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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-Q

|(Mark One)                                                    |                                                                                         
|------------------------------------------------------------- | ----------------------------------------------------------------------------------------
|ý                                                             | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 
|For the quarter ended September 30, 2003                     
|or                                                           
|o                                                             | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|For the transition period
from                             to

Commission file number: 005-55939

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UGC EUROPE, INC.(Exact name of Registrant as specified in its charter)

|Delaware(State or other jurisdiction of
incorporation or organization)                        |  | 20-0173340(I.R.S. Employer
Identification No.)
|--------------------------------------------------------------------------------------------- |  | ----------------------------------------------
|4643 South Ulster Street, Suite 1300
Denver, Colorado(Address of principal executive offices) |  | 80237(Zip code)                               
|(303) 220-4204(Registrant's telephone number, including area code)                           

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Indicate
by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months and (2) has been subject to such filing requirements for the past
90 days. Yes ý    No o

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

Indicate
by check mark whether the Registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to
the distribution of securities under a plan confirmed by a
court. Yes ý    No o

The
number of shares outstanding of the Registrant's common stock as of November 1, 2003 was:

49,985,521
shares of common stock, par value USD 0.01 per share.

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PART IFINANCIAL INFORMATION

|        |  |                                                                                                                                                    |  | Page
Number
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------
|Item 1. |  | Financial Statements                                                                                                                               |  |            
|        |  | Unaudited Condensed Consolidated Balance Sheets as of September 30, 2003 and December 31, 2002                                                     |  | 2          
|        |  | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2003 and 2002 |  | 4          
|        |  | Unaudited Condensed Consolidated Statements of Shareholders' Equity (Deficit) for the Nine Months Ended September 30, 2003                         |  | 5          
|        |  | Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2003 and 2002                                    |  | 6          
|        |  | Notes to Unaudited Condensed Consolidated Financial Statements                                                                                     |  | 7          
|Item 2. |  | Management's Discussion and Analysis of Financial Condition and Results of Operations                                                              |  | 32         
|Item 3. |  | Quantitative and Qualitative Disclosures About Market Risk                                                                                         |  | 42         
|Item 4. |  | Controls and Procedures                                                                                                                            |  | 46         

PART IIOTHER INFORMATION

|Item 1. |  | Legal Proceedings                |  | 47
|------- |  | -------------------------------- |  | --
|Item 3. |  | Defaults upon Senior Securities  |  | 47
|Item 5. |  | Other Information                |  | 47
|Item 6. |  | Exhibits and Reports on Form 8-K |  | 49

1

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PART IFINANCIAL INFORMATION

Item 1.    Financial Statements

UGC EUROPE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Stated in thousands of Euros, except par value and number of shares)
(Unaudited)

|                                                     |                                                                                                   | September 30,
2003   |         | December 31,
2002
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------- | -------------------- | ------- | -----------------
|ASSETS                                               |                                                                                                   |                      |         |                  
|Current assets                                       |                                                                                                   |                      |         |                  
|                                                     | Cash and cash equivalents                                                                         |                      | 176,837 |                  
|                                                     | Restricted cash                                                                                   |                      | 28,340  |                  
|                                                     | Subscriber receivables, net of allowance for doubtful accounts of 30,222 and 52,232, respectively |                      | 58,929  |                  
|                                                     | Costs to be reimbursed by affiliated companies                                                    |                      | 2,624   |                  
|                                                     | Other receivables                                                                                 |                      | 31,175  |                  
|                                                     | Deferred financing costs, net                                                                     |                      | 2,207   |                  
|                                                     | Prepaid expenses and other current assets                                                         |                      | 47,445  |                  
|                                                     |                                                                                                   |                      |         |                  
|                                                     |                                                                                                   | Total current assets |         | 347,557          
|Marketable debt and equity securities, at fair value |                                                                                                   | 36,306               |         | 12,760           
|Investments in and advances to affiliated companies  |                                                                                                   | 49,128               |         | 114,680          
|Property, plant and equipment, net                   |                                                                                                   | 2,796,667            |         | 3,175,363        
|Goodwill, net                                        |                                                                                                   | 990,043              |         | 995,946          
|Other intangible assets, net                         |                                                                                                   | 75,158               |         | 76,331           
|Deferred financing costs, net                        |                                                                                                   | 42,164               |         |                 
|Other assets                                         |                                                                                                   | 2,418                |         | 3,635            
|                                                     |                                                                                                   |                      |         |                  
|                                                     |                                                                                                   | Total assets         |         | 4,339,441        
|                                                     |                                                                                                   |                      |         |                  

The
accompanying notes are an integral part of these condensed consolidated financial statements.

2

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|                                                   |                                                                                                                                       | September 30,
2003                                    |            | December 31,
2002 |           
|-------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------- | ----------------- | ----------
|LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)     |                                                                                                                                       |                                                       |            |                   |           
|Current liabilities                                |                                                                                                                                       |                                                       |            |                   |           
|Not subject to compromise:                         |                                                                                                                                       |                                                       |            |                   |           
|                                                   | Accounts payable, including related party payables of 1,520 and 5,189, respectively                                                   |                                                       | 147,379    |                   | 166,679   
|                                                   | Accrued liabilities                                                                                                                   |                                                       | 279,469    |                   | 281,211   
|                                                   | Subscriber prepayments and deposits                                                                                                   |                                                       | 127,700    |                   | 121,749   
|                                                   | Derivative liabilities                                                                                                                |                                                       | 10,331     |                   | 10,133    
|                                                   | Short-term debt                                                                                                                       |                                                       |           |                   | 58,363    
|                                                   | Current portion of long-term debt                                                                                                     |                                                       | 166,909    |                   | 3,212,302 
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|                                                   |                                                                                                                                       | Total current liabilities not subject to compromise   |            | 731,788           |           
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|Subject to compromise:                             |                                                                                                                                       |                                                       |            |                   |           
|                                                   | Accounts payable                                                                                                                      |                                                       | 343        |                   | 36,889    
|                                                   | Accrued liabilities                                                                                                                   |                                                       |           |                   | 351,500   
|                                                   | Short term debt                                                                                                                       |                                                       | 5,257      |                   |          
|                                                   | Current portion of long-term debt, including related party debt of nil and 2,358,380, respectively                                    |                                                       | 330,315    |                   | 5,043,346 
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|                                                   |                                                                                                                                       | Total current liabilities subject to compromise       |            | 335,915           |           
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|Long-term liabilities                              |                                                                                                                                       |                                                       |            |                   |           
|Not subject to compromise:                         |                                                                                                                                       |                                                       |            |                   |           
|                                                   | Long term debt                                                                                                                        |                                                       | 2,882,452  |                   | 427,444   
|                                                   | Other long-term liabilities                                                                                                           |                                                       | 83,554     |                   | 83,999    
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|                                                   |                                                                                                                                       | Total long-term liabilities not subject to compromise |            | 2,966,006         |           
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|Guarantees, commitments and contingencies (Note 6) |                                                                                                                                       |                                                       |            |                   |           
|Minority interests in subsidiaries                 |                                                                                                                                       | 1,433                                                 |            | 1,660             |           
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|                                                   | Convertible preferred stock                                                                                                           |                                                       |           |                   | 1,664,689 
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|Shareholders' equity (deficit)                     |                                                                                                                                       |                                                       |            |                   |           
|                                                   | Preferred stock, USD 0.01 par value, 50,000,000 shares authorized, none issued and outstanding                                        |                                                       |           |                   |          
|                                                   | Ordinary stock, USD 0.01 par value, 250,000,000 shares authorized, 49,985,101 and 785,101 shares issued and outstanding, respectively |                                                       | 461        |                   | 7         
|                                                   | Additional paid-in capital                                                                                                            |                                                       | 8,165,046  |                   | 3,183,997 
|                                                   | Deferred compensation                                                                                                                 |                                                       |           |                   | (16,888   
|                                                   | Accumulated deficit                                                                                                                   |                                                       | (8,161,446 | )                 | (9,903,309
|                                                   | Accumulated other comprehensive income                                                                                                |                                                       | 300,238    |                   | 207,246   
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|                                                   |                                                                                                                                       | Total shareholders' equity (deficit)                  |            | 304,299           |           
|                                                   |                                                                                                                                       |                                                       |            |                   |           
|                                                   |                                                                                                                                       | Total liabilities and shareholders' equity (deficit)  |            | 4,339,441         |           
|                                                   |                                                                                                                                       |                                                       |            |                   |           

The
accompanying notes are an integral part of these condensed consolidated financial statements.

3

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UGC EUROPE, INC.        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS  AND COMPREHENSIVE INCOME        (Stated in thousands of Euros, except number of shares)  (Unaudited)

|                                                           |                                                                                  | Three Months
Ended
September 30, |           | Nine Months
Ended September 30, |         
|---------------------------------------------------------- | -------------------------------------------------------------------------------- | -------------------------------- | --------- | ------------------------------- | --------
|
|Statements of Operations                                   |                                                                                  |                                  |           |                                 |         
|Revenue                                                    |                                                                                  | 367,240                          |           | 340,872                         |         
|Operating expense(1)                                       |                                                                                  | (146,024                         | )         | (186,220                        | )       
|Selling, general and administrative expense                |                                                                                  | (92,596                          | )         | (81,837                         | )       
|Depreciation and amortization                              |                                                                                  | (154,112                         | )         | (189,779                        | )       
|Impairment and restructuring charges                       |                                                                                  | 407                              |           | 1,413                           |         
|                                                           |                                                                                  |                                  |           |                                 |         
|                                                           | Operating income (loss)                                                          |                                  | (25,085   | )                               | (115,551
|Interest income                                            |                                                                                  | 1,661                            |           | 597                             |         
|Interest expense                                           |                                                                                  | (60,420                          | )         | (154,594                        | )       
|Interest expenserelated party                             |                                                                                  |                                 |           | (59,353                         | )       
|Provision for loss on investments                          |                                                                                  |                                 |           | (7,957                          | )       
|Foreign currency exchange gain (loss)                      |                                                                                  | (234,331                         | )         | (9,977                          | )       
|Gain on extinguishment of debt                             |                                                                                  | 1,944,330                        |           |                                |         
|Gain on sale of investment in affiliate to related party   |                                                                                  |                                 |           |                                |         
|Gain (loss) on sale of assets and investment in affiliates |                                                                                  | (507                             | )         | 146,601                         |         
|Other income (expense), net                                |                                                                                  | (572                             | )         | (6,217                          | )       
|                                                           |                                                                                  |                                  |           |                                 |         
|                                                           | Income (loss) before income taxes and other items                                |                                  | 1,625,076 |                                 | (206,451
|Reorganization expense                                     |                                                                                  | (5,569                           | )         |                                |         
|Income tax expense, net                                    |                                                                                  | (802                             | )         |                                |         
|Minority interests in subsidiaries, net                    |                                                                                  | 44                               |           | (10,323                         | )       
|Share in results of affiliates, net                        |                                                                                  | 1,636                            |           | 2,779                           |         
|                                                           |                                                                                  |                                  |           |                                 |         
|                                                           | Income (loss) before cumulative effect of change in accounting principle         |                                  | 1,620,385 |                                 | (213,995
|Cumulative effect of change in accounting principle        |                                                                                  |                                 |           |                                |         
|                                                           |                                                                                  |                                  |           |                                 |         
|                                                           | Net income (loss)                                                                |                                  | 1,620,385 |                                 | (213,995
|                                                           |                                                                                  |                                  |           |                                 |         
|Earnings per share (Note 7):                               |                                                                                  |                                  |           |                                 |         
|                                                           | Basic income (loss) before cumulative effect of change in accounting principle   |                                  | 102.85    |                                 | (315.86 
|                                                           | Cumulative effect of change in accounting principle                              |                                  |          |                                 |        
|                                                           |                                                                                  |                                  |           |                                 |         
|                                                           |                                                                                  | Basic net income (loss)          |           | 102,85                          |         
|                                                           |                                                                                  |                                  |           |                                 |         
|Earnings per share (note 7):                               |                                                                                  |                                  |           |                                 |         
|                                                           | Diluted income (loss) before cumulative effect of change in accounting principle |                                  | 101.48    |                                 | (315.86 
|                                                           | Cumulative effect of change in accounting principle                              |                                  |          |                                 |        
|                                                           |                                                                                  |                                  |           |                                 |         
|                                                           |                                                                                  | Diluted net income (loss)        |           | 101.48                          |         
|                                                           |                                                                                  |                                  |           |                                 |         
|Statements of Comprehensive Income                         |                                                                                  |                                  |           |                                 |         
|                                                           | Net income (loss)                                                                |                                  | 1,620,385 |                                 | (213,995
|Other comprehensive income (loss), net of tax:             |                                                                                  |                                  |           |                                 |         
|                                                           | Foreign currency translation adjustments                                         |                                  | 16,260    |                                 | (11,916 
|                                                           | Change in fair value of derivative assets                                        |                                  |          |                                 | (57     
|                                                           | Change in unrealized gain in available-for-sale securities                       |                                  | 5,169     |                                 | (6,224  
|                                                           |                                                                                  |                                  |           |                                 |         
|                                                           |                                                                                  | Comprehensive income (loss)      |           | 1,641,814                       |         
|                                                           |                                                                                  |                                  |           |                                 |         

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The accompanying notes are an integral part of these condensed consolidated financial statements.

4

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UGC EUROPE, INC.        CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)        (Stated in thousands of Euros, except number of shares)        (Unaudited)

|                                                           |  | Priority Stock |  | Ordinary Stock |  |            |  |     |  |           |  |         |   |            |  
|---------------------------------------------------------- |  | -------------- |  | -------------- |  | ---------- |  | --- |  | --------- |  | ------- | - | ---------- | -
|
|
|December 31, 2002(2)                                       |  |               |  |               |  | 785,101    |  | 7   |  | 3,183,997 |  | (16,888 | ) | (9,903,309 | )
|Issuance of stock for the exchangeable loan held by parent |  |               |  |               |  | 23,853,179 |  | 220 |  | 863,433   |  |        |   |           |  
|Issuance of stock for notes held by parent                 |  |               |  |               |  | 8,896,821  |  | 82  |  | 1,547,979 |  |        |   |           |  
|Issuance of stock for preferred stock held by parent       |  |               |  |               |  | 200,000    |  | 2   |  | 1,664,687 |  |        |   |           |  
|Issuance of stock for notes held by third parties          |  |               |  |               |  | 16,250,000 |  | 150 |  | 887,203   |  |        |   |           |  
|Amortization of deferred compensation                      |  |               |  |               |  |           |  |    |  |          |  | 10,685  |   |           |  
|Cancellation of UPC NV stock option plans                  |  |               |  |               |  |           |  |    |  |          |  | 6,203   |   |           |  
|Capital contribution from parent                           |  |               |  |               |  |           |  |    |  | 17,747    |  |        |   |           |  
|Net income                                                 |  |               |  |               |  |           |  |    |  |          |  |        |   | 1,741,863  |  
|Unrealized gain on available-for-sale securities           |  |               |  |               |  |           |  |    |  |          |  |        |   |           |  
|Change in fair value of derivative assets                  |  |               |  |               |  |           |  |    |  |          |  |        |   |           |  
|Change in foreign currency translation adjustments         |  |               |  |               |  |           |  |    |  |          |  |        |   |           |  
|                                                           |  |                |  |                |  |            |  |     |  |           |  |         |   |            |  
|September 30, 2003                                         |  |               |  |               |  | 49,985,101 |  | 461 |  | 8,165,046 |  |        |   | (8,161,446 | )
|                                                           |  |                |  |                |  |            |  |     |  |           |  |         |   |            |  

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|                                                            |  |               
|----------------------------------------------------------- |  | --------------
|UGCE shares issued upon incorporation                       |  | 1,000 shares  
|UGCE shares in exchange for 300 UPC Priority Shares         |  | 1 share       
|UGCE shares in exchange for 443,417,525 UPC Ordinary Shares |  | 784,100 shares
|Total UGCE shares                                           |  | 785,101 shares

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

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UGC EUROPE, INC.        CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS        (Stated in thousands of Euros)  (Unaudited)

|                                                                                        |                                                          | Nine Months
Ended September 30, |           
|--------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------------- | ----------
|
|Cash flows from operating activities:                                                   |                                                          |                                 |           
|Net income (loss)                                                                       |                                                          | 1,741,863                       |           
|Adjustments to reconcile net income (loss) to net cash flows from operating activities: |                                                          |                                 |           
|                                                                                        | Accretion of interest                                    |                                 | 26,351    
|                                                                                        | Amortization of deferred financing costs                 |                                 | 14,887    
|                                                                                        | Cumulative effect of change in accounting principle      |                                 |          
|                                                                                        | Depreciation and amortization                            |                                 | 491,379   
|                                                                                        | Foreign exchange gain                                    |                                 | (88,540   
|                                                                                        | Gain on sale of investment in affiliate to related party |                                 | (25,518   
|                                                                                        | Gain on extinghuisment of debt                           |                                 | (2,013,694
|                                                                                        | Impairment and restructuring charges                     |                                 |          
|                                                                                        | Loss on derivative assets                                |                                 | 10,311    
|                                                                                        | Gain on sale of assets and investment in affiliates, net |                                 | (915      
|                                                                                        | Minority interests in subsidiaries, net                  |                                 | 31        
|                                                                                        | Provision for loss on investments                        |                                 |          
|                                                                                        | Share in results of affiliates, net                      |                                 | (3,650    
|                                                                                        | Stock-based compensation                                 |                                 | 18,717    
|                                                                                        | Adjustment of UPC Polska Bonds to allowed claim value    |                                 | (17,266   
|                                                                                        | Other                                                    |                                 | 1,074     
|                                                                                        | Decrease in restricted cash                              |                                 |          
|                                                                                        | Change in receivables                                    |                                 | 54,316    
|                                                                                        | Change in other current liabilities                      |                                 | 3,022     
|                                                                                        | Change in deferred taxes and other long-term liabilities |                                 | (106      
|                                                                                        |                                                          |                                 |           
|Net cash flows from operating activities                                                |                                                          | 212,262                         |           
|                                                                                        |                                                          |                                 |           
|Cash flows from investing activities:                                                   |                                                          |                                 |           
|Capital expenditures                                                                    |                                                          | (172,735                        | )         
|Proceeds received from the sale of assets                                               |                                                          | 101,165                         |           
|Restricted cash deposited, net                                                          |                                                          | (9,988                          | )         
|Purchase of derivatives                                                                 |                                                          | (9,090                          | )         
|Germany deconsolidated cash                                                             |                                                          |                                |           
|Derivative loan settlement                                                              |                                                          | (50,975                         | )         
|Investments in and advances to affiliated companies, net of repayment                   |                                                          |                                |           
|Dividends received                                                                      |                                                          | 3,745                           |           
|Acquisitions, net of cash acquired                                                      |                                                          | (689                            | )         
|                                                                                        |                                                          |                                 |           
|Net cash flows from investing activities                                                |                                                          | (138,567                        | )         
|                                                                                        |                                                          |                                 |           
|Cash flows from financing activities:                                                   |                                                          |                                 |           
|Proceeds from long-term and short-term borrowings                                       |                                                          | 10,000                          |           
|Repayments of long-term and short-term borrowings                                       |                                                          | (150,186                        | )         
|                                                                                        |                                                          |                                 |           
|Net cash flows from financing activities                                                |                                                          | (140,186                        | )         
|                                                                                        |                                                          |                                 |           
|Effect of exchange rates on cash                                                        |                                                          | (11,734                         | )         
|                                                                                        |                                                          |                                 |           
|Net decrease in cash and cash equivalents                                               |                                                          | (78,225                         | )         
|Cash and cash equivalents at beginning of period                                        |                                                          | 255,062                         |           
|                                                                                        |                                                          |                                 |           
|Cash and cash equivalents at end of period                                              |                                                          | 176,837                         |           
|                                                                                        |                                                          |                                 |           
|Supplemental cash flow disclosures:                                                     |                                                          |                                 |           
|                                                                                        | Cash paid for reorganization expenses                    |                                 | (22,966   
|                                                                                        |                                                          |                                 |           
|                                                                                        | Cash paid for interest                                   |                                 | (147,098  
|                                                                                        |                                                          |                                 |           
|                                                                                        | Cash received for interest                               |                                 | 4,860     
|                                                                                        |                                                          |                                 |           

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

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UGC EUROPE, INC.        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS        (Unaudited)

1.     Organization and Nature of Operations

UGC Europe, Inc. ("UGC Europe" or the "Company"), is one of the leading broadband communications and entertainment companies in Europe. Through its
broadband networks, UGC Europe provides television, internet access, telephone and programming services. UGC Europe's operations are currently organized into two principal divisionsUPC
Broadband and chello Media. UPC Broadband delivers video, internet access and telephone services to residential customers, and chello Media provides broadband internet and interactive digital products
and services. The chello Media division also includesPriority Telecom, which operates a competitive local exchange carrier business providing telephone
and data network solutions to the business market, and the group's investment holdings. UGC Europe is a successor issuer and parent company to United Pan-Europe Communications N.V., or
"UPC." In September 2003, UPC completed the restructuring of its balance sheet in United States and Dutch proceedings described below in Note 2 and, as a result,
UnitedGlobalCom, Inc. ("United") and certain other creditors of UPC and holders of UPC's ordinary shares became stockholders of UGC Europe. UGC Europe's common stock is listed on the Nasdaq
National Market under the symbol "UGCE."

All
monetary amounts included in these notes are stated in Euros, unless indicated otherwise.

2.     Reorganization under Bankruptcy Code

On December 3, 2002, UPC filed a petition for relief under Chapter 11 (the "Chapter 11 Case") of the United States Bankruptcy Code (the "U.S. Bankruptcy
Code"). On the same date UPC filed a
pre-negotiated plan of reorganization, as modified (the "Plan"), with the United States Bankruptcy Court for the Southern District of New York. In general, the Plan provided for the
transfer of shares of the Company's common stock for various claims against, and equity interests in UPC. In conjunction with the commencement of the Chapter 11 Case, on December 3, 2002, UPC
commenced a moratorium of payments in The Netherlands under Dutch bankruptcy law and filed a proposed plan of compulsory composition (the "Akkoord")
with the Amsterdam Court (Rechtbank) under the Dutch Bankruptcy Code. The restructuring contemplated by the Plan and the Akkoordwas completed on
September 3, 2003.

As
previously reported, the Plan was confirmed by the U.S. Bankruptcy Court on February 21, 2003, the ratification of theAkkoordwhich occurred on March 14, 2003, was appealed to the Dutch Supreme Court and the Dutch Implementation Offer was extended to August 30, 2003. On August 26, 2003, the Dutch Supreme
Court rejected the appeal of the ratification of theAkkoordand ruled in favour of UPC. UPC completed all the required actions and satisfied all of the
conditions to its Plan and the effective date of its emergence from Chapter 11 Reorganization, Dutch Moratorium andAkkoordproceeding was
September 3, 2003. Also on September 3, 2003, the Dutch Implementing Offer became unconditional.

On
September 24, 2003, a shareholders' resolution was adopted at a general meeting of shareholders and a meeting of holders of Ordinary Shares A of UPC to cancel all such
Ordinary Shares A. It is anticipated that such resolution will be implemented at the end of November 2003.

Upon
consummation of the restructuring, UPC recognized a gain on the effective retirement of its senior notes, senior discount notes and its Exchangeable Loan. The issuance of common
stock by UGC Europe to third-party holders of the remaining UPC senior notes and senior discount notes was recorded at fair value on September 3, 2003. This fair value was significantly less
than the accreted value of such debt securities as reflected in the Company's historical consolidated financial statements. Accordingly, the Company recognized a gain of 1.9 billion on the
extinguishment of debt outstanding equal to the excess of

7

---

the
then accreted value of such debt over the fair value of UGC Europe common stock. In addition, UPC recognized a gain of 9.3 million with the cancellation of certain payables.

With
the successful completion of its restructuring, UGC Europe believes that its existing cash balances, working capital, cash flow from operations and draw downs available under the
UPC Distribution Bank Facility will be sufficient to fund operations for the next year. However, should the operating results fall short of management's expectations, revisions to UGC Europe's bank
facility or additional debt or equity may be necessary. Such debt or equity may not be able to be obtained in a timely manner or on acceptable terms.

3.     Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with accounting principles, generally accepted in the United
States of America. The preparation of financial statements in conformity with accounting principles, generally accepted in the United States of America, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results could differ from those estimates. The financial statements have been prepared on a going-concern basis, which contemplates continuity
of operations, realization of assets, and liquidation of liabilities and commitments in the normal cause of business.

The
Company prepared its consolidated financial statements in accordance with AICPA Statement of Position 90-7,Financial Reporting by Entities in
Reorganization Under Bankruptcy Code("SOP 90-7"). This in connection with UPC's bankruptcy proceeding through September 3, 2003 and UPC Polska's continued
bankruptcy (for UPC Polska, see Note 3. "Polish Restructuring"). In accordance with SOP 90-7, all of the Company's pre-petition liabilities that are subject to
compromise under a plan of reorganization are segregated in the condensed consolidated balance sheet as liabilities subject to compromise. These liabilities are recorded at the amounts expected to be
allowed as claims in the bankruptcy proceedings rather than at the estimated amounts for which those allowed claims might be settled as a result of the approval of the plan of reorganization. The
estimates for allowable amounts are based on accounting records, discussions with creditors and amounts as documented in the plan of reorganization.

The
Company recorded reorganization gains for UPC and UPC Polska of 5.6 million and 18.1 million, respectively, for the three and nine months period ended
September 30, 2003. The reorganization expense

8

---

for
UPC for the three and nine months period ended September 30, 2003 is as follows (for UPC Polska see Note 3. "Polish Restructuring"):

|                             |  | Three months ended September 30, |  | Nine months ended September 30,
|---------------------------- |  | -------------------------------- |  | -------------------------------
|
|
|Professional fees            |  | 21,287                           |  | 33,780                         
|                             |  |                                  |  |                                
|Total reorganization expense |  | 21,287                           |  | 33,780                         
|                             |  |                                  |  |                                

Liabilities
and convertible preferred stock included in the consolidated debtor-in-possession balance sheet as of December 31, 2002, which
were subject to compromise under the terms of the Plan, are summarized as follows (in thousands of Euros):

|                                        |                                                                       | December 31,
2002
|--------------------------------------- | --------------------------------------------------------------------- | -----------------
|Movieco (Cinenova)                      |                                                                       | 11,667           
|Philips                                 |                                                                       | 25,222           
|                                        |                                                                       |                  
|                                        | Total accounts payable                                                |                  
|                                        |                                                                       |                  
|Accrued interest                        |                                                                       | 351,500          
|                                        |                                                                       |                  
|July 1999 notes                         |                                                                       | 1,513,558        
|October 1999 notes                      |                                                                       | 1,027,625        
|January 2000 notes                      |                                                                       | 1,607,706        
|The Exchangeable Loan                   |                                                                       | 894,457          
|                                        |                                                                       |                  
|                                        | Total senior notes, senior discount notes and other debt (see Note 7) |                  
|                                        |                                                                       |                  
|Convertible preferred stock             |                                                                       | 1,664,689        
|                                        |                                                                       |                  
|Total liabilities subject to compromise |                                                                       | 7,096,424        
|                                        |                                                                       |                  

Comparative figures

Certain prior period amounts have been reclassified to conform to the current period presentation. The Company adopted Financial Accounting Standards Board
("FASB") Statement of Financial Accounting Standards ("SFAS") No. 145,Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13,
and Technical Corrections("SFAS 145"). SFAS 145 required the Company to reclassify gains and losses associated with the extinguishment of debt from extraordinary
classification to other income (expense) in the accompanying condensed consolidated statements of operations.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company's wholly-owned subsidiaries and all subsidiaries where the Company exercises a
controlling financial interest through the ownership of a direct or indirect majority voting interest.

9

---

For
those investments in companies in which the Company's voting interest is 20.0% to 50.0%, the Company's investments are held through a combination of voting common stock, preferred
stock, debentures or convertible debt and/or the Company exerts significant influence through board representation and management authority, the equity method of accounting is used. Under this method,
the investment, originally recorded at cost, is adjusted to recognize the Company's proportionate share of net earnings or losses of the affiliate, limited to the extent of the Company's investment in
and advances to the affiliate, including any debt guarantees or other contractual funding commitments.

Polish Restructuring

A Delaware subsidiary of the Company, UPC Polska, Inc. ("UPC Polska") has over time incurred substantial debt, significant operating losses and negative
cash flow which were driven by the large capital investment required for the construction and acquisition of cable networks, acquisition of programming rights and the costs associated with commencing
DTH and programming operations.
After commencing an internal reorganization in 2001 and discussions with its creditors throughout 2002, UPC Polska, directly and through its advisors, started discussions with UPC, UPC Telecom B.V. (a
subsidiary of UPC), Belmarken (collectively, the "UPC Entities") and a group of holders of UPC Polska's outstanding senior discount notes due 2008 and 2009 (the "UPC Polska Notes). These discussions
culminated in the execution, on June 19, 2003, of a restructuring agreement (the "Restructuring Agreement"), which was extended to an additional creditor on July 2, 2003. The
Restructuring Agreement provides for a restructuring substantially on the same terms contained in the plan of reorganization.

In
the Restructuring Agreement, the parties agreed to implement the proposed restructuring through a plan of reorganization under Chapter 11. UPC Telecom B.V. and Belmarken and the
participating noteholders also agreed, subject to the terms and conditions of the Restructuring Agreement, to vote their claims in favor of the plan of reorganization. As of the date of this filing,
the participating noteholders (excluding UPC Telecom and Belmarken) represented approximately 75% (in value) of all outstanding UPC Polska Notes held by third parties that are not affiliates of UPC
Polska (approximately 17% of all outstanding UPC Polska Notes are held by UPC Telecom).

On
October 27, 2003, UPC Polska filed an amended disclosure statement and amended plan of reorganization with the U.S. Bankruptcy Court. A hearing was held in the U.S. Bankruptcy
Court on October 29, 2003, pursuant to which the Bankruptcy Court approved the amended disclosure statement. A hearing for confirmation of the amended plan of reorganization is scheduled for
December 3, 2003. The Company presently expects that the amended plan of reorganization will become effective and the restructuring will be completed by the end of 2003.

The
Polska Creditors Committee has informed UPC Polska that it does not intend to support the amended plan of reorganization or the proposed restructuring as currently proposed. The
Company believes that the bondholders owning 75% (in value) of the UPC Polska Notes held by unaffiliated third parties, including four of the seven members of the Polska Creditors Committee, are
obligated by the Restructuring Agreement to vote their claims in favour of the amended plan of reorganization.

The
restructuring contemplated by the Restructuring Agreement is subject to various closing conditions. It is currently anticipated that the Company will continue to own 100% of UPC
Polska after the consummation of the restructuring.

10

---

The
consolidated financial statements include the accounts of UPC Polska, which on July 7, 2003, filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code
with the U.S. Bankruptcy Court for the Southern District of New York. Although the U.S. bankruptcy laws convey jurisdiction to
the bankruptcy court, the Company believes during the bankruptcy proceedings that it will have the ability to substantively control UPC Polska for the following primary reasons:



Accordingly,
the accounts of UPC Polska have been consolidated for all periods presented in the accompanying financial statements. All significant intercompany accounts and transactions
have been eliminated in consolidation.

In
connection with its Chapter 11 case UPC Polska is required to prepare its consolidated financial statements as of September 30, 2003 in accordance with SOP 90-7. In
accordance with SOP 90-7, all of UPC Polska's pre-petition liabilities that are subject to compromise under UPC Polska's proposed plan of reorganization are segregated in the
Company's consolidated balance sheet as liabilities subject to compromise. These liabilities are recorded at the amounts expected to be allowed as claims in the UPC Polska's Chapter 11 case rather
than at the estimated amounts for which those allowed claims may be

11

---

settled
as a result of the approval of the UPC Polska plan of reorganization. The following table presents condensed consolidated financial information for UPC Polska in accordance with SOP
90-7.

|                         |                                                | September 30,
2003                                   |                                                    
|------------------------ | ---------------------------------------------- | ---------------------------------------------------- | ---------------------------------------------------
|
|UPC Polska Balance Sheet |                                                |                                                      |                                                    
|                         | Assets                                         |                                                      |                                                    
|                         |                                                | Current assets                                       |                                                    
|                         |                                                | Long-term assets                                     |                                                    
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      | Total assets                                       
|                         |                                                |                                                      |                                                    
|                         | Liabilities and Stockholders' Equity (Deficit) |                                                      |                                                    
|                         |                                                | Current liabilities                                  |                                                    
|                         |                                                |                                                      | Not subject to compromise:                         
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      | Total current liabilities not subject to compromise
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      | Subject to compromise:                             
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      |                                                    
|                         |                                                |                                                      | Total current liabilities subject to compromise    
|                         |                                                |                                                      |                                                    
|                         |                                                | Long-term liabilities not subject to compromise      |                                                    
|                         |                                                |                                                      |                                                    
|                         | Minority interests in subsidiaries             |                                                      |                                                   
|                         |                                                |                                                      |                                                    
|                         | Stockholders' equity (deficit)                 |                                                      | (652,333                                           
|                         |                                                |                                                      |                                                    
|                         |                                                | Total liabilities and stockholders' equity (deficit) |                                                    
|                         |                                                |                                                      |                                                    

---

|                                   |                               | Three Months
Ended
September 30, |        
|---------------------------------- | ----------------------------- | -------------------------------- | -------
|
|
|UPC Polska Statement of Operations |                               |                                  |        
|                                   | Revenue                       |                                  | 19,146 
|                                   | Expense                       |                                  | (14,676
|                                   | Depreciation and amortization |                                  | (6,238 
|                                   |                               |                                  |        
|                                   |                               | Operating income (loss)          |        
|                                   | Other income (expense), net   |                                  | 12,536 
|                                   |                               |                                  |        
|                                   |                               | Net income (loss)                |        
|                                   |                               |                                  |        

12

---

The
amounts for UPC Polska's Chapter 11 related reorganization expenses included in the consolidated statement of operations consist of the following for the three and
nine month's period ended September 30, 2003:

|                           |  | Three months
ended
September 30, |   | Nine months
ended
September 30, |  
|-------------------------- |  | -------------------------------- | - | ------------------------------- | -
|
|
|Professional fees          |  | 1,548                            |   | 1,548                           |  
|Bond valuation             |  | (17,266                          | ) | (17,266                         | )
|                           |  |                                  |   |                                 |  
|Total reorganization items |  | (15,718                          | ) | (15,718                         | )
|                           |  |                                  |   |                                 |  

The
write down of the UPC Polska Notes reflects an adjustment to the carrying value of the UPC Polska Notes required to state them at the amounts expected to be allowed
as claims in the Chapter 11 case. Professional fees represent amounts accrued and incurred for professional services subsequent to UPC Polska's Chapter 11 filing. By September 30, 2003.

In
accordance with SOP 90-7, interest expense is reported only to the extent that it will be paid during the bankruptcy proceedings or that it is an allowed claim. The
interest expense on liabilities subject to compromise allowed as a claim for the three and the nine months ended September 30, 2003 is 1.4 and 49.6 million, respectively. The contractual
interest expense on liabilities subject to compromise is 25.0 million and 73.2 million for the three and the nine months ended September 30, 2003, respectively.

As
of September 30, 2003, UPC Polska had not made interest payments on any outstanding indebtedness subject to compromise since the filing for relief under Chapter 11.

Stock-Based Compensation

The Company accounts for its stock-based compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees("APB 25"). The Company has provided pro forma disclosures of net loss as if the fair value based method of
accounting for these plans, as prescribed by SFAS No. 123,Accounting for Stock-Based Compensation("SFAS 123"), had been applied.
SFAS 123 is amended by Statement of Financial Accounting Standards No. 148,Accounting for Stock-Based CompensationTransition and Disclosure and
Amendment of FASB Statement No. 123("SFAS 148").

13

---

The
stock-based compensation had the following pro forma effect on net income (in thousands):

|                                                                                                                    |                                        | Three Months Ended September 30, |        | Nine Months Ended September 30, |        
|------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | -------------------------------- | ------ | ------------------------------- | -------
|
|
|Basic net income (loss) attributable to common shareholders, as reported                                            |                                        | 1,620,385                        |        | (213,995                        | )      
|Add: Stock-based compensation expense included in reported net income (loss), net of related tax effects            |                                        | 2,858                            |        | 4,980                           |        
|Deduct: Total stock-based compensation expense determined under fair value based method, net of related tax effects |                                        | (10,854                          | )      | (19,858                         | )      
|                                                                                                                    |                                        |                                  |        |                                 |        
|Pro forma net income (loss)                                                                                         |                                        | 1,612,389                        |        | (228,873                        | )      
|                                                                                                                    |                                        |                                  |        |                                 |        
|Earnings per share:                                                                                                 |                                        |                                  |        |                                 |        
|                                                                                                                    | Basic earnings per shareas reported   |                                  | 102.85 |                                 | (315.86
|                                                                                                                    |                                        |                                  |        |                                 |        
|                                                                                                                    | Basic earnings per sharepro forma     |                                  | 102.34 |                                 | (291.52
|                                                                                                                    |                                        |                                  |        |                                 |        
|                                                                                                                    | Diluted earnings per shareas reported |                                  | 101.48 |                                 | (315.86
|                                                                                                                    |                                        |                                  |        |                                 |        
|                                                                                                                    | Diluted earnings per sharepro forma   |                                  | 100.97 |                                 | (291.52
|                                                                                                                    |                                        |                                  |        |                                 |        

Stock-based
compensation is recorded as a result of applying fixed-plan accounting and variable-plan accounting to UPC's stock option plans. Under
fixed plan accounting, deferred compensation is recorded for the difference between fair value of options granted and the option price of such options at the date of grant. This deferred compensation
is then recognized in the statement of operations ratably over the vesting period of the option. Under variable-plan accounting, compensation expense is recognized at each financial
statement date for vested options based on the amount, if greater, of the estimated fair value of the underlying common stock over the grant price, until the options are exercised or expire. As a
result of UPC's emergence from Chapter 11 on September 3, 2003, all stock-based compensation plans within UPC were cancelled.

14

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4.     Goodwill

The following table presents the movement of net goodwill during 2003:

|               |                 | December 31,
2002 |         | Acquisitions |     | Cumulative
Translation
Adjustment
& Other |        | September 30,
2003
|-------------- | --------------- | ----------------- | ------- | ------------ | --- | ----------------------------------------- | ------ | ------------------
|
|UPC Broadband: |                 |                   |         |              |     |                                           |        |                   
|               | The Netherlands |                   | 610,704 |              |    |                                           | (2,143 | )                 
|               | Austria         |                   | 133,963 |              |    |                                           |       |                   
|               | Belgium         |                   | 13,634  |              |    |                                           | (1,276 | )                 
|               | Norway          |                   | 8,607   |              |    |                                           | (944   | )                 
|               | Hungary         |                   | 70,517  |              | 219 |                                           | (3,715 | )                 
|               | Sweden          |                   | 136,275 |              |    |                                           | 3,821  |                   
|               | Other           |                   | 22,246  |              |    |                                           | (1,865 | )                 
|               |                 |                   |         |              |     |                                           |        |                   
|Total          |                 | 995,946           |         | 219          |     | (6,122                                    | )      | 990,043           
|               |                 |                   |         |              |     |                                           |        |                   

5.     Long-Term Debt

|                               |                      | September 30,
2003 |           | December 31,
2002 |           
|------------------------------ | -------------------- | ------------------ | --------- | ----------------- | ----------
|
|July 1999 Notes                |                      |                   |           | 1,513,558         |           
|October 1999 Notes             |                      |                   |           | 1,027,625         |           
|January 2000 Notes             |                      |                   |           | 1,607,706         |           
|UPC Distribution Bank Facility |                      | 2,970,849          |           | 3,140,139         |           
|Exchangeable Loan              |                      |                   |           | 894,457           |           
|UPC Polska Notes               |                      | 330,315            |           | 359,951           |           
|DIC Loan                       |                      |                   |           | 54,438            |           
|Other                          |                      | 78,512             |           | 85,218            |           
|                               |                      |                    |           |                   |           
|                               |                      | 3,379,676          |           | 8,683,092         |           
|                               | Less current portion |                    | (497,224  | )                 | (8,255,648
|                               |                      |                    |           |                   |           
|                               | Total                |                    | 2,882,452 |                   | 427,444   
|                               |                      |                    |           |                   |           

Bank
lenders under the UPC Distribution Holding B.V. bank facility had extended until September 30, 2003, waivers of the defaults arising as a result of UPC's decision not to make
interest payments under its outstanding UPC Notes. During this time the UPC Distribution Bank Facility was classified as current portion of long-term debt. Following completion of the restructuring
the UPC Distribution Bank Facility waivers are no longer necessary and the UPC Distribution Bank Facility remains in place, and is classified as long-term debt. The Company may from time to time
consider various changes to the UPC Distribution Bank Facility. The PCI Notes were redeemed on November 3, 2003.

All
non-Euro denominated borrowings are recorded each period using the period end spot rate with the result being recorded as foreign exchange gain or loss.

15

---

UPC Polska Notes

As a result of UPC Polska's filing of a petition for relief under Chapter 11 of the U.S. Bankruptcy Code and expiration of waivers from subsidiaries of UPC, all
of UPC Polska's long-term debt has been classified as liabilities subject to compromise. For a detailed discussion on the Poland Chapter 11 case, see Note 3, "Polish
Restructuring".

6.     Guarantees, Commitments and Contingencies

The Company has entered into agreements that contain features, which meet the definition of a guarantee under FIN 45. FIN 45 defines a guarantee to
be a contract that contingently requires the Company to make payments (either in cash, financial instruments, other assets, common shares of the Company or through provision of services) to a third
party based upon changes in an underlying economic characteristic (such as interest rates or market value) that is related to an asset, a liability or an equity security of the other party. The
Company has the following major types of guarantees that are subject to the disclosure requirements of FIN:

Business sale agreements

In connection with agreements for the sale of portions of the Company's business, including certain discontinued operations, the Company typically retained
certain liabilities of a business, which relate to events occurring prior to its sale, such as tax, environmental, litigation and employment matters. The Company generally indemnifies the purchaser of
its business in the event that a third party asserts a claim against the purchaser that relates to a liability retained by the Company. These types of indemnification guarantees typically extend for a
number of years.

The
Company is unable to estimate the maximum potential liability for these types of indemnification guarantees as the business sale agreements sometimes do not specify a maximum amount
and the amounts are dependent upon the outcome of future contingent events, the nature and the likelihood of which cannot be determined at this time.

Historically,
the Company has not made any significant indemnification payments under such agreements and no amount has been accrued in the accompanying consolidated financial statements
with respect to these indemnification guarantees.

Lease agreements

The Company's Digital Media Center ("DMC") sub-leases transponder capacity to a third party. Under this sublease agreement, the Company guaranteed
performance criteria. These issued performance guarantees are fully matched with the guarantees received under the lease agreements between UPC and the third party.

Indemnification of lenders and agents under credit facilities

Under its credit facilities, the Company has agreed to indemnify its lenders under such facilities against costs or losses resulting from changes in laws and
regulation, which would increase the lenders'

16

---

costs,
and for legal action brought against the lenders. These indemnifications generally extend for the term of the credit facilities and do not provide for any limit on the maximum potential
liability.

Historically,
the Company has not made any significant indemnification payments under such agreements and no material amounts have been accrued in the accompanying financial statements
with respect to these indemnification guarantees, as the Company does not believe such amounts are probable of occurrence.

Other indemnification agreements

The DMC has third party contracts for the play out of channels from the DMC, which require the DMC to perform according to industry standard practice, with
penalties attached should performance drop below the agreed criteria. Additionally, UPC Media's interactive service group also entered into third party contracts for the delivery of interactive
content with certain performance criteria guarantees.

The
Company has certain franchise obligations under which the Company must meet performance requirements to construct networks under certain circumstances. Non-performance of
these obligations could result in penalties being levied against the Company. The Company continues to meet its obligations so as not to incur such penalties.

In
the ordinary course of business, the Company provides customers with certain performance guarantees, should a service outage occur in excess of a certain period in time, UPC will
compensate those customers for the outage.

Historically,
the Company has not made any significant payments under any of these indemnifications or guarantees. In certain cases, due to the nature of the agreement, the Company has
not been able to estimate its maximum potential loss, the maximum potential loss has not been specified.

Indemnity agreement between Philips Media B.V., UPC and UGC

In connection with the acquisition of the 50% of UPC ordinary shares held by Philips Electronics N.V. ("Philips") on December 1, 1997, UPC agreed to
indemnify Philips for any damages incurred by Philips in relation to a guarantee provided by them to the City of Vienna, Austria ("Vienna Obligations"), but was not able to give such indemnification
due to certain covenants in the then outstanding bonds. Following the successful tender for its bonds UGC was able to enter into an indemnity agreement with Philips with respect to the Vienna
Obligations. On August 27, 2003, UPC acknowledged to UGC that UPC would be primarily liable for the payment of any amounts owing pursuant to the Vienna Obligations and that UPC would indemnify
and hold UGC harmless for the payment of any amounts owing under such indemnity agreement.

Historically,
the Company has not made any significant indemnification payments to either Philips or UGC under such agreements and no material amounts have been accrued in the
accompanying financial statements with respect to these indemnification guarantees, as the Company does not believe such amounts are probable of occurrence.

17

---

Litigation

The following is a description of certain legal proceedings to which UGC Europe or one of UGC Europe's subsidiaries is a party. In addition, from time to time,
UGC Europe may become involved in litigation relating to claims arising out of its operations in the normal course of the Company's business. In the opinion of the Company's management, the ultimate
resolution of these legal proceedings would not be likely to have a material adverse effect on the business, results of operations, financial condition or liquidity of UGC Europe and its subsidiaries.
UPC's (but not its subsidiaries') liability under legal proceedings were subject to compromise pursuant to the Chapter 11 Case and theAkkoord. As these
legal proceedings are resolved, to the extent that UPC has any liability and such liability is owed by UPC, UPC will distribute shares of UGC Europe's Common Stock as provided under the Plan and the Akkoordin satisfaction of such claim.

UPC
Polska is involved in a dispute with HBO Communications (UK) Ltd., Polska Programming B.V. and HBO Poland Partners (collectively "HBO") concerning its cable carriage agreement
("Cable Agreement") and its D-DTH carriage agreement ("D-DTH Agreement") for the HBO premium movie channel. With respect to the Cable Agreement, on April 25, 2002, UPC
Polska commenced an arbitration proceeding before the International Chamber of Commerce, claiming that HBO was in breach of the "most favored nations" clause thereunder ("MFN") by providing
programming to other cable operators in the relevant territory on terms that are more favorable than those offered to UPC Polska. Specifically, UPC Polska contends that its "Service Fee" under the
Cable Agreement should not include any minimum guarantees because such minimum guarantees are not required of other cable operators in the relevant territory.

In
its answer in the arbitration, HBO asserted counterclaims against UPC Polska, alleging that UPC Polska was liable for minimum guarantees under the Cable Agreement, and also that UPC
Polska was liable for an increase in minimum guarantees under the D-DTH Agreement, based on the fact that UPC Polska merged its D-DTH business with an affiliate of Canal+ in
December 2001. UPC Polska responded to the counterclaims by (i) denying that it owes any sums for minimum guarantees under the Cable Agreement, in light of the MFN clause, and
(ii) denying that it owes any sums for an increase in minimum guarantees under the D-DTH Agreement, because it has not purchased an equity interest in HBO, a condition on which UPC
Polska contends the increase in minimum guarantees is predicated under the D-DTH Agreement.

UPC
Polska intends to vigorously prosecute its claims and defend against HBO's counterclaims. The case is currently in arbitration. UPC Polska has prepared the terms of reference, which
include a mapping out discovery needs, a timing/briefing schedule for future motions, and hearing dates. On April 15, 2003, the Arbitration Panel confirmed a schedule for UPC Polska's request
to have the matter decided on summary judgment. The oral argument occurred on May 29, 2003. The summary judgment motion was denied, and the discovery phase has begun. Submissions (such as
witness statements, pretrial briefs and joint exhibits) were due in October 2003. On July 8, 2003, the U.S. Bankruptcy Court handling UPC Polska's bankruptcy case granted relief
from the automatic stay imposed under section 362 of the Bankruptcy Code to allow the HBO Arbitration to continue in the ordinary course, up to and including entry of an adverse judgment. UPC
Polska need not seek any stay relief to enforce any favorable judgment. However, HBO may not enforce any judgment in its favor against UPC Polska and any such judgment against UPC Polska remains
subject to the automatic stay, although HBO could enforce any such judgment

18

---

against
UPC Polska's subsidiaries which are party to the arbitration, but which are not party to or protected by UPC Polska's Chapter 11 proceeding.

The
evidentiary hearings occurred on November 4 and 5, 2003 and witnesses of both parties were heard. The verdict of the Arbitration Panel is expected to be announced by the end
of the first quarter of 2004 at the earliest. At this stage UPC Polska is unable to predict the outcome of the arbitration process.

On
October 22, 2002, Philips Digital Networks B.V. ("Philips") commenced legal proceedings against UPC, UPC Nederland B.V. and UPC Distribution (together the "UPC Defendants")
alleging failure to perform by the UPC Defendants under a Set Top Computer Supply Agreement between the parties dated November 19, 2001, as amended (the "STC Agreement"). The action was
commenced by Philips following a termination of the STC Agreement by the UPC Defendants as a consequence of Philips' failure to deliver STCs conforming to the material technical specifications
required by the terms of the STC Agreement. Philips' principal allegation is that the UPC Defendants have failed to take delivery of 47,100 Set Top Computers ("STCs") with a value claimed of
21.2 million. Additionally, Philips is claiming dissolution of the STC Agreement and a release from an obligation to manufacture and deliver a further 29,850 STCs and related damages of
7.0 million. Lastly, Philips is claiming additional costs, including interest on late payments of approximately 1.0 million. The UPC Defendants deny all claims brought by Philips, and
vigorously defended themselves against these claims in their defense submitted on January 28, 2003.

Philips'
statement of reply to the defense, which was submitted on May 7, 2003, contained an incident action on the basis of Article 843a Dutch Code on Civil Procedure
("DCCP") and a change of the original claim. The 843a DCCP claim relates to certain documents Philips wished the UPC Defendants to produce in order to prove that at the time of entering into the STC
Agreement, the UPC Defendants did not intend to perform under the STC Agreement. The change of the claim related to the addition of another ground for the claim; a tort (deception/fraud) allegedly
committed by each of the UPC Defendants.

Judgment
on the incident action was rendered on October 9, 2003 and dismissed the action completely and unreservedly. The UPC Defendants have now until December 10, 2003 to
submit its Statement of Rejoinder (being its reply to Philips' statement of reply to the defense) but may apply for a six week extension to such submission date.

On
December 3, 2002, Europe Movieco Partners Limited ("Movieco") filed a request for arbitration (the "Request") against the Company with the International Court of Arbitration of
the International Chamber of Commerce. The Request contains claims, which are based on a cable affiliation agreement entered into between the parties on December 21, 1999 (the "CAA"). The
arbitral proceedings were suspended from December 17, 2002 to March 18, 2003. They have subsequently been reactivated and directions have been given by the Arbitral Tribunal. In the
proceedings, Movieco claims (i) unpaid licence fees due under the CAA, plus interest, (ii) an order for specific performance of the CAA or, in the alternative, damages for breach of that
agreement, to be assessed and (iii) legal and arbitration costs plus interest. Of the unpaid licence fees approximately USD 11 million had been accrued prior to the Company's commencing
insolvency proceedings in the Netherlands on December 3, 2002 (the "Pre-Petition Claim"). Movieco made a claim in theAkkoordfor the
Pre-Petition Claim and, should Movieco succeed in the arbitration, shares of the appropriate value have been set aside. The Company's position is that the CAA is null and void because it
breaches Article 81 of the EC Treaty and Section 6 of

19

---

the
Dutch Competition Act. The Company also relies on the Order of the Southern District of New York dated January 7, 2003 in which the New York Court ordered that the rejection of the CAA was
approved effective as of March 1, 2003 and that the Company shall have no further liability under the CAA. The Company has filed a counterclaim seeking the return of the amounts it has overpaid
to Movieco under the CAA. Movieco does not accept its treatment as a contingent creditor and as part of its attempts to obtain distribution of the shares it has filed an action in the Dutch Court on
October 28, 2003 challenging theAkkoord. The Company's position is that such action is without merit and it will be defending such action
accordingly.

In
2000, one of UPC's Dutch systems was assessed for a transfer tax on immovable property in the amount of 0.8 million for the purchase of a cable network. UPC had always regarded
its cable networks as movable property and not subject to such transfer tax. UPC appealed the tax assessment, but on June 6, 2003, the Dutch Supreme Court ruled against UPC. Therefore, UPC's
Dutch systems may be assessed for taxes on similar transactions. Currently, UPC cannot predict the extent to which the taxes could be assessed retroactively or the amount of tax that UPC's systems may
be assessed for, although it may be substantial, being 6% of the value attributable to some of UPC's systems at the date of transfer. Because UPC owns 100% of UPC Nederland, any tax liabilities
assessed against UPC's Dutch systems will be consolidated with UPC's results. The Company believes that most cable television companies and other utilities in The Netherlands could become subject to
similar tax liabilities. Various interested parties therefore are currently lobbying the Dutch Government to obtain clarification on how the Government intends to deal with the consequences of the
Supreme Court's ruling. There can be no assurance that such lobbying will limit the Company's exposure for past or future years.

On
October 8, 2003, an action was filed in the Court of Chancery of the State of Delaware in New Castle County, in which the plaintiff named as defendants the Company, United and
certain directors of the Company and United. The complaint purports to assert claims on behalf of all public shareholders of the Company. On October 21, 2003, the plaintiff filed an amended
complaint in the Delaware Court of Chancery. The complaint alleges that the Company and the defendant directors have breached their fiduciary duties to the public shareholders of the Company in
connection with an offer by United to exchange shares of its common stock for the outstanding Common Stock of the Company. Among the remedies demanded, the complaint seeks to enjoin the exchange offer
and obtain declaratory relief, unspecified damages and rescission. On November 12, United and the plaintiff, through respective counsel, entered into a memorandum of understanding approving the
terms of the revised offer and the disclosure concerning the revised offer and agreeing to settle the litigation, subject to entering into final settlement documents, consummation of the exchange
offer and court approval of the settlement.

20

---

7.     Earnings per share

|                                                                                                                     |                                                               | Three Months Ended
September 30, |         | Nine Months Ended
September 30, |        
|-------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | -------------------------------- | ------- | ------------------------------- | -------
|
|
|Numerator (Basic):                                                                                                   |                                                               |                                  |         |                                 |        
|Income (loss) before cumulative effect of change in accounting principle                                             |                                                               | 1,620,385                        |         | (213,995                        | )      
|                                                                                                                     | Accretion of Dividend on Series 1 Convertible Preferred Stock |                                  |        |                                 | (32,465
|                                                                                                                     | Accretion of Discount of Series 1 Convertible Preferred Stock |                                  |        |                                 | (1,525 
|                                                                                                                     |                                                               |                                  |         |                                 |        
|Basic income (loss) attributable to common stockholders before cumulative effect of change in accounting principle   |                                                               | 1,620,385                        |         | (247,985                        | )      
|Cumulative effect of change in accounting principle                                                                  |                                                               |                                 |         |                                |        
|                                                                                                                     |                                                               |                                  |         |                                 |        
|Basic net income (loss) attributable to common stockholders                                                          |                                                               | 1,620,385                        |         | (247,985                        | )      
|                                                                                                                     |                                                               |                                  |         |                                 |        
|Denominator (Basic):                                                                                                 |                                                               |                                  |         |                                 |        
|Basic weighted-average number of common shares outstanding                                                           |                                                               | 15,754,737                       |         | 785,101                         |        
|                                                                                                                     |                                                               |                                  |         |                                 |        
|Numerator (Diluted):                                                                                                 |                                                               |                                  |         |                                 |        
|Income (loss) before cumulative effect of change in accounting principle                                             |                                                               | 1,620,385                        |         | (213,995                        | )      
|                                                                                                                     | Reversal of gain on DIC Loan conversion                       |                                  |        |                                 |       
|                                                                                                                     | Reversal of interest accretion on DIC Loan                    |                                  |        |                                 |       
|                                                                                                                     | Accretion of Dividend on Series 1 Convertible Preferred Stock |                                  |        |                                 | (32,465
|                                                                                                                     | Accretion of Discount of Series 1 Convertible Preferred Stock |                                  |        |                                 | (1,525 
|                                                                                                                     |                                                               |                                  |         |                                 |        
|Diluted income (loss) attributable to common stockholders before cumulative effect of change in accounting principle |                                                               | 1,620,385                        |         | (247,985                        | )      
|Cumulative effect of change in accounting principle                                                                  |                                                               |                                 |         |                                |        
|                                                                                                                     |                                                               |                                  |         |                                 |        
|Diluted net income (loss) attributable to common stockholders                                                        |                                                               | 1,620,385                        |         | (247,985                        | )      
|                                                                                                                     |                                                               |                                  |         |                                 |        
|Denominator (Diluted):                                                                                               |                                                               |                                  |         |                                 |        
|Basic weighted-average number of common shares outstanding                                                           |                                                               | 15,754,737                       |         | 785,101                         |        
|                                                                                                                     | DIC Loan                                                      |                                  |        |                                 |       
|                                                                                                                     | Exchangeable Loan                                             |                                  | 152,068 |                                 |       
|                                                                                                                     | Series 1 Convertible Preferred Stock                          |                                  | 61,444  |                                 |       
|                                                                                                                     |                                                               |                                  |         |                                 |        
|Diluted weighted-average number of common shares outstanding                                                         |                                                               | 15,968,249                       |         | 785,101                         |        
|                                                                                                                     |                                                               |                                  |         |                                 |        

8.     Income Taxes

UPC Restructuring

On September 3, 2003, UPC discharged a substantial amount of debt in connection with its restructuring. Pursuant to the restructuring UPC has become a
subsidiary of UGC Europe Inc. The final discharge of the debt outstanding at the level of UPC took place after it had become such a subsidiary. As a result, also the U.S. income tax aspects of the
discharge of debt at the level of UPC need to be

21

---

considered.
The U.S. Internal Revenue Code provides that when a debtor discharges its debt at a discount, the debtor generally realizes "cancellation of debt" income (and earnings and profits in the
case of a corporation). The Internal Revenue Code also provides that this cancellation of debt income can be excluded from taxable income and, subject to certain limitations, earnings and profits
under certain circumstances, including when the cancellation of debt income occurs in a transaction consummated pursuant to the bankruptcy code. When a debtor excludes cancellation of debt income from
taxable income under the bankruptcy code exclusion, the debtor must reduce its basis in certain tax attributes, including but not limited to, net operating losses, capital losses and tax basis in
assets, by the amount of excluded income. The debtor may also exclude such cancellation of debt income from its earnings and profits, but only to the extent such cancellation of debt income is applied
to reduce the debtor's basis in its assets. If the excluded income exceeds the reduction in basis of the debtor's assets, the debtor's current year earnings and profits are increased by the amount of
such excess. An increase in current or future earnings and profits could impact UGC Europe's U.S. federal income tax liabilities as UGC Europe could be required to recognize all or a portion of UPC's
current or future earnings and profits as a deemed dividend under certain specific provisions of the U.S. Internal Revenue Code.

UPC
currently expects that it will be able to exclude any realized cancellation of debt income associated with its restructuring from its earnings and profits as determined for U.S. tax
purposes under the bankruptcy code exclusion to the extent that the Company is able to reduce its adjusted tax basis in its assets. Any material amount of earnings and profits recognized by the
exchange of UGC Europe equity for UPC obligations as part of the reorganization plan may cause UGC Europe to have a material income inclusion with respect to UPC's investment in U.S. property,
including its investment in its subsidiary, UPC Polska. The Company anticipates that after taking into account the exclusion, the exchange should not generate a material amount of earnings and profits
for the Company. UPC expects that it will be required to reduce the tax basis of its assets by a material amount as a result of the exclusion, which could have the effect of increasing UPC's earnings
and profits as determined for U.S. tax purposes in subsequent years, when such assets are disposed of in a taxable disposition. Any increase in earnings and profits could impact UGC Europe's U.S.
federal income tax liabilities by increasing required income inclusions under the U.S. Subpart F rules or investment in U.S. property rules.

The
Company also believes that as a result, in part, of certain internal restructuring efforts that the Company and/or UPC Polska intend to undertake following the reorganization, UPC
will not have any remaining material tax basis in any investment in U.S. property, as determined for U.S. federal income tax purposes. If UGC Europe is required to recognize income as a result of the
exchange, the resulting U.S. tax liability could be substantial.

In
connection with the Company's restructuring, the Company exchanged its equity for both U.S. dollar and Euro denominated UPC bonds. The Company then exchanged these bonds for UPC
equity. UGC Europe realized both exchange gains and losses on the exchange of Euro denominated bonds for UPC equity. Such gains and losses are measured based on the purchase price paid and spot rate
in effect when the bondholder who exchanged their bonds for UGC Europe equity acquired such bonds.

Under
Dutch tax law, the discharge of UPC's indebtedness in connection with its restructuring would generally constitute taxable income to UPC in the period of discharge. UPC has reached
an agreement with the Dutch tax authorities whereby UPC is able to utilize net operating loss carry forwards to offset Dutch income taxes arising from the discharge of debt in 2003. UPC, together with
its "fiscal unity"

22

---

companies,
expects that for the year ended December 31, 2003, it will have sufficient current year and carry forward losses to fully offset the income to be recognized on the discharge of the
debt.

9.     Segments and Geographic Information

The Company's operations are currently organized into two principal divisionsUPC Broadband and chello Media. UPC Broadband delivers video, internet
access and telephone services to residential customers and manages its business by country, and chello Media provides broadband internet and interactive digital products and services. The chello Media
division also includesPriority Telecom, which operates a competitive local exchange carrier business providing telephone and data network solutions to
the business market, and the group's investment holdings. The Company evaluates performance and allocates resources based on the results of these segments. Adjusted EBITDA is the primary measure used
by the Company's chief operating decision makers to evaluate segment-operating performance and to decide how to allocate resources to segments. "EBITDA" is an acronym for earnings before interest,
taxes, depreciation and amortization. As the Company uses the term, Adjusted EBITDA further removes the effects of cumulative effects of accounting changes, share in results of affiliates, minority
interests in subsidiaries, reorganization expense, other income and expense, gain on extinguishment of debt, provision for loss on investments, gain (loss) on sale of investments in affiliates and
other assets, proceeds from litigation settlement, foreign currency exchange gain (loss), impairment and restructuring charges, and stock-based compensation. The Company believes Adjusted EBITDA is
meaningful because it provides investors a means to evaluate the operating performance of its segments and its company on an ongoing basis using criteria that is used by its internal decision makers.
The Company's internal decision makers believe Adjusted EBITDA is a meaningful measure and is superior to other available GAAP measures because it represents a transparent view of its recurring
operating performance and allows management to readily view operating trends, perform analytical comparisons and benchmarking between segments in the 11 different countries in which the Company
operates and identify strategies to improve operating performance. For example, the Company's internal decision makers believe that the inclusion of impairment and restructuring charges within
Adjusted EBITDA distorts their ability to efficiently assess and view the core operating trends in its segments. In addition, the Company's internal decision makers believe its measure of Adjusted
EBITDA is important because analysts and other investors use it to compare the Company's performance to other companies in its industry. The Company reconciles the total of the reportable segments'
Adjusted EBITDA to its consolidated net income as presented in the accompanying consolidated statements of operations, because the Company believes consolidated net income is the most directly
comparable financial measure to total segment operating performance. Investors should view Adjusted EBITDA as a supplement to, and not a substitute for, other GAAP measures of income as a measure of
operating performance. As discussed above, Adjusted EBITDA

23

---

excludes,
among other items, frequently occurring impairment, restructuring and other charges that would be included in GAAP measures of operating performance.

|                                |                     | Three Months
Ended September 30, |         | Nine Months
Ended September 30, |        
|------------------------------- | ------------------- | -------------------------------- | ------- | ------------------------------- | -------
|
|
|Revenue                         |                     |                                  |         |                                 |        
|Triple Play:                    |                     |                                  |         |                                 |        
|                                | The Netherlands     |                                  | 133,854 |                                 | 121,172
|                                | Austria             |                                  | 57,757  |                                 | 52,283 
|                                | Belgium             |                                  | 6,909   |                                 | 6,476  
|                                | Czech Republic      |                                  | 13,686  |                                 | 11,766 
|                                | Norway              |                                  | 20,332  |                                 | 20,310 
|                                | Hungary             |                                  | 35,814  |                                 | 32,260 
|                                | France              |                                  | 26,395  |                                 | 23,684 
|                                | Poland              |                                  | 18,983  |                                 | 18,758 
|                                | Sweden              |                                  | 16,603  |                                 | 13,663 
|                                | Other               |                                  | 9,501   |                                 | 9,340  
|                                |                     |                                  |         |                                 |        
|Total Triple Play UPC Broadband |                     | 339,834                          |         | 309,712                         |        
|                                |                     |                                  |         |                                 |        
|Germany                         |                     |                                 |         | 5,224                           |        
|Other                           |                     | 7,636                            |         | 6,428                           |        
|                                |                     |                                  |         |                                 |        
|                                | Total UPC Broadband |                                  | 347,470 |                                 | 321,364
|                                |                     |                                  |         |                                 |        
|chello Media:                   |                     |                                  |         |                                 |        
|Priority Telecom                |                     | 26,597                           |         | 28,952                          |        
|UPC Media                       |                     | 22,636                           |         | 17,730                          |        
|UPC Investments                 |                     | 53                               |         |                                |        
|                                |                     |                                  |         |                                 |        
|                                | Total chello Media  |                                  | 49,286  |                                 | 46,682 
|                                |                     |                                  |         |                                 |        
|Intercompany Eliminations       |                     | (29,516                          | )       | (27,174                         | )      
|                                |                     |                                  |         |                                 |        
|                                | Total               |                                  | 367,240 |                                 | 340,872
|                                |                     |                                  |         |                                 |        

24

---



A
summary of the segment information by geographic area is as follows:

|                                |                 | Triple Play Revenues for the
Three Months Ended September 30, 2003
|------------------------------- | --------------- | ------------------------------------------------------------------
|
|
|Triple Play:                    |                 |                                                                   
|                                | The Netherlands |                                                                   
|                                | Austria         |                                                                   
|                                | Belgium         |                                                                   
|                                | Czech Republic  |                                                                   
|                                | Norway          |                                                                   
|                                | Hungary         |                                                                   
|                                | France          |                                                                   
|                                | Poland          |                                                                   
|                                | Sweden          |                                                                   
|                                | Other           |                                                                   
|                                |                 |                                                                   
|Total Triple Play UPC Broadband |                 | 200,343                                                           
|                                |                 |                                                                   

|                                |                 | Triple Play Revenues for the
Three Months Ended September 30, 2002
|------------------------------- | --------------- | ------------------------------------------------------------------
|
|
|Triple Play:                    |                 |                                                                   
|                                | The Netherlands |                                                                   
|                                | Austria         |                                                                   
|                                | Belgium         |                                                                   
|                                | Czech Republic  |                                                                   
|                                | Norway          |                                                                   
|                                | Hungary         |                                                                   
|                                | France          |                                                                   
|                                | Poland          |                                                                   
|                                | Sweden          |                                                                   
|                                | Other           |                                                                   
|                                |                 |                                                                   
|Total Triple Play UPC Broadband |                 | 182,479                                                           
|                                |                 |                                                                   

25

---

|                                |                 | Triple Play Revenues for the
Nine Months Ended September 30, 2003
|------------------------------- | --------------- | -----------------------------------------------------------------
|
|
|Triple Play:                    |                 |                                                                  
|                                | The Netherlands |                                                                  
|                                | Austria         |                                                                  
|                                | Belgium         |                                                                  
|                                | Czech Republic  |                                                                  
|                                | Norway          |                                                                  
|                                | Hungary         |                                                                  
|                                | France          |                                                                  
|                                | Poland          |                                                                  
|                                | Sweden          |                                                                  
|                                | Other           |                                                                  
|                                |                 |                                                                  
|Total Triple Play UPC Broadband |                 | 587,807                                                          
|                                |                 |                                                                  

|                                |                 | Triple Play Revenues for the
Nine Months Ended September 30, 2002
|------------------------------- | --------------- | -----------------------------------------------------------------
|
|
|Triple Play:                    |                 |                                                                  
|                                | The Netherlands |                                                                  
|                                | Austria         |                                                                  
|                                | Belgium         |                                                                  
|                                | Czech Republic  |                                                                  
|                                | Norway          |                                                                  
|                                | Hungary         |                                                                  
|                                | France          |                                                                  
|                                | Poland          |                                                                  
|                                | Sweden          |                                                                  
|                                | Other           |                                                                  
|                                |                 |                                                                  
|Total Triple Play UPC Broadband |                 | 556,685                                                          
|                                |                 |                                                                  

26

---

|                                |                     | Three Months
Ended September 30, |         | Nine Months
Ended September 30, |       
|------------------------------- | ------------------- | -------------------------------- | ------- | ------------------------------- | ------
|
|
|
|Triple Play:                    |                     |                                  |         |                                 |       
|                                | The Netherlands     |                                  | 69,856  |                                 | 28,730
|                                | Austria             |                                  | 22,887  |                                 | 17,058
|                                | Belgium             |                                  | 2,487   |                                 | 2,062 
|                                | Czech Republic      |                                  | 6,129   |                                 | 2,421 
|                                | Norway              |                                  | 6,568   |                                 | 5,101 
|                                | Hungary             |                                  | 12,884  |                                 | 10,071
|                                | France              |                                  | 5,050   |                                 | (1,665
|                                | Poland              |                                  | 4,984   |                                 | 4,314 
|                                | Sweden              |                                  | 7,311   |                                 | 4,884 
|                                | Other               |                                  | 3,681   |                                 | 3,614 
|                                |                     |                                  |         |                                 |       
|Total Triple Play UPC Broadband |                     | 141,837                          |         | 76,590                          |       
|                                |                     |                                  |         |                                 |       
|Germany                         |                     |                                 |         | 968                             |       
|Corporate                       |                     | (23,427                          | )       | (10,625                         | )     
|Other                           |                     | 8,781                            |         | 10,394                          |       
|                                |                     |                                  |         |                                 |       
|                                | Total UPC Broadband |                                  | 127,191 |                                 | 77,327
|                                |                     |                                  |         |                                 |       
|chello Media:                   |                     |                                  |         |                                 |       
|Priority Telecom                |                     | 3,353                            |         | 528                             |       
|UPC Media                       |                     | 7,359                            |         | 402                             |       
|UPC Investments                 |                     | (221                             | )       | (163                            | )     
|                                |                     |                                  |         |                                 |       
|                                | Total chello Media  |                                  | 10,491  |                                 | 767   
|                                |                     |                                  |         |                                 |       
|                                | Total               |                                  | 137,682 |                                 | 78,094
|                                |                     |                                  |         |                                 |       

27

---

Following
is a reconciliation of total segment Adjusted EBITDA to UGC Europe's consolidated net income (loss) for the three and nine months ended September 30, 2003 and 2002.

|                                                           |                                                                          | Three Months
Ended September 30, |           | Nine Months
Ended September 30, |         
|---------------------------------------------------------- | ------------------------------------------------------------------------ | -------------------------------- | --------- | ------------------------------- | --------
|
|
|Adjusted EBITDA                                            |                                                                          | 137,682                          |           | 78,094                          |         
|Depreciation and amortization                              |                                                                          | (154,112                         | )         | (189,779                        | )       
|Impairment and restructuring releases (charges)            |                                                                          | 407                              |           | 1,413                           |         
|Stock-based compensation                                   |                                                                          | (9,062                           | )         | (5,279                          | )       
|Loss on disposal of Poland DTH business                    |                                                                          |                                 |           |                                |         
|                                                           |                                                                          |                                  |           |                                 |         
|                                                           | Operating income (loss)                                                  |                                  | (25,085   | )                               | (115,551
|Interest income                                            |                                                                          | 1,661                            |           | 597                             |         
|Interest expense                                           |                                                                          | (60,420                          | )         | (213,947                        | )       
|Provision for loss on investments                          |                                                                          |                                 |           | (7,957                          | )       
|Foreign currency exchange gain (loss)                      |                                                                          | (234,331                         | )         | (9,977                          | )       
|Gain on extinguishment of debt                             |                                                                          | 1,944,330                        |           |                                |         
|Gain on sale of investment in affiliate to related party   |                                                                          |                                 |           |                                |         
|Gain (loss) on sale of assets and investment in affiliates |                                                                          | (507                             | )         | 146,601                         |         
|Other income (expense), net                                |                                                                          | (572                             | )         | (6,217                          | )       
|                                                           |                                                                          |                                  |           |                                 |         
|                                                           | Income (loss) before income taxes and other items                        |                                  | 1,625,076 |                                 | (206,451
|Reorganization expenses                                    |                                                                          | (5,569                           | )         |                                |         
|Income tax expense, net                                    |                                                                          | (802                             | )         |                                |         
|Minority interests in subsidiaries, net                    |                                                                          | 44                               |           | (10,323                         | )       
|Share in results of affiliates, net                        |                                                                          | 1,636                            |           | 2,779                           |         
|                                                           |                                                                          |                                  |           |                                 |         
|                                                           | Income (loss) before cumulative effect of change in accounting principle |                                  | 1,620,385 |                                 | (213,995
|Cumulative effect of change in accounting principle        |                                                                          |                                 |           |                                |         
|                                                           |                                                                          |                                  |           |                                 |         
|                                                           | Net income (loss)                                                        |                                  | 1,620,385 |                                 | (213,995
|                                                           |                                                                          |                                  |           |                                 |         

28

---

|               |                  | Total Assets
|-------------- | ---------------- | ------------
|
|
|chello Media:  |                  |             
|               | UPC Media        |             
|               | Priority Telecom |             
|UPC Broadband: |                  |             
|               | The Netherlands  |             
|               | Austria          |             
|               | Belgium          |             
|               | Czech Republic   |             
|               | Norway           |             
|               | Hungary          |             
|               | France           |             
|               | Poland           |             
|               | Sweden           |             
|               | Other            |             
|               | Corporate        |             
|               |                  |             
|Total          |                  | 4,339,441   
|               |                  |             

10.   Impairment and Restructuring Charges

During 2001, in reviewing the current and long-range plan, the Company implemented a Company-wide restructuring plan to both lower
operating expenses and strengthen its competitive and financial position. Management began implementation of the plan during the second half of 2001 by eliminating certain employee positions, reducing
office space and related overhead expenses, recognizing losses related to excess capacity under certain contracts and cancellation of certain programming contracts.

29

---

The
following table summarizes these costs by type and related segment of the business as of September 30, 2003.

|                                                                                                   |  | Employee
Severance &
Termination
Costs |   | Office
Closures |   | Programming
and Lease
Contracts
Termination Costs |   | Asset
Disposal
Losses and
Other Costs |   | Impairment
Charges |   | Total
Impairment and
Restructuring
Charges |  
|-------------------------------------------------------------------------------------------------- |  | -------------------------------------- | - | --------------- | - | ------------------------------------------------- | - | ------------------------------------- | - | ------------------ | - | ------------------------------------------ | -
|
|Impairment and restructuring liability, December 31, 2002                                          |  | 18,545                                 |   | 13,550          |   | 35,184                                            |   | 4,195                                 |   |                   |   | 71,474                                     |  
|                                                                                                   |  |                                        |   |                 |   |                                                   |   |                                       |   |                    |   |                                            |  
|Total impairment and restructuring charges (releases) for the nine months ended September 30, 2003 |  | (533                                   | ) |                |   |                                                  |   | (446                                  | ) | (391               | ) | (1,370                                     | )
|Cash paid during nine months ended September 30, 2003                                              |  | (9,747                                 | ) | (7,553          | ) | (2,240                                            | ) | (1,631                                | ) |                   |   | (21,171                                    | )
|Non-cash utilization of restructuring liability                                                    |  | (1,149                                 | ) | (431            | ) |                                                  |   | 1,580                                 |   |                   |   |                                           |  
|Cumulative translation adjustment & other                                                          |  | (200                                   | ) | (483            | ) | (2,550                                            | ) | (8                                    | ) | 391                |   | (2,850                                     | )
|                                                                                                   |  |                                        |   |                 |   |                                                   |   |                                       |   |                    |   |                                            |  
|Impairment and restructuring liability, September 30, 2003                                         |  | 6,916                                  |   | 5,083           |   | 30,394                                            |   | 3,690                                 |   |                   |   | 46,083                                     |  
|                                                                                                   |  |                                        |   |                 |   |                                                   |   |                                       |   |                    |   |                                            |  
|Short-term portion impairment and restructuring liability                                          |  | 2,674                                  |   | 1,605           |   | 982                                               |   | 2,071                                 |   |                   |   | 7,332                                      |  
|Long-term portion impairment and restructuring liability                                           |  | 4,242                                  |   | 3,478           |   | 29,412                                            |   | 1,619                                 |   |                   |   | 38,751                                     |  
|                                                                                                   |  |                                        |   |                 |   |                                                   |   |                                       |   |                    |   |                                            |  
|Impairment and restructuring liability, September 30, 2003                                         |  | 6,916                                  |   | 5,083           |   | 30,394                                            |   | 3,690                                 |   |                   |   | 46,083                                     |  
|                                                                                                   |  |                                        |   |                 |   |                                                   |   |                                       |   |                    |   |                                            |  

11.   Related Party Transactions

In 2002, a subsidiary of UGC Europe entered into a contract with Spinhalf Ltd. for the provision of network services. This company is owned by a family
member of the Company's former Chief Executive Officer of UPC Broadband, Mr. John Riordan was Chief Executive Officer of UPC in 2002. Mr. John Riordan resigned on November 13,
2003. The value of the contracted services to date is approximately 7 million.

Upon
consummation of the restructuring, UGC Europe acquired UPC's exchangeable loan, UPC Notes and UPC's preference shares held by UGC Europe's parent United for issuance of 32,950,000
shares of UGC Europe. This is a non-monetary transaction involving an exchange of assets and equity interests between entities under common control, which is accounted for at United
carrying values. Any excess of carrying value of loans of UPC over United is a capital transaction and recorded as additional paid in capital.

30

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12.   Subsequent Events

UGC Tender Offer

On October 6, 2003 United announced an exchange offer, through a wholly-owned subsidiary for all of the outstanding publicly held shares of UGC Europe.
United currently owns approximately 66.75% of the outstanding common stock of UGC Europe. On November 12, 2003, United announced revised terms to their offer to exchange their Class A
common stock for the 16.6 million outstanding shares of UGC Europe common stock not owned by their subsidiaries or United. This exchange offer is conditioned on the tender of a sufficient
number of outstanding shares of UGC Europe common stock such that, upon completion of the exchange offer, United will own at least 90% of the outstanding shares of UGC Europe common stock on a fully
diluted basis. If the exchange offer is successful, United will own 90% or more of the outstanding shares of UGC Europe common stock, and United will then effect a "short-form" merger with UGC Europe.
As provided by Delaware law, this short-form merger may be effected without the approval or participation of UGC Europe's board of directors or the remaining holders of UGC common stock. United
intends to effect the short-form merger as soon as practicable after United completes this exchange offer, unless United is prevented from doing so by a court or other legal requirement. In this
short-form merger each share of UGC Europe common stock not tendered in the exchange offer would be converted into the right to receive the same consideration offered in the exchange offer. The
exchange offer is conditioned upon satisfaction of various conditions, some of which United may waive. The Special Committee of Independent directors of UGC Europe, which was formed to respond to the
exchange offer, expects that it will announce a definitive position on the revised exchange offer in the coming days and, until such time, urges UGC Europe stockholders to refrain from tendering their
shares.

31

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Item 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations

We caution you that the following discussion contains, in addition to historical information, certain "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 that are based on management's beliefs, as well as on assumptions made by and information currently available to management. These forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements, or industry results, to be materially different from what we
say or imply with such forward-looking statements. All statements other than statements of historical fact included herein may constitute forward-looking statements. In addition, when we use the words
"may", "will", "expects", "intends", "estimates", "anticipates", "believes", "plans", "seeks" or "continues" or the negative thereof or similar expressions herein, we intend to identify
forward-looking statements. Such forward-looking statements involve known and unknown risks, including, but not limited to, national and international economic and market conditions, competitive
activities or other business conditions, and customer reception of our existing and future services. These forward-looking statements may include, among other things, statements concerning our plans,
objectives and future economic prospects, potential restructuring of our subsidiaries' capital structure, expectations, beliefs, future plans and strategies, anticipated events or trends and similar
expressions concerning matters that are not historical facts. Investors should be aware that the video, telephone and Internet access services industries are changing rapidly, and, therefore, the
forward-looking statements and statements of expectations, plans and intent herein are subject to a greater degree of risk than similar statements regarding certain companies involved in other
industries.

Although
we believe that our expectations with respect to the forward-looking statements are based upon reasonable assumptions within the bounds of our knowledge of our business and
operations, we cannot assure you that our actual results, performance or achievements will not differ materially from any future results, performance or achievements expressed or implied from such
forward-looking statements. Important factors that could cause actual results to differ materially from our expectations include, among other things, whether we and/or some of our subsidiaries will
continue as going concerns, changes in television viewing preferences and habits by our subscribers and potential subscribers and their acceptance of new technology, programming alternatives and new
video services that we may offer. They also include our subscribers' acceptance of our newer digital video, telephone and internet access services, our ability to manage and grow our newer digital
video, telephone and internet access services, our ability to secure adequate capital to fund other system growth and development and planned acquisitions, our ability to successfully close proposed
transactions and restructurings, risks inherent in investment and operations in foreign countries, changes in government regulation and changes in the nature of key strategic relationships with joint
venture partners. Certain of our subsidiaries are in breach of covenants with respect to their indebtedness and have filed for bankruptcy under Chapter 11 of the U.S. Bankruptcy Code and
planning to restructure their capital structure. The outcome of the breaches of covenants, the Chapter 11 bankruptcy proceedings and restructurings is uncertain and subject to many factors
outside of our control, including whether
creditors accept such proposed restructurings. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety
by our discussion of these factors. Other than as may be required by applicable law, we undertake no obligation to release publicly the results of any revisions to these forward-looking statements
that may be made to reflect any future events or circumstances. We caution you, however, that this list of risk factors and other cautionary language contained herein may not be exhaustive.

The
following discussion and analysis of financial condition and results of operations covers the three and nine month periods ended September 30, 2003, and 2002, respectively,
and should be read together with our consolidated financial statements and related notes included elsewhere herein. These consolidated financial statements provide additional information regarding our
financial activities and condition.

32

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All
monetary amounts in Management's Discussion and Analysis are stated in Euros, unless indicated otherwise. All capitalized terms used and not otherwise defined in
Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations have the meanings given to them in Notes to the Consolidated Financial Statements
contained in Part IFinancial Statements of this Quarterly Report on Form 10-Q.

Reorganization under Bankruptcy Code

For a detailed discussion on certain of our risks, uncertainties and liquidity, see Note 2 to our condensed consolidated financial statements included in this
Quarterly Report on Form 10-Q.

Description of Business

The Company's operations are currently organized into two principal divisionsUPC Broadband and chello Media. UPC Broadband delivers video, internet
access and telephone services to residential customers and manages its business by country, and chello Media provides broadband internet and interactive digital products and services. The chello Media
division also includesPriority Telecom, which operates a competitive local exchange carrier business providing telephone and data network solutions to
the business market, and the group's investment holdings. We evaluate performance and allocate resources based on the results of these segments. For more detail with respect to these two divisions, we
refer to our segment information in the accompanying notes to the unaudited condensed financial statements.

Results of Operations

Revenue

The following tables provide revenue detail for our operating segments for the three and nine months ended September 30, 2003 and 2002.

|                             |       | Revenue |        
|---------------------------- | ----- | ------- | -------
|
|
|
|
|UPC Broadband                |       | 347,470 |        
|chello Media                 |       | 49,286  |        
|Intercompany Eliminations(1) |       | (29,516 | )      
|                             |       |         |        
|                             | Total |         | 367,240
|                             |       |         |        

|                             |       | Revenue   |          
|---------------------------- | ----- | --------- | ---------
|
|
|
|
|UPC Broadband                |       | 1,023,766 |          
|chello Media                 |       | 146,045   |          
|Intercompany Eliminations(1) |       | (84,086   | )        
|                             |       |           |          
|                             | Total |           | 1,085,725
|                             |       |           |          

---

33

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UPC Broadband.The movement in revenue from UPC Broadband for the three and nine months ended September 30, 2003 is
attributable to:



chello Media.The movement in revenue fromchello Mediafor the three and
nine months ended September 30, 2003 is attributable to:



Operating Expenses

Operating expenses include direct costs and costs relating to network operations, customer operations, customer care, billing and collecting, broadcasting,
programming, content and franchise fees.

34

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The
following table shows the operating expenses for three and nine months ended September 30, 2003 and 2002, respectively.

|                          |       | Operating Expenses |        
|------------------------- | ----- | ------------------ | -------
|
|
|
|
|UPC Broadband             |       | 150,261            |        
|chello Media              |       | 23,004             |        
|Intercompany Eliminations |       | (27,241            | )      
|                          |       |                    |        
|                          | Total |                    | 146,024
|                          |       |                    |        

|                          |       | Operating Expenses |        
|------------------------- | ----- | ------------------ | -------
|
|
|
|
|UPC Broadband             |       | 466,926            |        
|chello Media              |       | 70,311             |        
|Intercompany Eliminations |       | (77,601            | )      
|                          |       |                    |        
|                          | Total |                    | 459,636
|                          |       |                    |        

The
movement in operating expenses for the three and nine months ended September 30, 2003 is attributable to:



Selling, General and Administrative Expenses

Selling, general and administrative expenses ("SG&A expenses") include costs relating to human resources, IT, general services, management, finance, legal, and
marketing. SG&A expenses also include stock-based compensation charges.

|                          |       | Selling, General & Administrative expenses |       
|------------------------- | ----- | ------------------------------------------ | ------
|
|
|
|
|UPC Broadband             |       | 70,013                                     |       
|chello Media              |       | 15,791                                     |       
|Stock-based compensation  |       | 9,062                                      |       
|Intercompany Eliminations |       | (2,270                                     | )     
|                          |       |                                            |       
|                          | Total |                                            | 92,596
|                          |       |                                            |       

35

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|                                        |       | Selling, General & Administrative expenses |        
|--------------------------------------- | ----- | ------------------------------------------ | -------
|
|
|
|
|UPC Broadband                           |       | 216,267                                    |        
|chello Media                            |       | 51,930                                     |        
|Stock-based compensation                |       | 18,717                                     |        
|Loss on disposal of Poland DTH business |       | 6,856                                      |        
|Intercompany Eliminations               |       | (6,304                                     | )      
|                                        |       |                                            |        
|                                        | Total |                                            | 287,466
|                                        |       |                                            |        

The
movement in selling, general and adminitrative expenses for the three and nine months ended September 30, 2003 is attributable to:



Adjusted EBITDA

We refer to our segment information in the accompanying notes to the unaudited condensed financial statements for a definition of Adjusted EBITDA and a
reconciliation of total segment Adjusted EBITDA to consolidated net income (loss).

36

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Adjusted
EBITDA increased for the three months and nine months ended September 30, 2003 primarily due to increased revenues, improved gross margin and continued cost control across all
our operating segments. The following tables provide Adjusted EBITDA details for our operating segments.

|              |       | Adjusted EBITDA |        
|------------- | ----- | --------------- | -------
|
|
|
|UPC Broadband |       | 127,191         |        
|chello Media  |       | 10,491          |        
|              |       |                 |        
|              | Total |                 | 137,682
|              |       |                 |        

|              |       | Adjusted EBITDA |        
|------------- | ----- | --------------- | -------
|
|
|
|
|UPC Broadband |       | 340,391         |        
|chello Media  |       | 23,805          |        
|              |       |                 |        
|              | Total |                 | 364,196
|              |       |                 |        

UPC Broadband.The movement in adjusted EBITDA from UPC Broadband for the three and nine months ended September 30,
2003 is attributable to:



chello Media.The movement in adjusted EBITDA fromchello Mediafor the three
and nine months ended September 30, 2003 is attributable to:



Depreciation and Amortization

Depreciation and amortization expense decreased 35.7 million to 154.1 million from 189.8 million for the three months ended September 30, 2003 and 2002,
respectively. Depreciation and amortization expense decreased 43.3 million to 491.4 million from 534.7 million for the nine months ended September 30, 2003 and 2002, respectively. The decreases
are mainly attributable to the deconsolidation of UPC Germany effective August 1, 2002.

37

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Interest Income

Interest income increased 1.1 million to 1.7 million from 0.6 million for the three months ended September 30, 2003 and 2002, respectively. Interest income
decreased 10.9 million to 6.4 million from 17.3 million for the nine months ended September 30, 2003 and 2002, respectively. The decreases are mainly attributable to decreases in cash
balances.

Interest Expense

Interest expense (including related party) decreased 153.5 million to 60.4 million from 213.9 million for the three months ended September 30, 2003 and
2002, respectively. Interest expense (including related party) decreased 448.3 million to 220.8 million from 669.1 million for the nine months ended September 30, 2003 and 2002, respectively.
The decreases are mainly attributable to the cessation of accreting interest in accordance with SOP 90-7 (as defined below) on our senior discount notes on December 3, 2002 when we filed a
petition for relief under Chapter 11 of the U.S. Bankruptcy Code. In addition, the decrease in interest expense is attributable to an increase of the euro against the U.S. dollar.

|                       |                    | For the Three Months Ended
September 30, |         | For the Nine Months Ended
September 30, |        
|---------------------- | ------------------ | ---------------------------------------- | ------- | --------------------------------------- | -------
|
|
|Cash Current Pay:      |                    |                                          |         |                                         |        
|                       | Bank               |                                          | (56,946 | )                                       | (59,320
|                       | Senior Notes       |                                          |        |                                         | (69,308
|                       |                    |                                          |         |                                         |        
|                       |                    | (56,946                                  | )       | (128,628                                | )      
|                       |                    |                                          |         |                                         |        
|Non-Cash Accretion:    |                    |                                          |         |                                         |        
|                       | Discount Notes     |                                          | (1,175  | )                                       | (66,540
|                       | Exchangeable Loan  |                                          |        |                                         | (14,356
|                       | Deferred Financing |                                          | (2,299  | )                                       | (4,423 
|                       |                    |                                          |         |                                         |        
|                       |                    | (3,474                                   | )       | (85,319                                 | )      
|                       |                    |                                          |         |                                         |        
|Total Interest Expense |                    | (60,420                                  | )       | (213,947                                | )      
|                       |                    |                                          |         |                                         |        

Foreign Currency Exchange Gain (Loss)

Foreign currency exchange loss increased 224.4 million to 234.3 million from (10) million, for the three months ended September 30, 2003 and 2002,
respectively. Foreign currency exchange gain decreased 411.0 million to 100.3 million from 511.3 million for the nine months ended September 30, 2003 and 2002, respectively. The loss
during for the three months is primarily a result of a significant foreign exchange loss on our dollar denominated senior notes and our Exchangeable Loan as the U.S. dollar strengthened against the
euro to September 3, 2003. This date is the effective date for transfer of the senior notes and Exchangeable Loan to equity in UGCE Common Stock. In the first half of 2003, we recognized a foreign
exchange gain on our dollar denominated notes and our Exchangeable loan.

Gain on Extinguishment of Debt

The gain on extinguishment of debt for the nine months ended September 30, 2003 relates to primarily to the cancellation of senior and senior discount
notes held by third party. Upon consummation of the restructuring, UPC recognized gain on the effective retirement of its senior notes, senior discount notes and its Exchangeable Loan. The issuance of
common stock by UGC Europe to third-party holders of the remaining UPC senior notes and senior discount notes was recorded at fair value on September 3, 2003. This fair value was significantly
less than the accreted value of such debt securities as reflected in the

38

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Company's
historical consolidated financial statements. Accordingly, we recognized a gain of 1.9 billion on the extinguishment of debt such debt outstanding equal to the excess of the then accreted
value of such debt over the fair value of UGC Europe common stock. In addition, the gain on extinguishment of debt for the nine months ended September 30, 2003 relates to the gain on the Tevel
transaction, recognized during the three months ended March 31, 2003.

The
gain on extinguishment of debt for the nine months ended September 30, 2002 relates to the gain on the unwinding of certain cross currency swap agreements for 347.2 million,
recognized during the three months ended September 30, 2002, and the gain on the restructuring and cancellation of costs associated with certain vendor contracts of Priority Telecomfor 124.5
million, recognized during the six months ended June 30, 2002.

Gain on Sale of Investment in Affiliate to Related Party

On April 9, 2003 we sold our investment in SBS Broadcasting to UnitedGlobalCom Europe B.V. for 100 million. As a result of the sale, we recognized a gain on sale
of investments to related party of 25.5 million.

Gain (loss) on Sale of Assets and Investment in Affiliates

The 134.5 million gain for the nine months ended September 30, 2002 consisted of a gain on the transfer of Germany shares of 150.3 million,
partly offset by a loss of 15.8 million on the sale of assets. The 0.8 million loss for the nine months ended September 30, 2003 relates to losses on sale of assets.

Other Income and Expense, Net

Other income and expense decreased 5.6 million to an expense of 0.6 million from an expense of 6.2 million for the three months ended
September 30, 2003 and 2002, respectively. Other income and expense decreased 156.2 million to an expense of 14.6 million from an expense of 170.8 million for the nine
months ended September 30, 2003 and 2002, respectively. Other income and expense primarily relates to the mark-to-market valuations of our cross currency and interest rate derivative contracts
from period to period. Consequently, the movement is mainly attributable to the number of derivatives held by us, and the change in the underlying exchange rate and interest variables.

Reorganization Expenses, Net

In connection with the UPC Chapter 11 Case, we were required to prepare our consolidated financial statements in accordance with Statement of Position 90-7,
Financial Reporting by Entities in Reorganization Under the Bankruptcy Code ("SOP 90-7"), issued by the American Institute of Certified Public Accountants until UPC's emergence on September 3, 2003,
in relation to UPC Polska's Chapter 11 case which commenced July 7, 2003, UPC Polska is also required to prepare its consolidated financial statements in accordance with SOP 90-7. The reorganization
expenses for the three and nine months ended September 30, 2003 was 5.6 million and 18.1 million, respectively. The amounts for Chapter 11 related reorganization expenses for UPC consist of
professional fees of 21.3 million and 33.8 million for the three and nine months period ended September 30, 2003, respectively. The reorganization expense for UPC Polska includes a gain of 17.3
million and professional fees of 1.5 million in the three months ended September 30, 2003. The gain of 17.3 million relates to an adjustment of the carrying value of the UPC Polska Notes
required to record these notes at the amounts expected to be allowed as claims in the UPC Polska's Chapter 11 case.

39

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Sources of Capital Share in Results of Affiliated Companies, Net

Share in results of affiliated companies decreased 1.1 million to a gain of 1.6 million from a gain of 2.8 million for the three months ended
September 30, 2003 and 2002, respectively. Share in result of affiliated companies increased 40.6 million to a gain of 3.7 million from a loss of 36.9 million for the nine months ended
September 30, 2003 and 2002, respectively. This increase is mainly attributable to:



Cumulative Effect of Change in Accounting Principle

Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"), which establishes that goodwill and intangible assets with
indefinite lives will not be amortized, but will be tested for impairment on an annual basis and whenever indicators of impairment arise. The adoption of SFAS 142 on January 1, 2002,
resulted in a cumulative decrease of income of 1,498.9 million and a cumulative decrease of net goodwill of 1,498.9 million during the nine months period ended September 30, 2002. The amount of
net loss as shown for the nine months period ended September 30, 2002 has been restated to include the effect of adoption of SFAS 142 as of January 1,2002.

Liquidity and Capital Resources

Historically, we have financed our operations and acquisitions primarily from:



In
general, we have been primarily dependent on the capital markets in the past to fund acquisitions, developing systems and products and corporate overhead, using the cash contributed
by United Europe, Inc. upon formation and debt and equity raised at the holding company levels for such purposes. Going forward we may access the capital markets again as a source of capital if terms
and conditions are acceptable to us.

In
addition, we have financed our systems from our UPC Distribution Bank Facility and with operating cash flow. Well-established systems generally have stable positive cable cash flows
that are used to partially offset funding necessary for new product offerings, including telephone and internet/data.

40

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Developing
systems are at various stages of construction and development and generally depend on us for some of the funding for their operating needs.

Restrictions under our UPC Distribution Bank Facility

Our activities are restricted by the covenants of our UPC Distribution Bank Facility as amended onSeptember 2003Among other things, the UPC Distribution Bank Facility places certain limitations on our ability, and the ability of our subsidiaries, to borrow money, pay dividends, make investments, create certain
liens, engage in certain transactions with affiliates, and sell certain assets or merge with or into other companies.

With
the successful completion of its restructuring, we believe that our existing cash balances, working capital, cash flow from operations and draw downs available under the UPC
Distribution Bank Facility will be sufficient to fund operations for the next year. However, should the operating results fall short of management's expectations, revisions to UGC Europe's bank
facility or additional debt or equity may be necessary. Such debt or equity may not be able to be obtained in a timely manner or on acceptable terms.

Sources of Capital

We had approximately 176.8 million of cash and cash equivalents on hand as of September 30, 2003. Our ability to access our borrowing capacity at the holding
company and subsidiary level was restricted or eliminated as a result of the payment defaults under our senior notes from 1 February 2002 until 3 September 2003. As of the date of the
filing, we have no such restrictions on our ability to make additional drawings under the UPC Distribution Bank Facility.

In
the remainder of 2003 and thereafter, we anticipate that the sources of capital possibly available to us will include working capital and operating cash flows, proceeds from the
disposal of non-core investments, further internal reorganization and alignment of businesses, draw downs under the UPC Distribution Bank Facility, vendor financing and capital markets. We believe
that our existing cash balances, our working capital and operating cash flow and draw downs available under the UPC Distribution Bank Facility will be sufficient to fund operations in the next 12
months.

Consolidated Capital Expenditures

Since 1995, we have been upgrading our existing cable television system infrastructure and constructing our new-build infrastructure with two-way high capacity
technology to support digital video, telephone and internet/data services. Capital expenditures for the upgrade and new-build construction can be reduced at our discretion, although such reductions
require lead-time in order to complete work-in-progress and can result in higher total costs of construction. At the end of 2001, we completed a strategic review of the business, which resulted in a
reduced capital expenditure program for 2002 and 2003, as we focused on increasing penetration of new services in our existing upgraded footprint and efficient deployment of capital on a limited
basis, aimed at causing product deployment to result in positive net present values.

In
addition to the network infrastructure and related equipment and capital resources described above, development of our newer businesses,chello broadband,
Priority Telecom,our digital distribution platform and DTH, including expansion into Central Europe, requires capital expenditures for construction and development of our
pan-European distribution and programming facilities, including our origination facility, network operating center, and related support systems and equipment.

For
the year 2003, we plan a slight increase on capital expenditures although customer premise equipment ("CPE") costs decreased in 2002 and are expected to decrease further based on
current prices, which are negotiated centrally, and continue to decrease as market rates for such equipment continue to fall. In addition, tighter field controls have been implemented leading to
higher rates of CPE retrieval.

41

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We
are limiting additional network investment primarily to that needed to cover maintenance and costs necessary to support expansion of services. We expect our existing network to
largely cope with the anticipated increase in traffic. In addition, we plan to limit new build expenditures primarily to these areas where essential franchise commitments require investment and to
limit additional upgrade investment until such a time that existing upgraded areas are fully serviced, although in certain areas of Eastern Europe, we are upgrading our network to launch internet
services.

Statements of Cash Flows

As of September 30, 2003 we had cash and cash equivalents of 176.8 million, a decrease of 78.2 million from 255.1million as of December 31, 2002. As of
September 30, 2002 we had cash and cash equivalents of 301.1 million, a decrease of 553.9 million from 855.0 million as December 31, 2001.

|                                                 |  | For the Nine Months
Ended September 30, |  
|------------------------------------------------ |  | --------------------------------------- | -
|
|
|Cash flows from operating activities             |  | 212,262                                 |  
|Cash flows from investing activities             |  | (138,567                                | )
|Cash flows from financing activities             |  | (140,186                                | )
|Effect of exchange rates on cash                 |  | (11,734                                 | )
|                                                 |  |                                         |  
|Net decrease in cash and cash equivalents        |  | (78,225                                 | )
|Cash and cash equivalents at beginning of period |  | 255,062                                 |  
|                                                 |  |                                         |  
|Cash and cash equivalents at end of period       |  | 176,837                                 |  
|                                                 |  |                                         |  

For the nine months ended September 30, 2003

Principal sources of cash during the nine-month period ended September 30, 2003 included 212.3 million from operating activities, 101.2 million of
proceeds from the sale of assets, 10.0 million of proceeds from long-term and short-term borrowing, and 3.7 million of dividends received.

Principal
uses of cash during the nine month period ended September 30, 2003 included 150.2 million for repayment of long- and short-term debt facilities, 172.7 million of capital
expenditures, 51.0 million for the settlement of a derivative loan, 10.0 million for restricted cash deposited, 9.1 million for the purchase of derivatives, and 0.7 million for acquisitions, net of
cash acquired.

For the nine months ended September 30, 2002

Principal sources of cash during the nine month period ended September 30, 2002 included 8.0 million of dividends received, 0.7 million from investments
and advances to affiliated companies, net of repayment, 21.5 million from the sale of assets, and proceeds of 10.0 million from long- and short-term debt facilities.

Principal
uses of cash during the nine month period ended September 30, 2002 included 298.7 million for operating activities, 191.3 million for capital expenditures, 24.1 million for
acquisitions, 60.1 million for the repayment of long- and short-term debt facilities, 9.4 million was deconsolidated, and 11.9 million for restricted cash deposited.

Item 3.    Quantitative and Qualitative Disclosures About Market Risk

Investment Portfolio

As of September 30, 2003, we had cash and cash equivalents of approximately 176.8 million. We have invested this cash in highly liquid instruments, which meet
high credit quality standards with original

42

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maturities
at the date of purchase of less than three months. These investments are subject to interest rate risk and foreign exchange fluctuations (with respect to amounts invested in currencies
outside the European Monetary Union). Additionally we hold certain investments in marketable debt and equity securities, which are subject to stock price fluctuations. To date we have not experienced
any material losses with respect to our investment portfolio.

Credit Risk

We monitor the financial risk of our trade counter parties. Subject to a materiality test, new vendors go through a credit check before a contract is awarded.
Periodical financial analyses are made of a group of vendors that provide material proprietary services or products. As of September 30, 2003, we believe our portfolio of these vendors as a
whole meets our internal criteria for acceptability.

Inflation and Foreign Currency Exchange Rate Losses

To date, we have not been impacted materially by inflation.

The
value of our monetary assets and liabilities is affected by fluctuations in foreign currency exchange rates as accounts payable for certain equipment purchases and certain operating
expenses, such as DTH and programming expenses, are denominated in currencies other than the functional currency of the entity making such payments. We and some of our operating companies have notes
payable and notes receivable that are denominated in, and loans payable that are linked to, a currency other than their own functional currency, exposing us to foreign currency exchange risks on these
monetary assets and liabilities. Historically, we have not hedged our exposure to foreign currency exchange rate operating risks. Accordingly, we may experience economic loss and a negative impact on
earnings and equity with respect to our holdings solely as a result of foreign currency exchange rate fluctuations.

The
functional currency for our operations generally is the applicable local currency for each operating company. We have consolidated operations in countries outside of the European
Monetary Union including Norway, Sweden, Poland, Hungary, Romania, Slovak Republic and Czech Republic. Assets and liabilities of foreign subsidiaries are translated at the exchange rates in effect at
period-end, and
the statements of operations are translated at the average exchange rates during the period. Exchange rate fluctuations on translating foreign currency financial statements into Euros result in
unrealized gains or losses referred to as translation adjustments. Cumulative translation adjustments are recorded as a separate component of shareholders' equity. Transactions denominated in
currencies other than the local currencies are recorded based on exchange rates at the time such transactions arise. Subsequent changes in exchange rates result in transaction gains and losses, which
are reflected in income as unrealized, based on period-end translations, or realized upon settlement of the transactions.

Cash
flows from our operations in foreign countries are translated based on their functional currencies. As a result, amounts related to assets and liabilities reported on the
consolidated statements of cash flows will not agree to changes in the corresponding balances on the consolidated balance sheets. The effects of exchange rate changes on cash balances held in foreign
currencies are reported as a separate line below cash flows from financing activities.

Impact of Foreign Currency Rate Changes

We are exposed to foreign exchange rate fluctuations related to our monetary assets and liabilities, including those of our operating subsidiaries, which are
denominated in currencies outside of the European Monetary Union, notably the EUR/USD risk arising from our U.S. dollar denominated liabilities. Our exposure to foreign exchange rate fluctuations also
arises from intercompany charges.

The
table below provides information about UPC's and its consolidated subsidiaries' foreign currency risk for cash, which is denominated in foreign currencies outside of the European
Monetary Union as of

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September
30, 2003. The information is presented in Euro equivalents, as the Euro is our reporting currency.

|                          |  | Amount Outstanding
as of September 30, 2003
|------------------------- |  | -------------------------------------------
|
|
|Cash and Cash Equivalents |  |                                            
|USD Cash                  |  | 80,105                                     

We
are risk averse towards foreign currency risk and therefore actively seek to manage our foreign currency risk by entering into hedge instruments where appropriate and available to us
in the financial markets. We use cross currency swaps, currency deposits and forward contracts to hedge the exposure. We actively monitor the various financial instruments available to us and expect
to shift the use of instruments to less credit capacity intensive instruments in the near future, driven by the current credit risk appetite in the financial markets. We have consistently managed our
foreign currency risk through the use of these instruments.

For
descriptions of the UPC Polska Notes we refer to Note 8 of our audited consolidated financial statements for the year ended December 31, 2002, as included in our Annual Report on
Form 10-K for such year. The interest rates of the notes are included in the interest rate sensitivity tables to which we refer.

The
table below provides information about our foreign currency exchange risk for debt, which is denominated in foreign currencies outside of the European Monetary Union as of
September 30, 2003, including cash flows, based on the expected repayment date and related weighted-average interest rates for debt. The instruments' actual cash flows are denominated in
foreign currency. The information is presented in Euro equivalents, which is our reporting currency and is based on classification of indebtedness in our consolidated financial statements for the nine
months ended September 30, 2003. Contractual maturities of the indebtedness differ from the information shown in the tables.

|                                                  |       | Amount Outstanding
as of
September 30, 2003 |         | Expected Repayment
as of September 30,
|------------------------------------------------- | ----- | ------------------------------------------- | ------- | --------------------------------------
|
|
|Dollar Denominated Facilities                     |       |                                             |         |                                       
|PCI Notes                                         |       | 12,426                                      |         | 12,426                                
|UPC Polska 1998 Senior Discount Notes(1)          |       | 164,982                                     |         | 61,512                                
|UPC Polska 1999 Senior Discount Notes(1)          |       | 146,804                                     |         | 58,552                                
|UPC Polska 1999 Series C Senior Discount Notes(1) |       | 18,529                                      |         | 9,404                                 
|UPC Distribution Bank Facility USD Tranche        |       | 297,599                                     |         | 297,599                               
|                                                  |       |                                             |         |                                       
|                                                  | Total |                                             | 640,340 |                                       
|                                                  |       |                                             |         |                                       

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Interest Rate Sensitivity

We actively manage our exposure to interest rates and use various financial instruments like interest rate swaps, interest rate caps and fixed and floating rate
credit instruments, when available to us and are appropriate. We aim at fixing a minimum 50% of the interest rates on our bank debt to average tenors with a minimum tenor of one year. We actively
monitor the various financial instruments available to us and expect to shift the use of instruments to less credit capacity intensive instruments in the near future, driven by the current credit risk
appetite in the financial markets. We have consistently managed, where possible, our interest rate exposure through the use of these instruments.

44

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For
descriptions of the UPC Polska Notes we refer to Note 8 of our audited consolidated financial statements for the year ended December 31, 2002, as included in our Annual Report on
Form 10-K for such year.

The
table below provides information about our financial instruments that are sensitive to changes in interest rates as of September 30, 2003, including cash flows based on the expected
repayment dates and the related weighted-average interest rates. The information is presented in Euro equivalents, which is our reporting currency and is based on classification of indebtedness in our
consolidated financial statements for the nine months ended September 30, 2003. Contractual maturities of the indebtedness differ from the information shown in the table.

|                                                             |                                       | Amount Outstanding
as of
September 30, 2003 |           | Expected Repayment
as of September 30,
|------------------------------------------------------------ | ------------------------------------- | ------------------------------------------- | --------- | --------------------------------------
|
|
|Fixed and Variable Rate Facilities                           |                                       |                                             |           |                                       
|Fixed rate PCI Notes                                         |                                       | 12,426                                      |           | 12,426                                
|                                                             | Average interest rate                 |                                             | 9.875     | %                                     
|Fixed rate UPC Polska 1998 Senior Discount Notes(1)          |                                       | 164,982                                     |           | 61,512                                
|                                                             | Average interest rate                 |                                             | 14.500    | %                                     
|Fixed rate UPC Polska 1999 Senior Discount Notes(1)          |                                       | 146,804                                     |           | 58,552                                
|                                                             | Average interest rate                 |                                             | 14.500    | %                                     
|Fixed rate UPC Polska 1999 Series C Senior Discount Notes(1) |                                       | 18,529                                      |           | 9,404                                 
|                                                             | Average interest rate                 |                                             | 7.000     | %                                     
|Variable rate UPC Distribution Bank Facility                 |                                       | 2,970,849                                   |           | 2,970,849                             
|                                                             | EURIBOR/USDLIBOR + 2.25%-5.5%         |                                             |           |                                       
|                                                             | Average interest rate                 |                                             | 6.930     | %                                     
|Capital lease obligations                                    |                                       | 49,653                                      |           | 49,653                                
|                                                             | Average interest rate                 |                                             | Various   |                                       
|Other debt                                                   |                                       | 16,434                                      |           | 16,434                                
|                                                             | Average interest rate                 |                                             | Various   |                                       
|                                                             |                                       |                                             |           |                                       
|                                                             | Total debt                            |                                             | 3,379,677 |                                       
|                                                             |                                       |                                             |           |                                       
|Short term debt                                              |                                       |                                             |           |                                       
|Operating leases                                             |                                       |                                             |           |                                       
|Purchase commitments                                         |                                       |                                             |           |                                       
|Other long term obligations                                  |                                       |                                             |           |                                       
|                                                             |                                       |                                             |           |                                       
|                                                             | Total commitments and short term debt |                                             |           |                                       
|                                                             |                                       |                                             |           |                                       
|                                                             | Total debt and commitments            |                                             |           |                                       
|                                                             |                                       |                                             |           |                                       

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Equity Prices

As of September 30, 2003, we are exposed to equity price fluctuations related to our investments in equity securities. We evaluate our investments in publicly
traded securities accounted for under the equity method for impairment in accordance with Accounting Principles Board Opinion No. 18, The Equity Method of Accounting for Investment in Common Stock
("APB 18") and Securities and Exchange Commission Staff Accounting Bulletin No. 59, Accounting for Noncurrent Marketable Equitable Securities. Under APB 18, a loss in value of an investment accounted
for under the equity method, which is other than a temporary decline, should be recognized as a realized loss, establishing a new carrying value for the investment. Factors we consider in making this
evaluation include: the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the issuer, including cash flows of the
investee and any specific events which may influence the operations of the issuer and the intent and ability of us to retain our investments for a period of time sufficient to allow

45

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for
any anticipated recovery in market value. A current fair value of an investment that is less than its carrying amount may indicate a loss in value of the investment.

|            |  | Number of
Shares |  | Fair Value
September 30, 2003
|----------- |  | ---------------- |  | -----------------------------
|
|United      |  | 5,569,240        |  | 29,142                       
|PrimaCom AG |  | 4,948,039        |  | 4,948                        
|Sorrento    |  | 1,561,081        |  | 5,043                        

Cross-Currency and Interest Rate Swaps

We entered into an interest rate swap in respect of 1,725 million of the UPC Distribution Bank Facility to fix the EURIBOR portion of the interest calculation at
4.5475% for the period ending April 15, 2003. This swap qualifies as an accounting cash flow hedge as defined by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.
Accordingly, the changes in fair value of this instrument are recorded through other comprehensive income in the consolidated statement of shareholders' equity. As per April 15, 2003, the interest
rate swap expired and ceased to exist. In the first quarter of 2003, we bought protection on the interest rate exposure on the Euro denominated bank indebtedness for 2003 and 2004. As a result,
EURIBOR (without the applicable margin) is capped at 3% for an amount totaling 2.7 billion. The changes in fair value of these caps are recorded through other income in the consolidated
statement of operations. In June 2003, we entered into a cross currency swap and interest rate swap pursuant to which a USD 347.5 million obligation under the UPC Distribution Bank Facility was
swapped at an average rate of 1.113 euros per U.S. dollar until July 2005.

The
consolidated balance sheet reflects these instruments as derivative assets or liabilities as appropriate.

Item 4.    Controls and Procedures





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PART IIOTHER INFORMATION

Item 1.    Legal Proceedings

For information regarding developments in certain legal proceedings to which the Company or any of its subsidiaries is a party, see Notes 2, 7 and 12 to our
condensed consolidated financial statements included elsewhere herein.

Item 2.    Changes in Securities and Use of Proceeds

None.

Item 3.    Defaults upon Senior Securities

For information regarding the defaults on our senior securities, see Note 2 to our condensed consolidated financial statements included elsewhere herein.

Item 5.    Other information

Summary Operating Data

In the tables below, the "UPC Paid In Ownership" column shows the percentage we own of the operating systems in which we have an interest. The operating data set
forth below reflect the aggregate statistics of the operating systems in which we have an ownership interest.

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|                |                      | As of September 30, 2003
|--------------- | -------------------- | ------------------------
|
|
|Norway          |                      | 100.0                   
|Sweden          |                      | 100.0                   
|Belgium         |                      | 100.0                   
|France          |                      | 92.0                    
|The Netherlands |                      | 100.0                   
|Austria         |                      | 95.0                    
|                |                      |                         
|                | Total Western Europe |                         
|                |                      |                         
|Poland          |                      | 100.0                   
|Hungary         |                      | 99.8100.0              
|Czech Republic  |                      | 99.9100.0              
|Romania         |                      | 100                     
|Slovak Republic |                      | 95.0100                
|                |                      |                         
|                | Total Eastern Europe |                         
|                |                      |                         
|                | Total                |                         
|                |                      |                         

Summary Operating Tables Notes

48

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Item 6.    Exhibits and Reports on Form 8-K

|     |  |                                                                                                    
|---- |  | ---------------------------------------------------------------------------------------------------
|(a)  |  | Exhibits                                                                                           
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|32.1 |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|32.2 |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|(b)  |  | Reports on Form 8-K filed during the Quarter                                                       

|Date of Report    |  | Date of Event     |  | Item Reported                                                                                                                                                                                                                                                                                                                                                                
|----------------- |  | ----------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|July 15, 2003     |  | July 15, 2003     |  | Item 7Announcement that UPC released a press release that on July 11, 2003 the Dutch Attorney General delivered advice to the Dutch Supreme Court, which concluded that all of the grounds for the appeal in relation
to the ratification of the Company's proposed plan of the compulsory composition are without merit and therefore the appeal should be dismissed.      
|July 28, 2003     |  | July 28, 2003     |  | Item 5 & 7Disclosure of proposed disclosure statement filed with the United States Bankruptcy Court for the Southern District of New York on July 28, 2003, by UPC Polska, Inc., a subsidiary of UPC, with respect to the voluntary petition for
relief under Chapter 11 of the U.S. Bankruptcy Code and the pre-negotiated plan of reorganization filed by UPC Polska, Inc.
|August 14, 2003   |  | August 14, 2003   |  | Item 7 & 12Announcement that on August 14, 2003 UPC filed a press release announcing its operating and financial results for the second quarter ending June 30, 2003.                                                                                                                                                                                                       
|August 26, 2003   |  | August 26, 2003   |  | Announcement that on August 26, 2003, the Dutch Supreme Court (Hoge Raad) rejected the appeal of the ratification of a proposed plan of compulsory composition (the "Akkoord"). The Supreme Court was the final point of appeal in relation to the
ratification of the Akkoord.                                                                                              
|August 28, 2003   |  | August 28, 2003   |  | Announcement that at the Extraordinary General Meeting held on August 28, 2003, the required absolute majority of shareholders voted in favor of a proposed amendment to the Company's articles of association to allow holders of ordinary shares C to
convert one or more of their ordinary shares C into ordinary shares A on a one-for-one basis.                        
|September 3, 2003 |  | September 3, 2003 |  | Item 5 & 7Announcement that UGC Europe, Inc., a Delaware corporation (former known as New UPC, Inc.), became the successor issuer to United Pan-Europe Communications N.V.                                                                                                                                                                                                  

49

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Merrill Corporation Ltd, London03LON2041

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SIGNATURES

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

| |  | UGC EUROPE, INC.a Delaware corporation
| |  | --------------------------------------
| |  | By:                                   
| |  | By:                                   

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