---

---

UNITED PAN-EUROPE COMMUNICATIONS N.V.
(DEBTOR-IN-POSSESSION)

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

---

FORM 10-Q

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

Commission file number: 000-25365

---

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

---

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

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

The
number of shares outstanding of the Registrant's common stock as of August 14, 2003 was:

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

---

---

---



PART IFINANCIAL INFORMATION

|                                                                                  |                                                                                                                                              |    | Page
Number
|--------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------- | -- | -----------
|Item 1Financial Statements                                                       |                                                                                                                                              |   
|                                                                                  | Unaudited Condensed Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002                                                    |    | 3          
|                                                                                  | Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2003 and 2002 |    | 5          
|                                                                                  | Unaudited Condensed Consolidated Statements of Shareholders' Equity (Deficit) for the Six Months Ended June 30, 2003                         |    | 6          
|                                                                                  | Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002                                    |    | 7          
|                                                                                  | Notes to Unaudited Condensed Consolidated Financial Statements                                                                               |    | 8          
|Item 2Management's Discussion and Analysis of Financial Condition and Results of |                                                                                                                                              |   
|                                                                                  | Operations                                                                                                                                   |    | 30         
|Item 3Quantitative and Qualitative Disclosures About Market Risk                 |                                                                                                                                              | 42
|Item 4Controls and Procedures                                                    |                                                                                                                                              | 47

PART IIOTHER INFORMATION

|                                                           |  |    | Page
Number
|---------------------------------------------------------- |  | -- | -----------
|Item 1Legal Proceedings                                   |  | 48
|Item 2Changes in Securities and Use of Proceeds           |  | 48
|Item 3Defaults Upon Senior Securities                     |  | 48
|Item 4Submission of Matters to a Vote of Security Holders |  | 48
|Item 5Other Information                                   |  | 48
|Item 6Exhibits and Reports on Form 8-K                    |  | 50

2

---

UNITED PAN-EUROPE COMMUNICATIONS N.V.

(DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED BALANCE SHEETS

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

|                                                     |                                                                                                   | June 30,
2003        |         | December 31,
2002
|---------------------------------------------------- | ------------------------------------------------------------------------------------------------- | -------------------- | ------- | -----------------
|ASSETS                                               |                                                                                                   |                      |         |                  
|Current assets                                       |                                                                                                   |                      |         |                  
|                                                     | Cash and cash equivalents                                                                         |                      | 178,499 |                  
|                                                     | Restricted cash                                                                                   |                      | 35,471  |                  
|                                                     | Subscriber receivables, net of allowance for doubtful accounts of 35,875 and 52,232, respectively |                      | 69,601  |                  
|                                                     | Costs to be reimbursed by affiliated companies                                                    |                      | 2,955   |                  
|                                                     | Other receivables                                                                                 |                      | 30,298  |                  
|                                                     | Deferred financing costs, net                                                                     |                      | 46,746  |                  
|                                                     | Prepaid expenses and other current assets                                                         |                      | 67,147  |                  
|                                                     |                                                                                                   |                      |         |                  
|                                                     |                                                                                                   | Total current assets |         | 430,717          
|Marketable debt and equity securities, at fair value |                                                                                                   | 31,704               |         | 12,760           
|Investments in and advances to affiliated companies  |                                                                                                   | 44,825               |         | 114,680          
|Property, plant and equipment, net                   |                                                                                                   | 2,884,090            |         | 3,175,363        
|Goodwill, net                                        |                                                                                                   | 988,208              |         | 994,670          
|Other intangible assets, net                         |                                                                                                   | 70,384               |         | 77,607           
|Other assets                                         |                                                                                                   | 2,407                |         | 3,635            
|                                                     |                                                                                                   |                      |         |                  
|                                                     |                                                                                                   | Total assets         |         | 4,452,335        
|                                                     |                                                                                                   |                      |         |                  

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

3

---

|                                                   |                                                                                                                | June 30,
2003                                         |            | December 31,
2002 |            
|-------------------------------------------------- | -------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | ---------- | ----------------- | -----------
|LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)     |                                                                                                                |                                                       |            |                   |            
|Current liabilities                                |                                                                                                                |                                                       |            |                   |            
|Not subject to compromise:                         |                                                                                                                |                                                       |            |                   |            
|                                                   | Accounts payable, including related party payables of 4,821 and 5,189, respectively                            |                                                       | 158,367    |                   | 166,679    
|                                                   | Accrued liabilities                                                                                            |                                                       | 248,971    |                   | 281,211    
|                                                   | Subscriber prepayments and deposits                                                                            |                                                       | 137,703    |                   | 121,749    
|                                                   | Derivative liabilities                                                                                         |                                                       | 4,089      |                   | 10,133     
|                                                   | Short-term debt                                                                                                |                                                       | 5,243      |                   | 58,363     
|                                                   | Current portion of long-term debt                                                                              |                                                       | 3,357,791  |                   | 3,212,302  
|                                                   |                                                                                                                |                                                       |            |                   |            
|                                                   |                                                                                                                | Total current liabilities not subject to compromise   |            | 3,912,164         |            
|                                                   |                                                                                                                |                                                       |            |                   |            
|Subject to compromise:                             |                                                                                                                |                                                       |            |                   |            
|                                                   | Accounts payable                                                                                               |                                                       | 36,889     |                   | 36,889     
|                                                   | Accrued liablities                                                                                             |                                                       | 329,013    |                   | 351,500    
|                                                   | Current portion of long-term debt, including related party debt of 2,180,560 and 2,358,380, respectively       |                                                       | 4,672,594  |                   | 5,043,346  
|                                                   |                                                                                                                |                                                       |            |                   |            
|                                                   |                                                                                                                | Total current liabilities subject to compromise       |            | 5,038,496         |            
|                                                   |                                                                                                                |                                                       |            |                   |            
|Long-term liabilities                              |                                                                                                                |                                                       |            |                   |            
|Not subject to compromise:                         |                                                                                                                |                                                       |            |                   |            
|                                                   | Long term debt                                                                                                 |                                                       | 60,209     |                   | 427,444    
|                                                   | Deferred gain on sale of assets                                                                                |                                                       | 150,321    |                   | 150,321    
|                                                   | Other long-term liabilities                                                                                    |                                                       | 85,605     |                   | 83,999     
|                                                   |                                                                                                                |                                                       |            |                   |            
|                                                   |                                                                                                                | Total long-term liabilities not subject to compromise |            | 296,135           |            
|                                                   |                                                                                                                |                                                       |            |                   |            
|Guarantees, commitments and contingencies (Note 8) |                                                                                                                |                                                       |            |                   |            
|Minority interests in subsidiaries                 |                                                                                                                | 1,504                                                 |            | 1,660             |            
|                                                   |                                                                                                                |                                                       |            |                   |            
|Convertible preferred stock subject to compromise: |                                                                                                                |                                                       |            |                   |            
|                                                   | Convertible preferred stock                                                                                    |                                                       | 1,664,689  |                   | 1,664,689  
|                                                   |                                                                                                                |                                                       |            |                   |            
|Shareholders' equity (deficit)                     |                                                                                                                |                                                       |            |                   |            
|                                                   | Priority stock, EUR 0.02 par value, 300 shares authorized, issued and outstanding                              |                                                       |           |                   |           
|                                                   | Ordinary stock, EUR 0.02 par value, 1,000,000,000 shares authorized, 443,417,525 shares issued and outstanding |                                                       | 8,868      |                   | 443,418    
|                                                   | Additional paid-in capital                                                                                     |                                                       | 3,192,883  |                   | 2,740,586  
|                                                   | Deferred compensation                                                                                          |                                                       | (9,061     | )                 | (16,888    
|                                                   | Accumulated deficit                                                                                            |                                                       | (9,932,152 | )                 | (10,053,630
|                                                   | Accumulated other comprehensive income                                                                         |                                                       | 278,809    |                   | 207,246    
|                                                   |                                                                                                                |                                                       |            |                   |            
|                                                   |                                                                                                                | Total shareholders' equity (deficit)                  |            | (6,460,653        | )          
|                                                   |                                                                                                                |                                                       |            |                   |            
|                                                   |                                                                                                                | Total liabilities and shareholders' equity (deficit)  |            | 4,452,335         |            
|                                                   |                                                                                                                |                                                       |            |                   |            

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

4

---



UNITED PAN-EUROPE COMMUNICATIONS N.V.        (DEBTOR-IN-POSSESSION)        CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME        (Stated in thousands of
Euros, except share and per share data)  (Unaudited)

|                                                         |                                                                                                     | Three Months
Ended June 30, |         | Six Months
Ended June 30, |         
|-------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | --------------------------- | ------- | ------------------------- | --------
|
|Statements of Operations                                 |                                                                                                     |                             |         |                           |         
|Revenue                                                  |                                                                                                     | 359,385                     |         | 358,917                   |         
|Operating expense(1)                                     |                                                                                                     | (155,189                    | )       | (192,701                  | )       
|Selling, general and administrative expense              |                                                                                                     | (96,788                     | )       | (105,815                  | )       
|Depreciation and amortization                            |                                                                                                     | (170,651                    | )       | (172,268                  | )       
|Impairment and restructuring charges                     |                                                                                                     | 963                         |         | (21,105                   | )       
|                                                         |                                                                                                     |                             |         |                           |         
|                                                         | Operating income (loss)                                                                             |                             | (62,280 | )                         | (132,972
|Interest income                                          |                                                                                                     | 1,152                       |         | 10,727                    |         
|Interest expense                                         |                                                                                                     | (78,035                     | )       | (160,278                  | )       
|Interest expenserelated party                           |                                                                                                     |                            |         | (64,658                   | )       
|Foreign currency exchange gain                           |                                                                                                     | 201,250                     |         | 577,315                   |         
|Gain on extinguishment of debt                           |                                                                                                     |                            |         | 347,207                   |         
|Gain on sale of investment in affiliate to related party |                                                                                                     | 25,518                      |         |                          |         
|Other income (expense), net                              |                                                                                                     | (11,394                     | )       | 10,274                    |         
|                                                         |                                                                                                     |                             |         |                           |         
|                                                         | Income (loss) before income taxes and other items                                                   |                             | 76,211  |                           | 587,615 
|Reorganization expense                                   |                                                                                                     | (4,852                      | )       |                          |         
|Income tax expense, net                                  |                                                                                                     | (703                        | )       | (2,851                    | )       
|Minority interests in subsidiaries, net                  |                                                                                                     | (10                         | )       | 126                       |         
|Share in results of affiliates, net                      |                                                                                                     | 4,509                       |         | (18,389                   | )       
|                                                         |                                                                                                     |                             |         |                           |         
|                                                         | Income (loss) before cumulative effect of change in accounting principle                            |                             | 75,155  |                           | 566,501 
|Cumulative effect of change in accounting principle      |                                                                                                     |                            |         |                          |         
|                                                         |                                                                                                     |                             |         |                           |         
|                                                         | Net income (loss)                                                                                   |                             | 75,155  |                           | 566,501 
|                                                         |                                                                                                     |                             |         |                           |         
|Earnings per share (Note 9):                             |                                                                                                     |                             |         |                           |         
|                                                         | Basic income (loss) per ordinary share before cumulative effect of change in accounting principle   |                             | 0.17    |                           | 1.20    
|                                                         | Cumulative effect of change in accounting principle                                                 |                             |        |                           |        
|                                                         |                                                                                                     |                             |         |                           |         
|                                                         |                                                                                                     | Basic net income (loss)     |         | 0.17                      |         
|                                                         |                                                                                                     |                             |         |                           |         
|                                                         | Diluted income (loss) per ordinary share before cumulative effect of change in accounting principle |                             | 0.12    |                           | 0.53    
|                                                         | Cumulative effect of change in accounting principle                                                 |                             |        |                           |        
|                                                         |                                                                                                     |                             |         |                           |         
|                                                         |                                                                                                     | Diluted net income (loss)   |         | 0.12                      |         
|                                                         |                                                                                                     |                             |         |                           |         
|Statements of Comprehensive Income                       |                                                                                                     |                             |         |                           |         
|                                                         | Net income (loss)                                                                                   |                             | 75,155  |                           | 566,501 
|Other comprehensive income (loss), net of tax:           |                                                                                                     |                             |         |                           |         
|                                                         | Foreign currency translation adjustments                                                            |                             | 24,457  |                           | 56,410  
|                                                         | Change in fair value of derivative assets                                                           |                             | 3,731   |                           | 5,210   
|                                                         | Change in unrealized gain in available-for-sale securities                                          |                             | 14,336  |                           | (19,037 
|                                                         |                                                                                                     |                             |         |                           |         
|                                                         |                                                                                                     | Comprehensive income (loss) |         | 117,679                   |         
|                                                         |                                                                                                     |                             |         |                           |         

---

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

5

---



UNITED PAN-EUROPE COMMUNICATIONS N.V.        (DEBTOR-IN-POSSESSION)        CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (DEFICIT)        (Stated in thousands of Euros, except
number of shares)  (Unaudited)

|                                                   |  | Priority Stock |  | Ordinary Stock |  |             |  |          |   |           |  |         |   |             |  
|-------------------------------------------------- |  | -------------- |  | -------------- |  | ----------- |  | -------- | - | --------- |  | ------- | - | ----------- | -
|
|
|December 31, 2002                                  |  | 300            |  |               |  | 443,417,525 |  | 443,418  |   | 2,740,586 |  | (16,888 | ) | (10,053,630 | )
|Decrease in nominal value                          |  |               |  |               |  |            |  | (434,550 | ) | 434,550   |  |        |   |            |  
|Amortization of deferred compensation              |  |               |  |               |  |            |  |         |   |          |  | 7,827   |   |            |  
|Capital contribution from subsidiary of parent     |  |               |  |               |  |            |  |         |   | 17,747    |  |        |   |            |  
|Net income                                         |  |               |  |               |  |            |  |         |   |          |  |        |   | 121,478     |  
|Unrealized gain on available-for-sale securities   |  |               |  |               |  |            |  |         |   |          |  |        |   |            |  
|Change in fair value of derivative assets          |  |               |  |               |  |            |  |         |   |          |  |        |   |            |  
|Change in foreign currency translation adjustments |  |               |  |               |  |            |  |         |   |          |  |        |   |            |  
|                                                   |  |                |  |                |  |             |  |          |   |           |  |         |   |             |  
|June 30, 2003                                      |  | 300            |  |               |  | 443,417,525 |  | 8,868    |   | 3,192,883 |  | (9,061  | ) | (9,932,152  | )
|                                                   |  |                |  |                |  |             |  |          |   |           |  |         |   |             |  

|                                                 |                                              | June 30,
2003 |         | December 31,
2002 |        
|------------------------------------------------ | -------------------------------------------- | ------------- | ------- | ----------------- | -------
|
|Foreign currency translation adjustments         |                                              | 275,861       |         | 231,627           |        
|Fair value of derivative assets                  |                                              |              |         | (10,133           | )      
|Unrealized gain on available-for-sale securities |                                              | 2,948         |         | (14,248           | )      
|                                                 |                                              |               |         |                   |        
|                                                 | Total accumulated other comprehensive income |               | 278,809 |                   | 207,246
|                                                 |                                              |               |         |                   |        

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

6

---



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

|                                                                                        |                                                          | Six Months
Ended June 30, |         
|--------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------------------------- | --------
|
|Cash flows from operating activities:                                                   |                                                          |                           |         
|Net income (loss)                                                                       |                                                          | 121,478                   |         
|Adjustments to reconcile net income (loss) to net cash flows from operating activities: |                                                          |                           |         
|                                                                                        | Depreciation and amortization                            |                           | 337,267 
|                                                                                        | Impairment and restructuring charges                     |                           | (963    
|                                                                                        | Stock-based compensation                                 |                           | 9,655   
|                                                                                        | Accretion of interest                                    |                           | 25,176  
|                                                                                        | Amortization of deferred financing costs                 |                           | 12,588  
|                                                                                        | Foreign exchange gains                                   |                           | (324,041
|                                                                                        | Gain on extinghuisment of debt                           |                           | (69,364 
|                                                                                        | Gain sale of investment in affiliate                     |                           | (25,518 
|                                                                                        | Loss on derivative assets                                |                           | 10,221  
|                                                                                        | Minority interests in subsidiaries                       |                           | 75      
|                                                                                        | Share in results of affiliated companies                 |                           | (2,014  
|                                                                                        | Cumulative effect of change in accounting principle      |                           |        
|                                                                                        | Loss on sale of assets                                   |                           |        
|                                                                                        | Other                                                    |                           | 2,654   
|                                                                                        | Decrease in restricted cash                              |                           |        
|                                                                                        | Change in receivables                                    |                           | 50,338  
|                                                                                        | Change in other current liabilities                      |                           | (10,278 
|                                                                                        | Change in deferred taxes and other long-term liabilities |                           | 1,606   
|                                                                                        |                                                          |                           |         
|Net cash flows from operating activities                                                |                                                          | 138,880                   |         
|                                                                                        |                                                          |                           |         
|Cash flows from investing activities:                                                   |                                                          |                           |         
|Capital expenditures                                                                    |                                                          | (103,085                  | )       
|Proceeds received from the sale of assets                                               |                                                          | 100,663                   |         
|Restricted cash deposited, net                                                          |                                                          | (17,119                   | )       
|Purchase of derivatives                                                                 |                                                          | (9,090                    | )       
|Derivative loan settlement                                                              |                                                          | (50,975                   | )       
|Dividends received                                                                      |                                                          | 3,745                     |         
|Acquisitions, net of cash acquired                                                      |                                                          | (671                      | )       
|                                                                                        |                                                          |                           |         
|Net cash flows from investing activities                                                |                                                          | (76,532                   | )       
|                                                                                        |                                                          |                           |         
|Cash flows from financing activities:                                                   |                                                          |                           |         
|Proceeds from long-term and short-term borrowings                                       |                                                          |                          |         
|Repayments of long-term and short-term borrowings                                       |                                                          | (128,348                  | )       
|                                                                                        |                                                          |                           |         
|Net cash flows from financing activities                                                |                                                          | (128,348                  | )       
|                                                                                        |                                                          |                           |         
|Effect of exchange rates on cash                                                        |                                                          | (10,563                   | )       
|                                                                                        |                                                          |                           |         
|Net decrease in cash and cash equivalents                                               |                                                          | (76,563                   | )       
|Cash and cash equivalents at beginning of period                                        |                                                          | 255,062                   |         
|                                                                                        |                                                          |                           |         
|Cash and cash equivalents at end of period                                              |                                                          | 178,499                   |         
|                                                                                        |                                                          |                           |         
|Supplemental cash flow disclosures:                                                     |                                                          |                           |         
|                                                                                        | Cash paid for reorganization expenses                    |                           | (12,511 
|                                                                                        |                                                          |                           |         
|                                                                                        | Cash paid for interest                                   |                           | (106,888
|                                                                                        |                                                          |                           |         
|                                                                                        | Cash received for interest                               |                           | 3,432   
|                                                                                        |                                                          |                           |         

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

7

---



UNITED PAN-EUROPE COMMUNICATIONS N.V.        (DEBTOR-IN-POSSESSION)        NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS        (Unaudited)

1.     Organization and Nature of Operations

United Pan-Europe Communications N.V. ("UPC" or the "Company"), a 53.1% owned subsidiary of UnitedGlobalCom, Inc. ("United"), was formed for
the purpose of acquiring and developing multi-channel television and telecommunications systems in Europe. UPC operates broadband communications networks in 11 European countries through its three
primary divisions, UPC Distribution, UPC Media andPriority Telecom. UPC Distribution provides video, telephone and internet services for
residential customers, (Triple Play) and is comprised of local operating systems. UPC Media provides broadband internet and interactive digital products and services, transactional television services
such as pay per view movies, digital broadcast and post-production services, and thematic channels for distribution on UPC's network, third party networks and satellite
direct-to-home ("DTH") platforms.Priority Telecomfocuses on providing network solutions to the business customer. In 2003, as
part of the ongoing realignment of the business, UPC formed an Investments Division, which manages UPC's non-consolidated investment assets. UPC continues to focus on rationalizing its
investment portfolio to maximize value.

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

2.     Reorganization Under Bankruptcy Code

UPC has experienced net losses since formation. On December 3, 2002, the Company filed a petition for relief under Chapter 11 (the "Chapter 11 Case") of
the United States Bankruptcy Code (the "U.S. Bankruptcy Code"), on the same date, the Company filed a pre-negotiated plan of reorganization, as modified (the "Plan"), with the United
States Bankruptcy Court for the Southern District of New York. In general, the Plan provides for the transfer of shares of common stock ("New UPC common stock") of a newly formed company that will
become the holding company of UPC ("New UPC") for various claims against, and equity interests in, the Company. In order to achieve fully the restructuring, including the distributions contemplated by
the Plan, it was also necessary to effect the restructuring under the laws of a non-U.S. jurisdiction, i.e. Dutch law. Accordingly, in conjunction with the commencement of the Chapter 11
Case, on December 3, 2002, the Company commenced a moratorium of payments in The Netherlands under Dutch bankruptcy law. On December 3, 2002, the Company filed a proposed plan of
compulsory composition (the "Akkoord") with the Amsterdam Court (Rechtbank) (the "District Court") under
the DutchFaillissementswet(the "Dutch Bankruptcy Code").

Unlike
the U.S. Bankruptcy Code, the Dutch Bankruptcy Code does not provide for theAkkoordto reorganize or cancel any of the equity
interests, ownership interests or shares in the Company. Therefore, in order to facilitate implementation of the Plan with respect to certain of the UPC Ordinary Shares A in accordance with Dutch law,
New UPC commenced an offer with respect to certain non U.S. holders of UPC Ordinary Shares A to deliver shares of New UPC common stock to such holders of UPC Ordinary Shares A in consideration for the
delivery by such holders of their UPC Ordinary Shares A to New UPC (the "Dutch Implementing Offer").

As
of June 30, 2003, as a result of the Chapter 11 Case and other matters, UPC's outstanding long term debt has been classified as current liabilities and there is substantial
uncertainty whether UPC's sources of capital, working capital and projected operating cash flow will be sufficient to fund the Company's expenditures and service the Company's indebtedness over the
next year. Accordingly, there is substantial doubt regarding the Company's ability to continue as a going concern. UPC's ability to continue as a going concern is dependent on (i) the
successful completion of the restructuring and (ii) UPC's ability to generate the cash flows required to enable it to recover the carrying value of the Company's assets and satisfy the
Company's liabilities, in the normal course of business, at the amounts

8

---

stated
in the consolidated financial statements. Due to the uncertainty of UPC's ability to continue as a going concern, the Report of Independent Accountant in the audited financial statements for
the year ended December 31, 2002, includes a modification in this respect. Following the successful completion of the planned restructuring, UPC believes that the Company will have sufficient
sources of capital, working capital and operating cash flows to enable the Company to continue as a going concern.

Summary of Status of the Restructuring

As of the date of the Company's filing of its Quarterly Report on Form 10-Q for the period ended June 30, 2003, the restructuring of the
Company has not been completed, but is in the final stages. The Plan has been confirmed by the U.S. Bankruptcy Court. In addition, theAkkoordhas been
ratified by the District Court. On March 21, 2003, Intercomm Holdings, L.L.C. ("ICH") filed an appeal against the ratification of theAkkoordby
the District Court.On April 15, 2003, the Dutch Court of Appeals confirmed the judgment by the District Court. On April 23, 2003, a
further appeal was filed with the Dutch Supreme Court, but the Company believes it is without merit and intends to oppose it vigorously. Both UPC and ICH have concluded the exchange of briefs in the
Supreme Court proceedings. On July 11, 2003, the Dutch Attorney General delivered advice to the Supreme Court, which advice concluded that all of the grounds for the appeal are without merit
and that, therefore, the appeal should be dismissed. The Supreme Court is independent of the Dutch Attorney General however, and there can be no assurance that the Supreme Court will act consistently
with the advice of the Dutch Attorney General. Judgment is expected in August 2003. The Dutch Implementing Offer, which was scheduled to expire on April 24, 2003, has been extended to
August 30, 2003. The Dutch Implementing Offer will become unconditional on the date the Plan becomes effective and the settlement of the Dutch Implementing Offer will occur no later than five
Euronext business days after the Dutch Implementing Offer becomes unconditional. Certain amendments to UPC's Articles of Association were adopted during an Extraordinary General Meeting of its
shareholders. One of the amendments was effective immediately, two amendments will become effective upon the effective date of the Plan and the remaining amendments will become effective upon the
later to occur of the effective date of the Plan and the date of the delisting of the Company's Ordinary Shares A from Euronext Amsterdam. The Plan and the Akkoordare expected to become effective and
the Company's restructuring complete soon after the appeal against the Akkoordis resolved. From and after the Effective Date of the Plan, the Company expects to operate its businesses and properties as
a reorganized entity
pursuant to the terms of the Plan. The Company's shareholders will be asked to adopt a further amendment to UPC's Articles of Association, allowing holders of UPC's Ordinary Shares C to convert their
Ordinary Shares C into Ordinary Shares A on a one-for-one basis. The purpose of the proposed amendment is to facilitate the delisting of the Ordinary Shares A from the Euronext
Amsterdam Stock Exchange ("Euronext"), so that the Company will not have any shares listed on a stock exchange or market. It is expected that an Extraordinary General Meeting of the Shareholders of
UPC will be held on August 28, 2003 to vote upon the amendment.

UPC
believes subscriber growth has been impacted in some countries by the Company's financial restructuring; however, the Company believes the restructuring has not had a material
adverse effect on its subsidiaries or its relationships with suppliers and employees.

Upon
completion of the restructuring, the Company will have substantially delevered its balance sheet, reducing its total long- and short term debt from 8.9 billion at
December 3, 2002, the date it

9

---

commenced
the Chapter 11 case, to approximately 3.4 billion, of which approximately 3.0 billion relates to the principal amount outstanding under its bank credit facility. At the
completion of the Company's restructuring, the bank facility will constitute the Company's only outstanding long-term debt.

Polish Restructuring

On June 19, 2003 the Company's subsidiary UPC Polska Inc. ("UPC Polska"), signed a binding agreement with creditors, holding approximately
86% of the UPC Polska's total debt, in support of a judicially supervised restructuring of the balance sheet of UPC Polska. These creditors include (i) an ad-hoc committee of
bondholders, which together with a creditor subsequently joining the agreement, hold approximately 75% of UPC Polska bonds, and (ii) UPC Telecom B.V. ("UPC Telecom") and Belmarken
Holding B.V. ("Belmarken"), which are wholly-owned subsidiaries of UPC and together hold approximately 17% of UPC Polska's outstanding bonds and approximately $481.0 million
(420.4 million) principal amount constituting substantially all of the other indebtedness of UPC Polska, as of June 30, 2003.

If
implemented under its current terms, the agreed restructuring will significantly reduce UPC Polska's indebtedness, substantially delevering UPC Polska's balance sheet. The
restructuring agreement consists primarily of the following key terms:



Upon
completion of the UPC Polska restructuring, the New Senior Notes would constitute the only long term debt of UPC Polska of approximately $60 million
(52.4 million).

In
addition, the restructuring agreement contains an agreement by the parties (other than UPC Polska) to forbear on exercising rights and remedies relating to defaults on
UPC Polska bonds and/or any other security of UPC Polska held by the parties while the restructuring agreement remains in effect.

In
order to effect the restructuring, UPC Polska filed, with the approval of its affiliated creditors and with the approval of nearly 75% of the non-affiliated holders of the
Polska Notes, a voluntary petition for

10

---

relief
under Chapter 11 of the United States Bankruptcy Code on July 7, 2003, and filed a pre-negotiated plan of reorganization on July 8, 2003, with the United States
Bankruptcy Court for the Southern District of New York. UPC Polska remains in possession of its assets and properties and continues to operate its businesses and manage its properties as a
debtor-in-possession pursuant to the U.S. Bankruptcy Code and under the supervision of the U.S. Bankruptcy Court. The Chapter 11 proceeding of UPC Polska does not
involve any of the operating subsidiaries of UPC Polska that hold substantially all of the assets and employee, supplier and customer contracts relating to its business. The restructuring contemplated
by the agreement is subject to various closing conditions, and should be completed by the end of 2003. Upon completion of the proposed recapitalization of UPC Polska, the New Senior Notes will
be the only long-term debt of UPC Polska.

3.     Basis of Presentation

Basis of Presentation

As
discussed in Note 2, the Company filed a petition for relief under Chapter 11 of the U.S Bankruptcy Code and the Company filed a plan of reorganization with the U.S. Bankruptcy
Court. In order to fully achieve the planned restructuring, it was also necessary to effect the restructuring under the laws of certain non-U.S. jurisdictions, including Dutch law.
Accordingly, in conjunction with the commencement of the Chapter 11 Case, on December 3, 2002, the Company commenced a moratorium of payments and an Akkoord in The Netherlands under
Dutch bankruptcy law. The U.S. petition and Dutch actions affect only the Company's itself and does not include any of the Company's subsidiaries. UPC is operating its business as a
debtor-in-possession.

The
accompanying consolidated financial statements of the Company have been prepared in accordance with accounting priciples, generally accepted in the United States of America. The
preparation of financial statements in conformity with accounting principles, generally accepted in the United States of America, requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the
reporting period. Actual results could differ from those estimates. The financial statements have been prepared on a going-concern basis, which contemplates continuity of operations, realization of
assets, and liquidation of liabilities and commitments in the normal cause of business. As a result of the Company's recurring losses from operations and net capital deficiency, and the Chapter 11
Case and related circumstances, realization of assets and liquidation of liabilities are subject to significant uncertainty. These matters, among others, raise substantial doubt about the Company's
ability to continue as a going concern. The Company's ability to continue as a going concern depends on, among other things, its ability to successfully complete the financial restructuring and
maintain business and financial operations consistent with those expected in the Plan (see Note 2).

While
operating as a debtor-in-possession, the Company may sell or otherwise dispose of assets and liquidate or settle liabilities for amounts other than those
reflected in the consolidated financial statements. Further, the Plan could materially change the amounts and classifications reported in the consolidated financial statements.

11

---

In
connection with the Chapter 11 Case, the Company is required to prepare its consolidated financial statements as of June 30, 2003, in accordance with AICPA Statement of
Position 90-7 ("SOP 90-7"). In accordance with SOP 90-7, all of the Company's pre-petition liabilities that are subject to compromise
under the proposed Plan are segregated in the Company's consolidated balance sheet as liabilities and convertible preferred stock
subject to compromise. These liabilities and the convertible preferred stock are recorded at the amounts expected to be allowed as claims in the Chapter 11 Case rather than at the estimated
amounts for which those allowed claims may be settled as a result of the approval of the Plan. The amounts for Chapter 11 related reorganization expenses included in the consolidated
debtor-in-possession statement of operations consist of professional fees of 12.5 million for the six months period ended June 30, 2003.

Liabilities
and convertible preferred stock included in the consolidated debtor-in-possession balance sheet as of June 30, 2003, which are subject to
compromise under the terms of the Plan, are summarized as follows (in thousands of Euros):

|                                        |                                                                       | June 30,
2003 |           | December 31,
2002
|--------------------------------------- | --------------------------------------------------------------------- | ------------- | --------- | -----------------
|
|Movieco (Cinenova)                      |                                                                       | 11,667        |           | 11,667           
|Philips                                 |                                                                       | 25,222        |           | 25,222           
|                                        |                                                                       |               |           |                  
|                                        | Total accounts payable                                                |               | 36,889    |                  
|                                        |                                                                       |               |           |                  
|Accrued interest                        |                                                                       | 329,013       |           | 351,500          
|                                        |                                                                       |               |           |                  
|July 1999 notes                         |                                                                       | 1,404,014     |           | 1,513,558        
|October 1999 notes                      |                                                                       | 964,934       |           | 1,027,625        
|January 2000 notes                      |                                                                       | 1,484,559     |           | 1,607,706        
|The Exchangeable Loan                   |                                                                       | 819,087       |           | 894,457          
|                                        |                                                                       |               |           |                  
|                                        | Total senior notes, senior discount notes and other debt (see Note 7) |               | 4,672,594 |                  
|                                        |                                                                       |               |           |                  
|Convertible preferred stock             |                                                                       | 1,664,689     |           | 1,664,689        
|                                        |                                                                       |               |           |                  
|Total liabilities subject to compromise |                                                                       | 6,703,185     |           | 7,096,424        
|                                        |                                                                       |               |           |                  

In
accordance with SOP 90-7 interest expense is reported only to the extent that it will be paid during the bankruptcy proceedings or that it is an allowed claim. The
interest expense allowed as claim is nil million both for the three and six months ended June 30, 2003, respectively. The contractual interest expense is 117.8 million and
239.9 million for the three and six months ended June 30, 2003, respectively.

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

12

---

New Accounting Principles

In
April 2003, FASB issued SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities ("SFAS 149"). SFAS 149 amends SFAS
No. 133 Accounting for Derivative Instruments and Hedging Activities to provide clarification on the financial accounting and reporting of derivative instruments and hedging activities and
requires that contracts with similar characteristics be accounted for on a comparable basis. The provisions of SFAS 149 are effective for contracts entered into or modified after
June 30, 2003, and for hedging relationships designated after June 30, 2003. We are currently evaluating the impact of adopting this statement.

In
May 2003, the FASB issued SFAS No. 150, Accounting For Certain Financial Instruments With Characteristics Of Both Liabilities And Equity ("SFAS 150").
SFAS 150 establishes standards on the classification and measurement of certain financial instruments with characteristics of both liabilities and equity. The provisions of SFAS 150 are
effective for financial instruments entered into or modified after May 31, 2003 and to all other instruments that exist as of the beginning of the first interim
financial reporting period beginning after June 15, 2003. We are currently evaluating the impact of adopting this statement.

Stock-Based Compensation

The Company accounts for its stock-based compensation plans using the intrinsic value method prescribed by Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees("APB 25"). The Company has provided pro forma disclosures of net loss as if the fair value based method
of accounting for these plans, as prescribed by Statement of Financial Accounting Standards No. 123,Accounting for Stock-Based Compensation("SFAS 123"), had been applied. SFAS 123 is amended by Statement of Financial Accounting Standards No. 148,Accounting for Stock-Based
CompensationTransition and Disclosure and Amendment of FASB Statement No. 123("SFAS 148"). The intrinsic value method results in compensation
expense for the difference between the grant price and the fair market value at each new measurement date. In addition, the Company, has stock-based compensation plans which are equivalent to stock
appreciation rights. Accordingly, variable plan accounting is used in which compensation expense and deferred compensation is recorded based on the difference between the grant price and the market
value of the underlying shares at each financial statement date. For our plans, which follow fixed plan accounting, compensation expense and deferred compensation is recorded based on the difference
between the grant price and the market value of the underlying shares at grant date. The Company has adopted the disclosure requirements of SFAS 123.

Based
upon Black-Scholes single option pricing model, the total aggregate fair value of options granted in the three and six-month period ended June 30, 2003 was nil.
The amount of the total aggregate fair values is being amortized using the straight-line method over the vesting period of the options. Cumulative compensation expense recognized in pro
forma net income, with respect to options that are forfeited prior to vesting, is adjusted as a reduction of pro forma compensation expense in the period of forfeiture. Stock-based compensation, net
of the effect of forfeitures and net of actual compensation expense recorded in the statement of operations, was 13.2 million and 24.4 million, for the three-month period ended
June 30, 2003 and June 30, 2002, respectively. Stock-based compensation, net of the effect of forfeitures and net of actual compensation expense recorded in the statement of operations,
was

13

---

30.5 million
and 44.8 million, for the six-month period ended June 30, 2003 and June 30, 2002, respectively. This stock-based compensation had the following pro
forma effect on net income (in thousands):

|                                                                                                                    |                                        | Three Months Ended June 30, |      | Six Months
Ended June 30, |     
|------------------------------------------------------------------------------------------------------------------- | -------------------------------------- | --------------------------- | ---- | ------------------------- | ----
|
|
|Basic net income (loss) attributable to common shareholders, as reported                                            |                                        | 75,155                      |      | 533,489                   |     
|Add: Stock-based compensation expense included in reported net income (loss), net of related tax effects            |                                        | 3,934                       |      | 6,495                     |     
|Deduct: Total stock-based compensation expense determined under fair value based method, net of related tax effects |                                        | (13,199                     | )    | (24,387                   | )   
|                                                                                                                    |                                        |                             |      |                           |     
|Pro forma net income (loss)                                                                                         |                                        | 65,890                      |      | 515,597                   |     
|                                                                                                                    |                                        |                             |      |                           |     
|Earnings per share:                                                                                                 |                                        |                             |      |                           |     
|                                                                                                                    | Basic earnings per shareas reported   |                             | 0.17 |                           | 1.20
|                                                                                                                    |                                        |                             |      |                           |     
|                                                                                                                    | Basic earnings per sharepro forma     |                             | 0.15 |                           | 1.16
|                                                                                                                    |                                        |                             |      |                           |     
|                                                                                                                    | Diluted earnings per shareas reported |                             | 0.12 |                           | 0.53
|                                                                                                                    |                                        |                             |      |                           |     
|                                                                                                                    | Diluted earnings per sharepro forma   |                             | 0.10 |                           | 0.52
|                                                                                                                    |                                        |                             |      |                           |     

4.     Dispositions

SBS

On April 9, 2003, UPC sold six million shares of SBS to UnitedGlobalCom Europe B.V., a subsidiary of UnitedGlobalCom, Inc. ("United"), for
100 million. UPC transferred the proceeds from the sale of the SBS shares to UPC Holding B.V., which, in turn, transferred these funds to UPC Distribution Holding B.V., as part of a
125 million funding contemplated by a waiver agreement relating to the UPC Distribution Bank Facility. UPC accounted for the transaction as a sale, and a gain of 25.5 million is recorded
on the income statement for the difference between UPC's book value and the readily available fair value of SBS on April 9, 2003, the date the transaction closed. The additional amount above
the readily available SBS trading value on that date and the amount paid by UnitedGlobalCom Europe B.V. was 17.7 million, this is recorded as a capital contribution.

14

---



5.     Property, Plant and Equipment

|                                             |                                    | June 30,
2003 |            | December 31,
2002 |           
|-------------------------------------------- | ---------------------------------- | ------------- | ---------- | ----------------- | ----------
|
|Cable distribution networks                  |                                    | 3,460,435     |            | 3,461,209         |           
|Subscriber premises equipment and converters |                                    | 913,710       |            | 890,589           |           
|DTH, MMDS and distribution facilities        |                                    | 87,046        |            | 87,666            |           
|IT systems, office equipment and fixtures    |                                    | 291,198       |            | 295,300           |           
|Buildings and leasehold improvements         |                                    | 136,353       |            | 144,606           |           
|Other                                        |                                    | 58,418        |            | 58,711            |           
|                                             |                                    |               |            |                   |           
|                                             |                                    | 4,947,160     |            | 4,938,081         |           
|                                             | Accumulated depreciation           |               | (2,063,070 | )                 | (1,762,718
|                                             |                                    |               |            |                   |           
|                                             | Property, plant and equipment, net |               | 2,884,090  |                   | 3,175,363 
|                                             |                                    |               |            |                   |           

6.     Goodwill and Other Intangible Assets

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

|              |                 | December 31,
2002 |         | Acquisitions |     | Cumulative
Translation
Adjustment
& Other |        | June 30,
2003
|------------- | --------------- | ----------------- | ------- | ------------ | --- | ----------------------------------------- | ------ | -------------
|
|Distribution: |                 |                   |         |              |     |                                           |        |              
|              | The Netherlands |                   | 610,704 |              |    |                                           |       |              
|              | Austria         |                   | 133,963 |              |    |                                           |       |              
|              | Belgium         |                   | 12,358  |              |    |                                           |       |              
|              | Norway          |                   | 8,607   |              |    |                                           | (1,016 | )            
|              | Hungary         |                   | 70,517  |              | 201 |                                           | (4,514 | )            
|              | Sweden          |                   | 136,275 |              |    |                                           | 377    |              
|              | Other           |                   | 22,246  |              |    |                                           | (1,510 | )            
|              |                 |                   |         |              |     |                                           |        |              
|Total         |                 | 994,670           |         | 201          |     | (6,663                                    | )      | 988,208      
|              |                 |                   |         |              |     |                                           |        |              

The
following table presents other intangible assets, as of June 30, 2003 and December 31, 2002:

|             |                         | June 30, 2003 |         | December 31, 2002
|------------ | ----------------------- | ------------- | ------- | -----------------
|
|
|License fees |                         | 113,515       |         | (44,609          
|Other        |                         | 7,190         |         | (5,712           
|             |                         |               |         |                  
|             | Total intangible assets |               | 120,705 |                  
|             |                         |               |         |                  

15

---

The
aggregate amortization expense on goodwill and other intangibles for the three months ended June 30, 2003 and 2002 was 2.6 million and 0.3 million, respectively.
The aggregate amortization expense of other intangibles for the six months ended June 30, 2003 and 2002 was 6.4 million and 5.2 million, respectively. The Company's future
estimated amortization expenses are as follows:

|Six Months Ended December 31, 2003    |       | 5,453 
|------------------------------------- | ----- | ------
|Twelve Months Ended December 31, 2004 |       | 7,684 
|Twelve Months Ended December 31, 2005 |       | 7,460 
|Twelve Months Ended December 31, 2006 |       | 7,359 
|Twelve Months Ended December 31, 2007 |       | 7,358 
|Thereafter                            |       | 35,070
|                                      |       |       
|                                      | Total |       
|                                      |       |       

7.     Long-Term Debt

|                               |                      | June 30,
2003 |            | December 31,
2002 |           
|------------------------------ | -------------------- | ------------- | ---------- | ----------------- | ----------
|
|July 1999 Notes                |                      | 1,404,014     |            | 1,513,558         |           
|October 1999 Notes             |                      | 964,934       |            | 1,027,625         |           
|January 2000 Notes             |                      | 1,484,559     |            | 1,607,706         |           
|UPC Distribution Bank Facility |                      | 2,984,042     |            | 3,140,139         |           
|Exchangeable Loan              |                      | 819,087       |            | 894,457           |           
|UPC Polska Notes               |                      | 353,295       |            | 359,951           |           
|DIC Loan                       |                      |              |            | 54,438            |           
|Other                          |                      | 80,663        |            | 85,218            |           
|                               |                      |               |            |                   |           
|                               |                      | 8,090,594     |            | 8,683,092         |           
|                               | Less current portion |               | (8,030,385 | )                 | (8,255,648
|                               |                      |               |            |                   |           
|                               | Total                |               | 60,209     |                   | 427,444   
|                               |                      |               |            |                   |           

Since
March 3, 2002, the Company has been in default under its senior notes and senior discount notes and has received short-term waivers with respect to the UPC
Distribution Bank Facility and the Exchangeable Loan. Accordingly, these borrowings have been reclassified to the current portion of long-term debt.

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.

UPC Polska Notes

As a result of UPC Polska's filing of a petition for relief under Chapter 11 of the U.S. Bankruptcy Code and expiration of waivers from subsidiaries
of UPC, all of UPC Polska's long-term debt, has been classified as short-term.

16

---

8.     Guarantees, Commitments and Contingencies

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

Business sale agreements

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

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

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

Lease agreements

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

Indemnification of lenders and agents under credit facilities

Under its credit facilities, the Company has agreed to indemnify its lenders under such facilities against costs or losses resulting from changes in laws and
regulation, which would increase the lenders' costs, and for legal action brought against the lenders. These indemnifications generally extend for the term of the credit facilities and do not provide
for any limit on the maximum potential liability.

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

17

---

Other indemnification agreements

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

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

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

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

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

On
July 4, 2001, InterComm Holdings L.L.C., InterComm France CVOHA ("ICF I"), InterComm France II CVOHA ("ICF II"), and Reflex Participations ("Reflex"), collectively with ICF I
and ICF II, the "ICF Party") served a demand for arbitration on UPC, UGC Holdings, Inc. ("UGC Holdings") and its subsidiaries, Belmarken and UPC France Holding B.V. The claimants allege
breaches of obligations allegedly owed by UPC in connection with the ICF Party's position as a minority shareholder in Médiaréseaux S.A. The claimants seek relief in the
nature of immediate acceleration of an alleged right to require UPC or an affiliate to purchase all or any of the remaining shares in Médiareséaux S.A. from the ICF Party
and/or compensatory damages, but in either case for a maximum of 192 million, plus reasonable fees and costs. The ICF Party has not specified from which entity it is seeking such relief,
however, UGC Holdings is not a party to any agreement with the claimants and has been dismissed from the proceedings. UPC and its affiliates, as respondents, deny these claims. UPC is vigorously
defending the arbitration proceedings and has filed appropriate counter claims. The ICF Party withdrew its claims on January 31, 2003; this arbitration is however still pending as a result of
the decision of UPC and its affiliates to maintain their counterclaims. The final hearing on respondents' counterclaims occurred on June 25, 2003.

18

---

UPC
and its affiliates were invited to provide the arbitral tribunal and the ICF party with additional supporting evidences before August 15, 2003. On February 14, 2003, the ICF Party
served a new demand for arbitration on UPC, Belmarken and UPC France Holdings B.V. in which the ICF Party filed again claims similar to those withdrawn on January 31, 2003. UPC and its
affiliates have answered such new demand for arbitration on April 29, 2003 and will, again deny vigorously the merit of these claims. The Terms of Reference are currently in the process of
being drawn up by the arbitrators.

On
March 21, 2003, ICH, a creditor in the Dutch moratorium proceeding appealed the District Court's ratification of theAkkoord. On
April 15, 2003, the Dutch Court of Appeals confirmed the judgment by the District Court of March 13, 2003 that ratified theAkkoord. On
April 23, 2003, ICH appealed the ratification of theAkkoordto the Dutch Supreme Court. UPC takes the view that the appeal before the Supreme
Court is without merit. Both UPC and ICH have concluded the exchange of briefs in the Supreme Court proceedings and on July 11, 2003, the Dutch Attorney General delivered advice to the Supreme
Court, which advice concluded that all of the grounds for the appeal are without merit and that, therefore, the appeal should be dismissed. The Supreme Court is independent of the Dutch Attorney
General, however, and there can be no assurance that the Supreme Court will act consistently with the advice of the Dutch Attorney General. Judgment is expected in August 2003.

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

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

UPC
Polska intends to vigorously prosecute its claims and defend against HBO's counterclaims. As of the date of filing this Quarterly Report on Form 10-Q, the case
remains in arbitration. The parties have prepared the terms of reference, which includes mapping out discovery needs, timing/briefing schedule for future motions, and hearing dates. On
April 15, 2003, the arbitration panel confirmed a schedule for UPC Polska's request to have the matter decided on summary judgment in which oral argument occurred on

19

---

May 29,
2003. On May 29, 2003 the tribunal assembled in New York for oral argument on the motion. The Tribunal did not award the motion and ruled that there is necessity of hearing
further evidence and therefore there will be an evidentiary hearing scheduled. The case is proceeding with discovery ensuing over the course of the summer and submissions (such as witness statements,
pretrial briefs and joint exhibits) due in October 2003. The evidentiary hearings are scheduled to occur in November 2003. UPC Polska is unable to predict the outcome of the arbitration
process.

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

20

---

9.     Earnings per share

|                                                                                                                     |                                                               | Three Months Ended
June 30, |             | Six Months Ended
June 30, |            
|-------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------- | --------------------------- | ----------- | ------------------------- | -----------
|
|
|Numerator (Basic):                                                                                                   |                                                               |                             |             |                           |            
|Income (loss) before cumulative effect of change in accounting principle                                             |                                                               | 75,155                      |             | 566,501                   |            
|                                                                                                                     | Accretion of Dividend on Series 1 Convertible Preferred Stock |                             |            |                           | (31,487    
|                                                                                                                     | Accretion of Discount of Series 1 Convertible Preferred Stock |                             |            |                           | (1,525     
|                                                                                                                     |                                                               |                             |             |                           |            
|Basic income (loss) attributable to common stockholders before cumulative effect of change in accounting principle   |                                                               | 75,155                      |             | 533,489                   |            
|Cumulative effect of change in accounting principle                                                                  |                                                               |                            |             |                          |            
|                                                                                                                     |                                                               |                             |             |                           |            
|Basic net income (loss) attributable to common stockholders                                                          |                                                               | 75,155                      |             | 533,489                   |            
|                                                                                                                     |                                                               |                             |             |                           |            
|Denominator (Basic):                                                                                                 |                                                               |                             |             |                           |            
|Basic weighted-average number of common shares outstanding                                                           |                                                               | 443,417,525                 |             | 443,417,525               |            
|                                                                                                                     |                                                               |                             |             |                           |            
|Numerator (Diluted):                                                                                                 |                                                               |                             |             |                           |            
|Income (loss) before cumulative effect of change in accounting principle                                             |                                                               | 75,155                      |             | 566,501                   |            
|                                                                                                                     | Reversal of gain on DIC Loan conversion                       |                             |            |                           |           
|                                                                                                                     | Reversal of interest accretion on DIC Loan                    |                             |            |                           | 1,768      
|                                                                                                                     | Accretion of exchangeable loan                                |                             |            |                           | 14,557     
|                                                                                                                     |                                                               |                             |             |                           |            
|Diluted income (loss) attributable to common stockholders before cumulative effect of change in accounting principle |                                                               | 75,155                      |             | 582,826                   |            
|Cumulative effect of change in accounting principle                                                                  |                                                               |                            |             |                          |            
|                                                                                                                     |                                                               |                             |             |                           |            
|Diluted net income (loss) attributable to common stockholders                                                        |                                                               | 75,155                      |             | 582,826                   |            
|                                                                                                                     |                                                               |                             |             |                           |            
|Denominator (Diluted):                                                                                               |                                                               |                             |             |                           |            
|Basic weighted-average number of common shares outstanding                                                           |                                                               | 443,417,525                 |             | 443,417,525               |            
|                                                                                                                     | DIC Loan                                                      |                             |            |                           | 475,554,629
|                                                                                                                     | Exchangeable Loan                                             |                             | 136,797,557 |                           | 131,467,986
|                                                                                                                     | Series 1 Convertible Preferred Stock                          |                             | 48,314,874  |                           | 44,731,969 
|                                                                                                                     |                                                               |                             |             |                           |            
|Diluted weighted-average number of common shares outstanding                                                         |                                                               | 628,529,956                 |             | 1,095,172,109             |            
|                                                                                                                     |                                                               |                             |             |                           |            

21

---



10.   Segments and Geographic Information

The Company is managed internally as three primary businesses, UPC Distribution, UPC Media andPriority
Telecom(with the UPC Media division managing thechello broadbandand programming businesses). UPC Distribution
focuses on providing cable television (including digital), DTH, internet and telephone services to residential customers and is comprised of the local operating systems. UPC Media includes chello broadband,the internet access provider, and UPCtv, which provides video content and programming as well as UPC's digital products.
UPC Media provides broadband internet and interactive digital products and services, transactional television services such as pay per view movies, digital broadcast and post production
services, and thematic channels for distribution on the Company's network, third party networks and DTH platforms. UPC has also formed an Investment Division, which manages UPC's
non-consolidated investment assets.Priority Telecomis focused on providing telephone and internet services to business customers. The
Company evaluates performance and allocates resources based on the results of these divisions. Adjusted EBITDA is the primary measure used by our chief operating decision makers to evaluate
segment-operating performance and to decide how to allocate resources to segments. EBITDA is an acronym for earnings before interest, taxes, depreciation and amortization. As the Company uses the
term, Adjusted EBITDA represents net income before cumulative effects of accounting changes, share in results of affiliates, minority interests in subsidiaries, income taxes, reorganization expense,
other income and expense, gain on issuance of common equity securities by subsidiaries, provision for loss on investments, gain (loss) on sale of investments in affiliates and other assets, foreign
currency exchange gain (loss), interest income and expense, impairment and restructuring charges, depreciation, amortization and stock-based compensation. The Company believes Adjusted EBITDA is
meaningful because it provides investors a means to evaluate the operating performance of its segments and its company on an ongoing basis using criteria that is used by its internal decision makers.
The Company reconciles the total of the reportable segments' Adjusted EBITDA to its consolidated net income as presented in the accompanying condensed consolidated statements of operations, because
the Company believes consolidated net income is the most directly, comparable financial measure to total

22

---

segment
operating performance. Investors should view Adjusted EBITDA as a supplement to, and not a substitute for, other GAAP measures of income as a measure of operating performance.

|                               |                    | Three Months Ended
June 30, |         | Six Months Ended
June 30, |        
|------------------------------ | ------------------ | --------------------------- | ------- | ------------------------- | -------
|
|
|Revenue                        |                    |                             |         |                           |        
|Triple Play:                   |                    |                             |         |                           |        
|                               | The Netherlands    |                             | 125,729 |                           | 121,670
|                               | Austria            |                             | 57,120  |                           | 52,895 
|                               | Belgium            |                             | 6,904   |                           | 6,559  
|                               | Czech Republic     |                             | 13,935  |                           | 11,628 
|                               | Norway             |                             | 20,814  |                           | 20,346 
|                               | Hungary            |                             | 36,392  |                           | 32,611 
|                               | France             |                             | 24,702  |                           | 25,011 
|                               | Poland             |                             | 18,803  |                           | 20,066 
|                               | Sweden             |                             | 16,730  |                           | 14,048 
|                               | Other              |                             | 10,119  |                           | 8,948  
|                               |                    |                             |         |                           |        
|Total Triple Play Distribution |                    | 331,248                     |         | 313,782                   |        
|                               |                    |                             |         |                           |        
|Germany                        |                    |                            |         | 11,977                    |        
|Other                          |                    | 6,583                       |         | 11,212                    |        
|                               |                    |                             |         |                           |        
|                               | Total Distribution |                             | 337,831 |                           | 336,971
|                               |                    |                             |         |                           |        
|Priority Telecom               |                    | 27,658                      |         | 30,876                    |        
|UPC Media                      |                    | 21,581                      |         | 17,860                    |        
|UPC Investments                |                    | 122                         |         |                          |        
|Intercompany Eliminations      |                    | (27,807                     | )       | (26,790                   | )      
|                               |                    |                             |         |                           |        
|                               | Total              |                             | 359,385 |                           | 358,917
|                               |                    |                             |         |                           |        

23

---

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

|             |                                | Triple Play Revenues for the
Three Months Ended June 30, 2003
|------------ | ------------------------------ | -------------------------------------------------------------
|
|
|Triple Play: |                                |                                                              
|             | The Netherlands                |                                                              
|             | Austria                        |                                                              
|             | Belgium                        |                                                              
|             | Czech Republic                 |                                                              
|             | Norway                         |                                                              
|             | Hungary                        |                                                              
|             | France                         |                                                              
|             | Poland                         |                                                              
|             | Sweden                         |                                                              
|             | Other                          |                                                              
|             |                                |                                                              
|             | Total Triple Play Distribution |                                                              
|             |                                |                                                              

|             |                                | Triple Play Revenues for the
Three Months Ended June 30, 2002
|------------ | ------------------------------ | -------------------------------------------------------------
|
|
|Triple Play: |                                |                                                              
|             | The Netherlands                |                                                              
|             | Austria                        |                                                              
|             | Belgium                        |                                                              
|             | Czech Republic                 |                                                              
|             | Norway                         |                                                              
|             | Hungary                        |                                                              
|             | France                         |                                                              
|             | Poland                         |                                                              
|             | Sweden                         |                                                              
|             | Other                          |                                                              
|             |                                |                                                              
|             | Total Triple Play Distribution |                                                              
|             |                                |                                                              

24

---

|             |                                | Triple Play Revenues for the
Six Months Ended June 30, 2003
|------------ | ------------------------------ | -----------------------------------------------------------
|
|
|Triple Play: |                                |                                                            
|             | The Netherlands                |                                                            
|             | Austria                        |                                                            
|             | Belgium                        |                                                            
|             | Czech Republic                 |                                                            
|             | Norway                         |                                                            
|             | Hungary                        |                                                            
|             | France                         |                                                            
|             | Poland                         |                                                            
|             | Sweden                         |                                                            
|             | Other                          |                                                            
|             |                                |                                                            
|             | Total Triple Play Distribution |                                                            
|             |                                |                                                            

|             |                                | Triple Play Revenues for the
Six Months Ended June 30, 2002
|------------ | ------------------------------ | -----------------------------------------------------------
|
|
|Triple Play: |                                |                                                            
|             | The Netherlands                |                                                            
|             | Austria                        |                                                            
|             | Belgium                        |                                                            
|             | Czech Republic                 |                                                            
|             | Norway                         |                                                            
|             | Hungary                        |                                                            
|             | France                         |                                                            
|             | Poland                         |                                                            
|             | Sweden                         |                                                            
|             | Other                          |                                                            
|             |                                |                                                            
|             | Total Triple Play Distribution |                                                            
|             |                                |                                                            

25

---

|                 |                                | Three Months
Ended June 30, |         | Six Months
Ended June 30, |       
|---------------- | ------------------------------ | --------------------------- | ------- | ------------------------- | ------
|
|
|
|Triple Play:     |                                |                             |         |                           |       
|                 | The Netherlands                |                             | 51,053  |                           | 27,087
|                 | Austria                        |                             | 21,968  |                           | 18,515
|                 | Belgium                        |                             | 2,570   |                           | 2,100 
|                 | Czech Republic                 |                             | 5,332   |                           | 2,068 
|                 | Norway                         |                             | 5,101   |                           | 3,670 
|                 | Hungary                        |                             | 13,740  |                           | 11,688
|                 | France                         |                             | 1,691   |                           | (4,272
|                 | Poland                         |                             | 7,213   |                           | 4,537 
|                 | Sweden                         |                             | 6,806   |                           | 4,597 
|                 | Other                          |                             | 4,289   |                           | 2,956 
|                 |                                |                             |         |                           |       
|                 | Total Triple Play Distribution |                             | 119,763 |                           | 72,946
|                 |                                |                             |         |                           |       
|Germany          |                                |                            |         | 6,691                     |       
|Corporate        |                                | (12,532                     | )       | (16,085                   | )     
|Other            |                                | 4,622                       |         | 4,853                     |       
|                 |                                |                             |         |                           |       
|                 | Total Distribution             |                             | 111,853 |                           | 68,405
|                 |                                |                             |         |                           |       
|Priority Telecom |                                | 3,130                       |         | (1,473                    | )     
|UPC Media        |                                | 5,559                       |         | (112                      | )     
|UPC Investments  |                                | (516                        | )       | 674                       |       
|                 |                                |                             |         |                           |       
|                 | Total                          |                             | 120,026 |                           | 67,494
|                 |                                |                             |         |                           |       

26

---

Following
is a reconciliation of Adjusted EBITDA to UPC's net income (loss) for the three and six months ended June 30, 2003 and 2002.

|                                                         |                                                                          | Three Months
Ended June 30, |         | Six Months
Ended June 30, |         
|-------------------------------------------------------- | ------------------------------------------------------------------------ | --------------------------- | ------- | ------------------------- | --------
|
|
|Adjusted EBITDA                                          |                                                                          | 120,026                     |         | 67,494                    |         
|Depreciation and amortization                            |                                                                          | (170,651                    | )       | (172,268                  | )       
|Impairment and restructuring charges                     |                                                                          | 963                         |         | (21,105                   | )       
|Stock-based compensation                                 |                                                                          | (5,762                      | )       | (7,093                    | )       
|Loss on disposal of Poland DTH business                  |                                                                          | (6,856                      | )       |                          |         
|                                                         |                                                                          |                             |         |                           |         
|                                                         | Operating income (loss)                                                  |                             | (62,280 | )                         | (132,972
|Interest income                                          |                                                                          | 1,152                       |         | 10,727                    |         
|Interest expense                                         |                                                                          | (78,035                     | )       | (224,936                  | )       
|Foreign currency exchange gain                           |                                                                          | 201,250                     |         | 577,315                   |         
|Gain on extinguishment of debt                           |                                                                          |                            |         | 347,207                   |         
|Gain on sale of investment in affiliate to related party |                                                                          | 25,518                      |         |                          |         
|Other income (expense), net                              |                                                                          | (11,394                     | )       | 10,274                    |         
|                                                         |                                                                          |                             |         |                           |         
|                                                         | Income (loss) before income taxes and other items                        |                             | 76,211  |                           | 587,615 
|Reorganization expenses                                  |                                                                          | (4,852                      | )       |                          |         
|Income tax expense, net                                  |                                                                          | (703                        | )       | (2,851                    | )       
|Minority interests in subsidiaries, net                  |                                                                          | (10                         | )       | 126                       |         
|Share in results of affiliates, net                      |                                                                          | 4,509                       |         | (18,389                   | )       
|                                                         |                                                                          |                             |         |                           |         
|                                                         | Income (loss) before cumulative effect of chance in accounting principle |                             | 75,155  |                           | 566,501 
|Cumulative effect of change in accounting principle      |                                                                          |                            |         |                          |         
|                                                         |                                                                          |                             |         |                           |         
|                                                         | Net income (loss)                                                        |                             | 75,155  |                           | 566,501 
|                                                         |                                                                          |                             |         |                           |         

27

---

|                              |                 | Total Assets
|----------------------------- | --------------- | ------------
|
|
|Corporate and UPC Investments |                 | 302,550     
|UPC Media                     |                 | 71,600      
|Priority Telecom              |                 | 223,619     
|Distribution:                 |                 |             
|                              | The Netherlands |             
|                              | Austria         |             
|                              | Belgium         |             
|                              | Czech Republic  |             
|                              | Norway          |             
|                              | Hungary         |             
|                              | France          |             
|                              | Poland          |             
|                              | Sweden          |             
|                              | Other           |             
|                              |                 |             
|Total                         |                 | 4,452,335   
|                              |                 |             

11.   Impairment and Restructuring Charges

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

28

---

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

|                                                                                             |  | Employee
Severance &
Termination
Costs |   | Office
Closures |   | Programming
and Lease
Contracts
Termination Costs |   | Asset
Disposal
Losses and
Other Costs |   | Total
Impairment and
Restructuring
Charges |  
|-------------------------------------------------------------------------------------------- |  | -------------------------------------- | - | --------------- | - | ------------------------------------------------- | - | ------------------------------------- | - | ------------------------------------------ | -
|
|Impairment and restructuring liability, December 31, 2002                                    |  | 18,545                                 |   | 13,550          |   | 35,184                                            |   | 4,195                                 |   | 71,474                                     |  
|                                                                                             |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Total impairment and restructuring charges (releases) for the six months ended June 30, 2003 |  | (963                                   | ) |                |   |                                                  |   |                                      |   | (963                                       | )
|Cash paid during six months ended June 30, 2003                                              |  | (7,195                                 | ) | (3,398          | ) | (2,061                                            | ) | (1,045                                | ) | (13,699                                    | )
|Non-cash release of restructuring liability                                                  |  |                                       |   |                |   | (435                                              | ) |                                      |   | (435                                       | )
|Cumulative translation adjustment & other                                                    |  | (143                                   | ) | (520            | ) | (2,130                                            | ) | (9                                    | ) | (2,802                                     | )
|                                                                                             |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Impairment and restructuring liability, June 30, 2003                                        |  | 10,244                                 |   | 9,632           |   | 30,558                                            |   | 3,141                                 |   | 53,575                                     |  
|                                                                                             |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Short-term portion impairment and restructuring liability                                    |  | 4,678                                  |   | 4,508           |   | 887                                               |   | 3,090                                 |   | 13,163                                     |  
|Long-term portion impairment and restructuring liability                                     |  | 5,566                                  |   | 5,124           |   | 29,671                                            |   | 51                                    |   | 40,412                                     |  
|                                                                                             |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  
|Impairment and restructuring liability, June 30, 2003                                        |  | 10,244                                 |   | 9,632           |   | 30,558                                            |   | 3,141                                 |   | 53,575                                     |  
|                                                                                             |  |                                        |   |                 |   |                                                   |   |                                       |   |                                            |  

12.   Related Party Transactions

In 2002, a subsidiary of UPC entered into a contract with Spinhalf Ltd. for the provision of network services. This company is owned by a family member of UPC's
Chief Executive Officer. The value of the contracted services to date is approximately 7 million.

13.   Subsequent Events

Certain subsequent events are described in Note 2 "Reorganization Under Bankruptcy Code" in the consolidated financial statements.

29

---



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

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

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

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

30

---

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

Risks, Uncertainties and Liquidity

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

Description of Business

The Company is managed internally as three primary businesses, UPC Distribution, UPC Media and Priority Telecom (with the UPC Media division managing the chello
broadband and programming businesses). UPC Distribution focuses on providing cable television (including digital), DTH, internet and telephone services to residential customers and is comprised of the
local operating systems. UPC Media includes chello broadband, the internet access provider, and UPCtv, which provides video content and programming as well as UPC's digital products. UPC Media
provides broadband internet and interactive digital products and services, transactional television services such as pay per view movies, digital broadcast and post production services, and thematic
channels for distribution on our network, third party networks and DTH platforms. We have also formed an Investment Division, which manages UPC's non-consolidated investment assets.
Priority Telecom is focused on providing telephone and internet services to business customers. We evaluate performance and allocate resources based on the results of these divisions.

31

---

Results of Operations

Revenue

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

|                             |                    | Revenue |        
|---------------------------- | ------------------ | ------- | -------
|
|
|
|Triple Play Distribution     |                    | 331,248 |        
|Germany(1)                   |                    |        |        
|Other                        |                    | 6,583   |        
|                             |                    |         |        
|                             | Total Distribution |         | 337,831
|Priority Telecom             |                    | 27,658  |        
|UPC Media                    |                    | 21,581  |        
|UPC Investment               |                    | 122     |        
|Intercompany Eliminations(2) |                    | (27,807 | )      
|                             |                    |         |        
|                             | Total              |         | 359,385
|                             |                    |         |        

|                             |                    | Revenue |        
|---------------------------- | ------------------ | ------- | -------
|
|
|
|Triple Play Distribution     |                    | 663,242 |        
|Germany(1)                   |                    |        |        
|Other                        |                    | 13,054  |        
|                             |                    |         |        
|                             | Total Distribution |         | 676,296
|Priority Telecom             |                    | 54,262  |        
|UPC Media                    |                    | 42,252  |        
|UPC Investment               |                    | 245     |        
|Intercompany Eliminations(2) |                    | (54,570 | )      
|                             |                    |         |        
|                             | Total              |         | 718,485
|                             |                    |         |        

---

UPC Distribution.The movement in revenue from UPC Distribution for the three and six months ended June 30, 2003 is
attributable to:



32

---



Priority Telecom.The movement in revenue fromPriority Telecomfor the three
and six months ended June 30, 2003 is attributable to:



UPC Media.The movement in revenue from UPC Media for the three and six months ended June 30, 2003 is mainly
attributable to an increase of 130,400 (22.0%) in the number of internet subscribers to 723,300 from 592,900 as per June 30, 2003 and 2002, respectively.

Operating Expenses

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

33

---

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

|                               |                    | Operating Expenses |        
|------------------------------ | ------------------ | ------------------ | -------
|
|
|
|Distribution excluding Germany |                    | 155,338            |        
|Germany(1)                     |                    |                   |        
|                               |                    |                    |        
|                               | Total Distribution |                    | 155,338
|Priority Telecom               |                    | 17,986             |        
|UPC Media                      |                    | 7,357              |        
|UPC Investments                |                    |                   |        
|Intercompany Eliminations      |                    | (25,492            | )      
|                               |                    |                    |        
|                               | Total              |                    | 155,189
|                               |                    |                    |        

|                               |                    | Operating Expenses |        
|------------------------------ | ------------------ | ------------------ | -------
|
|
|
|Distribution excluding Germany |                    | 316,665            |        
|Germany(1)                     |                    |                   |        
|                               |                    |                    |        
|                               | Total Distribution |                    | 316,665
|Priority Telecom               |                    | 33,044             |        
|UPC Media                      |                    | 14,263             |        
|UPC Investments                |                    |                   |        
|Intercompany Eliminations      |                    | (50,360            | )      
|                               |                    |                    |        
|                               | Total              |                    | 313,612
|                               |                    |                    |        

---

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



34

---



Selling, General & Administrative Expenses

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

|                                        |                    | Selling, General & Administrative expenses |       
|--------------------------------------- | ------------------ | ------------------------------------------ | ------
|
|
|
|Distribution excluding Germany          |                    | 70,560                                     |       
|Germany(1)                              |                    |                                           |       
|                                        |                    |                                            |       
|                                        | Total Distribution |                                            | 70,560
|Priority Telecom                        |                    | 6,541                                      |       
|UPC Media                               |                    | 8,666                                      |       
|UPC Investments                         |                    | 393                                        |       
|Stock-based compensation                |                    | 5,762                                      |       
|Loss on disposal of Poland DTH business |                    | 6,856                                      |       
|Intercompany Eliminations               |                    | (1,990                                     | )     
|                                        |                    |                                            |       
|                                        | Total              |                                            | 96,788
|                                        |                    |                                            |       

|                                        |                    | Selling, General & Administrative expenses |        
|--------------------------------------- | ------------------ | ------------------------------------------ | -------
|
|
|
|Distribution excluding Germany          |                    | 146,254                                    |        
|Germany(1)                              |                    |                                           |        
|                                        |                    |                                            |        
|                                        | Total Distribution |                                            | 146,254
|Priority Telecom                        |                    | 15,487                                     |        
|UPC Media                               |                    | 19,966                                     |        
|UPC Investments                         |                    | 686                                        |        
|Stock-based compensation                |                    | 9,655                                      |        
|Loss on disposal of Poland DTH business |                    | 6,856                                      |        
|Intercompany Eliminations               |                    | (4,034                                     | )      
|                                        |                    |                                            |        
|                                        | Total              |                                            | 194,870
|                                        |                    |                                            |        

---

The
movement in selling, general and administrative expenses for the three and six months ended June 30, 2003 is attributable to:



35

---



Adjusted EBITDA

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

|                         |                    | Adjusted EBITDA |        
|------------------------ | ------------------ | --------------- | -------
|
|
|
|Triple Play Distribution |                    | 119,763         |        
|Germany(1)               |                    |                |        
|Corporate                |                    | (12,532         | )      
|Other                    |                    | 4,622           |        
|                         |                    |                 |        
|                         | Total Distribution |                 | 111,853
|                         |                    |                 |        
|Priority Telecom         |                    | 3,130           |        
|UPC Media                |                    | 5,559           |        
|UPC Investments          |                    | (516            | )      
|                         |                    |                 |        
|                         | Total              |                 | 120,026
|                         |                    |                 |        

|                         |                    | Adjusted EBITDA |        
|------------------------ | ------------------ | --------------- | -------
|
|
|
|Triple Play Distribution |                    | 234,077         |        
|Germany(1)               |                    |                |        
|Corporate                |                    | (30,393         | )      
|Other                    |                    | 9,761           |        
|                         |                    |                 |        
|                         | Total Distribution |                 | 213,445
|                         |                    |                 |        
|Priority Telecom         |                    | 5,731           |        
|UPC Media                |                    | 8,024           |        
|UPC Investments          |                    | (686            | )      
|                         |                    |                 |        
|                         | Total              |                 | 226,514
|                         |                    |                 |        

---

36

---

UPC Distribution.The movement in Adjusted EBITDA from UPC Distribution for the three and six months ended June 30,
2003 is attributable to:



Priority Telecom.The movement in Adjusted EBITDA fromPriority Telecomfor
the three and six months ended June 30, 2003 is attributable to:



UPC Media.The movement in Adjusted EBITDA from UPC Media for the three and six months ended June 30, 2003 is mainly
attributable to:



Please
refer to our segment information in the accompanying footnotes to the unaudited condensed financial statements for a definition of Adjusted EBITDA and a reconciliation of total
segment Adjusted EBITDA to consolidated net income.

Depreciation and Amortization

Depreciation and amortization expense decreased 1.6 million (0.9%) to 170.7 million from 172.3 million for the three months
ended June 30, 2003 and 2002, respectively. Depreciation and amortization expense decreased 7.6 million (2.2%) to 337.3 million from 344.9 million for the six
months ended June 30, 2003 and 2002, respectively. The decreases are mainly attributable to the deconsolidation of UPC Germany effective August 1, 2002.

Interest Income

Interest income decreased 9.6 million (89.3%) to 1.2 million from 10.7 million for the three months ended June 30, 2003
and 2002, respectively. Interest income decreased 12.0 million (71.8%) to 4.7 million from 16.7 million for the six months ended June 30, 2003 and 2002,
respectively. The decreases are mainly attributable to the decrease in cash balances.

Interest Expense

Interest expense (including related party) decreased 146.9 million (65.3%) to 78.0 million from 224.9 million for the three
months ended June 30, 2003 and 2002, respectively. Interest expense (including related party) decreased 294.7 million (64.8%) to 160.4 million from
455.1 million for the six months ended June 30, 2003 and 2002, respectively. The decreases are mainly attributable to the cessation of accreting interest in accordance with SOP
90-7 (as defined below) on our senior discount notes on

37

---

December 3,
2002 when we filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. In addition, the decrease in interest expense is attributable to an increase of the euro
against the U.S. dollar.

|                       |                    | For the Three Months Ended June 30, |         | For the Six Months Ended June 30, |        
|---------------------- | ------------------ | ----------------------------------- | ------- | --------------------------------- | -------
|
|
|Cash Current Pay:      |                    |                                     |         |                                   |        
|                       | Bank               |                                     | (56,199 | )                                 | (66,167
|                       | Senior Notes       |                                     |        |                                   | (55,484
|                       |                    |                                     |         |                                   |        
|                       |                    | (56,199                             | )       | (121,651                          | )      
|                       |                    |                                     |         |                                   |        
|Non-Cash Accretion:    |                    |                                     |         |                                   |        
|                       | Discount Notes     |                                     | (12,483 | )                                 | (78,077
|                       | Exchangeable Loan  |                                     |        |                                   | (14,557
|                       | Deferred Financing |                                     | (9,353  | )                                 | (10,650
|                       |                    |                                     |         |                                   |        
|                       |                    | (21,836                             | )       | (103,284                          | )      
|                       |                    |                                     |         |                                   |        
|Total Interest Expense |                    | (78,035                             | )       | (224,935                          | )      
|                       |                    |                                     |         |                                   |        

The
recapitalization process is expected to be completed during 2003. If there is completion of the recapitalization, our senior notes, senior discount notes and other claims would be
exchanged for equity in New UPC. See Note 3 of the Company's Unaudited condensed consolidated financial statements captured in this Quarterly Report on Form 10-Q

Foreign Currency Exchange Gain

Foreign currency exchange gain decreased 376.1 million (65.1%) to 201.3 million from 577.3 million, for the three months ended
June 30, 2003 and 2002, respectively. Foreign currency exchange gain decreased 186.7 million (35.8%) to 334.6 million from 521.3 million for the six months
ended June 30, 2003 and 2002, respectively. These gains during both 2003 and 2002 are primarily a result of a significant foreign exchange gain on our dollar denominated senior notes and our
Exchangeable Loan as the euro strengthened against the U.S. dollar. Consequently, the decrease is mainly attributable to the difference in revaluation of the euro against the U.S. dollar during these
periods.

Gain on Extinguishment of Debt

The gain on extinguishment of debt for the six months ended June 30, 2003 relates to the gain on the Tevel transaction, recognized during the three months
ended March 31, 2003. The gain on
extinguishment of debt for the six months ended June 30, 2002 relates to the gain on the unwinding of certain cross currency swap agreements for 347.2 million, recognized during the
three months ended June 30, 2002, and the gain on the restructuring and cancellation of costs associated with certain vendor contracts ofPriority
Telecomfor 124.5 million, recognized during the three months ended March 31, 2002.

Gain on Sale of Investments to Related Party

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

Other Income and Expense

Other income and expense decreased 21.7 million to an expense of 11.4 million from an income of 10.3 million for the three months ended
June 30, 2003 and 2002, respectively. Other income and expense decreased 162.4 million (91.9%) to an expense of 14.3 million from an expense of 176.7 million
for the six

38

---

months
ended June 30, 2003 and 2002, respectively. Other income and expense primarily relates to the mark-to-market valuations of our cross currency and interest rate
derivative contracts from period to period. Consequently, the movement is mainly attributable to the number of derivatives held by us, and the change in the underlying exchange rate and interest
variables.

Reorganization Expenses, Net

In connection with the Chapter 11 Case, we are required to prepare our consolidated financial statements in accordance with Statement of Position
90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code ("SOP 90-7"), issued by the American Institute of Certified Public Accountants. The
reorganization expenses for the three and six months ended June 30, 2003 included professional fees of 4.9 million and 12.5 million, respectively.

Share in Results of Affiliated Companies, Net

Share in result of affiliated companies increased 22.9 million to a gain of 4.5 million from a loss of 18.4 million for the three months
ended June 30, 2003 and 2002, respectively. Share in result of affiliated companies increased 41.7 million to a gain of 2.0 million from a loss of 39.7 million for the six
months ended June 30, 2003 and 2002, respectively. This increase is mainly attributable to:



Cumulative Effect of Change in Accounting Principle

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

|      |                 | For the Six Months
Ended June 30, 2002 |         
|----- | --------------- | -------------------------------------- | --------
|
|      | The Netherlands |                                        | (491,737
|      | Czech Republic  |                                        | (98,463 
|      | Norway          |                                        | (43,572 
|      | Hungary         |                                        | (56,071 
|      | France          |                                        | (178,692
|      | Poland          |                                        | (409,906
|      | Sweden          |                                        | (189,447
|      | Other           |                                        | (30,983 
|      |                 |                                        |         
|Total |                 | (1,498,871                             | )       
|      |                 |                                        |         

39

---



Liquidity and Capital Resources

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



In
general, we have been primarily dependent on the capital markets in the past to fund acquisitions, developing systems and products and corporate overhead, using the cash contributed
by United Europe, Inc. upon formation and debt and equity raised at the holding company levels for such
purposes. However, going forward we may not be able to access the capital markets as a source of capital. Our current plans do not anticipate such access, although we might access such markets if we
were able and the terms of such financing were acceptable to us.

In
addition, we have financed our systems from our UPC Distribution Bank Facility and with operating cash flow. Well-established systems generally have stable positive cable
cash flows that are used to partially offset funding necessary for new product offerings, including telephone and internet/data. Developing systems are at various stages of construction and
development and generally depend on us for some of the funding for their operating needs.

In
the remainder of 2003 and thereafter, we anticipate that the sources of capital possibly available to us will include working capital and operating cash flows, proceeds from the
disposal of non-core investments, further internal reorganization and alignment of businesses, draw downs under the UPC Distribution Bank Facility and vendor financing. We do not
anticipate access to the capital markets as a source of funding unless we are able to restructure our existing indebtedness. If we are able to complete our planned recapitalization satisfactorily and
are able to implement a rationalization of our non-core investments and continue to improve our operating performance, we believe that our existing cash balances, our working capital and
operating cash flow and draw downs available under the UPC Distribution Bank Facility will be sufficient to fund operations as a going concern. Should our planned debt restructuring, or the investment
rationalization program be unsuccessful, or should our planned recapitalization be unsuccessful and our operating results fall behind our current business plan, there will be uncertainty whether we
have sufficient funds to meet our planned capital expenditures and/or existing debt commitments and it will be doubtful whether we will be able to continue as a going concern.

As
a result of our failure to pay interest when due on certain of our senior notes, the maturity of those notes, our senior discount notes, the Exchangeable Loan and the UPC Distribution
Facility may be accelerated at any time, subject, in the case of the Exchangeable Loan, and the UPC Distribution Facility to conditional waivers granted by the holders of such indebtedness.
Consequently, all such indebtedness has been classified as current portion of long-term debt.

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 our 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,

40

---

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.

Sources of Capital

We had approximately 178.5 million of cash and cash equivalents on hand as of June 30, 2003. Our ability to access our borrowing capacity at the
holding company and subsidiary level was restricted or eliminated as a result of the payment defaults under our senior notes in the first twelve months of 2002 and the first quarter of 2003. To date,
our principal sources of capital have been debt and equity capital raised at our holding company level and debt securities and bank debt issued or borrowed by subsidiaries. As of the date of the
filing, we have no restrictions to make additional drawings under the UPC Distribution Bank Facility.

Consolidated Capital Expenditures

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

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

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

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

41

---

Statements of Cash Flows

As of June 30, 2003 we had cash and cash equivalents of 178.5 million, a decrease of 76.6 million from 255.1 million as of
December 31, 2002. As of June 30, 2002 we had cash and cash equivalents of 382.8 million, a decrease of 472.2 million from 855.0 million as December 31, 2001.

|                                                 |  | For the Six Months
Ended June 30, |  
|------------------------------------------------ |  | --------------------------------- | -
|
|
|Cash flows from operating activities             |  | 138,880                           |  
|Cash flows from investing activities             |  | (76,532                           | )
|Cash flows from financing activities             |  | (128,348                          | )
|Effect of exchange rates on cash                 |  | (10,563                           | )
|                                                 |  |                                   |  
|Net decrease in cash and cash equivalents        |  | (76,563                           | )
|Cash and cash equivalents at beginning of period |  | 255,062                           |  
|                                                 |  |                                   |  
|Cash and cash equivalents at end of period       |  | 178,499                           |  
|                                                 |  |                                   |  

For the six months ended June 30, 2003

Principal sources of cash during the six month period ended June 30, 2003 included 138.9 million from operating activities, 100.7 million of
proceeds from the sale of assets, and 3.7 million of dividends received.

Principal
uses of cash during the six month period ended June 30, 2003 included 128.3 million for repayment of long- and short-term debt facilities,
103.1 million of capital expenditures, 51 million for the settlement of a derivative loan, 17.1 million for restricted cash deposited, and 9.1 million for the purchase of
derivatives.

For the six months ended June 30, 2002

Principal sources of cash during the six-month period ended June 30, 2002 included 8.0 million of dividends received and proceeds of
10.7 million from long- and short-term debt facilities.

Principal
uses of cash during the six month period ended June 30, 2002 included 246.3 million for operating activities, 172.8 million for capital expenditures,
24.1 million for acquisitions, 44.6 million for the repayment of long- and short-term debt facilities and 12.0 million for restricted cash deposited.

Item 3.    Quantitative and Qualitative Disclosure About Market Risk

Investment Portfolio

As of June 30, 2003, we had cash and cash equivalents of approximately 178.5 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 are subject to interest rate risk and foreign exchange fluctuations
(with respect to amounts invested in currencies outside the European Monetary Union). Additionally we hold certain investments in marketable debt and equity securities which are subject to stock price
fluctuations. To date we have not experienced any material losses with respect to our investment portfolio.

Credit Risk

We monitor the financial risk of our trade counter parties. Subject to a materiality test, new vendors go through a credit check before a contract is awarded.
Periodical financial analyses are made of a group of

42

---

vendors
that provide material proprietary services or products. As of June 30, 2003, we believe our portfolio of these vendors as a whole meets our internal criteria for acceptability.

Inflation and Foreign Currency Exchange Rate Losses

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

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

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

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

Impact of Foreign Currency Rate Changes

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

The
table below provides information about UPC's and its consolidated subsidiaries' foreign currency risk for cash, which is denominated in foreign currencies outside of the European
Monetary Union as of June 30, 2003. The information is presented in Euro equivalents, as the Euro is our reporting currency.

|                          |  | Amount Outstanding
as of June 30, 2003
|------------------------- |  | --------------------------------------
|
|
|Cash and Cash Equivalents |  |                                       
|USD Cash                  |  | 90,209                                

We
are risk averse towards foreign currency risk and therefore actively seek to manage our foreign currency risk by entering into hedge instruments where appropriate and available to us
in the financial

43

---

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

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

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

|                                               |  | Amount Outstanding
as of
June 30, 2003 |  | Expected Repayment
as of June 30, 2003
|---------------------------------------------- |  | -------------------------------------- |  | --------------------------------------
|
|
|Dollar Denominated Facilities                  |  |                                        |  |                                       
|UPC Senior Notes due 2009(1)                   |  | 665,771                                |  | 143,141                               
|UPC Senior Notes due 2007(1)                   |  | 148,517                                |  | 30,632                                
|UPC Senior Notes due 2009(1)                   |  | 208,284                                |  | 43,740                                
|UPC Senior Notes due 2010(1)                   |  | 199,556                                |  | 42,905                                
|UPC Senior Discount Notes due 2009(1)          |  | 525,186                                |  | 96,370                                
|UPC Senior Discount Notes due 2009(1)          |  | 324,783                                |  | 59,810                                
|UPC Senior Discount Notes due 2010(1)          |  | 644,992                                |  | 118,230                               
|UPC Senior Notes due 2010(1)                   |  | 494,263                                |  | 106,267                               
|PCI Notes                                      |  | 12,682                                 |  | 12,682                                
|UPC Polska 1998 Senior Discount Notes          |  | 173,018                                |  | 62,783                                
|UPC Polska 1999 Senior Discount Notes          |  | 161,288                                |  | 59,763                                
|UPC Polska 1999 Series C Senior Discount Notes |  | 18,989                                 |  | 9,598                                 
|Exchangeable Loan(1)                           |  | 819,087                                |  | 819,087                               

---

Interest Rate Sensitivity

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

For
descriptions of our senior notes, senior discount notes and the Exchangeable Loan we refer to Note 8 of our audited consolidated financial statements for the year ended
December 31, 2002, as included in our Annual Report on Form 10-K for such year.

The
table below provides information about our financial instruments that are sensitive to changes in interest rates as of June 30, 2003, including cash flows based on the
expected repayment dates and the related weighted-average interest rates. The information is presented in Euro equivalents, which is our

44

---

reporting
currency and is based on classification of indebtedness in our consolidated financial statements for the six months ended June 30, 2003. Contractual maturities of the indebtedness
differ from the information shown in the table.

|                                                          |                                       | Amount Outstanding
as of June 30, 2003 |           | Expected Repayment as of June 30,
|--------------------------------------------------------- | ------------------------------------- | -------------------------------------- | --------- | ---------------------------------
|
|
|Fixed and Variable Rate Facilities                        |                                       |                                        |           |                                  
|Fixed rate UPC Senior Notes due 2009(1)                   |                                       | 665,771                                |           | 143,141                          
|                                                          | Average interest rate                 |                                        | 10.875    | %                                
|Fixed rate UPC Senior Notes due 2007(1)                   |                                       | 69,166                                 |           | 12,969                           
|                                                          | Average interest rate                 |                                        | 10.875    | %                                
|Fixed rate UPC Senior Notes due 2009(1)                   |                                       | 69,774                                 |           | 13,083                           
|                                                          | Average interest rate                 |                                        | 11.250    | %                                
|Fixed rate UPC Senior Notes due 2009(1)                   |                                       | 213,057                                |           | 40,481                           
|                                                          | Average interest rate                 |                                        | 10.875    | %                                
|Fixed rate UPC Senior Discount Notes due 2009(1)          |                                       | 525,186                                |           | 96,370                           
|                                                          | Average interest rate                 |                                        | 12.500    | %                                
|Fixed rate UPC Senior Discount Notes due 2009(1)          |                                       | 144,410                                |           | 17,097                           
|                                                          | Average interest rate                 |                                        | 13.375    | %                                
|Fixed rate UPC Senior Discount Notes due 2009(1)          |                                       | 324,783                                |           | 59,810                           
|                                                          | Average interest rate                 |                                        | 13.375    | %                                
|Fixed rate UPC Senior Notes due 2007(1)                   |                                       | 148,517                                |           | 30,632                           
|                                                          | Average interest rate                 |                                        | 10.875    | %                                
|Fixed rate UPC Senior Notes due 2009(1)                   |                                       | 208,284                                |           | 43,740                           
|                                                          | Average interest rate                 |                                        | 11.250    | %                                
|Fixed rate UPC Senior Discount Notes due 2010(1)          |                                       | 644,992                                |           | 118,230                          
|                                                          | Average interest rate                 |                                        | 13.750    | %                                
|Fixed rate UPC Senior Notes due 2010(1)                   |                                       | 199,556                                |           | 42,905                           
|                                                          | Average interest rate                 |                                        | 11.500    | %                                
|Fixed rate UPC Senior Notes due 2010(1)                   |                                       | 494,263                                |           | 106,267                          
|                                                          | Average interest rate                 |                                        | 11.250    | %                                
|Fixed rate UPC Senior Notes due 2010(1)                   |                                       | 145,748                                |           | 27,692                           
|                                                          | Average interest rate                 |                                        | 11.250    | %                                
|Fixed rate PCI Notes                                      |                                       | 12,682                                 |           | 12,682                           
|                                                          | Average interest rate                 |                                        | 9.875     | %                                
|Fixed rate UPC Polska 1998 Senior Discount Notes          |                                       | 173,018                                |           | 62,783                           
|                                                          | Average interest rate                 |                                        | 14.500    | %                                
|Fixed rate UPC Polska 1999 Senior Discount Notes          |                                       | 161,288                                |           | 59,763                           
|                                                          | Average interest rate                 |                                        | 14.500    | %                                
|Fixed rate UPC Polska 1999 Series C Senior Discount Notes |                                       | 18,989                                 |           | 9,598                            
|                                                          | Average interest rate                 |                                        | 7.000     | %                                
|Fixed rate Exchangeable Loan(1)                           |                                       | 819,087                                |           | 819,087                          
|                                                          | Average interest rate                 |                                        | 6.000     | %                                
|Variable rate UPC Distribution Bank Facility              |                                       | 2,984,042                              |           | 2,984,042                        
|                                                          | EURIBOR/USDLIBOR + 0.75%4%           |                                        |           |                                  
|                                                          | Average interest rate                 |                                        | 8.060     | %                                
|Capital lease obligations                                 |                                       | 51,776                                 |           | 51,776                           
|                                                          | Average interest rate                 |                                        | Various   |                                  
|Other debt                                                |                                       | 16,205                                 |           | 16,205                           
|                                                          | Average interest rate                 |                                        | Various   |                                  
|                                                          |                                       |                                        |           |                                  
|                                                          | Total debt                            |                                        | 8,090,594 |                                  
|                                                          |                                       |                                        |           |                                  
|Short term debt                                           |                                       |                                        |           |                                  
|Operating leases                                          |                                       |                                        |           |                                  
|Purchase commitments                                      |                                       |                                        |           |                                  
|Other long term obligations                               |                                       |                                        |           |                                  
|                                                          |                                       |                                        |           |                                  
|                                                          | Total commitments and short term debt |                                        |           |                                  
|                                                          |                                       |                                        |           |                                  
|                                                          | Total debt and commitments            |                                        |           |                                  
|                                                          |                                       |                                        |           |                                  

---

Equity Prices

As of June 30, 2003, we are exposed to equity price fluctuations related to our investments in equity securities. We evaluate our investments in publicly
traded securities accounted for under the equity method for impairment in accordance with Accounting Principles Board Opinion No. 18, The Equity

45

---

Method
of Accounting for Investment in Common Stock ("APB 18") and Securities and Exchange Commission Staff Accounting Bulletin No. 59, Accounting for Noncurrent Marketable Equitable
Securities. Under APB 18, a loss in value of an investment accounted for under the equity method, which is other than a temporary decline, should be recognized as a realized loss, establishing a new
carrying value for the investment. Factors we consider in making this evaluation include: the length of time and the extent to which the market value has been less than cost, the financial condition
and near-term prospects of the issuer, including cash flows of the investee and any specific events which may influence the operations of the issuer and the intent and ability of us to
retain our investments for a period of time sufficient to allow for any anticipated recovery in market value. A current fair value of an investment that is less than its carrying amount may indicate a
loss in value of the investment.

|            |  | Number of Shares |  | Fair Value
June 30, 2003
|----------- |  | ---------------- |  | ------------------------
|
|United      |  | 5,569,240        |  | 24,827                  
|PrimaCom AG |  | 4,948,039        |  | 2,573                   
|Sorrento    |  | 1,561,081        |  | 3,616                   

As
of June 30, 2003, we are also exposed to equity price fluctuations related to our debt that 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. The information is presented in Euro equivalents, which is our reporting currency and is based on
classification of indebtedness in our consolidated financial statements for the six months ended June 30, 2003. Contractual maturities of the indebtedness differ from the information shown in
the table.

|                     |                | Amount Outstanding
as of June 30, 2003 |  |         |  |        
|-------------------- | -------------- | -------------------------------------- |  | ------- |  | -------
|
|
|
|
|Exchangeable Loan(1) |                | 819,087                                |  | 819,087 |  | 819,087
|                     | 6.0% per annum |                                        |  |         |  |        

---

Cross-Currency and Interest Rate Swaps

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

46

---

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

Item 4.    Controls and Procedures





47

---



PART IIOTHER INFORMATION

Item 1Legal Proceedings

For information regarding developments in certain legal proceedings to which the Company or any of its subsidiaries is a party, see Notes 2, 8 and 14 to our
condensed consolidated financial statements included elsewhere herein.

Item 2Changes in Securities and Use of Proceeds

None.

Item 3Defaults Upon Senior Securities

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

Item 4Submission of Matters to a Vote of Security Holders

For information regarding submission of matters to a vote of security holders, see Note 2 to our condensed consolidated financial statements included
elsewhere herein.

Item 5Other Information

Summary Operating Data

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

48

---

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

Summary Operating Tables Notes

49

---



Item 6.    Exhibits and Reports on Form 8-K

|     |  |                                                                                                           
|---- |  | ----------------------------------------------------------------------------------------------------------
|(a)  |  | Exhibits                                                                                                  
|31.1 |  | Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbaines-Oxley Act of 2002.      
|31.2 |  | Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbaines-Oxley Act of 2002.      
|32.1 |  | Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbaines-Oxley Act of 2002.      
|32.2 |  | Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbaines-Oxley Act of 2002.      
|(b)  |  | Reports on Form 8-K filed during the Quarter                                                              
|99.2 |  | Current report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934, dated June 19, 2003
|99.3 |  | Current report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934, dated July 7, 2003 
|99.4 |  | Current report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934, dated July 28, 2003

|Date of Report |  | Date of Event  |  | Item Reported                                                                                                                                                                                                                                                                                                                                                                      
|-------------- |  | -------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|April 24, 2003 |  | April 24, 2003 |  | Item 3 & 7Announcement that on April 24, 2004, following the confirmation of the Akkoord (plan of composition) by the Dutch Court of Appeals, InterComm Holdings L.L.C., has appealed the ratification of the
Akkoord to the Dutch Supreme Court (Hoge Raad).                                                                                                                     
|May 14, 2003   |  | May 14, 2003   |  | Item 7 & 9Announcement that on May 14, 2003 UPC filed a press release announcing its operating and financial results for the first quarter ending March 31, 2003.                                                                                                                                                                                                                 
|June 20, 2003  |  | June 20, 2003  |  | Item 5 & 7Announcement that on June 20, 2003, UPC Polska, Inc, a subsidiary of UPC, issued a press release announcing that, in connection with the proposed restructuring of its indebtedness, it has entered into a Restructuring Agreement,
dated as of June 19, 2003, with UPC Telecom B.V., Belmarken Holding B.V., and certain holders of UPC Polska's Senior Discount Notes.
|July 28, 2003  |  | July 28, 2003  |  | Item 5 & 7Disclosure of proposed disclosure statement filed with the United States Bankruptcy Court for the Southern District of New York on July 28, 2003, by UPC Polska, Inc., a subsidiary of UPC, with respect to the voluntary
petition for relief under Chapter 11 of the U.S. Bankruptcy Code and the pre-negotiated plan of reorganization filed by UPC Polska, Inc.      

50

---

SIGNATURES

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

| |  | UNITED PAN-EUROPE COMMUNICATIONS N.V.a Dutch Public limited liability company
| |  | -----------------------------------------------------------------------------
| |  | By:                                                                          
| |  | By:                                                                          

---

QuickLinks