**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON,D.C. 20549**

**FORM 10-K**

**AnnualReport Pursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934**

**For the fiscal year ended December 31, 2005**

| **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 of                            |   | (I.R.S. Employer |
| incorporation or  organization)                             |   | Identification  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) ofthe Exchange Act:  **None**

Securities registeredpursuant to Section 12(g) of the Exchange Act:  **None**

Indicate by check mark if any registrant is awell-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes  o  No  x

Indicate by check mark if each registrant is notrequired to file reports pursuant to Section 13 or Section 15(d) ofthe Exchange Act. Yes  x  No  o

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

Indicate by check mark if disclosure of delinquentfilers pursuant to Item 405 of Regulation S-K is not contained herein, and willnot be contained, to the best of registrants’ knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of this Form 10-Kor any amendment to this Form 10-K. Not Applicable

Indicateby check mark whether each registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of “acceleratedfiler and large accelerated filer” in Rule 12b-2 of the ExchangeAct. (Check one):

| Large accelerated filer o | Accelerated filer  o | Non-accelerated  filer x |
|---------------------------|----------------------|--------------------------|

 

Indicate by check mark whether any registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act).Yes  o  No  x

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

Indicatethe number of shares outstanding of the registrants’ common stock:  NotApplicable

 

----

**Table of Contents**

|                | ** ** | ** **                                                                    | ** ** | **Page**   | ** ** |
|----------------|------------|-------------------------------------------------------------------------------|------------|------------|------------|
|           |       | **PART I**                                                               |       |       |       |   |   |
| Item 1.        |       | Business                                                                      |       |       | 1          |   |   |
| Item 1A.       |       | Risk  Factors .                                                               |       |       | 26         |   |   |
| Item 1B        |       | Unresolved Staff Comments                                                     |       |       | 31         |   |   |
| Item 2.        |       | Properties  .                                                                 |       |       | 31         |   |   |
| Item 3.        |       | Legal  Proceedings                                                            |       |       | 31         |   |   |
| Item 4.        |       | Submission of Matters to a Vote of Security Holders .                         |       |       | 31         |   |   |
|           |       | **PART II**                                                              |       |       |       |   |   |
| Item 5.        |       | Market for  Registrants Common Equity, Related Stockholder Matters and Issuer |       |       |       |   |   |
|           |       | Purchases of Equity Securities                                                |       |       | 32         |   |   |
| Item 6.        |       | Selected  Financial Data                                                      | ** ** | ** ** | 32         |   |   |
| Item 7.        |       | Management’s  Discussion and Analysis of Financial Condition and         |       |       |       |   |   |
|           |       | Results of Operations                                                         |       |       | 33         |   |   |
| Item 7A.       |       | Quantitative and Qualitative Disclosures About Market  Risk                   |       |       | 45         |   |   |
| Item 8.        |       | Financial Statements and Supplementary Data                                   |       |       | 45         |   |   |
| Item 9.        |       | Changes in and  Disagreements with Accountants on Accounting and              |       |       |       |   |   |
|           |       | Financial Disclosure .                                                        |       |       | 45         |   |   |
| Item 9A.       |       | Controls and Procedures                                                       |       |       | 45         |   |   |
| Item  9B.      |       | Other  Information                                                            |       |       | 46         |   |   |
|           |       | **PART III**                                                             |       |       |       |   |   |
| Item 10.       |       | Directors and Executive Officers of the Registrant  .                         |       |       | 47         |   |   |
| Item 11.       |       | Executive Compensation .                                                      |       |       | 49         |   |   |
| Item 12.       |       | Security  Ownership of Certain Beneficial Owners and Management and Related   |       |       |       |   |   |
|           |       | Stockholder Matters .                                                         |       |       | 49         |   |   |
| Item 13.       |       | Certain Relationships and Related Transactions                                |       |       | 49         |   |   |
| Item 14.       |       | Principal Accountant Fees and Services                                        |       |       | 51         |   |   |
|           |       | **PART IV**                                                              |       |       |       |   |   |
| Item 15.       |       | Exhibits and Financial Statement Schedules.                                   |       |       | 51         |   |   |
| **SIGNATURES** |       |                                                                          |       |       |       |

 

i

----

**CAUTIONARY STATEMENT REGARDING FORWARD-LOOKINGINFORMATION**

This annual report on Form 10-K containscertain forward-looking statements with respect to the financial condition,results of operations, plans, objectives, future performance and business ofour company, including, without limitation, statements preceded by, followed byor that include the words “believes,” “expects,” “anticipates,” “estimates” orsimilar expressions. We believe it is important to communicate management’sexpectations to our stockholders. However, there may be events in the futurethat we are not able to accurately predict or over which we have no control.The risk factors listed in this annual report under Item 1A, as well as anyother cautionary language in this report, provide examples of risks,uncertainties and events that may cause our actual results to differ materiallyfrom the expectations we describe in our forward-looking statements. You shouldbe aware that the occurrence of the events described in these risk factors andelsewhere in this report could have a material adverse effect on our business,operating results and financial condition. Examples of these risks include:

·       All of the services offeredby our company face a wide range of competition that could adversely affect ourfuture results of operations;

·       We have substantial debtand have significant interest payment requirements, which may adversely affectour ability to obtain financing in the future to finance our operations and ourability to react to changes in our business;

·       The terms of InsightMidwest Holdings’ credit facility may limit our ability to access the cash flowof our subsidiaries;

·       There is uncertaintysurrounding our potential dissolution, the process for which may be triggeredby either of our partners;

·       We have a history of netlosses and may not be profitable in the future;

·       Our programming costs aresubstantial, and they are expected to increase; and

·       General businessconditions, economic uncertainty or slowdown, and the effects of governmentalregulation could adversely affect our future results of operations.

We do not undertake any obligation to publicly updateor release any revisions to these forward-looking statements to reflect eventsor circumstances after the date that this report is filed with the SEC or toreflect the occurrence of unanticipated events, except as required by law.

ii

----

**PART I**

**Item 1.**                        Business

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

**Our Manager**

Insight Communications Company, Inc. is the ninthlargest cable television system operator in the United States based oncustomers served.  Insight Communicationscurrently serves our approximately 1.3 million customers, all of whom areconcentrated in the four contiguous states of Indiana, Kentucky, Illinois andOhio. Our manager offers its customers an array of broadband products andservices, including analog and digital video, high-speed Internet access and,in certain markets, telephone services.

On December 16, 2005,our manager completed a going-private merger with Insight Acquisition Corp., anentity organized by certain affiliates of The Carlyle Group. Pursuant to thetransaction, Insight Acquisition Corp. merged with and into our manager, andour manager is the surviving corporation. Immediately after completion of thetransaction, our manager’s Class A common stock was delisted from TheNasdaq National Market, and our manager is now a privately-held corporation.

**Insight Midwest**

We are a limited partnership owned 50% by our managerand 50% by an indirect subsidiary of Comcast Cable Holdings, LLC, which is asubsidiary of Comcast Corporation. Our partnership agreement provides that at any time after December 31,2005 either partner has the right to commence a split-up process with respectto the partnership, subject to a limited right of postponement held by thenon-initiating partner. To date, neither partner has commenced the split-upprocess.

Our manager’s going-private transaction did not resultin any direct change in our ownership structure, and our manager continues toserve as our sole general partner and as the manager of each of our systems.Through a new class of Series A voting preferred stock of our managerissued in connection with the transaction, Sidney R. Knafel, Michael S. Willnerand related parties continue to maintain control of a majority of our manager’svoting power. Accordingly, the transaction is not expected to result in achange in the operational aspects of our business.

Our principal offices arelocated 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.,a Delaware corporation, was formed on September 23, 1999, for the solepurpose of being a co-issuer with Insight Midwest of senior notes which allowscertain investors the ability to be holders of the debt. Insight Capital has nooperations. The outstanding shares of Insight Capital are owned by InsightMidwest.

**Strategy**

Our strategy is to be afull-service provider of the highest caliber of entertainment, information andcommunications services. The centerpiece of our strategy, however, is toprovide exceptional customer service. We focus on building strong relationshipswith our customers and potential customers in the 

1

----

communitiesin which we operate because we believe that the single most important factor ingenerating customer loyalty is customer service. We believe that our localpresence and more personal relationships with our communities distinguishes usfrom our competitors and results in higher customer satisfaction. In addition,we continually explore opportunities to leverage the capacity and capability ofour upgraded broadband network to provide new and enhanced products andservices for our customers.

***Deliver excellent customer service and enhancecommunity relations***

We seek to secure a high level of customersatisfaction by managing local customer care units, staffed by professionalsfamiliar with the communities they serve; using market research to determinecustomer needs and priorities and by providing customers with an attractivelypriced product offering. A significant number of our customers visit theirlocal office on a monthly basis, providing us the opportunity to demonstrateand sell our new and enhanced products and services. We believe that thesedistinct marketing and promotion opportunities are effective sales channels,providing a competitive advantage as well as building customer loyalty.

We believe that our commitment to the communities inwhich we operate enhances our ability to attract and retain customers andfosters excellent franchise relationships. We are dedicated to building andsustaining strong community relations by providing valuable in-kind servicesand promotional opportunities to an array of local charities and organizations.We also support the cable industry’s Cable in the Classroom initiative andprovide free cable and high-speed Internet access to local schools. To further strengthenour bond with our communities and differentiate ourselves from othermultichannel video providers, we provide locally produced and orientedprogramming.

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

In addition to its geographic concentration, ourcommunications network is tightly-grouped, or “clustered,” with approximately97% of our customers served from 13 headends, or an average of approximately99,000 customers per headend (a headend processes signals received fordistribution to customers over our network). As a result, the amount ofcapital necessary to deploy new and enhanced products and services issignificantly reduced on a per home basis. We believe that the highly clusterednature of our systems also enables us to more efficiently deploy our marketingdollars and maximizes our ability to enhance customer awareness, increase useof our products and services and build brand support.

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

Many communities we serveare characterized by good housing growth, higher than average household incomeand low unemployment, and many are home to large universities and majorcommercial enterprises. We believe that the demographic profile of ourcommunities make them attractive markets for our existing and new products.

***Leverage our advanced broadband network to offerbundled services and introduce new and enhanced products***

Our advanced broadband network provides significantcapacity and the flexibility to offer our customers an array of products andservices. The capacity of a cable system to offer products and services isdetermined by its bandwidth. As of December 31, 2005, we estimate thatapproximately 97% of our customers were passed by our upgraded network, with abandwidth capacity of 750 megahertz (MHz) or greater. At the end of 2005,digital cable was available to 97% of basic customers passed by our broadbandnetwork, high-speed Internet was available to 98% of homes passed and telephoneservice was available to 34% of homes passed.

2

----

Our marketing strategy isto offer our customers an array of entertainment, information andcommunications services on a bundled basis. A bundled customer is one whosubscribes to two or more of our primary services (video, high-speed Internetaccess and telephone). Where available, all of our services are offered on abundled basis, supported by a single, integrated back-office platform, whichallows our customers to make one call to a single customer servicerepresentative regarding any and all of their services and to receive a singlebill for all services if they choose. By bundling our products and services, weprovide our customers with increased choice in value-added packages, which webelieve results in higher customer satisfaction, increased use of our servicesand greater customer retention.

***Pursue value-enhancing transactions in nearby oradjacent geographies***

We will seek to swap oracquire systems that strategically fit our clustering and operating strategyand are accretive to our value. We do not currently have any agreements,commitments or understandings for any future acquisitions. There is noassurance that any additional acquisitions will be completed. We believe thatby acquiring or swapping systems in close proximity we have the opportunity toimprove revenue growth and operating margins. This is achieved through theconsolidation of headends, spreading of fixed costs over larger systems andincreased operating efficiencies associated with larger systems.

**Technical Overview**

We believe that in order to achieve consistently highlevels of customer service, reduce operating costs, maintain a strongcompetitive position and deploy important new technologies, we need to maintaina state-of-the-art technical platform. The deployment of fiber optic cablewhich has a capacity for a very large number of channels, the increase in thebandwidth to 750 MHz or higher, the activation of a two-way communicationsnetwork and the installation of digital equipment allows us to deliver new andenhanced products and services, including interactive digital video, high-speedInternet services and telephone services.

As of December 31, 2005, our systems werecomprised of approximately 30,700 network miles serving approximately 1.3million customers and passing approximately 2.4 million homes resulting in adensity of approximately 78 homes per mile. As of that date, our systems weremade up of an aggregate of 28 headends, and approximately 97% of our customerswere served by 13 headends. As of December 31, 2005, we estimate thatapproximately 97% of our customers were passed by our upgraded network.

Our network design calls for an analog and digitaltwo-way active network with fiber optic cable carrying signals from the headendto the distribution point within our customers’ neighborhoods. The signals aretransferred to our coaxial cable network at the node for delivery to ourcustomers. We have designed the fiber system to be capable of subdividing thenodes if traffic on the network requires additional capacity.

We believe that active use of fiber optic technologyas a supplement to coaxial cable plays a major role in expanding channelcapacity and improving the performance of our systems. Fiber optic strands arecapable of carrying hundreds of video, data and voice channels over extendeddistances without the extensive signal amplification typically required forcoaxial cable. We will continue to deploy fiber optic cable to further reduceamplifier cascades while improving picture quality and system reliability.

A direct result of this extensive use of fiber opticsis an improvement in picture quality and a reduction of outages because systemfailures will be both significantly reduced and will impact far fewer customerswhen they do occur. Our design allows our systems to have the capability to runmultiple separate channel line-ups from a single headend and to insert targetedadvertisements into specific neighborhoods.

We are improving thereliability of telephone services by implementing standby powering and statusmonitoring on our local network as telephone services are deployed in oursystems. The existing 

3

----

commercialpower structure deployed in cable networks is subject to potential disruptionsin local power utility service. Standby power provides battery back-up for alimited duration, thereby making both telephone services and other products andservices delivered over our local network more reliable. Status monitoring willenable us to monitor key components of our local network so that we can helpreduce and diagnose problems affecting the performance of our local network.

**Products and Services**

We offer our customers a full array of traditionalcable television services and programming offerings. We tailor both our basicline-up and our additional channel offerings to each regional system inresponse to demographics, programming preferences, competition and localregulation. We offer a basic level of service which includes up to 25 channelsof television programming. As of December 31, 2005, approximately 91% ofour customers chose to pay an additional amount to receive additional channelsunder our “Classic” or “expanded” service. Premium channels, which are offeredindividually or in packages of several channels, are optional add-ons to thebasic service or the classic service. As of December 31, 2005, premiumunits as a percentage of basic subscribers was approximately 36%.

As network upgrades wereactivated, we deployed new and enhanced products and services in substantiallyall of our markets, including interactive digital video and high-speed Internetservices. In addition, we are offering telephone services to our customers inselected markets.

***Analog Video***

Our analog cabletelevision service offering includes the following:

·       *Basic Service.* All of our video customersreceive the basic level of service, which generally consists of over-the-airlocal broadcast television and local community programming, includinggovernment and public access, and may include a limited number ofsatellite-delivered channels.

·       *Classic Service or Expanded Service.* Thisexpanded level of service includes a group of satellite-delivered ornon-broadcast channels such as ESPN, CNN, Discovery Channel and Lifetime.

·       *Premium Channels.* These channels provideunedited, commercial-free movies, sports and other special event entertainmentprogramming such as HBO, Cinemax, Starz! and Showtime. We offer subscriptionsto these channels primarily as a multi-channel digital service, along withsubscription video-on-demand services.

·       *Pay-Per-View*. These analog channels allow customers withaddressable analog or digital set-top boxes to pay to view a one-time specialsporting event or music concert on an unedited, commercial-free basis. Pay-per-viewmovies are available through our video-on-demand digital service.

***Interactive Digital Video***

The implementation of interactive digital technologysignificantly enhances and expands the video and service offerings we provideto our customers. Because of the significantly increased bandwidth and two-waytransmission capability of our state-of-the-art technical platform, we havedesigned a more extensive digital product that is rich in attractive featuresand provides customers with a high degree of interactive capability. Ourinteractive digital service is designed to exploit the advantages of abroadband network in the existing generation of set-top devices. The digitalservice encompasses three interactive applications: (1) an interactiveprogram guide; (2) interactive local information and community guides; and(3) a video-on-demand service.

We have conducted numerous focus groups andcommissioned research studies, the findings of which have helped to develop ourinteractive digital strategy. We believe that our digital penetration will 

4

----

continue to increase as aresult of our differentiated services such as a graphically rich localinformation network and video-on-demand pay-per-view with full VCRfunctionality.

We are packagingour digital service under the “Insight Digital” brand, which includes thefollowing features:

·       Adigital set-top box and remote control;

·       Aninteractive navigational program guide for all analog and digital channels;

·       Alocal, interactive Internet-style service;

·       Accessto multi-channel premium service for customers who separately subscribe topremium channels, such as HBO and Showtime, and in some cases with subscriptionvideo-on-demand;

·       Accessto video-on-demand;

·       MagRack, a selection of video magazines with video-on-demand functionality; and

·       Adigital 40-channel audio music service.

We offer a high-definition programming serviceconsisting of broadcast networks and premium channels. Digital customers withhigh-definition television (HDTV) sets can receive any high-definitionprogramming that is available from local broadcasters. HDTV customers who haveHBO or Showtime would receive any HDTV programs available from these networksas well. We believe that offering HDTV programming from local broadcasters putsus in a favorable competitive position with the direct broadcast satellitetelevision distributors which have limited HDTV programming due to capacityrestrictions.

Through our wholly-owned subsidiary, InsightInteractive, LLC, our interactive digital platform provides its local,interactive Internet-style service and an interactive program guide. For anadditional monthly charge over our Insight Digital price, we also offer asingle digital set-top box which integrates our existing HDTV programming andvideo-on-demand services with a new digital video recorder (DVR) service. Theseadvanced services are supported by Gemstar-TV Guide’s interactive program guidebut do not include the local service.

Our digital customers areserved by a video-on-demand (VOD) infrastructure provided by SeaChangeInternational, Inc. Customers receive the movies electronically over thenetwork and have full VCR functionality, including pause, play, fast forwardand rewind. The movies are delivered with a high quality digital picture anddigital sound. Our video-on-demand product is designed to provide movies atprices comparable to those charged for videotape rentals, pay-per-view and nearvideo-on-demand movies, but with far greater convenience and functionality.Additionally, customers who subscribe to premium services, such as HBO andShowtime, can access selected movies and original programming from thesenetworks at no additional cost to their regular monthly premium channel feeutilizing our video-on-demand system. Insight’s video-on-demand system alsoprovides free content from certain cable networks including the NFL Network,Food Network, DIY Network and the National Geographic Channel to any digitalcustomer with VOD access. As of December 31, 2005, approximately 40% ofour customers had access to video-on-demand services.

***High-Speed Internet***

We offer high-speed Internet service for personalcomputers for all of our upgraded systems through our own regional networkbranded Insight BroadbandSM, except for our Columbus, Ohio system, which utilizesthe RoadRunner service. AT&T Corp. provides the IP network backbone for ourInsight Broadband service and certain core Internet support functions. As of December 31,2005, high-speed Internet services were available in approximately 2.4 millionof our homes passed and served approximately 470,400 of our customers.

5

----

The broad bandwidth of ourcable network enables data to be transmitted significantly faster thantraditional telephone-based modem technologies, and the cable connection doesnot interfere with normal telephone activity or usage. For example, cable’son-line customers can download large files from the Internet in a fraction ofthe time it takes when using any widely available telephone modem technology.Moreover, surfing the Internet on a high-speed network removes the long delaysfor Web pages to fully appear on the computer screen, allowing theexperience to more closely approximate the responsiveness of changing channelson a television set. In addition, the cable modem is always on and does notrequire the customer to dial into an Internet service provider and awaitauthorization. We believe that these factors of speed and easy accessibilitywill increase the use and impact of the Internet.

***Telephone Services***

Under the “Insight Phone” brand, telephone servicesare currently available in portions of the Louisville and Lexington, Kentucky,Evansville, Indiana, and Columbus, Ohio areas and were available to a total ofapproximately 832,000 marketable homes passed, with approximately 89,900customers as of December 31, 2005.

In August 2005, we launched Insight Phone tocustomers in selected areas of Northern Indiana. This launch was subsequentlysuspended due to the discontinuance of service by a key vendor. We have sincecompleted our transition off of this vendor’s service.

We currently anticipatethat we will launch Insight Phone in new markets during 2006.

**Business Background of Our Manager**

Insight Communications was co-founded in 1985 as alimited partnership under the name Insight Communications Company, L.P. bySidney R. Knafel and Michael S. Willner after a previous association with oneanother at Vision Cable Communications where Mr. Knafel was co-founder andChairman and Mr. Willner held various operating positions, ultimately holdingthe position of Executive Vice President and Chief Operating Officer. VisionCable was sold to The Newhouse Group Inc. in 1981 and Mr. Willner remainedthere to run the cable operations until 1985 when he and Mr. Knafel formedInsight Communications.

In addition to many years of conventional cabletelevision experience, Insight Communications’ management team has beeninvolved in the development and deployment of full service communicationsnetworks since 1989. Through a then related entity, Insight CommunicationsCompany UK, L.P., Insight Communications’ management and related partiesentered the cable television market in the United Kingdom, where today modernnetworks are widely deployed.

As a result of itsmanagement’s British experience, Insight Communications recognized that thetechnology and products developed in the United Kingdom would migrate to theUnited States in similar form. Insight Communications focused on planning toupgrade our network promptly after it became clear that the 1996 Telecom Actwould encourage competition in the communications industries. InsightCommunications understood, however, that the new products and servicesavailable with new technology were best deployed in markets which provided forefficiencies for branding and technical investment. Insight Communications’original acquisition strategy, which focused on customer growth, was verysuccessful. However, Insight Communications’ management team recognized theopportunity to evolve from our role as a cable television operator providingonly home video entertainment into a full service alternative communicationsnetwork providing not only standard video services, but also interactivedigital video, high-speed Internet access and communications products andservices.

6

----

Recognizing theopportunities presented by newly available products and services and favorablechanges in the regulatory environment, Insight Communications executed a seriesof asset swaps, acquisitions and entered into several joint ventures that resultedin its current composition. The largest of these transactions were the 50/50joint ventures formed with  Comcast Cable(formerly known as AT&T Broadband) and its affiliates in October 1998with respect to the Indiana systems, in October 1999 with respect to theKentucky systems and on January 5, 2001 with respect to the Illinoissystems. As of December 31, 1997, Insight Communications’ systems hadapproximately 180,000 customers with the two largest concentrations in Utah andIndiana, which together represented less than half of its customers. InsightCommunications believes that it has successfully transformed its assets so thatit currently owns,  operates and managesa cable television network serving approximately 1.3 million customers, all ofwhich are clustered in the contiguous states of Indiana, Kentucky, Illinois andOhio. Insight Communications’ current assets are reflective of its strategy toown systems that have high ratios of customers to headends.

In July 1999, InsightCommunications consummated an initial public offering of 26,450,000 shares ofits Class A common stock, raising an aggregate of approximately $650.0million. In December 2005,Insight Communications completed a going-private merger with InsightAcquisition Corp., an entity organized by certain affiliates of The CarlyleGroup. The transaction resulted in Insight Communications becoming aprivately-held corporation.

**Our Systems**

Our systems in Indiana,Kentucky, Illinois and Ohio serve approximately 1.3 million customers. We arethe largest operator of cable systems in Kentucky and the second-largest inboth Indiana and Illinois. Our systems are clustered to serve an average of99,000 customers per headend.

We are able to realizesignificant operational synergies due to the size of the clusters in thesestates and the demographic proximity of all of our systems. In all of oursystems, we have substantially completed upgrading our system infrastructuresto enable us to deliver new technologies, products and services to provide ourcustomers with greater value and choices in the face of growing competition. Asnetwork upgrades were activated, we deployed new and enhanced products andservices in substantially all of our markets, including interactive digitalvideo and high-speed Internet services. In addition, we are offering telephoneservices to our customers in selected markets.

The highly clusterednature of our systems enables us to (a) more efficiently invest ourmarketing dollars and maximize our brand awareness, (b) more economicallyintroduce new and enhanced services, and (c) reduce our overall operatingand maintenance costs as a result of our ability to deploy fiber and reduce thenumber of headends we use throughout our systems. As a result, we believe weare able to achieve improved operating performance on both a combined andsystem-wide basis. Our relationship with Comcast Cable provides us withsubstantial purchasing economies for both our programming and hardware needs.

***The East Region***

As of December 31,2005, the East Region passed approximately 836,600 homes and servedapproximately 417,300 customers. Approximately 98% of our customers in the EastRegion are served by six headends. The East Region, comprised of systemslocated within the States of Indiana, Kentucky and Ohio, is organized in sixmanagement districts:

*The Central District*

As of December 31,2005, the Central District passed approximately 144,700 homes and servedapproximately 78,900 customers, principally in the community of Bloomington.The City of Bloomington, located 45 miles south of Indianapolis, is the home ofIndiana University. Besides the University, major employers include BloomingtonHospital, Cook Incorporated and General Electric.

7

----

*The Southwest District*

As of December 31,2005, the Southwest District passed approximately 128,500 homes and servedapproximately 58,200 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, HDTVwas launched in this District. Telephone service is now fully deployed inEvansville, Boonville and Mt. Vernon, Indiana, as well as in Henderson,Kentucky.

SIGECOM, LLC has overbuiltthe City of Evansville, providing cable television, high-speed Internet andtelephone services in the City of Evansville and neighboring areas. We believethe SIGECOM overbuild passed approximately 83,000 homes, representing 65% ofthe Southwest District’s total homes passed as of December 31, 2005.

*The Lexington District*

As of December 31,2005, the Lexington District passed approximately 144,600 homes and servedapproximately 85,900 customers from a single headend. Lexington is Kentucky’ssecond largest city, located in the central part of the state. Major employersin the Lexington area include the University of Kentucky, Toyota and LexmarkInternational.

As of December 31,2005, approximately 49% of customers have subscribed to our interactive InsightDigital service. Approximately 29% of customers have Insight Broadbandhigh-speed Internet service. Our phone service is available in over 78% ofLexington.

*The Northern Kentucky District*

As of December 31,2005, the Northern Kentucky District passed approximately 158,400 homes and servedapproximately 81,600 customers from a single headend primarily in the City ofEdgewood. Covington is Kentucky’s fifth largest city. Major employers in theCovington area include Delta Airlines, Toyota, Citicorp, Ashland, Inc.,Fidelity Investments, BICC General Cable Corporation, Omnicare, COMAIR, LeviStrauss, Gap, Inc., Mazak Corp. and R.A. Jones, Inc and Ticona.

*The Bowling Green District*

As of December 31,2005, the Bowling Green District passed approximately 39,000 homes and servedapproximately 24,700 customers from a single headend. Bowling Green is located120 miles south of Louisville, 110 miles southwest of Lexington and 70 milesnorth of Nashville, Tennessee. Bowling Green is the fourth largest city inKentucky and is the home of Western Kentucky University. Major employers in theBowling Green area include General Motors, Fruit of the Loom, CommonwealthHealth Corporation, DESA International and Houchens Industries.

*The Columbus District*

As of December 31,2005, the Columbus District passed approximately 221,200 homes and servedapproximately 87,900 customers from a single headend. The District serves theeastern portion of the City of Columbus and adjacent suburban communitieswithin eastern Franklin County and the contiguous counties of Delaware,Licking, Fairfield and Pickaway. The City of Columbus is the 34th largestdesignated market area, the capital of Ohio and the home of Ohio StateUniversity. In addition to the state government and university, the Columbuseconomy is well diversified with the significant presence of prominentcompanies such as The Limited, Merck, Wendy’s, Nationwide Insurance, JP MorganChase Bank and Worthington Industries.

As of December 31,2005, approximately 43,800 of customers have subscribed to our interactiveInsight Digital service, representing a penetration of nearly 52% in areaswhere digital service is available. The RoadRunner high-speed Internet service,launched in 2000, has achieved a penetration of 

8

----

approximately20% as of December 31, 2005 in areas where service is available. We havelaunched a telephone service alternative to SBC (Ameritech) in the ColumbusDistrict. In addition, the Columbus District provides exclusive local sportsand entertainment programming, featuring a variety of sporting events from areahigh schools and the Ohio State University to Columbus Clippers baseball andColumbus Crew major league soccer.

In 1996, Ameritechobtained a citywide cable television franchise for the City of Columbus andmost other suburban communities in Franklin County. WideOpenWest acquired theassets of Ameritech in December 2001, and has built its system, both inour service area and in the Time Warner service area on the west side ofColumbus. The areas of the Columbus District served by both us and WideOpenWestpass approximately 132,000 homes, representing 60% of the Columbus District’stotal homes passed as of December 31, 2005.

***The West Region***

As of December 31,2005, the West Region passed approximately 1,026,700 homes and servedapproximately 588,000 customers. Approximately 96% of our customers in the WestRegion are served by six headends. The West Region, comprised of systemslocated within the States of Indiana and Illinois, is organized in sixmanagement districts:

*The Northwest District*

As of December 31,2005, the Northwest District passed approximately 108,800 homes and servedapproximately 68,000 customers, principally in the communities of Lafayette andKokomo. The City of Lafayette is the home of Purdue University. Besides PurdueUniversity, major employers include Eli Lilly, Subaru, Caterpillar, Great LakesChemical, Lafayette Life Insurance, Delphi Electronics and Chrysler.

*The Northeast District*

As of December 31,2005, the Northeast District passed approximately 211,500 homes and servedapproximately 116,900 customers in Richmond as well as in the suburbancommunities near Indianapolis, including Noblesville and extending north toAnderson and east to Richmond, Indiana. Indianapolis is the state capital ofIndiana and is the twelfth largest city in the United States. Major employersinclude General Motors, Eli Lilly, Sallie May, Roche, Bridgestone/Firestone andAnderson University.

*The Northern Illinois District*

As of December 31,2005, the Northern Illinois District, which is comprised of Rockford and Dixon,Illinois, passed approximately 206,600 homes and served approximately 117,000customers. Rockford is Illinois’ second largest city. Major employers in theRockford metropolitan area include Chrysler Corporation, Rockford Health System,Sundstrand Corporation and Swedish American Health Systems.

Dixon customers areprincipally in the communities of Rock Falls, Peru and Dixon. Dixon is locatedin the north/central part of the State of Illinois. Major employers in theDixon area include the State of Illinois, Raynor Manufacturing Company and BorgWarner Automotive.

Approximately 99% of theNorthern Illinois District currently operates with a network of 750 MHz orhigher. As of December 31, 2005, the district achieved penetration levelsfor its digital service of approximately 35% in areas where the service isavailable.

*The Peoria District*

As of December 31,2005, the Peoria District passed approximately 206,900 homes and servedapproximately 123,000 customers, principally in the communities of Bloomingtonand Peoria, Illinois. Bloomington is located in the north/central part of thestate. The Bloomington system is home to Illinois State University with over21,000 students and Illinois Wesleyan University with over 2,100 students. The 

9

----

majoremployers in Bloomington are State Farm Insurance and Mitsubishi Motor Companyof America. Peoria is the fifth largest city in Illinois, located in the north/centralpart of the state. The Peoria system is home to Bradley University. Majoremployers in the Peoria area include the world headquarters of Caterpillar. Peoriais the regional medical center in the State of Illinois outside Chicago. Withthe University of Illinois College of Medicine and four recognized hospitalswithin the city limits, Peoria ranks high on the list of those cities offeringsuperior health care.

The Peoria Districtcompleted the upgrade of all but 68 miles of its 2,300 mile network to 750 MHzor higher. As of December 31, 2005, the Peoria District achievedpenetration levels for its digital service of approximately 36% in areas wheredigital service is available. The District has launched high-speed Internetservice and has achieved penetration levels of approximately 22% as of December 31,2005 in areas where the service is available. In September 2003,video-on-demand and HDTV services were made available to customers in thePeoria District.

*The Springfield District*

As of December 31,2005, the Springfield District passed approximately 191,800 homes and servedapproximately 111,600 customers, principally in the communities of Decatur andSpringfield. Springfield is the capital of Illinois and the sixth largest cityin the state, located in the central part of the state. The major employer inthe Springfield area is the State of Illinois.

Approximately 74% of theSpringfield District operates with a network which is two-way interactive. Asof December 31, 2005, the district achieved penetration levels for itsdigital service of 37% in the areas where the service is available. The districthas launched Insight Broadband high-speed Internet service and has achievedpenetration levels of approximately 19% in areas where the service isavailable. In September 2003, video-on-demand and HDTV services were madeavailable to customers in the Springfield District.

*The Champaign District*

As of December 31,2005, the Champaign District passed approximately 101,200 homes and servedapproximately 51,400 customers. Champaign/Urbana is located in the easterncentral part of the state. The Champaign District is home to the University ofIllinois with over 45,000 students. Major employers in the Champaign and Urbanaareas include the University of Illinois, Kraft Foods and the Carle ClinicAssociation.

The Champaign Districtserves substantially all of its customers by a two-way, 750 MHz network. Thedistrict had approximately 19,700 digital customers as of December 31,2005. The Champaign District has launched Insight Broadband high-speed Internetservice and as of December 31, 2005 had approximately 22,800 customers.

***The South Region***

As of December 31,2005, the South Region passed approximately 557,300 homes and servedapproximately 276,400 customers, principally in the City of Louisville,Kentucky. This region includes approximately 92,798 homes passed andapproximately 42,059 customers served by the Scottsburg, Jeffersonville and NewAlbany, Indiana systems which are operated by the management of the Louisville,Kentucky system. Louisville is the 16th largest city in the United States and isKentucky’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% ofthe United States population, which makes it an important crossroads for tradeand business. Major employers in the Louisville metropolitan area includeHumana, UPS, General Electric and Ford. Knology, Inc. obtained a franchiseto provide cable television service in the City of Louisville in September 2000,although it had not commenced building a cable system as of December 31,2005.

10

----

Substantially all of thecustomers of the Louisville system are served by two-way 750 MHz cable from asingle headend. As of December 31, 2005, approximately 116,000 customersin the Louisville system have subscribed to our interactive Insight Digitalservice. Our phone service is available in approximately 79% of Louisville.

**Customer Rates**

Rates charged to customersvary based on the market served and service selected. As of December 31,2005, the weighted average revenue for our monthly combined basic and classicservice was approximately $39.40.

A one-time installationfee, which we may reduce during promotional periods, is charged to newcustomers, as well as reconnected customers. We charge monthly fees for set topboxes and remote control devices. We also charge administrative fees fordelinquent payments for service. Customers are free to discontinue service atany time without additional charge and may be charged a reconnection fee toresume service. Commercial customers, such as hotels, motels and hospitals, arecharged negotiated monthly fees and a non-recurring fee for the installation ofservice. Multiple dwelling unit accounts may be offered a bulk rate in exchangefor single-point billing and basic service to all units.

**Sales and Marketing**

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

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

We build awareness of the “Insight”brand through advertising campaigns and strong community relations. As a resultof our branding efforts and consistent service standards, we believe we havedeveloped a reputation for quality and reliability. We also believe that ourmarketing strategies are particularly effective due to our regional clusteringand market significance, which enables us to reach a greater number of bothcurrent and potential customers in an efficient, uniform manner.

**ProgrammingSuppliers**

Most cable companiespurchase their programming product directly from the program networks byentering into a contractual relationship with the program supplier. The vastmajority of these program suppliers offer the cable operator license fee ratecards with size-based volume discounts and other financial incentives, such aslaunch and marketing support and cross-channel advertising.

Currently there are over180 cable networks competing for carriage on our analog and digital platforms.We have continued to leverage both our systems’ channel capacity and newlydeployed digital services including video-on-demand as an incentive to oursuppliers to secure long term programming deals with reasonable pricestructures to offset license fee increases.

11

----

Because of ourrelationship with Comcast Cable, we have the right to purchase certainprogramming services for our systems directly through Comcast Cable’s programmingsupplier Satellite Services, Inc. We believe that Satellite Services hasattractive programming costs. Additionally, given the clustering of our systemsin the Midwest, we have been successful in affiliating with regionally basedprogramming products such as sports and news, at lower than average licensefees.

Under the terms of ourpartnership agreement, our manager and Comcast Cable are each required to usecommercially reasonable efforts to extend to us all of the programmingdiscounts available to them. Accordingly, we should benefit from both theexisting Satellite Services arrangement as well as additional discountsavailable to Comcast Cable. However, we cannot predict with certainty whenthese benefits will occur, or the extent to which they actually will beachieved.

**Commitmentto Community Relations**

We believe thatmaintaining strong community relations will continue to be an important factorin ensuring our long-term success. Our community-oriented initiatives includeeducational programs and the sponsorship of programs and events recognizinglocal citizens and supporting local charitable organizations. In addition,members of our management team host community events for political and businessleaders as well as representatives of the local media, where they discuss ouroperations, recent enhancements to our service and recent developments in thetelecommunications industry. We have received numerous awards recognizing ourongoing community relations, and we believe that such initiatives result inconsumer and governmental goodwill and name recognition, increasing customerloyalty and likely facilitating any future efforts to provide newcommunications services.

We encourage all of ourlocal management teams to take leadership roles in community and civicactivities. Over the years, our systems have received various forms ofrecognition for their support of local causes and charities as well as theirsponsorship of programs that improve the quality of life in the communitiesthey serve.

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

With cable modems in theclassroom, teachers and students alike can benefit from the speedy downloadsand access to advanced applications to enhance the learning experience. Inaddition to providing this advanced technology free of charge, we intend tocontinue offering programming enhancements in partnership with various cablenetworks.

One of the advantages alocal cable operator has over nationally distributed competitors is its abilityto develop local programming. To further strengthen community relations anddifferentiate us from direct broadcast satellite television systems and othermultichannel video providers, we provide locally produced and orientedprogramming. Several of our systems have full production capabilities, within-house and/or mobile production studios to create local content. We offer abroad range of local programming alternatives, including community information,local government proceedings and local specialty interest shows. In some of ourmarkets, we are the exclusive broadcaster of local college and high schoolsporting events, which we believe provides unique programming and buildscustomer loyalty. We believe that our emphasis on local programming createssignificant opportunities for increased advertising revenues. Locallyoriginated programming will also play an integral role in the deployment of ournew and enhanced products and services.

12

----

**Franchises**

Cabletelevision systems are constructed and operated under fixed-term non-exclusivefranchises or other types of operating authorities that are granted by eitherlocal governmental or centralized state authorities. These franchises typicallycontain many conditions, such as:

·                    Timelimitations on commencement and completion of construction;

·                    Conditions ofservice, including the number of channels, the provision of free service toschools and other public institutions;

·                    Themaintenance of insurance and indemnity bonds; and

·                    The payment offees to communities.

As of December 31,2005, 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 franchisesrequire the payment of fees to the issuing authorities of 3% to 5% of grossrevenues, as defined by each franchise agreement, from the related cablesystem.

The Communications Act of1934 prohibits franchising authorities from imposing annual franchise fees inexcess of 5% of gross annual revenues from the provision of cable services andalso permits the cable television system operator to seek renegotiation andmodification of franchise requirements if warranted by changed circumstancesthat render performance commercially impracticable.

The following tablesummarizes information relating to the year of expiration of our franchises, asof December 31, 2005:

| **Year of Franchise Expiration** | ** ** | ** ** | ** ** | **Number of  Franchises** | ** ** | **Percentage of  Total Franchises** | ** ** | **Estimated  Number of  Basic Customers** | ** ** | **Percentage Total  Basic Customers  Under Franchises** | ** ** |
|-------------------------------------------------|------------|------------|------------|--------------------------------|------------|-----------------------------------------------|------------|-----------------------------------------------------|------------|------------------------------------------------------------------------|------------|
| Expired*.                                       |       |       | 109        |                           |       |                                          | 19.9       | %                                                   |       |                                                                   | 128,790    |   |   |   | 10.7 | % |   |
| 2006                                            |       |       | 26         |                           |       |                                          | 4.8        | %                                                   |       |                                                                   | 156,415    |   |   |   | 13.0 | % |   |
| 2007.                                           |       |       | 15         |                           |       |                                          | 2.7        | %                                                   |       |                                                                   | 104,536    |   |   |   | 8.7 | % |   |
| 2008.                                           |       |       | 32         |                           |       |                                          | 5.9        | %                                                   |       |                                                                   | 74,903     |   |   |   | 6.2 | % |   |
| 2009                                            |       |       | 44         |                           |       |                                          | 8.0        | %                                                   |       |                                                                   | 123,103    |   |   |   | 10.2 | % |   |
| After 2009                                      |       |       | 321        |                           |       |                                          | 58.7       | %                                                   |       |                                                                   | 618,172    |   |   |   | 51.2 | % |   |

 

----

*                    Suchfranchises are operated on a month-to-month basis and are in the process ofbeing renewed. Of these franchises, 41 serve communities in Indiana and may berenewed pursuant to the state-level franchising statute that will take effect July 1,2006.

The Communications Act provides, among other things,for an orderly franchise renewal process which limits a franchising authority’sability to deny a franchise renewal if the incumbent operator followsprescribed statutory criteria. In addition, the Communications Act includescomprehensive renewal procedures which require, when properly elected by anoperator, that an incumbent franchisee’s renewal application be assessed on itsown merits and not as part of a comparative process with competingapplications.

We believe that our cablesystems generally have good relationships with their respective franchiseauthorities. We have never had a franchise revoked or failed to have afranchise renewed.

**Competition**

Cable systems face increasing competition fromalternative methods of receiving and distributing their core video business.Both wireline and wireless competitors have made inroads in competing against 

13

----

incumbent cable operators.The extent to which a cable operator is competitive depends, in part, upon itsability to provide to customers, at a reasonable price, a greater variety ofprogramming and other communications services than are available off-air orthrough alternative delivery sources and upon superior technical performanceand customer service.

Congress has enacted legislation and the FCC hasadopted regulatory policies providing a more favorable operating environmentfor new and existing technologies, in particular direct broadcast satellitetelevision system operators, that continue to provide increased competition tocable systems. Congress has also enacted legislation which permits directbroadcast 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 toencourage local exchange telephone companies and others to provide a widevariety of video services competitive with services provided by cable systems.Local exchange telephone companies in various states have either announcedplans, obtained local franchise authorizations or are currently competing withour cable communications systems. Certain telephone companies have begun todeploy fiber more extensively in their networks and some are carrying outannounced plans to deploy broadband services, including video programmingservices, using a switched Internet protocol platform or other technologiesdesigned to avoid certain regulatory burdens imposed on our business. Legislationrecently passed in several states and similar legislation is pending, or hasbeen proposed in certain other states and in Congress, that would allow localtelephone companies to deliver services in competition with our cable service,without obtaining equivalent local franchises. Another proposal in Congresswould also limit our ability to maintain competitive prices. Such alegislatively granted advantage to our competitors could adversely affect ourbusiness. Indiana, the state in which we have the greatest number of localfranchises, recently passed legislation under which the Indiana UtilityRegulatory Commission would become the state’s sole video franchising authorityon July 1, 2006. Some franchise obligations under these state-issuedfranchises are tied to a pro-rata application of the obligations imposed on theincumbent under its locally-issued franchise issued prior to July 1, 2006.This legislation may significantly speed the ability to fulfill the regulatoryprerequisites to new entrants seeking to provide video service in Indiana.Local exchange telephone companies and other companies also provide facilitiesfor the transmission and distribution to homes and businesses of interactivecomputer-based services, including the Internet, as well as data and othernon-video services. The ability of local exchange telephone companies tocross-subsidize video, data and telecommunication services also poses somethreat to cable operators.

Franchised cable systems compete with private cablesystems for the right to service condominiums, apartment complexes and othermultiple unit residential developments. The operators of these private systems,also known as satellite master antenna television systems, often enter into exclusiveagreements with apartment building owners or homeowners’ associations thatpreclude franchised cable television operators from serving residents of suchprivate complexes. However several states, including Illinois and Ohio where weoperate, have adopted legislation granting cable operators the right to serveresidents of such private complexes under certain conditions and Indiana haspassed legislation that provides the right to all communication serviceproviders to access all multi-tenant properties used for business purposes.

The 1984 Cable Act gives franchised cable operatorsthe right to use existing compatible easements within their franchise areas onnondiscriminatory terms and conditions. Accordingly, where there arepreexisting compatible easements, cable operators may not be unfairly deniedaccess or discriminated against with respect to access to those easements.Conflicting judicial decisions have been issued interpreting the scope of theaccess right granted by the 1984 Cable Act, particularly with respect toprivate easements granted to a specific utility and not “dedicated” to thepublic. Moreover, this statutory easement access right does not appear to allowa cable operator to install facilities within a building without permissionfrom the property owner.

14

----

The 1996 Telecom Act mayexempt some of our competitors from regulation as cable systems. The 1996Telecom Act amends the definition of a “cable system” such that providers ofcompetitive video programming are only regulated and franchised as “cablesystems” if they use public rights-of-way. Thus, a broader class of entitiesproviding video programming, including operators of satellite master antennatelevision systems, may be exempt from regulation as cable television systemsunder the 1996 Telecom Act. This exemption may give these entities acompetitive advantage over us. The 1996 Telecom Act also exempts telephonecompany facilities that provide video services exclusively on an “interactiveon-demand” basis from the definition of a “cable system,” which some telephonecompanies argue exempts them from local franchising and other requirementsapplicable to cable operators.

Cable television systemsare operated under non-exclusive franchises granted by local or stateauthorities thereby allowing more than one cable system to be built in the samearea. Although the number of municipal and commercial overbuild cable systemsis small, the potential profitability of a cable system is adversely affectedif the local customer base is divided among multiple systems. Additionally,constructing a competing cable system is a capital intensive process whichinvolves a high degree of risk. We believe that in order to be successful, acompetitor’s overbuild would need to be able to serve the homes in theoverbuilt area on a more cost-effective basis than we can. Any such overbuildoperation would require either significant access to capital or access tofacilities already in place that are capable of delivering cable televisionprogramming. As of December 31, 2005, our Evansville, Indiana andColumbus, Ohio systems were overbuilt. As a result, approximately 9% of thetotal homes passed by our systems were overbuilt as of such date.

Direct broadcast satellitetelevision systems use digital video compression technology to increase thechannel capacity of their systems. Direct broadcast satellite televisionsystems’ programming is currently available to individual households,condominiums and apartment and office complexes through conventional, mediumand high-power satellites. High-power direct broadcast satellite televisionsystem service is currently being provided by DIRECTV, Inc. and EchoStarCommunications Corporation, which during 2005 acquired certain assets of theVOOM satellite service to provide high definition programming. Direct broadcastsatellite television systems have some advantages over cable systems that havenot been upgraded, such as greater channel capacity and digital picturequality. The 2003 acquisition of DIRECTV by News Corp. has provided it withaccess to financial, programming and other resources that could enhance itscompetitive potential. In addition, legislation has been enacted which permitsdirect broadcast satellite television systems to retransmit the signals oflocal television stations in their local markets. However, direct broadcastsatellite television systems have a limited ability to offer locally producedprogramming, and do not have a significant local presence in the community. Inaddition, direct broadcast satellite television system packages can be moreexpensive than cable, especially if the subscriber intends to view the serviceon more than one television in the household. Finally, direct broadcastsatellite television systems do not have the same full two-way capability,which we believe will limit their ability to compete in a meaningful way ininteractive television, high-speed Internet and voice communications. Directbroadcast satellite has enjoyed a 27.7% average penetration nationwide, and webelieve that satellite penetration in our various markets generally is at orbelow such average.

Telephone companies haveintroduced digital subscriber line technology (“DSL”), which allows Internetaccess over traditional phone lines at data transmission speeds typicallygreater than those available by a standard telephone modem. Although thesetransmission speeds are not as great as the transmission speed of a cablemodem, we believe that the transmission speed of DSL technology is sufficientlyhigh that such technology competes with cable modem technology. The FCC iscurrently considering its authority to promulgate rules to facilitate thedeployment of these services and regulate areas including high-speed Internetand interactive Internet services. We cannot predict the outcome of any FCCproceedings, or the impact of that outcome on the success of our Internetaccess services or on our operations. Major telephone companies have also begunto carry out their announced plans to 

15

----

constructnew fiber networks over the next several years and to offer high-speed data andvideo services over these fiber networks. In addition, other technologies areentering the marketplace such as broadband wireless networks. One majorprovider, AT&T, recently announced plans to acquire BellSouth Corp. whichcould give it access to greater resources and economies of scale as well asincrease its geographic footprint. In addition, the FCC has recently approvedthe provision of broadband Internet service to consumers over electronic powerlines.

As we expand our offeringsto include telephone services, such services will be subject to competitionfrom existing providers, including both local exchange telephone companies andlong-distance carriers as well as competing providers using alternativetechnologies such as voice over Internet protocol (“VoIP”). Thetelecommunications industry is highly competitive and many telephone serviceproviders may have greater financial resources than we have, or haveestablished relationships with regulatory authorities. In addition, newtechnologies such as VoIP may allow competing telephone providers to offerservice in competition with us over an existing broadband connection (e.g.,cable modem or DSL), thereby avoiding significant capital expenditures for a localdistribution infrastructure. We cannot predict the extent to which the presenceof these competitors will influence customer penetration in our telephoneservice areas. While we may add our telephone service offering to variousmarkets, the service has only been launched in selected markets and has not yetachieved material penetration levels.

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

**Legislation andRegulation**

The cable televisionindustry is regulated by the FCC, some state governments and the applicablelocal governments. In addition, various legislative and regulatory proposalsunder consideration from time to time by Congress and various federal agencieshave in the past, and may in the future, materially affect us. The following isa summary of federal laws and regulations materially affecting the growth andoperation of the cable television industry and a description of certain stateand local laws. We believe that the regulation of the cable television industryremains a matter of interest to Congress, the FCC and other regulatoryauthorities. There can be no assurance as to what, if any, future actions suchlegislative and regulatory authorities may take or the effect thereof on us.

**Federal Legislation**

The principal federalstatute governing the cable television industry is the Communications Act. Asit affects the cable television industry, the Communications Act has beensignificantly amended on three occasions, by the 1984 Cable Act, the 1992 CableAct and the 1996 Telecom Act. The 1996 Telecom Act altered the regulatorystructure governing the nation’s telecommunications providers. It reducedbarriers to competition in both the cable television market and the localtelephone market. Among other things, it also reduced the scope of cable rateregulation.

**Federal Regulation**

The FCC, the principalfederal regulatory agency with jurisdiction over cable television, has adoptedregulations covering such areas as cross-ownership between cable televisionsystems and other communications businesses, carriage of television broadcastprogramming, cable rates, consumer protection and customer service, leasedaccess, obscene and indecent programming, programmer access to cable televisionsystems, programming agreements, technical standards, consumer electronicsequipment compatibility and consumer education, ownership of home wiring,availability of programming to competitors, equal employment opportunity,availability of devices to block objectionable programming, originationcablecasting, sponsorship identification, closed captioning, politicaladvertising, advertising 

16

----

limitsfor children’s programming, signal leakage and frequency use, maintenance ofvarious records as well as antenna structure notification, marking andlighting. The FCC has the authority to enforce these regulations through theimposition of substantial fines, the issuance of cease and desist orders and/orthe imposition of other administrative sanctions, such as the revocation of FCClicenses needed to operate certain transmission facilities often used inconnection with cable operations. A brief summary of certain of these federalregulations as adopted to date follows.

*Rate Regulation*

The 1984 Cable Act codifiedexisting FCC preemption of rate regulation for premium channels and optionalnon-basic program tiers. The 1984 Cable Act also deregulated basic cable ratesfor cable television systems determined by the FCC to be subject to effectivecompetition. The 1992 Cable Act substantially changed the previous statutoryand FCC rate regulation standards. The 1992 Cable Act replaced the FCC’s oldstandard for determining effective competition, under which most cabletelevision systems were not subject to rate regulation, with a statutoryprovision that resulted in nearly all cable television systems becoming subjectto rate regulation of basic and cable programming service (expanded basic)tiers. The 1992 Cable Act allows cable operators to obtain deregulation of allrates upon demonstrating effective competition based on cable systempenetration of less than 30%, aggregate penetration by competing providers inexcess of 15%, or competition from a municipally-owned provider available to atleast 50% of the community.

For cable systems notsubject to effective competition, the 1992 Cable Act required the FCC to adopta formula for franchising authorities to assure that basic cable rates arereasonable; allowed the FCC to review rates for cable programming service tiers,other than per-channel or per-program services, in response to complaints filedby franchising authorities and/or cable customers; prohibited cable televisionsystems from requiring basic customers to purchase service tiers above basicservice in order to purchase premium services if the system is technicallycapable of compliance; required the FCC to adopt regulations to establish, onthe basis of actual costs, the price for installation of cable service, remotecontrols, converter boxes and additional outlets; and allowed the FCC to imposerestrictions on the retiering and rearrangement of cable services under certainlimited circumstances. The 1996 Telecom Act limited the class of complainantsregarding cable programming service tier rates to franchising authorities only,and ended FCC regulation of cable programming service tier rates onMarch 31, 1999. The 1996 Telecom Act also relaxed existing uniform raterequirements by specifying that such requirements do not apply where theoperator faces effective competition, and by exempting bulk discounts tomultiple dwelling units, although complaints about predatory pricing may belodged with the FCC. In addition, the 1996 Telecom Act expanded the definitionof effective competition to cover situations where a local telephone company orits affiliate, or any multichannel video provider using telephone companyfacilities, offers comparable video service by any means except directbroadcast satellite television systems.

The FCC’s implementingregulations contain standards for the regulation of basic service rates. Localfranchising authorities are empowered to order a reduction of existing rateswhich exceed the maximum permitted level for basic services and associatedequipment, and refunds can be required. The FCC adopted a benchmark price capsystem for measuring the reasonableness of existing basic service rates. Therules also require that charges for cable-related equipment, converterboxes and remote control devices, for example, and installation services beunbundled from the provision of cable service and based upon actual costs plusa reasonable profit. The regulations also provide that future rate increasesmay not exceed an inflation-indexed amount, plus increases in certain costsbeyond the cable operator’s control, such as taxes, franchise fees andincreased programming costs. Cost-based adjustments to these capped rates canalso be made in the event a cable television operator adds or deletes channels.Alternatively, cable operators have the opportunity to make cost-of-serviceshowings which, in some cases, may justify rates above the applicablebenchmarks. There is also a streamlined cost-of-service methodology availableto justify a rate increase on the basic tier for “significant” system upgrades.

17

----

*Carriage ofBroadcast Television Signals*

The 1992 Cable Actcontains signal carriage requirements which allow commercial televisionbroadcast stations that are “local” to a cable television system, that is tosay that the system is located in the station’s Nielsen “designated marketarea,” to elect every three years whether to require the cable televisionsystem to carry the station, subject to certain exceptions, or whether thecable television system will have to negotiate for “retransmission consent” to carrythe station. The last election between must-carry and retransmission consentwas October 1, 2005. Both broadcasters electing to require retransmissionconsent and affected cable operators are subject to FCC rules that imposereciprocal requirements on each party to negotiate in good faith over suchconsent. These rules do not require, however, that an agreement beactually reached. A cable television system is generally required to devote upto one-third of its activated channel capacity for the carriage of localcommercial television stations whether pursuant to mandatory carriagerequirements or the retransmission consent requirements of the 1992 Cable Act.Local non-commercial television stations are also given mandatory carriagerights, subject to certain exceptions, within the larger of:  (i) a50 mile radius from the station’s city of license; or (ii) the station’sGrade B contour, a measure of signal strength. Unlike commercial stations,noncommercial stations are not given the option to negotiate retransmissionconsent for the carriage of their signal. In addition, cable television systemshave to obtain retransmission consent for the carriage of all “distant”commercial broadcast stations, except for certain “superstations,” which arecommercial satellite-delivered independent stations such as WGN. To date,compliance with the “retransmission consent” and “must carry” provisions of the1992 Cable Act has not had a material effect on us, although this result maychange in the future depending on such factors as market conditions, channelcapacity and similar matters when such arrangements are renegotiated. FCC rules requirecarriage of local television broadcast stations that transmit solely in adigital format. In addition, the FCC recently reaffirmed that a stationtransmitting in both analog and digital formats during the current transitionperiod which will end on February 17, 2009, is entitled to carriage ofonly its analog signal and that the mandatory carriage obligation extends onlyto the primary video signal, not to multiple services transmitted by a stationover its digital channel. No later than February 18, 2009, all televisionbroadcasts must be solely in digital format.

*Packaging ofCertain Programming*

Reversing the findings ofa November 2004 report, the FCC released a report in February 2006finding that consumers could benefit under certain a la carte models fordelivery of video programming. The staff-level report did not specificallyrecommend or propose the adoption of any specific rules by the FCC and itdid not endorse a pure a la carte model where subscribers could purchasespecific channels without restriction. Instead, it favored tiers plusindividual channels or smaller theme-based tiers. Shortly after release of thereport, the FCC voted to seek additional information as to whether cablesystems with at least 36 channels are available to at least 70 percent of U.S.homes and whether 70 percent of households served by those systems subscribe.If so, the FCC may have additional discretion under the Cable Act to promulgateadditional rules necessary to promote diversity of information sources.The FCC did not specify what rules it would seek to promulgate; however,the Chairman of the FCC has expressed support for family-friendly tiers ofprogramming and availability of programming on an a la carte basis. Certaincable operators, including us, have responded by announcing the intent to offer“family-friendly” programming tiers. It is not certain whether those effortswill ultimately be regarded as a sufficient response. Congress may alsoconsider legislation regarding programming packaging, bundling or a-la-cartedelivery of programming. Any such requirements could fundamentally change theway in which we package and price our services. We cannot predict the outcomeof any current or future FCC proceedings or legislation in this area, or theimpact of such proceedings on our business at this time.

18

----

*Deletion of CertainProgramming*

Cable television systemsthat have 1,000 or more customers must, upon the appropriate request of a localtelevision station, delete the simultaneous or nonsimultaneous networkprogramming of distant stations when such programming has also been contractedfor by the local station on an exclusive basis. FCC regulations also enabletelevision stations that have obtained exclusive distribution rights forsyndicated programming in their market to require a cable television system todelete or “black out” such programming from other television stations which arecarried by the cable television system. In addition, the rights holder to alocal sports event can prohibit a cable operator from carrying that event on adistant station if the event is not broadcast live by a local station.

*Franchising*

The FCC recently issued aNotice of Proposed Rulemaking seeking comment on whether the current localfranchising process constitutes an impediment to widespread issuance offranchises to competitive cable providers in terms of the sheer number offranchising authorities, the impact of state-level franchising authorities, theburdens some local franchising authorities seek to impose as conditions ofgranting franchises and whether state “level-playing field” statutes alsocreate barriers to entry. We cannot determine the outcome of any potential new rules onour business; however, any change that would lessen the local franchisingburdens and requirements imposed on our competitors relative to those that areor have been imposed on us could harm our business.

*Franchise Fees*

Although franchisingauthorities may impose franchise fees under the 1984 Cable Act, such paymentscannot exceed 5% of a cable television system’s annual gross revenues from theprovision of cable services. Under the 1996 Telecom Act, franchisingauthorities may not exact franchise fees from revenues derived fromtelecommunications services, although they may be able to exact some additionalcompensation for the use of public rights-of-way. The FCC has ruled thatfranchise fees may not be imposed on revenue from cable modem service.Franchising authorities are also empowered, in awarding new franchises orrenewing existing franchises, to require cable television operators to providecable-related facilities and equipment and to enforce compliance with voluntarycommitments. In the case of franchises in effect prior to the effective date ofthe 1984 Cable Act, franchising authorities may enforce requirements containedin the franchise relating to facilities, equipment and services, whether or notcable-related. The 1984 Cable Act, under certain limited circumstances, permitsa cable operator to obtain modifications of franchise obligations.

*Renewal ofFranchises*

The 1984 Cable Act and the 1992 Cable Act establishrenewal procedures and criteria designed to protect incumbent franchiseesagainst arbitrary denials of renewal and to provide specific grounds forfranchising authorities to consider in making renewal decisions, including afranchisee’s performance under the franchise and community needs. Even afterthe formal renewal procedures are invoked, franchising authorities and cabletelevision operators remain free to negotiate a renewal outside the formalprocess. Nevertheless, renewal is by no means assured, as the franchisee mustmeet certain statutory standards. Even if a franchise is renewed, a franchisingauthority may impose new and more onerous requirements such as upgradingfacilities and equipment, although the municipality must take into account thecost of meeting such requirements. Similarly, if a franchising authority’sconsent is required for the purchase or sale of a cable television system orfranchise, such authority may attempt to impose burdensome or onerous franchiserequirements in connection with a request for such consent. Historically,franchises have been renewed for cable television operators that have providedsatisfactory services and have complied with the terms of their franchises. Atthis time, we are not aware of any current or past 

19

----

material failure on ourpart to comply with our franchise agreements. The Telecommunications Board ofNorthern Kentucky (“TBNK”) has alleged that Insight has failed to comply with afranchise provision regarding certain operational capabilities of Insight’scable television system that serves communities in northern Kentucky. Thismatter is currently subject to litigation before the U.S. District Court forthe Northern District of Kentucky. We cannot predict the outcome of thismatter. We believe that we have generally complied with the terms of ourfranchises and have provided quality levels of service.

The 1992 Cable Act makesseveral changes to the process under which a cable television operator seeks toenforce its renewal rights which could make it easier in some cases for afranchising authority to deny renewal. Franchising authorities may consider the“level” of programming service provided by a cable television operator indeciding whether to renew. For alleged franchise violations occurring after December 29,1984, franchising authorities are no longer precluded from denying renewalbased on failure to substantially comply with the material terms of thefranchise where the franchising authority has “effectively acquiesced” to suchpast violations. Rather, the franchising authority is estopped if, after givingthe cable television operator notice and opportunity to cure, it fails torespond to a written notice from the cable television operator of its failureor inability to cure. Courts may not reverse a denial of renewal based onprocedural violations found to be “harmless error.”

*Channel Set-Asides*

The 1984 Cable Act permitslocal franchising authorities to require cable television operators to setaside certain television channels for public, educational and governmentalaccess programming. The 1984 Cable Act further requires cable televisionsystems with thirty-six or more activated channels to designate a portion oftheir channel capacity for commercial leased access by unaffiliated thirdparties to provide programming that may compete with services offered by thecable television operator. The 1992 Cable Act requires leased access rates tobe set according to a formula determined by the FCC.

*Ownership*

The 1996 Telecom Act repealed the statutory banagainst local exchange carriers providing video programming directly tocustomers within their local exchange telephone service areas. Consequently,the 1996 Telecom Act permits telephone companies to compete directly withoperations of cable television systems. Under the 1996 Telecom Act andimplementing rules adopted by the FCC local exchange carriers may providevideo service as broadcasters, common carriers, or cable operators. Inaddition, local exchange carriers and others may also provide video servicethrough “open video systems,” a regulatory regime that may give them moreflexibility than traditional cable television systems. Open video systemoperators (including local exchange carriers) can, however, be required toobtain a local franchise, and they can be required to make payments to localgovernmental bodies in lieu of cable franchise fees. In general, open videosystem operators must make up to two-thirds of the channels on their systemsavailable to programming providers (other than the incumbent cable operator) onrates, terms and conditions that are reasonable and nondiscriminatory.

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

20

----

The 1996 Telecom Act made several other changes torelax ownership restrictions and regulations of cable television systems. The1996 Telecom Act repealed the 1992 Cable Act’s three-year holding requirementpertaining to sales of cable television systems. The statutory broadcast/cablecross-ownership restrictions imposed under the 1984 Cable Act were eliminatedin 1996, although the parallel FCC regulations prohibiting broadcast/cablecommon-ownership remained in effect. The U.S. Court of Appeals for the Districtof Columbia circuit struck down these rules. The FCC’s rules alsogenerally prohibit cable operators from offering satellite master antennaservice 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 “cablesystem” under the Communications Act so that competitive providers of videoservices will be regulated and franchised as “cable systems” only if they usepublic rights-of-way. Thus, a broader class of entities providing videoprogramming may be exempt from regulation as cable television systems under theCommunications Act.

The 1996 Telecom Actprovides that registered utility holding companies and subsidiaries may providetelecommunications services, including cable television, notwithstanding thePublic Utilities Holding Company Act of 1935, as amended. Electric utilitiesmust establish separate subsidiaries known as “exempt telecommunicationscompanies” and must apply to the FCC for operating authority. Certain electricpower providers are exploring the provision of broadband service over powerlines. In 2004, the FCC adopted rules: 1) that affirmed the ability of electricservice providers to provide broadband Internet access services over theirdistribution systems; and 2) that seek to avoid interference with existingservices. Due to their resources, electric utilities could be formidablecompetitors to traditional cable television systems.

*Access to Programming*

The 1992 Cable Act imposedrestrictions on the dealings between cable operators and cable programmers. Ofspecial significance from a competitive business posture, the 1992 Cable Actprecludes video programmers affiliated with cable companies from favoring theiraffiliated cable operators and requires such programmers to sell theirprogramming to other multichannel video distributors. This provision limits theability of vertically integrated cable programmers to offer exclusiveprogramming arrangements to cable companies. The prohibition on certain typesof exclusive programming arrangements was set to expire on October 5,2002, but the FCC has determined that a five-year extension of the prohibitionis necessary to preserve and protect competition in video programmingdistribution.

*Privacy*

The 1984 Cable Act imposesa number of restrictions on the manner in which cable television operators cancollect and disclose data about individual system customers. The statute alsorequires that the system operator periodically provide all customers withwritten information about its policies regarding the collection and handling ofdata about customers, their privacy rights under federal law and theirenforcement rights. In the event that a cable television operator was found tohave violated the customer privacy provisions of the 1984 Cable Act, it couldbe required to pay damages, attorneys’ fees and other costs. Under the 1992Cable Act, the privacy requirements were strengthened to require that cabletelevision operators take such actions as are necessary to prevent unauthorizedaccess to personally identifiable information. Certain of these requirementswere modified by the Electronic Communications Privacy Act of 2001.Additionally, certain states have enacted laws that require disclosure toresidents of those states if certain personal information held about them isaccessed or is reasonably believed to have been accessed without authorization.

*Franchise Transfers*

The 1992 Cable Actrequires franchising authorities to act on any franchise transfer requestsubmitted after December 4, 1992 within 120 days after receipt of allinformation required by FCC regulations and by 

21

----

thefranchising authority. Approval is deemed to be granted if the franchisingauthority fails to act within such period.

*Technical Requirements*

The FCC has imposedtechnical standards applicable to all classes of channels which carrydownstream National Television System Committee video programming. The FCC alsohas adopted additional standards applicable to cable television systems usingfrequencies in the 108 to 137 MHz and 225 to 400 MHz bands in order to preventharmful interference with aeronautical navigation and safety radio services andhas also established limits on cable television system signal leakage. Periodictesting by cable television operators for compliance with the technicalstandards and signal leakage limits is required and an annual filing of theresults of these measurements is required. The 1992 Cable Act requires the FCCto periodically update its technical standards to take into account changes intechnology. Under the 1996 Telecom Act, local franchising authorities may notprohibit, condition or restrict a cable television system’s use of any type ofcustomer equipment or transmission technology.

The FCC has adoptedregulations to implement the requirements of the 1992 Cable Act designed toimprove the compatibility of cable television systems and consumer electronicsequipment. These regulations, among other things, generally prohibit cabletelevision operators from scrambling their basic service tier. The 1996 TelecomAct directs the FCC to set only minimal standards to assure compatibilitybetween television sets, VCRs and cable television systems, and otherwise torely on the marketplace. Pursuant to the 1992 Cable Act, the FCC has adopted rules toassure the competitive availability to consumers of customer premisesequipment, such as converters, used to access the services offered by cabletelevision systems and other multichannel video programming distributors.Pursuant to those rules, consumers are given the right to attach compatibleequipment to the facilities of their multichannel video programmingdistributors so long as the equipment does not harm the network, does notinterfere with the services purchased by other customers and is not used toreceive unauthorized services. As of July 1, 2000, multichannel videoprogramming distributors, other than operators of direct broadcast satellitetelevision systems, were required to separate security from non-securityfunctions in the customer premises equipment which they sell or lease to theircustomers and offer their customers the option of using component securitymodules obtained from the multichannel video programming distributors withset-top units purchased or leased from retail outlets. As of July 1, 2007,multichannel video programming distributors will be prohibited fromdistributing new set-top equipment integrating both security and non-securityfunctions to their customers.

*Inside Wiring; Customer Access*

FCC rules require anincumbent cable operator upon expiration of a multiple dwelling unit servicecontract to sell, abandon, or remove “home run” wiring that was installed bythe cable operator in a multiple dwelling unit building. These inside wiring rules assistbuilding owners in their attempts to replace existing cable operators with newprogramming 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 preemptingstate, local and private restrictions on over-the-air reception antennas placedon 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 onthe common areas of multiple dwelling units, such as on roofs. This orderlimits the extent to which multiple dwelling unit owners may enforce certainaspects of multiple dwelling unit agreements which otherwise would prohibit,for example, placement of direct broadcast satellite television systemstelevision receiving antennae in multiple dwelling unit areas, such asapartment balconies or patios, under the exclusive occupancy of a renter.

22

----

*Pole Attachments*

The FCC currentlyregulates the rates and conditions imposed by certain public utilities for useof their poles unless state public service commissions are able to demonstratethat they adequately regulate the rates, terms and conditions of cabletelevision pole attachments. A number of states and the District of Columbiahave certified to the FCC that they adequately regulate the rates, terms andconditions for pole attachments. Illinois, Ohio, and Kentucky, states in whichwe 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 aformula which it has devised. Pursuant to the 1996 Telecom Act, the FCC hasadopted a new rate formula for any attaching party, including cable televisionsystems, which offers telecommunications services. This new formula will resultin higher attachment rates that will apply only to cable television systemswhich elect to offer telecommunications services. Any increases pursuant tothis new formula began in 2001, and will be phased in by equal increments overthe five ensuing years. The FCC ruled that the provision of Internet serviceswill not, in and of itself, trigger use of the new formula. The Supreme Courtaffirmed this decision and also held that the FCC’s authority to regulate ratesfor attachments to utility poles extended to attachments by cable operators andtelecommunications carriers that are used to provide Internet service or forwireless telecommunications service. This development benefits our business andwill place a constraint on the prices that utilities can charge with regard tothe cable facilities over which we also provide Internet access service.

*Interactive Television*

The FCC has issued aNotice of Inquiry covering a wide range of issues relating to InteractiveTelevision (“ITV”). Examples of ITV services are interactive electronic programguides and access to a graphic interface that provides supplementaryinformation related to the video display. In the near term, cable systems arelikely to be the platform of choice for the distribution of ITV services. TheFCC has posed a series of questions including the definition of ITV, thepotential for discrimination by cable systems in favor of affiliated ITVproviders, enforcement mechanisms, and the proper regulatory classification ofITV service.

*Copyright*

Cable television systemsare subject to federal copyright licensing covering carriage of broadcastsignals. In exchange for making semi-annual payments to a federal copyrightroyalty pool and meeting certain other obligations, cable television operatorsobtain a statutory license to retransmit broadcast signals. The amount of thisroyalty payment varies, depending on the amount of system revenues from certainsources, the number of distant signals carried, and the location of the cabletelevision system with respect to over-the-air television stations. Adjustmentto the copyright royalty rates are done through an arbitration processsupervised by the U.S. Copyright Office. Cable television operators are liablefor interest on underpaid and unpaid royalty fees, but are not entitled tocollect interest on refunds received for overpayment of copyright fees.

Various bills have beenintroduced into Congress over the past several years that would eliminate ormodify the cable television compulsory license. Without the compulsory license,cable television operators would have to negotiate rights from the copyrightowners for all of the programming on the broadcast stations carried by cabletelevision systems. Such negotiated agreements would likely increase the costto cable television operators of carrying broadcast signals. The 1992 CableAct’s retransmission consent provisions expressly provide that retransmissionconsent agreements between television broadcast stations and cable televisionoperators do not obviate the need for cable operators to obtain a copyrightlicense for the programming carried on each broadcaster’s signal.

23

----

Several petitions are currently pending with theUnited States Copyright Office seeking revisions to certain compulsorycopyright license reporting requirements and clarification of certain issuesrelating to the application of the compulsory license to the carriage ofdigital broadcast stations. The Copyright Office may open one or morerulemakings in response to these petitions. We cannot predict the outcome ofany such rulemakings; however, it is possible that certain changes in the rules orcopyright compulsory license fee computations could have an adverse affect onour business by increasing our copyright compulsory license fee costs or bycausing us to reduce or discontinue carriage of certain broadcast signals thatwe currently carry on a discretionary basis.

Copyrighted music performed in programming supplied tocable television systems by pay cable networks, such as HBO, and basic cablenetworks, such as USA Network, is licensed by the networks through privateagreements with performing rights organizations such as the American Society ofComposers and Publishers, generally known as ASCAP, BMI, Inc. and SESAC, Inc.ASCAP and BMI offer “through to the viewer” licenses to the cable networkswhich cover the retransmission of the cable networks’ programming by cabletelevision systems to their customers.

Licenses to performcopyrighted music by cable television systems themselves, including on localorigination channels, in advertisements inserted locally on cable televisionnetworks, and in cross-promotional announcements, must be obtained by the cabletelevision operator from the appropriate performing rights organization.

*State and LocalRegulation*

Cable television systems generally are operatedpursuant to nonexclusive franchises, permits or licenses granted by amunicipality or other state or local government entity. The terms andconditions of franchises vary materially from jurisdiction to jurisdiction, andeven from city to city within the same state, historically ranging fromreasonable to highly restrictive or burdensome. Franchises generally containprovisions governing fees to be paid to the franchising authority, length ofthe franchise term, renewal, sale or transfer of the franchise, territory ofthe franchise, design and technical performance of the system, use andoccupancy of public streets and number and types of cable television servicesprovided. The terms and conditions of each franchise and the laws andregulations under which it was granted directly affect the profitability of thecable television system. The 1984 Cable Act places certain limitations on afranchising authority’s ability to control the operation of a cable televisionsystem. The 1992 Cable Act prohibits exclusive franchises, and allowsfranchising authorities to exercise greater control over the operation offranchised cable television systems, especially in the area of customer serviceand rate regulation. The 1992 Cable Act also allows franchising authorities tooperate their own multichannel video distribution system without having toobtain a franchise and permits states or local franchising authorities to adoptcertain restrictions on the ownership of cable television systems. Moreover,franchising authorities are immunized from monetary damage awards arising fromregulation of cable television systems or decisions made on franchise grants,renewals, transfers and amendments. The 1996 Telecom Act restricts afranchising authority from either requiring or limiting a cable televisionoperator’s provision of telecommunications services.

Various proposals have been introduced at the stateand local levels with regard to the regulation of cable television systems, anda number of states have adopted legislation subjecting cable television systemsto the jurisdiction of centralized state governmental agencies, some of whichimpose regulation of a character similar to that of a public utility. A newKentucky statute enacted in 2005 replaces the fees established by individualfranchise with a 3% excise tax and a 2.4% gross receipts tax which is alsoimposed on other providers of video programming service, such as DBS.

Several states have recently passed legislation andsimilar legislation is pending, or has been proposed in certain other statesand in Congress, that would allow local telephone companies to deliver servicesthat 

24

----

would compete with ourcable service, without obtaining an equivalent local franchise. To the extentthat incumbents have made prior payments, including capital grants, incumbentswould still remain at a competitive disadvantage under the legislation. Anotherproposal in Congress would also limit our ability to maintain competitiveprices. Any such legislatively granted advantages to our competitors couldadversely affect our business. The effect of such initiatives, if any, on ourobligation to obtain local franchises, many of which have years remaining inthe terms, cannot be predicted.

Under a bill recently passed by the IndianaLegislature, effective July 1, 2006, the Indiana Utility RegulatoryCommission would become the state’s sole video franchising authority. Underthis legislation we would have until November 1, 2006 to elect to switchto the state-issued certificate or our existing local franchises will continueuntil the later of January 1, 2009 or the termination or expiration ofeach franchise. A state-issued certificate with respect to us would have someof the same obligations under the existing local franchises. Some franchiseobligations under these state-issued franchises are tied to a pro-rataapplication of the obligations imposed on the incumbent under its locally-issuedfranchise issued prior to July 1, 2006. This legislation would greatlyspeed fulfillment of the regulatory prerequisites to new entrants seeking toprovide video service in Indiana.

The foregoing summarizescertain material present and proposed federal, state and local regulations andlegislation relating to the cable television industry. Other existing federalregulations, copyright licensing and, in many jurisdictions, state and localfranchise requirements, currently are the subject of a variety of judicialproceedings, legislative hearings and administrative and legislative proposalswhich could change, in varying degrees, the manner in which cable televisionsystems operate. Neither the outcome of these proceedings nor their impact uponthe cable television industry or us can be predicted at this time.

**Internet Access Service**

We offer a service which enables consumers to accessthe Internet at high speeds via high capacity broadband transmission facilitiesand cable modems. We compete with many other providers of Internet accessservices which are known as Internet service providers (“ISPs”). ISPs includesuch companies as America Online, MSN and Earthlink as well as majortelecommunications providers, including AT&T and local exchange telephonecompanies. The FCC has decided and the United States Supreme Court has affirmedthat cable Internet service should be classified for regulatory purposes as an “informationservice” rather than either a “cable service” or a “telecommunications service.”Concurrently, the FCC has initiated a wide-ranging rulemaking proceeding inwhich it seeks comment on the regulatory ramifications of this classification.Among the issues to be decided are whether the FCC should permit localauthorities to impose an access requirement, whether local authorities shouldbe prohibited from imposing fees on cable Internet service revenues, and whatregulatory role local authorities should be permitted to play. We cannotpredict the outcome of the current FCC proceeding or its impact on ourbusiness.

There are currently fewlaws or regulations which specifically regulate communications or commerce overthe Internet. Section 230 of the Communications Act, added to that act bythe 1996 Telecom Act, declares it to be the policy of the United States topromote the continued development of the Internet and other interactivecomputer services and interactive media, and to preserve the vibrant andcompetitive free market that presently exists for the Internet and otherinteractive computer services, unfettered by federal or state regulation. Onearea in which Congress did attempt to regulate content over the Internetinvolved the dissemination of obscene or indecent materials. The provisions ofthe 1996 Telecom Act, generally referred to as the Communications Decency Act,were found to be unconstitutional, in part, by the United States Supreme Courtin 1997. In response, Congress passed the Child Online Protection Act. Theconstitutionality 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 Courtof Appeals that the use of “contemporary community standards” to identify material“harmful to minors “ was overly broad and therefore violative of the FirstAmendment. The Supreme Court, however, remanded the matter to the Third Circuitto 

25

----

determinethe validity of other challenges to the constitutionality of the Child OnlineProtection Act and kept the stay prohibiting government enforcement in placeuntil further action by the lower courts. Finally, disclosure of customercommunications or records is governed by the Electronic Communications PrivacyAct of 2001 and the Cable Act, both of which were amended by the USA PatriotAct.

**Local Telecommunications Services**

The 1996 Telecom Act provides that no state or locallaws or regulations may prohibit or have the effect of prohibiting any entityfrom providing any interstate or intrastate telecommunications service. Statesare authorized, however, to impose “competitively neutral” requirementsregarding universal service, public safety and welfare, service quality andconsumer protection. State and local governments also retain their authority tomanage the public rights-of-way and may require fair and reasonable,competitively neutral and non-discriminatory compensation for management of thepublic rights-of-way when cable operators or others provide telecommunicationsservice using public rights-of-way. State and local governments must publiclydisclose required compensation from telecommunications providers for use ofpublic rights-of-way.

Local telecommunications services are subject toregulation by state utility commissions. Use of local telecommunicationsfacilities to originate and terminate long distance services, a servicecommonly referred to as “exchange access,” is subject to regulation both by theFCC and by state utility commissions. As providers of local exchange service, weare subject to the requirements imposed upon competitive local exchangecompanies by the 1996 Telecom Act. These include requirements governing resale,telephone number portability, dialing parity, access to rights-of-way andreciprocal compensation, among others. Further, the FCC has recently initiateda proceeding to determine whether additional safeguards are required to protectthe privacy of certain customer information including call records. Although wecannot 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 operatorsare 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 areconsidering differing regulatory treatment for VoIP, ranging from minimal or noregulation to full-blown common carrier status. The FCC recently decided thatalternative voice technologies, like certain types of VoIP telephony, should beregulated only at the federal level, rather than by individual states. Manyimplementation details remain unresolved, and there are substantial regulatorychanges being considered that could either benefit or harm VoIP telephony as abusiness operation. While the final outcome of the FCC proceedings cannot bepredicted, it is generally believed that the FCC favors a “light touch”regulatory approach for VoIP telephony, which might include preemption ofcertain state or local regulation.

**Employees**

As of December 31,2005, we employed approximately 3,640 full-time employees and 60 part-timeemployees. We consider our relations with our employees to be good.

**Item 1A.**                RiskFactors

Our business faces many risks. The risks describedbelow may not be the only risks we face. Additional risks that we do not yetknow of, or that we currently think are immaterial, may also impair ourbusiness operations or financial results. If any of the events or circumstancesdescribed in the following risks actually occurs, our business, financialcondition or results of operations could suffer.

***We have substantial debt and significant interestpayment requirements, which may adversely affect our ability to obtainfinancing in the future, to finance our operations and to react to changes inour business.***

26

----

Wehave a substantial amount of debt. The following table shows certain importantcredit statistics about us.

| ** **               | ** ** | **As of  December 31, 2005** | ** ** |
|--------------------------|------------|---------------------------------------------|------------|
| ** **               | ** ** | **(dollars in thousands**         | **)**      |
| Total debt.         |       |                                        | $          | 2,516,311 |   |   |
| Partners’  capital. |       |                                        | 840,386    |   |   |
| Debt to equity ratio.    |       |                                        | 2.99x      |   |   |

 

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

·       Ourability to obtain additional financing in the future for capital expenditures,acquisitions, working capital or other purposes may be limited;

·       Wewill need to use a large portion of our revenues to pay interest on ourborrowings, which will reduce the amount of money available to finance ouroperations, capital expenditures and other activities;

·       Someof our debt has a variable rate of interest, which exposes us to the risk ofincreased interest rates; and

·       Ourindebtedness may limit our ability to withstand competitive pressures andreduce our flexibility in responding to changing business and economicconditions.

***We depend upon our operating subsidiaries for cash tofund our obligations.***

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

***Our partnership agreement provides for a split-upprocess that may be initiated by either partner.***

Our partnership agreement provides that at any timeafter December 31, 2005 either Comcast Cable or our manager, Insight LP (awholly-owned subsidiary of Insight Communications) has the right to cause asplit-up of the partnership, subject to a limited right of postponement held bythe non-initiating partner. To date, neither partner has commenced the split-upprocess. The split-up would reduce the cash flow from operations that we needto repay our debt, and could require us to make a change of control offer whichwe may be unable to finance.

***The terms of the Insight Midwest Holdings creditfacility and inability to refinance any borrowings under such facility maylimit our ability to access the cash flow of our subsidiaries.***

Our ability to receive cash from our subsidiaries isrestricted by the terms of the Insight Midwest Holdings credit facility. InsightMidwest Holdings’ credit facility permits it to distribute cash to us, subjectto certain limitations, provided that there is no default under such creditfacility. If there is a default under the Midwest Holdings credit facility, wewould not have any cash to pay interest on our obligations.

Furthermore, borrowings under the Insight MidwestHoldings credit facility are secured and will mature prior to our outstandingnotes. Accordingly, we may need to refinance all or a portion of ourindebtedness on or before maturity. We cannot assure you that we will be ableto refinance any of our indebtedness on commercially reasonable terms or atall.

27

----

***The Insight Midwest Holdings credit facility requiresus to comply with various financial and operating restrictions which couldlimit our ability to compete as well as our ability to expand.***

The Insight MidwestHoldings credit facility contains covenants that restrict Insight MidwestHoldings’ subsidiaries ability to:

·       distributefunds or pay dividends to us;

·       incuradditional indebtedness or issue additional equity;

·       repurchaseor redeem equity interests and indebtedness;

·       pledgeor sell assets or merge with another entity;

**·****     **createliens; and

·       makecertain capital expenditures, investments or acquisitions.

Such restriction could limit our ability to compete aswell as our ability to expand. The ability of Insight Midwest Holdings’subsidiaries to comply with these provisions may be affected by events beyondour control. If they were to breach any of these covenants, they would be in defaultunder the credit facility and they would be prohibited from makingdistributions to us.

***We have a history of net losses, and may not beprofitable in the future.***

Although we reported net income before accruals ofpreferred interests of $13.3 million and $28.0 million for the years ended December 31,2005 and 2004 and $26.2 million for the year ended December 31, 2003primarily due to the gain recorded on the settlement of a programming contractand the swap of our Griffin, Georgia system, we have a history of net lossesand may incur additional net losses in the future. We incurred a net lossbefore 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 amountof interest expense in respect of debt incurred and depreciation andamortization expenses relating to acquisitions of cable systems as well asexpansion and upgrade programs. Such expenses have contributed to the netlosses we experienced.

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

Our manager may in the future manage cable systemsother than the cable systems we own. Management of other cable systems wouldrequire our manager to devote a significant portion of its personnel and otherresources to the management of such other cable systems. As a result, theattention of our manager’s senior executive officers and key personnel may bediverted from the management of our cable systems and the allocation ofmanagement resources between our cable systems and such new systems could giverise to conflicts of interest.

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

In recent years, the cable and satellite videoindustries have experienced an escalation in the cost of programming, andsports programming in particular. Our cable programming services are dependentupon our ability to procure programming that is attractive to our customers atreasonable rates. Programming costs may continue to escalate, and we may not beable to pass programming cost increases on to our customers. Our financialcondition and results of operations could be negatively affected by furtherincreases in programming costs. Programming has been and is expected tocontinue to be our largest single expense item and accounted for approximately37% of the total programming and other operating costs and selling, general andadministrative expenses for our systems for the year ended December 31,2005.

28

----

Because of ourrelationship with Comcast Cable, we currently have the right to purchasecertain programming services for our systems directly through Comcast Cable’sprogramming supplier Satellite Services, Inc. In addition, under the termsof our partnership agreement, our manager and Comcast Cable are each requiredto use commercially reasonable efforts to extend to us all of the programmingdiscounts available to them. If a split-up of the partnership were to occur, wemay no longer be able to benefit from the favorable programming costs availablethrough Comcast Cable.

***The competition weface from other cable networks and alternative service providers may cause usto lose market share.***

The impact fromcompetition, particularly from direct broadcast satellite television systemsand companies that overbuild in our market areas, has resulted in a decrease incustomer growth rates as well as a loss of customers. According to the FCC, thepercentage of multichannel video customers served by cable television operatorsdropped from 71.6% as of June 2004 to 69.4% as of June 2005, whilethe percentage of customers served nationwide by direct broadcast satellitegrew from 25.1% to 27.7% during this same period. This growing competition hasnegatively impacted our financial performance. Increased competition maycontinue to impact our financial performance. Many of our potential competitorshave substantially greater resources than we do, and we cannot predict themarket share our competitors will eventually achieve, nor can we predict theirability to develop products which will compete with our planned new andenhanced products and services such as high-speed Internet access,video-on-demand and telephone services.

Direct broadcast satelliteservice consists of television programming transmitted via high-poweredsatellites to individual homes, each served by a small satellite dish.Legislation permitting direct broadcast satellite operators to transmit localbroadcast signals was enacted on November 29, 1999. This eliminates asignificant competitive advantage that cable system operators have had overdirect broadcast satellite operators. Direct broadcast satellite operatorscurrently deliver local broadcast signals in the largest markets and continueto expand such carriage to additional markets.

The 1996 Telecom Actcontains provisions designed to encourage local exchange telephone companiesand others to provide a wide variety of video services competitive withservices provided by cable systems. Local exchange telephone companies invarious states have either announced plans, obtained local franchiseauthorizations or are currently competing with our cable communicationssystems. Certain telephone companies have begun to deploy fiber moreextensively in their networks and to deploy broadband services, including videoprogramming services, using a switched Internet protocol platform or othertechnologies designed to avoid the same regulatory burdens imposed on ourbusiness. New laws or regulations at the federal or state level may clarify theability of local telephone companies to provide their services withoutobtaining state or local cable franchises. If local telephone companies are notrequired to obtain local cable franchises comparable to ours, it would be adverseto our business.

Since our cable systemsare operated under non-exclusive franchises, competing operators of cablesystems and other potential competitors, such as municipalities and municipalutility providers, may be granted franchises to build cable systems in marketswhere we hold franchises. Competition in geographic areas where a secondaryfranchise is obtained and a cable network is constructed is called “overbuilding.”  As of December 31, 2005, approximately9% of the homes passed by our cable systems were overbuilt. As of December 31,2005, SIGECOM, LLC had overbuilt our Evansville, Indiana system and passedapproximately 83,000 homes also passed by us. In addition, as of December 31,2005, WideOpenWest had overbuilt our Columbus, Ohio system and passedapproximately 132,000 homes also passed by us. We cannot predict what effectcompetition from these or future competitors will have on our business andoperations.

29

----

***We will facecompetition from providers of alternatives to our Internet and telephoneservices.***

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

As we expand our offeringsto include telephone services in additional markets, the telephone services wedeliver will be subject to competition from existing providers, including bothlocal exchange telephone companies and long-distance carriers as well ascompeting providers using alternative technologies such as voice over Internetprotocol (“VoIP”). We cannot predict the extent to which the presence of thesecompetitors will influence customer penetration in our telephone service areas.

We expect that the mostsignificant competitors for our Internet access and telephone service offeringswill be the existing local exchange telephone companies as well as resellersusing the local exchange telephone companies’ networks, although the FCC, aftera one-year grace period, will no longer require telecommunications companies tounbudle and resell DSL services as a stand alone product. These competitors arecurrently the predominant providers of Internet and telephone services in ourmarkets.

***Our business hasbeen and continues to be subject to extensive governmental legislation andregulation, and changes in this legislation and regulation could increase ourcosts of compliance and reduce the profitability of our business.***

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

***We could faceconsiderable business and financial risk in implementing our acquisitionstrategy.***

As part of our strategy ofpursuing value-enhancing transactions, we intend to seek to swap or acquiresystems that strategically fit our clustering and operating strategy. Althoughwe regularly engage in discussions with respect to possible acquisitions and jointventures, we do not currently have any understandings, commitments oragreements relating to any acquisitions. Future acquisitions could result inpotentially dilutive issuances of equity securities and the incurrence of debtand contingent liabilities which could have a material adverse effect upon ourbusiness, financial condition and results of operations.

Riskswe could face with respect to acquisitions include:

·       difficultiesin the integration of the operations, technologies, products and personnel ofthe acquired company;

·       risksof entering markets in which we have no or limited prior experience;

·       diversionof management’s attention away from other business concerns; and

·       expensesof any undisclosed or potential legal liabilities of the acquired company.

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

30

----

**Item 1B.**               UnresolvedStaff Comments

Not applicable.

**Item 2.**                        Properties

Acable television system consists of three principal operating components:

·                    The firstcomponent, the signal reception processing and originating point called a “headend,”receives television, cable programming service, radio and data signals that aretransmitted by means of off-air antennas, microwave relay systems and satelliteearth systems. Each headend includes a tower, antennae or other receivingequipment at a location favorable for receiving broadcast signals and one ormore earth stations that receives signals transmitted by satellite. The headendfacility also houses the electronic equipment, which amplifies, modifies andmodulates the signals, preparing them for passage over the system’s network ofcables.

·                    The secondcomponent of the system, the distribution network, originates at the headendand extends throughout the system’s service area. A cable system’s distributionnetwork consists of microwave relays, coaxial or fiber optic cables placed onutility poles or buried underground and associated electronic equipment.

·                    The thirdcomponent of the system is a “drop cable,” which extends from the distributionnetwork into each customer’s home and connects the distribution system to thecustomer’s television set.

We own and lease parcelsof real property for signal reception sites which house our antenna towers andheadends, microwave complexes and business offices which includes our principalexecutive offices. In addition, we own our cable systems’ distributionnetworks, various office fixtures, test equipment and service vehicles. Thephysical components of our cable systems require maintenance and periodicupgrading to keep pace with technological advances. We believe that ourproperties, both owned and leased, are in good condition and are suitable andadequate for our business operations as presently conducted and as proposed tobe conducted.

**Item 3.**                        LegalProceedings

In April 2005, AcaciaMedia Technologies Corporation filed a lawsuit against Insight Communicationsand others in the United States District Court for the Southern District of NewYork. The complaint alleges, among other things, infringement of certain UnitedStates patents that allegedly relate to systems and methods for transmittingand/or receiving digital audio and video content. The complaint seeksinjunctive relief and damages in an unspecified amount. In the event that acourt ultimately determines that we infringe on any of the patents, we may be subjectto substantial damages, which may include treble damages and/or an injunctionthat could require us to materially modify certain products and services thatwe currently offer to customers. We believe that the claims are without meritand intend to defend the action vigorously. The final disposition of this claimis not expected to have a material adverse effect on our consolidated financialposition but could possibly be material to our consolidated results ofoperations of any one period. Further, at this time the outcome of thelitigation is impossible to predict, and no assurance can be given that anyadverse outcome would not be material to our consolidated financial position.

We believe there are noother pending or threatened legal proceedings that, if adversely determined,would have a material adverse effect on us.

**Item4.**                        Submissionof Matters to a Vote of Security Holders

Not applicable.

31

----

**PART II**

**Item 5.**                        Marketfor Registrant’s Common Stock, Related Stockholder Matters and Issuer Purchasesof Equity Securities

There is no public trading market for our equity, allof 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.**                        SelectedFinancial Data

In thefollowing table, we provide you with our selected consolidated historicalfinancial and other data as of and for the five years ended December 31, 2005.When you read this selected consolidated historical financial and other data,it is important that you read along with it the historical financial statementsand related notes in our consolidated financial statements included in thisreport, as well as “Management’s Discussion and Analysis of Financial Conditionand Results of Operations,” also included in this report. Certain other prioryear amounts have been reclassified to conform to the current year’spresentation.

| ** **                                           | ** ** | **Year Ended December 31,** | ** ** |
|------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                           | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** | **2002** | ** ** | **2001** | ** ** |
| ** **                                           | ** ** | **(dollars in thousands)**       | ** ** |
| **Statement  of Operations Data:**                   |       |                                       |       |   |   |   |   |   |   |   |   |
| Revenue                                              |       | $                                          | 1,117,680  |   | $ | 1,000,814 |   | $ | 899,797 |   | $ | 808,925 |   | $ | 726,663 |   |
| Total operating  costs and expenses                  |       | 909,216                                    |       | 809,869 |   | 743,311 |   | 670,493 |   | 789,746 |   |
| Operating income  (loss)                             |       | 208,464                                    |       | 190,945 |   | 156,486 |   | 138,432 |   | (63,083 | ) |
| Total other  expense, net                            |       | (195,165                                   | )          | (178,524 | ) | (130,262 | ) | (180,476 | ) | (200,113 | ) |
| Income (loss)  before extraordinary item             |       | 13,299                                     |       | 12,421 |   | 26,224 |   | (42,044 | ) | (263,196 | ) |
| Extraordinary item                                   |       | —                                     |       | 15,627 |   | — |   | — |   | — |   |
| Net income (loss)  (1)                               |       | 13,299                                     |       | 28,048 |   | 26,224 |   | (42,044 | ) | (263,196 | ) |
| Accrual of  preferred interests (2)                  |       | —                                     |       | — |   | (10,353 | ) | (20,107 | ) | (19,432 | ) |
| Net income (loss)  applicable to common interests    |       | $                                          | 13,299     |   | $ | 28,048 |   | $ | 15,871 |   | $ | (62,151 | ) | $ | (282,628 | ) |
| **Other  Financial Data:**                           |       |                                       |       |   |   |   |   |   |   |   |   |
| Capital  expenditures                                |       | $                                          | 215,083    |   | $ | 164,720 |   | $ | 193,487 |   | $ | 280,027 |   | $ | 319,956 |   |
| Net cash provided  by operating activities           |       | 252,185                                    |       | 280,972 |   | 211,483 |   | 170,179 |   | 161,536 |   |
| Net cash used in  investing activities               |       | 214,575                                    |       | 162,913 |   | 220,851 |   | 290,165 |   | 399,995 |   |
| Net cash (used  in) provided by financing activities |       | (85,233                                    | )          | (68,260 | ) | 22,110 |   | 117,777 |   | 244,870 |   |
| **Balance  Sheet Data:**                             |       |                                       |       |   |   |   |   |   |   |   |   |
| Cash and cash  equivalents                           |       | $                                          | 24,853     |   | $ | 72,476 |   | $ | 22,679 |   | $ | 9,937 |   | $ | 12,146 |   |
| Fixed assets, net                                    |       | 1,107,571                                  |       | 1,130,600 |   | 1,198,830 |   | 1,202,003 |   | 1,133,627 |   |
| Total assets                                         |       | 3,567,903                                  |       | 3,647,415 |   | 3,677,353 |   | 3,626,246 |   | 3,561,080 |   |
| Total debt,  including preferred interests (2)       |       | 2,516,311                                  |       | 2,602,379 |   | 2,669,600 |   | 2,625,416 |   | 2,484,075 |   |
| Partner’s capital                               |       | 840,386                                    |       | 827,622 |   | 796,152 |   | 763,406 |   | 820,622 |   |

 

32

----

 

| ** **                                      | ** ** | **As of December 31, 2005** | ** ** |
|-------------------------------------------------|------------|-------------------------------------------------|------------|
| ** **                                      | ** ** | **South  Region**                               | ** ** | **East  Region** | ** ** | **West  Region** | ** ** | **Total** | ** ** |
| **Technical  Data:**                            | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Network miles                                   |       | 6,900                                           |       | 11,000 |   | 12,800 |   | 30,700 |   |
| Number of headends                              |       | 2                                               |       | 9 |   | 17 |   | 28 |   |
| Number of headends serving 97% of our customers |       | 1                                               |       | 6 |   | 6 |   | 13 |   |
| **Operating  Data:**                            | ** ** | ** **                                      | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** |
| Homes passed(3)                                 |       | 557,300                                         |       | 836,600 |   | 1,026,700 |   | 2,420,600 |   |
| Basic customers(4)                              |       | 276,400                                         |       | 417,300 |   | 588,000 |   | 1,281,700 |   |
| Basic penetration(5)                            |       | 49.6                                            | %          | 49.9 | % | 57.3 | % | 52.9 | % |
| Digital ready homes(6)                          |       | 276,300                                         |       | 403,400 |   | 558,900 |   | 1,238,600 |   |
| Digital customers(7)                            |       | 116,000                                         |       | 187,500 |   | 215,300 |   | 518,800 |   |
| Digital penetration(8)                          |       | 42.0                                            | %          | 46.5 | % | 38.5 | % | 41.9 | % |
| Premium units(9)                                |       | 125,500                                         |       | 156,000 |   | 178,300 |   | 459,800 |   |
| Premium penetration(10)                         |       | 45.4                                            | %          | 37.4 | % | 30.3 | % | 35.9 | % |
| High-Speed Internet customers(11)               |       | 100,800                                         |       | 164,300 |   | 205,300 |   | 470,400 |   |

----

(1)          In accordance with theadoption of SFAS No. 142, beginning January 1, 2002, we no longerrecord amortization expense associated with franchise costs, goodwill and otherindefinite lived intangible assets. This change in accounting would haveresulted in a net loss of $72.1 million for the year ended December 31,2001.

(2)          The preferred interestswere converted to common interests as of September 26, 2003.

(3)          Homes passed are thenumber of single residence homes, apartments and condominium units passed bythe cable distribution network in a cable system’s service area.

(4)          Basic customers arecustomers of a cable television system who receive a package of over-the-airbroadcast stations, local access channels and certain satellite-delivered cabletelevision services, other than premium services, and who are usually charged aflat monthly rate for a number of channels.

(5)          Basic penetration meansbasic customers as a percentage of total number of homes passed.

(6)          Digital ready homesmeans the total number of homes passed to which digital service is available.

(7)          Customers with a digitalconverter box.

(8)          Digital penetrationmeans digital service units as a percentage of digital ready homes.

(9)          Premium units mean thenumber of subscriptions to premium services, which are paid for on anindividual unit basis.

(10)   Premium penetration meanspremium service units as a percentage of the total number of basic customers. Acustomer may purchase more than one premium service, each of which is countedas a separate premium service unit. This ratio may be greater than 100% if theaverage customer subscribes to more than one premium service unit.

(11)   Customersreceiving high-speed Internet service.

**Item 7.**                        Management’sDiscussion and Analysis of Financial Condition and Results of Operations

**Introduction**

Our revenues areearned from customer fees for cable television video services including basic,premium, digital and pay-per-view services and ancillary services, such asrental of converters and remote 

33

----

control devices andinstallations. In addition, we earn revenues from providing high-speed Internetservices, selling advertising, providing telephone services and commissions forproducts sold through home shopping networks.

We have generated increases inrevenues for each of the past three fiscal years, primarily through acombination of internal customer growth and increases in monthly revenue percustomer, growth in advertising revenue and increasing revenue from selling newservices including high-speed Internet access, interactive digital video andtelephone services.

We recorded net losses for theyears ended December 31, 2001 and December 31, 2002. Some of theprincipal reasons for these net losses include i) depreciation and amortizationassociated with our capital expenditures for the construction, expansion andmaintenance of our systems, and ii) interest costs on borrowed money.

We face intense competition forour video programming services, primarily from direct broadcast satellite (“DBS”)service providers. In 2004, competitive pressure from the DBS service providersincreased when they launched local television channels in markets representing anestimated 37% of our basic customer base. Since they have been permitted todeliver 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 localtelevision signals. These “local-into-local” launches were typicallyaccompanied by significant marketing and advertising and were a major cause ofour loss of basic customers in 2004. As of December 31, 2005, localtelevision coverage in our markets by one or more DBS service providerrepresented an estimated 98% of our basic customers.

The following table is derived for the periods presentedfrom our consolidated financial statements that are included in this report andsets forth certain statement of operations data for our consolidated operations.Certain prior year amounts have been reclassified to conform to the currentyear’s presentation.

| ** **                                           | ** ** | **Year Ended December 31,** | ** ** |
|------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                           | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                           | ** ** | **(in thousands)**                    | ** ** |
| Revenue                                              |       | $                                          | 1,117,680  |   | $ | 1,000,814 |   | $ | 899,797 |   |
| Operating costs  and expenses:                       |       |                                       |       |   |   |   |   |
| Programming and other operating costs                |       | 381,121                                    |       | 340,990 |   | 327,071 |   |
| Selling, general and administrative                  |       | 246,524                                    |       | 203,787 |   | 165,014 |   |
| Management fees                                      |       | 33,534                                     |       | 29,987 |   | 26,352 |   |
| Stock-based compensation                             |       | 6,342                                      |       | — |   | — |   |
| Depreciation and amortization                        |       | 241,695                                    |       | 235,105 |   | 224,874 |   |
| Total operating  costs and expenses                  |       | 909,216                                    |       | 809,869 |   | 743,311 |   |
| Operating income                                     |       | 208,464                                    |       | 190,945 |   | 156,486 |   |
| Interest expense                                     |       | (200,241                                   | )          | (177,524 | ) | (184,499 | ) |
| Extraordinary  item                                  |       | —                                     |       | 15,627 |   | — |   |
| Net income                                           |       | 13,299                                     |       | 28,048 |   | 26,224 |   |
| Net cash provided  by operating activities           |       | 252,185                                    |       | 280,972 |   | 211,483 |   |
| Net cash used in  investing activities               |       | 214,575                                    |       | 162,913 |   | 220,851 |   |
| Net cash (used  in) provided by financing activities |       | (85,233                                    | )          | (68,260 | ) | 22,110 |   |
| Capital expenditures                                 |       | 215,083                                    |       | 164,720 |   | 193,487 |   |
|                                                      |            |                                            |            |  |  |  |  |  |  |  |

 

34

----

**Useof Operating Income before Depreciation and Amortization and Free Cash Flow**

We utilize Operating Income before Depreciation andAmortization, among other measures, to evaluate the performance of ourbusinesses. Operating Income before Depreciation and Amortization is consideredan important indicator of the operational strength of our businesses and is acomponent of our annual compensation programs. In addition, our debt agreementsuse Operating Income before Depreciation and Amortization, adjusted for certainnon-recurring items, in their leverage and other covenant calculations. We alsouse this measure to determine how we will allocate resources and capital. Ourmanagement finds this measure helpful because it captures all of the revenueand ongoing operating expenses of our businesses and therefore provides a meansto directly evaluate the ability of our business operations to generate returnsand to compare operating capabilities across our businesses. This measure isalso used by equity and fixed income research analysts in their reports toinvestors evaluating our businesses and other companies in the cable televisionindustry. We believe Operating Income before Depreciation and Amortization isuseful to investors because it enables them to assess our performance in amanner similar to the methods used by our management and provides a measurethat can be used to analyze, value and compare companies in the cabletelevision industry, which may have different depreciation and amortizationpolicies.

A limitation of Operating Income before Depreciationand Amortization, however, is that it does not reflect the periodic costs ofcertain capitalized tangible and intangible assets used in generating revenuesin our businesses. Management evaluates the costs of such tangible andintangible assets through other financial measures such as capitalexpenditures, investment spending and Free Cash Flow. Management also evaluatesthe costs of capitalized tangible and intangible assets by analyzing returnsprovided on the capital dollars deployed. Another limitation of OperatingIncome before Depreciation and Amortization is that it does not reflect incomenet of interest expense, which is a significant expense for us because of thesubstantial debt we incurred to acquire cable television systems and financecapital expenditures to upgrade our cable network. Management evaluates theimpact of interest expense through measures including interest expense itself,Free Cash Flow, the returns analysis discussed above and debt service covenantratios under our credit facility.

Free Cash Flow is net cash provided by operatingactivities (as defined by accounting principles generally accepted in theUnited States) less capital expenditures. Free Cash Flow is considered to be animportant indicator of our liquidity, including our ability to repayindebtedness. We believe Free Cash Flow is useful for investors because itenables them to assess our ability to service our debt and to fund continuedgrowth with internally generated funds in a manner similar to the methods usedby our management, and provides a measure that can be used to analyze, valueand compare companies in the cable television industry.

Both Operating Income before Depreciation andAmortization and Free Cash Flow should be considered in addition to, not as asubstitute for, Operating Income, Net Income and various cash flow measures(e.g., Net Cash Provided by Operating Activities), as well as other measures offinancial performance and liquidity reported in accordance with accountingprinciples generally accepted in the United States.

35

----

***Reconciliation of Net Income to Operating Incomebefore Depreciation and Amortization***

Thefollowing table reconciles Net Income to Operating Income before Depreciationand Amortization. In addition, the table provides the components from NetIncome to Operating Income for purposes of the discussions that follow.

| ** **                                             | ** ** | **Year Ended December 31,** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                             | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| ** **                                             | ** ** | **(in thousands)**                    | ** ** |
| Net income                                             |       | $                                          | 13,299     |   | $ | 28,048 |   | $ | 26,224 |   |
| Extraordinary  item, net of tax                        |       | —                                     |       | (15,627 | ) | — |   |
| Income before  extraordinary item                      |       | 13,299                                     |       | 12,421 |   | 26,224 |   |
| Other income (expense):                                |       |                                       |       |   |   |   |   |
| Gain on settlement of programming contract             |       | —                                     |       | — |   | (37,742 | ) |
| Loss from early extinguishments of debt                |       | —                                     |       | — |   | 10,879 |   |
| Other (income) expense, net                            |       | (3,083                                     | )          | 1,368 |   | 591 |   |
| Interest income                                        |       | (1,993                                     | )          | (368 | ) | (831 | ) |
| Interest expense                                       |       | 200,241                                    |       | 177,524 |   | 184,499 |   |
| Gain on cable system exchange                          |       | —                                     |       | — |   | (27,134 | ) |
| Total other  expense, net                              |       | 195,165                                    |       | 178,524 |   | 130,262 |   |
| Operating income                                       |       | 208,464                                    |       | 190,945 |   | 156,486 |   |
| Depreciation and  amortization                         |       | 241,695                                    |       | 235,105 |   | 224,874 |   |
| Stock-based  compensation                              |       | 6,342                                      |       | — |   | — |   |
| Operating Income before  Depreciation and Amortization |       | $                                          | 456,501    |   | $ | 426,050 |   | $ | 381,360 |   |

 

***Reconciliation of Net Cash Provided by OperatingActivities to Free Cash Flow***

Thefollowing table provides a reconciliation from net cash provided by operatingactivities to Free Cash Flow. In addition, the table provides the componentsfrom net cash provided by operating activities to operating income for purposesof the discussions that follow.

| ** **                                             | ** ** | **Year Ended December 31,** | ** ** |
|--------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                             | ** ** | **2005**                                   | ** ** | **2004** | ** ** |
| ** **                                             | ** ** | **(in thousands)**                    | ** ** |
| Operating income                                       |       | $                                          | 208,464    |   | $ | 190,945 |   |
| Depreciation and amortization                          |       | 241,695                                    |       | 235,105 |   |
| Stock-based compensation                               |       | 6,342                                      |       | — |   |
| Operating Income  before Depreciation and Amortization |       | 456,501                                    |       | 426,050 |   |
| Changes  in working capital accounts (1)               |       | (16,100                                    | )          | 22,524 |   |
| Cash paid  for interest                                |       | (188,216                                   | )          | (167,602 | ) |
| Net cash provided  by operating activities             |       | 252,185                                    |       | 280,972 |   |
| Capital  expenditures                                  |       | (215,083                                   | )          | (164,720 | ) |
| Free Cash Flow                                         |       | $                                          | 37,102     |   | $ | 116,252 |   |

----

(1)          Changesin working capital accounts are based on the net cash changes in current assetsand current liabilities, excluding changes related to interest and taxes andother non-cash expenses.

**Results of Operations**

***Year Ended December 31, 2005 Compared to YearEnded December 31, 2004***

Revenue for the year ended December 31, 2005 totaled $1.1 billion, an increase of 12%over the prior year, due primarily to customer gains in all services, as wellas basic and classic video rate increases. High-

36

----

speed Internet servicerevenue increased 45% over the prior year, which is mainly attributable to anincreased customer base. We added a net 139,900 high-speed Internet customersduring the year to end the year at 470,400 customers. In addition, digitalservice revenue increased 13% over the prior year due to an increased customerbase. We added a net 67,500 digital customers during the year to end the yearat 518,800 customers.

Basic cable service revenue increased 4% primarily dueto basic and classic video rate increases, partially offset by promotionaldiscounts. Although the number of basic video customers was higher at December 31,2005 than December 31, 2004, the average number of customers during theyear declined slightly. We are increasing our customer retention efforts byemphasizing bundling, enhancing and differentiating our video services andproviding video-on-demand, high definition television and digital videorecorders. We are also continuing to focus on improving customer satisfactionthrough higher service levels, increased education of our product offerings andincreased spending on sales and marketing efforts.

Revenueby service offering was as follows for the year ended December 31 (dollarsin thousands):

| ** **           | ** ** | **Revenue by Service Offering** | ** ** | ** **                            | ** ** | ** ** | ** ** |
|----------------------|------------|------------------------------------------------|------------|---------------------------------------|------------|------------|------------|
| ** **           | ** ** | **2005**                                       | ** ** | **% of Total Revenue** | ** ** | **2004**   | ** ** | **% of Total  Revenue** | ** ** | ** ** | ** ** | **% Change  in Revenue** | ** ** |
| Basic                |       | $                                              | 596,321    |                                  |       | 53.4       | %          |   | $ | 573,650 |   |   | 57.3 | % |   |   |   |   | 4.0 | % |   |
| High-speed  Internet |       | 190,820                                        |       |                                  | 17.1       | %          |       | 132,011 |   |   | 13.2 | % |   |   |   |   | 44.5 | % |   |
| Digital              |       | 111,202                                        |       |                                  | 9.9        | %          |       | 98,797 |   |   | 9.9 | % |   |   |   |   | 12.6 | % |   |
| Advertising          |       | 76,004                                         |       |                                  | 6.8        | %          |       | 68,415 |   |   | 6.8 | % |   |   |   |   | 11.1 | % |   |
| Premium              |       | 54,414                                         |       |                                  | 4.9        | %          |       | 57,054 |   |   | 5.7 | % |   |   |   |   | (4.6 | )% |   |
| Telephone            |       | 35,502                                         |       |                                  | 3.2        | %          |       | 15,254 |   |   | 1.5 | % |   |   |   |   | 132.7 | % |   |
| Franchise fees       |       | 30,721                                         |       |                                  | 2.7        | %          |       | 28,721 |   |   | 2.9 | % |   |   |   |   | 7.0 | % |   |
| Other                |       | 22,696                                         |       |                                  | 2.0        | %          |       | 26,912 |   |   | 2.7 | % |   |   |   |   | (15.7 | )% |   |
| Total                |       | $                                              | 1,117,680  |                                  |       | 100.0      | %          |   | $ | 1,000,814 |   |   | 100.0 | % |   |   |   |   | 11.7 | % |   |

 

TotalCustomer Relationships were approximately 1,347,500 as of December 31,2005, an increase of 24,800 from 1,322,700 as of December 31, 2004. TotalCustomer Relationships represent the number of customers who receive one ormore 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 telephonecustomers, as of December 31, 2005 increased 11% as compared to December 31,2004. RGUs by category were as follows (in thousands):

| ** **           | ** ** | **December 31**, 2005 | ** ** | **December 31**, 2004 | ** ** |
|----------------------|------------|---------------------------------|------------|---------------------------------|------------|
| Basic                |       |                            | 1,281.6    |                            |       |   | 1,272.5 |   |   |
| Digital              |       |                            | 518.8      |                            |       |   | 451.3 |   |   |
| High-speed  Internet |       |                            | 470.4      |                            |       |   | 330.5 |   |   |
| Telephone            |       |                            | 89.9       |                            |       |   | 64.3 |   |   |
| Total RGUs           |       |                            | 2,360.7    |                            |       |   | 2,118.6 |   |   |

 

Average monthly revenue per basic customer was $73.30for the year ended December 31, 2005, compared to $64.85 for the yearended December 31, 2004. This primarily reflects the continued growth ofhigh-speed Internet and digital product offerings in all markets as well asbasic and classic video rate increases. In addition, telephone revenues for theyear ended December 31, 2005, reflect service revenues earned directlyfrom customers compared to the year ended December 31, 2004, whichreflected revenues billed to Comcast under a previous contractual agreementthat was terminated effective December 31, 2004. Also included intelephone revenue for the year ended December 31, 2005 is the continued 

37

----

amortization ofinstallation revenue under the previous arrangement with Comcast in the amountof $3.3 million.

Programming and other operating costs increased $40.1million, or 12%. Total programming costs for our video products decreased forthe year ended December 31, 2005 compared to the year ended December 31,2004. The substantial increases in programming rates were offset by programmingcredits. The credits resulted from favorable resolution of pricing negotiationsrelated to certain prior period programming costs that were accrued at a higherrate than the amount actually paid and a settlement of disputed claims with avendor. In addition, direct operating costs increased due to an increased volumeof modems sold and cost of sales associated with telephone that were previouslypaid by Comcast. Other operating costs increased primarily as a result ofincreases in technical salaries for new and existing employees, in addition todecreased capitalized labor costs due to the continued transition from upgradeand new connect activities to maintenance and reconnect activities. Otheroperating costs also increased as a result of increases in repairs andmaintenance costs due to increased repair costs for customer premise equipment,an increase in drop materials due to customer growth and increased propertytaxes due to a favorable reversal of accrued property taxes recorded in 2004.

Selling, general and administrative expenses increased$42.7 million, or 21%, primarily due to increased payroll and payroll relatedcosts, including an increase in the number of employees and salary increasesfor existing employees. Marketing support funds (recorded as a reduction toselling, general and administrative expenses) decreased from the prior year. Marketingexpenses increased over the prior year to support the continued rollout ofhigh-speed Internet, digital and telephone products, and to maintain thecompany’s core video customer base. A decrease in expenses previously allocatedto Comcast under our prior agreement to manage certain Comcast systems alsocontributed to the increase in selling, general and administrative expenses. Asthis agreement was terminated effective July 31, 2004, the year ended December 31,2005 does not include any of these expense allocations, and the year ended December 31,2004 includes seven months of these expense allocations. Some cost savings havebeen realized upon termination of the management agreement, and the impact ofcertain of these savings is reflected in programming and other operating costs.

Management fees are directly related to revenue asthese fees are calculated at approximately 3% of revenues.

Stock-based compensation expense was $6.3 million dueto the expense associated with the accelerated vesting of certain restrictedshares in connection with Insight’s going-private transaction and in connectionwith the granting of restricted and deferred shares during the year ended December 31,2005.

Depreciation and amortization expense increased $6.6million, or 3%, primarily as a result of additional capital expendituresthrough December 31, 2005. These expenditures were primarily for telephoneequipment, purchases of customer premise equipment and drop materials andnetwork extensions, all of which we consider necessary in order to continue tomaintain and grow our customer base and expand our service offerings. Partiallyoffsetting this increase was a decrease in depreciation expense related tocertain assets that have become fully depreciated since December 31, 2004.

As a result of the factors discussed above, OperatingIncome before Depreciation and Amortization increased $30.5 million, or 7%.

Interest expense increased $22.7 million, or 13%, dueto higher interest rates, which averaged 7.8% for the year ended December 31,2005, as compared to 6.7% for the year ended December 31, 2004.

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

Revenue for the year ended December 31, 2004totaled $1.0 billion, an increase of 10% over the prior year, due primarily tocustomer gains in high-speed Internet and digital services, as well as basicrate 

38

----

increases. High-speedInternet service revenue increased 41% over the prior year, primarily due to anincreased customer base. We added a net 100,500 high-speed Internet customersduring the year to end the year at 330,500 customers. Basic cable servicerevenue increased 7%, primarily due to basic rate increases partially offset bycustomer losses. Our loss in basic customers resulted primarily from greatercompetitive pressures by DBS service providers, particularly in those marketswhere we experienced their “local-to-local” launches. To reverse this videocustomer trend, we are increasing our customer retention efforts and ouremphasis on bundling, enhancing and differentiating our video products andservices with video-on-demand, high definition television and digital videorecorders.  In addition, digital servicerevenue increased 18% over the prior year, primarily due to an increasedcustomer base. We added a net 48,400 digital customers during the year to endthe year at 451,300 customers.

Revenueby service offering was as follows for the year ended December 31 (dollarsin thousands):

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

 

TotalCustomer Relationships were approximately 1,322,700 as of December 31,2004 compared to 1,327,200 as of December 31, 2003. RGUs as of December 31,2004 increased 7% as compared to December 31, 2003. RGUs by category wereas follows (in thousands):

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

Programming and other operating costs increased $13.9million, or 4%. Partially offsetting the increase in programming and otheroperating costs was the reversal of a $14.7 million accrual for property taxesfor the years 1999 through 2004. Excluding the reversal of this accrual,programming and other operating costs increased 9%. Programming costs increased11%, primarily as a result of increased programming rates for our classicservice and an increase in digital customers served. In addition, programmingcosts increased due to an increase in high-speed Internet costs driven by thenet addition of 100,500 high-speed Internet customers. This increase inhigh-speed Internet costs was partially offset by more favorable per customercharges under a new agreement with our Internet service provider, beginning 

39

----

July 2004. Inaddition, programming costs increased as a result of an increased volume ofmodems provided to customers under certain marketing campaigns. Excluding thereversal of the property tax accrual, other operating costs increased 3%,primarily attributable to increases in labor costs, which increased due to areduction of network rebuild/upgrade activities.

Selling, general and administrative expenses increased$38.8 million, or 24%, primarily due to increased payroll and related costsreflecting salary increases for existing employees and increases in healthinsurance costs. In addition, marketing expenses increased to support thecontinued rollout of high-speed Internet and digital products and to maintainthe core video customer base. A decrease in expenses previously allocated toComcast Cable in connection with the cable systems we previously managed for aComcast Cable affiliate also contributed to the increase in selling, generaland administrative expenses. As this management arrangement was terminatedeffective July 31, 2004, the year ended December 31, 2004 containsonly 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 managementarrangement, the impact of some of these savings is reflected in programmingand other operating costs. In addition, bad debts and collection costsincreased, reflecting an increase in the number of accounts written offcombined with a higher balance per average account written off.

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

Depreciation and amortization expense increased $10.2million, or 5%, primarily as a result of additional capital expendituresthrough December 31, 2004to extend the plant and continue the rollout of digital, high-speed Internetand telephone services to existing and new service areas.

As a result of the factors discussed above, OperatingIncome 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, whichaveraged 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, 2004and 2003, our outstanding debt averaged $2.6 billion and $2.5 billion.

**Liquidity and Capital Resources**

Our business requires cash for operations, debtservice and capital expenditures. The cable television business has substantialon-going capital requirements for the construction, expansion and maintenanceof its broadband networks and provision of new services. In the past,expenditures have been made for various purposes including the upgrade of ourexisting cable network, and in the future will be made for network extensions,installation of new services, customer premise equipment (e.g., set-top boxes),deployment of new product and service offerings, and, to a lesser extent,network upgrades. Historically, we have been able to meet our cash requirementswith cash flow from operations, borrowings under our credit facilities andissuances of private and public debt and equity.

Cash provided by operations for the years endedDecember 31, 2005 and 2004 was $252.2 million and $281.0 million. Thedecrease was primarily attributable to the timing of cash receipts and paymentsrelated to our working capital accounts and a decrease in net income partiallyoffset by the affect of non-cash items.

Cash used in investing activities for the years endedDecember 31, 2005 and 2004 was $214.6 million and $162.9 million. Theincrease primarily was due to capital expenditures to launch our telephoneproduct in additional markets, customer premise equipment and drop materials.

40

----

Cash used in financing activities for the years ended December 31,2005 and 2004 was $85.2 million and $68.3 million. The increase was due toincreased amortization payments on the credit facility in 2005 and debtissuance costs paid for the refinancing of the Term B loan facility.

For the years ended December 31, 2005 and 2004,we spent $215.1 million and $164.7 million in capital expenditures. Theseexpenditures principally constituted purchases of customer premise equipment,telephone equipment, capitalized labor, drop materials, headend equipment andsystem upgrades and rebuilds, all of which are necessary to maintain ourexisting network, grow our customer base and expand our service offerings.

Free Cash Flow forthe year ended December 31, 2005 totaled $37.1 million compared to $116.3million for the year ended December 31, 2004. The decrease was primarilydriven by the following:

·       A$30.5 million increase in Operating Income before Depreciation andAmortization;

·       A$20.7 million increase in cash interest expense paid driven by an increase ininterest rates;

·       A$16.1 million use of Free Cash Flow for the year ended December 31, 2005compared to a $22.5 million source for the year ended December 31, 2004from changes in working capital accounts; and

·       A$50.4 million increase in capital expenditures.

The above changes resulted in an overall decrease inFree Cash Flow from 2004 to 2005 of $79.2 million.

While we expect to continue to use Free Cash Flow torepay our indebtedness, as interest rates continue to increase, we expect ourinterest costs will also be higher.

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

On October 1, 1999, in connection with theformation of Insight Midwest and the acquisition of a 50% interest in theKentucky systems, Insight Midwest completed an offering of $200.0 millionprincipal amount of its 93⁄4% senior notes due 2009.  The net proceeds of the offering were used torepay certain outstanding debt of the Kentucky systems. On November 6,2000, Insight Midwest completed an offering of $500.0 million principal amountof its 101⁄2% senior notes due 2010. The net proceeds of the offering of $486.0million were used to repay a portion of the then existing Indiana and Kentuckycredit facilities. Interest on the Insight Midwest 93⁄4% senior notes is payableon April 1 and October 1 of each year and interest on the Insight Midwest101⁄2% senior notes is payable on May 1 and November 1 of each year. Theindentures relating to these senior notes impose certain limitations on theability of Insight Midwest to, among other things, incur debt, makedistributions, 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. InsightMidwest received proceeds of $176.9 million, including $3.8 million of interestaccruing from October 1, 2002 through the date of issuance that was repaidto 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 ofthis offering were used to repay a portion of the outstanding revolving loansunder the Midwest Holdings credit facility. Since this add-on offering occurredunder the 93⁄4% senior notes indenture, these additional debt securities and theprevious 93⁄4% senior notes are considered a single series of senior notes withidentical terms.

On December 9, 2003, Insight Midwest completed a$130.0 million add-on offering under the 101⁄2% senior notes indenture. InsightMidwest received proceeds of $140.9 million, including $1.4 million of interestaccruing from November 1, 2003 through the date of issuance that wasrepaid to holders of the bonds in the first semi-annual interest payment due onMay 1, 2004 and a bond premium of $11.4 million 

41

----

that is being amortizedthrough November 2010, and net of an underwriting fee of $2.0 million. Theproceeds of this offering were used to repay a portion of the outstandingrevolving loans under the Midwest Holdings credit facility. Since thisadditional add-on offering occurred under the 101⁄2% senior notes indenture,these additional debt securities and the previous 101⁄2% senior notes areconsidered a single series of senior notes with identical terms.

On January 5, 2001, in conjunction with a seriesof transactions with cable subsidiaries of AT&T Broadband (now known asComcast Cable), Insight Midwest Holdings, LLC, a subsidiary of Insight Midwestwhich serves as a holding company for all of Insight Midwest’s systems, enteredinto a $1.75 billion credit facility. Insight Midwest Holdings borrowed $663.0million 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 permitsthe distribution of cash from Midwest Holdings’ subsidiaries to enable InsightMidwest to pay interest on its 93⁄4% senior notes and 101⁄2% senior notes, so longas there exists no default under the credit facility. The Insight MidwestHoldings credit facility contains covenants restricting, among other things,the ability of Midwest Holdings and its subsidiaries to acquire or dispose ofassets, make investments and engage in transactions with related parties. Thefacility also requires compliance with certain financial ratios and containscustomary events of default. As of December 31, 2005, we were incompliance with the credit facility’s covenant requirements. Given currentoperating conditions and projected results of operations, we anticipatecontinued compliance under this credit facility for the foreseeable future.

On March 28, 2002, we borrowed $100.0 millionfrom our manager. Insight Midwest Holdings is permitted to make distributionsto us for the purpose of repaying this loan provided that there are no defaultsexisting under the credit facility. This loan bears annual interest of 9%, compounded semi-annually, has ascheduled maturity date of January 31, 2011 and permits prepayments. As of December 31, 2005 and 2004, thebalance of the $100.0 million loan, including accrued interest, was $139.1 and$127.4 million.

On July 21, 2005, we completed a refinancing ofthe existing $1.1 billion Term B loan facility under the Insight Midwest creditfacility. This refinancing reduced the applicable margins for LIBOR rateborrowings from LIBOR plus 275 basis points to LIBOR plus 200 basis points andthe applicable margin will be reduced an additional 25 basis points if theMidwest Holdings leverage ratio drops below 2.75. The maximum total leverageratio covenant was reset from 3.75 to 4.50 on July 1, 2005 with step downsto 4.25 on July 1, 2006 and 4.00 on July 1, 2007. The facility wasalso amended to provide certain flexibility to refinance the senior notes atInsight Midwest.

We have a substantial amount of debt. Our high levelof debt could have important consequences for you. Our investments in ouroperating subsidiaries, including Insight Midwest, constitute substantially allof our operating assets. Consequently, our subsidiaries conduct all of ourconsolidated operations and own substantially all of our operating assets. Ourprincipal source of cash we need to pay our obligations and to repay theprincipal amount of our debt obligations is the cash that our subsidiariesgenerate from their operations and their borrowings. Our subsidiaries are notobligated to make funds available to us and are restricted by the terms of theirindebtedness from doing so. Because of such restrictions, our ability to accessthe cash flow of our subsidiaries may be contingent upon our ability torefinance the debt of our subsidiaries.

We believe that the Insight Midwest Holdings creditfacility, cash on-hand and our cash flow from operations are sufficient tosupport our current operating plan. For the years ended December 31, 2005and 2004 we had positive Free Cash Flow. We had the ability to draw upon $302.0million of unused availability under the Insight Midwest Holdings CreditFacility as of December 31, 2005 to fund any shortfall resulting from theinability of Insight Midwest’s cash from operations to fund its capitalexpenditures, meet its debt service requirements or otherwise fund itsoperations.

42

----

Thefollowing table summarizes our contractual obligations and commitments,excluding interest and commitments for programming, as of December 31,2005, including periods in which the related payments are due (in thousands):

| ** **              | ** ** | **Contractual Obligations** | ** ** |
|-------------------------|------------|----------------------------------|------------|
| ** **              | ** ** | **Long-Term  Debt**              | ** ** | **Operating  Leases** | ** ** | **Total** | ** ** |
| 2006                    |       | $                                | 83,500     |   |   | $ | 2,774 |   |   | $ | 86,274 |   |
| 2007                    |       | 83,500                           |       |   | 1,652 |   |   | 85,152 |   |
| 2008                    |       | 104,750                          |       |   | 1,263 |   |   | 106,013 |   |
| 2009                    |       | 1,517,500                        |       |   | 914 |   |   | 1,518,414 |   |
| 2010                    |       | 630,000                          |       |   | 783 |   |   | 630,783 |   |
| Thereafter              |       | 100,000                          |       |   | 740 |   |   | 100,740 |   |
| Total cash  obligations |       | $                                | 2,519,250  |   |   | $ | 8,126 |   |   | $ | 2,527,376 |   |

 

**Recent Accounting Pronouncements**

On December 16, 2004, the FASB issued SFAS No. 123(revised 2004), *Share-Based Payment* (“SFAS No. 123(R)”),which is a revision of SFAS No. 123, and supersedes APB Opinion No. 25.SFAS No. 123(R) requires all share-based payments to employees,including grants of employee stock options, to be recognized in the financialstatements based on their fair values, beginning with the next fiscal year thatbegins after June 15, 2005. In addition, SFAS No. 123(R) willcause unrecognized expense related to previously issued options vesting afterthe date of initial adoption to be recognized as a charge to results ofoperations over the remaining vesting period. We are required to adopt SFAS No. 123(R) inour first quarter of 2006. The FASB has concluded that companies may adopt thenew standard in one of two ways: the modified prospective transition method andthe modified retrospective transition method. Under the modified retrospectivetransition method, prior periods may be retroactively adjusted either as of thebeginning of the year of adoption or for all periods presented. The modifiedprospective transition method requires that compensation expense be recordedfor all unvested stock options and share awards at the beginning of the fiscalperiod of adoption of SFAS No. 123R, while the retrospective method wouldrecord compensation expense for all unvested stock options and share awardsbeginning with the fiscal period retroactively adjusted. We do not anticipatethat the adoption of this standard will have a material impact on ourconsolidated financial statements.

In March 2005, FASB issued Interpretation No. 47(“FIN 47”), “*Accounting for Conditional Asset RetirementObligations (an Interpretation of SFAS No. 143)*”. ThisInterpretation provides clarification with respect to the timing of liabilityrecognition for legal obligations associated with the retirement of long-livedassets when the timing and/or method of settlement of the obligation isconditional on a future event. This Interpretation requires that the fair valueof a liability for a conditional asset retirement obligation be recognized inthe period in which it occurred if a reasonable estimate of fair value can bemade. FIN 47 is effective for fiscal years ending after December 2005. Wedo not anticipate that the adoption of this standard will have a materialimpact on our consolidated financial statements.

In May 2005, FASBissued SFAS No. 154, *Accounting**Changes and Error Corrections*. SFAS No. 154 replacesAPB Opinion No. 20, *Accounting Changes*,and SFAS No. 3, *Reporting AccountingChanges in Interim Financial Statements* and changes the requirementsfor the accounting for and reporting of a change in accounting principles. SFASNo. 154 applies to all voluntary changes in an accounting principle. Italso applies to changes required by an accounting pronouncement in the unusualinstance that the pronouncement does not include specific transition provisions.When a pronouncement includes specific provisions, those provisions should befollowed. SFAS 154 is effective for accounting changes and corrections oferrors made in fiscal years beginning in 2006. We do not anticipate that theadoption of this standard will have a material impact on our consolidatedfinancial statements.

43

----

**Critical Accounting Policies**

The methods, estimates andjudgments we use in applying our most critical accounting policies have asignificant impact on the results we report in our consolidated financialstatements. We evaluate our estimates and judgments on an on-going basis. Webase our estimates on historical experience and on assumptions that we believeto be reasonable under the circumstances. Our experience and assumptions formthe basis for our judgments about the carrying value of assets and liabilitiesthat are not readily apparent from other sources. Actual results may vary fromwhat we anticipate and different assumptions or estimates about the futurecould change our reported results. We believe the following accounting policiesare the most critical to us, in that they are important to the portrayal of ourfinancial statements and they require our most difficult, subjective or complexjudgments in the preparation of our consolidated financial statements.

**FairValue of Assets Acquired and Liabilities Assumed in Purchase Combinations**

The purchase combinationscarried out by us require management to estimate the fair value of the assetsacquired and liabilities assumed in the combinations. These estimates of fairvalue are based on our business plan for the entities acquired includingplanned redundancies, restructuring, use of assets acquired and assumptions asto the ultimate resolution of obligations assumed for which no future benefitwill be received. We also utilize appraisal reports issued by independentappraisers. Should actual use of assets or resolution of obligations differfrom our estimates, revisions to the estimated fair values would be required. Ifa change in estimate occurs after one year of the acquisition, the change wouldbe recorded in our statement of operations.

**Goodwilland Other Identifiable Intangibles**

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

·       Significantunderperformance relative to expected historical or projected future operatingresults;

·       Significantchanges in the manner of our use of the acquired assets or the strategy for ouroverall business; and

·       Significantnegative industry or economic trends.

When we determine that the carrying value of goodwilland other indefinite-lived intangibles may not be recoverable based upon theexistence of one or more of the above indicators of impairment, we measure anyimpairment based on a projected discounted cash flow method using a discountrate determined by our management to be commensurate with the risk inherent inour current business model. With the adoption of SFAS No. 142, “Goodwilland Other Intangible Assets,” on January 1, 2002 we ceased amortizinggoodwill and franchise costs arising from acquisitions. In lieu ofamortization, we perform an annual impairment analysis. If we determine throughthe impairment review process that goodwill or franchise costs have beenimpaired, we would record an impairment charge in our statement of operations.

44

----

**Fixed Assets**

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

**Item 7A.   Quantitative and Qualitative DisclosureAbout Market Risk**

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

The fair market value ofour 93⁄4% senior notes and 101⁄2% senior notes was $1.1 billion and thecarrying value of our 93⁄4% senior notes and 101⁄2% senior notes was $1.0 billionas of December 31, 2005. The fair market value of our credit facilityborrowings approximates its carrying value as the credit facility borrowingsbear interest at floating rates of interest. As of December 31, 2005 and2004, the cost, if terminated, of our interest rate swap agreements wereapproximately $2.4 million and $1.6 million and are reflected in our financialstatements as other non-current liabilities. Changes in the fair value of ourinterest rate derivative financial instruments are either recognized in incomeor in stockholders’ equity as a component of other comprehensive loss dependingon whether the derivative financial instruments qualify for hedge accounting.

**Item 8.   Financial Statements and SupplementaryData**

Reference is made to ourconsolidated financial statements beginning on page F-1 of thisreport.

**Item 9.**   Changes in andDisagreements with Accountants on Accounting and Financial Disclosure

Not applicable.

**Item 9A.**   Controls andProcedures

Insight Midwest’s management carried out anevaluation, with the participation of its Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of its disclosure controls andprocedures as of December 31, 2005. Based upon that evaluation, its ChiefExecutive Officer and Chief Financial Officer concluded that (i) itsdisclosure controls and procedures were effective to ensure that informationrequired to be disclosed by Insight Midwest in reports that it files or submitsunder the Securities Exchange Act of 1934 is recorded, processed, summarizedand reported, within the time periods specified in the rules and forms ofthe Securities and Exchange Commission and (ii) its disclosure controlsand procedures were designed to ensure that information required to bedisclosed by it in reports that it files or submits under the SecuritiesExchange Act of 1934 is accumulated and communicated to its management,including its Chief Executive Officer and Chief Financial Officer, asappropriate to allow timely decisions regarding required disclosure.

There has not been any change in Insight Midwest’sinternal control over financial reporting in connection with the evaluationrequired by Rule 13a-15(d) or 15d-15(d) under theExchange Act that occurred during the quarter ended December 31, 2005 thathas materially affected, or is reasonably likely to materially affect, itsinternal control over financial reporting.

45

----

Insight Capital’s management carried out anevaluation, with the participation of its Chief Executive Officer and ChiefFinancial Officer, of the effectiveness of its disclosure controls andprocedures as of December 31, 2005. Based upon that evaluation, its ChiefExecutive Officer and Chief Financial Officer concluded that (i) itsdisclosure controls and procedures were effective to ensure that informationrequired to be disclosed by Insight Capital in reports that it files or submitsunder the Securities Exchange Act of 1934 is recorded, processed, summarizedand reported, within the time periods specified in the rules and forms ofthe Securities and Exchange Commission and (ii) its disclosure controlsand procedures were designed to ensure that information required to bedisclosed by it in reports that it files or submits under the SecuritiesExchange Act of 1934 is accumulated and communicated to its management,including its Chief Executive Officer and Chief Financial Officer, asappropriate to allow timely decisions regarding required disclosure.

There has not been anychange in Insight Capital’s internal control over financial reporting inconnection with the evaluation required by Rule 13a-15(d) or15d-15(d) under the Exchange Act that occurred during the quarterended December 31, 2005 that has materially affected, or is reasonablylikely to materially affect, its internal control over financial reporting.

**Item 9**B.   Other Information

Not Applicable

46

----

**PART III**

**Item 10.   Directors and Executive Officers of theRegistrant**

InsightLP is our sole general partner. Insight Communications is the sole generalpartner of Insight LP. The following table sets forth certain information withrespect to the executive officers of us, Insight Capital and InsightCommunications. Insight Communications, through Insight LP, serves as ourmanager.

| **Name**             | ** ** | ** ** | ** ** | **Age**                                                                                                                                                                                       | ** ** | **Position** |
|----------------------|------------|------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------|
| Sidney R. Knafel     |       | 75         |       | Chairman of the Board of  Insight Communications and Member of the Advisory Committee                                                                                                         |
| Michael S. Willner   |       | 53         |       | Chairman and Chief  Executive Officer of Insight Midwest and Insight Capital and Vice Chairman  and Chief Executive Officer of Insight Communications and Chairman of the  Advisory Committee |
| Dinni Jain           |       | 42         |       | President and Chief Operating  Officer of Insight Midwest, Insight Capital and Insight Communications and  Member of the Advisory Committee                                                   |
| John Abbot           |       | 43         |       | Executive Vice President  and Chief Financial Officer of Insight Midwest, Insight Capital and Insight  Communications                                                                         |
| Christopher Slattery |       | 38         |       | Executive  Vice President, Field Operations of Insight Midwest, Insight Capital  and Insight Communications                                                                                   |
| Elliot Brecher       |       | 40         |       | Senior Vice President and General Counsel of Insight  Midwest, Insight Capital and Insight Communications                                                                                     |

 

*SidneyR. Knafel,* a director of Insight Communications, hasbeen Chairman of the Board of Insight Communications since 1985. He was thefounder, Chairman and an equity holder of Vision Cable Communications, Inc.from 1971 until its sale in 1981. Mr. Knafel is presently the managingpartner of SRK Management Company, a private investment company. He is adirector of General American Investors Company, Inc., IGENE Biotechnology, Inc.and VirtualScopics, Inc., as well as several private companies. Mr. Knafelis a graduate of Harvard College and Harvard Business School.

*MichaelS. Willner,* a director of Insight Communications,co-founded and has served as Chief Executive Officer since 1985. Mr. Willnerhas also served as Vice Chairman of Insight Communications since August 2002and as President from 1985 to August 2002 and from August 2003 to February 2006.Since August 2002, he has served as Chairman of Insight Midwest andInsight Capital. Mr. Willner served as Executive Vice President and ChiefOperating Officer of Vision Cable from 1979 through 1985, Vice President ofMarketing for Vision Cable from 1977 to 1979 and General Manager of VisionCable’s Bergen County, New Jersey cable television system from 1975 to 1977. He currently serves on the Board of Directorsand Executive Committee of the National Cable & TelecommunicationsAssociation. He also serves on the boards of C-SPAN, Women in Cable andTelecommunications, the Cable Center and the Walter Kaitz Foundation, as wellas the Executive Committee of CableLabs. Mr. Willner is a graduate ofBoston University’s College of Communication and serves on the school’sExecutive Committee.

*DinniJain*   has served as President since February 2006and as Chief Operating Officer since October 2003. Mr. Jain served asExecutive Vice President between October 2003 and February 2006. Hejoined Insight Communications in January 2002 as Senior Vice President andChief Financial Officer. From 1994 through 2002, he served in a number of rolesin sales, marketing, customer service, strategy, corporate development andgeneral management at NTL Incorporated, one of Europe’s leading cable andtelecommunications companies. He ultimately served as Deputy Managing Directorof NTL’s Consumer Division, overseeing customer and new business growth, aswell as the quality of customer satisfaction. He also managed the operations ofNTL’s Cable and Wireless Consumer Group from 2000 to 2001. He 

47

----

currently serves on theBoard of Directors of the Cable & Telecommunication Association forMarketing Foundation. Mr. Jain attended Princeton University.

*JohnAbbot***hasserved as Executive Vice President since February 2006 and as ChiefFinancial Officer since January 2004. Mr. Abbot served as Senior VicePresident between January 2004 and February 2006. From January 1995to January 2004, Mr. Abbot served in a number of roles at MorganStanley, most recently as Managing Director in the Global Media andCommunications Group of its Investment Banking Division. Prior to joiningMorgan Stanley, Mr. Abbot was an associate 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 theU.S. Naval Academy, an ME in Industrial Engineering from Pennsylvania StateUniversity and an MBA from Harvard Business School.

*ChristopherSlattery* has served as Executive Vice President, FieldOperations since February 2006. He joined Insight Communications in October 2004as Senior Vice President, Sales, then served as Senior Vice President, Growthfrom April 2005 until January 2006 when he was named Senior VicePresident, Field Operations. Prior to joining Insight Communications, from September 2002,Mr. Slattery served as a Managing Director of NTL’s London operations,responsible for the management of 1.5 million cable network homes, and withresponsibility in the areas of sales, growth strategy, reduction of churn andcustomer experience. Prior thereto, from September 2001, he served asSales Director for NTL’s European operations, responsible for designing,developing and implementing customer growth strategies across NTL’s thennewly-acquired European assets. From August 2000 to August 2001, Mr. Slatteryserved as a General Manager of NTL’s United Kingdom operations, with overallresponsibility for sales and marketing, customer retention, customer care andnetwork maintenance, as well as budget strategy, planning and implementation.Prior thereto, from January 1990, Mr. Slattery served in a number ofsales-related roles at NTL and its predecessors.

*ElliotBrecher* has served as Senior Vice President andGeneral 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 2000when it merged with Sonnenschein Nath & Rosenthal, LLP which continuesto serve as our legal counsel. He joined that firm in February 1994 andserved as a partner from January 1996 until joining InsightCommunications. Prior to that, he was an associate of the law firm Rosenman &Colin from October 1988. Mr. Brecher received his law degree fromFordham University.

Except as described in this report, there are noarrangements or understandings between any Member of the Advisory Committee orexecutive officer and any other person pursuant to which that person waselected or appointed to his or her position.

Since we are not a listed company, we are not requiredto establish an audit committee. Rather, the functions of an audit committeefor our company are performed by the audit committee of our manager. Thecurrent members of the audit committee are Michael J. Connelly (Chairman),Stephen C. Gray and Geraldine B. Laybourne. The board of directors of ourmanager has determined that each of Messrs. Connelly and Gray meets theSEC definition of an audit committee financial expert.

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

**Advisory Committee**

The Partnership Agreementof Insight Midwest provides for a five member Advisory Committee. InsightCommunications, through Insight LP, is entitled to designate three of themembers of the Advisory 

48

----

Committee.The remaining members are designated by an affiliate of Comcast Cable. TheAdvisory Committee serves in an advisory capacity only. Insight LP is ourgeneral partner and has the exclusive authority to manage our business,operations and affairs, subject to certain approval rights of Comcast Cable.

**Item 11.**   ExecutiveCompensation

None of the executiveofficers of Insight Midwest or Insight Capital are compensated for theirservices as such officers, but rather receive compensation from InsightCommunications. None of the members of the Advisory Committee of InsightMidwest are compensated for their services as such members, but are entitled toreimbursement for travel expenses.

**Item 12.**   Security Ownershipof Certain Beneficial Owners and Management and Related Stockholder Matters

Insight Capital is a wholly-owned subsidiary ofInsight Midwest.

The following table sets forth information withrespect 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 awholly-owned subsidiary of Insight Communications. Sidney R. Knafel, hischildren and trusts for their benefit, and Michael S. Willner, through theirownership of Insight Communications’ Series A voting preferred stock haveapproximately 62.1% of Insight Communications’ voting power.

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

**Partnership Split-Up Provisions**

Our manager, InsightCommunications, owns 50% of our outstanding partnership interests. The other50% is owned by an indirect subsidiary of Comcast Corporation. Our partnershipagreement provides that at any time after December 31, 2005 either partnerhas the right to commence a split-up process with respect to the partnership,subject to a limited right of postponement held by the non-initiating partner.To date, neither partner has commenced the split-up process.

**Item 13.**   CertainRelationships and Related Transactions

**Insight Interactive**

Our manager is currentlyproviding the interactive services of its wholly-owned subsidiary, InsightInteractive, LLC, including an interactive program guide and interactive localinformation and community guides, to customers in some of our systems. For theyears ended December 31, 2005, 2004 and 2003, fees for such servicestotaled $2.8 million, $2.5 million and $2.1 million.

49

----

**Insight LP**

Our manager, throughInsight LP, receives a management fee for each twelve-month period equal to 3%of substantially all revenue arising out of or in connection with theoperations of our systems. For the years ended December 31, 2005, 2004 and2003, Insight LP earned management fees of $33.5 million, $30.0 million and$26.4 million. Our manager, through Insight LP, owns 50% of the partnershipinterests in us, and we own 100% of the common stock of Insight Capital. Inaddition, Sidney Knafel, Michael Willner and Dinni Jain, who are each executiveofficers of our manager, are members of and collectively constitute a majorityof our advisory committee.

**Insight Midwest Holdings**

Insight Midwest Holdingsis party to a $1.975 billion credit facility. On March 28, 2002, weborrowed $100.0 million from our manager, $97.0 million of which wascontributed to Insight Midwest Holdings in April 2002 for use in payingdown the credit facility balance and in funding financing costs associated withamendments to the facility, and $3.0 million of which was contributed to InsightOhio as of March 28, 2002. Insight Midwest Holdings is permitted to makedistributions to us for the purpose of repaying the $100.0 million loan so longas no default exists under the credit facility. This loan, which remainedoutstanding as of December 31, 2005, 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 throughaffiliates of Comcast Cable. Charges for such programming, including a 11⁄2%administrative fee, were $157.6 million, $151.0 million and $142.4 million forthe three years ended December 31, 2005, 2004 and 2003. As of December 31,2005 and 2004, $29.9 million and $36.8 million of accrued programming costs weredue to affiliates of Comcast Cable.  Webelieve that the programming rates charged through these affiliates are lowerthan those available from independent parties.

In October 1999, to facilitate the administrationof our advertising services in our Kentucky Systems, we entered into anagreement with Comcast Cable, which provided for this affiliate to perform allof our Kentucky advertising sales and related administrative services. EffectiveSeptember 26, 2004, this agreement was terminated by mutual agreement. Weearned advertising revenues through this affiliate of $0, $13.5 million and$18.5 million for the years ended December 31, 2005, 2004 and 2003. As of December 31,2005 and December 31, 2004, we had $0 and $1.1 million as a receivable duefrom this affiliate included in our other current assets. Through September 26,2004 we paid this affiliate a fixed and variable fee for providing this servicebased on advertising sales cash flow growth. As of December 31, 2005 and2004, we had $0 and $38,500 recorded as payables to this affiliate related tosuch services.

Prior to December 31, 2004, to facilitatedelivery of telephone services, we were party to a joint operating agreementwith Comcast Cable that allowed us to deliver to our residential customers, incertain of its service areas, local telephone service provided by Comcast Cable.Under the terms of the agreement, we leased certain capacity on our localnetwork to Comcast Cable. Revenue earned from leased network capacity used inthe provision of telephone services was $0.0, $8.5 million and $6.2 million forthe years ended December 31, 2005, 2004 and 2003. In addition, we receivedadditional payments related to certain services and support, includinginstallations, marketing and billing.

On December 31, 2004, we acquired the telephonebusiness conducted by Comcast Cable in the markets served under our jointoperating agreement and terminated the joint operating agreement. Subsequent toDecember 31, 2004, we no longer earn revenue from the services describedabove, but rather we record the continued amortization of installation feerevenue and revenues earned directly from our customers for providing telephoneand telephone related services. Comcast Cable paid us 

50

----

approximately $13 millionin cash and transferred to us certain assets and liabilities related to thetelephone business.

On March 17, 2000,Insight LP entered into a management agreement with Comcast ofMontana/Indiana/Kentucky/Ohio (“Comcast”) (formerly known as InterMediaPartners Southeast), an affiliate of Comcast Cable, to provide managementservices to cable television systems owned by Comcast. These systems servedapproximately 89,400 customers in the state of Indiana. Certain of ouremployees operated these managed systems. Overhead costs we incurred wereallocated ratably and charged to Comcast on a monthly basis. Effective July 31,2004, the management agreement was terminated by mutual agreement.

**Item 14.**   PrincipalAccountant Fees and Services

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

| ** **          | ** ** | **2005**                | ** ** | **2004** | ** ** |
|---------------------|------------|-------------------------|------------|----------|------------|
| ** **          | ** ** | **(in thousands)** | ** ** |
| Audit fees          |       | $                       | 302        |     | $          | 376 |   |
| Audit-related  fees |       | —                  |       | —   |       |
| Tax fees            |       | —                  |       | —   |       |
| All other fees      |       | —                  |       | —   |       |
| Total               |       | $                       | 302        |     | $          | 376 |   |

 

Audit fees include fees associated with the annualaudit, the reviews of our quarterly reports on Form 10-Q andassistance with and review of documents filed with the Securities and ExchangeCommission.

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

**PART IV**

**Item 15.   Exhibits and Financial StatementSchedules**

**(a)**   FinancialStatements:

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

51

----

**(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)                                                                                                                                               |
|   | 3.2                  | A          |       | 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) |
|   | 10.1                 | A          |       | Additional Term Loan  Supplement to Credit Agreement dated August 26, 2003(4)                                                                                                                                                                         |
|   | 10.1                 | B          |       | Amendment No. 1,  dated as of July 14, 2005, and Form of Additional Term Loan  Supplement to Credit Agreement(5)                                                                                                                            |
|   | 10.2                 |       |       | Second Amended and  Restated Operating Agreement of Insight Communications Midwest, LLC, dated as  of January 5, 2001(6)                                                                                                                              |
|   | 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.(6)                                                           |
|   | 10.5                 |       |       | Amended and Restated Limited  Partnership Agreement of Insight Kentucky Partners II, L.P., dated as of  October 1, 1999(6)                                                                                                                            |
|   | 10.6                 |       |       | First Amendment to  Amended and Restated Limited Partnership Agreement of Insight Kentucky  Partners II, L.P., dated as of January 5, 2001(6)                                                                                                         |
|   | 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  93⁄4% senior notes of Registrants, dated as of October 1, 1999(7)                                                                                                                                                           |
|   | 10.10                | A          |       | First Supplemental  Indenture, dated as of January 14, 2004, relating to 93⁄4% senior notes(8)                                                                                                                                                     |
|   | 10.11                |       |       | Indenture relating to  101⁄2% senior notes of Registrants, dated as of November 6, 2000(6)                                                                                                                                                         |
|   | 10.11                | A          |       | First Supplement Indenture,  dated as of January 14, 2004, relating to 101⁄2% senior notes(8)                                                                                                                                                      |
|   | 10.12                |       |       | Promissory Note, dated  March 28, 2002, made by Insight Midwest, L.P. to Insight Communications  Company, Inc.(9)                                                                                                                                |
|   | 10.13                |       |       | Purchase  Agreement, dated July 2, 2004, between Insight Midwest Holdings, LLC and  Comcast Cable Holdings, LLC and certain of its affiliates(10)                                                                                                     |
|        |                      |            |            |                                                                                                                                                                                                                                                            |  |  |

52

----

 

|        | 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.(11)                                                                                                                                                                             |
|--------|-------|--------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | 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(8)                                                                                                                                                                                                                                                                                                                                |
|   | 21    |   |   | Subsidiaries of  Registrants(12)                                                                                                                                                                                                                                                                                                                 |
|   | 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)          Filedas an exhibit to Registrants’ Registration Statement on Form S-4(Registration No. 333- 33540) and incorporated herein by reference.

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

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

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

(5)          Filedas an exhibit to Registrant’s Quarterly Report on Form 10-Q for thequarterly period ended June 30, 2005 and incorporated herein by reference.

(6)          Filedas 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 byreference.

(7)          Filedas 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 byreference.

(8)          Filedas 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 byreference.

(9)          Filedas 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 byreference.

(10)   Filedas an exhibit to the Quarterly Report on Form 10-Q for the quarterlyperiod ended June 30, 2004 of Insight Communications Company, Inc.and incorporated herein by reference.

(11)   Filedas an exhibit to the Quarterly Report on Form 10-Q for the quarterlyperiod ended September 30, 2004 of Insight Communications Company, Inc.and incorporated herein by reference.

(12)   Filedas an exhibit to the Annual Report on Form 10-K for the year ended December 31,2004 of Registrants and incorporated herein by reference.

53

----

**INDEXTO CONSOLIDATED FINANCIAL STATEMENTS**

| ** **                                                                                                               | ** ** | **Page** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------|------------|----------|------------|
| **Insight Midwest, L.P.**                                                                                                |       |     |       |
| Report of Independent Auditors—Ernst & Young  LLP                                                          |       | F-1      |       |
| Consolidated  Balance Sheets as of December 31, 2005 and 2004                                                       |       | F-2      |       |
| Consolidated Statements of Operations for the years  ended  December 31, 2005, 2004 and 2003                        |       | F-3      |       |
| Consolidated Statements of Changes in Partners’  Capital for the years ended  December 31, 2005, 2004 and 2003 |       | F-4      |       |
| Consolidated Statements of Cash Flows for the years  ended  December 31, 2005, 2004 and 2003                        |       | F-5      |       |
| Notes to Consolidated Financial Statements                                                                               |       | F-6      |       |
| **Insight  Capital, Inc.**                                                                                          |       |     |       |
| Report of Independent Auditors—Ernst & Young  LLP                                                          |       | F-21     |       |
| Balance Sheets as of December 31, 2005 and 2004                                                                     |       | F-22     |       |
| Statements of Operations for the years ended  December 31, 2005, 2004 and 2003                                      |       | F-23     |       |
| Statements of Changes in Shareholders Deficit for the  years ended  December 31, 2005, 2004 and 2003                |       | F-24     |       |
| Statements of Cash Flows for the years ended  December 31, 2005, 2004 and 2003                                      |       | F-25     |       |
| Notes  to Financial Statements                                                                                           |       | F-26     |       |

 

54

----

**Report of Independent Registered Public AccountingFirm**

The Partners ofInsight Midwest, LP

We have audited the accompanying consolidated balancesheets of Insight Midwest, LP (the “Company”) as of December 31, 2005 and2004, and the related consolidated statements of operations, changes inpartners’ capital, and cash flows for each of the three years in the periodended December 31, 2005. These financial statements are the responsibilityof the Company’s management. Our responsibility is to express an opinion onthese financial statements based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. We were not engaged to perform an audit of the Company’s internalcontrol over financial reporting*.*Our audits included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financial reporting.Accordingly, we express no such opinion. An audit also includes examining, on atest basis, evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used and significant estimatesmade by management, and evaluating the overall financial statementpresentation. We believe that our audits provide a reasonable basis for ouropinion.

In ouropinion, the financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of Insight Midwest, LPat December 31, 2005 and 2004, and the consolidated results of theiroperations and their cash flows for each of the three years in the period endedDecember 31, 2005, in conformity with U.S. generally accepted accountingprinciples.

|                     | /s/ Ernst & Young LLP |
|---------------------|--------------------------------|
| New York, New York  |
| March 10, 2006 |

 

F-1

----

**INSIGHT MIDWEST, LP**

**CONSOLIDATEDBALANCE SHEETS***(*dollars in thousands)

| ** **                                                                                                                     | ** ** | **December 31,** | ** ** | **December 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------|------------|-----------------------|------------|
|                                                                                                                           | ** ** |                  | **2005**   | ** **            |       |   | **2004** | ** ** |   |
| **Assets**                                                                                                                     | * *   | * *              | * *   | ** **            |       |   |   | ** ** |   |
| Cash and cash  equivalents                                                                                                     |       |                  | $          | 24,853                |       |   |   | $ | 72,476 | ** ** |   |
| Investments                                                                                                                    |       |                  | 4,701      |                  |       |   | 4,100 | ** ** |   |
| Trade accounts  receivable, net of allowance for doubtful accounts of $1,079 and $1,050 as of  December 31, 2005 and 2004 |       |                  | 27,233     |                  |       |   | 31,352 | ** ** |   |
| Launch funds  receivable                                                                                                       |       |                  | 974        |                  |       |   | 2,749 | ** ** |   |
| Prepaid expenses  and other current assets                                                                                     |       |                  | 8,860      |                  |       |   | 9,300 | ** ** |   |
| Total current assets                                                                                                           |       |                  | 66,621     |                  |       |   | 119,977 | ** ** |   |
| Fixed assets, net                                                                                                              |       |                  | 1,107,571  |                  |       |   | 1,130,600 | ** ** |   |
| Goodwill                                                                                                                       |       |                  | 14,684     |                  |       |   | 14,684 | ** ** |   |
| Franchise costs                                                                                                                |       |                  | 2,357,535  |                  |       |   | 2,357,535 | ** ** |   |
| Deferred  financing costs, net of accumulated amortization of $19,769 and $15,170 as of  December 31, 2005 and 2004       |       |                  | 19,910     |                  |       |   | 22,776 | ** ** |   |
| Other non-current  assets                                                                                                      |       |                  | 1,582      |                  |       |   | 1,843 | ** ** |   |
| Total assets                                                                                                                   |       |                  | $          | 3,567,903             |       |   |   | $ | 3,647,415 | ** ** |   |
| **Liabilities  and partners’ capital**                                                                                    |       |                  |       |                  |       |   |   | ** ** |   |
| Accounts payable                                                                                                               |       |                  | $          | 40,843                |       |   |   | $ | 27,147 | ** ** |   |
| Accrued expenses  and other liabilities                                                                                        |       |                  | 38,535     |                  |       |   | 36,092 | ** ** |   |
| Accrued property  taxes                                                                                                        |       |                  | 12,792     |                  |       |   | 13,049 | ** ** |   |
| Accrued  programming costs (inclusive of $29,878 and $36,838 due to related parties as  of December 31, 2005 and 2004)    |       |                  | 43,705     |                  |       |   | 51,328 | ** ** |   |
| Deferred revenue                                                                                                               |       |                  | 4,978      |                  |       |   | 8,996 | ** ** |   |
| Interest payable                                                                                                               |       |                  | 20,459     |                  |       |   | 20,643 | ** ** |   |
| Debt—current  portion                                                                                                     |       |                  | 83,500     |                  |       |   | 83,500 | ** ** |   |
| Due to affiliates                                                                                                              |       |                  | 46,013     |                  |       |   | 55,177 | ** ** |   |
| Total current liabilities                                                                                                      |       |                  | 290,825    |                  |       |   | 295,932 | ** ** |   |
| Deferred revenue                                                                                                               |       |                  | 1,499      |                  |       |   | 2,904 | ** ** |   |
| Debt                                                                                                                           |       |                  | 2,432,811  |                  |       |   | 2,518,879 | ** ** |   |
| Other non-current  liabilities                                                                                                 |       |                  | 2,382      |                  |       |   | 2,078 | ** ** |   |
| Partners’  capital:                                                                                                       |       |                  |       |                  |       |   |   | ** ** |   |
| Deferred stock  compensation                                                                                                   |       |                  | (535       | )                     |       |   | - | ** ** |   |
| Partners’  accumulated capital                                                                                            |       |                  | 840,921    |                  |       |   | 827,622 | ** ** |   |
| Total partners’  capital                                                                                                  |       |                  | 840,386    |                  |       |   | 827,622 | ** ** |   |
| Total liabilities  and partners’ capital                                                                                  |       |                  | $          | 3,567,903             |       |   |   | $ | 3,647,415 | ** ** |   |

 

See accompanying notes

 

F-2

----

**INSIGHT MIDWEST, LPCONSOLIDATED STATEMENTSOF OPERATIONS(dollars in thousands)**

| ** **                                                                                                                                                                                                              | ** ** | **Year Ended December 31,** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                                                                                                                                                              | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| Revenue                                                                                                                                                                                                                 |       | $                                          | 1,117,680  |   | $ | 1,000,814 |   | $ | 899,797 |   |
| Operating costs  and expenses:                                                                                                                                                                                          |       |                                       |       |   |   |   |   |
| Programming and other operating costs (exclusive of  depreciation and amortization) (inclusive of $157,643, $150,956 and $142,387  of programming expense incurred through related parties during 2005, 2004 and  2003) |       | 381,121                                    |       | 340,990 |   | 327,071 |   |
| Selling, general and administrative                                                                                                                                                                                     |       | 246,524                                    |       | 203,787 |   | 165,014 |   |
| Management fees                                                                                                                                                                                                         |       | 33,534                                     |       | 29,987 |   | 26,352 |   |
| Stock-based compensation                                                                                                                                                                                                |       | 6,342                                      |       | — |   | — |   |
| Depreciation and amortization                                                                                                                                                                                           |       | 241,695                                    |       | 235,105 |   | 224,874 |   |
| Total operating  costs and expenses                                                                                                                                                                                     |       | 909,216                                    |       | 809,869 |   | 743,311 |   |
| Operating income                                                                                                                                                                                                        |       | 208,464                                    |       | 190,945 |   | 156,486 |   |
| Other income  (expense):                                                                                                                                                                                                |       |                                       |       |   |   |   |   |
| 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                                                                                                                                                                                                        |       | (200,241                                   | )          | (177,524 | ) | (184,499 | ) |
| Interest income                                                                                                                                                                                                         |       | 1,993                                      |       | 368 |   | 831 |   |
| Other income (expense), net                                                                                                                                                                                             |       | 3,083                                      |       | (1,368 | ) | (591 | ) |
| Total other  expense, net                                                                                                                                                                                               |       | (195,165                                   | )          | (178,524 | ) | (130,262 | ) |
| Income before  extraordinary item                                                                                                                                                                                       |       | 13,299                                     |       | 12,421 |   | 26,224 |   |
| Extraordinary  item                                                                                                                                                                                                     |       | —                                     |       | 15,627 |   | — |   |
| Net income                                                                                                                                                                                                              |       | 13,299                                     |       | 28,048 |   | 26,224 |   |
| Accrual of  preferred interests                                                                                                                                                                                         |       | —                                     |       | — |   | (10,353 | ) |
| Net income applicable to  common interests                                                                                                                                                                              |       | $                                          | 13,299     |   | $ | 28,048 |   | $ | 15,871 |   |

 

See accompanying notes

F-3

----

**INSIGHT MIDWEST, LPCONSOLIDATED STATEMENTSOF CHANGES IN PARTNERS’ CAPITAL(dollars in thousands)**

| ** **                               | ** ** | **Partners’  Accumulated  Capital** | ** ** | **Deferred Stock  Compensation** | ** ** | **Accumulated  Other  Comprehensive  Income (Loss)** | ** ** | **Partners’  Capital** | ** ** |
|------------------------------------------|------------|------------------------------------------|------------|---------------------------------------|------------|-----------------------------------------------------------|------------|-----------------------------|------------|
| Balance at  January 1, 2003         |       |                                     | $          | 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 |   |
| Issuance of deferred stock               |       |                                     |       |                                  |       |                                                      | (535       | )                           |       |   |   |   |   | (535 | ) |
| Net income                               |       |                                     | 13,299     |                                  |       |                                                      |       |                        |       |   |   |   |   | 13,299 |   |
| Balance at  December 31, 2005       |       |                                     | $          | 840,921                               |       |                                                      |       | $                           | (535       | ) |   |   | $ | — |   |   | $ | 840,386 |   |

 

See accompanying notes

F-4

----

**INSIGHT MIDWEST, LPCONSOLIDATED STATEMENTSOF CASH FLOWS(dollars in thousands)**

| ** **                                                                         | ** ** | **Year Ended December 31,** | ** ** |
|------------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                         | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Operating activities:**                                                          |       |                                       |       |   |   |   |   |
| Net income                                                                         |       | $                                          | 13,299     |   | $ | 28,048 |   | $ | 26,224 |   |
| Adjustments  to reconcile net income to net cash provided by operating activities: |       |                                       |       |   |   |   |   |
| Depreciation and amortization                                                      |       | 241,695                                    |       | 235,105 |   | 224,874 |   |
| Stock-based compensation                                                           |       | 6,342                                      |       | — |   | — |   |
| Loss on early extinguishment of debt                                               |       | —                                     |       | — |   | 2,616 |   |
| Provision for losses on trade accounts receivable                                  |       | 17,613                                     |       | 18,301 |   | 13,366 |   |
| Amortization of note discount                                                      |       | 333                                        |       | 304 |   | 1,835 |   |
| Gain on cable systems exchange                                                     |       | —                                     |       | — |   | (27,134 | ) |
| Gain on settlement of programming contract                                         |       | —                                     |       | — |   | (34,819 | ) |
| (Gain) loss on interest rate swaps                                                 |       | (2,078                                     | )          | (36 | ) | 2,114 |   |
| Changes  in operating assets and liabilities:                                      |       |                                       |       |   |   |   |   |
| Trade accounts receivable                                                          |       | (13,494                                    | )          | (20,382 | ) | (16,495 | ) |
| Launch funds receivable                                                            |       | 1,775                                      |       | 6,672 |   | (4,224 | ) |
| Prepaid expenses and other assets                                                  |       | 608                                        |       | 3,483 |   | (3,198 | ) |
| Accounts payable                                                                   |       | 13,696                                     |       | (2,280 | ) | (17,320 | ) |
| Accrued expenses and other liabilities                                             |       | (27,604                                    | )          | 11,757 |   | 43,644 |   |
| Net cash provided by operating activities                                          |       | 252,185                                    |       | 280,972 |   | 211,483 |   |
| **Investing  activities:**                                                         |       |                                       |       |   |   |   |   |
| Purchase of fixed assets                                                           |       | (215,083                                   | )          | (162,806 | ) | (193,487 | ) |
| Purchase of intangible assets                                                      |       | —                                     |       | (107 | ) | (889 | ) |
| Purchase of investments                                                            |       | (601                                       | )          | — |   | — |   |
| Sale of fixed assets                                                               |       | 1,109                                      |       | — |   | — |   |
| Purchase of cable television systems, net                                          |       | —                                     |       | — |   | (26,475 | ) |
| Net cash used in investing activities                                              |       | (214,575                                   | )          | (162,913 | ) | (220,851 | ) |
| **Financing  activities:**                                                         |       |                                       |       |   |   |   |   |
| Distributions of preferred interests                                               |       | —                                     |       | — |   | (11,554 | ) |
| Net proceeds from borrowings under credit facilities                               |       | —                                     |       | — |   | 118,000 |   |
| Repayment of credit facilities                                                     |       | (83,500                                    | )          | (68,250 | ) | (25,000 | ) |
| Repayment of Coaxial notes                                                         |       | —                                     |       | — |   | (195,869 | ) |
| Proceeds from issuance of notes                                                    |       | —                                     |       | — |   | 141,375 |   |
| Debt issuance costs                                                                |       | (1,733                                     | )          | (12 | ) | (4,842 | ) |
| Net cash (used in) provided by financing activities                                |       | (85,233                                    | )          | (68,262 | ) | 22,110 |   |
| Net change in cash and cash equivalents                                            |       | (47,623                                    | )          | 49,797 |   | 12,742 |   |
| Cash and cash equivalents, beginning of year                                       |       | 72,476                                     |       | 22,679 |   | 9,937 |   |
| Cash and cash  equivalents, end of year                                            |       | $                                          | 24,853     |   | $ | 72,476 |   | $ | 22,679 |   |

 

See accompanying notes

F-5

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

**1.   Organizationand Basis of Presentation**

We were formed in September 1999 to serve as theholding 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 owned50% by Insight Communications Company, L.P. (“Insight LP”), which is whollyowned by Insight Inc., and 50% by an indirect subsidiary of Comcast Cable. InsightLP serves as our general partner and manages and operates our systems.

Through our wholly owned operating subsidiaries,Insight Communications Midwest, LLC (“Insight Communications Midwest”), InsightCommunications of Central Ohio, LLC (“Insight Ohio”) and Insight KentuckyPartners II, L.P. (“Insight Kentucky”), we own and operate cable televisionsystems in Indiana, Kentucky, Ohio, and Illinois which passed approximately 2.4million homes and served approximately 1.3 million customers as of December 31,2005. In addition, we also owned and operated a cable television system inGriffin, Georgia through February 28, 2003.

The accompanying consolidated financial statementsinclude the accounts of Insight Midwest Holdings, LLC, our wholly-ownedsubsidiary which owns 100% of the outstanding equity of our operatingsubsidiaries.

On July 28, 2005,Insight Inc. entered into a definitive merger agreement (“the merger”) withInsight Acquisition Corp., an entity organized by affiliates of The CarlyleGroup in order to effect the transactions contemplated by the merger agreement.Pursuant to the terms of the merger agreement, on December 16, 2005,Insight Acquisition Corp. merged with and into Insight Inc., and Insight Inc.is the surviving entity. As of the effective time of the merger, Insight Inc.’spublic shareholders (other than stockholders that are continuing as investorsin the surviving corporation and stockholders who demanded appraisal rights)had no further ownership interest in Insight Inc. Instead, the shares of commonstock of such holders were converted into the right to receive $11.75 in cashper share. As a result of the merger, Insight Inc.’s common stock is no longerpublicly traded.

***Indiana Systems***

On October 31, 1998,Insight LP and AT&T Broadband contributed certain of their cable televisionsystems located in Indiana and Northern Kentucky to form Insight Indiana (nowknown as Insight Communications Midwest, LLC) in exchange for a 50% equityinterest. On October 1, 1999, as part of a joint venture restructuringinvolving the Kentucky Systems (discussed below), Insight Indiana became ourwholly owned subsidiary. Pursuant to the terms of our respective operatingagreements, 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 CableAcquisition Company, LLC, InterMedia Capital Management VI, LLC and asubsidiary and related party of AT&T Broadband, for $341.5 million(inclusive of expenses). Concurrently with this acquisition, the KentuckySystems were contributed to us and we assumed debt of $742.1 million (the totaldebt of the IPVI Partnership) in connection with this transaction. Pursuant tothe terms of our respective operating agreements, we and 

F-6

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**1.**   Organization and Basis of Presentation (Continued)

InsightKentucky will continue until October 1, 2011, unless extended orterminated sooner by Insight LP and Comcast Cable.

***Illinois Systems***

Effective January 1, 2001, we completed a seriesof transactions with Insight LP and AT&T Broadband for the acquisition ofadditional cable television systems, primarily located in the state ofIllinois, valued at approximately $2.2 billion (the “AT&T transactions”),inclusive of systems valued at approximately $775.8 million, contributed byInsight LP.

***Concurrently with the completion ofInsight LP’s purchase of systems from AT&T Broadband, Insight LPcontributed such systems to us, along with all of its wholly owned systemsserving approximately 175,000 customers. The total value of such contributedsystems was $1.2 billion. We recorded the respective assets and liabilities,including debt assumed, of the contributed systems’ at their respectivecarrying values with the net difference recorded as an addition to partners’capital.***

Concurrently, AT&T Broadband contributed directlyto us certain Illinois systems serving approximately 250,000 customers. Thetotal value of such contributed systems was $983.3 million. We recorded 100% ofthe assets and liabilities of the systems contributed at fair value with anaddition to partners’ capital of $659.9 million equal to the total fair valueof the net assets contributed. The fair value of $983.3 million was allocatedto the cable television assets acquired in relation to their fair values asincreases in fixed assets of $116.1 million and franchise costs of $867.2million.

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

***Ohio Systems***

On August 21, 1998, Insight LP and CoaxialCommunications of Central Ohio, Inc. (“Coaxial”) entered into acontribution agreement pursuant to which Coaxial contributed to Insight Ohiosubstantially all of the assets and liabilities of its cable television systemslocated in Columbus, Ohio and Insight LP contributed $10.0 million in cash toInsight Ohio.

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

**2. Significant AccountingPolicies**

***Basis of Consolidation***

The consolidated financialstatements include our accounts and those of our wholly owned subsidiaries. Intercompanybalances and transactions have been eliminated in consolidation.

F-7

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**2. SignificantAccounting Policies (Continued)**

***Revenue Recognition***

Revenue is earned fromcustomer fees for cable television programming services including premium,digital and pay-per-view services and ancillary services, such as rental ofconverters, remote control devices, and installations. In addition, we earnrevenues from providing high-speed Internet services, selling advertising,telephone services and commissions for products sold through home shoppingnetworks. Revenue is recorded in the month the related services are rendered. Feesreceived for activation of telephone services are amortized over the customerrelationship period for the years ended December 31, 2004 and 2003. (SeeNote 10 “Related Party Transactions”).

***Use of Estimates***

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

***Cash Equivalents***

We consider all highlyliquid investments with original maturities of three months or less to be cashequivalents. The carrying amounts of our cash equivalents approximate their fairvalues.

***Investments***

Investments for which aquoted market price is unavailable are carried at cost and periodicallyreviewed for impairment.

***Fixed Assets***

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

The carrying value offixed assets is reviewed if facts and circumstances suggest that they may beimpaired. If this review indicates that the carrying value of the fixed assetswill not be recovered from undiscounted future cash flows generated from suchassets, an impairment loss would be recognized for the amount that the asset’scarrying value exceeds its fair value. We believe that no impairment of fixedassets existed as of December 31, 2005 or 2004.

F-8

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**2. SignificantAccounting Policies (Continued)**

***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 ofindefinite-lived intangible assets, including our franchise costs and goodwill.SFAS No. 142 requires goodwill and indefinite-lived intangible assets betested for impairment annually, or more frequently as warranted by events orchanges in circumstances. According to guidance prescribed in Emerging IssuesTask Force (“EITF”) Issue No. 02-7, *Unitof Accounting for Testing of Impairment of Indefinite-Lived Intangible Assets*,single units of accounting operated as a single asset and essentiallyinseparable from each other, should be combined as a single asset group forpurposes of impairment testing. Management has identified three asset groupsbased on cable system management, geographic clustering and management’s beliefthat such grouping represents the best use of those assets.

Additionally, during September 2004,the SEC staff issued Topic D-108, *Useof the Residual Method to Value Acquired Assets Other than Goodwill*,which requires the direct method of separately valuing all intangible assetsand does not permit goodwill to be included in franchise assets. In connectionwith adopting SFAS No. 142 and Topic D-108 and based on guidancefrom EITF Issue No. 02-7, we performed an impairment assessmentusing an independent third-party appraiser for the three asset groupsidentified. The Company determined that, as of December 31, 2005 and 2004,there had been no impairment to our franchise costs.

***Deferred Financing Costs***

Deferred financing costsrelate to costs, primarily legal and bank facility fees, incurred in securingbank loans and other sources of financing. These costs are amortized over thelife of the applicable debt. For the years ended December 31, 2005, 2004and 2003, we recorded amortization expense of $4.7 million, $4.5 million and$4.0 million.

***Stock-Based Compensation***

Pursuant to SFAS No. 148,*Accounting for Stock Based Compensation—Transitionand Disclosure,*we have elected to continue to account for employeestock-based compensation under Accounting Principals Board (“APB”) Opinion No. 25,*Accounting for Stock Issued to Employees*,and related interpretations, as permitted by SFAS No. 123, *Accounting for Stock-Based Compensation*,as amended. Compensation expense for stock options is measured as the excess,if any, of the quoted market price of our stock at the date of grant over theamount an option holder must pay to acquire the stock. We record compensationexpense for restricted stock awards based on the quoted market price at thedate of grant over the vesting period.

***Comprehensive Income (Loss)***

We record the effectiveportion of certain derivatives’ net unrealized gains as components ofcomprehensive income (loss).

F-9

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**2. SignificantAccounting Policies (Continued)**

***Income Taxes***

No provision has been madein the accompanying financial statements for federal, state or local incometaxes since our income or loss is reportable by the individual partners in theirrespective tax returns.

***Marketing and Promotional***

Marketing and promotionalcosts are expensed as incurred. Marketing and promotional expenses, net ofmarketing support (recorded as a reduction to marketing expense), for the yearsended December 31, 2005, 2004 and 2003 were $31.2 million, $18.1 millionand $8.5 million.

***Recent Accounting Pronouncements***

*On December 16, 2004, the FASBissued SFAS No. 123 (revised 2004),*Share-Based Payment (“SFAS No. 123(R)”), which is a revision ofSFAS No. 123, and supersedes APB Opinion No. 25. SFAS No. 123(R) requiresall share-based payments to employees, including grants of employee stockoptions, to be recognized in the financial statements based on their fairvalues, beginning with the next fiscal year that begins after June 15,2005. In addition, SFAS No. 123(R) will cause unrecognized expenserelated to previously issued options vesting after the date of initial adoptionto be recognized as a charge to results of operations over the remainingvesting period. We are required to adopt SFAS No. 123(R) in our firstquarter of 2006. The FASB has concluded that companies may adopt the newstandard in one of two ways: the modified prospective transition method and themodified retrospective transition method. Under the modified retrospectivetransition method, prior periods may be retroactively adjusted either as of thebeginning of the year of adoption or for all periods presented. The modifiedprospective transition method requires that compensation expense be recorded forall unvested stock options and share awards at the beginning of the fiscalperiod of adoption of SFAS No. 123R, while the retrospective method wouldrecord compensation expense for all unvested stock options and share awardsbeginning with the fiscal period retroactively adjusted. The Company does notanticipate that the adoption of this standard will have a material impact onits consolidated financial statements.

*In March 2005, FASB issuedInterpretation No. 47 (“FIN 47”), “*Accounting forConditional Asset Retirement Obligations (anInterpretation of SFAS No. 143)”. ThisInterpretation provides clarification with respect to the timing of liabilityrecognition for legal obligations associated with the retirement of long-livedassets when the timing and/or method of settlement of the obligation isconditional on a future event. This Interpretation requires that the fair valueof a liability for a conditional asset retirement obligation be recognized in the period inwhich it occurred if a reasonable estimate of fair value can be made. FIN 47 iseffective for fiscal years ending after December 2005. The Company doesnot anticipate that the adoption of this standard will have a material impacton its consolidated financial statements.

In May 2005, FASBissued SFAS No. 154, *Accounting**Changes and Error Corrections*. SFAS No. 154 replacesAPB Opinion No. 20, *Accounting Changes*,and SFAS No. 3, *Reporting AccountingChanges in Interim Financial Statements* and changes the requirementsfor the accounting for and reporting of a change in accounting principles. SFASNo. 154 applies to all voluntary changes in an accounting principle. Italso applies to changes required by an accounting pronouncement in the unusualinstance that the pronouncement does not include specific transition provisions.When a pronouncement includes specific provisions, those provisions should befollowed. SFAS 154 is effective for accounting changes and 

F-10

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**2. SignificantAccounting Policies (Continued)**

correctionsof errors made in fiscal years beginning in 2006. The Company does notanticipate that the adoption of this standard will have a material impact onits consolidated financial statements.

***Reclassifications***

Reclassifications havebeen made to the prior years’ financial statements to conform to thoseclassifications used in 2005.

**3.Fixed Assets**

| ** **                                       | ** ** | **December 31,**   | ** ** | **December 31,** | ** ** |
|--------------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                       | ** ** | **2005**                | ** ** | **2004**              | ** ** |
| ** **                                       | ** ** | **(in thousands)** | ** ** |
| Land, buildings  and improvements                |       | $                       | 36,768     |                  | $          | 35,649 |   |
| Cable system  equipment                          |       | 2,365,956               |       | 2,155,193             |       |
| Furniture,  fixtures and office equipment        |       | 19,079                  |       | 17,867                |       |
|                                             |       | 2,421,803               |       | 2,208,709             |       |
| Less: accumulated  depreciation and amortization |       | (1,314,232              | )          | (1,078,109            | )          |
| Total fixed assets, net                          |       | $                       | 1,107,571  |                  | $          | 1,130,600 |   |

 

Depreciation expense for the years ended December 31,2005, 2004 and 2003 was $237.0 million, $230.6 million and $220.9 million.

**4. Investments**

***Oxygen Cable, LLC***

Oxygen Cable, LLC (“Oxygen”) is an independent cabletelevision network with programming tailored to the interests of women. OnJuly 9, 2002 we entered into a carriage agreement with Oxygen, whereby weagreed to carry programming content from Oxygen. The term of the carriageagreement expires on December 31, 2006. For the years endedDecember 31, 2005, 2004 and 2003, we paid Oxygen approximately $440,000,$0 and $0 for programming content. In addition, Oxygen paid us marketingsupport fees, which we record as a reduction of marketing expense, ofapproximately $40,000, $440,000 and $95,000 for the years ended December 31,2005, 2004 and 2003. As of December 31, 2005 and December 31, 2004,our carrying value in this investment was $4.7 million and $3.8 million.

Concurrently with thecarriage agreement, we entered into an equity issuance agreement with Oxygen.The agreement calls for Oxygen to deliver to us shares having an aggregate fairmarket value as of December 31, 2005 of $3.8 million, and byDecember 1, 2006 deliver us additional shares having an aggregate fairmarket value as of the December 31, 2005 valuation of $2.0 million. We andOxygen are in the process of determining the fair market value of Oxygen sharesand as of the date of this filing no shares have been delivered.

F-11

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**5. Debt**

Debt consisted of:

| ** **                                | ** ** | **December 31,**   | ** ** | **December 31,** | ** ** |
|-------------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                | ** ** | **2005**                | ** ** | **2004**              | ** ** |
| ** **                                | ** ** | **(in thousands)** | ** ** |
| Note payable to  Insight Inc.             |       |                    | $          | 100,000               |       |   |   | $ | 100,000 |   |   |
| Insight Midwest  Holdings Credit Facility |       |                    | 1,404,250  |                  |       |   | 1,487,750 |   |   |
| Insight Midwest  93⁄4% Senior Notes    |       |                    | 385,000    |                  |       |   | 385,000 |   |   |
| Insight Midwest  101⁄2% Senior Notes   |       |                    | 630,000    |                  |       |   | 630,000 |   |   |
|                                      |       |                    | 2,519,250  |                  |       |   | 2,602,750 |   |   |
| Net unamortized  discount on notes        |       |                    | (557       | )                     |       |   | (890 | ) |   |
| Market value of  interest rate swaps      |       |                    | (2,382     | )                     |       |   | 519 |   |   |
| Total debt                                |       |                    | $          | 2,516,311             |       |   |   | $ | 2,602,379 |   |   |

 

***Insight MidwestHoldings $1.975 Billion Credit Facility***

Our wholly ownedsubsidiary, Insight Midwest Holdings, LLC serves as a borrower under a $1.975billion credit facility. Obligations under this credit facility are secured bya pledge of the outstanding equity interests of Insight Midwest Holdings andits subsidiaries.

On March 28, 2002, weborrowed $100.0 million from Insight Inc. The loan bears annual interest of 9%,compounded semi-annually, has a scheduled maturity date of January 31, 2011and permits prepayments. Insight Midwest Holdings is permitted under the creditfacility to make distributions to us for the purpose of repaying this loan,including accrued interest, provided that there are no defaults existing underthe credit facility. As of December 31, 2005 and 2004, the balance of the$100.0 million loan, including accrued interest, was $139.1 million and $127.4million.

On July 21, 2005 Insight Inc. completed arefinancing of the existing $1.1 billion Term B loan facility under the InsightMidwest credit facility. This refinancing reduced the applicable margins forLIBOR rate borrowings from LIBOR plus 275 basis points to LIBOR plus 200 basispoints and the applicable margin will be reduced an additional 25 basis pointsif Insight Midwest’s leverage ratio drops below 2.75. The maximum totalleverage ratio covenant was reset from 3.75 to 4.50 on July 1, 2005 withstep downs to 4.25 on July 1, 2006 and 4.00 on July 1, 2007. Thefacility was also amended to provide Insight Inc. certain flexibility torefinance the senior notes at Insight Midwest.

***Insight MidwestSenior Notes***

***On October 1, 1999 simultaneously with the closing ofthe purchase of Insight Kentucky, we completed a $200.0 million offering of 93⁄4%senior notes due in October 2009. Interest payments on these Senior Notes,which commenced on April 1, 2000, are payable semi-annually on April 1and 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 $5.0million 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 outstandingdebt under the then existing Insight Indiana credit facility and InsightKentucky credit facility. Interest payments on these Senior Notes, whichcommenced on May 1, 2001, are payable semi-annually on May 1 and November 1.

The 93⁄4% and 101⁄2% SeniorNotes 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 

F-12

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**5. Debt(Continued)**

and November 1,2005, with the net proceeds from certain sales of our equity. As of December 31,2005 none of these notes have been redeemed. Each holder of the Senior Notesmay require us to redeem all or part of that holder’s notes upon certainchanges of control. The Senior Notes are general unsecured obligations and aresubordinate to all of our other liabilities, the amounts of which were $1.6billion and $1.7 billion as of December 31, 2005 and 2004. The SeniorNotes 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 SecuritiesAct of 1933.

In December 2002, wecompleted 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 interestaccruing from October 1, 2002 through the date of issuance that will berepaid to holders of the bonds in the first semi-annual interest payment due onApril 1, 2003, and net of an underwriting fee of $3.1 million and a bonddiscount of $8.8 million that is being amortized through October 2009. Theproceeds of this offering were used to repay a portion of the outstandingrevolving loans under the Midwest Holdings Credit Facility. Since thisadditional add-on offering occurred under the 93⁄4% Senior Notes indenture, theseadditional debt securities and the 93⁄4% Senior Notes are considered a singleseries of senior notes with identical terms. In June 2003, we completed anexchange offer pursuant to which the $185.0 million add-on offering under the93⁄4% Senior Notes were exchanged for identical notes registered under theSecurities Act of 1933.

In December 2003, wecompleted 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 interestaccruing from November 1, 2003 through the date of issuance that will berepaid to holders of the bonds in the first semi-annual interest payment due onMay 1, 2004 and a bond premium of $11.4 million that is being amortizedthrough November 2010 and net of an underwriting fee of $2.0 million. Theproceeds of this offering were used to repay a portion of the outstandingrevolving loans under the Midwest Holdings Credit Facility. Since thisadditional add-on offering occurred under the 101⁄2% Senior Notes indenture,these additional debt securities and the 101⁄2% Senior Notes are considered asingle series of senior notes with identical terms.

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

F-13

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**5. Debt (Continued)**

***Debt PrincipalPayments***

As of December 31,2005, the remaining principal payments required on our debt were as follows (inthousands):

| 2006       |   | $         | 83,500    |   |
|------------|--------|-----------|-----------|--------|
| 2007       |   | 83,500    |      |
| 2008       |   | 104,750   |      |
| 2009       |   | 1,517,500 |      |
| 2010       |   | 630,000   |      |
| Thereafter |   | 100,000   |      |
| Total      |   | $         | 2,519,250 |   |

 

**6. Derivative Instruments**

We enter into derivativeinstruments, typically interest-rate swap agreements, to modify the interestcharacteristics of our outstanding debt to either a floating or fixed ratebasis. These agreements involve fixed rate interest payments in exchange forfloating rate interest receipts, known as cash flow hedges, and floating rateinterest payments in exchange for fixed rate interest receipts, known as fairvalue hedges, over the life of the agreement without an exchange of theunderlying principal amount. The differential to be paid or received is accruedas interest rates change and is recognized as an adjustment to interest expenserelated to the debt. The related amount payable or receivable is included inother non-current liabilities or assets.

Gains and losses relatedto cash flow hedges that are determined to be effective hedges are recorded asaccumulated other comprehensive income or loss in the accompanying consolidatedbalance sheets. Gains and losses related to fair value hedges that aredetermined to be effective hedges are recorded in the consolidated statementsof operations as an adjustment to the swap instrument and an equal andoffsetting adjustment to the carrying value of the underlying debt. Gains andlosses related to interest rate swaps that are determined not to be effectivehedges and do not qualify for hedge accounting are recorded in our consolidatedstatements of operations as other income or expense.

***Fair Value Hedges***

In February 2003, weentered into two interest rate swap agreements whereby we swapped fixed ratesunder our 101⁄2% senior notes due in December 2010 for variable rates equalto six-month LIBOR, plus the applicable margin of approximately 7.7%, on $185.0million 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 swapsand received proceeds of $1.8 million and recorded a gain in this amount, whichis included in other income (expense), net in our consolidated statements ofoperations.

In July 2003, weentered into three new interest rate swap agreements whereby we swapped fixedrates under our 101⁄2% senior notes due in December 2010 for variable ratesequal to six-month LIBOR, plus the applicable margin of approximately 8.3%, on$185.0 million notional value of debt. These agreements expired on November 1,2005. We recorded a gain (loss) on these swaps of $2.1 million, $36,000 and($2.1) million for the years ended December 31, 2005, 2004 and 2003,which is included in other income (expense), net. As of December 31, 2005and 2004, we recorded $0 and $364,000 of interest payable related to theseagreements. The cost, if terminated, of these agreements was $0 and $2.1million as of December 31, 2005 and 2004.

F-14

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**6. DerivativeInstruments (Continued)**

In December 2003, we entered into an interestrate swap agreement whereby we swapped fixed rates under our 101⁄2% senior notesdue in December 2010 for variable rates equal to six-month LIBOR, plus theapplicable margin of approximately 5.9%, on $130.0 million notional value ofdebt. This agreement expires November 1, 2010. This swap has beendetermined to be perfectly effective in hedging against fluctuations in thefair value of the underlying debt. As such, changes in the fair value of theunderlying debt equally offset changes in the value of the interest rate swapin our consolidated statements of operations. The fair value (cost ifterminated) of this swap as of December 31, 2005 and 2004 was ($2.4)million and $519,000 and has been recorded in other non-current assets(liabilities) and as an adjustment to the carrying value of debt.

**7.Supplemental Cash Flow Information**

Thefollowing amounts were paid in cash during the years ended December 31:

| ** ** | ** ** | **2005**                | ** ** | **2004** | ** ** | **2003** | ** ** |
|------------|------------|-------------------------|------------|----------|------------|----------|------------|
| ** ** | ** ** | **(in thousands)** | ** ** |
| Interest   |       | $                       | 188,216    |     | $          | 167,602  |       | $ | 163,457 |   |
|            |            |                         |            |          |            |          |            |  |  |  |

 

**8.Stock Option Plan and Other Stock Based Compensation**

***1999 EquityIncentive Plan***

The Insight Inc. 1999Equity Incentive Plan (the “Plan”) provided for the grant of incentive stockoptions, nonqualified stock options and restricted stock, as well as otherawards such as performance units, performance shares, deferred stock, dividendequivalents and other stock-based awards. The Plan remains in effect underwhich only the deferred stock units remain outstanding. At December 31,2005 we have recorded $535,000 of deferred compensation for Midwest employeesthat are eligible to participate in this Plan.

***2005 StockIncentive Plan***

On December 16, 2005,concurrently with the merger, the Insight Inc. Board of Directors adopted the2005 Stock Incentive Plan (the “2005 Plan”). Under the 2005 Plan the Board hasthe authority to grant awards of shares of its non-voting common stock toofficers, directors and employees of Midwest. A total of 3,666,887 shares of Series ENon-Voting Common Stock and 100,000 shares of Series F Non-Voting CommonStock are available for issuance under the 2005 Plan. Shares under the 2005Plan require the execution of a subscription agreement.

On December 16, 2005,the Board authorized the issuance of 1,388,762 shares of Series ENon-Voting Common Stock to Midwest employees. These shares were issued on January 20,2006.

***Stock Options***

As of the effective timeof the merger, each option to purchase Insight common stock (whether vested orunvested) outstanding immediately prior to the effective time of the merger wascanceled in exchange for the right to receive a cash payment equal to theproduct of (A) the excess, if any, of (i) $11.75, over (ii) theper share exercise price of the stock option, multiplied by (B) the numberof shares of Insight common stock covered by the stock option. For the yearended December 31, 2005 we recorded stock based compensation expense of$3.5 million which was being amortized on a straight-line basis over thevesting term.

F-15

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**8. Stock Option Plan andOther Stock Based Compensation (Continued)**

We have excluded all disclosures of option activity,options outstanding, options exercisable and weighted average exercise pricesas we believe that the presentation of this information would not be meaningfulto the reader of the financial statements because as of the effective time ofthe merger Insight Inc.’s common stock is not publicly traded, all of ouroptions have been canceled and other equity interests have been converted intosimilar rights in the surviving corporation.

Pursuant to SFAS No. 123,we had, prior to the merger, elected to continue to account for employeestock-based compensation under APB Opinion No. 25, using an intrinsicvalue approach to measure compensation expense. Accordingly, no compensationexpense has been recognized for options granted to employees under the Plansince all such options were granted at exercise prices equal to or greater thanfair market value on the date of grant.

***Other Stock Based Compensation***

***Restricted Stock***

In 2005 we issued to employees 249,437 shares ofInsight common stock in the form of restricted stock. The restricted stockprovided for vesting over a five-year period and were issued in the name of theemployee on the date of grant and held by us until the shares vested. Werecorded stock based compensation expense of $2.4 million which was beingamortized on a straight-line basis over the vesting term.

At the effective time ofthe merger, pursuant to the merger agreement, we waived the transferabilityrestrictions and/or the vesting conditions applicable to all restricted shares,and except for such shares that continued as shares of the survivingcorporation, such shares became entitled to receive $11.75 in cash per share.

***Deferred Stock Units***

In 2005 we have issued to employees 65,000 shares ofdeferred stock units. The deferred stock units vest over a five-year period andwere issued in the name of the employee on the date of grant. For the yearended December 31, 2005 we recorded stock based compensation expense of$400,000 which was being amortized on a straight-line basis over the vestingterm.

At the effective time ofthe merger, we adjusted each of the deferred stock unit agreements so that,upon delivery at the end of the deferral period, the holder of each deferredstock unit will be entitled to receive one share of Series C Non-VotingPreferred Stock of the surviving corporation for each share of Insight Class Acommon stock that the holder otherwise would have been entitled to receiveprior to the adjustment. We also amended the agreements evidencing the deferredstock units to provide that the deferral period will end on the earlier of achange of control or prior thereto upon the later to occur of December 16,2010 or the employee’s termination of employment. Any deferred stock units thatremained unvested at the effective time of the merger will continue to vestaccording to the schedule set forth in the applicable agreement evidencing thegrant of such deferred stock units.

F-16

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**9.**FinancialInstruments

***Concentrations of Credit Risk***

Financial instruments thatpotentially subject us to concentrations of credit risk consist principally ofcash and cash equivalents and accounts receivable. We maintain cash and cashequivalents with various financial institutions and our policy is designed tolimit exposure to any one institution. Concentrations of credit risk withrespect to accounts receivable are limited due to the large number of customerscomprising our customer base.

***Fair Value***

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

*Cashequivalents and accounts receivable:**  *The carrying amount reported in the consolidatedbalance sheets for cash equivalents and accounts receivable approximates fairvalue.

*Debt:**  *The carrying amounts of our borrowings under ourcredit arrangements approximate fair value as they bear interest at floatingrates. The fair value of our Senior Notes and Senior Discount Notes are basedon quoted market prices and are listed in the following table:

| ** **                              | ** ** | **Fair Value at** | ** ** | **Fair Value at** | ** ** |
|-----------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                              | ** ** | **December 31,**       | ** ** | **December 31,**       | ** ** |
| ** **                              | ** ** | **2005**                    | ** ** | **2004**                    | ** ** |
| ** **                              | ** ** | **(in thousands)**     | ** ** |
| Insight Midwest  93⁄4% Senior Notes  |       |                        | $          | 394,600                     |       |   |   | $ | 404,300 |   |   |
| Insight Midwest 101⁄2%  Senior Notes |       |                        | $          | 659,100                     |       |   |   | $ | 689,900 |   |   |

* *

*Interest rate swapagreements:**  *Interestrate swap agreements are recorded in our financial statements at fair value. Thecost of such swap agreements was $2.4 million and $1.6 million as of December 31,2005 and 2004.

**10. Related PartyTransactions**

***Managed Systems***

On March 17, 2000, we entered into a managementagreement with Comcast of Montana/Indiana/Kentucky/Ohio (“Comcast”) (formerlyknown as InterMedia Partners Southeast), an affiliate of Comcast Cable, toprovide management services to cable television systems owned by Comcast. EffectiveJuly 31, 2004, the management agreement was terminated by mutual agreement.We recognized management fees in connection with this agreement of $0, $1.4million and $2.4 million for the years ended December 31, 2005, 2004 and2003.

On February 28, 2003, Insight Midwest exchangedwith Comcast of Montana/Indiana/Kentucky/Ohio the system we then owned inGriffin, 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 theagreement, Insight Midwest paid approximately $1.5 million as a closingadjustment to Comcast of Montana/Indiana/Kentucky/Ohio to complete the rebuildand upgrade of the Griffin, Georgia system.

F-17

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**10. RelatedParty Transactions (Continued)**

This system exchange wasaccounted for on that date as a sale of the Griffin, Georgia system and apurchase of the New Albany, Indiana and Shelbyville, Kentucky systems. Inconnection with this system exchange, we recorded a gain of approximately $27.1million equal to the difference between the fair value and carrying value ofthe Griffin, Georgia system as of the closing date. Of the $64.5 millionpurchase price of the New Albany, Indiana and Shelbyville, Kentucky systems$31.9 million was allocated to such cable television systems’ assets acquiredin relation to their fair values and $32.6 million was allocated to franchisecosts.

***Programming***

We purchase the majority of our programming throughaffiliates of Comcast Cable. Charges for such programming, including a 11⁄2%administrative fee, were $157.6 million, $151.0 million and $142.4 million forthe three years ended December 31, 2005, 2004 and 2003. As of December 31,2005 and 2004, $29.9 million and $36.8 million of accrued programmingcosts were due to affiliates of Comcast Cable. We believe that the programmingrates charged through these affiliates are lower than those available from independentparties.

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

***Telephone Agreements***

Prior to December 31, 2004, to facilitatedelivery of telephone services, we were party to a joint operating agreementwith Comcast Cable that allowed Insight Midwest to deliver to its residentialcustomers, in certain of its service areas, local telephone service provided byComcast Cable. Under the terms of the agreement, Insight Midwest leased certaincapacity on our local network to Comcast Cable. Revenue earned from leasednetwork capacity used in the provision of telephone services was $0, $8.5 millionand $6.2 million for the years ended December 31, 2005, 2004 and 2003. Inaddition, Insight Midwest received additional payments related to certainservices and support, including installations, marketing and billing. Feerevenue earned in connection with installations was deferred and amortized overthe expected term a telephone customer was expected to maintain their telephoneservice, then estimated to be three years. Marketing and billing supportrevenue was recognized in the period such services were performed.

On December 31, 2004,we acquired the telephone business conducted by Comcast Cable in the marketsserved under our joint operating agreement and terminated the joint operatingagreement. Subsequent to December 31, 2004, we no longer earn revenue fromthe services described above, but rather we record the continued amortizationof installation fee revenue and revenues earned directly from our customers forproviding telephone and telephone related services. Comcast Cable paid us 

F-18

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**10. RelatedParty Transactions (Continued)**

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

***Advertising Services***

*In October 1999, to facilitatethe administration of our advertising services in our Kentucky Systems, weentered into an agreement with Comcast Cable, which provided for this affiliateto perform all of our Kentucky advertising sales and related administrativeservices. Effective September 26, 2004, this agreement was terminated by mutualagreement.*

We earned advertisingrevenues through this affiliate of $0, $13.5 million and $18.5 million for theyears ended December 31, 2005, 2004 and 2003. As of December 31, 2005and December 31, 2004, we had $0 and $1.1 million as a receivable due fromthis affiliate included in other current assets. Through September 26,2004 we paid this affiliate a fixed and variable fee for providing this servicebased on advertising sales cash flow growth. As of December 31, 2005 and2004, we had $0 and $38,500 recorded as payables to this affiliate related tosuch services.

***Insight Interactive***

Effective November 17,1999, Insight Cable Services entered into a Contribution Agreement with SourceMedia, Inc., providing for the creation of a joint venture, InsightInteractive LLC. Under the terms of the Contribution Agreement, Source Mediacontributed its Virtual Modem 2.5 software and the Interactive Channel productsand services, including SourceGuide and LocalSource television content. On March 14,2002, Insight Cable Services purchased the remaining 50% equity interest inInsight Interactive that it did not already own from Source Media. We arecurrently providing Insight Interactive’s services to customers in some of oursystems. For the years ended December 31, 2005, 2004 and 2003, fees forsuch services totaled $2.8 million, $2.5 million and $2.1 million.

***Due to Affiliates***

As of December 31,2005 and 2004, we had amounts owed to Insight LP, our manager, primarilycomprised of accrued interest related to our $100.0 million note payableto Insight Inc., incurred but unpaid management fees calculated asapproximately 3% of revenues and other operational expenses.

**11.**Commitments and Contingencies

***Programming Contracts***

We enter into long-termcontracts with third parties who provide us with programming for distributionover our cable television systems. These programming contracts are asignificant part of our business and represent a substantial portion of ouroperating costs. Since future fees under such contracts are based on numerousvariables, including number and type of customers, we have not recorded anyliabilities with respect to such contracts.

F-19

----

**INSIGHT MIDWEST, LP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)**

**11. Commitmentsand Contingencies (Continued)**

***Lease Agreements***

Welease and sublease equipment and office space under various operating leasearrangements expiring through October 24, 2101. Future minimum rentalpayments required under such operating leases as of December 31, 2005 were(in thousands):

| 2006       |   | $     | 2,774  |   |
|------------|--------|-------|--------|--------|
| 2007       |   | 1,652 |   |
| 2008       |   | 1,263 |   |
| 2009       |   | 914   |   |
| 2010       |   | 783   |   |
| Thereafter |   | 740   |   |
| Total      |   | $     | 8,126  |   |

 

Rental expense onoperating leases for the years ended December 31, 2005, 2004 and 2003 was$4.8 million, $3.6 million and $3.7 million.

***Litigation***

In April 2005, Acacia Media TechnologiesCorporation filed a lawsuit against us and others in the United States DistrictCourt for the Southern District of New York. The complaint alleges, among otherthings, infringement of certain United States patents that allegedly relate tosystems and methods for transmitting and/or receiving digital audio and videocontent. The complaint seeks injunctive relief and damages in an unspecifiedamount. In the event that a Court ultimately determines that we infringe on anyof the patents, we may be subject to substantial damages, which may includetreble damages and/or an injunction that could require us to materially modifycertain products and services that we currently offer to subscribers. Webelieve that the claims are without merit and intend to defend the actionvigorously. The final disposition of this claim is not expected to have a materialadverse effect on our consolidated financial position but could possibly bematerial to our consolidated results of operations of any one period. Further,at this time the outcome of the litigation is impossible to predict, and noassurance can be given that any adverse outcome would not be material to ourconsolidated financial position.

We are subject to various legal proceedings that arisein the ordinary course of business. While it is impossible to determine withcertainty the ultimate outcome of these matters, it is our opinion that theresolution of these matters will not have a material adverse affect on ourconsolidated financial condition.

F-20

----

**Report of Independent Registered Public AccountingFirm**

The Shareholder ofInsight Capital, Inc.

We have audited the accompanying balance sheets ofInsight Capital, Inc. (the “Company”) as of December 31, 2005 and2004 and the related statements of operations, changes in shareholder’s deficitand cash flows for each of the three years in the period ended December 31,2005. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these financialstatements based on our audits.

We conducted our audits in accordance with thestandards of the Public Company Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of materialmisstatement. We were not engaged to perform an audit of the Company’s internalcontrol over financial reporting. Our audits included consideration of internalcontrol over financial reporting as a basis for designing audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing anopinion on the effectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit also includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financialstatement presentation. We believe that our audits provide a reasonable basisfor our opinion.

As indicated in Note 1, Insight Capital, Inc. has nooperations. Its ability to satisfy debt and other obligations is dependent uponfunding from related entities, which are under the common control of the ownersof the Company.

In our opinion, thefinancial statements referred to above present fairly, in all materialrespects, the financial position of Insight Capital, Inc. at December 31,2005 and 2004 and the results of its operations and its cash flows for each ofthe three years in the period ended December 31, 2005 in conformity withU.S. generally accepted accounting principles.

|   | /s/ Ernst & Young  LLP |
|--------|---------------------------------|

New York, New York

March 10, 2006

F-21

----

**INSIGHT CAPITAL, INC.BALANCE SHEETS(dollars in thousands, except share amounts)**

| ** **                                                                                                              | ** ** | **December 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| **Assets**                                                                                                              | ** ** | ** **                  | ** ** | ** **                  | ** ** |
| Cash                                                                                                                    |       | $                           | 1          |                        | $          | 1 |   |
| Deferred  financing costs, net of accumulated amortization of $11,689 and $9,081 as of  December 31, 2005 and 2004 |       | 11,092                      |       | 13,700                      |       |
| Total assets                                                                                                            |       | $                           | 11,093     |                        | $          | 13,701 |   |
| **Liabilities  and shareholder’s deficit**                                                                         |       |                        |       |                        |       |
| Accrued interest                                                                                                        |       | $                           | 20,409     |                        | $          | 20,409 |   |
| Total current liabilities                                                                                               |       | 20,409                      |       | 20,409                      |       |
| Senior notes, to be paid by Insight Midwest, LP                                                                         |       | 1,014,443                   |       | 1,014,110                   |       |
| Total liabilities                                                                                                       |       | 1,034,852                   |       | 1,034,519                   |       |
| Shareholder’s  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                              |       | (531,616                    | )          | (635,304                    | )          |
| Accumulated  deficit                                                                                                    |       | (492,144                    | )          | (385,515                    | )          |
| Total shareholder’s deficit                                                                                        |       | (1,023,759                  | )          | (1,020,818                  | )          |
| Total liabilities  and shareholder’s deficit                                                                       |       | $                           | 11,093     |                        | $          | 13,701 |   |

 

See accompanying notes

F-22

----

 

**INSIGHT CAPITAL, INC.STATEMENTS OF OPERATIONS(dollars in thousands)**

| ** **       | ** ** | **Year Ended December 31,** | ** ** |
|------------------|------------|--------------------------------------------|------------|
| ** **       | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Expenses:**    |       |                                       |       |   |   |   |   |
| Amortization     |       | $                                          | (2,608     | ) | $ | (2,608 | ) | $ | (2,258 | ) |
| Interest expense |       | (104,021                                   | )          | (103,991 | ) | (92,706 | ) |
| Net loss         |       | $                                          | (106,629   | ) | $ | (106,599 | ) | $ | (94,964 | ) |

 

See accompanying notes

F-23

----

**INSIGHT CAPITAL, INC.STATEMENTS OF CHANGES INSHAREHOLDER’S DEFICIT(dollars in thousands)**

| ** **                                                 | ** ** | **Additional  paid-in-  capital** | ** **     | **In-substance  contributions  (allocations)  related to  senior notes** | ** ** | **Accumulated  deficit** | ** ** | **Total  shareholder’s  deficit** | ** ** |
|------------------------------------------------------------|------------|-----------------------------------|----------------|------------------------------------------------------------------------------------|------------|--------------------------|------------|----------------------------------------|------------|
| Balance, January 1,  2003                             |       |                              | $              | 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   | )                                      |       |   | (385,515 | ) |   | (1,020,818 | ) |
| Interest payments made by Insight Midwest on senior  notes |       |                              | —         |                                                                               |       |                     | 103,688    |                                   |       |   | — |   |   | 103,688 |   |
| Net loss                                                   |       |                              | —         |                                                                               |       |                     | —     |                                   |       |   | (106,629 | ) |   | (106,629 | ) |
| Balance,  December 31, 2005                           |       |                              | $              | 1                                                                                  |       |                     |       | $                                      | (531,616   | ) |   |   | $ | (492,144 | ) |   | $ | (1,023,759 | ) |

 

See accompanying notes

F-24

----

**INSIGHTCAPITAL, INC.STATEMENTS OF CASH FLOWS(dollars in thousands)**

| ** **                                                                       | ** ** | **Year Ended December 31,** | ** ** |
|----------------------------------------------------------------------------------|------------|--------------------------------------------|------------|
| ** **                                                                       | ** ** | **2005**                                   | ** ** | **2004** | ** ** | **2003** | ** ** |
| **Cash flows from operating  activities:**                                       |       |                                       |       |   |   |   |   |
| Net loss                                                                         |       | $                                          | (106,629   | ) | $ | (106,599 | ) | $ | (94,964 | ) |
| Adjustments to reconcile  net loss to net cash provided by operating activities: |       |                                       |       |   |   |   |   |
| Accretion of discount on notes                                                   |       | 333                                        |       | 303 |   | 1,833 |   |
| Amortization                                                                     |       | 2,608                                      |       | 2,608 |   | 2,258 |   |
| Interest expense assumed by affiliate                                            |       | 103,688                                    |       | 103,688 |   | 90,037 |   |
| Changes in  operating assets and liabilities:                                    |       |                                       |       |   |   |   |   |
| Accrued interest                                                                 |       | —                                     |       | — |   | 836 |   |
| 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 |   |
| Interest payments made  by Insight Midwest                                       |       | 103,688                                    |       | 103,688 |   | 90,037 |   |

 

See accompanying notes

F-25

----

**INSIGHT CAPITAL, INC. NOTES TO FINANCIAL STATEMENTS**

**1.**   Natureof 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. (“InsightMidwest”) of senior notes which allows certain investors the ability to beholders of the debt. The Company has no operations. The outstanding shares ofthe Company are owned by Insight Midwest.

**2.**   Summary ofSignificant Accounting Policies

***Deferred Financing Costs***

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

***Fair Value of Financial Instruments***

The fair value of the 93¤4%Senior Notes as of December 31, 2005 and 2004 was $394.6 million and$404.3 million, respectively. The fair value of the 101¤2% Senior Notesas of December 31, 2005 and 2004 was $659.1 million and $689.9 million,respectively.

***In-Substance Allocation of Note Proceeds***

Since both Insight Midwestand the Company are severally and jointly liable, the senior notes, deferredfinancing costs and associated interest expense are reflected in the Company’sfinancial statements as well as a charge to the equity section representing anin-substance allocation of the proceeds from the senior notes. The Company hasaccrued interest on the outstanding balance. When Insight Midwest makesinterest payments, the Company reduces accrued interest payable and records anin-substance contribution to equity.

***Income Taxes***

The Company has preparedits income tax provision using the liability method in accordance withFinancial Accounting Standards Board Statement No.109, “Accounting for IncomeTaxes.”  Under this method, deferred taxassets and liabilities are determined based on the difference between thefinancial reporting and tax bases of assets and liabilities and are measuredusing tax rates that will be in effect when the differences are expected toreverse. As of December 31, 2005 and 2004 the Company had no deferred taxassets or liabilities and no tax provision to record.

***Use of Estimates***

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States requires us to make estimates and assumptionsthat affect the amounts reported in the financial statements and accompanyingnotes. Actual results could differ from those estimates.

F-26

----

**INSIGHT CAPITAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

**3.**   Notes Payable

Debtconsisted of:

| ** **                                | ** ** | **December 31,  2005** | ** ** | **December 31,  2004** | ** ** |
|-------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| *** ***                              | ** ** | **(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 |   |   |
| Net unamortized  discount on notes        |       |                        | (557       | )                           |       |   | (890 | ) |   |
| Total debt                                |       |                        | $          | 1,014,443                   |       |   |   | $ | 1,014,110 |   |   |

 

On October 1, 1999, the Company and InsightMidwest completed a $200.0 million offering of 93¤4% Senior Notesdue in October 2009. The proceeds of the offering were used to repaycertain debt of Insight Midwest. Interest payments on these Senior Notes, whichcommenced on April 1, 2000, are payable semi-annually on April 1 and October 1.

On November 6, 2000, the Company and InsightMidwest completed a $500.0 million offering of 101¤2% Senior Notesdue 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, InsightMidwest completed exchange offers pursuant to which the 93¤4%Senior Notes and 101¤2%Senior Notes were exchanged for identical notes registered under the SecuritiesAct of 1933.

In December 2002, the Company and Insight Midwestcompleted 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 throughthe date of issuance that will be repaid to holders of the bonds in the firstsemi-annual interest payment due on April 1, 2003, and net of anunderwriting fee of $3.1 million and a bond discount of $8.8 million that isbeing amortized through October 2009. The proceeds of this offering wereused to repay a portion of the outstanding revolving loans under the MidwestHoldings Credit Facility. Since this additional add-on offering occurred underthe 93¤4%Senior Notes indenture, these additional debt securities and the 93¤4% Senior Notesare considered a single series of senior notes with identical terms.

In June 2003, Insight Midwest completed anexchange 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 SecuritiesAct of 1933.

In December 2003, the Company and Insight Midwestcompleted 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 throughthe date of issuance that will be repaid to holders of the bonds in the firstsemi-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 anunderwriting fee of $2.5 million. The proceeds of this offering were used torepay all of the outstanding revolving loans under the Midwest Holdings CreditFacility. Since this additional add-on offering occurred under the 101¤2%Senior 

F-27

----

**INSIGHT CAPITAL, INC. NOTES TO FINANCIAL STATEMENTS (Continued)**

**3.**   Notes Payable (Continued)

Notes indenture, theseadditional debt securities and the 101¤2% Senior Notesare considered a single series of senior notes with identical terms.

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

The 93¤4% Senior Notesand 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’sequity. As of December 31, 2005 none of these notes have been redeemed. Eachholder of the Senior Notes may require redemption of all or part of that holder’snotes upon certain changes of control. Although the Company is a co-issuer ofthe Senior Notes, it has no substantial assets or any operations and will nothave access to additional sources of cash flow to make any payments on suchdebt. All future funding on the Senior Notes, including principal and interestpayments, are dependent upon the operating results of Insight Midwest.

The Senior Notes are general unsecured obligations andare subordinate to all Insight Midwest’s liabilities, the amounts of which were$1.6 billion and $1.7 billion as of December 31, 2005 and 2004,respectively. The Senior Notes contain certain financial and other debtcovenants.

F-28

----

**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this Report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

|                            | **INSIGHT MIDWEST, L.P.** |
|----------------------------|---------------------------|
| Date: March 30,  2006 | By:                       | /s/ MICHAEL S. WILLNER |
|                       |                      | Michael S. Willner, Chairman and |
|                       |                      | Chief Executive Officer |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this Report hasbeen signed below by the following persons on behalf of the Registrant and inthe capacities and on the dates indicated.

|                                  | **Signatures** | ** **                                                                                                                         | ** ** |                     | **Title** | ** ** | ** ** |  | **Date** | ** ** |
|----------------------------------|----------------|------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------|-----------|------------|------------|--|----------|------------|
| /s/  SIDNEY R. KNAFEL            |           | Chairman of the Board of  Insight                                                                                                  |       | March 30, 2006 |
| Sidney R. Knafel                 |           | Communications  Company, Inc.                                                                                                 |       |                |
| /s/  MICHAEL S. WILLNER          |           | Chairman and Chief  Executive Officer of                                                                                           |       | March 30, 2006 |
| Michael S.  Willner              |           | Registrant, Vice  Chairman and Chief Executive Officer of Insight Communications  Company, Inc. (Principal Executive Officer) |       |                |
| /s/  DINNI JAIN                  |           | President  and Chief Operating Officer of                                                                                          |       | March 30, 2006 |
| Dinni Jain                       |           | Registrant and Insight  Communications Company, Inc.                                                                          |       |                |
| /s/  JOHN ABBOT                  |           | Executive Vice President  and Chief Financial                                                                                      |       | March 30, 2006 |
| John Abbot                       |           | Officer of Registrant  and Insight Communications Company, Inc. (Principal Financial Officer)                                 |       |                |
| /s/  DANIEL MANNINO              |           | Senior Vice President  and Controller of                                                                                           |       | March 30, 2006 |
| Daniel Mannino                   |           | Registrant and Insight  Communications Company, Inc. (Principal Accounting Officer)                                           |       |                |
| /s/  JAMES A. ATTWOOD, Jr.  |           | Director of Insight  Communications                                                                                                |       | March 30, 2006 |
| James A.  Attwood, Jr.      |           | Company, Inc.                                                                                                                 |       |                |
| /s/  MICHAEL J. CONNELLY         |           | Director of Insight  Communications                                                                                                |       | March 30, 2006 |
| Michael J.  Connelly             |           | Company, Inc.                                                                                                                 |       |                |
| /s/  STEPHEN C. GRAY             |           | Director of Insight  Communications                                                                                                |       | March 30, 2006 |
| Stephen C. Gray                  |           | Company, Inc.                                                                                                                 |       |                |
| /s/  AMOS B. HOSTETTER, Jr. |           | Director of Insight  Communications                                                                                                |       | March 30, 2006 |
| Amos B.  Hostetter, Jr.     |           | Company, Inc.                                                                                                                 |       |                |

----

 

| /s/ WILLIAM E. KENNARD      |   | Director of Insight  Communications |   | March 30, 2006 |
|-----------------------------|--------|-------------------------------------|--------|---------------------|
| William E.  Kennard         |   | Company, Inc.                  |   |                |
| /s/  GERALDINE B. LAYBOURNE |   | Director of Insight  Communications |   | March 30, 2006 |
| Geraldine B.  Laybourne     |   | Company, Inc.                  |   |                |

 

----

**SIGNATURES**

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the Registrant has duly caused this Report to be signed on itsbehalf by the undersigned, thereunto duly authorized.

|                            | **INSIGHT CAPITAL, INC.** |
|----------------------------|---------------------------|
| Date: March 30,  2006 | By:                       | /s/ MICHAEL S. WILLNER |
|                       |                      | Michael S. Willner, Chairman and |
|                       |                      | Chief Executive Officer |

 

Pursuantto the requirements of the Securities Exchange Act of 1934, this Report hasbeen signed below by the following persons on behalf of the registrant and inthe capacities and on the dates indicated.

|                         | **Signatures** | ** **                                      | ** ** |                      | **Title** | ** ** | ** ** |  | **Date** | ** ** |
|-------------------------|----------------|-------------------------------------------------|------------|----------------------|-----------|------------|------------|--|----------|------------|
| /s/ SIDNEY  R. KNAFEL   |           | Director                                        |       | March 30,  2006 |
| Sidney  R. Knafel       |           |                                            |       |                 |
| /s/ MICHAEL  S. WILLNER |           | Chairman, Chief  Executive Officer and Director |       | March 30,  2006 |
| Michael  S. Willner     |           | (Principal Executive Officer)                   |       |                 |
| /s/ JOHN  ABBOT         |           | Executive Vice  President and Chief Financial   |       | March 30,  2006 |
| John  Abbot             |           | Officer (Principal Financial Officer)           |       |                 |
| /s/ DANIEL  MANNINO     |           | Senior Vice  President and Controller           |       | March 30,  2006 |
| Daniel Mannino          |           | (Principal  Accounting Officer)                 |       |                 |

 

----