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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM 10-Q

|/x/ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|--- | ---------------------------------------------------------------------------------------

For the quarter ended September 30, 2001
or

|/ / | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|--- | ----------------------------------------------------------------------------------------

For the transition period
from                to

Commission File No. 000-25365

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UNITED PAN-EUROPE COMMUNICATIONS N.V.

(Exact name of Registrant as specified in its charter)

The Netherlands(State or other jurisdiction of
incorporation or organization)

98-0191997(I.R.S. Employer
Identification No.)Boeing Avenue 53,
Schiphol Rijk, The Netherlands(Address of principal executive offices)

1119 PE(Zip code)


Registrant's telephone number, including area code: (31) 20-778-9840

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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 /x/  No / /

The
number of shares outstanding of the Registrant's common stock as of November 14, 2001 was:

443,417,525
ordinary shares A, including
shares represented by American Depository Receipts

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UNITED PAN-EUROPE COMMUNICATIONS N.V.        TABLE OF CONTENTS

|                                                                                             |                                                                                                                   | Page
Number
|-------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------- | -----------
|PART IFINANCIAL INFORMATION                                                                 |                                                                                                                   |            
|Item 1Financial Statements                                                                  |                                                                                                                   |            
|                                                                                             | Consolidated Balance Sheets of September 30, 2001 (Unaudited) and December 31, 2000                               |            
|                                                                                             | Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2001 and 2000 (Unaudited) |            
|                                                                                             | Consolidated Statement of Shareholders' Equity for the Nine Months Ended September 30, 2001 (Unaudited)           |            
|                                                                                             | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2001 and 2000 (Unaudited)           |            
|                                                                                             | Notes to the Consolidated Financial Statements (Unaudited)                                                        |            
|Item 2Management's Discussion and Analysis of Financial Condition and Results of Operations |                                                                                                                   | 27         
|Item 3Quantitative and Qualitative Disclosure About Market Risk                             |                                                                                                                   | 46         
|PART IIOTHER INFORMATION                                                                    |                                                                                                                   |            
|Item 5Other Information                                                                     |                                                                                                                   | 50         
|Item 6Exhibits and Reports on Form 8-K                                                      |                                                                                                                   | 56         

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UNITED PAN-EUROPE COMMUNICATIONS N.V.        CONSOLIDATED BALANCE SHEETS        (Stated in thousands of Euros, except share and per share amounts)    
(Unaudited)

|                                                                 |                                                                                                                                                                      | As of
September 30,
2001                    |            | As of
December 31,
2000 |           
|---------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------- | ---------- | ----------------------- | ----------
|ASSETS:                                                          |                                                                                                                                                                      |                                             |            |                         |           
|Current assets                                                   |                                                                                                                                                                      |                                             |            |                         |           
|                                                                 | Cash and cash equivalents                                                                                                                                            |                                             | 893,756    |                         | 1,590,230 
|                                                                 | Restricted cash                                                                                                                                                      |                                             | 5,526      |                         | 421       
|                                                                 | Subscriber receivables, net of allowance for doubtful accounts of 79,034 and 57,108, respectively                                                                    |                                             | 94,148     |                         | 151,977   
|                                                                 | Costs to be reimbursed by affiliated companies                                                                                                                       |                                             | 14,163     |                         | 12,459    
|                                                                 | Other receivables, including related party receivables of nil and 5,140, respectively                                                                                |                                             | 84,368     |                         | 155,212   
|                                                                 | Inventory                                                                                                                                                            |                                             | 130,885    |                         | 127,813   
|                                                                 | Prepaid expenses and other current assets                                                                                                                            |                                             | 121,558    |                         | 82,475    
|                                                                 |                                                                                                                                                                      |                                             |            |                         |           
|                                                                 |                                                                                                                                                                      | Total current assets                        |            | 1,344,404               |           
|Other investments                                                |                                                                                                                                                                      | 30,387                                      |            | 105,063                 |           
|Investments in and advances to affiliated companies              |                                                                                                                                                                      | 250,712                                     |            | 685,288                 |           
|Property, plant and equipment, net                               |                                                                                                                                                                      | 3,682,323                                   |            | 3,581,539               |           
|Goodwill and other intangible assets, net                        |                                                                                                                                                                      | 4,544,526                                   |            | 5,119,892               |           
|Deferred financing costs, net                                    |                                                                                                                                                                      | 156,793                                     |            | 178,113                 |           
|Derivative assets                                                |                                                                                                                                                                      | 334,822                                     |            |                        |           
|Other assets                                                     |                                                                                                                                                                      | 26,273                                      |            | 11,889                  |           
|                                                                 |                                                                                                                                                                      |                                             |            |                         |           
|                                                                 |                                                                                                                                                                      | Total assets                                |            | 10,370,240              |           
|                                                                 |                                                                                                                                                                      |                                             |            |                         |           
|LIABILITIES AND SHAREHOLDERS' DEFICIT:                           |                                                                                                                                                                      |                                             |            |                         |           
|Current liabilities                                              |                                                                                                                                                                      |                                             |            |                         |           
|                                                                 | Accounts payable, including related party payables of 1,891 and 762, respectively                                                                                    |                                             | 302,537    |                         | 579,060   
|                                                                 | Accrued liabilities                                                                                                                                                  |                                             | 508,817    |                         | 583,351   
|                                                                 | Subscriber prepayments and deposits                                                                                                                                  |                                             | 149,782    |                         | 100,696   
|                                                                 | Short-term debt                                                                                                                                                      |                                             | 39,255     |                         | 51,860    
|                                                                 | Current portion of long-term debt                                                                                                                                    |                                             | 25,893     |                         | 17,832    
|                                                                 |                                                                                                                                                                      |                                             |            |                         |           
|                                                                 |                                                                                                                                                                      | Total current liabilities                   |            | 1,026,284               |           
|Long-term debt                                                   |                                                                                                                                                                      | 9,342,998                                   |            | 8,078,269               |           
|Other long-term liabilities                                      |                                                                                                                                                                      | 152,185                                     |            | 46,801                  |           
|                                                                 |                                                                                                                                                                      |                                             |            |                         |           
|                                                                 |                                                                                                                                                                      | Total liabilities                           |            | 10,521,467              |           
|                                                                 |                                                                                                                                                                      |                                             |            |                         |           
|Commitments and contingencies (see Note 10)                      |                                                                                                                                                                      |                                             |            |                         |           
|Minority interests in subsidiaries                               |                                                                                                                                                                      | 588,972                                     |            | 831,132                 |           
|Shareholders' deficit (As adjusted for stock split, see Note 11) |                                                                                                                                                                      |                                             |            |                         |           
|                                                                 | Priority stock, 1.0 par value, 300 shares authorized, 300 and 300 shares issued, respectively                                                                        |                                             |           |                         |          
|                                                                 | Series 1 convertible preference stock, class A common stock, 1.0 par value, 12,400 shares, authorized, 12,400 and 12,400 shares issued and outstanding, respectively |                                             | 1,474,718  |                         | 1,392,251 
|                                                                 | Ordinary stock, 1.0 par value, 1,000,000,000 shares authorized, 443,417,525 and 441,246,729 shares issued and outstanding, respectively                              |                                             | 443,418    |                         | 441,247   
|                                                                 | Additional paid-in capital                                                                                                                                           |                                             | 2,769,358  |                         | 2,800,234 
|                                                                 | Deferred compensation                                                                                                                                                |                                             | (63,610    | )                       | (87,945   
|                                                                 | Accumulated deficit                                                                                                                                                  |                                             | (5,330,897 | )                       | (3,110,627
|                                                                 | Other cumulative comprehensive income                                                                                                                                |                                             | (33,186    | )                       | 78,210    
|                                                                 |                                                                                                                                                                      |                                             |            |                         |           
|                                                                 |                                                                                                                                                                      | Total shareholders' deficit                 |            | (740,199                | )         
|                                                                 |                                                                                                                                                                      |                                             |            |                         |           
|                                                                 |                                                                                                                                                                      | Total liabilities and shareholders' deficit |            | 10,370,240              |           
|                                                                 |                                                                                                                                                                      |                                             |            |                         |           

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

1

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UNITED PAN-EUROPE COMMUNICATIONS N.V.        CONSOLIDATED STATEMENTS OF OPERATIONS        (Stated in thousands of Euros, except share and per share amounts)    
 (Unaudited)

|                                                                                                            |                                              | For the Three Months
Ended September 30, |          | For the Nine Months
Ended September 30, |         
|----------------------------------------------------------------------------------------------------------- | -------------------------------------------- | ---------------------------------------- | -------- | --------------------------------------- | --------
|
|Service and other revenue                                                                                   |                                              | 342,444                                  |          | 257,877                                 |         
|Operating expense                                                                                           |                                              | (221,013                                 | )        | (179,020                                | )       
|Selling, general and administrative expense                                                                 |                                              | (166,809                                 | )        | (171,984                                | )       
|Depreciation and amortization                                                                               |                                              | (262,437                                 | )        | (187,396                                | )       
|Impairment and restructuring charges                                                                        |                                              | (38,345                                  | )        |                                        |         
|                                                                                                            |                                              |                                          |          |                                         |         
|                                                                                                            | Net operating loss                           |                                          | (346,160 | )                                       | (280,523
|Interest income                                                                                             |                                              | 17,275                                   |          | 8,377                                   |         
|Interest expense                                                                                            |                                              | (222,853                                 | )        | (176,783                                | )       
|Provision for loss on investments                                                                           |                                              | (375,923                                 | )        |                                        |         
|Foreign exchange gain (loss) and other income (expense), net                                                |                                              | 227,378                                  |          | (153,653                                | )       
|                                                                                                            |                                              |                                          |          |                                         |         
|                                                                                                            | Net loss before income taxes and other items |                                          | (700,283 | )                                       | (602,582
|Share in results of affiliated companies                                                                    |                                              | (45,673                                  | )        | (40,638                                 | )       
|Minority interests in subsidiaries                                                                          |                                              | 34,805                                   |          | 4,606                                   |         
|Income tax benefit (expense)                                                                                |                                              | (292                                     | )        | (889                                    | )       
|                                                                                                            |                                              |                                          |          |                                         |         
|Net loss before cumulative effect of change in accounting principle                                         |                                              | (711,443                                 | )        | (639,503                                | )       
|Cumulative effect of change in accounting principle                                                         |                                              |                                         |          |                                        |         
|                                                                                                            |                                              |                                          |          |                                         |         
|                                                                                                            | Net loss                                     |                                          | (711,443 | )                                       | (639,503
|                                                                                                            |                                              |                                          |          |                                         |         
|Basic net loss attributable to common shareholders (See Note 14)                                            |                                              | (741,515                                 | )        | (639,503                                | )       
|                                                                                                            |                                              |                                          |          |                                         |         
|Basic and diluted net loss per ordinary share before cumulative effect of change in accounting principle(1) |                                              | (1.67                                    | )        | (1.46                                   | )       
|                                                                                                            |                                              |                                          |          |                                         |         
|Basic and diluted net loss per ordinary share(1)                                                            |                                              | (1.67                                    | )        | (1.46                                   | )       
|                                                                                                            |                                              |                                          |          |                                         |         
|Weighted-average number of ordinary shares outstanding(1)                                                   |                                              | 442,994,524                              |          | 438,812,857                             |         
|                                                                                                            |                                              |                                          |          |                                         |         

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

2

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UNITED PAN-EUROPE COMMUNICATIONS N.V.        CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY        (Stated in thousands of Euros, except share and per share amounts)        (Unaudited)

|                                                              |  |     |  |   |  | Series 1 Convertible Class A Preference stock |  |           |   |             |  |         |  |           |   |         |   |            |   |         |  
|------------------------------------------------------------- |  | --- |  | - |  | --------------------------------------------- |  | --------- | - | ----------- |  | ------- |  | --------- | - | ------- | - | ---------- | - | ------- | -
|
|
|
|Balance, December 31, 2000                                    |  | 300 |  |  |  | 12,400                                        |  | 1,392,251 |   | 441,246,729 |  | 441,247 |  | 2,800,234 |   | (87,945 | ) | (3,110,627 | ) | 78,210  |  
|Deferred compensation expense related to stock options, net   |  |    |  |  |  |                                              |  |          |   |            |  |        |  | (17,874   | ) | 17,874  |   |           |   |        |  
|Amortization of deferred compensation                         |  |    |  |  |  |                                              |  |          |   |            |  |        |  |          |   | 6,461   |   |           |   |        |  
|SAB 51 loss on subsidiary's issuance of shares                |  |    |  |  |  |                                              |  |          |   |            |  |        |  | (12,617   | ) |        |   |           |   |        |  
|Issuance of shares                                            |  |    |  |  |  |                                              |  |          |   | 2,170,796   |  | 2,171   |  | (385      | ) |        |   |           |   |        |  
|Capital tax on preference stock                               |  |    |  |  |  |                                              |  | (7,127    | ) |            |  |        |  |          |   |        |   |           |   |        |  
|Accrual of Dividend on Series 1 Convertible Preferred Stock   |  |    |  |  |  |                                              |  | 85,466    |   |            |  |        |  |          |   |        |   | (85,466    | ) |        |  
|Accretion of Discount of Series 1 Convertible Preferred Stock |  |    |  |  |  |                                              |  | 4,128     |   |            |  |        |  |          |   |        |   | (4,128     | ) |        |  
|Unrealized loss on investments                                |  |    |  |  |  |                                              |  |          |   |            |  |        |  |          |   |        |   |           |   | (30,934 | )
|Change in fair value of derivative assets                     |  |    |  |  |  |                                              |  |          |   |            |  |        |  |          |   |        |   |           |   | (26,752 | )
|Change in cumulative translation adjustments                  |  |    |  |  |  |                                              |  |          |   |            |  |        |  |          |   |        |   |           |   | (53,710 | )
|Net loss                                                      |  |    |  |  |  |                                              |  |          |   |            |  |        |  |          |   |        |   | (2,130,676 | ) |        |  
|                                                              |  |     |  |   |  |                                               |  |           |   |             |  |         |  |           |   |         |   |            |   |         |  
|Total comprehensive loss                                      |  |    |  |  |  |                                              |  |          |   |            |  |        |  |          |   |        |   |           |   |        |  
|                                                              |  |     |  |   |  |                                               |  |           |   |             |  |         |  |           |   |         |   |            |   |         |  
|Balance, September 30, 2001                                   |  | 300 |  |  |  | 12,400                                        |  | 1,474,718 |   | 443,417,525 |  | 443,418 |  | 2,769,358 |   | (63,610 | ) | (5,330,897 | ) | (33,186 | )
|                                                              |  |     |  |   |  |                                               |  |           |   |             |  |         |  |           |   |         |   |            |   |         |  

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

3

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UNITED PAN-EUROPE COMMUNICATIONS N.V.        CONSOLIDATED STATEMENTS OF CASH FLOWS        (Stated in thousands of Euros)        (Unaudited)

|                                                                               |                                                        | For the Nine Months
Ended September 30,                               |         
|------------------------------------------------------------------------------ | ------------------------------------------------------ | --------------------------------------------------------------------- | --------
|
|Cash flows from operating activities:                                          |                                                        |                                                                       |         
|Net loss                                                                       |                                                        | (2,130,676                                                            | )       
|Adjustments to reconcile net loss to net cash flows from operating activities: |                                                        |                                                                       |         
|                                                                               | Depreciation and amortization                          |                                                                       | 767,979 
|                                                                               | Amortization of deferred financing costs               |                                                                       | 30,867  
|                                                                               | Impairment and restructuring charges                   |                                                                       | 348,680 
|                                                                               | Provision for loss on investments                      |                                                                       | 375,923 
|                                                                               | Accretion of interest expense                          |                                                                       | 218,796 
|                                                                               | Share in results of affiliated companies               |                                                                       | 107,723 
|                                                                               | Compensation expense (income) related to stock options |                                                                       | 290     
|                                                                               | Minority interests in subsidiaries                     |                                                                       | (111,473
|                                                                               | Exchange rate differences in loans                     |                                                                       | (26,140 
|                                                                               | Cumulative effect of change in accounting principle    |                                                                       | (35,349 
|                                                                               | Gain on derivative assets                              |                                                                       | (104,187
|                                                                               | Other                                                  |                                                                       | (34,422 
|                                                                               | Changes in assets and liabilities:                     |                                                                       |         
|                                                                               |                                                        | Decrease (increase) in receivables                                    |         
|                                                                               |                                                        | Increase in inventories                                               |         
|                                                                               |                                                        | Decrease (increase) in other non-current assets                       |         
|                                                                               |                                                        | Increase (decrease) in other current liabilities                      |         
|                                                                               |                                                        | Increase (decrease) in deferred taxes and other long-term liabilities |         
|                                                                               |                                                        |                                                                       |         
|Net cash flows from operating actvities                                        |                                                        | (808,246                                                              | )       
|                                                                               |                                                        |                                                                       |         
|Cash flows from investing activities:                                          |                                                        |                                                                       |         
|Restricted cash deposited, net                                                 |                                                        | (5,105                                                                | )       
|Investment in securities, net                                                  |                                                        |                                                                      |         
|Investments in and advances to affiliated companies, net of repayments         |                                                        | (26,576                                                               | )       
|Capital expenditures                                                           |                                                        | (650,534                                                              | )       
|Acquisitions, net of cash acquired                                             |                                                        | (22,892                                                               | )       
|                                                                               |                                                        |                                                                       |         
|Net cash flows from investing activities                                       |                                                        | (705,107                                                              | )       
|                                                                               |                                                        |                                                                       |         
|Cash flows from financing activities:                                          |                                                        |                                                                       |         
|Proceeds from issuance of shares                                               |                                                        | 1,786                                                                 |         
|Proceeds from senior notes                                                     |                                                        |                                                                      |         
|Proceeds from short-term borrowings                                            |                                                        | 6,202                                                                 |         
|Proceeds from long-term borrowings                                             |                                                        | 1,609,353                                                             |         
|Deferred financing costs                                                       |                                                        | (12,712                                                               | )       
|Repayments of long-term and short-term borrowings                              |                                                        | (787,272                                                              | )       
|                                                                               |                                                        |                                                                       |         
|Net cash flows from financing activities                                       |                                                        | 817,357                                                               |         
|                                                                               |                                                        |                                                                       |         
|Effect of exchange rates on cash                                               |                                                        | (478                                                                  | )       
|                                                                               |                                                        |                                                                       |         
|Net decrease in cash and cash equivalents                                      |                                                        | (696,474                                                              | )       
|Cash and cash equivalents at beginning of period                               |                                                        | 1,590,230                                                             |         
|                                                                               |                                                        |                                                                       |         
|Cash and cash equivalents at end of period                                     |                                                        | 893,756                                                               |         
|                                                                               |                                                        |                                                                       |         

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

4

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|                                             |                                                             | For the Nine Months
Ended September 30, |         
|-------------------------------------------- | ----------------------------------------------------------- | --------------------------------------- | --------
|
|Non-cash investing and financing activities: |                                                             |                                         |         
|                                             | Unrealized loss (gain) on investments and derivative assets |                                         | 57,685  
|                                             |                                                             |                                         |         
|                                             | Issuance of warrants                                        |                                         |        
|                                             |                                                             |                                         |         
|                                             | Conversion of Stjärn Seller's Note                          |                                         |        
|                                             |                                                             |                                         |         
|Supplemental cash flow disclosures:          |                                                             |                                         |         
|                                             | Cash paid for interest                                      |                                         | (455,066
|                                             |                                                             |                                         |         
|                                             | Cash received for interest                                  |                                         | 39,082  
|                                             |                                                             |                                         |         

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

5

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UNITED PAN-EUROPE COMMUNICATIONS N.V.        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.  Organization and Nature of Operations

United Pan-Europe Communications N.V., formerly known as United and Philips Communications B.V. ("UPC" or the "Company"), was formed for the
purpose of acquiring and developing multi-channel television and telecommunications systems in Europe. In 1995, UnitedGlobalCom, Inc. (formerly known as United International
Holdings, Inc. ("United")), a United States of America corporation, and Philips Electronics N.V. ("Philips"), contributed their respective ownership interests in European and Israeli
multi-channel television systems to UPC. In December 1997, United acquired Philips' 50% interest in UPC (the "UPC Acquisition"), thereby making it an effectively wholly-owned subsidiary of
United (subject to certain employee equity incentive compensation arrangements). Subsequently in February 1999, UPC had its initial public offering. As of September 30, 2001, United owns
53.09% of UPC. Through its broadband communications networks or services in 17 countries in Europe and in Israel, UPC currently offers communication services in many European countries through its
three primary divisions, UPC Distribution, UPC Media andPriority Telecom. UPC Distribution, which comprises the local operating systems, provides
video, telephony and internet services for residential customers. UPC Media comprises the internet access and converging internet content and programming businesses.Priority
Telecomfocuses on providing network solutions to the business customer.

The
following chart presents a summary of the Company's significant investments as of September 30, 2001.

|                 |                                      | UPC's
Ownership |       
|---------------- | ------------------------------------ | --------------- | ------
|Distribution:    |                                      |                 |       
|Austria:         |                                      |                 |       
|                 | Telekabel Group                      |                 | 95.0% 
|Belgium:         |                                      |                 |       
|                 | UPC Belgium                          |                 | 100.0%
|Czech Republic:  |                                      |                 |       
|                 | KabelNet                             |                 | 100.0%
|                 | Kabel Plus                           |                 | 99.9% 
|France:          |                                      |                 |       
|                 | Médiaréseaux S.A                     |                 | 92.0% 
|Germany:         |                                      |                 |       
|                 | EWT/TSS Group                        |                 | 51.0% 
|                 | PrimaCom AG ("PrimaCom")             |                 | 25.0% 
|Hungary:         |                                      |                 |       
|                 | UPC Magyarorszag                     |                 | 100.0%
|                 | Monor Telefon Tarsasag Rt. ("Monor") |                 | 98.9% 
|The Netherlands: |                                      |                 |       
|                 | UPC Nederland                        |                 | 100.0%
|                 | Alkmaar                              |                 | 100.0%

6

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|Distribution (Continued): |                                                    |  |       
|------------------------- | -------------------------------------------------- |  | ------
|Norway:                   |                                                    |  |       
|                          | UPC Norge AS ("UPC Norge")                         |  | 100.0%
|Sweden:                   |                                                    |  |       
|                          | UPC Sweden                                         |  | 100.0%
|Slovak Republic:          |                                                    |  |       
|                          | Trnavatel                                          |  | 95.0% 
|                          | Kabeltel                                           |  | 100.0%
|                          | UPC Slovensko s.r.o.                               |  | 100.0%
|Romania:                  |                                                    |  |       
|                          | Eurosat                                            |  | 51.0% 
|                          | AST Romania                                        |  | 70.0% 
|Poland:                   |                                                    |  |       
|                          | UPC Polska, Inc ("UPC Polska")                     |  | 100.0%
|Media:                    |                                                    |  |       
|Pan-European:             |                                                    |  |       
|                          | chello broadband N.V.("chello")                    |  | 100.0%
|Ireland:                  |                                                    |  |       
|                          | Tara Televison Limited                             |  | 80.0% 
|U.K./Central Europe:      |                                                    |  |       
|                          | UPC Broadcast Centre Ltd. ("UPC Broadcast Centre") |  | 100.0%
|Spain:                    |                                                    |  |       
|                          | Iberian Programming Services ("IPS")               |  | 50.0% 
|United Kingdom:           |                                                    |  |       
|                          | Xtra Music Ltd                                     |  | 50.0% 
|The Netherlands:          |                                                    |  |       
|                          | UPC Programming B.V. ("UPCtv")                     |  | 100.0%
|Czech/Slovak/Hungary:     |                                                    |  |       
|                          | UPC Direct Programming B.V                         |  | 100.0%
|Poland:                   |                                                    |  |       
|                          | Wizja TV B.V                                       |  | 100.0%
|Other:                    |                                                    |  |       
|                          | SBS Broadcasting SA ("SBS")                        |  | 23.5% 

7

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UNITED PAN-EUROPE COMMUNICATIONS N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1.  Organization and Nature of Operations (Continued)

|                   |                                                          | UPC's
Ownership |       
|------------------ | -------------------------------------------------------- | --------------- | ------
|Priority Telecom:  |                                                          |                 |       
|                   | Priority Telecom N.V. ("Priority Telecom")               |                 | 87.0% 
|Priority Wireless: |                                                          |                 |       
|                   | Priority Wireless AG ("Priority Wireless")               |                 | 100.0%
|Investments:       |                                                          |                 |       
|Israel:            |                                                          |                 |       
|                   | Tevel Israel International Communications Ltd. ("Tevel") |                 | 46.6% 
|Malta:             |                                                          |                 |       
|                   | Melita Cable TV P.L.C. ("Melita")                        |                 | 50.0% 

---

2.  Summary of Significant Accounting Policies

Risks and Uncertainties

The Company has incurred substantial operating losses and negative cash flows from operations, which have been driven by continuing development efforts,
including the introduction of new services such as digital video, telephony and internet. Additionally, substantial capital expenditures have been required to deploy these services and to acquire
businesses. Management expects the Company to incur operating losses at least through 2003, primarily as a result of the continued introduction of these new services, which are in the early stages of
deployment, as well as continued depreciation and amortization expense. In order for the Company to achieve consolidated operating profitability and positive operating cash flows, the Company's
business plan calls for substantial growth in the number of
subscribers that will use these new services. Management believes that the Company can achieve the anticipated growth in subscribers and that the required capital resources will be available to fund
expected capital expenditures and operating losses. However, if such subscriber growth is not achieved, management believes access to sources of capital will be sufficient to satisfy future cash
needs. This growth requires the availability of capital resources that are sufficient to fund expected capital expenditures. Management's estimates of the cash flows generated by these new services
and the capital

8

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resources needed and available to complete their deployment could change, and such change could differ materially from the estimates used to evaluate the Company's ability to realize its investments.

Strategic Review

In July UPC engaged a strategic consultant to review its current and long-term strategic plan for all segments of the business. The final
conclusions are currently being prepared and will be presented to UPC's Supervisory Board for consideration in due course. As a result of this strategic review and the related decisions taken by the
Supervisory Board, further reorganization of UPC's business might occur and significant charges for asset impairments and various restructuring measures may be recorded. UPC intend to conclude this
project by the end of the year.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States and with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim financial information. Accordingly, these statements do
not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation have been included. All significant intercompany accounts and transactions have been eliminated in consolidation. Operating
results for the three and nine months ended September 30, 2001 are not necessarily indicative of the results that may be expected for the year ending December 31, 2001. For further
information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 2000. Certain prior period amounts have been reclassified to conform with current period presentation.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of UPC and all subsidiaries where it exercises a controlling interest through the
ownership of a majority voting interest. All significant intercompany accounts and transactions have been eliminated in consolidation.

Investment in Publicly Traded Securities Accounted for Under the Equity Method

UPC evaluates its 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 Investments in Common Stock" ("APB 18") and Staff Accounting Bulletin No. 59, "Accounting for Noncurrent Marketable Equity
Securities" ("SAB 59"). 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 the Company considers 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 the Company to retain its investments for a period of time sufficient to allow 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.

9

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Accounting Change

Effective January 1, 2001, the Company adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative and Hedging
Activities" ("SFAS 133"), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging
activities. All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. The adoption of SFAS 133 on January 1,
2001, resulted in a cumulative increase to income of 35.3 million and a cumulative increase to Other Comprehensive Income ("OCI") of 36.7 million. The increase to income was attributable
to a loss of approximately 36.7 million reclassified from OCI for the value of certain warrants held by the Company, which are derivatives and are not designated as a hedging instrument, and
income of approximately 72.0 million related to gains associated with cross currency swaps held by the Company, which do not qualify as hedging instruments as defined by SFAS 133. UPC
uses derivative instruments to manage exposures to foreign currency and interest rate risks.

New Accounting Principles

In June 2001, the Financial Accounting Standards Board authorized the issuance of Statement of Financial Accounting Standards No. 141, "Business
Combinations" ("SFAS 141") and Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires the use of the
purchase method of accounting for all business combinations initiated after June 30, 2001. SFAS 141 requires intangible assets acquired in a business combination to be recognized if they
arise from contractual or legal rights or are "separable", i.e., it is feasible that they may be sold, transferred, licensed, rented, exchanged or pledged.

Under
SFAS 142, 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 goodwill impairment test, which is based on fair value, is to be performed on a reporting unit level. Goodwill will no longer be tested for impairment under SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS 121"). Additionally, goodwill on equity method investments will no
longer be amortized; however, it will continue to be tested for impairment in accordance with Accounting Principles Board Opinion No. 18, "The Equity Method of Accounting for Investments in
Common Stock." Under SFAS 142, intangible assets with indefinite lives will not be amortized. Instead they will be carried at the lower of cost or market value and tested for impairment at
least annually. All other recognized intangible assets will continue to be amortized over their estimated useful lives.

SFAS 142
is effective for fiscal years beginning after December 15, 2001, although goodwill on business combinations consummated after July 1, 2001 will not be
amortized. On adoption the Company expects to record a cumulative effect adjustment to reflect the impairment of previously recognized goodwill and other intangible assets. While the Company has not
yet determined what the impact will be on its financial position and results of operations, it is possible that a substantial cumulative effect adjustment may be required.

In
August 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets" ("SFAS 144"). SFAS 144 establishes a single accounting model for long-lived assets to be disposed of by sale consistent with the fundamental
provisions of SFAS 121 "Accounting for the Impairment of

10

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Long-Lived Assets and for Long-Lived Assets to be Disposed Of." While it supersedes APB Opinion 30 "Reporting the Results of operationsReporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions" it retains the presentation of discontinued operations but broadens that
presentation to include a component of an entity (rather than a segment of a business). However, discontinued operations are no longer recorded at net realizable value and future operating losses are
no longer recognized before they occur. Under SFAS 144 there is no longer a requirement to allocate goodwill to long-lived assets to be tested for impairment. It also establishes a
probability weighted cash flow estimation approach to deal with situations in which there are a range of cash flows that may be generated by the asset being tested for impairment. SFAS 144 also
establishes criteria for determining when an asset should be treated as held for sale.

SFAS 144
is effective for fiscal years beginning after December 15, 2001 and interim periods within those fiscal years, with early application encouraged. The provisions
of SFAS 144 are generally to be applied prospectively. The Company, does not anticipate that adoption of SFAS 144 will have a material impact on its results of operations or its
financial position.

3.  Acquisitions

Eneco K&T Group

In March 2000, UPC acquired the Eneco K&T Group ("K&T"), the cable interests of ENECO N.V., for consideration of 1,046.3 million, including the
repayment to ENECO N.V. and the assumption of debt from K&T to ENECO N.V. of 225.6 million. The acquisition was accounted for under purchase accounting. Effective March 31, 2000, UPC
began consolidating its investment in K&T.

Pro Forma Information

The following unaudited pro forma condensed consolidated operating results for the nine months ended September 30, 2000 gives effect to UPC's
acquisition of K&T as if this acquisition had occurred at the beginning of the period presented. This unaudited pro forma condensed consolidated financial information does not purport to represent
what the Company's results of operations would actually have been if such transactions had in fact occurred on such date.

|                                                       |  | For the Nine Months Ended
September 30, 2000 |  
|------------------------------------------------------ |  | -------------------------------------------- | -
|
|
|Service and other revenue                              |  | 695,466                                      |  
|                                                       |  |                                              |  
|Net loss                                               |  | (1,475,031                                   | )
|                                                       |  |                                              |  
|Weighted-average number of ordinary shares outstanding |  | 436,973,545                                  |  
|                                                       |  |                                              |  
|Basic and diluted net loss per ordinary share          |  | (3.38                                        | )
|                                                       |  |                                              |  

Announcement of Merger with PrimaCom

On March 29, 2001, UPC announced an agreement with PrimaCom to merge its German assets, including EWT/TSS and the TeleColumbus option, as well as its
Alkmaar subsidiary located in the

11

---

Netherlands, with those of PrimaCom. The TeleColumbus option expired at the end of August 2001 and no longer forms part of the discussions. UPC's interest in EWT is held through its 51% owned
subsidiary, UPC Germany. Due to changes in market conditions, the transactionis currently being re-evaluated. UPC's carrying value of the assets subject to discussion in this proposed
transaction, amounting to 939.1 million, is significantly greater than the fair value of the consideration that could be received should the PrimaCom transaction be completed. As a result, a
transaction resulting from these
discussions would result in UPC Germany recording a significant write-down upon closing of any such transaction.

Announcement of Polish DTH Merger

On August 10, 2001, UPC and Canal+ Group ("Canal+"), the television and film division of Vivendi Universal, announced the signing of definitive
agreements to merge their respective Polish direct-to-home ("DTH") satellite television platforms, as well as the Canal+ Polska premium channel, to form a common Polish DTH platform. In the merger
agreements, UPC Polska agreed to contribute its Polish and United Kingdom DTH assets to TKP, the Polish subsidiary of Canal+, and fund a maximum of 30.0 million in the form of a note receivable from
TKP at closing. For this, UPC Polska will receive a 25% ownership interest in TKP and 150.0 million in cash. As part of this transaction, through a carriage agreement, Canal+ Polska premium channel
will also be available on UPC's Polska's cable network. TKP will be managed and controlled by Canal+, who will own 75%. UPC will own the remaining 25%. For accounting purposes, TKP will be deemed the
acquirer. UPC Polska's investment in the merged companies will be recorded at fair value as of the date of the transaction. UPC Polska's carrying value of the Polish DTH assets being contributed may
be significantly higher than the determined fair value of its investment in the merged companies if and when the transaction is consummated, leading to a write down at the date the transaction is
consummated. On November 13, 2001, the Company received the regulatory approval necessary for merger completion, which, subject to certain formal judicial registrations, is anticipated to close
by December 31, 2001. UPC will deconsolidate the DTH operations upon closure of the merger.

Public Offering Priority Telecom

On September 5, 2001, the General Meeting of Shareholders ofPriority Telecomapproved the conversion of
109,144,190 ordinary shares, with a nominal value of Euro 0.10 each, as held by UPC, into 2,728,605 class A shares with a nominal value of Euro 4.00 each.

On
September 27, 2001,Priority Telecomlisted its 3,986,519 issued and outstanding ordinary shares on the Euronext Amsterdam
("Euronext"). The ordinary shares available for free float at listing represent approximately 15% of the issued and outstanding ordinary shares ofPriority
Telecom. The listing involves all ofPriority Telecom's ordinary shares. In additionPriority
Telecomhas 2,728,605 class A shares issued and outstanding, which are currently held by UPC and are not included in the listing.

Priority Telecomhas issued 5,327 series 1 convertible shares and 273 series 2 convertible shares to UPC, for an
aggregate purchase price of approximately 364 million. The purchase price is comprised of 174 million in cash and the conversion of 190 million accreted value of shareholder loans
from UPC outstanding at September 30, 2001, into convertible shares.

12

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UNITED PAN-EUROPE COMMUNICATIONS N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4.  Impairment and Restructuring Charges

During the second quarter of 2001, UPC's management identified indicators of possible impairment of long-lived assets, principally Indefeasible
Rights of Use ("IRU's") and related goodwill, within its CLEC subsidiary,Priority Telecom. Such indicators include significant declines in the market
value of publicly traded telecommunications providers and a change, subsequent to the acquisition of Cignal Global Communications ("Cignal"), in the way that certain assets from the Cignal acquisition
would be used withinPriority Telecom.

UPC
changed its strategic plans for using withinPriority Telecomcertain assets acquired in the Cignal transaction because of reduced
levels of private equity funding activity for CLEC businesses and a decision by UPC to complete a public offering ofPriority Telecomin the second half
of 2001. The changes in strategic plans included a decision to phase-out the legacy international wholesale voice operations of Cignal. When UPC andPriority
Telecomreached agreement to acquire Cignal in the second quarter of 2000, the companies originally intended to continue the international wholesale voice operations of Cignal
for the foreseeable future. This original plan for the international wholesale voice operations was considered in the determination of the consideration to be paid for Cignal and the subsequent
allocation of the purchase price. This allocation was completed by an independent third party in November 2000. In 2001, using the strategic plan prepared for contemplated financing, an
impairment assessment test and measurement in accordance with SFAS 121 was completed, resulting a write-down of tangible assets, related goodwill and other impairment charges of
319.0 million for the nine months ended September 30, 2001.

Priority Telecomrecorded restructuring and other impairment charges in connection with operations in Spain and other countries of
10.3 million for the nine months ended September 30, 2001.

A
subsidiary of UPC has impaired the value of DTH boxes leased to certain former customers for which the recovery of the value of the boxes is unlikely. The amount of the impairment
is based on the number of disconnected customers, to whom the DTH boxes were rented, decreased by the number of collected boxes and multiplied by the net book value of the box at the end of the
corresponding period. The amount of impairment charges for the nine months ended September 30, 2001, were 19.4 million.

5.  Investments in and Advances to Affiliated Companies, Accounted for Under the Equity Method

|           |  | As of September 30, 2001
|---------- |  | ------------------------
|
|
|Tevel      |  | 114,278                 
|Melita     |  | 12,748                  
|Xtra Music |  | 14,039                  
|IPS        |  | 10,065                  
|SBS        |  | 261,999                 
|PrimaCom   |  | 345,096                 
|Other, net |  | 54,689                  
|           |  |                         
|Total      |  | 812,914                 
|           |  |                         

13

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Based
on analyses performed by UPC using the quantitative and qualitative factors as described in Note 2, Investment in Publicly Traded Securities Accounted for Under the
Equity Method, UPC recorded a provision for loss on its investments in SBS and PrimaCom for 114.6 million and 261.3 million, respectively, as of September 30, 2001. The provision
has been separately presented under Provision for Loss on Investments, in the accompanying statement of operations.

6.  Other Investments

Marketable Equity Securities of United, at Fair Value

As a result of the UPC Acquisition, a subsidiary of UPC acquired 6,338,302 of United's Class A common shares, as adjusted for United's 2:1 stock split
in November 1999, valued at fair market value of 30.3 million as of December 11, 1997. In November 1998, UPC sold 769,062 shares. As of September 30, 2001, the fair
value of the remaining 5,569,240 shares was 12.2 million, resulting in a cumulative unrealized loss of 12.5 million as of September 30, 2001.

7.  Property, Plant and Equipment

|                                             |                                    | As of
September 30,
2001 |            | As of
December 31,
2000 |          
|-------------------------------------------- | ---------------------------------- | ------------------------ | ---------- | ----------------------- | ---------
|
|Cable distribution networks                  |                                    | 3,354,652                |            | 3,089,342               |          
|Subscriber premises equipment and converters |                                    | 633,386                  |            | 440,015                 |          
|DTH, MMDS and distribution facilities        |                                    | 223,836                  |            | 218,568                 |          
|IT systems, office equipment and fixtures    |                                    | 294,256                  |            | 250,918                 |          
|Buildings and leasehold improvements         |                                    | 163,820                  |            | 132,092                 |          
|Other                                        |                                    | 90,900                   |            | 61,636                  |          
|                                             |                                    |                          |            |                         |          
|                                             |                                    | 4,760,850                |            | 4,192,571               |          
|                                             | Accumulated depreciation           |                          | (1,078,527 | )                       | (611,032 
|                                             |                                    |                          |            |                         |          
|                                             | Property, plant and equipment, net |                          | 3,682,323  |                         | 3,581,539
|                                             |                                    |                          |            |                         |          

14

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UNITED PAN-EUROPE COMMUNICATIONS N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8.  Goodwill and Other Intangible Assets

|                   |                                           | As of
September 30,
2001 |           | As of
December 31,
2000 |          
|------------------ | ----------------------------------------- | ------------------------ | --------- | ----------------------- | ---------
|
|UPC Nederland      |                                           | 1,375,926                |           | 1,713,365               |          
|UPC Polska         |                                           | 1,048,832                |           | 1,024,469               |          
|UPC Germany        |                                           | 896,171                  |           | 951,990                 |          
|UPC Sweden         |                                           | 385,772                  |           | 418,828                 |          
|Priority Telecom   |                                           | 446,485                  |           | 363,215                 |          
|UPC NV             |                                           | 210,593                  |           | 208,540                 |          
|Telekabel Group    |                                           | 181,084                  |           | 180,200                 |          
|UPC France         |                                           | 166,497                  |           | 176,639                 |          
|UPC Magyarorszag   |                                           | 145,479                  |           | 141,264                 |          
|UPC Czech Republic |                                           | 104,651                  |           | 102,488                 |          
|Priority Wireless  |                                           | 107,286                  |           | 108,020                 |          
|UPC Norge          |                                           | 75,658                   |           | 72,427                  |          
|Other              |                                           | 134,269                  |           | 96,838                  |          
|                   |                                           |                          |           |                         |          
|                   |                                           | 5,278,703                |           | 5,558,283               |          
|                   | Accumulated amortization                  |                          | (734,177  | )                       | (438,391 
|                   |                                           |                          |           |                         |          
|                   | Goodwill and other intangible assets, net |                          | 4,544,526 |                         | 5,119,892
|                   |                                           |                          |           |                         |          

9.  Long-Term Debt

|                               |                      | As of
September 30,
2001 |           | As of
December 31,
2000 |          
|------------------------------ | -------------------- | ------------------------ | --------- | ----------------------- | ---------
|
|July 1999 Notes                |                      | 1,744,376                |           | 1,567,212               |          
|October 1999 Notes             |                      | 1,171,532                |           | 1,059,174               |          
|January 2000 Notes             |                      | 1,878,735                |           | 1,761,130               |          
|UPC Distribution Bank Facility |                      | 2,974,896                |           | 2,395,998               |          
|UPC Bridge Facility            |                      |                         |           | 750,000                 |          
|Exchangeable Loan              |                      | 955,638                  |           |                        |          
|@Entertainment Notes           |                      | 368,845                  |           | 323,275                 |          
|DIC loan                       |                      | 53,593                   |           | 55,359                  |          
|Other                          |                      | 221,276                  |           | 183,953                 |          
|                               |                      |                          |           |                         |          
|                               |                      | 9,368,891                |           | 8,096,101               |          
|                               | Less current portion |                          | (25,893   | )                       | (17,832  
|                               |                      |                          |           |                         |          
|                               | Total                |                          | 9,342,998 |                         | 8,078,269
|                               |                      |                          |           |                         |          

The
increase in the July 1999 Notes, October 1999 Notes, January 2000 Notes, as well as the UPC Distribution Bank Facility, is partly due to the adoption of
SFAS 133. Under SFAS 133, the fair value of the derivative assets as of September 30, 2001, amounting to 334.8 million (including both the fair value of the foreign
currency portion and the interest portion of the swaps), has been recorded as an

15

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asset on the balance sheet. Of this amount, 185.8 million has been added to the carrying value of the related long-term debt resulting from the fluctuations in exchange rates
subsequent to the initial borrowings. 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.

Exchangeable Loan

In May 2001, UPC completed a placement with Liberty Media Corp. ("Liberty") of USD 1,225.0 million 6% Guaranteed Discount Notes
due 2007 ("the Exchangeable Loan"), receiving proceeds of USD 856.8 million (Euro 1.0 billion). Liberty has the right to exchange the notes, which were issued by a wholly-owned
subsidiary of UPC, into ordinary shares of UPC under certain circumstances at USD 6.85 per share after May 29, 2002. The Exchangeable Loan is expected to be transferred to United as part of a
transaction between Liberty and United.

The
principal terms of the Exchangeable Loan are as follows:



UPC Bridge Facility

UPC repaid the 750 million borrowed on this facility in May 2001.

UPC Distribution Bank Facility

In October 2000, UPC closed a 4.0 billion operating and term loan facility ("UPC Distribution Bank Facility"). The facility is guaranteed by
existing cable operating companies, excluding Polish and German operations. The UPC Distribution Bank Facility bears interest at EURIBOR +0.75%4.0% depending on certain leverage ratios,
and an annual commitment fee of 0.5% over the undrawn amount is applicable. A first drawing was made in October 2000, to refinance existing operating company bank debt totaling
2.0 billion. The purpose of the UPC Distribution Bank Facility is to finance further digital rollout and triple play by UPC's existing cable companies, excluding Polish and German operations.
Additional availability is linked to certain performance tests. As is customary for a financing of this nature, there are certain financial covenants and restrictions on UPC's cable companies' ability
to make dividends and/or other payments to UPC, incur indebtedness, dispose of

16

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assets, merge and enter into affiliate transactions. UPC was in compliance with these covenants at September 30, 2001. Principal repayment will begin in 2004. The facility reaches final
maturity in 2009. At September 30, 2001, approximately 3.0 billion was outstanding under this facility. The facility is structured in different tranches, with one tranche denominated in
dollars for the amount of USD 347.5 million, the remainder of the facility is denominated in Euros. Concurrent with the closing, UPC entered into cross currency and interest rate
swaps, pursuant to which a USD 347.5 million obligation under the UPC Distribution Bank Facility was effectively changed into a 408.1 million obligation until November 29, 2002.
In addition UPC entered into an interest rate swap in respect of 1,725 million to fix the EURIBOR portion of the interest calculation at 4.5475% for the period ending April 15, 2003.
Effectively, the entire USD tranche has been swapped in Euros.

DIC Loan

In November 1998, a subsidiary of DIC loaned UPC USD 90.0 million (89.4 million) to acquire interests in the Israeli and Maltese systems.
The original loan from DIC matured in November 2000 and was secured by UPC's pledge of its ownership interest in the Israeli system. In connection with the loan from DIC, UPC granted the
Discount Group, its partner in the Israeli system, an option to acquire USD 90.0 million (89.4 million), plus accrued interest, of ordinary shares A at a price equal to 90.0% of the
initial public offering price, and, if this option is exercised, another option to acquire USD 45.0 million (44.7 million), plus accrued interest, of ordinary shares A at a price equal
to the 30-day average closing price of UPC's ordinary shares A on the Stock Market of Amsterdam Exchanges, or the initial public offering price, whichever is higher. At UPC's initial
public offering, DIC exercised the first option and acquired 4,675,962 ordinary shares A. UPC repaid USD 45.0 million (44.7 million) of the loan, plus accrued interest, with proceeds
from the option exercise. The other option was exercisable until September 30, 2000. In October 2000, the remaining USD 45.0 million loan was refinanced by a two-year
convertible note for the amount of 55.0 million at an annual interest of 10%. UPC also extended, through September 30, 2002, the DIC's option to convert the note to UPC shares at the
average of the close price in the last 30 trading days before the conversion date.

10. Commitments and Contingencies

Leases

UPC has entered into various short- and long-term agreements with third parties, varying in term from 3 to 15 years, for IRU's on fiber
optic cable as well as for operational leases. Under these agreements UPC has commitments for discounted future minimum lease payments, and for operation and maintenance charges, which total
approximately 16.4 million as of September 30, 2001.

A
subsidiary of UPC leases DTH technical equipment, conduit and satellite transponder capacity, as well as several offices and warehouses. At the end of September 2001, these
leases had an aggregate maximum commitment of approximately USD 209.0 million (228.4 million) over the next nine years.

UPC
has entered into an agreement for the long-term lease of satellite transponder capacity providing service from Europe to Europe, North America and South America. The
remaining term of the agreement is 134 months, with a minimum aggregate total cost of approximately USD 101.3 million (110.7 million) payable in monthly installments based on
capacity used.

17

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Programming, Broadcast and Exhibition Rights

A subsidiary of UPC has entered into long-term programming agreements and agreements for the purchase of certain exhibition or broadcast rights
with a number of third-party content providers for its digital direct-to-home ("DTH") and cable systems. At September 30, 2001, these agreements had an aggregate minimum
commitment of approximately USD 206.0 million (225.2 million) over the next nine years.

Purchase Options

In October 2000, UPC acquired, through its subsidiary, UPC Germany, 100% of EWT for a preliminary purchase price of 238.4 million in cash and 49%
of UPC Germany. In the third quarter of 2001, the purchase price was finalized and the Company recorded the necessary adjustments to the initial purchase price allocation to reflect this settlement.
Under the UPC Germany Shareholders Agreement, the 49% shareholder has an option to put his interest in UPC Germany to UPC in exchange for approximately 10.6 million of UPC's ordinary shares A,
as adjusted for final settlement. The option expires March 31, 2003. UPC has the option to pay for the put, if exercised, in either its 10.6 million shares or the equivalent value of
cash on such date. If the option is not exercised, upon its expiration, the 49% shareholder has the right to demand that UPC contribute cash and/or other assets (including stock) to UPC Germany equal
to approximately 358.8 million, representing the remainder of UPC's contribution obligation to UPC Germany.

The
minority shareholders in UPC Romania V.O.F. have exercised the option as stated in the general Partnership Agreement of UPC Romania Holding V.O.F. The option requires the Company
to purchase all of their partnership interests at the sale date, being December 31, 2001, for a consideration of approximately USD 20.8 million (22.7 million), which is payable
before February 15, 2002.

Litigation and Claims

UPC has received a notice, purporting to exercise certain option rights of the former Cignal shareholders. However, those option rights no longer exist since
they had been granted for the event that no initial public offeringof Priority Telecomwould take place prior to October 1, 2001. Since a
successful initial public offering ofPriority Telecomhas been completed prior to that date, the notice is not effective and UPC will disregard it.

The
Company is currently engaged in arbitration proceedings in France. A minority shareholder in the Company's subsidiary, Médiaréseaux S.A., has
instituted arbitration proceedings under ICC Rules alleging breach of contract under a certain Business Combination Agreement dated December 15, 1999 and entered into between, inter alia, the
Company and Intercomm France CVOHA ("ICH"). As part of the arbitration proceedings, ICH obtained an attachment of the shares held by UPC France Holding B.V. in
Médiaréseaux S.A. The Company is vigorously defending the attachment and the arbitration proceedings and has filed appropriate counter claims.

From
time to time, the Company is subject to various claims and suits arising out of the ordinary course of business. While the ultimate result of all such matters is not presently
determinable, based upon current knowledge and facts, management does not expect that their resolution will have a material adverse effect on the Company's consolidated financial position or results
of operations.

18

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11. Shareholders' Equity

At an extraordinary general meeting of shareholders in March 2000, the shareholders approved the amendment of UPC's Articles of Association to
(i) split each ordinary share A, priority share, preference share A and preferred share B (as of December 31, 1999, with a nominal value of Euro 2.00 each) into three shares with a
nominal value of Euro 1.00 each, (ii) split each ordinary share B (as of December 31, 1999, with a nominal value of Euro 0.02 each) into three shares with a nominal value of Euro 0.01
each and (iii) pay up an amount of Euro 145.2 million on account of the share premium reserve of the Company. All share and per share amounts in the accompanying consolidated financial
statements and notes thereto have been retroactively restated to reflect the 3 for 1 share split.

In
November 2000,Priority Telecomacquired Cignal through a merger and exchange offer, resulting in recognition of a SAB 51
gain by UPC. In the stock-based deal,Priority Telecomacquired 100% of Cignal in exchange for a 16% interest inPriority
Telecomvalued at USD 200.0 million. As part of the transaction, the CLEC operations of UPC Distribution companies have been spun-off to Priority Telecom. As of
December 31, 2000, the separation process was not complete and, accordingly, the SAB 51 gain and the minority interest
recorded by the Company as of December 31, 2000, were based on information available at that time. Upon finalization of the spin-off in the third quarter of 2001, the final SAB 51
gain was calculated, resulting in a decrease of 12.6 million to the preliminary amount.

As
of September 30, 2001, the Company has negative equity of 740.2 million.

12. Segment and Geographic Information

The Company's business has historically been derived from cable television. Commencing in 1998, the Company began launching telephony and internet services
over parts of its upgraded network. The Company is managed internally as three primary divisions, UPC Distribution, UPC Media andPriority Telecom. In
addition, Corporate, IT and Other is a separate reporting segment. UPC Distribution focuses on providing cable television, DTH, internet and telephony services to residential customers and is
comprised of the local operating systems.chello broadbandserves as the internet access provider and was, in February 2001, combined with the
programming businesses led by UPCtv under one management team as UPC Media.Priority Telecomis focused on providing services to business customers.
Corporate, IT and Other relates primarily to centralized activities which support multiple platforms/services.

The
Company evaluates performance and allocates resources based on the results of these divisions. The key operating performance criteria used in this evaluation include revenue
growth and net operating loss before depreciation, amortization, stock-based compensation expense and impairment charges ("Adjusted EBITDA"). Industry analysts generally consider EBITDA to be a
helpful way to measure the performance of cable television operations and communications companies. Management believes Adjusted EBITDA helps investors to assess the cash flow from operations from
period to period and thus value the Company's business. Adjusted EBITDA should not, however, be considered a replacement for net income, cash flows or any other measure of performance or liquidity
under generally accepted accounting principles, or as an indicator of a company's operating performance. The presentation of Adjusted EBITDA may not be comparable to statistics with a similar name
reported by other companies. Not all companies and analysts calculate Adjusted EBITDA in the same manner. As the Company increases its bundling of products, the allocation of indirect operating and
SG&A expenses between individual products will become increasingly difficult and may not represent the actual Adjusted EBITDA for individual products.

19

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UNITED PAN-EUROPE COMMUNICATIONS N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Segment and Geographic Information (Continued)

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

|                  |                 | Revenue for the Three Months Ended September 30, 2001
|----------------- | --------------- | -----------------------------------------------------
|
|
|Corporate         |                 |                                                     
|UPCtv             |                 |                                                     
|chello broadband  |                 |                                                     
|Priority Telecom  |                 |                                                     
|Priority Wireless |                 |                                                     
|Distribution:     |                 |                                                      
|                  | The Netherlands |                                                      
|                  | Austria         |                                                      
|                  | Belgium         |                                                      
|                  | Czech Republic  |                                                      
|                  | Norway          |                                                      
|                  | Hungary         |                                                      
|                  | France          |                                                      
|                  | Poland          |                                                      
|                  | Sweden          |                                                      
|                  | Germany         |                                                      
|                  | Other           |                                                      
|                  |                 |                                                      
|Total             |                 | 188,541                                              
|                  |                 |                                                      

20

---

|                  |                 | Revenue for the Three Months Ended September 30, 2000
|----------------- | --------------- | -----------------------------------------------------
|
|
|Corporate         |                 |                                                     
|UPCtv             |                 |                                                     
|chello broadband  |                 |                                                     
|Priority Telecom  |                 |                                                     
|Priority Wireless |                 |                                                     
|Distribution:     |                 |                                                      
|                  | The Netherlands |                                                      
|                  | Austria         |                                                      
|                  | Belgium         |                                                      
|                  | Czech Republic  |                                                      
|                  | Norway          |                                                      
|                  | Hungary         |                                                      
|                  | France          |                                                      
|                  | Poland          |                                                      
|                  | Sweden          |                                                      
|                  | Germany         |                                                      
|                  | Other           |                                                      
|                  |                 |                                                      
|Total             |                 | 163,376                                              
|                  |                 |                                                      

|                  |                 | Revenue for the Nine Months Ended September 30, 2001
|----------------- | --------------- | ----------------------------------------------------
|
|
|Corporate         |                 |                                                    
|UPCtv             |                 |                                                    
|chello broadband  |                 |                                                    
|Priority Telecom  |                 |                                                    
|Priority Wireless |                 |                                                    
|Distribution:     |                 |                                                     
|                  | The Netherlands |                                                     
|                  | Austria         |                                                     
|                  | Belgium         |                                                     
|                  | Czech Republic  |                                                     
|                  | Norway          |                                                     
|                  | Hungary         |                                                     
|                  | France          |                                                     
|                  | Poland          |                                                     
|                  | Sweden          |                                                     
|                  | Germany         |                                                     
|                  | Other           |                                                     
|                  |                 |                                                     
|Total             |                 | 563,628                                             
|                  |                 |                                                     

21

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UNITED PAN-EUROPE COMMUNICATIONS N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Segment and Geographic Information (Continued)

|                  |                 | Revenue for the Nine Months Ended September 30, 2000
|----------------- | --------------- | ----------------------------------------------------
|
|
|Corporate         |                 |                                                    
|UPCtv             |                 |                                                    
|chello broadband  |                 |                                                    
|Priority Telecom  |                 |                                                    
|Priority Wireless |                 |                                                    
|Distribution:     |                 |                                                     
|                  | The Netherlands |                                                     
|                  | Austria         |                                                     
|                  | Belgium         |                                                     
|                  | Czech Republic  |                                                     
|                  | Norway          |                                                     
|                  | Hungary         |                                                     
|                  | France          |                                                     
|                  | Poland          |                                                     
|                  | Sweden          |                                                     
|                  | Germany         |                                                     
|                  | Other           |                                                     
|                  |                 |                                                     
|Total             |                 | 461,824                                             
|                  |                 |                                                     

|                  |                 | Adjusted EBITDA for the Three Months Ended September 30, 2001 |       
|----------------- | --------------- | ------------------------------------------------------------- | ------
|
|
|Corporate         |                 |                                                              |       
|UPCtv             |                 |                                                              |       
|chello broadband  |                 |                                                              |       
|Priority Telecom  |                 |                                                              |       
|Priority Wireless |                 |                                                              |       
|Distribution:     |                 |                                                               |       
|                  | The Netherlands |                                                               | 35,110
|                  | Austria         |                                                               | 9,501 
|                  | Belgium         |                                                               | 2,067 
|                  | Czech Republic  |                                                               | 2,798 
|                  | Norway          |                                                               | 3,826 
|                  | Hungary         |                                                               | 5,001 
|                  | France          |                                                               | (2,931
|                  | Poland          |                                                               | 814   
|                  | Sweden          |                                                               | 3,126 
|                  | Germany         |                                                               | 6,730 
|                  | Other           |                                                               | 3,060 
|                  |                 |                                                               |       
|Total             |                 | 69,102                                                        |       
|                  |                 |                                                               |       

22

---

|                  |                 | Adjusted EBITDA for the Three Months Ended September 30, 2000 |       
|----------------- | --------------- | ------------------------------------------------------------- | ------
|
|
|Corporate         |                 |                                                              |       
|UPCtv             |                 |                                                              |       
|chello broadband  |                 |                                                              |       
|Priority Telecom  |                 |                                                              |       
|Priority Wireless |                 |                                                              |       
|Distribution:     |                 |                                                               |       
|                  | The Netherlands |                                                               | 28,416
|                  | Austria         |                                                               | 10,371
|                  | Belgium         |                                                               | 1,259 
|                  | Czech Republic  |                                                               | 707   
|                  | Norway          |                                                               | 4,677 
|                  | Hungary         |                                                               | 4,038 
|                  | France          |                                                               | 3,850 
|                  | Poland          |                                                               | 400   
|                  | Sweden          |                                                               | 2,757 
|                  | Germany         |                                                               |      
|                  | Other           |                                                               | 4,431 
|                  |                 |                                                               |       
|Total             |                 | 60,906                                                        |       
|                  |                 |                                                               |       

|                  |                 | Adjusted EBITDA for the Nine Months Ended September 30, 2001 |       
|----------------- | --------------- | ------------------------------------------------------------ | ------
|
|
|Corporate         |                 |                                                             |       
|UPCtv             |                 |                                                             |       
|chello broadband  |                 |                                                             |       
|Priority Telecom  |                 |                                                             |       
|Priority Wireless |                 |                                                             |       
|Distribution:     |                 |                                                              |       
|                  | The Netherlands |                                                              | 97,039
|                  | Austria         |                                                              | 27,420
|                  | Belgium         |                                                              | 5,108 
|                  | Czech Republic  |                                                              | 8,948 
|                  | Norway          |                                                              | 11,944
|                  | Hungary         |                                                              | 15,433
|                  | France          |                                                              | (2,799
|                  | Poland          |                                                              | 4,104 
|                  | Sweden          |                                                              | 8,833 
|                  | Germany         |                                                              | 20,969
|                  | Other           |                                                              | 9,397 
|                  |                 |                                                              |       
|Total             |                 | 206,396                                                      |       
|                  |                 |                                                              |       

23

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UNITED PAN-EUROPE COMMUNICATIONS N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Segment and Geographic Information (Continued)

|                  |                 | Adjusted EBITDA for the Nine Months Ended September 30, 2000 |       
|----------------- | --------------- | ------------------------------------------------------------ | ------
|
|
|Corporate         |                 |                                                             |       
|UPCtv             |                 |                                                             |       
|chello broadband  |                 |                                                             |       
|Priority Telecom  |                 |                                                             |       
|Priority Wireless |                 |                                                             |       
|Distribution:     |                 |                                                              |       
|                  | The Netherlands |                                                              | 78,011
|                  | Austria         |                                                              | 32,699
|                  | Belgium         |                                                              | 4,232 
|                  | Czech Republic  |                                                              | 2,987 
|                  | Norway          |                                                              | 13,990
|                  | Hungary         |                                                              | 11,855
|                  | France          |                                                              | 10,538
|                  | Poland          |                                                              | 1,905 
|                  | Sweden          |                                                              | 9,275 
|                  | Germany         |                                                              |      
|                  | Other           |                                                              | 7,526 
|                  |                 |                                                              |       
|Total             |                 | 173,018                                                      |       
|                  |                 |                                                              |       

Following
is a reconciliation of Adjusted EBITDA to UPC's net loss before income taxes:

|                                                              |                                                                                                      | For the Three Months Ended September 30, |          | For the Nine Months Ended September 30, |         
|------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------- | ---------------------------------------- | -------- | --------------------------------------- | --------
|
|
|Adjusted EBITDA                                               |                                                                                                      | (36,834                                  | )        | (96,556                                 | )       
|Depreciation and amortization                                 |                                                                                                      | (262,437                                 | )        | (187,396                                | )       
|Stock-based compensation                                      |                                                                                                      | (8,544                                   | )        | 3,429                                   |         
|Impairment and restructuring charges                          |                                                                                                      | (38,345                                  | )        |                                        |         
|                                                              |                                                                                                      |                                          |          |                                         |         
|                                                              | Net operating loss                                                                                   |                                          | (346,160 | )                                       | (280,523
|Interest income                                               |                                                                                                      | 17,275                                   |          | 8,377                                   |         
|Interest expense                                              |                                                                                                      | (222,853                                 | )        | (176,783                                | )       
|Provision for loss on investments                             |                                                                                                      | (375,923                                 | )        |                                        |         
|Foreign exchange gain (loss) and other income (expense), net. |                                                                                                      | 227,378                                  |          | (153,653                                | )       
|                                                              |                                                                                                      |                                          |          |                                         |         
|                                                              | Net loss before income taxes and other items                                                         |                                          | (700,283 | )                                       | (602,582
|Share in results of affiliated companies, net                 |                                                                                                      | (45,673                                  | )        | (40,638                                 | )       
|Minority interests in subsidiaries                            |                                                                                                      | 34,805                                   |          | 4,606                                   |         
|                                                              |                                                                                                      |                                          |          |                                         |         
|                                                              | Net loss before income tax benefit (expense) and cumulative effect of change in accounting principle |                                          | (711,151 | )                                       | (638,614
|                                                              |                                                                                                      |                                          |          |                                         |         

24

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UNITED PAN-EUROPE COMMUNICATIONS N.V.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)

12. Segment and Geographic Information (Continued)

|                  |                 | Total Assets
|----------------- | --------------- | ------------
|
|
|Corporate         |                 | 1,702,907   
|UPCtv             |                 | 86,732      
|chello broadband  |                 | 123,523     
|Priority Telecom  |                 | 889,224     
|Priority Wireless |                 | 114,966     
|Distribution:     |                 |             
|                  | The Netherlands |             
|                  | Austria         |             
|                  | Belgium         |             
|                  | Czech Republic  |             
|                  | Norway          |             
|                  | Hungary         |             
|                  | France          |             
|                  | Poland          |             
|                  | Sweden          |             
|                  | Germany         |             
|                  | Other           |             
|                  |                 |             
|Total             |                 | 10,370,240  
|                  |                 |             

13. Comprehensive Income (Loss)

The components of total comprehensive income (loss) are as follows:

|                                   |                                                 | For the Three Months
Ended September 30, |          | For the Nine Months Ended September 30, |         
|---------------------------------- | ----------------------------------------------- | ---------------------------------------- | -------- | --------------------------------------- | --------
|
|
|Net loss                           |                                                 | (711,443                                 | )        | (639,503                                | )       
|Other comprehensive income (loss): |                                                 |                                          |          |                                         |         
|                                   | Change in unrealized gain (loss) on investments |                                          | (42,725  | )                                       | (152,644
|                                   | Change in fair value of derivative assets       |                                          | (20,624  | )                                       |        
|                                   | Change in cumulative translation adjustments    |                                          | (126,864 | )                                       | 29,346  
|                                   |                                                 |                                          |          |                                         |         
|                                   |                                                 | Total comprehensive income (loss)        |          | (901,656                                | )       
|                                   |                                                 |                                          |          |                                         |         

25

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14. Basic Net Loss Attributable to Common Shareholders

|                                                   |  | For the Three Months
Ended September 30, |   | For the Nine Months Ended September 30, |  
|-------------------------------------------------- |  | ---------------------------------------- | - | --------------------------------------- | -
|
|
|Net loss                                           |  | (711,443                                 | ) | (639,503                                | )
|Accretion of Series 1 convertible preferred stock  |  | (30,072                                  | ) |                                        |  
|                                                   |  |                                          |   |                                         |  
|Basic net loss attributable to common shareholders |  | (741,515                                 | ) | (639,503                                | )
|                                                   |  |                                          |   |                                         |  

15. Related Party Transactions

Tender Offer for Notes

On November 7, 2001, Liberty announced the completion of a tender offer for a portion of UPC's July 1999 Senior Notes, UPC's October 1999 Senior Notes and
UPC's January 2000 Senior Notes. According to Liberty's press release, Liberty acquired approximately USD 1.4 billion (1.5 billion) principal amount of bonds for total
consideration of approximately USD 205.3 million (224.4 million), including accrued interest through November 8, 2001.

16. Subsequent Event

Announcement of closure of Czech Sports Channel

UPC will end the broadcasting of the paid sports channel Sport 1 in the Czech Republic and Slovakia as of October 31, 2001.

26

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

The following discussion, contains, in addition to historical information, forward-looking statements that involve risks and uncertainties. These
forward-looking statements may include statements concerning our plans, objectives and future economic prospects, expectations, beliefs, future plans and strategies, anticipated events or trends and
similar expressions concerning matters that are not historical facts. These forward-looking statements involve both known and unanticipated 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 the forward-looking statements. These factors include, among other things,
changes in television viewing preferences and habits by our subscribers and potential subscribers, their acceptance of new technology, programming alternatives and new video services we may offer.
They also include our ability to complete announced transactions, our ability to secure adequate capital to fund system growth, new business and acquisitions and to manage and grow our newer
telephony, digital and internet/data services. We have disclosed estimated adjustments to our financial statements as a result of planned transactions. We also will be subject to new accounting rules
that may require write-downs due to impairment of goodwill and other indefinite-lived assets. These adjustments and potential impairment write-downs will be based on underlying fair values of such
assets, which are subject to change. These forward- looking statements apply only as of the time of this report and we have no obligation or plans to provide updates or revisions to these
forward-looking statements or any other changes in events or circumstances on which these forward-looking statements are based. The following discussion and analysis of financial condition and results
of operations covers the three and nine months ended September 30, 2001 and 2000, 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.

Introduction

We own and operate broadband communications networks or services in 17 countries in Europe and in Israel. Our operations are organized into three principal
divisions. UPC Distribution, which comprises our local operating systems, delivers video, telephony and internet services to our residential customers. UPC Media comprises our internet access and
converging internet content and programming businesses, which provide their products and services to us, as well as to third parties.Priority Telecom,
which targets the business telephony market, is our third principal division. Our subscriber base is the largest of any group of broadband communications networks operated across Europe. Our goal is
to enhance our position as a leading pan-European distributor of video programming services and to become a leading pan-European provider of telephony, internet and enhanced
video services, offering a one-stop shopping solution for residential and business communication needs. We plan to achieve this goal by increasing the penetration of our new services, such
as digital video, telephony and internet.

Since
formation, we have developed largely through acquisitions. The most recent acquisitions have resulted in significant growth in our consolidated revenues and expenditures. We are
still in the process of integrating our acquisitions. We may continue to make select acquisitions that complement our existing assets and operations, although we do not expect these acquisitions to be
of the magnitude or frequency of our acquisitions during the last few years. We might also restructure, combining some of our assets with other assets and retain an interest in the combined
operations. We may also sell some of our assets in the future or enter into strategic partnerships for the development of our assets.

27

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The following table summarizes our larger acquisitions since January 1, 2000.

|Operating Companies             |  | Interest
Acquired |  | Location                 |  | Closing Date             |  | Purchase
Price |    
|------------------------------- |  | ----------------- |  | ------------------------ |  | ------------------------ |  | -------------- | ---
|
|PrimaCom AG                     |  | 25.0%             |  | Germany                  |  | December 1999March 2000 |  | 344.2          |    
|SBS                             |  | 10.2%             |  | pan-European             |  | February 2000            |  | 162.5          |    
|Intercomm(1)                    |  | 100%              |  | France                   |  | February 2000            |  | 100.0          |    
|Tebecai                         |  | 100%              |  | The Netherlands          |  | February 2000            |  | 62.2           |    
|ElTele Østfold/Vestfold         |  | 100%              |  | Norway                   |  | March 2000               |  | 39.3           |    
|Kabel Haarlem B.V               |  | 100%              |  | The Netherlands          |  | March 2000               |  | 62.2           |    
|Eneco K&T Group                 |  | 100%              |  | The Netherlands          |  | March 2000               |  | 1,046.3        | (2)
|UPC Magyarorszag(3)             |  | 20.75%            |  | Hungary                  |  | March 2000               |  | 63.9           |    
|DattelKabel                     |  | 100%              |  | Czech Republic           |  | July 2000                |  | 24.5           |    
|EWT/TSS Group(4)                |  | 100%              |  | Germany                  |  | October 2000             |  | 812.1          |    
|Cignal Global Communications(5) |  | 100%              |  | United States of America |  | November 2000            |  | 235.7          |    
|Alkmaar                         |  | 100%              |  | The Netherlands          |  | January 2001             |  | 49.2           |    

---

Announcement of Merger with PrimaCom

On March 29, 2001, we announced an agreement with PrimaCom to merge its German assets, including EWT/TSS and the TeleColumbus option, as well as our
Alkmaar subsidiary located in the Netherlands, with those of PrimaCom. The TeleColumbus option expired at the end of August 2001 and no longer
forms part of the discussions. Our investment in EWT is held through our 51% owned subsidiary, UPC Germany. Due to changes in market conditions, the transaction is currently being
re-evaluated. Our carrying value of the assets subject to discussion in this proposed transaction, amounting to 939.1 million, is significantly greater than the fair value of the
consideration that could be received should the PrimaCom transaction be completed. As a result, the transaction resulting from these discussions would result in UPC Germany recording a significant
write-down upon closing of any such transaction.

Announcement of Polish DTH Merger

On August 10, 2001, we and Canal+ Group ("Canal+"), the television and film division of Vivendi Universal, announced the signing of definitive
agreements to merge our respective Polish direct-to-home ("DTH") satellite television platforms, as well as the Canal+ Polska premium channel, to form a common Polish DTH platform. In the merger
agreements, one of our subsidiaries agreed to contribute its Polish and United Kingdom DTH assets to TKP, the Polish subsidiary of Canal+, and fund a maximum of 30.0 million in the form of a note
receivable from TKP at closing. For this, our subsidiary will receive a 25% ownership interest in TKP and 150.0 million in cash. As part of this

28

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transaction, through a carriage agreement, Canal+ Polska premium channel will also be available on our cable network. TKP will be managed and controlled by Canal+, who will own 75%. Our subsidiary
will own the remaining 25%. For accounting purposes, TKP will be deemed the acquirer. Our investment in the merged companies will be recorded at fair value as of the date of the transaction. Our
carrying value of the Polish DTH assets being contributed may be significantly higher than the determined fair value of our investment in the merged companies if and when the transaction is
consummated, leading to a write down at the date the transaction is consummated. On November 13, 2001, we received the regulatory approval necessary for merger completion, which, subject to
certain formal judicial registrations, is anticipated to close by December 31, 2001. We will deconsolidate the DTH operations upon closure of the merger.

Strategic Review

In July we engaged a strategic consultant to review our current and long-term strategic plan for all segments of the business. The final
conclusions are currently being prepared and will be presented to our Supervisory Board for consideration in due course. As a result of this strategic review and the related decisions taken by the
Supervisory Board, further reorganization of our business might occur and significant charges for asset impairments and various restructuring measures may be recorded. We intend to conclude this
project by the end of the year.

Priority Telecom

On September 27, 2001, Priority Telecom completed its initial public offering. Consequently,Priority
Telecomseparately announces its results, which are based on Dutch Generally Accepted Accounting Principles compared to US Generally Accepted Accounting Principles, as
presented in our financial statements.

Services

To date, our primary source of revenue has been analog video entertainment services to residential customers. We believe that an increasing percentage of our
future revenues will come from telephony, internet and digital video services within the residential market, as well as expanding to the business customer. These are forward-looking statements and
will not be fulfilled unless our new services grow dramatically. Capital constraints, technological limitations, competition, lack of programming, loss of personnel, adverse regulation and many other
factors could prevent our new services from growing as we expect. The introduction of telephony services and internet services had a significant negative impact on our Adjusted EBITDA during 2001,
2000 and 1999. We expected this negative impact due to the high costs associated with obtaining subscribers, branding and launching these new services against the incumbent operator. This negative
impact is expected to decline. We intend for these new businesses to be Adjusted EBITDA positive after two to three years following introduction of the service, but there can be no assurance this will
occur. We believe that our new services will continue to have a negative impact on Adjusted EBITDA due to the one-time costs associated with obtaining customers.

UPC DistributionAnalog Video and Digital Services.We currently offer our
subscribers a wide choice of pay-tv services. We plan to continue to improve our expanded basic tier offerings by adding new channels and where possible, migrating popular commercial
channels into an expanded basic tier service. In addition, we plan to offer subscribers additional choice by offering thematic groupings of tiered video services in a variety of genres. In many
systems, we have introduced impulse pay-per-view services.

We
are currently launching digital services in some of our markets. The increased channel capacity in digitalization will enable us to offer subscribers more choice in
pay-tv services, as well as

29

---

transactional television and interactive services. We intend to offer transactional television services, such as near-video-on-demand (``NVOD") and
video-on-demand (``VOD"). We have launched NVOD in the Netherlands. We plan to offer interactive services, such as interactive program guides (``IPG"), walled garden, internet
on television, basic email functionality and interactive television games. We also intend to provide our subscribers with customizable programming guides that would enable them to program
their favorite channels and also allow parents to restrict their children's viewing habits. The increased channel capacity provided by digitalization will enable subscribers to customize their
subscriptions to our services to suit their lifestyles.

UPC DistributionVoice.We provide local, national and international
long-distance voice telephony services to residential customers. Our operating systems offer a full complement of telephony services to residential customers, including caller ID, call
waiting, call forwarding, call blocking, distinctive ringing and three-way calling.

UPC DistributionInternet.We operate our internet business locally through our
operating companies. Our local operating companies provide subscribers with high-speed internet access via their cable modem. We provide subscribers cable-based internet access that is
always-on for a flat fee. In 2001, we introduced on a trial basis network monitoring tools. These tools will allow us to comprehensively monitor our stated fair-use policy, and
will also enable us to offer more sophisticated products for heavy users.

UPC Media.In February 2001, we combined the management of our internet access and
content group,chello broadband, and our programming business led by UPCtv, to form a new division, UPC Media. In addition to internet access and
pay television, UPC Media will develop interactive services and transactional television for our digital product.

chello broadbandprovides our local operating companies and non-affiliated local operators with access to the internet
gateway and additional services, such as high-speed connectivity, caching, local language broadband portals, and marketing support, through franchise agreements. To date, substantially all
ofchello broadband's revenues were subscription based and derived from our local operating companies. These intercompany revenues have been eliminated
in our consolidated operating results. We believe we have an opportunity to increase non-affiliated revenue through thechello broadbandservice in future years. We cannot predict whether our products and services, including broadband internet services in general, will become accepted or profitable in these markets. At
September 30, 2001,chello broadbandhad approximately 497,000 subscribers, including 33,000 non-UPC affiliates.

We
plan to deploy interactive products which will support our planned digital roll-out across Europe, including, interactive/enhanced television, walled garden,
e-commerce and entertainment and internet on the television. We also plan to deploy transactional television services, which include NVOD and VOD. In addition UPCtv has developed and
launched eight pay-per-view channels of various genres since May 1999. We have constructed a pan-European digital distribution platform designed for the
state of the art production and the digital distribution of our new channels and other signals to our upgraded networks. To date, substantially all of our programming businesses' revenues were
subscription-based and derived from our local operating companies. These intercompany revenues have been eliminated in our consolidated operating results. We believe we have an opportunity to grow
non-affiliated revenue through the media group's service in future years. We cannot predict whether our products and services, will become accepted or profitable in these markets. We
believe these businesses will become increasingly inter-dependent and overlapping.

Priority Telecom.Priority Telecomoffers
telephony services to business customers. Services vary per country, covering the range of voice, data, IP and hosting. In the course of 2000,Priority
Telecombrought together a separate management team responsible for the provisioning of these services to

30

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business customers. At September 30, 2001,Priority Telecomhad approximately 7,200 business customers.

Pricing

UPC DistributionAnalog Video and Digital Services.We usually charge a
one-time installation fee when we connect video subscribers, a monthly subscription fee that depends on whether basic or expanded basic tier service is offered, and incremental amounts for
those subscribers purchasing pay-per-view and premium programming. For our digital set-top computer, we may collect a customer deposit as security.

UPC DistributionVoice.Revenue from residential telephony services usually
consists of a flat monthly line rental and a usage charge based upon minutes. In order to achieve high-growth from early market entry, we price our telephony service at a discount compared
to services offered by incumbent telecommunications operators. Initially, we will also waive or substantially discount installation fees.

UPC DistributionInternet.To date, virtually all of our revenues have been derived
from monthly subscription fees. Most local operators have chosen to waive installation charges, although in most instances we collect a customer deposit. Currently, our services are offered to
residential subscribers at flat subscription fees. Following the introduction of bandwidth monitoring tools, we anticipate charging tiered pricing levels which more accurately reflect the individual
consumption of bandwidth. For business subscribers to services other than our standard broadband internet access services, we generally agree the pricing with local operators on a case by case basis,
depending on the size and capacity requirements of the businesses.

UPC Media.  chello broadbandprovides internet access and other services for a fee based upon a
percentage of subscription revenue. For our programming channels, including our UPCtv and some Wizja TV channels, we charge cable operators on a per-subscriber basis. Charges for
transactional television are per transaction.

Priority Telecom.Pricing may differ per type of service rendered. Revenue from voice services
usually consist of a flat monthly fee plus a usage based charge. Data, IP and hosting services are typically billed flat by month.

Costs of Operations

UPC DistributionAnalog Video and Digital Services.Direct operating costs include
the costs of programming, which are variable, based on the number of subscribers. The cost per subscriber is established either by negotiation between us and the program supplier or by rates
negotiated by cable associations. Indirect operating costs include franchise fees and operating expenses necessary to provide service to the subscriber. Franchise fees, where applicable, are typically
based upon a percentage of revenue. Other operating expenses include personnel, service vehicles, maintenance and facilities. Selling, general and administrative expenses includes branding, marketing
and customer acquisition costs, personnel related costs, such as stock-based compensation expense, legal and accounting, human resources, office facilities and other overhead costs.

UPC DistributionVoice.Direct operating costs include interconnection costs.
Indirect operating costs include network operations, customer operations and customer care. Interconnection costs are variable based upon usage as determined through negotiated interconnection
agreements. Selling, general and administrative expenses includes branding, marketing and customer acquisition costs, personnel related costs, such as stock-based compensation expense, legal and
accounting, human resources, office facilities and other overhead costs.

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UPC DistributionInternet.Direct operating costs for our local operating companies
include the franchise fee paid tochello broadbandfor internet access. Indirect operating costs include personnel, service vehicles, maintenance and
facilities. Selling, general and administrative expenses include branding, marketing, customer acquisition costs, personnel-related costs, including stock-based compensation expenses, legal and
accounting, office facilities and other overhead costs.

UPC Media.Operating costs forchello
broadband'saccess consist primarily of leased-line and network related costs. Operating costs for our interactive television, transactional services and pay
television groups within UPC Media include the costs of programming rights, portal design and development, production costs, and distribution costs, including transponder fees and operating costs. A
significant portion of these costs are fixed in nature through contractual commitments. Selling, general and
administrative expenses include branding, marketing, personnel-related costs, legal and accounting, office facilities and other overhead costs.

Priority Telecom.Operating costs include costs of installation of our customers and costs of
ownership and management of our part of the network. Selling, general and administrative expenses include branding, marketing, customer acquisition costs, personnel-related costs, including
stock-based compensation expenses, legal and accounting, office facilities and other overhead costs.

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The following table presents an overview of our revenue and Adjusted EBITDA by segment for the three and nine months ended September 30, 2001 and 2000.

|                           |                           | For the Three Months ended September 30, |         | For the Nine Months ended September 30, |        
|-------------------------- | ------------------------- | ---------------------------------------- | ------- | --------------------------------------- | -------
|
|
|Revenue:                   |                           |                                          |         |                                         |        
|UPC Distribution           |                           |                                          |         |                                         |        
|                           | Cable televison           |                                          | 188,541 |                                         | 163,376
|                           | Telephony(1)              |                                          | 45,260  |                                         | 29,186 
|                           | Internet                  |                                          | 48,030  |                                         | 23,291 
|                           | DTH                       |                                          | 21,987  |                                         | 16,045 
|                           | Other                     |                                          | 16,343  |                                         | 2,036  
|                           | Intercompany Eliminations |                                          | (15,366 | )                                       |       
|                           |                           |                                          |         |                                         |        
|Total Distribution         |                           | 304,795                                  |         | 233,934                                 |        
|Priority Telecom(1)        |                           | 53,403                                   |         | 21,698                                  |        
|chello broadband           |                           | 18,260                                   |         | 8,790                                   |        
|Programming                |                           | 23,483                                   |         | 18,622                                  |        
|Corporate, IT and Other    |                           | 1,271                                    |         |                                        |        
|Intercompany Eliminations  |                           | (58,768                                  | )       | (25,167                                 | )      
|                           |                           |                                          |         |                                         |        
|                           |                           | 342,444                                  |         | 257,877                                 |        
|                           |                           |                                          |         |                                         |        
|Adjusted EBITDA(2):        |                           |                                          |         |                                         |        
|UPC Distribution           |                           |                                          |         |                                         |        
|                           | Cable television          |                                          | 69,102  |                                         | 60,906 
|                           | Telephony(1)              |                                          | (6,753  | )                                       | (20,520
|                           | Internet                  |                                          | 3,609   |                                         | (13,457
|                           | DTH                       |                                          | 156     |                                         | (8,696 
|                           | Other                     |                                          | (13,339 | )                                       | (3,584 
|                           |                           |                                          |         |                                         |        
|Total Distribution         |                           | 52,775                                   |         | 14,649                                  |        
|Priority Telecom(1)        |                           | (32,021                                  | )       | (8,016                                  | )      
|chello broadband           |                           | (9,475                                   | )       | (33,397                                 | )      
|Programming                |                           | (24,507                                  | )       | (27,230                                 | )      
|Corporate, IT and Other(3) |                           | (23,606                                  | )       | (42,562                                 | )      
|                           |                           |                                          |         |                                         |        
|                           |                           | (36,834                                  | )       | (96,556                                 | )      
|                           |                           |                                          |         |                                         |        

---

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UPC Distribution



For the three months ended September 30, 2001, revenue from UPC Distribution increased 70.9 million to 304.8 million, from
233.9 million for the three months ended September 30, 2000, a 30.3% increase. Increases of 25.2 million from cable television, 16.1 million from telephony,
24.7 million from internet, and 5.9 million from DTH, were partially offset with a decrease of 1.1 million from other, net of related intercompany eliminations. For the nine
months ended September 30, 2001, revenue from UPC Distribution increased 245.6 million to 887.0 million, from 641.3 million for the nine months ended September 30,
2000, a 38.3% increase. Of the increase, 101.8 million is from cable television, 47.4 million is from telephony, 70.2 million is from internet and 29.1 million is from DTH.
Other, net of related intercompany eliminations, decreased 2.9 million.

The
increase in cable television revenue of 25.2 million for the three months ended September 30, 2001, is due to increased subscribers from our acquisition of EWT
(Germany), which we included in our consolidated results effective October 1, 2000, as well as increased average revenue per basic cable subscriber and organic subscriber growth. Cable
television revenue from EWT included in our consolidated results for the three months ended September 30, 2001, totaled 12.8 million, compared to nil for the three months ended
September 30, 2000. The increase in cable television revenue of 101.8 million for the nine months ended September 30, 2001, is also due to increased subscribers from acquisitions,
as well as increased revenue per average basic cable subscriber and organic subscriber growth. Cable television revenue from K&T (the Netherlands), which we include in our consolidated results
effective March 31, 2000 and EWT included in our consolidated results for the nine months ended September 30, 2001, totaled 85.7 million, compared to 18.6 million for the
nine months ended September 30, 2000.

The
increase in telephony revenue of 16.1 million and 47.4 million for the three and nine months ended September 30, 2001, respectively, primarily relates to
organic subscriber growth. Residential telephony subscribers increased 127.8%, from approximately 348,600 at September 30, 2000 to approximately 445,600 at September 30, 2001.

The
increase in internet revenue of 24.7 million and 70.2 million for the three and nine months ended September 30, 2001, respectively, primarily relates to
organic subscriber growth. Internet subscribers increased 74.7%, from approximately 272,600 at September 30, 2000 to approximately 476,200 at September 30, 2001. We continued to increase
subscriber penetration in systems where we had launched internet services prior to January 1, 2000. In addition, we launched internet in the second half of 2000 in other systems, including
Poland, Hungary and the Czech Republic. The acquisition of K&T also
contributed to increased internet revenue. Internet revenue from K&T included in our consolidated results for the three months ended September 30, 2001, totaled 4.5 million, compared to
1.9 million for the three months ended September 30, 2000. Internet revenue from K&T included in our consolidated results for the nine months ended September 30, 2001, totaled
10.1 million, compared to 2.7 million for the nine months ended September 30, 2000.

The
increase in DTH revenue of 5.9 million and 29.1 million for the three and nine months ended September 30, 2001, respectively, primarily relates to organic
subscriber growth. DTH subscribers increased from approximately 395,000 at September 30, 2000 to approximately 413,000 at

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September 30, 2001. In the second half of 2000, we launched DTH service in our systems in Hungary, the Czech Republic and the Slovak Republic, leveraging off our existing DTH platform in
Poland.

The
increase in other revenue of 14.3 million and 39.0 million for the three and nine months period ended September 30, 2001, respectively, primarily relates to
revenue recognized for the provision of network related services toPriority Telecom. UPC Distribution andPriority
Telecomhave entered into agreements for the provision by UPC Distribution of network, maintenance and operations services. This intercompany revenue eliminates in our
consolidated results.



For the three months ended September 30, 2001, Adjusted EBITDA from UPC Distribution increased 38.1 million to 52.8 million, from
14.6 million for the three months ended September 30, 2000, a 260.3% increase. Of the increase, 8.2 million is from cable television, 13.8 million is from telephony,
17.1 million is from internet and 8.9 million is from DTH. These increases were partially offset by a decrease of 9.8 million in other. For the nine months ended
September 30, 2001, Adjusted EBITDA from UPC Distribution increased 83.0 million to 131.0 million, from 48.1 million for the nine months ended September 30, 2000, a
172.7% increase. Of the increase, 33.4 million is from cable television, 37.5 million is from telephony, 31.2 million is from internet and 6.9 million is from DTH. These
increases were partially offset by a decrease of 25.9 million in other.

The
increase in cable television Adjusted EBITDA of 8.2 million for the three months ended September 30, 2001 is due to our acquisition of EWT (Germany) and organic
subscriber growth, which has allowed us to realize economies of scales. Cable television Adjusted EBITDA from EWT included in our consolidated results for the three months ended September 30,
2001, totaled 6.7 million, compared to nil for the three months ended September 30, 2000. The increase in cable television Adjusted EBITDA of 33.4 million for the nine months
ended September 30, 2001 is primarily due to our acquisition of K&T (the Netherlands) and EWT (Germany). Cable television Adjusted EBITDA from
K&T and EWT included in our consolidated results for the nine months ended September 30, 2001, totaled 51.0 million, compared to 18.4 million for the nine months ended
September 30, 2000.

The
improvement of telephony Adjusted EBITDA of 13.8 million and 37.5 million for the three and nine months ended September 30, 2001, respectively, and the
improvement of internet Adjusted EBITDA of 17.1 million and 31.2 million for the three and nine months ended September 30, 2001, respectively, primarily relates to organic
subscriber growth, which has allowed us to realize economies of scale. In addition, we have realized costs savings from continued integration and restructuring of operations, as well as lower
start-up costs.

The
increase in DTH Adjusted EBITDA of 8.9 million and 6.9 million for the three and nine months ended September 30, 2001, respectively, relates to positive
Adjusted EBITDA from our systems in Hungary and Czech Republic, as they gained subscribers, which allowed us to realize economies of scales. The increase in DTH Adjusted EBITDA of Poland is due to
lower marketing and customer acquisition costs for both the three and nine months period.

The
decrease in other Adjusted EBITDA of 9.8 million and 25.9 million for the three months and nine months ended September 30, 2001, respectively, primarily
relates to start-up costs for our digital services in the Netherlands and Austria. The negative impact on Adjusted EBITDA of digital services is partially offset by positive Adjusted
EBITDA recognized for the provision of the network related services toPriority Telecom. We are in the early stages of offering our digital product in
the Netherlands, Austria, Norway and Sweden, and are incurring costs related to sales and marketing, training and customer care for our digital services. Adjusted EBITDA associated with our digital
services in the Netherlands and Austria for the three and nine months ended September 30, 2001 was 13.3 million and 40.8 million, respectively.

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Priority Telecom



For the three months ended September 30, 2001, revenue fromPriority Telecomincreased
31.7 million to 53.4 million, from 21.7 million for the three months ended September 30, 2000. For the nine months ended September 30, 2001, revenue from Priority Telecomincreased 134.0 million to 183.3 million, from 49.4 million for the nine months ended September 30, 2000.
The increase in revenue of 31.7 million for the three months ended September 30, 2001, is primarily due to the acquisition of Cignal and to a lesser extent organic subscriber growth. The
increase in revenue of 134.0 million for the nine months ended September 30, 2001, is due to acquisitions of Cignal and K&T and to subscriber growth. In November 2000, we
completed the acquisition of Cignal and began consolidating its operations. In addition, UPC Distribution acquired K&T and began consolidating its results effective March 31, 2000. Cignal
revenue included in the consolidated revenue ofPriority Telecomfor the three and nine months ended September 30, 2001, totaled
12.0 million and 54.0 million, respectively.



For the three months ended September 30, 2001, Adjusted EBITDA fromPriority Telecomdecreased
24.0 million to a negative 32.0 million, from a negative 8.0 million for the three months ended September 30, 2000. For the nine months ended September 30, 2001,
Adjusted EBITDA fromPriority Telecomdecreased 61.5 million to a negative 79.5 million, from a negative 17.9 million for the nine
months ended September 30, 2000. The decrease in Adjusted EBITDA of 24.0 million and 61.5 million for the three and nine months ended September 30, 2001, respectively,
relates primarily to the acquisition of Cignal. In addition,Priority Telecomincurred costs for the development and launch of products within its
markets that were carved out from existing operations in the Netherlands, Austria, Norway and Sweden.

chello broadband



For the three months ended September 30, 2001, revenue fromchello broadbandincreased
9.5 million to 18.3 million, from 8.8 million for the three months ended September 30, 2000. For the nine months ended September 30, 2001, revenue from chello broadbandincreased 27.1 million to 48.6 million, from 21.5 million for the nine months ended September 30, 2000. The
increase in revenue of 9.5 million and 27.1 million for the three and nine months ended September 30, 2001, respectively, is primarily due to increased internet subscribers. We
continued to increase internet subscribers in UPC Distributions' systems, which have a franchise agreement withchello broadband. In addition, UPC
Distribution launchedchello broadband's services in Poland and Hungary in the second half of 2000.

In
general,chello broadbandreceives 40% of subscription-based revenue for its services from the local operator. Intercompany revenues
are eliminated in our consolidated operating results. Intercompany revenues for three months ended September 30, 2001 and 2000 were 17.9 million and 8.7 million, respectively.
Intercompany revenues for the nine months ended September 30, 2001 and 2000 were 46.9 million and 21.2 million, respectively.



For the three months ended September 30, 2001, Adjusted EBITDA fromchello broadbandimproved
23.9 million to a negative 9.5 million, from a negative 33.4 million for the three months ended September 30, 2000. For the nine months ended September 30, 2001,
Adjusted EBITDA fromchello broadbandimproved 46.2 million to a negative 48.3 million, from a negative 94.5 million for the

36

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nine months ended September 30, 2000. The improvement in Adjusted EBITDA of 23.9 million and 46.2 million for the three and nine months ended September 30, 2001,
respectively, primarily relates to continued subscriber growth, as well as decreased start-up and development costs, and cost efficiencies from the integration and restructuring of
operations.

Programming



For the three months ended September 30, 2001, revenue from our programming businesses increased 4.9 million to 23.5 million, from
18.6 million for the three months ended September 30, 2000. For the nine months ended September 30, 2001, revenue from our programming businesses increased 25.1 million to
73.0 million, from 47.8 million for the nine months ended September 30, 2000. The increase in revenue of 4.9 million and 25.1 million for the three and nine months
ended September 30, 2001, respectively, relates to revenue from our Polish, Hungarian and Czech programming, as well as increased revenue from UPCtv. UPCtv provides programming to our
distribution companies as well as to non-UPC video service companies. Our Central and Eastern Europe sports channels were launched in the second half of 2000 and also contributed to the
increase in revenue.

In
general, programming revenue relates to programming provided to UPC Distribution. Intercompany revenues are eliminated in our consolidated operating results. Intercompany revenues
for the three months ended September 30, 2001 and 2000 were 20.8 million and 16.5 million, respectively. Intercompany revenues for the nine months ended September 30, 2001
and 2000 were 64.9 million and 43.3 million, respectively.



For the three months ended September 30, 2001, Adjusted EBITDA from our programming business improved 2.7 million to a negative
24.5 million, from a negative 27.2 million for the three months ended September 30, 2000. The improvement in Adjusted EBITDA of 2.7 million for the three months ended
September 30, 2001, primarily relates to improved EBITDA from our central European programming, which is due to economies of scale and increase in subscriber base compared to 2000. For the nine
months ended September 30, 2001, Adjusted EBITDA from our programming business decreased 2.8 million to a negative 77.7 million, from a negative 74.9 million for the nine
months ended September 30, 2000. The decrease in Adjusted EBITDA of 2.8 million for the nine months ended September 30, 2001, primarily relates to costs related to the development
of our pay tv business and transactional television.

Corporate, IT and Other



For the three months ended September 30, 2001, Adjusted EBITDA from corporate, IT and other improved 19.0 million to a negative
23.6 million, from a negative 42.6 million for the three months ended September 30, 2000. For the nine months ended September 30, 2001, Adjusted EBITDA from corporate, IT
and other improved 15.0 million to a negative 77.7 million, from a negative 92.7 million for the nine months ended September 30, 2000. Adjusted EBITDA for corporate, IT and
other includes costs of our corporate functions, such as corporate development, investor relations, finance, legal, regulatory, human resources and marketing. Adjusted EBITDA for corporate, IT and
other also includes costs related to the development and roll-out of our pan-European financial and customer care systems. Other costs included in corporate, IT and other
include development costs, such as costs related to the development of our digital set-top computer, and investigation of new technologies, such as NVOD, voice-over IP
telephony and satellite. Other Adjusted EBITDA from Priority Wireless operations, which were previously recorded withPriority Telecom, included in our
consolidated results

37

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for the three and nine months ended September 30, 2001, totaled negative 1.8 million and negative 2.7 million, respectively, compared to negative 3.6 million and negative
7.5 million, for the three and nine months ended September 30, 2000.

Depreciation and Amortization

During the three months ended September 30, 2001, our depreciation and amortization expense increased 75.0 million to 262.4 million, from
187.4 million for the three months ended September 30, 2000, a 40.0% increase. During the nine months ended September 30, 2001, our depreciation and amortization expense increased
290.7 million to 768.0 million, from 477.3 million for the nine months ended September 30, 2000, a 60.9% increase. Of this increase, approximately 30.2 million and
74.4 million for the three months and nine months, respectively, relates to increased amortization expense for goodwill created in connection with acquisitions in 2000. Depreciation expense
also increased due to the acquisitions that closed during 2000, which we have consolidated, as well as additional depreciation expense on capital expenditures to upgrade the network in our Western
European systems and new-build for developing systems.

Impairment and Restructuring Charges

During the three and nine month period ended September 30, 2001, impairment charges increased 38.3 million and 348.7 million,
respectively. During the second quarter of 2001, we identified indicators of possible impairment of long-lived assets, principally IRU's and related goodwill, within our CLEC subsidiary, Priority Telecom. Such indicators included significant declines in the market value of publicly traded telecommunications providers and a change,
subsequent to the acquisition of Cignal, in the way that certain assets from the Cignal acquisition would be used withinPriority Telecom. We have
changed our strategic plans for using withinPriority Telecomcertain assets acquired in the Cignal transaction because of reduced levels of private
equity funding activity for CLEC businesses and our decision to complete a public offering ofPriority Telecomin the second half of 2001. The changes
in strategic plans included a decision to phase-out the legacy international wholesale voice operations of Cignal. When we andPriority
Telecomreached agreement to acquire Cignal in the second quarter of 2000, the companies originally intended to continue the international wholesale voice operations of Cignal
for the foreseeable future. This original plan for the international wholesale voice operations was considered in the determination of the consideration to be paid for Cignal and the subsequent
allocation of the purchase price. This allocation was completed by an independent third party in November 2000. In 2001, using the strategic plan prepared for contemplated financing, an
impairment assessment test and measurement in accordance with SFAS 121 was completed, resulting in a write-down of tangible assets, related goodwill and other impairment charges of
19.0 million and 319.0 million for the three and nine months ended September 30, 2001, respectively. In addition to the Cignal write-down, restructuring and other impairment
charges relating toPriority Telecom, were 10.3 million for both the three and nine months ended September 30, 2001. One of our
subsidiaries has impaired the value of DTH boxes leased to certain former customers for which the recovery of the value of the boxes is unlikely. The amount of the impairment is based on the number of
disconnected customers, to whom the DTH boxes were rented, decreased by the number of collected boxes and multiplied by the net book value of the box at the end of the corresponding period. The amount
of impairment charges for these DTH boxes for the three and nine months ended September 30, 2001, were 9.1 million and 19.4 million, respectively.

Interest Income

During the three months ended September 30, 2001 as compared to the three months ended September 30, 2000, interest income increased
8.9 million to 17.3 million, from 8.4 million, a 106.0% increase. During the nine months ended September 30, 2001 as compared to the nine months ended

38

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September 30, 2000, interest income increased 14.4 million to 44.9 million, from 30.5 million, a 47.2% increase. The increase is due to a higher average cash balance during
the three and nine months ended September 30, 2001, mainly resulting from our drawdown of the UPC Bridge Facility and the UPC Distribution Bank Facility and the preference shares issuance in
December 2000, and from the proceeds of our Exchangeable Loan in May 2001.

Interest Expense

During the three months ended September 30, 2001 as compared to the three months ended September 30, 2000, interest expense increased
46.1 million to 222.9 million, from 176.8 million, a 26.1% increase. During the nine months ended September 30, 2001 as compared to the nine months ended
September 30, 2000, interest expense increased 203.7 million to 688.2 million, from 484.5 million, a 42.0% increase. The increase in 2001 is primarily due to our borrowings
under the UPC Distribution Bank Facility, the Exchangeable Loan and the UPC Bridge Facility. A significant amount of our interest expense in 2001 relates to accretion on our discount notes, which are
not currently cash pay.

|                       |                    | For the Three Months Ended September 30, |         | For the Nine Months Ended September 30, |        
|---------------------- | ------------------ | ---------------------------------------- | ------- | --------------------------------------- | -------
|
|
|Cash Current Pay:      |                    |                                          |         |                                         |        
|                       | Bank               |                                          | (59,913 | )                                       | (33,835
|                       | Senior Notes       |                                          | (74,975 | )                                       | (74,346
|                       | Other              |                                          |        |                                         | (1,346 
|                       |                    |                                          |         |                                         |        
|                       |                    | (134,888                                 | )       | (109,527                                | )      
|                       |                    |                                          |         |                                         |        
|Non-Cash Accretion:    |                    |                                          |         |                                         |        
|                       | Discount Notes     |                                          | (67,804 | )                                       | (59,445
|                       | Exchangeable Loan  |                                          | (14,742 | )                                       |       
|                       | Redeemed DIC Loan  |                                          |        |                                         | (3,881 
|                       | New DIC Loan       |                                          | (169    | )                                       |       
|                       | Deferred Financing |                                          | (5,250  | )                                       | (3,930 
|                       |                    |                                          |         |                                         |        
|                       |                    | (87,965                                  | )       | (67,256                                 | )      
|                       |                    |                                          |         |                                         |        
|Total Interest Expense |                    | (222,853                                 | )       | (176,783                                | )      
|                       |                    |                                          |         |                                         |        

Provision for Loss on Investments

We evaluate our investments in publicly traded securities accounted for under the equity method for impairment in accordance with APB 18 and SAB 59. 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 our ability to retain
our investments for a period of time sufficient to allow 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. Based on our analyses of specific quantitative and qualitative factors as of September 30, 2001, we determined the decline in market value of SBS and PrimaCom to be
other than temporary, and as a result we recorded a write down of our investments in SBS and PrimaCom, amounting to 114.6 million and 261.3 million, respectively, for both the three and
nine months ended September 30, 2001.

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Foreign Exchange Gain (Loss) and Other Income (Expense)

The net loss from foreign exchange gain (loss) and other income (expense) decreased 381.0 million from a loss of 153.7 million for the three
months ended September 30, 2000 compared to a gain of 227.4 million for the three months ended September 30, 2001. During the nine months ended September 30, 2001 as
compared to the nine months ended September 30, 2000, the net loss from foreign exchange and other decreased 396.5 million to a gain of 118.9 million from a loss of
277.6 million. The decrease for the three-month period ended September 30, 2001, is mainly due to a foreign exchange gain of 171.1 million and a gain of 64.6 million
relating to the valuation of the derivative assets in connection with the adoption of SFAS 133. The decrease for the nine month period ended September 30, 2001, is to due a gain of
103.6 million relating to the valuation of the derivative assets in connection with the adoption of SFAS 133, and due to a gain of 17.3 million as foreign exchange from the
decreased value of the US dollar against the Euro.

Cumulative effect of Accounting Change

Effective January 1, 2001, we adopted Statement of Financial Accounting Standards No. 133, "Accounting for Derivative and Hedging Activities"
("SFAS 133"), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts and for hedging activities.
All derivatives, whether designated in hedging relationships or not, are required to be recorded on the balance sheet at fair value. The adoption of SFAS 133 on January 1, 2001, resulted
in a cumulative increase to income of 35.3 million and a cumulative increase to Other Comprehensive Income ("OCI") of 36.7 million. The increase to income was attributable to a loss of
approximately 36.7 million reclassified from OCI for the value of certain warrants held by the Company, which are derivatives and are not designated as a hedging instrument, and income of
approximately 72.0 million related to gains associated with the cross currency swaps which are held by the Company, which do not qualify as hedging instruments as defined by SFAS 133. We
use derivative instruments to manage exposures to foreign currency and interest rate risks.

Share in Results of Affiliated Companies, Net

For the three months ended September 30, 2001, our share in net losses of affiliated companies increased 5.0 million to 45.7 million, from
40.6 million for the three months ended September 30, 2000, a 12.4% increase. During the nine months ended September 30, 2001, as compared to the nine months ended
September 30, 2000, our share in net losses of affiliated companies increased 36.0 million to 107.7 million, from 71.7 million for the nine months ended
September 30, 2000, a 50.2% increase. The increase for both the three and nine months ended September 30, 2001, was primarily due to increased losses from our investments in SBS,
PrimaCom and Tevel.

Statements of Cash Flows

We had cash and cash equivalents of 893.8 million as of September 30, 2001, an increase of 711.8 million from 182.0 million as of
September 30, 2000.

Cash Flows from Operating Activities

During the nine months ended September 30, 2001, net cash flow used in operating activities was 808.2 million compared to a use of
556.5 million for the comparable period in 2000. This increase in cash flow used for operating activities was primarily related to continued costs incurred for the development and introduction
of our new services, as well as an unwind of our current liabilities.

40

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Cash Flows from Investing Activities

We used 705.1 million of net cash flow in investing activities during the nine months ended September 30, 2001, compared to
2,840.1 million for the nine months ended September 30, 2000. During the period ended September 30, 2001, we acquired Alkmaar for 22.9 million, net of cash acquired and
made a net investment in affiliates of 26.6 million. Capital expenditures represented 650.5 million, excluding approximately 3.0 million relating to increased inventory, that once
placed in service will be transferred to property, plant and equipment.

During
the nine months ended September 30, 2000, cash was used principally for acquisitions, including K&T, for 1,046.3 million, net of cash acquired, UPC Magyaroszag
for 63.9 million, net of cash acquired, Tebecai for 62.2 million, net of cash acquired, Haarlem for 62.2 million, net of cash acquired, and other acquisitions totaling
153.0 million, net of cash acquired. Capital expenditures represented 1,092.6 million. During this period we made a net investment in affiliates of 315.4 million, including our
acquisitions of an additional 10.5% interest in SBS for 162.5 million, shares in PrimaCom for 123.6 million and other investments in affiliates of 29.3 million. We also made a net
investment in securities of 44.5 million.

Cash Flows from Financing Activities

We had 817.4 million of cash flows from financing activities during the nine months ended September 30, 2001, compared to 2,552.8 million
for nine months ended September 30, 2000. The principal source of cash was a 6% Exchangeable Loan from Liberty amounting to 1,000 million and a drawdown of 600.0 million from the
UPC Distribution Bank Facility. We paid down the UPC Bridge Facility of 750.0 million and 37.3 million of various long and short-term debt facilities.

The
principal source of cash for the nine months ended September 30, 2000, was net proceeds from our senior notes and discount notes offering in January 2000 of
1,594.2 million. Additional sources of cash were from long-term and short-term borrowings of 455.4 million and 1,005.4 million, respectively.
Long-term borrowings included borrowings under the UPC Senior Credit Facility of 281.4 million, 148.0 million under the France Facility, and other borrowings of
26.0 million. We used proceeds of 231.4 million from the New A2000 Facility to pay off the existing A2000 Facilities. We had additional proceeds from short-term debt of
774.0 million, including 32.9 million from the GelreVision facility, 500.0 million from the new UPC Bridge Loan, and 227.4 million under the UPC Corporate Facility. We paid
down other long-term and short-term loans of 211.1 million. During the nine months ended September 30, 2000 we incurred deferred financing costs of
59.7 million.

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, telephony 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.

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, construction and development of our pan-European distribution
and programming facilities, including our origination facility, network operating center and related support systems and equipment require capital expenditures.

41

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Liquidity and Capital Resources

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



Our
distribution division has historically been funded by bank loans and will continue to be in the future, primarily from the UPC Distribution Bank Facility. Our service divisions,
includingchello broadband, programming andPriority Telecomhave been funded through proceeds from our
equity and debt offerings.

Restrictions under our July 1999, October 1999 and January 2000 Indentures

Our activities are restricted by the covenants of our indentures dated July 30, October 29, 1999 and January 20, 2000, under which senior
notes and senior discount notes were issued. Among other things, our indentures place certain limitations on our ability, and the ability of our subsidiaries, to borrow money, pay dividends or
repurchase stock, make investments, create certain liens, engage in certain transactions with affiliates, and sell certain assets or merge with or into other companies.

Under
the terms of our indentures, as we raise additional paid-in equity, we are permitted to incur additional debt.

Restrictions under United Indentures

As a subsidiary of United, our activities are restricted by the covenants in United's indentures dated February 5, 1998 and April 29, 1999. Among
other things, the United indentures place certain limitations on our ability, and the ability of our subsidiaries, to borrow money, pay dividends or repurchase stock, make investments, create certain
liens, engage in certain transactions with affiliates, and sell certain assets or merge with or into other companies. The United indentures generally place limitations on the additional amount of debt
that we or our subsidiaries or controlled affiliates may borrow, preferred shares that they or we may issue, and the amount and type of investments we may make.

Amsterdam ExchangeNegative Equity

As of September 30, 2001 we have negative shareholders equity. This does not affect the fundamentals of our business and is a function of the
significant capital investment with correspondingly high depreciation and amortization charges, typical of the telecommunications industry. Upon occurrence of the event, we promptly reported this
deficit to the Euronext. It is expected that the Euronext will put our shares on the so called "penalty bench" until such moment that we returned to positive shareholders equity and will remove our
shares from the AEX index after three months. This would
not, however, result in a delisting of our shares. We believe that this trading measure should not have an impact on our business operations.

42

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In accordance with article 108A, book 2 of the Dutch Civil Code, we will address the issue of negative equity at the next general shareholders' meeting.

Nasdaq National Market Listing Requirements

Our ordinary shares A are traded in the form of American Depositary Shares on the Nasdaq National Market under the symbol "UPCOY." Nasdaq has traditionally
maintained certain rules regarding bid prices for continued listing on the market. The minimum bid applicable to us for continued listing has been USD 1.00.

On
September 27, 2001, Nasdaq announced a suspension of the minimum bid requirements for continued listing. The suspension of these requirements will remain in effect until at
least January 2, 2002. After that date, we are not certain whether Nasdaq will re-institute the minimum bid requirements for continued listing on the market.

On
August 16, 2001, our stock began trading below the USD 1.00 minimum bid price and has not traded above USD 1.00 to date. We will not be considered deficient in
our continued listing requirements with Nasdaq while the suspension of the requirement remains in effect. Should Nasdaq reinstate the minimum bid requirement and if our shares continue to trade below
that minimum bid requirement, we would potentially be subject to having our ADSs no longer eligible for trading on Nasdaq's National Market.

Sources of Capital

We had 893.8 million of unrestricted cash and cash equivalents on hand as of September 30, 2001. In 2000, we raised approximately
7.6 billion, and gained access to an additional 2.8 billion from a combination of banks, bonds and equity markets. We intend to continue to access these sources of capital, as well as
other less traditional sources including vendor financing, equity partners, and leasing structures. We may also obtain funds from strategic partnerships and the sale of assets.

On
January 20, 2000, we closed an offering of our 111/2% senior notes due 2010; our 111/4% senior notes due 2010 and our 133/4%
senior discount notes due 2010. The offering generated gross proceeds of approximately 1.6 billion. Proceeds from this bond offering were used for working capital and other general corporate
purposes, including acquisitions of businesses and possible investments.

In
January 2000, UPC Nederland, refinanced its existing bank facilities with a one year term-loan bridge facility of 231.4 million and a one year revolving
credit bridge facility of 49.9 million, subject to certain availability covenants. In October 2000, we repaid this facility with the proceeds from the UPC Distribution Bank Facility.

At
the end of March 2000 we were provided with a fully committed 2.0 billion stand-by revolving credit facility. UPC and certain subsidiaries guarantee the
facility. We repaid the 750 million borrowed on this facility in May 2001 with the proceeds of the Exchangeable Loan, described below.

On
April 7, 2000, Médiaréseaux refinanced its existing debt and the existing debt of Videopole and RCF with a 250 million bridge facility.
The refinancing of the Rhone Vision Cable Credit Facility with this facility was completed in the fourth quarter of 2000. In October 2000, we repaid this facility with the proceeds from the UPC
Distribution Bank Facility.

In
connection with the Eneco K&T acquisition, UPC Nederland received a short-term bridge loan of 500 million secured with guarantees of certain of our Dutch assets.
Drawdowns of the UPC Bridge Loan refinanced certain existing inter-company loans from UPC N.V. In October 2000, we repaid this facility with the proceeds from the UPC Distribution Bank
Facility.

In
October 2000, we closed a 4.0 billion operating and term loan facility ("The UPC Distribution Bank Facility"). The facility is guaranteed by existing cable operating
companies, excluding Polish and

43

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German operations. The UPC Distribution Bank Facility bears interest at EURIBOR +0.75%-4.0% depending on certain leverage ratios, and an annual commitment fee of 0.5% over the undrawn
amount is applicable. A first drawing was made in October 2000, to refinance existing operating company bank debt totaling 2.0 billion. The purpose of the UPC Distribution Bank Facility
is to finance further digital rollout and the triple play strategy by our existing cable companies, excluding Polish and German operations. Additional availability is linked to certain performance
tests. As is customary for a financing of this nature, there are certain financial covenants and restrictions on our cable companies' ability to make dividends and/or other payments to us, incur
indebtedness, dispose of assets, merge and enter into affiliate transactions. We were in compliance with these covenants at September 30, 2001. Principal repayment will begin in 2004. The
facility reaches final maturity in 2009. At September 30, 2001, approximately 3.0 billion was outstanding under this facility. Subsequent to September 30, 2001, we have drawn an
additional 185.0 million on this facility. The facility is structured in different tranches,
with one tranche denominated in dollars for the amount of USD 347.5 million, the remainder of the facility is denominated in Euros. Concurrent with the closing, we entered into cross currency
and interest rate swaps, pursuant to which a USD 347.5 million obligation under the UPC Distribution Bank Facility was effectively changed into a 408.1 million obligation until
November 29, 2002. In addition, we entered into an interest rate swap in respect of 1,725 million to fix the EURIBOR portion of the interest calculation at 4.5475% for the period ending
April 15, 2003. Effectively, the entire USD tranche has been swapped in Euros.

In
December 2000, we sold 1.43 billion worth of convertible preference shares and warrants for cash, to a group of investors, including United.

In
May 2001, we completed the placement with Liberty of USD 1,255 million 6% Guaranteed Discount Notes due 2007 ("the Exchangeable Loan"), receiving proceeds of USD
856.8 million (Euro 1.0 billion). Liberty has the right to exchange the notes, which were issued by a wholly-owned subsidiary of UPC, into ordinary shares of UPC under certain
circumstances at USD 6.85 per share after May 29, 2002. The Exchangeable Loan is expected to be transferred to United as a part of a transaction between Liberty and United, which is expected to
close after approval by United shareholders sometime during the first half of 2002.

Certain Dutch Tax Issues

One of our Dutch systems was assessed for a transfer tax on immovable property in the amount of Euro 0.8 million for the purchase of a cable network. We
have always regarded our cable networks as movable property and not subject to such transfer tax. We are appealing this tax assessment. Should we be unsuccessful, our Dutch systems may be assessed for
taxes on similar transactions. We cannot predict the extent to which the taxes could be assessed retroactively or the amount of tax that our systems may be assessed for, although it may be
substantial, being 6% of the value attributable to our systems at the date of transfer. Because we own 100% of UPC Nederland, any tax liabilities assessed against our Dutch systems will be
consolidated with our results. We believe that, if our appeal is unsuccessful, most cable television companies and other utilities in The Netherlands would become subject to similar tax liabilities.
If this happens, we expect these entities would lobby the Dutch tax authorities with us against such tax assessments. We cannot, however, assure that such lobbying would be successful.

In
October 1999, the Dutch tax authorities issued an assessment on the 1995 tax return of one of our subsidiaries. The assessment, on a taxable amount of approximately
36.3 million, resulted in a tax payable of approximately 12.7 million. The Dutch tax authorities indicated that this assessment was issued to reserve the rights of the Dutch tax
authorities pending expiration of time under the statute of limitations. The assessment does not express an opinion of the Dutch tax authorities on the taxes due and is still subject to discussion. We
filed an appeal against the assessment to defend our tax filing position. We are in the final stage of settling with the Dutch tax authorities and expect that the assessment will decrease
substantially.

44

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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, our operating companies and we have not hedged our exposure to foreign currency exchange rate operating risks. Accordingly, from time to
time, we will 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. Occasionally we will
execute hedge transactions to reduce our exposure to foreign currency exchange rate risk. In connection with our offerings of senior notes in July 1999, October 1999, January 2000
and the UPC Distribution Bank Facility, we entered into cross-currency swap agreements, exchanging dollar-denominated debt for Euro denominated debt.

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, the Czech Republic and the Slovak Republic and operations, which report in US dollars. 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 currency 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 reporting currencies. As a result, amounts related to assets and liabilities reported on the
consolidated statements of cash flows will not agree with 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.

European Economic and Monetary Union

On January 1, 1999, eleven of the fifteen member countries of the European Union established fixed conversion rates between their existing sovereign
currencies and the Euro. The participating countries adopted the Euro as their common legal currency on that day. The Euro trades on currency exchanges and is available for non-cash
transactions during the transition period between January 1, 1999 and January 1, 2002. During this transition period, the existing currencies are scheduled to remain legal tender in the
participating countries as denominations of the Euro and public and private parties may pay for goods and services using either the Euro or the participating countries' existing currencies.

During
the transition period, within countries who have adopted the Euro, all operating companies' billing systems will include amounts in Euro as well as the respective country's
existing currency. We do not expect the introduction of the Euro to affect materially our cable television and other operations.

45

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Item 3Quantitative and Qualitative Disclosure About Market Risk

Investment Portfolio

As of September 30, 2001, we have cash and cash equivalents of approximately 893.8 million. We have invested this cash in highly liquid
instruments, which meet high credit quality standards with original maturities at the date of purchase of less than three months. These investments will be subject to interest rate risk and foreign
exchange fluctuations (with respect to amounts invested in currencies outside the European Monetary Union) however, the Company does not expect any material losses with respect to its investment
portfolio.

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. 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 exchange risk for debt which is denominated in foreign currencies outside of the
European Monetary Union as of September 30, 2001, including cash flows based on the expected repayment date and related weighted-average interest rates for debt. The information is presented in
Euro equivalents, which is the Company's reporting currency. The instruments' actual cash flows are denominated in US Dollars.

|                                                   | Amount Outstanding
as of September 30, 2001 |  |         |  |   |  |   |  |        |  |  
|-------------------------------------------------- | ------------------------------------------- |  | ------- |  | - |  | - |  | ------ |  | -
|
|
|
|
|Dollar Denominated Facilities                      |                                             |  |         |  |   |  |   |  |        |  |  
|UPC Senior Discount Notes due 2009                 | 569,820                                     |  | 35,610  |  |  |  |  |  |       |  | 
|UPC Senior Discount Notes due 2009                 | 350,481                                     |  | 21,896  |  |  |  |  |  |       |  | 
|UPC Senior Discount Notes due 2010                 | 702,200                                     |  | 42,988  |  |  |  |  |  |       |  | 
|UPC Senior Notes due 2010                          | 651,839                                     |  | 96,748  |  |  |  |  |  |       |  | 
|PCI Notes                                          | 15,858                                      |  | 12,524  |  |  |  |  |  | 15,858 |  | 
|@Entertainment 1998 Senior Discount Notes          | 176,637                                     |  | 16,959  |  |  |  |  |  |       |  | 
|@Entertainment 1999 Senior Discount Notes          | 158,816                                     |  | 14,948  |  |  |  |  |  |       |  | 
|@Entertainment 1999 Series C Senior Discount Notes | 17,534                                      |  | 1,724   |  |  |  |  |  |       |  | 
|Exchangeable Loan                                  | 955,638                                     |  | 955,638 |  |  |  |  |  |       |  | 

Occasionally
we will execute hedge transactions to reduce our exposure to foreign currency exchange rate risk. In connection with our offerings of senior notes in July 1999,
October 1999, January 2000 and the UPC Distribution Bank Facility, we entered into cross-currency swap agreements, exchanging dollar-denominated debt for Euro denominated debt.

Interest Rate Sensitivity

The table below provides information about our financial instruments that are sensitive to changes in interest rates as of September 30, 2001, including
cash flows based on the expected repayment dates

46

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and the related weighted -average interest rates. The information is presented in Euro equivalents, as the Euro is our reporting currency.

|                                  |                                                                    | Amount Outstanding
as of September 30, 2001 |        | Expected Repayment
as of December 31,
|--------------------------------- | ------------------------------------------------------------------ | ------------------------------------------- | ------ | -------------------------------------
|
|
|Variable Rate Facilities          |                                                                    |                                             |        |                                      
|UPC 10.875% Senior Notes due 2009 |                                                                    | 874,556                                     |        | 128,998                              
|                                  | EURIBOR + 4.15% and 8.54%, average rate in 2001 of 8.50% and 8.54% |                                             |        |                                      
|                                  | Average interest rate                                              |                                             | 10.875 | %                                    
|UPC 10.875% Senior Notes due 2007 |                                                                    | 218,639                                     |        | 32,249                               
|                                  | EURIBOR + 4.8% and 9.92%, average rate in 2001 of 9.47% and 9.92%  |                                             |        |                                      
|                                  | Average interest rate                                              |                                             | 10.875 | %                                    
|UPC 11.25% Senior Notes due 2009  |                                                                    | 273,841                                     |        | 40,634                               
|                                  | EURIBOR + 4.8% and 9.92%, average rate in 2001 of 9.47% and 9.92%  |                                             |        |                                      
|                                  | Average interest rate                                              |                                             | 11.250 | %                                    
|UPC Distribution Bank Facility(1) |                                                                    | 2,974,896                                   |        | 2,974,896                            
|                                  | EURIBOR/USD LIBOR + 0.75%4%,                                      |                                             |        |                                      
|                                  |                                                                    | Average interest rate                       |        | 7.462                                

---

47

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|                                                   |                       | Amount Outstanding
as of September 30, 2001 |        |         |        |   |  |        |  |        |  |  
|-------------------------------------------------- | --------------------- | ------------------------------------------- | ------ | ------- | ------ | - |  | ------ |  | ------ |  | -
|
|
|
|
|Fixed Rate Facilities                              |                       |                                             |        |         |        |   |  |        |  |        |  |  
|UPC Senior Notes due 2009                          |                       | 300,000                                     |        | 42,000  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 10.875 | %       | 79.530 | % |  |        |  |        |  |  
|UPC Senior Discount Notes due 2009                 |                       | 569,820                                     |        | 35,610  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 12.5   | %       | 59.2   | % |  |        |  |        |  |  
|UPC Senior Discount Notes due 2009                 |                       | 350,481                                     |        | 21,896  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 13.375 | %       | 57.400 | % |  |        |  |        |  |  
|UPC Senior Discount Notes due 2009                 |                       | 128,174                                     |        | 9,604   |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 13.375 | %       | 53.410 | % |  |        |  |        |  |  
|UPC Senior Notes due 2007                          |                       | 100,000                                     |        | 14,000  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 10.875 | %       | 84.580 | % |  |        |  |        |  |  
|UPC Senior Notes due 2009                          |                       | 100,397                                     |        | 14,140  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 11.25  | %       | 82.00  | % |  |        |  |        |  |  
|UPC Senior Discount Notes due 2010                 |                       | 702,200                                     |        | 42,988  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 13.75  | %       | 55.14  | % |  |        |  |        |  |  
|UPC Senior Notes due 2010                          |                       | 325,939                                     |        | 48,374  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 11.50  | %       | 79.53  | % |  |        |  |        |  |  
|UPC Senior Notes due 2010                          |                       | 651,839                                     |        | 96,748  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 11.25  | %       | 79.17  | % |  |        |  |        |  |  
|UPC Senior Notes due 2010                          |                       | 198,757                                     |        | 28,000  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 11.25  | %       | 81.25  | % |  |        |  |        |  |  
|PCI Notes                                          |                       | 15,858                                      |        | 12,524  |        |  |  |       |  | 15,858 |  | 
|                                                   | Average interest rate |                                             | 9.875  | %       | 15.150 | % |  |        |  |        |  |  
|@Entertainment 1998 Senior Discount Notes          |                       | 176,637                                     |        | 16,959  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 14.5   | %       | 71.900 | % |  |        |  |        |  |  
|@Entertainment 1999 Senior Discount Notes          |                       | 158,816                                     |        | 14,948  |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 14.5   | %       | 64.2   | % |  |        |  |        |  |  
|@Entertainment 1999 Series C Senior Discount Notes |                       | 17,534                                      |        | 1,724   |        |  |  |       |  |       |  | 
|                                                   | Average interest rate |                                             | 7.000  | %       | 76.597 | % |  |        |  |        |  |  
|DIC Loan                                           |                       | 53,593                                      |        | 53,593  |        |  |  | 53,593 |  |       |  | 
|                                                   | Average interest rate |                                             | 10.0   | %       | 10.0   | % |  |        |  |        |  |  
|Exchangeable Loan                                  |                       | 955,638                                     |        | 955,638 |        |  |  |       |  |       |  | 
|                                                   | Average Interest rate |                                             | 6.0    | %       | 6.0    | % |  |        |  |        |  |  

Equity Prices

As of September 30, 2001, we are exposed to equity price fluctuations related to our investments in equity securities. Our investment in United is
classified as available for sale. Changes in the price of the stock are reflected as unrealized gains (losses) in our statement of shareholders' equity, until such

48

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time as the stock is sold and any unrealized gain (loss) will be reflected in the statement of operations. Our investments in PrimaCom and SBS are accounted for under the equity method of accounting.

|            |  | Number of Shares |  | Fair Value as of
September 30, 2001
|----------- |  | ---------------- |  | -----------------------------------
|
|United      |  | 5,569,240        |  | 14,125                             
|PrimaCom AG |  | 4,948,039        |  | 20,176                             
|SBS         |  | 6,000,000        |  | 104,947                            

As
of September 30, 2001, we are also exposed to equity price fluctuations related to our debt, which is convertible into our ordinary shares. The table below provides
information about our convertible debt, including expected cash flows and related weighted-average interest rates.

|         |               | Amount Outstanding
as of September 30, 2001 |  |        |  |  
|-------- | ------------- | ------------------------------------------- |  | ------ |  | -
|
|
|
|
|DIC Loan |               | 53,593                                      |  | 53,593 |  | 
|         | 10% per annum |                                             |  |        |  |  

49

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PART IIOTHER INFORMATION

Item 5Other Information

The operating data set forth below reflect the aggregate statistics of the operating systems in which the Company has an ownership interest.

|                            |                        | As at September 30, 2001
|--------------------------- | ---------------------- | ------------------------
|
|Multi-channel TV            |                        |                         
|Consolidated companies:     |                        |                         
|Norway                      |                        | 100.0                   
|Sweden                      |                        | 100.0                   
|Belgium                     |                        | 100.0                   
|France                      |                        | 92.0                    
|The Netherlands             |                        | 100.0                   
|The Netherlands (Alkmaar)   |                        | 100.0                   
|Austria                     |                        | 95.0                    
|Germany (EWT/TSS)           |                        | 51.0                    
|                            |                        |                         
|                            | Total Western Europe   |                         
|                            |                        |                         
|Poland                      |                        | 100.0                   
|Hungary                     |                        | 98.9100.0              
|Czech Republic              |                        | 99.9100.0              
|Romania                     |                        | 5170.0                 
|Slovak Republic             |                        | 95100.0                
|                            |                        |                         
|                            | Total Eastern Europe   |                         
|                            |                        |                         
|                            | Total consolidated     |                         
|                            |                        |                         
|Non-consolidated companies: |                        |                         
|Germany (PrimaCom)(2)       |                        | 25.0                    
|Israel(9)                   |                        | 46.6                    
|Malta                       |                        | 50.0                    
|                            |                        |                         
|                            | Total non-consolidated |                         
|                            |                        |                         
|                            | Total                  |                         
|                            |                        |                         

50

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Summary Operating Data 2001 (continued)

|                        |                           | As at September 30, 2001
|----------------------- | ------------------------- | ------------------------
|
|Cable Telephony         |                           |                         
|Consolidated companies: |                           |                         
|Norway                  |                           | 100.0                   
|France                  |                           | 92.0                    
|The Netherlands         |                           | 100.0                   
|Austria                 |                           | 95.0                    
|Germany (EWT/TSS)       |                           | 51.0                    
|                        |                           |                         
|                        | Total cable telephony     |                         
|                        |                           |                         
|Non-Cable Telephony     |                           |                         
|Consolidated companies: |                           |                         
|Czech Republic(3)       |                           | 99.9100.0              
|Hungary(3)              |                           | 98.9100.0              
|                        |                           |                         
|                        | Total non-cable telephony |                         
|                        |                           |                         
|                        | Total                     |                         
|                        |                           |                         

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Summary Operating Data 2001 (continued)

|                            |                         | As at September 30, 2001
|--------------------------- | ----------------------- | ------------------------
|
|
|
|
|Internet                    |                         |                         
|Consolidated companies:     |                         |                         
|Norway                      |                         | 100.0                   
|Sweden                      |                         | 100.0                   
|Belgium                     |                         | 100.0                   
|France                      |                         | 92.0                    
|The Netherlands             |                         | 100.0                   
|The Netherlands (Alkmaar)   |                         | 100.0                   
|Austria                     |                         | 95.0                    
|Germany (EWT/TSS)           |                         | 51.0                    
|                            |                         |                         
|                            | Total Western Europe    |                         
|                            |                         |                         
|Poland                      |                         | 100.0                   
|Hungary                     |                         | 98.9100.0              
|Czech Republic              |                         | 99.9100.0              
|                            |                         |                         
|                            | Total Eastern Europe    |                         
|                            |                         |                         
|                            | Total consolidated      |                         
|                            |                         |                         
|Non-consolidated companies: |                         |                         
|Germany (PrimaCom)(2)       |                         | 25.0                    
|Malta                       |                         | 50.0                    
|                            |                         |                         
|                            | Total non- consolidated |                         
|                            |                         |                         
|                            | Total                   |                         
|                            |                         |                         

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Summary Operating Data 2001 (continued)

The
operating data set forth below reflects the aggregate statistics of the operating systems in which the Company has an ownership interest.

|                 |                             | As at September 30, 2000
|---------------- | --------------------------- | ------------------------
|
|Multi-channel TV |                             |                         
|                 | Consolidated companies:     |                         
|                 | Norway                      |                         
|                 | Sweden                      |                         
|                 | Belgium                     |                         
|                 | France                      |                         
|                 | The Netherlands             |                         
|                 | Austria                     |                         
|                 |                             |                         
|                 |                             | Total Western Europe    
|                 |                             |                         
|                 | Poland                      |                         
|                 | Hungary                     |                         
|                 | Czech Republic              |                         
|                 | Romania                     |                         
|                 | Slovak Republic             |                         
|                 |                             |                         
|                 |                             | Total Eastern Europe    
|                 |                             |                         
|                 |                             | Total consolidated      
|                 |                             |                         
|                 | Non-consolidated companies: |                         
|                 | Germany (PrimaCom)(5)       |                         
|                 | Israel                      |                         
|                 | Malta                       |                         
|                 |                             |                         
|                 |                             | Total non-consolidated  
|                 |                             |                         
|                 | Total                       |                         
|                 |                             |                         

53

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Summary Operating Data 2000 (continued)

|                    |                         | As at September 30, 2000 
|------------------- | ----------------------- | -------------------------
|
|
|
|Cable Telephony     |                         |                          
|                    | Consolidated companies: |                          
|                    | Norway                  |                          
|                    | France                  |                          
|                    | The Netherlands         |                          
|                    | Austria                 |                          
|                    |                         |                          
|                    |                         | Total cable telephony    
|                    |                         |                          
|Non-Cable Telephony |                         |                          
|                    | Consolidated companies: |                          
|                    | The Netherlands(6)      |                          
|                    | Mundi Telecom           |                          
|                    | Czech Republic(3)       |                          
|                    | Hungary (Monor)(3)      |                          
|                    |                         |                          
|                    |                         | Total non-cable telephony
|                    |                         |                          
|                    | Total                   |                          
|                    |                         |                          

|         |                             | As at September 30, 2000
|-------- | --------------------------- | ------------------------
|
|
|
|
|Internet |                             |                         
|         | Consolidated companies:     |                         
|         | Norway                      |                         
|         | Sweden                      |                         
|         | Belgium                     |                         
|         | France                      |                         
|         | The Netherlands             |                         
|         | Austria                     |                         
|         |                             |                         
|         |                             | Total Western Europe    
|         |                             |                         
|         | Hungary                     |                         
|         | Czech Republic              |                         
|         |                             |                         
|         |                             | Total Eastern Europe    
|         |                             |                         
|         |                             | Total consolidated      
|         |                             |                         
|         | Non-consolidated companies: |                         
|         | Germany (PrimaCom)(5)       |                         
|         |                             |                         
|         |                             | Total non-consolidated  
|         |                             |                         
|         | Total                       |                         
|         |                             |                         

54

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Summary Operating Data 2000 and 2001

Residential RGU's(7)

The operating data set forth below reflect the aggregate statistics of the operating systems in which the Company has an ownership interest.

|                                            |                      | Total RGU's
|------------------------------------------- | -------------------- | -----------
|
|Norway                                      |                      | 373,100    
|Sweden                                      |                      | 305,000    
|Belgium                                     |                      | 142,700    
|France                                      |                      | 513,600    
|The Netherlands                             |                      | 2,710,700  
|The Netherlands (Alkmaar)                   |                      | 44,400     
|The Netherlands (Uniport Carrier Select)(6) |                      |           
|Austria                                     |                      | 752,900    
|Germany (EWT/TSS)                           |                      | 589,500    
|Mundi(8)                                    |                      |           
|                                            |                      |            
|                                            | Total Western Europe |            
|                                            |                      |            
|Poland                                      |                      | 1,324,300  
|Hungary                                     |                      | 782,600    
|Czech Republic                              |                      | 388,900    
|Romania                                     |                      | 289,100    
|Slovak Republic                             |                      | 317,300    
|                                            |                      |            
|                                            | Total Eastern Europe |            
|                                            |                      |            
|                                            | Total consolidated   |            
|                                            |                      |            

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55

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Item 6Exhibits and Reports on Form 8-K

|Date Filed         |  | Date of Event      |  | Item Reported                                                                                                                                                                         
|------------------ |  | ------------------ |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|August 27, 2001    |  | August 10, 2001    |  | Item 5Announcement of execution of definitive agreements to merge Polish satellite television platforms with the Polish platform of Canal + Group.                                   
|September 26, 2001 |  | September 21, 2001 |  | Item 5Announcement of issuance of prospectus for purpose of the listing of ordinary shares of Priority Telecom N.V. at the Official Segment of the Euronext Amsterdam stock exchange.
|October 22, 2001   |  | October 19, 2001   |  | Item 5Response statement, to holders of UPC Notes, states that UPC is expressing no opinion and remains neutral toward the Liberty offer.                                            

56

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SIGNATURE

Pursuant to the requirements 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.

|Date: November 14, 2001 |  | UNITED PAN-EUROPE COMMUNICATIONS N.V.
|----------------------- |  | -------------------------------------
|                        |  | By:                                  

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