notes (7)                                                                                                                                           
|               | 
|10.11          |  | Indenture relating to 10 1⁄2% senior notes of Registrants, dated as of November 6, 2000 (5)                                                                                                                                               
|               | 
|10.11A         |  | First Supplement Indenture, dated as of January 14, 2004, relating to 10 1⁄2% senior notes (7)                                                                                                                                            
|               | 
|10.12          |  | Promissory Note, dated March 28, 2002, made by Insight Midwest, L.P. to Insight Communications Company, Inc. (8)                                                                                                                        
|               | 
|10.13          |  | Purchase Agreement, dated July 2, 2004, between Insight Midwest Holdings, LLC and Comcast Cable Holdings, LLC and certain of its affiliates (9)                                                                                         
|               | 
|10.14          |  | Transition and Termination Agreement, dated as of July 22, 2004, between Comcast of Montana/Indiana/Kentucky/Utah and Insight Communication Company, L.P. (10)                                                                          



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|      |  |                                                                                                                                                                                                                                                                                                                             
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.15 |  | Purchase Agreement dated as of August 26, 2003, among Coaxial Communications of Central Ohio, Inc. Insight Communications of Central Ohio, LLC, Insight Communications Company, LP Insight
Communications Company, Inc., Coaxial DJM LLC, Coaxial DSM LLC, Barry Silverman, Dennis J. McGillicuddy, and D. Stevens McVoy (4)
|      | 
|14    |  | Code of Ethics (7)                                                                                                                                                                                                                                                                                                          
|      | 
|21    |  | Subsidiaries of Registrants                                                                                                                                                                                                                                                                                                 
|      | 
|31.1  |  | Rule 13a-14/15d-14(a) Certification of the Chief Executive Officer of Insight Midwest, L.P.                                                                                                                                                                                                                                 
|      | 
|31.2  |  | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of Insight Midwest, L.P.                                                                                                                                                                                                                              
|      | 
|31.3  |  | Rule 13a-14/15d-14(a) Certification of the Chief Executive Officer of Insight Capital, Inc.                                                                                                                                                                                                                                 
|      | 
|31.4  |  | Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of Insight Capital, Inc.                                                                                                                                                                                                                              
|      | 
|32.1  |  | Section 1350 Certifications of Insight Midwest, L.P.                                                                                                                                                                                                                                                                        
|      | 
|32.2  |  | Section 1350 Certifications of Insight Capital, Inc.                                                                                                                                                                                                                                                                        

---

|(1) | Filed as an exhibit to Registrants Registration Statement on Form S-4 (Registration No. 333- 33540) and incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Filed as an exhibit to the Current Report on Form 8-K, dated January 5, 2001, of Insight Communications Company, Inc. and incorporated herein by reference.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2002 of Insight Communications Company, Inc. and incorporated herein by
reference.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2003 of Insight Communications Company, Inc. and incorporated herein by
reference.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2000 of Insight Communications Company, Inc. and incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 1999 of Insight Communications Company, Inc. and incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2003 of Insight Communications Company, Inc. and incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(8) | Filed as an exhibit to the Annual Report on Form 10-K for the year ended December 31, 2004 of Insight Communications Company, Inc. and incorporated herein by reference.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(9) | Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 of Insight Communications Company, Inc. and incorporated herein by reference.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(10) | Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004 of Insight Communications Company, Inc. and incorporated herein by
reference.
|---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



56



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##### Table of Contents

Report of Independent Registered Public Accounting Firm



The Partners of

Insight Midwest, LP



We have audited the accompanying consolidated balance sheets of Insight Midwest, LP (the Company) as of December 31, 2004 and 2003, and the related
consolidated statements of operations, changes in partners capital, and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting.Our audits included consideration of internal control over financial
reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31,
2004 and 2003, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2004, in conformity with U.S. generally accepted accounting principles.



/s/ Ernst & Young LLP



New York, New York

March 7, 2005



F-1



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##### Table of Contents

INSIGHT MIDWEST, LP

CONSOLIDATED BALANCE SHEET

(in thousands)



|                                                                                                                        |  |                  |           |                  |   |           |  
|----------------------------------------------------------------------------------------------------------------------- |  | ---------------- | --------- | ---------------- | - | --------- | -
|                                                                                                                        |  | December 31,2004 |           | December 31,2003 |  
|Assets                                                                                                                  |  |                  |           |                  |   |           |  
|Cash and cash equivalents                                                                                               |  | $                | 72,476    |                  | $ | 22,679    |  
|Investments                                                                                                             |  |                  | 4,100     |                  |   | 2,246     |  
|Trade accounts receivable, net of allowance for doubtful accounts of $1,050 and $1,123 as of December 31, 2004 and 2003 |  |                  | 31,352    |                  |   | 29,271    |  
|Launch funds receivable                                                                                                 |  |                  | 2,749     |                  |   | 9,421     |  
|Prepaid expenses and other current assets                                                                               |  |                  | 9,300     |                  |   | 15,465    |  
|                                                                                                                        |  |                  |           |                  |   |           |  
|Total current assets                                                                                                    |  |                  | 119,977   |                  |   | 79,082    |  
|                                                                                                                        |  |                 
|Fixed assets, net                                                                                                       |  |                  | 1,130,600 |                  |   | 1,198,830 |  
|Goodwill                                                                                                                |  |                  | 14,684    |                  |   | 14,684    |  
|Franchise costs                                                                                                         |  |                  | 2,357,535 |                  |   | 2,357,535 |  
|Deferred financing costs, net of accumulated amortization of $15,170 and $10,710 as of December 31, 2004 and 2003       |  |                  | 22,776    |                  |   | 27,222    |  
|Other non-current assets                                                                                                |  |                  | 1,843     |                  |   |          |  
|                                                                                                                        |  |                  |           |                  |   |           |  
|Total assets                                                                                                            |  | $                | 3,647,415 |                  | $ | 3,677,353 |  
|                                                                                                                        |  |                  |           |                  |   |           |  
|Liabilities and partners capital                                                                                       |  |                  |           |                  |   |           |  
|Accounts payable                                                                                                        |  | $                | 27,147    |                  | $ | 29,427    |  
|Accrued expenses and other liabilities                                                                                  |  |                  | 36,092    |                  |   | 31,932    |  
|Accrued property taxes                                                                                                  |  |                  | 13,049    |                  |   | 22,954    |  
|Accrued programming costs (inclusive of $36,838 and $28,322 due to related parties as of December 31, 2004 and 2003)    |  |                  | 51,328    |                  |   | 43,261    |  
|Deferred revenue                                                                                                        |  |                  | 8,996     |                  |   | 10,061    |  
|Interest payable                                                                                                        |  |                  | 20,643    |                  |   | 23,315    |  
|Debt  current portion                                                                                                  |  |                  | 83,500    |                  |   | 62,250    |  
|Due to affiliates                                                                                                       |  |                  | 55,177    |                  |   | 40,386    |  
|                                                                                                                        |  |                  |           |                  |   |           |  
|Total current liabilities                                                                                               |  |                  | 295,932   |                  |   | 263,586   |  
|                                                                                                                        |  |                 
|Deferred revenue                                                                                                        |  |                  | 2,904     |                  |   | 4,523     |  
|Debt                                                                                                                    |  |                  | 2,518,879 |                  |   | 2,607,350 |  
|Other non-current liabilities                                                                                           |  |                  | 2,078     |                  |   | 5,742     |  
|                                                                                                                        |  |                 
|Partners capital:                                                                                                      |  |                  |           |                  |   |           |  
|Partners accumulated capital                                                                                           |  |                  | 827,622   |                  |   | 799,574   |  
|Accumulated other comprehensive loss                                                                                    |  |                  |          |                  |   | (3,422    | )
|                                                                                                                        |  |                  |           |                  |   |           |  
|Total partners capital                                                                                                 |  |                  | 827,622   |                  |   | 796,152   |  
|                                                                                                                        |  |                  |           |                  |   |           |  
|Total liabilities and partners capital                                                                                 |  | $                | 3,647,415 |                  | $ | 3,677,353 |  
|                                                                                                                        |  |                  |           |                  |   |           |  



See accompanying
notes



F-2



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##### Table of Contents

INSIGHT MIDWEST, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)



|                                                                                                                                                                                                                     |  |                         |           |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | --------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                                                                                                                                                     |  | Year Ended December 31, |          
|                                                                                                                                                                                                                     |  | 2004                    |           |   | 2003 |   |          | 2002 | 
|Revenue                                                                                                                                                                                                              |  | $                       | 1,000,814 |   |      | $ | 899,797  |      |  | $ | 808,925  |  
|                                                                                                                                                                                                                     |  |                         |          
|Operating costs and expenses:                                                                                                                                                                                        |  |                         |           |   |      |   |          |      |  |   |          |  
|Programming and other operating costs (exclusive of depreciation and amortization) (inclusive of $150,956, $142,387 and $130,507 of
programming expense incurred through related parties during 2004, 2003 and 2002) |  |                         | 342,123   |   |      |   | 327,071  |      |  |   | 281,443  |  
|Selling, general and administrative                                                                                                                                                                                  |  |                         | 202,654   |   |      |   | 165,014  |      |  |   | 153,620  |  
|Management fees                                                                                                                                                                                                      |  |                         | 29,987    |   |      |   | 26,352   |      |  |   | 23,593   |  
|Depreciation and amortization                                                                                                                                                                                        |  |                         | 235,105   |   |      |   | 224,874  |      |  |   | 211,837  |  
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |          |      |  |   |          |  
|Total operating costs and expenses                                                                                                                                                                                   |  |                         | 809,869   |   |      |   | 743,311  |      |  |   | 670,493  |  
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |          |      |  |   |          |  
|Operating income                                                                                                                                                                                                     |  |                         | 190,945   |   |      |   | 156,486  |      |  |   | 138,432  |  
|                                                                                                                                                                                                                     |  |                         |          
|Other income, net:                                                                                                                                                                                                   |  |                         |           |   |      |   |          |      |  |   |          |  
|Gain on cable system exchange                                                                                                                                                                                        |  |                         |          |   |      |   | 27,134   |      |  |   |         |  
|Gain on settlement of programming contract                                                                                                                                                                           |  |                         |          |   |      |   | 37,742   |      |  |   |         |  
|Loss from early extinguishments of debt                                                                                                                                                                              |  |                         |          |   |      |   | (10,879  | )    |  |   |         |  
|Interest expense                                                                                                                                                                                                     |  |                         | (177,524  | ) |      |   | (184,499 | )    |  |   | (180,465 | )
|Interest income                                                                                                                                                                                                      |  |                         | 368       |   |      |   | 831      |      |  |   | 176      |  
|Other                                                                                                                                                                                                                |  |                         | (1,368    | ) |      |   | (591     | )    |  |   | (187     | )
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |          |      |  |   |          |  
|Total other expense, net                                                                                                                                                                                             |  |                         | (178,524  | ) |      |   | (130,262 | )    |  |   | (180,476 | )
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |          |      |  |   |          |  
|Income (loss) before extraordinary item                                                                                                                                                                              |  |                         | 12,421    |   |      |   | 26,224   |      |  |   | (42,044  | )
|Extraordinary item                                                                                                                                                                                                   |  |                         | 15,627    |   |      |   |         |      |  |   |         |  
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |          |      |  |   |          |  
|Net income (loss)                                                                                                                                                                                                    |  |                         | 28,048    |   |      |   | 26,224   |      |  |   | (42,044  | )
|Accrual of preferred interests                                                                                                                                                                                       |  |                         |          |   |      |   | (10,353  | )    |  |   | (20,107  | )
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |          |      |  |   |          |  
|Net income (loss) applicable to common interests                                                                                                                                                                     |  | $                       | 28,048    |   |      | $ | 15,871   |      |  | $ | (62,151  | )
|                                                                                                                                                                                                                     |  |                         |           |   |      |   |          |      |  |   |          |  



See accompanying
notes



F-3



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##### Table of Contents

INSIGHT MIDWEST, LP

CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS CAPITAL

(in thousands)



|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  
|---------------------------------------- |  | ----------------------------- | ------- | - | --------------------------------- | - | ------- | ----------------- |  | - | ------- | -
|                                         |  | Partners Accumulated Capital |         |   | AccumulatedOtherComprehensiveLoss |   |         | Partners Capital | 
|Balance at January 1, 2002               |  | $                             | 843,377 |   |                                   | $ | (22,755 | )                 |  | $ | 820,622 |  
|                                         |  |                               |        
|Net loss                                 |  |                               | (42,044 | ) |                                   |   |         |                   |  |   | (42,044 | )
|Unrealized income on interest rate swaps |  |                               |         |   |                                   |   | 4,935   |                   |  |   | 4,935   |  
|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  
|Total comprehensive loss                 |  |                               |         |   |                                   |   |         |                   |  |   | (37,109 | )
|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  
|Accrual of preferred interests           |  |                               | (20,107 | ) |                                   |   |         |                   |  |   | (20,107 | )
|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  
|Balance at December 31, 2002             |  |                               | 781,226 |   |                                   |   | (17,820 | )                 |  |   | 763,406 |  
|                                         |  |                               |        
|Net income                               |  |                               | 26,224  |   |                                   |   |         |                   |  |   | 26,224  |  
|Unrealized income on interest rate swaps |  |                               |         |   |                                   |   | 14,398  |                   |  |   | 14,398  |  
|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  
|Total comprehensive income               |  |                               |         |   |                                   |   |         |                   |  |   | 40,622  |  
|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  
|Accrual of preferred interests           |  |                               | (10,353 | ) |                                   |   |         |                   |  |   | (10,353 | )
|Contribution of Coaxial interests        |  |                               | 2,477   |   |                                   |   |         |                   |  |   | 2,477   |  
|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  
|Balance at December 31, 2003             |  |                               | 799,574 |   |                                   |   | (3,422  | )                 |  |   | 796,152 |  
|                                         |  |                               |        
|Net income                               |  |                               | 28,048  |   |                                   |   |         |                   |  |   | 28,048  |  
|Unrealized income on interest rate swaps |  |                               |         |   |                                   |   | 3,422   |                   |  |   | 3,422   |  
|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  
|Total comprehensive income               |  |                               |         |   |                                   |   |         |                   |  |   | 31,470  |  
|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  
|Balance at December 31, 2004             |  | $                             | 827,622 |   |                                   | $ |        |                   |  | $ | 827,622 |  
|                                         |  |                               |         |   |                                   |   |         |                   |  |   |         |  



See accompanying
notes



F-4



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##### Table of Contents

INSIGHT MIDWEST, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|---------------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                         |  | Year Ended December 31, |         
|                                                                                         |  | 2004                    |          |   | 2003 |   |          | 2002 | 
|Operating activities:                                                                    |  |                         |          |   |      |   |          |      |  |   |          |  
|Net income (loss)                                                                        |  | $                       | 28,048   |   |      | $ | 26,224   |      |  | $ | (42,044  | )
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                         |          |   |      |   |          |      |  |   |          |  
|Depreciation and amortization                                                            |  |                         | 235,105  |   |      |   | 224,874  |      |  |   | 211,837  |  
|Loss on early extinguishment of debt                                                     |  |                         |         |   |      |   | 2,616    |      |  |   |         |  
|Provision for losses on trade accounts receivable                                        |  |                         | 18,301   |   |      |   | 13,366   |      |  |   | 13,386   |  
|Amortization of note discount                                                            |  |                         | 304      |   |      |   | 1,835    |      |  |   | 1,047    |  
|Gain on cable systems exchange                                                           |  |                         |         |   |      |   | (27,134  | )    |  |   |         |  
|Gain on settlement of programming contract                                               |  |                         |         |   |      |   | (34,819  | )    |  |   |         |  
|(Gain) loss on interest rate swaps                                                       |  |                         | (36      | ) |      |   | 2,114    |      |  |   |         |  
|Changes in operating assets and liabilities, net of the effect of acquisitions:          |  |                         |          |   |      |   |          |      |  |   |          |  
|Trade accounts receivable                                                                |  |                         | (20,382  | ) |      |   | (16,495  | )    |  |   | (16,501  | )
|Launch fund receivable                                                                   |  |                         | 6,672    |   |      |   | (4,224   | )    |  |   | 7,783    |  
|Prepaid expenses and other assets                                                        |  |                         | 3,483    |   |      |   | (3,198   | )    |  |   | 6,163    |  
|Accounts payable                                                                         |  |                         | (2,280   | ) |      |   | (17,320  | )    |  |   | (19,965  | )
|Accrued expenses and other liabilities                                                   |  |                         | 11,757   |   |      |   | 43,644   |      |  |   | 8,473    |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash provided by operating activities                                                |  |                         | 280,972  |   |      |   | 211,483  |      |  |   | 170,179  |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Investing activities:                                                                    |  |                         |          |   |      |   |          |      |  |   |          |  
|Purchase of fixed assets                                                                 |  |                         | (162,806 | ) |      |   | (193,487 | )    |  |   | (280,027 | )
|Purchase of intangible assets                                                            |  |                         | (107     | ) |      |   | (889     | )    |  |   | (1,316   | )
|Purchase of cable television systems, net                                                |  |                         |         |   |      |   | (26,475  | )    |  |   | (8,822   | )
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash used in investing activities                                                    |  |                         | (162,913 | ) |      |   | (220,851 | )    |  |   | (290,165 | )
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Financing activities:                                                                    |  |                         |          |   |      |   |          |      |  |   |          |  
|Distributions of preferred interests                                                     |  |                         |         |   |      |   | (11,554  | )    |  |   | (14,000  | )
|Proceeds from borrowings under credit facilities                                         |  |                         |         |   |      |   | 118,000  |      |  |   | 131,000  |  
|Repayment of credit facilities                                                           |  |                         | (68,250  | ) |      |   | (25,000  | )    |  |   | (273,000 | )
|Repayment of Coaxial notes                                                               |  |                         |         |   |      |   | (195,869 | )    |  |   |         |  
|Proceeds from issuance of notes                                                          |  |                         |         |   |      |   | 141,375  |      |  |   | 179,995  |  
|Borrowings from parent under intercompany loan                                           |  |                         |         |   |      |   |         |      |  |   | 100,000  |  
|Debt issuance costs                                                                      |  |                         | (10      | ) |      |   | (4,842   | )    |  |   | (5,535   | )
|Principal payments on capital leases and other non-current liabilities                   |  |                         |         |   |      |   |         |      |  |   | (683     | )
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Net cash (used) provided by financing activities                                         |  |                         | (68,260  | ) |      |   | 22,110   |      |  |   | 117,777  |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Net change in cash and cash equivalents                                                  |  |                         | 49,799   |   |      |   | 12,742   |      |  |   | (2,209   | )
|Cash and cash equivalents, beginning of year                                             |  |                         | 22,679   |   |      |   | 9,937    |      |  |   | 12,146   |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  
|Cash and cash equivalents, end of year                                                   |  | $                       | 72,478   |   |      | $ | 22,679   |      |  | $ | 9,937    |  
|                                                                                         |  |                         |          |   |      |   |          |      |  |   |          |  



See accompanying
notes



F-5



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##### Table of Contents

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Basis of Presentation



We were formed in September 1999 to serve as the holding company and a financing vehicle for
Insight Communications Company, Inc.s (Insight Inc.) cable television system joint venture with AT&T Broadband, LLC (now known as Comcast Cable Holdings, LLC (Comcast Cable)). We are owned 50% by Insight
Communications Company, L.P. (Insight LP), which is wholly owned by Insight Inc., and 50% by an indirect subsidiary of Comcast Cable. Insight LP serves as our general partner and manages and operates our systems.



Through our wholly owned operating subsidiaries, Insight Communications Midwest, LLC
(Insight Communications Midwest), Insight Communications of Central Ohio, LLC (Insight Ohio) and Insight Kentucky Partners II, L.P. (Insight Kentucky), we own and operate cable television systems in Indiana,
Kentucky, Ohio, and Illinois which passed approximately 2.4 million homes and served approximately 1.3 million customers as of December 31, 2004. In addition, we also owned and operated a cable television system in Griffin, Georgia through February
28, 2003.



The accompanying consolidated financial statements include the
accounts of Insight Midwest Holdings, LLC, our wholly-owned subsidiary which owns 100% of the outstanding equity of our operating subsidiaries.



Indiana Systems



On October 31, 1998, Insight LP and AT&T Broadband contributed certain of their cable television systems located in Indiana and Northern Kentucky to form Insight Indiana (now known as Insight Communications
Midwest, LLC) in exchange for a 50% equity interest. On October 1, 1999, as part of a joint venture restructuring involving the Kentucky Systems (discussed below), Insight Indiana became our wholly owned subsidiary. Pursuant to the terms of our
respective operating agreements, we and Insight Indiana will continue until October 1, 2011, unless extended or terminated sooner by Insight LP and Comcast Cable.



Kentucky Systems



On October 1, 1999, Insight LP acquired a combined 50% interest in InterMedia Capital Partners VI, LP (the IPVI Partnership) from related parties of
Blackstone Cable Acquisition Company, LLC, InterMedia Capital Management VI, LLC and a subsidiary and related party of AT&T Broadband, for $341.5 million (inclusive of expenses). Concurrently with this acquisition, the Kentucky Systems were
contributed to us and we assumed debt of $742.1 million (the total debt of the IPVI Partnership) in connection with this transaction. Pursuant to the terms of our respective operating agreements, we and Insight Kentucky will continue until October
1, 2011, unless extended or terminated sooner by Insight LP and Comcast Cable.



On February 28, 2003, we exchanged with Comcast of Montana/Indiana/Kentucky/Ohio the system we then owned in Griffin, Georgia, serving approximately 11,800 customers, plus $25.0 million, for the managed systems located in New Albany,
Indiana and Shelbyville, Kentucky, together serving approximately 23,400 customers. Additionally, pursuant to the agreement, we paid approximately $1.5



F-6



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##### Table of Contents

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Basis of Presentation (continued)



million as a closing adjustment to Comcast of Montana/Indiana/Kentucky/Ohio to complete the rebuild and upgrade of the Griffin, Georgia system.



This system exchange was accounted for on that date as a sale of the Griffin, Georgia
system and a purchase of the New Albany, Indiana and Shelbyville, Kentucky systems. In connection with this system exchange, we recorded a gain of $27.1 million equal to the difference between the fair value and carrying value of the Griffin,
Georgia system as of the closing date. Of the $64.5 million purchase price of the New Albany, Indiana and Shelbyville, Kentucky systems $31.9 million was allocated to such cable television systems assets acquired in relation to their fair
values and $32.6 million was allocated to franchise costs.



Illinois
Systems



Effective January 1, 2001, we completed a series of
transactions with Insight LP and AT&T Broadband for the acquisition of additional cable television systems, primarily located in the state of Illinois, valued at approximately $2.2 billion (the AT&T transactions), inclusive of
systems valued at approximately $775.8 million, contributed by Insight LP. The AT&T transactions were financed through a credit facility established on January 5, 2001 (the Midwest Holdings Credit Facility). As a result of the
AT&T transactions, we acquired all of Insight LPs wholly owned systems serving approximately 280,000 customers, including systems that Insight LP purchased from AT&T Broadband. At the same time, we acquired from AT&T Broadband
systems serving approximately 250,000 customers.



Concurrently with the
completion of Insight LPs purchase of systems from AT&T Broadband, Insight LP contributed such systems to us, along with all of its wholly owned systems serving approximately 175,000 customers. The total value of such contributed systems
was $1.2 billion. We recorded the respective assets and liabilities, including debt assumed, of the contributed systems at their respective carrying values with the net difference recorded as an addition to partners capital.



Concurrently, AT&T Broadband contributed directly to us certain Illinois systems
serving approximately 250,000 customers. The total value of such contributed systems was $983.3 million. We recorded 100% of the assets and liabilities of the systems contributed at fair value with an addition to partners capital of $659.9
million equal to the total fair value of the net assets contributed. The fair value of $983.3 million was allocated to the cable television assets acquired in relation to their fair values as increases in fixed assets of $116.1 million and franchise
costs of $867.2 million.



Both Insight LP and AT&T Broadband contributed
their respective systems to us subject to an amount of indebtedness such that we remain equally owned by Insight LP and AT&T Broadband. The total debt assumed by us of $654.5 million was financed with the proceeds from the Midwest Holdings
Credit Facility.



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Basis of Presentation (continued)



Ohio Systems



On August 21, 1998, Insight LP and Coaxial Communications of Central Ohio, Inc. (Coaxial) entered into a contribution agreement pursuant to which Coaxial
contributed to Insight Ohio substantially all of the assets and liabilities of its cable television systems located in Columbus, Ohio and Insight LP contributed $10.0 million in cash to Insight Ohio. As a result of the contribution, Coaxial owned
25% of the non-voting common equity and Insight LP, through its subsidiary Insight Holdings of Ohio, LLC, owned 75% of the non-voting common equity of Insight Ohio. In addition, Coaxial also received two separate series of voting preferred equity
(Series A Preferred Interest$140 million and Series B Preferred Interest$30 million) of Insight Ohio.



The voting Preferred Interests provided for cash distributions to Coaxial and certain of its affiliates in amounts equal to the payments required on the then outstanding
10% Senior Notes and 127/8% Senior Discount Notes. Insight Ohio was required to redeem the Series A Preferred
Interests in August 2006 and the Series B Preferred Interest in August 2008. The Senior Notes and Senior Discount Notes were conditionally guaranteed by Insight Ohio.



On August 8, 2000, Insight Ohio purchased Coaxials 25% non-voting common equity interest (the Purchase and Option
Agreement). The purchase price was 800,000 shares of Insight Inc.s common stock and cash in the amount of $2.6 million. In connection with the purchase, Insight Ohios operating agreement was amended to, among other things, remove
certain participating rights of the principals of Coaxial and certain of its affiliates. The agreement was amended to incorporate 70% of Insight Ohios total voting power into the common equity interests of Insight Ohio and 30% of Insight
Ohios total voting power into the Preferred Interests of Insight Ohio. Additionally, an option in the agreement provided that if at any time the Senior Notes or Senior Discount Notes were repaid or significantly modified, or in any case after
August 15, 2008, the principals of Coaxial could have required us to purchase their interests in Coaxial.



Although the financial results of Insight Ohio have been consolidated in our financials since January 1, 2001, for financing purposes, until September 29, 2003, Insight
Ohio was an unrestricted subsidiary of ours and was prohibited by the terms of its indebtedness from making distributions to us.



On September 25, 2003, Insight Inc. purchased all the outstanding equity of the owners of Coaxial, which held the preferred interests of Insight Ohio and 800,000 shares
of Insight Inc.s stock, for $29.4 million. The purchase was financed through Insight Inc.s existing cash on hand. Additionally, the Purchase and Option Agreement, between Coaxial and Insight Inc., dated August 8, 2000, was terminated.



In connection with these transactions, Insight Inc. retired the 800,000 shares
of its stock held by Coaxial and, immediately thereafter, contributed the purchased interests and our interests in Insight Ohio to Insight Midwest Holdings. Additionally, the Series A and Series B preferred interests were converted to common
interests.



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Basis of Presentation (continued)



On September 29, 2003, we retired the remaining Ohio obligations, comprised of the Senior Notes and Senior Discount
Notes, through our refinancing of the Insight Midwest Holdings Credit Facility. Insight Ohio is now a restricted subsidiary under the terms of our indentures. We recorded a loss of $10.9 million on the extinguishment of these obligations as a result
of call premiums and the write-off of deferred financing costs.



2.
Significant Accounting Policies



Basis of Consolidation



The consolidated financial statements include our accounts and those
of our wholly owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.



Revenue Recognition



Revenue is earned from customer fees for cable television programming services including premium, digital and pay-per-view services and ancillary services, such as rental
of converters, remote control devices, and installations. In addition, we earn revenues from providing high-speed Internet services, selling advertising, facilitating the delivery of telephone services, and commissions for products sold through home
shopping networks. Revenue is recorded in the month the related services are rendered. Fees received for activation of telephone services are amortized over the customer relationship period.



Use of Estimates



The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.



Cash
Equivalents



We consider all highly liquid investments with original
maturities of three months or less to be cash equivalents.



Investments



Investments for which a quoted market price is unavailable are
carried at cost and periodically reviewed for impairment.



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2. Significant Accounting Policies (continued)



Fixed Assets



Fixed assets are stated at cost and include costs capitalized for labor and overhead incurred in connection with the installation of cable system infrastructures,
including those providing high-speed Internet and facilitating the delivery of telephone services. In addition, we capitalize labor and material costs associated with installations related to new services on customer premises. Depreciation for
buildings, cable system equipment, furniture, fixtures and office equipment is calculated using the straight-line method over estimated useful lives ranging from 2 to 30 years. Building improvements are amortized using the straight-line method over
the shorter of the remaining terms of the leases or the estimated lives of the improvements.



The carrying value of fixed assets is reviewed if facts and circumstances suggest that they may be impaired. If this review indicates that the carrying value of the fixed assets will not be recovered from undiscounted
future cash flows generated from such assets, an impairment loss would be recognized for the amount that the assets carrying value exceeds its fair value. We believe that no impairment of fixed assets existed as of December 31, 2004 or 2003.



Franchise Costs and Goodwill



On January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets. In
accordance with SFAS No. 142, we discontinued the amortization of indefinite-lived intangible assets, including our franchise costs and goodwill. SFAS No. 142 requires goodwill and indefinite-lived intangible assets be tested for impairment
annually, or more frequently as warranted by events or changes in circumstances. According to guidance prescribed in Emerging Issues Task Force (EITF) Issue No. 02-7, Unit of Accounting for Testing of Impairment of Indefinite-Lived
Intangible Assets, single units of accounting operated as a single asset and essentially inseparable from each other, should be combined as a single asset group for purposes of impairment testing. Management has identified three asset groups
based on cable system management, geographic clustering and managements belief that such grouping represents the best use of those assets.



Additionally, during September 2004, the SEC staff issued Topic D-108, Use of the Residual Method to Value Acquired Assets Other than Goodwill, which requires the
direct method of separately valuing all intangible assets and does not permit goodwill to be included in franchise assets. In connection with adopting SFAS No. 142 and Topic D-108 and based on guidance from EITF Issue No. 02-7, we performed an
impairment assessment using an independent third-party appraiser for the three asset groups identified. The valuation was completed as of October 1, 2004 and resulted in no impairment to our franchise costs.



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2. Significant Accounting Policies (continued)



Deferred Financing Costs



Deferred financing costs relate to costs, primarily legal and bank facility fees, incurred in securing bank loans and other sources of
financing. These costs are amortized over the life of the applicable debt. For the years ended December 31, 2004, 2003 and 2002, we recorded amortization expense of $4.5 million, $4.0 million and $3.6 million.



Comprehensive Loss



We record the effective portion of certain derivatives net unrealized gains and losses
as components of comprehensive loss. Comprehensive loss is presented in the accompanying consolidated statements of changes in partners capital. The cumulative amount of comprehensive loss is presented in the accompanying consolidated balance
sheets as accumulated other comprehensive loss.



Income Taxes



No provision has been made in the accompanying financial statements
for federal, state or local income taxes since our income or loss is reportable by the individual partners in their respective tax returns.



Marketing and Promotional



Marketing and promotional costs are expensed as incurred. Marketing and promotional expenses, net of marketing support (recorded as a reduction to marketing expense), for
the years ended December 31, 2004, 2003 and 2002 were $18.1 million, $8.5 million and $10.9 million.



Recent Accounting Pronouncements



In May 2003, the FASB issued SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. SFAS No. 150 requires that an issuer classify a financial instrument that is within its scope as a liability or, in some circumstances, as an asset, with many such financial
instruments having been previously classified as equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective July 1, 2003. SFAS No. 150 is to be implemented by reporting the
cumulative effect of a change in an accounting principle for financial instruments outstanding before the issuance date of the Statement and still existing at July 1, 2003. Restatement is not permitted.



As of July 1, 2003, we had $195.2 million of preferred interests recorded in our balance
sheets as temporary equity. These preferred interests were fully accreted to their maturity value of $195.9 million as of August 15, 2003 and were subsequently converted to common interests in connection with our refinancing of the obligations of
Insight Ohio. In connection with the adoption of SFAS No. 150, for the three months ended September 30, 2003, we recorded a $5.0 million accrual of preferred interests, which has been included in interest expense in our consolidated statements of
operations.



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



2. Significant Accounting Policies (continued)



In September 2004, the EITF reached a consensus regarding Issue No. 04-1, Accounting for Preexisting Relationships
Between the Parties to a Business Combination.EITF Issue No. 04-1 requires an acquirer in a business combination to evaluate any preexisting relationship with the acquiree to determine if the business combination in effect contains a settlement
of the preexisting relationship. A business combination between parties with a preexisting relationship should be viewed as a multiple element transaction. EITF 04-1 is effective for business combinations after October 13, 2004, but requires
goodwill resulting from prior business combinations involving parties with a preexisting relationship to be tested for impairment by applying the guidance in the consensus. The Company adopted the provisions of EITF 04-1 during the fourth quarter of
2004 in connection with the acquisition of Comcast Cables telephone business described in Note 8.



Reclassifications



Certain prior
year amounts have been reclassified to conform to the current years presentation.



3. Fixed Assets



|                                               |  |                  |            |   |                   |   |           |  
|---------------------------------------------- |  | ---------------- | ---------- | - | ----------------- | - | --------- | -
|                                               |  | December 31,2004 |            |   | December 31, 2003 |  
|                                               |  | (in thousands)   |           
|Land, buildings and improvements               |  | $                | 35,649     |   |                   | $ | 34,856    |  
|Cable system equipment                         |  |                  | 2,155,193  |   |                   |   | 2,026,641 |  
|Furniture, fixtures and office equipment       |  |                  | 17,867     |   |                   |   | 15,605    |  
|                                               |  |                  |            |   |                   |   |           |  
|                                               |  |                  | 2,208,709  |   |                   |   | 2,077,102 |  
|Less accumulated depreciation and amortization |  |                  | (1,078,109 | ) |                   |   | (878,272  | )
|                                               |  |                  |            |   |                   |   |           |  
|Total fixed assets, net                        |  | $                | 1,130,600  |   |                   | $ | 1,198,830 |  
|                                               |  |                  |            |   |                   |   |           |  



During the year ended December 31,
2002, we wrote-off approximately $11.1 million related to video-on-demand equipment as a result of transitioning to a new video-on-demand service provider. This amount was included in depreciation and amortization in our statement of operations.



Depreciation expense for the years ended December 31, 2004, 2003 and 2002 was
$230.6 million, $220.9 million and $208.2 million.



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



4. Debt



Debt consisted of:



|                                         |  |                   |           |   |                  |   |           |  
|---------------------------------------- |  | ----------------- | --------- | - | ---------------- | - | --------- | -
|                                         |  | December 31, 2004 |           |   | December31, 2003 |  
|                                         |  | (in thousands)    |          
|Note payable to Insight Inc.             |  | $                 | 100,000   |   |                  | $ | 100,000   |  
|Insight Midwest Holdings Credit Facility |  |                   | 1,487,750 |   |                  |   | 1,556,000 |  
|Insight Midwest 93⁄4% Senior Notes         |  |                   | 385,000   |   |                  |   | 385,000   |  
|Insight Midwest 101⁄2% Senior Notes        |  |                   | 630,000   |   |                  |   | 630,000   |  
|                                         |  |                   |           |   |                  |   |           |  
|                                         |  |                   | 2,602,750 |   |                  |   | 2,671,000 |  
|Less unamortized discount on notes       |  |                   | (890      | ) |                  |   | (1,194    | )
|Market value of interest rate swaps      |  |                   | 519       |   |                  |   | (206      | )
|                                         |  |                   |           |   |                  |   |           |  
|Total debt                               |  | $                 | 2,602,379 |   |                  | $ | 2,669,600 |  
|                                         |  |                   |           |   |                  |   |           |  



Insight Midwest Holdings $1.975
Billion Credit Facility



On January 5, 2001, through our wholly owned
subsidiary, Insight Midwest Holdings, which holds all of our cable television operating subsidiaries, we entered into a credit facility to finance the AT&T transactions and to repay the outstanding indebtedness under our then existing Insight
Indiana and Insight Kentucky credit facilities. We recorded a charge of $10.3 million related to the write-off of unamortized deferred financing costs related to these credit facilities. The Midwest Holdings Credit Facility expires in 2009 and
provides for maximum borrowings of $1.975 billion. Obligations under this credit facility are secured by a pledge of the outstanding equity interests of Insight Midwest Holdings and its subsidiaries.



The Midwest Holdings Credit Facility requires Insight Midwest Holdings to meet certain
financial and other debt covenants. Borrowings under this credit facility bear interest, based on our election, of an Alternative Base Rate (equal to the greater of the Prime Rate or the Federal Funds Effective Rate plus 0.5%) or Adjusted LIBOR
(equal to LIBOR multiplied by the Statutory Reserve Rate) plus an additional margin yield tied to Insight Midwest Holdings leverage ratio of between 0.5% and 2.75%. As of December 31, 2004 and 2003, the weighted average interest rate on this
credit facility was 4.5% and 3.7%.



On March 28, 2002, we borrowed $100.0
million from Insight Inc., $97.0 million of which was contributed to Insight Midwest Holdings in April 2002 for use in paying down the credit facility balance and in funding financing costs associated with the amendments, and $3.0 million of which
was contributed to Insight Ohio as of March 28, 2002. Insight Midwest Holdings is permitted under the credit facility to make distributions to us for the purpose of repaying this loan provided that there are no defaults existing under the credit
facility. This loan bears annual interest of 9%, compounded semi-annually, has a scheduled maturity date of January 31, 2011 and permits prepayments.



On August 26, 2003 we amended the Insight Midwest Holdings Credit Facility in connection with our plan to refinance all of the obligations and conditionally guaranteed
obligations of Insight Ohio. The



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



4. Debt (continued)



amendment increased the Term B loan portion of the credit facility from $900.0 million to $1.125 billion which increased the total facility size to $1.975
billion from $1.750 billion. We recorded $2.2 million of deferred financing costs associated with this amendment that will be amortized over the remaining term of the credit facility.



On August 29, 2003, Insight Midwest Holdings distributed $22.0 million to us and, in turn, we contributed this amount to Insight Ohio for
the purpose of repaying the Insight Ohio Credit Facility. Simultaneously, Insight Ohio used these proceeds plus cash on hand to repay the then outstanding balance of the Insight Ohio Credit Facility of $22.5 million plus accrued interest.



Insight Midwest Senior Notes



On October 1, 1999 simultaneously with the closing of the purchase of Insight Kentucky, we
completed a $200.0 million offering of 93⁄4% senior notes due in October 2009. The proceeds of the offering were used to repay certain debt of the IPVI Partnership. Interest payments on these Senior Notes, which commenced on April 1, 2000, are
payable semi-annually on April 1 and October 1.



On November 6, 2000, we
completed a $500.0 million offering of 101⁄2% senior notes due in November 2010. We received proceeds of $487.5 million, net of an underwriting fee of $5.0 million and a bond discount of $7.5 million that is being amortized through November 2010.
The proceeds of the offering were used to repay a portion of the outstanding debt under the then existing Insight Indiana credit facility and Insight Kentucky credit facility. Interest payments on these Senior Notes, which commenced on May 1, 2001,
are payable semi-annually on May 1 and November 1.



The 93⁄4% and 101⁄2%
Senior Notes are redeemable on or after October 1, 2004 and November 1, 2005. In addition, we can redeem up to 35% of the 93⁄4% and 101⁄2% Senior Notes prior to October 1, 2002 and November 1, 2005, with the net proceeds from certain sales of
our equity. Each holder of the Senior Notes may require us to redeem all or part of that holders notes upon certain changes of control. The Senior Notes are general unsecured obligations and are subordinate to all of our other liabilities, the
amounts of which were $1.7 billion and $1.8 billion as of December 31, 2004 and 2003. The Senior Notes contain certain financial and other debt covenants.



In May 2000 and September 2001, we completed exchange offers pursuant to which the 93⁄4% Senior Notes and 101⁄2% Senior Notes were exchanged for identical notes
registered under the Securities Act of 1933.



In December 2002, we completed a
$185.0 million add-on offering under the 93⁄4% Senior Notes indenture. We received proceeds of $176.9 million, including $3.8 million of interest accruing from October 1, 2002 through the date of issuance that will be repaid to holders of the
bonds in the first semi-annual interest payment due on April 1, 2003, and net of an underwriting fee of $3.1 million and a bond discount of $8.8 million that is being amortized through October 2009. The proceeds of this offering were used to repay a
portion of the outstanding revolving loans under the Midwest Holdings Credit Facility. Since this additional add-on offering occurred under the 93⁄4% Senior Notes indenture, these



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



4. Debt (continued)



additional debt securities and the 93⁄4% Senior Notes are considered a single series of senior notes with identical terms. In June 2003, we completed an
exchange offer pursuant to which the $185.0 million add-on offering under the 93⁄4% Senior Notes were exchanged for identical notes registered under the Securities Act of 1933.



In December 2003, we completed a $130.0 million add-on offering under the 101⁄2% Senior Notes indenture. We received proceeds of $140.9
million, including $1.5 million of interest accruing from November 1, 2003 through the date of issuance that will be repaid to holders of the bonds in the first semi-annual interest payment due on May 1, 2004 and a bond premium of $11.4 million that
is being amortized through November 2010 and net of an underwriting fee of $2.0 million. The proceeds of this offering were used to repay a portion of the outstanding revolving loans under the Midwest Holdings Credit Facility. Since this additional
add-on offering occurred under the 101⁄2% Senior Notes indenture, these additional debt securities and the 101⁄2% Senior Notes are considered a single series of senior notes with identical terms.



In July 2004, Insight Midwest completed an exchange offer pursuant to which the $130.0
million 101⁄2% Senior Notes issued in December 2003 were exchanged for substantially identical notes registered under the Securities Act of 1933.



Debt Principal Payments



As of December 31, 2004, principal payments required on our debt were as follows (in thousands):



|           |  |   |          
|---------- |  | - | ---------
|2005       |  | $ | 83,500   
|2006       |  |   | 83,500   
|2007       |  |   | 83,500   
|2008       |  |   | 104,750  
|2009       |  |   | 1,517,500
|Thereafter |  |   | 730,000  
|           |  |   |          
|Total      |  | $ | 2,602,750
|           |  |   |          



5. Derivative Instruments



We enter into derivative instruments, typically interest-rate swap and
collar agreements, to modify the interest characteristics of our outstanding debt to either a floating or fixed rate basis. These agreements involve fixed and floating rate interest payments in exchange for floating and fixed rate interest receipts
over the life of the agreement without an exchange of the underlying principal amount. The differential to be paid or received is accrued as interest rates change and is recognized as an adjustment to interest expense related to the debt. The
related amount payable or receivable is included in other liabilities or assets. We record the effective portion of certain derivatives gains or losses as accumulated other comprehensive income or loss in the accompanying consolidated balance
sheets. Gains and losses related to derivative instruments that are determined not to be effective are recorded in our consolidated



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5. Derivative Instruments (continued)



statements of operations as either an adjustment to interest expense or other income or expense depending on whether the swap is a cash flow hedge or fair
value hedge.



Cash Flow Hedges



As of December 31, 2003, we had entered into an interest rate swap agreement effectively
fixing the interest rate at 5.0% on $150.0 million notional value of debt. This agreement expired in August 2004. We recorded $826,000 of accrued interest related to this agreement as of December 31, 2003. As of December 31, 2003, the estimated cost
to terminate our interest rate swap agreement was approximately $3.4 million.



Fair Value Hedges



In February 2003, we entered into
two interest rate swap agreements whereby we swapped fixed rates under our 101⁄2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 7.7%, on $185.0 million notional value of
debt. Six-month LIBOR ranged between 1.26% and 1.34% for February and March 2003. In May 2003, we settled these swaps and received proceeds of $1.8 million and recorded a gain in this amount, which is included in other expense in our consolidated
statements of operations.



In July 2003, we entered into three new interest
rate swap agreements whereby we swapped fixed rates under our 101⁄2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 8.3%, on $185.0 million notional value of debt. These
agreements expire November 1, 2005. We recorded a gain on these swaps of $36,000 for the year ended December 31, 2004, which is included in other income. As of December 31, 2004 and 2003, we recorded $(364,000) and $275,000 of interest receivable
(payable) related to these agreements. The cost if terminated of these agreements was $2.1 million as of December 31, 2004 and 2003.



In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under our 101⁄2% senior notes due in December 2010 for variable rates
equal to six-month LIBOR, plus the applicable margin of approximately 5.9%, on $130.0 million notional value of debt. This agreement expires November 1, 2010. This swap has been determined to be perfectly effective in hedging against fluctuations in
the fair value of the underlying debt. As such, changes in the fair value of the underlying debt equally offset changes in the value of the interest rate swap in our consolidated statements of operations. The fair value (cost if terminated) of this
swap as of December 31, 2004 and 2003 was $519,000 and $(206,000) and has been recorded in other non-current liabilities and as an adjustment to the carrying value of debt.



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6. Supplemental Cash Flow Information



The following amounts were paid in cash during the years ended December 31,:



|         |  |                |         |      |   |         |  |   |        
|-------- |  | -------------- | ------- | ---- | - | ------- |  | - | -------
|         |  | 2004           |         | 2003 |   | 2002   
|         |  | (in thousands)
|Interest |  | $              | 167,602 |      | $ | 163,457 |  | $ | 167,703



7. Financial Instruments



Concentrations of Credit Risk



Financial instruments that potentially subject us to concentrations of credit risk consist
principally of cash and cash equivalents and accounts receivable. We maintain cash and cash equivalents with various financial institutions and our policy is designed to limit exposure to any one institution. Concentrations of credit risk with
respect to accounts receivable are limited due to the large number of customers comprising our customer base.



Fair Value



We used the
following methods and assumptions in estimating our fair value disclosures for financial instruments:



Cash equivalents and accounts receivable:The carrying amount reported in the consolidated balance sheets for cash equivalents and accounts receivable approximates fair value.



Debt:The carrying amounts of our borrowings under our credit arrangements approximate
fair value as they bear interest at floating rates. The fair value of our Senior Notes and Senior Discount Notes are based on quoted market prices. The fair value of our 93⁄4% Senior Notes as of December 31, 2004 and 2003 was $404.3 million and
$407.1 million. The fair value of our 101⁄2% Senior Notes as of December 31, 2004 and 2003 was $689.9 million and $685.1 million.



Interest rate swap agreements:Interest rate swap agreements are recorded in our financial statements at fair value. The cost of such swap agreements was $1.6
million and $5.7 million as of December 31, 2004 and 2003.



8. Related Party
Transactions



Managed Systems



On March 17, 2000, Insight LP entered into a management agreement with Comcast of
Montana/Indiana/Kentucky/Ohio (Comcast) (formerly known as InterMedia Partners Southeast), an affiliate of Comcast Cable, to provide management services to cable television systems owned by



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. Related Party Transactions (continued)



Comcast. These systems served approximately 89,400 customers in the state of Indiana. Certain of our employees operated these managed systems. Overhead costs
we incurred were allocated ratably and charged to Comcast on a monthly basis. Effective July 31, 2004, the management agreement was terminated by mutual agreement.



On February 28, 2003, Insight Midwest exchanged with Comcast of Montana/Indiana/Kentucky/Ohio the system we then owned in Griffin, Georgia,
serving approximately 11,800 customers, plus $25.0 million, for the managed systems located in New Albany, Indiana and Shelbyville, Kentucky, together serving approximately 23,400 customers. Additionally, pursuant to the agreement, Insight Midwest
paid approximately $1.5 million as a closing adjustment to Comcast of Montana/Indiana/Kentucky/Ohio to complete the rebuild and upgrade of the Griffin, Georgia system.



This system exchange was accounted for on that date as a sale of the Griffin, Georgia system and a purchase of the New Albany, Indiana and
Shelbyville, Kentucky systems. In connection with this system exchange, we recorded a gain of approximately $27.1 million equal to the difference between the fair value and carrying value of the Griffin, Georgia system as of the closing date. Of the
$64.5 million purchase price of the New Albany, Indiana and Shelbyville, Kentucky systems $31.9 million was allocated to such cable television systems assets acquired in relation to their fair values and $32.6 million was allocated to
franchise costs.



Programming



We purchase the majority of our programming through affiliates of Comcast Cable. Charges for
such programming, including a 11⁄2% administrative fee, were $151.0 million, $142.4 million and $130.5 million for the three years ended December 31, 2004, 2003 and 2002. As of December 31, 2004 and 2003, $36.8 million and $28.3 million of
accrued programming costs were due to affiliates of Comcast Cable. We believe that the programming rates charged through these affiliates are lower than those available from independent parties.



In 2001, in connection with the purchase and contribution of our systems primarily located in
Illinois, we acquired, through affiliates of Comcast Cable, an above-market programming contract. The above-market portion of the contract was recorded as an adjustment to the purchase price of the Illinois systems of $36.5 million with a long-term
programming liability recorded in other non-current liabilities. This contract was renegotiated, by affiliates of Comcast Cable and the programmer during the third quarter of 2003 and indirectly resulted in more favorable programming rates for us.
As such, we recorded a reduction to programming expense of $3.1 million and recorded a gain on the extinguishment of the liability for $37.7 million, both of which have been recorded in our consolidated statements of operations during the three
months ended September 30, 2003.



Telephone Agreements



In July 2000, to facilitate delivery of telephone services we entered
into a ten-year agreement with AT&T Broadband (now known as Comcast Cable) that allowed Insight Midwest to deliver to its



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. Related Party Transactions (continued)



residential customers, in certain of its service areas, local telephone service provided by Comcast Cable. Under the terms of the agreement, Insight Midwest
leased certain capacity on our local network to Comcast Cable. Revenue earned from leased network capacity used in the provision of telephone services was $8.5 million, $6.2 million and $2.2 million for the years ended December 31, 2004, 2003 and
2002. In addition, Insight Midwest provided certain services and support for which it received additional payments related to installations, marketing and billing support. Fee revenue earned in connection with installations was deferred and
amortized over the term a telephone customer was expected to maintain their telephone service, currently estimated to be three years. Marketing and billing support revenue was recognized in the period such services were performed.



On July 2, 2004, we entered into an agreement with Comcast Cable and certain other
subsidiaries of Comcast Corporation to acquire the telephone business conducted by Comcast Cable in the markets served under our joint operating agreement. By acquiring ownership of the telephone business from Comcast Cable, we terminated our
pre-existing joint operating agreement with Comcast Cable and have gained both operational and strategic control over this business. The acquisition was completed on December 31, 2004 and was accounted for under the purchase method of accounting.



Comcast Cable paid us approximately $13 million in cash and transferred to us
certain assets and liabilities related to the telephone business. We recorded an extraordinary gain of $15.6 million in connection with the acquisition and settled amounts with Comcast Cable under our pre-existing joint operating agreement for $2.6
million, representing the net current liabilities owed to Comcast Cable.



Advertising Services



In October 1999, to facilitate
the administration of our advertising services in our Kentucky Systems, we entered into an agreement with an affiliate of AT&T Broadband (now known as Comcast Cable), which provided for this affiliate to perform all of our Kentucky advertising
sales and related administrative services. Effective September 26, 2004, this agreement was terminated by mutual agreement.



We, through our Kentucky Systems, earned advertising revenues through this affiliate of $13.5 million from January 1, 2004 through September 26, 2004 and $18.5 million
and $15.8 million for the years ended December 31, 2003 and 2002. As of December 31, 2004 and December 31, 2003, we had $1.1 million and $9.3 million as a receivable due from this affiliate included in other current assets. The amount included as of
December 31, 2004 will be eliminated during the first quarter of 2005 upon final settlement of the agreement termination described above. Through September 26, 2004 we paid this affiliate a fixed and variable fee for providing this service based on
advertising sales cash flow growth. As of December 31, 2004 and 2003, we had $38,500 and $102,000 recorded as payables to this affiliate related to such services. The amount payable as of December 31, 2004 will be eliminated upon final settlement
during the first quarter of 2005.



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##### Table of Contents

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. Related Party Transactions (continued)



Insight Interactive



On November 17, 1999, Insight Cable Services formed a joint venture with Source Media, Inc. known as Insight Interactive, LLC to conduct all
lines of business of Source Media relating to its VirtualModem and Interactive Channel products and businesses. On March 14, 2002, Insight Cable Services purchased the remaining 50% equity interest in Insight Interactive that it did not already own
from Source Media. We are currently providing Insight Interactives services to customers in some of our systems. For the years ended December 31, 2004, 2003 and 2002, fees for such services totaled $2.5 million, $2.1 million and $1.6 million.



Due To Affiliates



As of December 31, 2004 and 2003, we had amounts owed to Insight LP, our manager, primarily
comprised of incurred but unpaid management fees calculated as approximately 3% of revenues.



9. At Home Corporation



High-speed
Internet service charges were incurred through February 28, 2002 as a result of payments made to At Home Corporation (@Home), the former provider of high-speed Internet services for all of our systems, except for those located in Ohio.
On September 28, 2001, @Home filed for protection under Chapter 11 of the Bankruptcy Code. For the purpose of continuing service to existing customers and to resume the provisioning of service to new customers, we entered into an interim service
arrangement that required that we pay $10.0 million to @Home to extend service for three months through February 28, 2002.



As a result of this arrangement, we incurred approximately $2.8 million in excess of our original agreed-to cost for such services rendered during the year ended December
31, 2001 and approximately $4.1 million in excess of our original agreed-to cost for such services rendered from January 1, 2002 through February 28, 2002. Additionally, as of December 31, 2001, we recorded an allowance for bad debt of $1.0 million
for a net receivable from @Home in connection with monies @Home collected from our high-speed Internet customers on our behalf prior to September 28, 2001. These additional costs are presented as high-speed Internet charges on our statement of
operations.



As of March 1, 2002, we had transitioned all of our systems
affected by this bankruptcy filing to our own regional network that resides on AT&T Corporations platform.



10. Commitments and Contingencies



Programming Contracts



We enter into long-term contracts with third parties who provide us with programming for distribution over our cable television systems. These programming contracts are a
significant part of our business and represent a substantial portion of our operating costs. Since future fees under such contracts are



F-20



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##### Table of Contents

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10. Commitments and Contingencies (continued)



based on numerous variables, including number and type of customers, we have not recorded any liabilities with respect to such contracts.



Lease Agreements



We lease and sublease equipment and office space under various operating lease arrangements expiring through February 10, 2047. Future
minimum rental payments required under such operating leases as of December 31, 2004 were (in thousands):



|           |  |   |      
|---------- |  | - | -----
|2005       |  | $ | 2,859
|2006       |  |   | 2,301
|2007       |  |   | 1,352
|2008       |  |   | 952  
|2009       |  |   | 636  
|Thereafter |  |   | 1,360
|           |  |   |      
|Total      |  | $ | 9,460
|           |  |   |      



Rental expense on operating leases for
the years ended December 31, 2004, 2003 and 2002 was $3.6 million, $3.7 million and $3.7 million.



Litigation



In November 2000, we
filed a state court action against the City of Louisville for its grant, in September 2000, of a more favorable franchise to Knology of Louisville, Inc. Upon commencement of this action, the City, pursuant to a provision in its franchise agreement
with Knology, automatically suspended Knologys franchise pending a final, non-appealable court determination as to whether Knologys franchise was more favorable than the franchise under which we operated. In November 2000, Knology filed
a federal court action against us seeking monetary damages and other relief for alleged violations of federal laws arising out of our having filed, pursuant to the provisions of our own franchise agreement with the City, the state court action. In
March 2001, the federal court preliminarily set aside the suspension of Knologys franchise. To date, Knology has begun no work in the City. In March 2002, a state circuit court ruled against our claim that Knologys franchise was more
favorable. We appealed the circuit courts order to the state court of appeals which, in June 2003, upheld the lower court ruling. We filed a motion for discretionary review of the appeals courts ruling which was denied by the Kentucky
Supreme Court.



In May 2003, the federal court granted us summary judgment and
dismissed six of Knologys 11 claims. The court granted summary judgment to Knology on three claims, two of which resulted in permanently enjoining enforcement of the automatic suspension provision of Knologys franchise agreement and did
not involve damages. The third such claim was for violation of Knologys first amendment rights, which was to proceed to trial solely on the issue of damages, and could have resulted in an award of legal fees and court costs specific to such
claim if upheld. The remaining undecided claims related to allegations of anticompetitive conduct arising from the state court lawsuit and were to proceed to trial on the merits. In



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##### Table of Contents

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



10. Commitments and Contingencies (continued)



August 2003, the court agreed, in part, with our Motion for Reconsideration, that the stay provision provides no justification for an injunction since the
language was severed. Further, the court granted our Motion to Certify Questions for an Immediate Appeal to the Sixth Circuit Court of Appeals. The Sixth Circuit Court of Appeals granted our Motion to Certify, and ruled in our favor overturning the
trial courts rulings in favor of Knology. The Sixth Circuit found that our right to file the state court lawsuit against the City was protected and thus we were immune from liability arising from that lawsuit. Knology filed a motion for an en
banc review by the Sixth Circuit which was denied March 2005. The matter will return to the trial court for final rulings consistent with the Sixth Circuit opinion.



We are subject to various legal proceedings that arise in the ordinary course of business. While it is impossible to determine with
certainty the ultimate outcome of these matters, it is our opinion that the resolution of these matters will not have a material adverse affect on our consolidated financial condition.



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##### Table of Contents



Report of Independent Registered Public Accounting Firm



The Shareholders

Insight Capital, Inc.



The Shareholders

Insight Capital, Inc.



We have audited the accompanying balance sheets of Insight Capital, Inc. (the
Company) as of December 31, 2004 and 2003 and the related statements of operations, changes in shareholders deficit and cash flows for each of the three years in the period ended December 31, 2004. These financial statements are
the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Oversight Board (United States). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Companys internal control over financial reporting.Our audits included
consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal
control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



As indicated in Note 1, the Company has no operations. Its ability to satisfy debt and other obligations is dependent upon funding from
related entities, which are under the common control of the owners of the Company.



In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2004 and 2003 and the results of its operations and cash flows for each of the
three years in the period ended December 31, 2004 in conformity with U.S. generally accepted accounting principles.



/s/ Ernst & Young LLP



New York, New York

March 7, 2005



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##### Table of Contents

INSIGHT CAPITAL, INC.

BALANCE SHEETS

(in thousands)



|                                                                                                                |  |                  |            |   |                  |   |            |  
|--------------------------------------------------------------------------------------------------------------- |  | ---------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                |  | December 31,2004 |            |   | December 31,2003 |  
|Assets                                                                                                          |  |                  |            |   |                  |   |            |  
|Cash                                                                                                            |  | $                | 1          |   |                  | $ | 1          |  
|Deferred financing costs, net of accumulated amortization of $9,081 and $6,473 as of December 31, 2004 and 2003 |  |                  | 13,700     |   |                  |   | 16,307     |  
|                                                                                                                |  |                  |            |   |                  |   |            |  
|Total assets                                                                                                    |  | $                | 13,701     |   |                  | $ | 16,308     |  
|                                                                                                                |  |                  |            |   |                  |   |            |  
|Liabilities and shareholders deficit                                                                           |  |                  |            |   |                  |   |            |  
|Accrued interest                                                                                                |  | $                | 20,409     |   |                  | $ | 20,409     |  
|                                                                                                                |  |                  |            |   |                  |   |            |  
|Total current liabilities                                                                                       |  |                  | 20,409     |   |                  |   | 20,409     |  
|Senior notes, to be paid by Insight Midwest, LP                                                                 |  |                  | 1,014,110  |   |                  |   | 1,013,806  |  
|                                                                                                                |  |                  |            |   |                  |   |            |  
|Total liabilities                                                                                               |  |                  | 1,034,519  |   |                  |   | 1,034,215  |  
|                                                                                                                |  |                 
|Shareholders deficit:                                                                                          |  |                  |            |   |                  |   |            |  
|Common stock; $.01 par value; 1,000 shares authorized, issued and outstanding                                   |  |                  |           |   |                  |   |           |  
|Paid-in-capital                                                                                                 |  |                  | 1          |   |                  |   | 1          |  
|In-substance allocation of proceeds related to senior notes to be paid by Insight Midwest                       |  |                  | (635,304   | ) |                  |   | (738,992   | )
|Accumulated deficit                                                                                             |  |                  | (385,515   | ) |                  |   | (278,916   | )
|                                                                                                                |  |                  |            |   |                  |   |            |  
|Total shareholders deficit                                                                                     |  |                  | (1,020,818 | ) |                  |   | (1,017,907 | )
|                                                                                                                |  |                  |            |   |                  |   |            |  
|Total liabilities and shareholders deficit                                                                     |  | $                | 13,701     |   |                  | $ | 16,308     |  
|                                                                                                                |  |                  |            |   |                  |   |            |  



See accompanying
notes



F-24



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##### Table of Contents

INSIGHT CAPITAL, INC.

STATEMENTS OF OPERATIONS

(in thousands)



|                 |  |                         |          |   |      |   |         |      |  |   |         |  
|---------------- |  | ----------------------- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                 |  | Year Ended December 31, |         
|                 |  | 2004                    |          |   | 2003 |   |         | 2002 | 
|Expenses:        |  |                         |          |   |      |   |         |      |  |   |         |  
|                 |  |                         |         
|Amortization     |  | $                       | (2,608   | ) |      | $ | (2,258  | )    |  | $ | (1,650  | )
|Interest expense |  |                         | (103,991 | ) |      |   | (92,706 | )    |  |   | (73,749 | )
|                 |  |                         |          |   |      |   |         |      |  |   |         |  
|Net loss         |  | $                       | (106,599 | ) |      | $ | (94,964 | )    |  | $ | (75,399 | )
|                 |  |                         |          |   |      |   |         |      |  |   |         |  



See accompanying
notes



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##### Table of Contents

INSIGHT CAPITAL, INC.

STATEMENTS OF CHANGES IN SHAREHOLDERS DEFICIT

(in thousands)



|                                                          |  |                           |   |                                                              |   |          |                    |  |   |                           |   |  |   |            |  
|--------------------------------------------------------- |  | ------------------------- | - | ------------------------------------------------------------ | - | -------- | ------------------ |  | - | ------------------------- | - |  | - | ---------- | -
|                                                          |  | Additionalpaid-in-capital |   | In-substancecontributions(allocations)related tosenior notes |   |          | Accumulateddeficit |  |   | Totalshareholdersdeficit |  
|Balance, January 1, 2002                                  |  | $                         | 1 |                                                              | $ | (586,430 | )                  |  | $ | (108,553                  | ) |  | $ | (694,982   | )
|                                                          |  |                           |   |                                                             
|Borrowings under senior notes by Insight Midwest, net     |  |                           |  |                                                              |   | (174,429 | )                  |  |   |                          |   |  |   | (174,429   | )
|Interest payments made by Insight Midwest on senior notes |  |                           |  |                                                              |   | 72,000   |                    |  |   |                          |   |  |   | 72,000     |  
|Net loss                                                  |  |                           |  |                                                              |   |         |                    |  |   | (75,399                   | ) |  |   | (75,399    | )
|                                                          |  |                           |   |                                                              |   |          |                    |  |   |                           |   |  |   |            |  
|Balance, December 31, 2002                                |  |                           | 1 |                                                              |   | (688,859 | )                  |  |   | (183,952                  | ) |  |   | (872,810   | )
|                                                          |  |                           |   |                                                             
|Borrowings under senior notes by Insight Midwest, net     |  |                           |  |                                                              |   | (140,170 | )                  |  |   |                          |   |  |   | (140,170   | )
|Interest payments made by Insight Midwest on senior notes |  |                           |  |                                                              |   | 90,037   |                    |  |   |                          |   |  |   | 90,037     |  
|Net loss                                                  |  |                           |  |                                                              |   |         |                    |  |   | (94,964                   | ) |  |   | (94,964    | )
|                                                          |  |                           |   |                                                              |   |          |                    |  |   |                           |   |  |   |            |  
|Balance, December 31, 2003                                |  |                           | 1 |                                                              |   | (738,992 | )                  |  |   | (278,916                  | ) |  |   | (1,017,907 | )
|                                                          |  |                           |   |                                                             
|Interest payments made by Insight Midwest on senior notes |  |                           |  |                                                              |   | 103,688  |                    |  |   |                          |   |  |   | 103,688    |  
|Net loss                                                  |  |                           |  |                                                              |   |         |                    |  |   | (106,599                  | ) |  |   | (106,599   | )
|                                                          |  |                           |   |                                                              |   |          |                    |  |   |                           |   |  |   |            |  
|Balance, December 31, 2004                                |  | $                         | 1 |                                                              | $ | (635,304 | )                  |  | $ | (278,916                  | ) |  | $ | (1,020,818 | )
|                                                          |  |                           |   |                                                              |   |          |                    |  |   |                           |   |  |   |            |  



See accompanying
notes



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##### Table of Contents

INSIGHT CAPITAL, INC.

STATEMENTS OF CASH FLOWS

(in thousands)



|                                                                                |  |                         |          |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------------- |  | ----------------------- | -------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                |  | Year Ended December 31, |         
|                                                                                |  | 2004                    |          |   | 2003 |   |         | 2002 | 
|Cash flows from operating activities:                                           |  |                         |          |   |      |   |         |      |  |   |         |  
|                                                                                |  |                         |         
|Net loss                                                                        |  | $                       | (106,599 | ) |      | $ | (94,964 | )    |  | $ | (75,399 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                         |          |   |      |   |         |      |  |   |         |  
|Accretion of discount on notes                                                  |  |                         | 303      |   |      |   | 1,833   |      |  |   | 1,046   |  
|Amortization                                                                    |  |                         | 2,608    |   |      |   | 2,258   |      |  |   | 1,650   |  
|Interest expense assumed by affiliate                                           |  |                         | 103,688  |   |      |   | 90,037  |      |  |   | 72,000  |  
|Changes in operating assets and liabilities:                                    |  |                         |          |   |      |   |         |      |  |   |         |  
|Accrued interest                                                                |  |                         |         |   |      |   | 836     |      |  |   | 703     |  
|                                                                                |  |                         |          |   |      |   |         |      |  |   |         |  
|Net cash provided by operating activities                                       |  |                         |         |   |      |   |        |      |  |   |        |  
|                                                                                |  |                         |          |   |      |   |         |      |  |   |         |  
|Net increase in cash                                                            |  |                         |         |   |      |   |        |      |  |   |        |  
|Cash, beginning of year                                                         |  |                         | 1        |   |      |   | 1       |      |  |   | 1       |  
|                                                                                |  |                         |          |   |      |   |         |      |  |   |         |  
|Cash, end of year                                                               |  | $                       | 1        |   |      | $ | 1       |      |  | $ | 1       |  
|                                                                                |  |                         |          |   |      |   |         |      |  |   |         |  
|Supplemental non-cash financing activity:                                       |  |                         |          |   |      |   |         |      |  |   |         |  
|Proceeds from issuance of notes by Insight Midwest                              |  | $                       |         |   |      | $ | 140,170 |      |  | $ | 174,429 |  
|Interest payments made by Insight Midwest                                       |  |                         | 103,688  |   |      |   | 90,037  |      |  |   | 72,000  |  



See accompanying
notes



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##### Table of Contents

INSIGHT CAPITAL, INC.

NOTES TO FINANCIAL STATEMENTS



1. Nature of Business



Insight Capital, Inc. (the Company), a Delaware corporation, was formed on September 23, 1999, for the sole purpose of being a
co-issuer with Insight Midwest, L.P. (Insight Midwest) of senior notes which allows certain investors the ability to be holders of the debt. The Company has no operations. The outstanding shares of the Company are owned by Insight
Midwest.



2. Summary of Significant Accounting Policies



Deferred Financing Costs



Deferred financing costs relate to costs, primarily underwriting and professional fees,
associated with the issuance of the senior notes, which are amortized over the life of the senior notes.



Fair Value of Financial Instruments



The fair value of the 93⁄4% Senior Notes as of December 31, 2004 and 2003 was $404.3 million and $407.1 million, respectively. The fair value of the 101⁄2% Senior Notes as of December 31, 2004 and 2003 was $689.9 million and $685.1
million, respectively.



In-Substance Allocation of Note Proceeds



Since both Insight Midwest and the Company are severally and jointly
liable, the senior notes, deferred financing costs and associated interest expense are reflected in the Companys financial statements as well as a charge to the equity section representing an in-substance allocation of the proceeds from the
senior notes. The Company has accrued interest on the outstanding balance. When Insight Midwest makes interest payments, the Company reduces accrued interest payable and records an in-substance contribution to equity.



Income Taxes



The Company has prepared its income tax provision using the liability method in accordance with Financial Accounting Standards Board
Statement No.109, Accounting for Income Taxes. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial reporting and tax bases of assets and liabilities and are measured using
tax rates that will be in effect when the differences are expected to reverse. As of December 31, 2004 and 2003 the Company had no deferred tax assets or liabilities and no tax provision to record.



Use of Estimates



The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make
estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.



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##### Table of Contents

INSIGHT CAPITAL, INC.

NOTES TO FINANCIAL STATEMENTS



3.
Notes Payable



Debt consisted of:



|                                           |  |                  |           |   |                  |   |           |  
|------------------------------------------ |  | ---------------- | --------- | - | ---------------- | - | --------- | -
|                                           |  | December 31,2004 |           |   | December 31,2003 |  
|                                           |  | (in thousands)   |          
|Insight Midwest 93⁄4% Senior Notes           |  | $                | 385,000   |   |                  | $ | 385,000   |  
|Insight Midwest 101⁄2% Senior Notes          |  |                  | 630,000   |   |                  |   | 630,000   |  
|                                           |  |                  | 1,015,000 |   |                  |   | 1,015,000 |  
|Less unamortized discount/premium on Notes |  |                  | (890      | ) |                  |   | (1,194    | )
|                                           |  |                  |           |   |                  |   |           |  
|Total debt                                 |  | $                | 1,014,110 |   |                  | $ | 1,013,806 |  
|                                           |  |                  |           |   |                  |   |           |  



On October 1, 1999, the Company and
Insight Midwest completed a $200.0 million offering of 93⁄4% Senior Notes due in October 2009. The proceeds of the offering were used to repay certain debt of Insight Midwest. Interest payments on these Senior Notes, which commenced on April 1,
2000, are payable semi-annually on April 1 and October 1.



On November 6, 2000,
the Company and Insight Midwest completed a $500.0 million offering of 101⁄2% Senior Notes due in November 2010. Insight Midwest received proceeds of $487.5 million, net of an underwriting fee of $5.0 million and a bond discount of $7.5 million.
The proceeds of the offering were used to repay certain debt of Insight Midwest. Interest payments on these Senior Notes, which commenced on May 1, 2001, are payable semi-annually on May 1 and November 1.



In May 2000 and September 2001, Insight Midwest completed exchange offers pursuant to which
the 93⁄4% Senior Notes and 101⁄2% Senior Notes were exchanged for identical notes registered under the Securities Act of 1933.



In December 2002, the Company and Insight Midwest completed a $185.0 million add-on offering under the 93⁄4% Senior Notes indenture. Insight Midwest received proceeds
of $176.9 million, including $3.8 million of interest accruing from October 1, 2002 through the date of issuance that will be repaid to holders of the bonds in the first semi-annual interest payment due on April 1, 2003, and net of an underwriting
fee of $3.1 million and a bond discount of $8.8 million that is being amortized through October 2009. The proceeds of this offering were used to repay a portion of the outstanding revolving loans under the Midwest Holdings Credit Facility. Since
this additional add-on offering occurred under the 93⁄4% Senior Notes indenture, these additional debt securities and the 93⁄4% Senior Notes are considered a single series of senior notes with identical terms.



In June 2003, Insight Midwest completed an exchange offer pursuant to which the $185.0
million add-on offering under the 93⁄4% Senior Notes were exchanged for identical notes registered under the Securities Act of 1933.



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##### Table of Contents

INSIGHT CAPITAL, INC.

NOTES TO FINANCIAL STATEMENTS



3. Notes Payable (continued)



In December 2003, the Company and Insight Midwest completed a $130.0 million add-on offering under the 101⁄2%
Senior Notes indenture. Insight Midwest received proceeds of $140.9 million, including $1.5 million of interest accruing from November 1, 2003 through the date of issuance that will be repaid to holders of the bonds in the first semi-annual interest
payment due on May 1, 2004 and a bond premium of $11.4 million that is being amortized through November 2010 and net of an underwriting fee of $2.5 million. The proceeds of this offering were used to repay all of the outstanding revolving loans
under the Midwest Holdings Credit Facility. Since this additional add-on offering occurred under the 101⁄2% Senior Notes indenture, these additional debt securities and the 101⁄2% Senior Notes are considered a single series of senior notes
with identical terms.



In July 2004, Insight Midwest completed an exchange
offer pursuant to which the $130.0 million 101⁄2% Senior Notes issued in December 2003 were exchanged for substantially identical notes registered under the Securities Act of 1933.



The 93⁄4% Senior Notes and 101⁄2% Senior Notes are redeemable on or after October 1,
2004 and November 1, 2005, respectively. In addition, Insight Midwest can redeem up to 35% of the 93⁄4% Senior Notes and 101⁄2% Senior Notes prior to October 1, 2002 and November 1, 2005, respectively, with the net proceeds from certain sales
of Insight Midwests equity. Each holder of the Senior Notes may require redemption of all or part of that holders notes upon certain changes of control. Although the Company is a co-issuer of the Senior Notes, it has no substantial
assets or any operations and will not have access to additional sources of cash flow to make any payments on such debt. All future funding on the Senior Notes, including principal and interest payments, are dependent upon the operating results of
Insight Midwest.



The Senior Notes are general unsecured obligations and are
subordinate to all Insight Midwests liabilities, the amounts of which were $1.7 billion and $1.8 billion as of December 31, 2004 and 2003, respectively. The Senior Notes contain certain financial and other debt covenants.



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##### Table of Contents



SIGNATURES



Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                     |  |  |  |                       |  |                           |  |                                                
|-------------------- |  |  |  | --------------------- |  | ------------------------- |  | -----------------------------------------------
|                     |  |  |  | INSIGHT MIDWEST, L.P.
|                     |  |  | 
|Date: March 30, 2005 |  |  |  | By:                   |  | /s/    MICHAEL S.
WILLNER
|                     |  |  |  |                       |  |                           |  | Michael S. Willner,                            
|                     |  |  |  |                       |  |                           |  | Chairman, President and Chief Executive Officer



Pursuant to the
requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                                                    |  |                                                                                                                                                                                           |  |               
|--------------------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                           |  | Title                                                                                                                                                                                     |  | Date          
|                                                    |  |                                                                                                                                                                                          
|/s/    SIDNEY R.
KNAFELSidney R.
Knafel             |  | Chairman of the Board of Insight Communications Company, Inc.                                                                                                                             |  | March 30, 2005
|                                                    |  |                                                                                                                                                                                          
|/s/    MICHAEL S.
WILLNERMichael S.
Willner         |  | Chairman, President and Chief Executive Officer of Registrant, Vice Chairman, President and Chief Executive Officer of Insight Communications Company, Inc. (Principal Executive
Officer) |  | March 30, 2005
|                                                    |  |                                                                                                                                                                                          
|/s/    DINNI JAINDinni Jain                         |  | Executive Vice President and Chief Operating Officer of Registrant and Insight Communications Company, Inc                                                                                |  | March 30, 2005
|                                                    |  |                                                                                                                                                                                          
|/s/    JOHN ABBOTJohn Abbot                         |  | Senior Vice President and Chief Financial Officer of Registrant and Insight Communications Company, Inc. (Principal Financial Officer)                                                    |  | March 30, 2005
|                                                    |  |                                                                                                                                                                                          
|/s/    DANIEL MANNINODaniel Mannino                 |  | Senior Vice President and Controller of Registrant and Insight Communications Company, Inc. (Principal Accounting Officer)                                                                |  | March 30, 2005
|                                                    |  |                                                                                                                                                                                          
|/s/    THOMAS L.
KEMPNERThomas L.
Kempner           |  | Director of Insight Communications Company, Inc.                                                                                                                                          |  | March 30, 2005
|                                                    |  |                                                                                                                                                                                          
|/s/    GERALDINE B.
LAYBOURNEGeraldine B.
Laybourne |  | Director of Insight Communications Company, Inc.                                                                                                                                          |  | March 30, 2005
|                                                    |  |                                                                                                                                                                                          
|/s/    DAVID C. LEEDavid C. Lee                     |  | Director of Insight Communications Company, Inc.                                                                                                                                          |  | March 30, 2005
|                                                    |  |                                                                                                                                                                                          
|/s/    JAMES S. MARCUSJames S. Marcus               |  | Director of Insight Communications Company, Inc.                                                                                                                                          |  | March 30, 2005





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##### Table of Contents



SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.



|                     |  |  |  |                       |  |                           |  |                                                
|-------------------- |  |  |  | --------------------- |  | ------------------------- |  | -----------------------------------------------
|                     |  |  |  | INSIGHT CAPITAL, INC.
|                     |  |  | 
|Date: March 30, 2005 |  |  |  | By:                   |  | /s/    MICHAEL S.
WILLNER
|                     |  |  |  |                       |  |                           |  | Michael S. Willner,                            
|                     |  |  |  |                       |  |                           |  | Chairman, President and Chief Executive Officer



Pursuant to the requirements of the
Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.



|                                            |  |                                                                                         |  |               
|------------------------------------------- |  | --------------------------------------------------------------------------------------- |  | --------------
|Signature                                   |  | Title                                                                                   |  | Date          
|                                            |  |                                                                                        
|/s/    SIDNEY R.
KNAFELSidney R.
Knafel     |  | Director                                                                                |  | March 30, 2005
|                                            |  |                                                                                        
|/s/    MICHAEL S.
WILLNERMichael S.
Willner |  | Chairman, President, Chief Executive Officer and Director (Principal Executive Officer) |  | March 30, 2005
|                                            |  |                                                                                        
|/s/    JOHN ABBOTJohn Abbot                 |  | Senior Vice President and Chief Financial Officer (Principal Financial Officer)         |  | March 30, 2005
|                                            |  |                                                                                        
|/s/    DANIEL MANNINODaniel Mannino         |  | Senior Vice President and Controller (Principal Accounting Officer)                     |  | March 30, 2005