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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE

SECURITIES EXCHANGE
ACT OF 1934



For the Quarterly Period Ended June 30, 2004



Commission file
numbers          333-33540

333-33540-1



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INSIGHT MIDWEST, L.P.

INSIGHT CAPITAL, INC.

(Exact name of
registrants as specified in their charters)



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|                                                               |  |                                      
|-------------------------------------------------------------- |  | -------------------------------------
|Delaware                                                       |  | 13-4079232                           
|Delaware                                                       |  | 13-4079679                           
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification Nos.)
|                                                               | 
|810 7thAvenue                                                  |  |                                      
|New York, New York                                             |  | 10019                                
|(Address of principal executive offices)                       |  | (Zip code)                           



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



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



Indicate by check mark whether the registrants are accelerated filers (as
defined in Exchange Act Rule 12b-2).    Yes ̈No  x



Indicate the number of shares
outstanding of each of the registrants classes of common stock, as of the latest practicable date.



|                      |  |                  |  | 
|--------------------- |  | ---------------- |  | 
|Insight Midwest, L.P. |  | - Not Applicable
|Insight Capital, Inc. |  | - Not Applicable



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PART I. FINANCIAL INFORMATION



Item 1. Financial Statements



The accompanying unaudited consolidated financial statements have been prepared in accordance with the requirements of Form 10-Q and, therefore, do not include all
information and footnotes required by accounting principles generally accepted in the United States. However, in our opinion, all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the results of operations
for the relevant periods have been made. Results for the interim periods are not necessarily indicative of the results to be expected for the year. These financial statements should be read in conjunction with the summary of significant accounting
policies and the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2003.



1



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INSIGHT MIDWEST, LP

CONSOLIDATED BALANCE SHEETS

(in thousands)



|                                                                                                                                 |  |               |           |   |                  |   |           |  
|-------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---------------- | - | --------- | -
|                                                                                                                                 |  | June 30, 2004 |           |   | December 31,2003 |  
|                                                                                                                                 |  | (unaudited)   |           |   |                  |  
|Assets                                                                                                                           |  |               |           |   |                  |   |           |  
|Cash and cash equivalents                                                                                                        |  | $             | 38,364    |   |                  | $ | 22,679    |  
|Trade accounts receivable, net of allowance for doubtful accounts of $1,242 and $1,123 as of June 30, 2004 and December 31,
2003 |  |               | 23,907    |   |                  |   | 29,271    |  
|Launch funds receivable                                                                                                          |  |               | 4,728     |   |                  |   | 9,421     |  
|Prepaid expenses and other assets                                                                                                |  |               | 15,075    |   |                  |   | 17,711    |  
|                                                                                                                                 |  |               |           |   |                  |   |           |  
|Total current assets                                                                                                             |  |               | 82,074    |   |                  |   | 79,082    |  
|Fixed assets, net                                                                                                                |  |               | 1,167,353 |   |                  |   | 1,198,830 |  
|Goodwill                                                                                                                         |  |               | 14,684    |   |                  |   | 14,684    |  
|Franchise costs, net of accumulated amortization of $358,728 and $358,687 as of June 30, 2004 and December 31, 2003              |  |               | 2,357,463 |   |                  |   | 2,357,535 |  
|Deferred financing costs, net of accumulated amortization of $12,940 and $10,710 as of June 30, 2004 and December 31, 2003       |  |               | 25,002    |   |                  |   | 27,222    |  
|                                                                                                                                 |  |               |           |   |                  |   |           |  
|Total assets                                                                                                                     |  | $             | 3,646,576 |   |                  | $ | 3,677,353 |  
|                                                                                                                                 |  |               |           |   |                  |   |           |  
|Liabilities and partners capital                                                                                                |  |               |           |   |                  |   |           |  
|Accounts payable                                                                                                                 |  | $             | 19,903    |   |                  | $ | 29,427    |  
|Accrued expenses and other liabilities                                                                                           |  |               | 31,385    |   |                  |   | 31,932    |  
|Accrued property taxes                                                                                                           |  |               | 25,757    |   |                  |   | 22,954    |  
|Accrued programming costs                                                                                                        |  |               | 48,218    |   |                  |   | 43,261    |  
|Deferred revenue                                                                                                                 |  |               | 11,803    |   |                  |   | 10,061    |  
|Interest payable                                                                                                                 |  |               | 23,065    |   |                  |   | 23,315    |  
|Debt  current portion                                                                                                           |  |               | 72,875    |   |                  |   | 62,250    |  
|Due to affiliates                                                                                                                |  |               | 48,463    |   |                  |   | 40,386    |  
|                                                                                                                                 |  |               |           |   |                  |   |           |  
|Total current liabilities                                                                                                        |  |               | 281,469   |   |                  |   | 263,586   |  
|                                                                                                                                 |  |              
|Deferred revenue                                                                                                                 |  |               | 3,670     |   |                  |   | 4,523     |  
|Debt                                                                                                                             |  |               | 2,557,201 |   |                  |   | 2,607,350 |  
|Other non-current liabilities                                                                                                    |  |               | 6,718     |   |                  |   | 5,742     |  
|                                                                                                                                 |  |               |           |   |                  |   |           |  
|Total liabilities                                                                                                                |  |               | 2,849,058 |   |                  |   | 2,881,201 |  
|                                                                                                                                 |  |              
|Partners capital:                                                                                                               |  |               |           |   |                  |   |           |  
|Partners accumulated capital                                                                                                    |  |               | 798,133   |   |                  |   | 799,574   |  
|Accumulated other comprehensive loss                                                                                             |  |               | (615      | ) |                  |   | (3,422    | )
|                                                                                                                                 |  |               |           |   |                  |   |           |  
|Total partners capital                                                                                                          |  |               | 797,518   |   |                  |   | 796,152   |  
|                                                                                                                                 |  |               |           |   |                  |   |           |  
|Total liabilities and partners capital                                                                                          |  | $             | 3,646,576 |   |                  | $ | 3,677,353 |  
|                                                                                                                                 |  |               |           |   |                  |   |           |  



See
accompanying notes



2



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INSIGHT MIDWEST, LP

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands)



|                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|----------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                          |  | Three months endedJune 30, |         |   | Six months endedJune 30, |  
|                                          |  | 2004                       |         |   | 2003                     |   |         | 2004 |  |   | 2003    |  
|Revenue                                   |  | $                          | 249,952 |   |                          | $ | 222,376 |      |  | $ | 488,036 |   |  | $ | 436,671 |  
|                                          |  |                            |         |  
|Operating costs and expenses:             |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Programming and other operating costs     |  |                            | 88,513  |   |                          |   | 81,349  |      |  |   | 176,004 |   |  |   | 160,882 |  
|Selling, general and administrative       |  |                            | 48,757  |   |                          |   | 41,820  |      |  |   | 92,831  |   |  |   | 81,825  |  
|Management fees                           |  |                            | 7,323   |   |                          |   | 6,494   |      |  |   | 14,326  |   |  |   | 12,790  |  
|Depreciation and amortization             |  |                            | 58,959  |   |                          |   | 58,619  |      |  |   | 115,948 |   |  |   | 112,187 |  
|                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Total operating costs and expenses        |  |                            | 203,552 |   |                          |   | 188,282 |      |  |   | 399,109 |   |  |   | 367,684 |  
|                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Operating income                          |  |                            | 46,400  |   |                          |   | 34,094  |      |  |   | 88,927  |   |  |   | 68,987  |  
|                                          |  |                            |         |  
|Other income (expense):                   |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Gain on cable system exchange             |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   | 26,992  |  
|Interest expense                          |  |                            | (44,769 | ) |                          |   | (45,367 | )    |  |   | (89,125 | ) |  |   | (91,659 | )
|Interest income                           |  |                            | 27      |   |                          |   | 64      |      |  |   | 83      |   |  |   | 99      |  
|Other income (expense)                    |  |                            | (3,340  | ) |                          |   | 1,881   |      |  |   | (1,326  | ) |  |   | 1,906   |  
|                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Total other expense, net                  |  |                            | (48,082 | ) |                          |   | (43,422 | )    |  |   | (90,368 | ) |  |   | (62,662 | )
|                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net income (loss)                         |  |                            | (1,682  | ) |                          |   | (9,328  | )    |  |   | (1,441  | ) |  |   | 6,325   |  
|Accrual of preferred interests            |  |                            |        |   |                          |   | (5,203  | )    |  |   |        |   |  |   | (10,353 | )
|                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  
|Net loss attributable to common interests |  | $                          | (1,682  | ) |                          | $ | (14,531 | )    |  | $ | (1,441  | ) |  | $ | (4,028  | )
|                                          |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |         |  



See
accompanying notes



3



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INSIGHT MIDWEST, LP

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                         |  |                          |         |   |      |   |          |  
|---------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | -------- | -
|                                                                                         |  | Six months endedJune 30, |        
|                                                                                         |  | 2004                     |         |   | 2003 |  
|Operating activities:                                                                    |  |                          |         |   |      |   |          |  
|Net income (loss)                                                                        |  | $                        | (1,441  | ) |      | $ | 6,325    |  
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |                          |         |   |      |   |          |  
|Depreciation and amortization                                                            |  |                          | 115,948 |   |      |   | 112,187  |  
|Provision for losses on trade accounts receivable                                        |  |                          | 8,070   |   |      |   | 5,106    |  
|Amortization of note discount                                                            |  |                          | 148     |   |      |   | 987      |  
|Gain on cable systems exchange                                                           |  |                          |        |   |      |   | (26,992  | )
|Loss on interest rate swaps                                                              |  |                          | 1,235   |   |      |   |         |  
|Changes in operating assets and liabilities, net of the effect of acquisitions:          |  |                          |         |   |      |   |          |  
|Trade accounts receivable                                                                |  |                          | (2,706  | ) |      |   | (7,821   | )
|Launch fund receivable                                                                   |  |                          | 4,693   |   |      |   | 3,882    |  
|Prepaid expenses and other assets                                                        |  |                          | 1,808   |   |      |   | (861     | )
|Accounts payable                                                                         |  |                          | (9,524  | ) |      |   | (33,311  | )
|Accrued expenses and other liabilities                                                   |  |                          | 15,929  |   |      |   | 41,956   |  
|                                                                                         |  |                          |         |   |      |   |          |  
|Net cash provided by operating activities                                                |  |                          | 134,160 |   |      |   | 101,458  |  
|                                                                                         |  |                          |         |   |      |   |          |  
|Investing activities:                                                                    |  |                          |         |   |      |   |          |  
|Purchase of fixed assets                                                                 |  |                          | (82,232 | ) |      |   | (82,442  | )
|Purchase of intangible assets                                                            |  |                          |        |   |      |   | (788     | )
|Sale of fixed assets                                                                     |  |                          | 892     |   |      |   |         |  
|Purchase of cable television systems, net                                                |  |                          |        |   |      |   | (26,475  | )
|                                                                                         |  |                          |         |   |      |   |          |  
|Net cash used in investing activities                                                    |  |                          | (81,340 | ) |      |   | (109,705 | )
|                                                                                         |  |                          |         |   |      |   |          |  
|Financing activities:                                                                    |  |                          |         |   |      |   |          |  
|Distributions of preferred interests                                                     |  |                          |        |   |      |   | (7,000   | )
|Net borrowings (repayments) under credit facilities                                      |  |                          | (37,125 | ) |      |   | 44,500   |  
|Debt issuance costs                                                                      |  |                          | (10     | ) |      |   |         |  
|                                                                                         |  |                          |         |   |      |   |          |  
|Net cash provided by (used in) financing activities                                      |  |                          | (37,135 | ) |      |   | 37,500   |  
|                                                                                         |  |                          |         |   |      |   |          |  
|Net increase in cash and cash equivalents                                                |  |                          | 15,685  |   |      |   | 29,253   |  
|Cash and cash equivalents, beginning of period                                           |  |                          | 22,679  |   |      |   | 9,937    |  
|                                                                                         |  |                          |         |   |      |   |          |  
|Cash and cash equivalents, end of period                                                 |  | $                        | 38,364  |   |      | $ | 39,190   |  
|                                                                                         |  |                          |         |   |      |   |          |  



See
accompanying notes



4



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



1. Organization and Basis of Presentation



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



Through our wholly owned
operating subsidiaries, Insight Communications Midwest, LLC (Insight Communications Midwest), Insight Communications of Central Ohio, LLC (Insight Ohio) and Insight Kentucky Partners II, L.P. (Insight Kentucky),
we own and operate cable television systems in Indiana, Kentucky, Ohio, and Illinois which passed approximately 2.3 million homes and served approximately 1.3 million customers as of June 30, 2004. In addition, we also owned and operated a cable
television system in Griffin, Georgia through February 28, 2003.



The
accompanying consolidated financial statements include the accounts of Insight Midwest Holdings, LLC, our wholly-owned subsidiary which owns 100% of the outstanding equity of our operating subsidiaries. Certain prior period amounts have been
reclassified to conform to the current period presentation



2.
Responsibility for Interim Financial Statements



Our accompanying
unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements.



In our opinion, the consolidated financial statements reflect all adjustments considered
necessary for a fair presentation of the consolidated results of operations and financial position for the interim periods presented. All such adjustments are of a normal recurring nature. These unaudited interim consolidated financial statements
should be read in conjunction with the audited consolidated financial statements and notes to consolidated financial statements contained in our Annual Report on Form 10-K for the year ended December 31, 2003.



The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The results of operations for the three and six months ended June 30, 2004 are not necessarily indicative of the results to be expected
for the year ending December 31, 2004 or any other interim period.



5



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



3. Fixed Assets



|                                               |  |                |           |   |                  |   |           |  
|---------------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                               |  | June 30,2004   |           |   | December 31,2003 |  
|                                               |  | (in thousands) |          
|Land, buildings and improvements               |  | $              | 36,408    |   |                  | $ | 34,856    |  
|Cable system equipment                         |  |                | 2,105,895 |   |                  |   | 2,026,641 |  
|Furniture, fixtures and office equipment       |  |                | 16,269    |   |                  |   | 15,605    |  
|                                               |  |                |           |   |                  |   |           |  
|                                               |  |                | 2,158,572 |   |                  |   | 2,077,102 |  
|Less accumulated depreciation and amortization |  |                | (991,219  | ) |                  |   | (878,272  | )
|                                               |  |                |           |   |                  |   |           |  
|Total fixed assets, net                        |  | $              | 1,167,353 |   |                  | $ | 1,198,830 |  
|                                               |  |                |           |   |                  |   |           |  



We recorded depreciation expense of
$57.8 million and $113.7 million for the three and six months ended June 30, 2004 and $57.7 million and $110.3 million for the three and six months ended June 30, 2003.



4. Debt



|                                          |  |                |           |   |                  |   |           |  
|----------------------------------------- |  | -------------- | --------- | - | ---------------- | - | --------- | -
|                                          |  | June 30,2004   |           |   | December 31,2003 |  
|                                          |  | (in thousands) |          
|Note payable to Insight Inc.              |  | $              | 100,000   |   |                  | $ | 100,000   |  
|Insight Midwest Holdings Credit Facility  |  |                | 1,518,875 |   |                  |   | 1,556,000 |  
|Insight Midwest 93⁄4% Senior Notes          |  |                | 385,000   |   |                  |   | 385,000   |  
|Insight Midwest 101⁄2% Senior Notes         |  |                | 630,000   |   |                  |   | 630,000   |  
|                                          |  |                |           |   |                  |   |           |  
|                                          |  |                | 2,633,875 |   |                  |   | 2,671,000 |  
|Net unamortized discount/premium on notes |  |                | (1,046    | ) |                  |   | (1,194    | )
|Market value of interest rate swaps       |  |                | (2,753    | ) |                  |   | (206      | )
|                                          |  |                |           |   |                  |   |           |  
|Total debt                                |  | $              | 2,630,076 |   |                  | $ | 2,669,600 |  
|                                          |  |                |           |   |                  |   |           |  



Insight Midwest Holdings $1.975
Billion Credit Facility



Our wholly owned subsidiary, Insight Midwest
Holdings, LLC, serves as borrower under a $1.975 billion credit facility. On March 28, 2002, we borrowed $100.0 million from Insight Inc., $97.0 million of which was contributed to Insight Midwest Holdings in April 2002 for use in paying down the
credit facility balance and in funding financing costs associated with the amendments, and $3.0 million of which was contributed to Insight Ohio as of March 28, 2002. Insight Midwest Holdings is permitted under the credit facility to make
distributions to us for the purpose of repaying this loan, including accrued interest, provided that there are no defaults existing under the credit facility. The loan bears annual interest of 9%, compounded semi-annually, has a scheduled maturity
date of January 31, 2011 and permits prepayments.



On August 26, 2003 we
amended the Insight Midwest Holdings Credit Facility in connection with our refinancing of all the obligations and conditionally guaranteed obligations of Insight Ohio. The amendment increased the Term B loan portion of the credit facility from
$900.0 million to $1.125 billion which increased the total facility size to $1.975 billion from $1.750 billion. We recorded $2.2 million of deferred financing costs associated with this amendment that is being amortized over the remaining term of
the credit facility.



6



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



4. Debt (continued)



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



Senior Notes



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



Debt Principal Payments



As of June 30, 2004, principal payments required on our debt were as follows (in thousands):



|           |  |   |          
|---------- |  | - | ---------
|2004       |  | $ | 31,125   
|2005       |  |   | 83,500   
|2006       |  |   | 83,500   
|2007       |  |   | 83,500   
|2008       |  |   | 104,750  
|Thereafter |  |   | 2,247,500
|           |  |   |          
|Total      |  | $ | 2,633,875
|           |  |   |          



5. Derivative Instruments



We enter into derivative instruments, typically interest-rate swap
agreements, to modify the interest characteristics of our outstanding debt to either a floating or fixed rate basis. These agreements involve fixed rate interest payments in exchange for floating rate interest receipts, known as cash flow hedges,
and floating rate interest payments in exchange for fixed rate interest receipts, known as fair value hedges, over the life of the agreement without an exchange of the underlying principal amount. The differential to be paid or received is accrued
as interest rates change and is recognized as an adjustment to interest expense related to the debt. The related amount payable or receivable is included in other liabilities or assets.



Gains and losses related to cash flow hedges that are determined to be effective hedges are recorded as accumulated other comprehensive
income or loss in the accompanying consolidated balance sheets. Gains and losses related to fair value hedges that are determined to be effective hedges are recorded in the consolidated statements of operations as an adjustment to the swap
instrument and an offsetting adjustment to the carrying value of the underlying debt. Gains and losses related to interest rate swaps that are determined not to be effective hedges and do not qualify for hedge accounting are recorded in our
consolidated statements of operations as other income or expense.



7



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



5. Derivative Instruments (continued)



Cash Flow Hedges



As of June 30, 2004 and December 31, 2003, we had one interest rate
swap agreement outstanding that effectively fixed interest rates at 5% on $150.0 million notional value of debt. This agreement expires in August 2004. We recorded $823,000 and $826,000 of accrued interest related to this agreement as of June 30,
2004 and December 31, 2003. As of June 30, 2004 and December 31, 2003, the estimated fair value (cost if terminated) of this interest rate swap agreement was approximately $(615,000) and $(3.4) million.



Fair Value Hedges



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



In July 2003, we entered into three interest rate swap agreements whereby we swapped fixed rates under our 101⁄2% senior notes due in
December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 8.3%, on $185.0 million notional value of debt. These agreements expire November 1, 2005. We recorded a loss on these swaps of $3.0 million and
$1.2 million for the three and six months ended June 30, 2004, which is included in other income (expense). As of June 30, 2004 and December 31, 2003, we recorded $7,000 and $275,000 of interest receivable related to these agreements. The fair
market value (cost if terminated) of these agreements was $(3.3) million and $(2.1) million as of June 30, 2004 and December 31, 2003.



In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under our 101⁄2% senior notes due in December 2010 for variable rates
equal to six-month LIBOR, plus the applicable margin of approximately 5.9%, on $130.0 million notional value of debt. This agreement expires November 1, 2010. This swap has been determined to be perfectly effective in hedging against fluctuations in
the fair value of the underlying debt. As such, changes in the fair value of the underlying debt equally offset changes in the value of the interest rate swap in our consolidated statements of operations. The fair value (cost if terminated) of this
swap as of June 30, 2004 and December 31, 2003 was $(2.8) million and $(206,000) and has been recorded in other non-current assets (liabilities) and as an adjustment to the carrying value of debt.



8



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INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



6. Comprehensive Income (Loss)



We record the effective
portion of certain derivatives gains or losses as accumulated other comprehensive income or loss in the accompanying consolidated balance sheets. The following is a reconciliation of net income (loss) to comprehensive income (loss) (in
thousands):



|                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |       
|-------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------
|                                       |  | Three months endedJune 30, |        |   | Six months endedJune 30,
|                                       |  | 2004                       |        |   | 2003                     |   |        | 2004 |  |   | 2003  
|Net income (loss)                      |  | $                          | (1,682 | ) |                          | $ | (9,328 | )    |  | $ | (1,441 | ) |  | $ | 6,325 
|Unrealized gain on interest rate swaps |  |                            | 1,462  |   |                          |   | 3,606  |      |  |   | 2,807  |   |  |   | 10,346
|                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |       
|Comprehensive income (loss)            |  | $                          | (220   | ) |                          | $ | (5,722 | )    |  | $ | 1,366  |   |  | $ | 16,671
|                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |       



7. Related Party Transactions



Managed Systems



On March 17, 2000, Insight LP entered into a management agreement with Comcast of
Montana/Indiana/Kentucky/Ohio (Comcast) (formerly known as InterMedia Partners Southeast), an affiliate of Comcast Cable, to provide management services to cable television systems owned by Comcast. As of June 30, 2004, these systems
served approximately 89,400 customers in the state of Indiana. Certain of our employees operate these managed systems. Overhead costs we incur are allocated ratably and charged to them on a monthly basis. Effective July 31, 2004, the management
agreement was terminated by mutual agreement.



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



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



Programming



We purchase the majority of our
programming through affiliates of Comcast Cable. Charges for such programming, including a 11⁄2% administrative fee, were $36.7 million and $73.5 million for the three and six months ended June 30, 2004 and $35.3 million and $70.8 million for the
three and six months ended June 30,



9



---

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



7. Related Party Transactions (continued)



2003. As of June
30, 2004 and December 31, 2003, $32.1 million and $28.3 million of accrued programming costs were due to affiliates of Comcast Cable. We believe that the programming rates charged through these affiliates are lower than those available from
independent parties.



Telephone Agreements



In July 2000, to facilitate delivery of telephone services Insight LP entered into a
ten-year agreement with AT&T Broadband (now known as Comcast Cable) that allows us to deliver to our residential customers, in certain of our service areas, local telephone service provided by Comcast Cable. Under the terms of the agreement, we
lease certain capacity on our local network to Comcast Cable. Revenue earned from leased network capacity used in the provision of telephone services was $2.2 million and $4.3 million for the three and six months ended June 30, 2004 and $1.4 million
and $2.6 million for the three and six months ended June 30, 2003. In addition, we provide certain services and support for which we receive additional payments related to installations, marketing and billing support. Fee revenue earned in
connection with installations is deferred and amortized over the expected term a telephone customer maintains their telephone service, currently estimated to be three years. Marketing and billing support revenue is recognized in the period such
services are performed.



On July 2, 2004, we entered into an agreement with
Comcast Cable to acquire the telephone business of Comcast Cable relating to the markets served under our agreement. The transfer of ownership and operational control of Comcast Cables telephone business to us will take place after a
transition period and is subject to customary closing conditions, including regulatory approvals. The closing is expected to occur during the first half of 2005.



Advertising Services



In October 1999, to facilitate the administration of our advertising services in our Kentucky Systems, we entered into an agreement with an affiliate of AT&T
Broadband (now known as Comcast Cable), which provides for this affiliate to perform all of our Kentucky advertising sales and related administrative services. We, through our Kentucky Systems, earned advertising revenues through this affiliate of
$5.1 million and $9.1 million for the three and six months ended June 30, 2004 and $5.2 million and $9.1 million for the three and six months ended June 30, 2003. As of June 30, 2004 and December 31, 2003, we had $6.9 million and $9.3 million as a
receivable due from this affiliate included in other current assets. We pay this affiliate a fixed and variable fee for providing this service based on advertising sales cash flow growth. As of June 30, 2004 and December 31, 2003, we had $58,000 and
$102,000 recorded as payables to this affiliate related to such services. In accordance with the terms of the agreement, we have notified Comcast Cable that the agreement will terminate effective August 31, 2004.



Due To Affiliates



As of June 30, 2004 and December 31, 2003, we owed Insight LP, certain amounts comprised
primarily of incurred but unpaid management fees, calculated as approximately 3% of revenues, and accrued interest related to our $100.0 million note payable to Insight Inc.



10



---

INSIGHT MIDWEST, LP

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



8. Commitments and Contingencies



Programming Contracts



We enter into long-term contracts with third parties who provide us
with programming for distribution over our cable television systems. These programming contracts are a significant part of our business and represent a substantial portion of our operating costs. Since future fees under such contracts are based on
numerous variables, including number and type of customers, we have not recorded any liabilities with respect to such contracts.



Litigation



In November 2000, we filed a state court action against the City of Louisville for its grant, in September 2000, of a more favorable franchise to Knology of Louisville, Inc. Upon commencement of this action, the City,
pursuant to a provision in its franchise agreement with Knology, automatically suspended Knologys franchise pending a final, non-appealable court determination as to whether Knologys franchise was more favorable than the franchise under
which we operated. In November 2000, Knology filed a federal court action against us seeking monetary damages and other relief for alleged violations of federal laws arising out of our having filed, pursuant to the provisions of our own franchise
agreement with the City, the state court action. In March 2001, the federal court preliminarily set aside the suspension of Knologys franchise. In March 2002, a state circuit court ruled against our claim that Knologys franchise was more
favorable. We appealed the circuit courts order to the state court of appeals which, in June 2003, upheld the lower court ruling. We filed a motion for discretionary review of the appeals courts ruling which was denied by the Kentucky
Supreme Court. In May 2003, the federal court granted us summary judgment and dismissed six of Knologys 11 claims. The court granted summary judgment to Knology on three claims, two of which resulted in permanently enjoining enforcement of the
automatic suspension provision of Knologys franchise agreement and do not involve damages. The third such claim is for violation of Knologys first amendment rights, which will proceed to trial solely on the issue of damages, and would
result in an award of legal fees and court costs specific to such claim if upheld. The remaining undecided claims relate to allegations of anticompetitive conduct and are to proceed to trial on the merits. In August 2003, the court agreed, in part,
with our Motion for Reconsideration, that the stay provision provides no justification for an injunction since the language was severed. Further, the court granted our Motion to Certify Questions for an Immediate Appeal to the Sixth Circuit Court of
Appeals. The Sixth Circuit Court of Appeals granted our Motion to Certify, and we have briefed the issues. The trial will remain stayed pending the Sixth Circuits action. We continue to believe that we have substantial and meritorious defenses
to the remaining asserted federal claims and intend to defend them vigorously. Consequently, we have not recorded any loss reserves in the accompanying financial statements.



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



11



---

INSIGHT CAPITAL, INC.

BALANCE SHEETS

(in thousands)



|                                                                                                                         |  |               |            |   |                  |   |            |  
|------------------------------------------------------------------------------------------------------------------------ |  | ------------- | ---------- | - | ---------------- | - | ---------- | -
|                                                                                                                         |  | June 30, 2004 |            |   | December 31,2003 |  
|                                                                                                                         |  | unaudited     |            |   |                  |  
|Assets                                                                                                                   |  |               |            |   |                  |   |            |  
|Cash                                                                                                                     |  | $             | 1          |   |                  | $ | 1          |  
|Deferred financing costs, net of accumulated amortization of $7,777 and $6,473 as of June 30, 2004 and December 31, 2003 |  |               | 15,003     |   |                  |   | 16,307     |  
|                                                                                                                         |  |               |            |   |                  |   |            |  
|Total assets                                                                                                             |  | $             | 15,004     |   |                  | $ | 16,308     |  
|                                                                                                                         |  |               |            |   |                  |   |            |  
|Liabilities and shareholder deficit                                                                                      |  |               |            |   |                  |   |            |  
|Accrued interest                                                                                                         |  | $             | 20,409     |   |                  | $ | 20,409     |  
|                                                                                                                         |  |               |            |   |                  |   |            |  
|Total current liabilities                                                                                                |  |               | 20,409     |   |                  |   | 20,409     |  
|                                                                                                                         |  |              
|Senior notes, to be paid by Insight Midwest, LP                                                                          |  |               | 1,013,954  |   |                  |   | 1,013,806  |  
|                                                                                                                         |  |               |            |   |                  |   |            |  
|Total liabilities                                                                                                        |  |               | 1,034,363  |   |                  |   | 1,034,215  |  
|Shareholder deficit:                                                                                                     |  |               |            |   |                  |   |            |  
|Common stock; $.01 par value; 1,000 shares authorized, issued and outstanding                                            |  |               |           |   |                  |   |           |  
|Paid-in-capital                                                                                                          |  |               | 1          |   |                  |   | 1          |  
|In-substance allocation of proceeds related to senior notes to be paid by Insight Midwest                                |  |               | (687,148   | ) |                  |   | (738,992   | )
|Accumulated deficit                                                                                                      |  |               | (332,212   | ) |                  |   | (278,916   | )
|                                                                                                                         |  |               |            |   |                  |   |            |  
|Total shareholder deficit                                                                                                |  |               | (1,019,359 | ) |                  |   | (1,017,907 | )
|                                                                                                                         |  |               |            |   |                  |   |            |  
|Total liabilities and shareholder deficit                                                                                |  | $             | 15,004     |   |                  | $ | 16,308     |  
|                                                                                                                         |  |               |            |   |                  |   |            |  



See
accompanying notes



12



---

INSIGHT CAPITAL, INC.

STATEMENTS OF OPERATIONS

(unaudited)

(in thousands)



|             |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|------------ |  | --------------------------- | ------- | - | ------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|             |  | Three months Ended June 30, |         |   | Six months Ended June 30, |  
|             |  | 2004                        |         |   | 2003                      |   |         | 2004 |  |   | 2003    |  
|Expenses:    |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|             |  |                             |         |  
|Amortization |  | $                           | (652    | ) |                           | $ | (556    | )    |  | $ | (1,304  | ) |  | $ | (1,112  | )
|Interest     |  |                             | (25,997 | ) |                           |   | (23,004 | )    |  |   | (51,992 | ) |  |   | (46,008 | )
|             |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Net loss     |  | $                           | (26,649 | ) |                           | $ | (23,560 | )    |  | $ | (53,296 | ) |  | $ | (47,120 | )
|             |  |                             |         |   |                           |   |         |      |  |   |         |   |  |   |         |  



See
accompanying notes



13



---

INSIGHT CAPITAL, INC.

STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)



|                                                                                |  |                          |         |   |      |   |         |  
|------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                |  | Six months EndedJune 30, |        
|                                                                                |  | 2004                     |         |   | 2003 |  
|Cash flows from operating activities:                                           |  |                          |         |   |      |   |         |  
|                                                                                |  |                         
|Net loss                                                                        |  | $                        | (53,296 | ) |      | $ | (47,120 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                          |         |   |      |   |         |  
|Accretion of discount on notes                                                  |  |                          | 148     |   |      |   | 988     |  
|Amortization                                                                    |  |                          | 1,304   |   |      |   | 1,112   |  
|Interest expense assumed by affiliate                                           |  |                          | 51,844  |   |      |   | 45,020  |  
|                                                                                |  |                          |         |   |      |   |         |  
|Net cash provided by operating activities                                       |  |                          |        |   |      |   |        |  
|                                                                                |  |                          |         |   |      |   |         |  
|Net increase in cash                                                            |  |                          |        |   |      |   |        |  
|Cash, beginning of period                                                       |  |                          | 1       |   |      |   | 1       |  
|                                                                                |  |                          |         |   |      |   |         |  
|Cash, end of period                                                             |  | $                        | 1       |   |      | $ | 1       |  
|                                                                                |  |                          |         |   |      |   |         |  



See
accompanying notes



14



---

INSIGHT CAPITAL, INC.

NOTES TO FINANCIAL STATEMENTS



1.
Nature of Business



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



2. Responsibility for Interim Financial Statements



The accompanying unaudited financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by accounting principles generally accepted in the United States for complete financial statements.



In managements opinion, the financial statements reflect all adjustments
considered necessary for a fair statement of the financial position as of the interim dates presented. These unaudited interim financial statements should be read in conjunction with the audited financial statements and notes to financial statements
contained in the Companys Annual Report on Form 10-K for the year ended December 31, 2003.



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



15



---

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



Forward-Looking Statements



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



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



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



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



We believe it is important to communicate our expectations to our investors. However, there may be events in the future that we are not able to accurately predict or over
which we have no control. The risk factors listed in our Annual Report on Form 10-K for the year ended December 31, 2003, as well as any cautionary language in this quarterly report, provide examples of risks, uncertainties and events that may cause
our actual results to differ materially from the expectations we describe in our forward-looking statements. Examples of these risks include our history and expectation of future net losses, our substantial debt, changes in laws and regulations,
increasing programming costs and competition. You should be aware that the occurrence of the events described in these risk factors and elsewhere in this quarterly report could have a material adverse effect on our business, operating results and
financial condition. We assume no responsibility to update any forward-looking statements as a result of new information, future events or otherwise.



Recent Developments



Acquisition of Telephone Business



On July 2, 2004, we entered into an agreement with Comcast Cable to acquire its telephone business as it relates to the markets served under our existing telephone joint operating agreement. Under our current agreement, we lease certain
capacity on our local network to Comcast Cable for which we receive a fee and also provide certain services and support for which we receive additional payments related to installations, marketing and billing. By acquiring ownership of the telephone
business from Comcast Cable, we will gain operational and strategic control over the business. Comcast Cable has agreed to pay us, upon the closing of the transaction, an amount equal to $20.0 million less the cumulative negative free cash flow
incurred by Comcast Cable in operating this telephone business between June 1, 2004 and the closing. Additionally, as part of the agreement, Comcast Cable will provide to us certain fixed assets related to the telephone business. The transfer of
ownership and operational control of Comcast Cables telephone business to us will take place after a transition period and is subject to customary closing conditions, including regulatory approvals. The closing is expected to occur during the
first half of 2005. At this time, we are unable to predict, with certainty, the actual closing date or the amount of cumulative negative free cash flow that will be incurred by Comcast Cable prior to the closing.



16



---

Termination of Managed Systems Arrangement



On March 17, 2000, Insight LP entered into a management agreement with an affiliate of Comcast to provide management services to cable
television systems owned by Comcast. As of June 30, 2004 these systems served approximately 89,400 customers in the state of Indiana. Certain of our employees operate these managed systems. Overhead costs we incur are allocated ratably and charged
to them on a monthly basis. Effective July 31, 2004, the management agreement was terminated by mutual agreement.



Termination of Kentucky Advertising Sales Arrangement



In October 1999, we entered into an agreement with an affiliate of Comcast Cable whereby the Comcast Cable affiliate performs all of our Kentucky advertising sales and
related administrative services. In accordance with the terms of the agreement, we have notified Comcast Cable that the agreement will terminate effective August 31, 2004. We believe that the assumption of the advertising sales responsibilities in
Kentucky offers us the opportunity to continue to grow this business and align the Kentucky operating strategy with our other markets.



For additional information regarding the termination of each of these related party arrangements see Note 7 to Notes to Consolidated Financial Statements.



Results of Operations



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



We have historically recorded net losses. Some of the principle reasons for these net losses include depreciation and amortization associated with our acquisitions and capital expenditures for the construction and upgrading of our systems,
and interest costs on borrowed money. We expect to continue to report net losses for the foreseeable future and cannot predict what impact, if any, continued losses will have on our ability to finance our operations in the future.



17



---

The following table is derived from our consolidated financial statements that are included in this report and sets forth
certain statement of operations data for our consolidated operations:



|                                                    |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |        
|--------------------------------------------------- |  | -------------------------- | ------- | - | ------------------------ | - | ------- | ---- |  | - | ------- | - |  | - | -------
|                                                    |  | Three Months EndedJune 30, |         |   | Six Months EndedJune 30,
|                                                    |  | 2004                       |         |   | 2003                     |   |         | 2004 |  |   | 2003   
|                                                    |  | (in thousands)            
|Revenue                                             |  | $                          | 249,952 |   |                          | $ | 222,376 |      |  | $ | 488,036 |   |  | $ | 436,671
|Operating costs and expenses:                       |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |        
|Programming and other operating costs               |  |                            | 88,513  |   |                          |   | 81,349  |      |  |   | 176,004 |   |  |   | 160,882
|Selling, general and administrative                 |  |                            | 48,757  |   |                          |   | 41,820  |      |  |   | 92,831  |   |  |   | 81,825 
|Management fees                                     |  |                            | 7,323   |   |                          |   | 6,494   |      |  |   | 14,326  |   |  |   | 12,790 
|Depreciation and amortization                       |  |                            | 58,959  |   |                          |   | 58,619  |      |  |   | 115,948 |   |  |   | 112,187
|                                                    |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |        
|Total operating costs and expenses                  |  |                            | 203,552 |   |                          |   | 188,282 |      |  |   | 399,109 |   |  |   | 367,684
|                                                    |  |                            |         |   |                          |   |         |      |  |   |         |   |  |   |        
|Operating income                                    |  |                            | 46,400  |   |                          |   | 34,094  |      |  |   | 88,927  |   |  |   | 68,987 
|Operating cash flow                                 |  |                            | 105,359 |   |                          |   | 92,713  |      |  |   | 204,875 |   |  |   | 181,174
|Interest expense                                    |  |                            | 44,769  |   |                          |   | 45,367  |      |  |   | 89,125  |   |  |   | 91,659 
|Net income (loss)                                   |  |                            | (1,682  | ) |                          |   | (9,328  | )    |  |   | (1,441  | ) |  |   | 6,325  
|Net cash provided by operating activities           |  |                            | 39,295  |   |                          |   | 39,605  |      |  |   | 134,160 |   |  |   | 101,458
|Net cash used in investing activities               |  |                            | 38,276  |   |                          |   | 42,862  |      |  |   | 81,340  |   |  |   | 109,705
|Net cash provided by (used in) financing activities |  |                            | (21,572 | ) |                          |   | 16,750  |      |  |   | (37,135 | ) |  |   | 37,500 
|Capital expenditures                                |  |                            | 38,788  |   |                          |   | 42,695  |      |  |   | 82,232  |   |  |   | 82,442 



Operating cash flow is a financial
measure that is not calculated and presented in accordance with accounting principles generally accepted in the United States. We define operating cash flow as operating income or loss before depreciation and amortization. Operating cash flow is
useful to management in measuring the overall operational strength and performance of our company. A limitation of this measure, however, is that it does not reflect the periodic costs of certain capitalized tangible and intangible assets used in
generating our revenues. Management evaluates the costs of such tangible and intangible assets through other financial measures such as capital expenditures and investment spending. Another limitation of operating cash flow is that it does not
reflect income net of interest expense, which is a significant expense of our company because of the substantial debt we incurred to acquire our cable television systems and finance the capital expenditures for the upgrade of our cable network.



Despite the limitations of operating cash flow, management believes that the
presentation of this financial measure is relevant and useful for investors because it allows investors to evaluate our performance in a manner similar to the method used by management. In addition, operating cash flow is commonly used in the cable
television industry to analyze and compare cable television companies on the basis of operating performance, although our measure of operating cash flow may not be directly comparable to similar measures used by other companies. Operating cash flow
should not be regarded as an alternative to, or more meaningful than, either operating income or net income as an indicator of operating performance or cash flows as a measure of liquidity, as well as other measures of financial performance reported
in accordance with accounting principles generally accepted in the United States.



18



---

The following calculations of operating cash flow are not necessarily comparable to similarly titled amounts of other
companies:



|                              |  |                            |         |                          |   |        |  |      |         |  |   |        
|----------------------------- |  | -------------------------- | ------- | ------------------------ | - | ------ |  | ---- | ------- |  | - | -------
|                              |  | Three Months EndedJune 30, |         | Six Months EndedJune 30,
|                              |  | 2004                       |         | 2003                     |   | 2004   |  | 2003
|                              |  | (in thousands)            
|Operating income              |  | $                          | 46,400  |                          | $ | 34,094 |  | $    | 88,927  |  | $ | 68,987 
|Adjustment:                   |  |                            |         |                          |   |        |  |      |         |  |   |        
|Depreciation and amortization |  |                            | 58,959  |                          |   | 58,619 |  |      | 115,948 |  |   | 112,187
|                              |  |                            |         |                          |   |        |  |      |         |  |   |        
|Operating cash flow           |  | $                          | 105,359 |                          | $ | 92,713 |  | $    | 204,875 |  | $ | 181,174
|                              |  |                            |         |                          |   |        |  |      |         |  |   |        



Three Months Ended June 30, 2004
Compared to Three Months Ended June 30, 2003



The $27.6 million or 12%
increase in revenue was primarily a result of increases in basic cable service revenue of 9% due to basic rate increases and gains in our high-speed Internet and digital video revenues, which increased 39% and 23% over the prior years quarter,
driven by an increased customer base.



Revenue by service offering was as
follows (in thousands):



|                              |  |                              |         |                  |       |   |                              |   |                  |  |       |                    |  |       |   
|----------------------------- |  | ---------------------------- | ------- | ---------------- | ----- | - | ---------------------------- | - | ---------------- |  | ----- | ------------------ |  | ----- | --
|                              |  | Revenue by Service Offering  |         |                  |       |  
|                              |  | ThreeMonthsEndedJune 30,2004 |         | % ofTotalRevenue |       |   | ThreeMonthsEndedJune 30,2003 |   | % ofTotalRevenue |  |       | % Changein Revenue | 
|Basic                         |  | $                            | 145,446 |                  | 58.2  | % |                              | $ | 133,625          |  | 60.1  | %                  |  | 8.8   | % 
|Digital                       |  |                              | 24,679  |                  | 9.9   | % |                              |   | 20,049           |  | 9.0   | %                  |  | 23.1  | % 
|High-speed Internet           |  |                              | 31,095  |                  | 12.4  | % |                              |   | 22,352           |  | 10.1  | %                  |  | 39.1  | % 
|Premium / analog pay-per-view |  |                              | 14,612  |                  | 5.8   | % |                              |   | 14,387           |  | 6.5   | %                  |  | 1.6   | % 
|Telephone                     |  |                              | 3,802   |                  | 1.5   | % |                              |   | 2,796            |  | 1.2   | %                  |  | 36.0  | % 
|Advertising                   |  |                              | 16,883  |                  | 6.8   | % |                              |   | 15,179           |  | 6.8   | %                  |  | 11.2  | % 
|Franchise fees                |  |                              | 7,264   |                  | 2.9   | % |                              |   | 6,812            |  | 3.1   | %                  |  | 6.6   | % 
|Other                         |  |                              | 6,171   |                  | 2.5   | % |                              |   | 7,176            |  | 3.2   | %                  |  | (14.0 | )%
|                              |  |                              |         |                  |       |   |                              |   |                  |  |       |                    |  |       |   
|Total                         |  | $                            | 249,952 |                  | 100.0 | % |                              | $ | 222,376          |  | 100.0 | %                  |  | 12.4  | % 
|                              |  |                              |         |                  |       |   |                              |   |                  |  |       |                    |  |       |   



Revenue Generating Units
(RGUs) as of June 30, 2004, which represent the sum of basic, digital, high-speed Internet, and telephone customers, increased approximately 8% as compared to June 30, 2003. RGUs by type were as follows (in thousands):



|                    |  |               |  |              
|------------------- |  | ------------- |  | -------------
|                    |  | June 30, 2004 |  | June 30, 2003
|Basic               |  | 1,282.4       |  | 1,295.7      
|Digital             |  | 418.2         |  | 360.2        
|High-speed Internet |  | 273.9         |  | 179.5        
|Telephone           |  | 61.6          |  | 42.1         
|                    |  |               |  |              
|Total RGUs          |  | 2,036.1       |  | 1,877.5      
|                    |  |               |  |              



19



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Average monthly revenue per basic customer was $64.58 for the three months ended June 30, 2004, compared to $56.92 for
the three months ended June 30, 2003 primarily reflecting basic rate increases and the continued growth of our high-speed Internet and digital product offerings in all markets.



Programming and other operating costs increased $7.2 million or 9%. Programming costs increased primarily as a result of increased
programming rates. Additionally, programming costs increased as a result of increased video-on-demand and pay-per-view purchases quarter over quarter. Other operating costs increased primarily due to increased high-speed Internet service provider
costs driven by the net addition of approximately 94,400 high-speed Internet customers since June 30, 2003. In addition, other operating costs increased as a result of an increased volume of modems sold.



Selling, general and administrative expenses increased $6.9 million or 17%, primarily because
of payroll and related costs due to the addition of new employees, annual salary increases for existing employees and increases in health insurance costs. Marketing expenses increased to support the continued roll-out of high-speed Internet and
digital products and also to maintain our core video customer base. Partially offsetting these increases was an increase in marketing support funds (recorded as a reduction to selling, general and administrative expenses) for the promotion of new
channel launches.



Management fees increased $829,000 or 13% to $7.3 million
for the three months ended June 30, 2004 from $6.5 million for the three months ended June 30, 2003. Management fees, equal to approximately 3% of revenues, are paid to Insight LP.



Depreciation and amortization expense increased $340,000 or 1% primarily as a result of additional capital expenditures through June 30,
2004. These expenditures were primarily for network extensions, upgrades to our headends and purchases of customer premise equipment, all of which we consider necessary in order to continue to grow our customer base and expand our service offerings.
Partially offsetting this increase was a decrease in depreciation expense related to certain assets that have become fully depreciated since June 30, 2003.



Operating cash flow increased $12.6 million or 14% primarily due to increased basic, digital and high-speed Internet revenue, offset by increases in programming and other
operating costs and selling, general and administrative costs.



Interest
expense remained relatively flat quarter over quarter. The decrease of $598,000 is primarily due to lower interest rates, which averaged 6.8% for the three months ended June 30, 2004 as compared to 7.4% for the three months ended June 30, 2003 and
was offset by an increase in debt outstanding, which averaged $2.64 billion for the three months ended June 30, 2004 as compared to $2.47 billion for the three months ended June 30, 2003. As of June 30, 2003, we had $2.67 billion of debt and
preferred interests outstanding.



Six Months Ended June 30, 2004 Compared
to Six Months Ended June 30, 2003



The $51.4 million or 12% increase
in revenue was primarily a result of increases in basic cable service revenue of 8% due to basic rate increases and gains in our high-speed Internet and digital video revenues, which increased 41% and 24% over the same prior year period, driven by
an increased customer base.



20



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Revenue by service offering was as follows (in thousands):



|                              |  |                             |         |                  |       |   |                             |   |                  |  |       |                     |  |       |   
|----------------------------- |  | --------------------------- | ------- | ---------------- | ----- | - | --------------------------- | - | ---------------- |  | ----- | ------------------- |  | ----- | --
|                              |  | Revenue by Service Offering |         |                  |       |  
|                              |  | Six MonthsEndedJune 30,2004 |         | % ofTotalRevenue |       |   | Six MonthsEndedJune 30,2003 |   | % ofTotalRevenue |  |       | % Change in Revenue | 
|Basic                         |  | $                           | 284,451 |                  | 58.3  |   |                             | $ | 264,476          |  | 60.6  | %                   |  | 7.6   | % 
|Digital                       |  |                             | 48,400  |                  | 9.9   |   |                             |   | 39,181           |  | 9.0   | %                   |  | 23.5  | % 
|High-speed Internet           |  |                             | 60,035  |                  | 12.3  |   |                             |   | 42,613           |  | 9.8   | %                   |  | 40.9  | % 
|Premium / analog pay-per-view |  |                             | 29,518  |                  | 6.1   |   |                             |   | 29,091           |  | 6.6   | %                   |  | 1.5   | % 
|Telephone                     |  |                             | 7,560   |                  | 1.6   |   |                             |   | 5,364            |  | 1.2   | %                   |  | 40.9  | % 
|Advertising                   |  |                             | 30,870  |                  | 6.3   |   |                             |   | 27,714           |  | 6.3   | %                   |  | 11.4  | % 
|Franchise fees                |  |                             | 14,272  |                  | 2.9   |   |                             |   | 13,514           |  | 3.1   | %                   |  | 5.6   | % 
|Other                         |  |                             | 12,930  |                  | 2.6   |   |                             |   | 14,718           |  | 3.4   | %                   |  | (12.1 | )%
|                              |  |                             |         |                  |       |   |                             |   |                  |  |       |                     |  |       |   
|Total                         |  | $                           | 488,036 |                  | 100.0 | % |                             | $ | 436,671          |  | 100.0 | %                   |  | 11.8  | % 
|                              |  |                             |         |                  |       |   |                             |   |                  |  |       |                     |  |       |   



Average monthly revenue per basic
customer was $62.99 for the six months ended June 30, 2004, compared to $56.04 for the six months ended June 30, 2003 primarily reflecting basic rate increases and the continued growth of our high-speed Internet and digital product offerings in all
markets.



Programming and other operating costs increased $15.1 million or 9%.
Programming costs increased primarily as a result of increased programming rates. Additionally, programming costs increased as a result of increased video-on-demand purchases period over period. Other operating costs increased primarily due to
increased high-speed Internet service provider costs driven by the net addition of approximately 94,400 high-speed Internet customers since June 30, 2003. In addition, other operating costs increased as a result of technical salaries and related
benefits for new and existing employees and an increased volume of modems sold.



Selling, general and administrative expenses increased $11.0 million or 13%, primarily because of payroll and related costs due to the addition of new employees, annual salary increases for existing employees and increases in health
insurance costs. Marketing expenses increased to support the continued roll-out of high-speed Internet and digital products and also to maintain our core video customer base. In addition, due to the net impact of the swap of our Griffin, Georgia
system, effective February 28, 2003, for the then managed Shelbyville, Kentucky and New Albany, Indiana systems, we incurred incremental selling, general and administrative costs and are no longer receiving reimbursements from Comcast for these
costs. Partially offsetting these increases was an increase in marketing support funds (recorded as a reduction to selling, general and administrative expenses) for the promotion of new channel launches.



Management fees increased $1.5 or 12% to $14.3 million for the six months ended June 30, 2004
from $12.8 million for the six months ended June 30, 2003. Management fees, equal to approximately 3% of revenues, are paid to Insight LP.



Depreciation and amortization expense increased $3.8 million or 3% primarily as a result of additional capital expenditures through June 30, 2004. These expenditures were
primarily for network extensions, upgrades to our headends and purchases of customer premise equipment, all of which we consider necessary in order to continue to grow our customer base and expand our service offerings. Partially offsetting this
increase was a decrease in depreciation expense related to certain assets that have become fully depreciated since June 30, 2003.



21



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Operating cash flow increased $23.7 million or 13% primarily due to increased basic, digital and high-speed Internet
revenue, offset by increases in programming and other operating costs and selling, general and administrative costs.



Interest expense remained relatively flat period over period. The decrease of $2.5 million or 3% is primarily due to lower interest rates, which averaged 6.7% for the six
months ended June 30, 2004 as compared to 7.5% for the six months ended June 30, 2003, and was partially offset by an increase in debt outstanding, which averaged $2.65 billion for the six months ended June 30, 2004 as compared to $2.46 billion for
the six months ended June 30, 2003.



Liquidity and Capital Resources



Our business requires cash for operations, debt service, capital
expenditures and acquisitions. The cable television business has substantial on-going capital requirements for the construction, expansion and maintenance of its broadband networks. Capital expenditures have primarily been made to expand our service
offerings to include digital video, high-speed Internet and telephone services. These services require certain upgrades to our cable infrastructure and typically include upgrades at our headends and throughout our distribution network. Additionally,
these new services require us to purchase additional types customer premise equipment, including digital converters, cable modems and network interface units. Historically, we have been able to meet our cash requirements with cash flow from
operations, borrowings under our credit facilities and issuances of private and public debt.



Cash provided by operations for the six months ended June 30, 2004 and 2003 was $134.2 million and $101.5 million. The increase was primarily attributable to increased operating income and the timing of cash receipts
and payments related to our working capital accounts.



Cash used in investing
activities for the six months ended June 30, 2004 and 2003 was $81.3 million and $109.7 million. The decrease was attributable to the swap of our Griffin, Georgia system for the New Albany, Indiana and Shelbyville, Kentucky systems in the first
quarter of 2003.



Cash provided by (used in) financing activities for the six
months ended June 30, 2004 and 2003 was $(37.1) million and $37.5 million. During the six months ended June 30, 2004, we:



| |  | made scheduled debt amortization payments related to the A and B Term Loan portions of our credit facility, which totaled $31.1 million; and
| | - | --------------------------------------------------------------------------------------------------------------------------------------------



| |  | repaid $6.0 million of revolver borrowings that were outstanding as of March 31, 2004 and did not need to re-borrow due to increased operating cash flow.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------



During the six months ended June 30, 2003, we:



| |  | borrowed $44.5 million under our credit facilities to support our operations and capital spending; and
| | - | ------------------------------------------------------------------------------------------------------



| |  | made $7.0 million of scheduled preferred interest distribution payments, which ceased with the refinancing of debt of Insight Ohio, discussed below, during the third quarter of
2003.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For the six months ended June 30, 2004 and 2003, we spent
$82.2 million and $82.4 million in capital expenditures. These expenditures were primarily for network extensions, upgrades to our headends and purchases of customer premise equipment, all of which we consider necessary in order to continue to grow
our customer base and expand our service offerings.



22



---

On August 26, 2003, we amended the Insight Midwest Holdings Credit Facility in connection with our plan to refinance all
of the obligations and conditionally guaranteed obligations of Insight Ohio. The amendment increased the Term B loan portion of the credit facility from $900.0 million to $1.125 billion, which increased the total facility size to $1.975 billion from
$1.750 billion. We recorded $2.2 million of deferred financing costs associated with this amendment that will be amortized over the remaining term of the credit facility.



We have a substantial amount of debt. Our high level of debt could have important consequences for you. Our principal source of cash we need
to pay our obligations and to repay the principal amount of our debt obligations is the cash that our subsidiaries generate from their operations and their borrowings. We believe that the Insight Midwest Holdings credit facility, cash on-hand and
our cash flow from operations are sufficient to support our current operating plan. We have the ability to draw upon $399.5 million of unused availability under the Insight Midwest Holdings credit facility as of June 30, 2004 to fund any shortfall
resulting from the inability of our cash from operations to fund our capital expenditures, meet our debt service requirements or otherwise fund our operations. On July 1, 2004 the leverage ratio covenant under the Insight Midwest Holdings credit
facility reduced from 4.75x to 4.25x. As of June 30, 2004, after giving effect to this reduction, we would have had the ability to draw upon $272.2 million of unused availability under the Insight Midwest Holdings credit facility to fund any cash
shortfall.



The following table summarizes our contractual obligations and
commitments, excluding interest and commitments for programming, as of June 30, 2004, including periods in which the related payments are due (in thousands):



|                       |  |                         |           |                 |   |       |  |   |          
|---------------------- |  | ----------------------- | --------- | --------------- | - | ----- |  | - | ---------
|                       |  | Contractual Obligations
|                       |  | Long-TermDebt           |           | OperatingLeases |   | Total
|2004                   |  | $                       | 31,125    |                 | $ | 1,307 |  | $ | 32,432   
|2005                   |  |                         | 83,500    |                 |   | 1,732 |  |   | 85,232   
|2006                   |  |                         | 83,500    |                 |   | 1,338 |  |   | 84,838   
|2007                   |  |                         | 83,500    |                 |   | 668   |  |   | 84,168   
|2008                   |  |                         | 104,750   |                 |   | 435   |  |   | 105,185  
|Thereafter             |  |                         | 2,247,500 |                 |   | 657   |  |   | 2,248,157
|                       |  |                         |           |                 |   |       |  |   |          
|Total cash obligations |  | $                       | 2,633,875 |                 | $ | 6,137 |  | $ | 2,640,012
|                       |  |                         |           |                 |   |       |  |   |          



Item 3. Quantitative and
Qualitative Disclosure About Market Risk



Our revolving credit and term
loan agreements bear interest at floating rates. Accordingly, we are exposed to potential losses related to changes in interest rates. In order to manage our exposure to interest rate risk, we enter into derivative financial instruments, typically
interest rate swaps. The counter-parties to our swap agreements are major financial institutions. We do not enter into derivatives or other financial instruments for trading or speculative purposes.



As of June 30, 2004, we had entered into $150.0 million notional amount of floating to fixed
rate interest rate swaps that approximated 10%, of our borrowings under our credit facility, which expire in August 2004. A hypothetical 100 basis point increase in interest rates along the entire interest rate yield curve would increase our annual
interest expense, for the unhedged portion of our credit facility, by approximately $13.7 million.



23



---

In July 2003, we entered into three interest rate swap agreements whereby we swapped fixed rates under our 101⁄2%
senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately 8.3%, on $185.0 million notional value of debt. These agreements expire November 1, 2005. We recorded a loss on these swaps of
$3.0 million and $1.2 million for the three and six months ended June 30, 2004, which is included in other income (expense). A hypothetical 100 basis point increase in interest rates along the entire interest rate yield curve would increase our
annual interest expense for these three swaps by approximately $1.9 million.



In December 2003, we entered into an interest rate swap agreement whereby we swapped fixed rates under our 101⁄2% senior notes due in December 2010 for variable rates equal to six-month LIBOR, plus the applicable margin of approximately
5.9%, on $130.0 million notional value of debt. This agreement expires November 1, 2010. This swap has been determined to be perfectly effective in hedging against fluctuations in the fair value of the underlying debt. As such, changes in the fair
value of the underlying debt equally offset changes in the value of the interest rate swap in our consolidated statements of operations. The fair value (cost if terminated) of this swap as of June 30, 2004 and December 31, 2003 was $(2.8) million
and $(206,000) and has been recorded in other non-current assets (liabilities) and as an adjustment to the carrying value of debt. A hypothetical 100 basis point increase in interest rates along the entire interest rate yield curve would increase
our annual interest expense for this swap by approximately $1.3 million.



The
aggregate fair market value and aggregate carrying value of our 93⁄4% and 101⁄2% senior notes was $1.1 billion and $1.0 billion as of June 30, 2004. The fair market value of our credit facility borrowings approximates its carrying value as the
credit facility borrowings bear interest at floating rates of interest. As of June 30, 2004, the estimated fair value (cost if terminated) of our interest rate swap agreements was approximately $(6.7) million and is reflected in our financial
statements as other non-current liabilities. Changes in the fair value of our interest rate swaps are either recognized in income or in partners capital as a component of accumulated other comprehensive income (loss) depending on the type of
swap and whether it qualifies for hedge accounting.



Item 4. Controls and
Procedures



Insight Midwests management carried out an evaluation,
with the participation of its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures as of June 30, 2004. Based upon that evaluation, its Chief Executive Officer and Chief Financial
Officer concluded that Insight Midwests disclosure controls and procedures were effective to ensure that information required to be disclosed by it in reports that it files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission.



There has not been any change in its internal control over financial reporting in connection with the evaluation required by Rule 13a-15(d) under the Exchange Act that
occurred during the quarter ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.



Insight Capitals management carried out an evaluation, with the participation of its Chief Executive Officer and Chief Financial
Officer, of the effectiveness of its disclosure controls and procedures as of June 30, 2004. Based upon that evaluation, its Chief Executive Officer and Chief Financial Officer concluded that Insight Capitals disclosure controls and procedures
were effective to ensure that information required to be disclosed by it in reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the rules
and forms of the Securities and Exchange Commission.



24



---

There has not been any change in its internal control over financial reporting in connection with the evaluation required
by Rule 13a-15(d) under the Exchange Act that occurred during the quarter ended June 30, 2004 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.



25



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PART II. OTHER INFORMATION



Item 1. Legal Proceedings



See Note 8 in Item 1 of PART I, Notes to Consolidated Financial Statements, and incorporated herein by reference.



Item 6. Exhibits and Reports on Form 8-K



(a) Exhibits:



|     |  |                                                                                                                                              
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------
|10   |  | Purchase Agreement dated July 2, 2004 between Insight Midwest Holdings, LLC and Comcast Cable Holdings, LLC and certain of its affiliates (1)
|31.1 |  | Rule 13a-14(a)/15d-14(a) Certifications of the Chief Executive Officer of Insight Midwest, L.P.                                              
|31.2 |  | Rule 13a-14(a)/15d-14(a) Certifications of the Chief Financial Officer of Insight Midwest, L.P.                                              
|31.3 |  | Rule 13a-14(a)/15d-14(a) Certifications of the Chief Executive Officer of Insight Capital, Inc.                                              
|31.4 |  | Rule 13a-14(a)/15d-14(a) Certifications of the Chief Financial Officer of Insight Capital, Inc.                                              
|32.1 |  | Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer of Insight Midwest, L.P.                              
|32.2 |  | Section 1350 Certifications of the Chief Executive Officer and Chief Financial Officer of Insight Capital, Inc.                              

---

|(1) | Filed as an exhibit to the Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2004 of Insight Communications Company, Inc. and incorporated herein by reference
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



(b) Reports on Form 8-K:



| | None
| | ----



26



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SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.



|                     |  |                                
|-------------------- |  | -------------------------------
|Date: August 6, 2004 |  | INSIGHT MIDWEST, L.P.          
|                     | 
|                     |  | By: /s/ John Abbot             
|                     |  | John Abbot                     
|                     |  | Senior Vice President and Chief
|                     |  | Financial Officer              
|                     |  | (Principal Financial Officer)  



Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                     |  |                                
|-------------------- |  | -------------------------------
|Date: August 6, 2004 |  | INSIGHT CAPITAL, INC.          
|                     | 
|                     |  | By: /s/ John Abbot             
|                     |  | John Abbot                     
|                     |  | Senior Vice President and Chief
|                     |  | Financial Officer              
|                     |  | (Principal Financial Officer)  



27