##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


FORM 20-F

(Mark One)

|   |  |                                                                                                                                           
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------
|o  |  | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934                                            
|   |  |                                                                                                                                           
|OR
|   |  |                                                                                                                                           
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2002          
|   |  |                                                                                                                                           
|OR
|   |  |                                                                                                                                           
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
ACT OF 1934
For such transition period from __________ to ____________

Commission file number: 000-30004

PRIMACOM AG

(Exact name of Registrant as specified in its charter)


Federal Republic of Germany

(Jurisdiction of incorporation or organization)


An der Ochsenwiese 3
55124 Mainz
011 49 6131 944.0

(Address of principal executive offices)


Securities registered or to be registered pursuant to Section 12(b) of the Act:

|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of each
class |  | Name of each exchange on which registered
|None                |  | Not Applicable                           

Securities registered or to be registered pursuant to Section 12(g) of the Act.

Bearer Ordinary Shares, with no nominal value

(Title of Class)

American Depositary Shares, each representing one-half of one Ordinary Share

(Title of Class)

Securities for which there is a reporting obligation pursuant to Section 15(d)
of the Act:

None

(Title of Class)

Indicate the number of outstanding shares of each of the issuers classes of
capital or common stock as of the close of the period covered by the annual
report: 19,798,552

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such report) and (2) has been subject to such
filing requirements for the past 90 days.

| |       |  |   
| | ----- |  | --
| | Yes þ |  | No

Indicate by check mark which financial statement item the registrant has elected to follow:

| |         |  |          
| | ------- |  | ---------
| | Item 17 |  | Item 18 þ





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TABLE OF CONTENTS



|                     |                                                                                         |  |  |  |  |  |  | 
|-------------------- | --------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I              
|                     | ITEM 1. IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                          
|                     | ITEM 2. OFFER STATISTICS AND EXPECTED TIMETABLE                                        
|                     | ITEM 3. KEY INFORMATION                                                                
|                     | ITEM 4. INFORMATION ON THE COMPANY                                                     
|                     | ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                   
|                     | ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                     
|                     | ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                              
|                     | ITEM 8. FINANCIAL INFORMATION                                                          
|                     | ITEM 9. THE OFFER AND LISTING                                                          
|                     | ITEM 10. ADDITIONAL INFORMATION                                                        
|                     | ITEM 11. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                    
|                     | ITEM 12. DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                        
|PART II             
|                     | ITEM 13. DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                               
|                     | ITEM 14. MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND USE OF PROCEEDS
|                     | ITEM 15. CONTROLS AND PROCEDURES                                                       
|                     | ITEM 16. [RESERVED]                                                                    
|PART III            
|                     | ITEM 17. FINANCIAL STATEMENTS                                                          
|                     | ITEM 18. FINANCIAL STATEMENTS                                                          
|                     | ITEM 19. EXHIBITS                                                                      
|English Translation 
|Standing Orders     
|Rules of Procedure  
|List of Subsidiaries
|Certifications      



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##### Table of Contents



TABLE OF CONTENTS

|         |  |  |  |          |  |                                                                                |  |  |    |  |  | 
|-------- |  |  |  | -------- |  | ------------------------------------------------------------------------------ |  |  | -- |  |  | 
|PART I   |  |  |  |          |  |                                                                                |  |  | 1  | 
|         |  |  |  | ITEM 1.  |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS                          |  |  | 1  | 
|         |  |  |  | ITEM 2.  |  | OFFER STATISTICS AND EXPECTED TIMETABLE                                        |  |  | 1  | 
|         |  |  |  | ITEM 3.  |  | KEY INFORMATION                                                                |  |  | 1  | 
|         |  |  |  | ITEM 4.  |  | INFORMATION ON THE COMPANY                                                     |  |  | 14 | 
|         |  |  |  | ITEM 5.  |  | OPERATING AND FINANCIAL REVIEW AND PROSPECTS                                   |  |  | 47 | 
|         |  |  |  | ITEM 6.  |  | DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES                                     |  |  | 63 | 
|         |  |  |  | ITEM 7.  |  | MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS                              |  |  | 69 | 
|         |  |  |  | ITEM 8.  |  | FINANCIAL INFORMATION                                                          |  |  | 72 | 
|         |  |  |  | ITEM 9.  |  | THE OFFER AND LISTING                                                          |  |  | 72 | 
|         |  |  |  | ITEM 10. |  | ADDITIONAL INFORMATION                                                         |  |  | 74 | 
|         |  |  |  | ITEM 11. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                     |  |  | 82 | 
|         |  |  |  | ITEM 12. |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES                         |  |  | 83 | 
|PART II  |  |  |  |          |  |                                                                                |  |  | 83 | 
|         |  |  |  | ITEM 13. |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES                                |  |  | 83 | 
|         |  |  |  | ITEM 14. |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS
AND USE OF PROCEEDS |  |  | 83 | 
|         |  |  |  | ITEM 15. |  | CONTROLS AND PROCEDURES                                                        |  |  | 83 | 
|         |  |  |  | ITEM 16. |  | [RESERVED]                                                                     |  |  | 83 | 
|PART III |  |  |  |          |  |                                                                                |  |  | 83 | 
|         |  |  |  | ITEM 17. |  | FINANCIAL STATEMENTS                                                           |  |  | 83 | 
|         |  |  |  | ITEM 18. |  | FINANCIAL STATEMENTS                                                           |  |  | 84 | 
|         |  |  |  | ITEM 19. |  | EXHIBITS                                                                       |  |  | 85 | 

i



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##### Table of Contents






PART I






|ITEM 1. |  | IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
|------- |  | -----------------------------------------------------

Not applicable.






|ITEM 2. |  | OFFER STATISTICS AND EXPECTED TIMETABLE
|------- |  | ---------------------------------------

Not applicable.






|ITEM 3. |  | KEY INFORMATION
|------- |  | ---------------

In addition to historical information, this annual report includes
forward-looking statements. These statements relate to our future prospects,
developments and business strategies and are based on analyses of forecasts of
future results and estimates of amounts not yet determinable. These
forward-looking statements are made only as of the date of this annual report,
and we do not undertake to publicly update or revise these statements, whether
as a result of new information, future events or otherwise.

These forward-looking statements are identified by their use of terms and
phrases such as anticipate, believe, could, estimate, expect,
intend, may, plan, predict, project, will and similar terms and
phrases, including references to assumptions. Most of these statements are
contained in sections entitled Item 3.D Risk Factors, Item 3.A Selected
Financial Data, Item 4.B Business Overview and Item 5. Operating and
Financial Review and Prospects and other sections of this annual report.

These forward-looking statements involve risks, uncertainties and other
factors that may cause our actual future results, performance and achievements
to be materially different from those suggested or described in this annual
report. Many of the factors that will determine these results, performance and
achievements are beyond our control. Such factors, among others, include:



| |  |  | our ability to negotiate with our existing lenders and to
secure adequate financing,                                                            
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | the speed and cost at which we are able to implement our
cable television network upgrades and build broadband networks,                        
|
| |  |  | the response from our subscribers to the new services and
products offered to them on our existing networks and our upgraded
broadband networks,
|
| |  |  | our ability to extend our contracts with housing associations
in Germany under commercially acceptable terms,                                   
|
| |  |  | changes in technology,                                                                                                                          
|
| |  |  | changes in the competitive environment for cable television
network and broadband network operators,                                            
|
| |  |  | changes in governmental regulation of the German, Dutch and
European Union telecommunications markets.                                          

The risks described above and in the other sections of this annual report
are not exhaustive. We operate in a very competitive and rapidly changing
environment. New risks, uncertainties and other factors emerge from time to
time and it is not possible for us to predict all such risks, nor can we assess
the impact of all such risks on our business or the extent to which any risk,
or combination of risks, may cause actual results to differ materially from
those contained in any forward-looking statements as a prediction or guarantee
of actual results.

1



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| | A. |  | Selected Financial Data
| | -- |  | -----------------------

The selected consolidated statements of operations and cash flow data set
forth below for the years ended December 31, 2000, 2001 and 2002 and the
selected consolidated balance sheet data set forth below as of December 31,
2000, 2001 and 2002 have been derived from our consolidated financial
statements, included elsewhere in this annual report, which have been prepared
in accordance with accounting principles generally accepted in the United
States (U.S. GAAP) and audited by Ernst & Young, independent auditors. The
selected consolidated statements of operations and cash flow data set forth
below for the year ended December 31, 1998 and the consolidated balance sheet
data set forth below as at December 31, 1998 have been derived from the
financial statements of Süweda Elektronische Medien- und Kabelkommunikations
AG, the accounting acquirer in the merger referred to in the next paragraph,
which have been prepared in accordance with U.S. GAAP and audited by Ernst &
Young.

We commenced operations as a combined entity under the name PrimaCom AG
following the merger of KabelMedia Holding AG (KabelMedia) and Süweda, two
similarly sized German cable television operators, on December 30, 1998. In
this merger, shares of KabelMedia were issued to the shareholders of Süweda as
consideration in the merger and KabelMedia was the surviving corporate entity,
which then changed its name to PrimaCom AG. For purposes of U.S. GAAP, the
merger was accounted for under the purchase method as a reverse acquisition of
KabelMedia by Süweda and Süweda was treated as the accounting acquirer. As a
result, Süwedas historical financial statements for periods prior to the
merger are treated as our historical financial statements. The selected
consolidated data presented below should be read in conjunction with our
consolidated financial statements and notes thereto included elsewhere in this
annual report.

Our consolidated financial statements for 1998 were prepared using the
Deutsche Mark and have been restated in Euro using the Council of the European
Unions official fixed conversion rate between the Euro and the Deutsche Mark
of DM1.95583 per 1.00. The Deutsche Mark and the Euro had legal tender status
through a transition period which ended February 28, 2002. Our consolidated
financial statements for 1999 through 2002 were originally prepared in Euro.
The selected consolidated financial data is not comparable to financial data of
other companies that report in Euros and that restate amounts from currencies
other than the Deutsche Mark.

|                                                                             |                                                   |       |        |                                              |        |      |         |        |         |      |         |        |         |  |          |         |         |  |          |        |         | 
|---------------------------------------------------------------------------- | ------------------------------------------------- | ----- | ------ | -------------------------------------------- | ------ | ---- | ------- | ------ | ------- | ---- | ------- | ------ | ------- |  | -------- | ------- | ------- |  | -------- | ------ | ------- | 
|                                                                             |                                                   |       |        | Year Ended December 31,                     
|                                                                             |                                                   |       |        |                                             
|Statement of Operations Data                                                 |                                                   | 1998  |        | 1999                                         |        | 2000 |         | 2001   |         | 2002
|                                                                             |                                                   |       |        |                                              |        |      |         |        |         |     
|                                                                             |                                                   |       |        | ('000 except per share and operations data)
|Revenues                                                                     |                                                   |       | 49,339 |                                              |        |      | 105,949 |        |         |      | 124,343 |        |         |  | 165,496  |         |         |  | 182,042  |       
|Operating costs and expenses:                                                |                                                   |       |        |                                              |        |      |         |        |         |      |         |        |         |  |          |         |         |  |          |       
|                                                                             | Operations                                        |       |        | 13,062                                       |        |      |         | 24,543 |         |      |         | 30,794 |         |  |          | 44,195  |         |  |          | 48,460 |        
|                                                                             | Selling, general and administrative               |       |        | 6,271                                        |        |      |         | 18,590 |         |      |         | 27,981 |         |  |          | 37,630  |         |  |          | 39,101 |        
|                                                                             | Corporate overhead                                |       |        | 1,278                                        |        |      |         | 12,413 |         |      |         | 17,219 |         |  |          | 14,929  |         |  |          | 12,976 |        
|                                                                             | Debt refinancing                                  |       |        |                                             |        |      |         |       |         |      |         |       |         |  |          |        |         |  |          | 2,432  |        
|                                                                             | Depreciation and amortization                     |       |        | 16,072                                       |        |      |         | 61,277 |         |      |         | 75,530 |         |  |          | 118,360 |         |  |          | 95,943 |        
|                                                                             |                                                   |       |        |                                              |        |      |         |        |         |      |         |        |         |  |          |         |         |  |          |       
|                                                                             |                                                   | Total |        |                                              | 36,683 |      |         |        | 116,823 |      |         |        | 151,524 |  |          |         | 215,114 |  |          |        | 198,912 | 
|                                                                             |                                                   |       |        |                                              |        |      |         |        |         |      |         |        |         |  |          |         |         |  |          |       
|Operating profit (loss)                                                      |                                                   |       | 12,656 |                                              |        |      | (10,874 | )      |         |      | (27,181 | )      |         |  | (49,618  | )       |         |  | (16,870  | )     
|Interest expense:                                                            |                                                   |       |        |                                              |        |      |         |        |         |      |         |        |         |  |          |         |         |  |          |       
|                                                                             | Convertible Second Secured Loan
non-cash interest |       |        |                                             |        |      |         |       |         |      |         |       |         |  |          |        |         |  |          | 31,079 |        
|                                                                             | Other bank interest and other interest            |       |        | 7,862                                        |        |      |         | 15,874 |         |      |         | 26,173 |         |  |          | 62,768  |         |  |          | 78,342 |        
|                                                                             |                                                   |       |        |                                              |        |      |         |        |         |      |         |        |         |  |          |         |         |  |          |       
|Total                                                                        |                                                   |       | 7,862  |                                              |        |      | 15,874  |        |         |      | 26,173  |        |         |  | 62,768   |         |         |  | 109,421  |       
|Other income (expense)                                                       |                                                   |       | (232   | )                                            |        |      | (767    | )      |         |      | 1,690   |        |         |  | (5,649   | )       |         |  | (993     | )     
|                                                                             |                                                   |       |        |                                              |        |      |         |        |         |      |         |        |         |  |          |         |         |  |          |       
|Income (loss) from continuing
operations before income taxes and
other items |                                                   |       | 4,562  |                                              |        |      | (27,515 | )      |         |      | (51,664 | )      |         |  | (118,035 | )       |         |  | (127,284 | )     
|Income tax (expense) benefit                                                 |                                                   |       | (827   | )                                            |        |      | (1,667  | )      |         |      | (4,258  | )      |         |  | 15,381   |         |         |  | (10,980  | )     
|                                                                             |                                                   |       |        |                                              |        |      |         |        |         |      |         |        |         |  |          |         |         |  |          |       

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|                                                                                     |  |      |           |                                              |  |      |           |      |  |      |           |   |  |  |           |   |  |  |           |   |  | 
|------------------------------------------------------------------------------------ |  | ---- | --------- | -------------------------------------------- |  | ---- | --------- | ---- |  | ---- | --------- | - |  |  | --------- | - |  |  | --------- | - |  | 
|                                                                                     |  |      |           | Year Ended December 31,                     
|                                                                                     |  |      |           |                                             
|Statement of Operations Data                                                         |  | 1998 |           | 1999                                         |  | 2000 |           | 2001 |  | 2002
|                                                                                     |  |      |           |                                              |  |      |           |      |  |     
|                                                                                     |  |      |           | ('000 except per share and operations data)
|Income (loss) from continuing
operations before minority interest and
equity earning |  |      | 3,735     |                                              |  |      | (29,182   | )    |  |      | (55,922   | ) |  |  | (102,654  | ) |  |  | (138,264  | )
|Minority interest in net income of
subsidiaries                                      |  |      | (303      | )                                            |  |      | (70       | )    |  |      | (94       | ) |  |  | (88       | ) |  |  | (63       | )
|Equity loss in affiliate                                                             |  |      |          |                                              |  |      |          |      |  |      | (128      | ) |  |  | (420      | ) |  |  |          |  
|                                                                                     |  |      |           |                                              |  |      |           |      |  |      |           |   |  |  |           |   |  |  |           |  
|Income (loss) from continuing operations                                             |  |      | 3,432     |                                              |  |      | (29,252   | )    |  |      | (56,144   | ) |  |  | (103,162  | ) |  |  | (138,327  | )
|Loss from discontinued operations, net
of income tax benefit                         |  |      | (2,922    | )                                            |  |      |          |      |  |      |          |   |  |  |          |   |  |  |          |  
|Extraordinary loss, net of income tax                                                |  |      |          |                                              |  |      |          |      |  |      | (8,180    | ) |  |  |          |   |  |  |          |  
|Cumulative effect of change in
accounting Principle, net of income tax               |  |      |          |                                              |  |      |          |      |  |      |          |   |  |  | (946      | ) |  |  |          |  
|                                                                                     |  |      |           |                                              |  |      |           |      |  |      |           |   |  |  |           |   |  |  |           |  
|Net income (loss)                                                                    |  |      | 510       |                                              |  |      | (29,252   | )    |  |      | (64,324   | ) |  |  | (104,108  | ) |  |  | (138,327  | )
|                                                                                     |  |      |           |                                              |  |      |           |      |  |      |           |   |  |  |           |   |  |  |           |  
|Net income (loss) per share                                                          |  |      |           |                                              |  |      |           |      |  |      |           |   |  |  |           |   |  |  |           |  
|Basic and diluted:                                                                   |  |      |           |                                              |  |      |           |      |  |      |           |   |  |  |           |   |  |  |           |  
|Continuing operations                                                                |  |      | 0.22      |                                              |  |      | (1.53     | )    |  |      | (2.85     | ) |  |  | (5.21     | ) |  |  | (6.99     | )
|Net income (loss)                                                                    |  |      | 0.03      |                                              |  |      | (1.53     | )    |  |      | (3.26     | ) |  |  | (5.26     | ) |  |  | (6.99     | )
|Balance Sheet Data (at period end)                                                   |  |      |           |                                              |  |      |           |      |  |      |           |   |  |  |           |   |  |  |           |  
|Total assets                                                                         |  |      | 609,229   |                                              |  |      | 586,636   |      |  |      | 1,108,376 |   |  |  | 1,125,006 |   |  |  | 1,085,718 |  
|Total debt                                                                           |  |      | 332,800   |                                              |  |      | 224,762   |      |  |      | 754,333   |   |  |  | 852,660   |   |  |  | 909,255   |  
|Total liabilities                                                                    |  |      | 368,757   |                                              |  |      | 257,961   |      |  |      | 838,994   |   |  |  | 954,814   |   |  |  | 1,052,403 |  
|Shareholders equity                                                                 |  |      | 240,031   |                                              |  |      | 328,590   |      |  |      | 269,184   |   |  |  | 169,992   |   |  |  | 33,042    |  
|Cash Flow Data                                                                       |  |      |           |                                              |  |      |           |      |  |      |           |   |  |  |           |   |  |  |           |  
|Net cash provided by operating
activities                                            |  |      | 28,565    |                                              |  |      | 44,214    |      |  |      | 11,685    |   |  |  | 15,321    |   |  |  | 31,091    |  
|Net cash provided by (used in) investing
activities                                  |  |      | 8,451     |                                              |  |      | (47,858   | )    |  |      | (387,759  | ) |  |  | (80,552   | ) |  |  | (37,012   | )
|Net cash provided by (used in) financing
activities                                  |  |      | (39,706   | )                                            |  |      | 4,164     |      |  |      | 372,350   |   |  |  | 63,521    |   |  |  | 3,790     |  
|Capital expenditures (excluding
acquisitions)                                        |  |      | 3,110     |                                              |  |      | 31,704    |      |  |      | 99,817    |   |  |  | 68,636    |   |  |  | 36,861    |  
|Operations Data                                                                      |  |      |           |                                              |  |      |           |      |  |      |           |   |  |  |           |   |  |  |           |  
|Homes
passed(1)                                                                      |  |      | 1,335,052 |                                              |  |      | 1,422,826 |      |  |      | 1,916,870 |   |  |  | 1,964,868 |   |  |  | 1,977,958 |  
|Ready for service homes(2)                                                           |  |      |          |                                              |  |      | 30,456    |      |  |      | 412,538   |   |  |  | 440,883   |   |  |  | 457,088   |  
|Number of television subscribers                                                     |  |      | 877,152   |                                              |  |      | 919,641   |      |  |      | 1,299,926 |   |  |  | 1,304,494 |   |  |  | 1,305,769 |  
|Number of Internet subscribers(3)                                                    |  |      |          |                                              |  |      | 150       |      |  |      | 20,489    |   |  |  | 34,078    |   |  |  | 53,545    |  
|Number of digital television subscribers                                             |  |      |          |                                              |  |      |          |      |  |      | 4,570     |   |  |  | 11,875    |   |  |  | 11,628    |  
|Total revenue generating units                                                       |  |      | 877,152   |                                              |  |      | 919,791   |      |  |      | 1,325,185 |   |  |  | 1,351,235 |   |  |  | 1,371,774 |  
|Analog Video penetration(4)                                                          |  |      | 65.7      | %                                            |  |      | 64.6      | %    |  |      | 67.8      | % |  |  | 66.4      | % |  |  | 66.0      | %
|Internet penetration(5)                                                              |  |      |          |                                              |  |      | 0.5       | %    |  |      | 3.9       | % |  |  | 7.0       | % |  |  | 11.7      | %
|Digital penetration(6)                                                               |  |      |          |                                              |  |      |          |      |  |      | 1.1       | % |  |  | 2.7       | % |  |  | 2.5       | %
|EBITDA (000) (7)                                                                   |  |      | 28,728    |                                              |  |      | 50,403    |      |  |      | 48,349    |   |  |  | 68,742    |   |  |  | 79,073    |  
|EBITDA margin(8)                                                                     |  |      | 58.2      | %                                            |  |      | 47.6      | %    |  |      | 38.9      | % |  |  | 41.5      | % |  |  | 43,4      | %
|Adjusted EBITDA (000) (9)                                                          |  |      | 28,728    |                                              |  |      | 53,160    |      |  |      | 51,907    |   |  |  | 72,595    |   |  |  | 82,882    |  
|Adjusted EBITDA margin (10)                                                          |  |      | 58.2      | %                                            |  |      | 50.2      | %    |  |      | 41.8      | % |  |  | 43.9      | % |  |  | 45.5      | %



|(1) |  | At end of the period in 2002, 1,409,934 homes were passed by coaxial
cable networks and approximately 568,024 were homes passed by fiber optic
cable networks.                                                                                                                                                                                                                                                                      
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Upgraded from the fiber node to the home (862 MHz and two-way capable).                                                                                                                                                                                                                                                                                                                                                             
|   
|(3) |  | Includes 4,240 dial-up customers at December 31, 2000 and 3,203 dial-up
customers at December 31, 2001. We did not have dial-up customers at
December 31, 2002.                                                                                                                                                                                                                                                                     
|   
|(4) |  | Analog television subscribers as a percentage of homes passed.                                                                                                                                                                                                                                                                                                                                                                      
|   
|(5) |  | High-speed Internet subscribers as a percentage of ready for service
homes.                                                                                                                                                                                                                                                                                                                                                         
|   
|(6) |  | Number of digital subscribers as a percentage of ready for service homes.                                                                                                                                                                                                                                                                                                                                                           
|   
|(7) |  | We define EBITDA as earnings (loss) before discontinued operations,
equity earnings (loss) in affiliates, extraordinary items, cumulative
effect of change in accounting principle, minority interests, gain (loss)
on disposal of fixed assets, net interest expense, income taxes and
depreciation and amortization. Other participants in the cable television
and broadband industries also use EBITDA, defined in a similar but

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|     |  | often
not exactly comparable manner, as a measure of performance. We believe
that EBITDA is a useful supplement to net income and other income
statement data in understanding cash flows generated from operations that
are available for taxes, debt service and capital expenditures and because
it is the most commonly used measure to analyze and compare cable
television and broadband companies on the basis of operating performance,
leverage and liquidity. EBITDA is not a U.S. GAAP measure of income
(loss) or cash flow from operations and should not be considered as an
alternative to net income as an indication of our financial performance or
as an alternative to cash flow from operating activities as a measure of
our liquidity.                                                                                                        
|---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    
|(8)  |  | EBITDA margin is EBITDA divided by revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|    
|(9)  |  | Adjusted EBITDA represents our EBITDA adjusted to add back non-cash
compensation expenses related to stock options of approximately 1,377,000
in the year ended December 31, 2002. 3,853,000 in the year ended
December 31, 2001, approximately 3,558,000 in the year ended December 31,
2000 and approximately 2,757,000 in the year ended December 31, 1999. In
the year ended December 31, 2002 we also adjusted for 2,432,000 debt
refinancing expenses. For more information about these adjustments, see
Item 5. Operating and Financial Review and ProspectsCorporate
Overhead. Other cable television and broadband companies may also
measure performance with reference to adjusted EBITDA, but the nature of
the adjustments made by these companies may differ from those made by us,
making analysis and comparison of these measures difficult.
|    
|(10) |  | Adjusted EBITDA margin is Adjusted EBITDA divided by revenues.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

The following schedule reconciles EBITDA and adjusted EBITDA to our U.S.
GAAP financial statements:

|                              |  |                                         |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |  
|----------------------------- |  | --------------------------------------- | ------ | ---- |  | ---- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | - |  |  | ------- | -
|                              |  | Year
ended December 31,( in thousands)
|                              |  |                                        
|                              |  | 1998                                    |        | 1999 |  | 2000 |         | 2001 |  | 2002
|                              |  |                                         |        |      |  |      |         |      |  |     
|Operating profit (loss)       |  |                                         | 12,656 |      |  |      | (10,874 | )    |  |      | (27,181 | ) |  |  | (49,618 | ) |  |  | (16,870 | )
|Depreciation and amortization |  |                                         | 16,072 |      |  |      | 61,277  |      |  |      | 75,530  |   |  |  | 118,360 |   |  |  | 95,943  |  
|                              |  |                                         |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |  
|EBITDA                        |  |                                         | 28,728 |      |  |      | 50,403  |      |  |      | 48,349  |   |  |  | 68,742  |   |  |  | 79,073  |  
|Non-cash compensation expense |  |                                         |       |      |  |      | 2,757   |      |  |      | 3,558   |   |  |  | 3,853   |   |  |  | 1,377   |  
|Debt refinancing              |  |                                         |       |      |  |      |        |      |  |      |        |   |  |  |        |   |  |  | 2,432   |  
|                              |  |                                         |        |      |  |      |         |      |  |      |         |   |  |  |         |   |  |  |         |  
|Adjusted EBITDA               |  |                                         | 28,728 |      |  |      | 53,160  |      |  |      | 51,907  |   |  |  | 72,595  |   |  |  | 82,882  |  

Exchange rate information

Effective January 1, 1999, Germany and ten other members of the European
Union introduced the Euro as their official currency and established fixed
conversion rates between their existing sovereign currencies and the Euro.
Currency exchanges traded the Euro beginning January 4, 1999. Beginning on
January 1, 2002, the Euro became the official currency of all member countries.
There was a transition period which ended February 28, 2002 during which the
Deutsche Mark was used alongside the Euro.

The table below sets forth, for the periods and dates indicated,
information concerning the exchange rate for the U.S. dollar against the Euro,
based on the noon buying rate and expressed in U.S. dollar per Euro. Since the
Euro did not exist during all years listed in the table below, a portion of the
information stated has been derived from the noon buying rate in The City of
New York for cable transfers in the Deutsche Mark, as certified for customs
purposes by the Federal Reserve Bank of New York, expressed as DM per U.S.
dollar and converted to Euro at the fixed exchange rate between the Euro and
the Deutsche Mark of DM1.95583 per 1.00.

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|              |  |                      |        |         |  |      |        |     |  |  |        |  |  |  |        | 
|------------- |  | -------------------- | ------ | ------- |  | ---- | ------ | --- |  |  | ------ |  |  |  | ------ | 
|              |  | U.S. dollar per Euro
|              |  |                     
|              |  | Period-end           |        | Average |  |      |        |    
|Calendar Year |  | Rate                 |        | Rate(1) |  | High |        | Low
|              |  |                      |        |         |  |      |        |    
|1998          |  |                      | 0.8523 |         |  |      | 0.8979 |     |  |  | 0.9466 |  |  |  | 0.8199 | 
|1999          |  |                      | 0.9930 |         |  |      | 0.9445 |     |  |  | 0.9984 |  |  |  | 0.8466 | 
|2000          |  |                      | 1.0652 |         |  |      | 1.0881 |     |  |  | 1.2092 |  |  |  | 0.9676 | 
|2001          |  |                      | 0.8901 |         |  |      | 0.8993 |     |  |  | 0.9535 |  |  |  | 0.8370 | 
|2002          |  |                      | 1.0485 |         |  |      | 0.9495 |     |  |  | 1.0485 |  |  |  | 0.8594 | 



---

|(1) |  | The average of the noon buying rate on the last business day of each
month during the year.
|--- |  | -------------------------------------------------------------------------------------------

The following table sets forth, for the period indicated, information
concerning the noon buying rate of U.S. dollar per Euro.

|                                    |  |                      |        |      |  |     |        |  |  |  |        | 
|----------------------------------- |  | -------------------- | ------ | ---- |  | --- | ------ |  |  |  | ------ | 
|                                    |  | U.S. dollar per Euro
|                                    |  |                     
|                                    |  | Period-end           |        |      |  |     |        |  |  | 
|Month                               |  | Rate                 |        | High |  | Low
|                                    |  |                      |        |      |  |    
|September 2002                      |  |                      | 0.9879 |      |  |     | 0.9959 |  |  |  | 0.9685 | 
|October 2002                        |  |                      | 0.9881 |      |  |     | 0.9881 |  |  |  | 0.9708 | 
|November 2002                       |  |                      | 0.9932 |      |  |     | 1.0139 |  |  |  | 0.9895 | 
|December 2002                       |  |                      | 1.0485 |      |  |     | 1.0485 |  |  |  | 0.9927 | 
|January 2003                        |  |                      | 1.0739 |      |  |     | 1.0861 |  |  |  | 1.0361 | 
|February 2003                       |  |                      | 1.0779 |      |  |     | 1.0875 |  |  |  | 1.0708 | 
|March 2003 (through March 27, 2003) |  |                      | 1.0708 |      |  |     | 1.1062 |  |  |  | 1.0590 | 

On March 27, 2003, the noon buying rate of U.S. dollar per Euro was $1 =
1.0708.

The rates stated above are provided solely for the convenience of the
reader and are not necessarily the exchange rates, if any, we used in the
preparation of our consolidated financial statements included elsewhere in this
annual report. No representation is made that Deutsche Mark or Euro could have
been, or could be, converted into U.S. dollars at these rates or at any other
rates, or at all.

B. Capitalization and Indebtedness

Not applicable.

C. Reasons for Offer and Use of Proceeds

Not applicable.

D. Risk Factors

Risk associated with our business

Our substantial debt creates financial risk, including the risk of
insolvency

We are highly leveraged and the ratio of our indebtedness to our equity
has increased as we have incurred additional indebtedness and written off our
losses against equity throughout our operating history. In addition to
provisions pursuant to which the filing of insolvency proceedings can occur
when a debtor cannot pay its obligations as they become due, which are common
to most jurisdictions, German law requires a company to commence insolvency
proceedings if it becomes over-indebted. We would be treated as being
over-indebted if we have negative equity, due to the amount of our liabilities
exceeding the amount of our assets. Over-indebtedness must be assessed both for
us, as we are a holding company, and for each of our subsidiaries. These
assessments are required under

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German generally accepted accounting principles
and are done first on the basis of the respective balance sheets of the
relevant companies and if the test is not passed, in a second step on the basis
of an adjusted balance sheet. This adjusted balance sheet would substitute
going-concern values for the book values reflected in the balance sheet
included in our financial statements. The difference between these two balance
sheets relates to hidden reserves that have to be taken into account and
various assets that have to be valued differently. If we or any of our
subsidiaries were over-indebted on this second basis, the affected entity would
be required to file insolvency proceedings without undue delay, but in no event
later than three weeks after the determination is made. The test for
over-indebtedness is performed with reference to our year-end balance sheet,
unless there are reasons, including increased operating costs, that trigger a
requirement to perform the analysis during a fiscal year. We cannot assure you
that we, or any of our subsidiaries, will not at any time in the future become
over-indebted and required to file insolvency proceedings as a result of our
over indebtedness or for
other reasons. If we or PrimaCom Management GmbH, or one of our other
subsidiaries which is an obligor under our credit facilities were to file
insolvency proceedings, the filing would constitute an event of default under
our credit facilities and could lead to the acceleration of the date of the
required payment of those facilities, which would have a material adverse
effect on our financial position and our ability to continue our business
operations.

Our substantial leverage limits our ability to obtain additional financing
and makes us more vulnerable to an economic downturn

As of December 31, 2002, we had a debt to equity ratio of approximately
27.5:1 as compared to a debt to equity ratio of 5.0:1 as of December 31, 2001.
In addition to the insolvency risk described above, our degree of leverage also
has other important consequences. For example, the current degree of leverage
limits our ability to obtain additional financing for working capital, capital
expenditures, product development or other general corporate purposes, and
acquisitions. It also makes us more vulnerable to a downturn in business or
the economy generally. The dramatic and continued reduction in the market
values of the securities of companies in the telecommunications and media
sectors has in all but a few instances access of participants in these sectors
from accessing to the capital markets and significantly reduced both the number
of financial institutions willing to provide credit facilities to participants
in those sectors and the amount of credit the remaining institutions are
willing to extend. These developments have directly affected us and
substantially increased the risks associated with our substantial leverage.

We may not be able to generate sufficient cash from operations to fund our
operating expenses, debt service obligations and capital expenditures

As of December 31, 2002, we had approximately 909,255,000 in bank and
other debt outstanding and approximately 33,042,000 in shareholders equity as
compared to 852,660,000 in bank and other debt and 169,992,000 in
shareholders equity as of December 31, 2001. Practically all of our cash flow
from operations is dedicated to servicing this debt. This limits the amount of
cash that may be used for selective planned capital expenditures and possible acquisitions.
If our cash flow from operations
is less than what we budgeted in our business plan, we may be forced to:



| |  |  | restructure or refinance our debt (including on terms that
may be even less favorable to us than our current debt) and seek new
investors to increase shareholders equity;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | further reduce or delay capital expenditures;                                                                                                                              
|
| |  |  | sell assets on terms that would otherwise be unacceptable to us; or                                                                                                        
|
| |  |  | forgo business opportunities.                                                                                                                                              

Any of these actions could prevent us from obtaining some or all of the
benefits expected from our business strategy.

In addition, we may not have sufficient cash from our operations to make
future payments to meet the scheduled amortization on our senior facility that
are required. The facility reduction schedule reduces the available commitment
at quarterly intervals starting on March 31, 2003. If this and other future
principal payments cannot be

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refinanced, extended or paid with proceeds of
other transactions such as new raising of equity or debt capital, we could be
declared in default of our loan obligations, in which case our debts under
these instruments could become immediately payable.

Currently, we own 100% of PrimaCom Management GmbH which, in turn, owns,
directly or indirectly, all our other operating subsidiaries and partnerships.
However, our convertible second secured term loan facility gives the lenders
the right to convert the outstanding debt under this facility into up to 65% of
the shares of PrimaCom Management on December 31, 2004 and thereafter. Unless
these lenders do not exercise this right or we refinance this convertible
second secured term loan facility, your indirect equity interests in PrimaCom
Management and its operating subsidiaries and partnerships may be significantly
diluted. We cannot assure you that we will be able to refinance this facility
on terms that are acceptable to us, or at all. Our debt instruments are more
fully described in Item 5. Operating and Financial Review and
ProspectusLiquidity and Capital Resources.

We expect to incur net losses in the near term, and the value of our
business and our securities will likely decline if we are unable to generate
net profits in the future

We incurred net losses of approximately 138,327,000 in the year ended
December 31, 2002 and 104,108,000 in 2001. Unless we can significantly reduce
our indebtedness, we expect to continue to incur net losses. As part of our
strategy to attempt to generate net profits, we intend to continue to upgrade
our networks on a very selective basis and develop new products including
broadband services, which will give rise to additional capital expenditure and
increase our already substantial interest expense. This planned selective
upgrading and our product development efforts will allow us to provide
value-added services, which we believe will permit us to selectively increase
our revenues per subscriber in the future. At the same time, we will seek to
reduce operating expenses, including by installing our own head-ends to receive
programming directly from satellites instead of through the network of Kabel
Deutschland GmbH, especially in those instances where our delivery fees from
Kabel Deutschland have increased. A more detailed description of our signal
delivery agreements with Kabel Deutschland is provided in Item 5. Operating
and Financial Review and Prospects and Item 4. Information on the
CompanyBusinessStrategy. We cannot assure you that this strategy will be
successful or that we will be able to generate net profits in the future. Our
inability to generate net profits in the future may have a significant negative
impact on the value of our business and the securities you own.

Our debt instruments contain restrictive covenants which may be breached
and which may pose potential financial and operating problems

Our operating and financial flexibility and liquidity is limited by
restrictions imposed by our existing debt instruments. These contain financial
and operating covenants including, among other things, maintenance of
identified financial ratios, as well as limitations on our ability to sell all
or substantially all of our assets and engage in mergers, consolidations and
other acquisitions. If we fail to comply with the covenants and other
provisions of these debt instruments, our debts under these instruments could become
payable prior to their scheduled payment date.

We have no governmental franchises and primarily serve our subscribers
through concession agreements with housing associations in Germany, and if we
are unable to successfully extend these agreements on commercially reasonable
terms, this failure may negatively impact our business

Unlike the cable market in the United States, German governmental bodies
do not grant franchise areas to cable operators. Instead, we serve our German
subscribers primarily under concession contracts with housing associations that
administer large housing blocks. We will face strong competition for these
concessions, which must be periodically renewed. If we are unable to renew our
concessions, or if housing associations are successful in terminating these
contracts either upon or before their expiration, the decrease in subscribers
could have a material negative impact on our operating results. For more
information about these contracts with housing associations, see Item 4.
Information on the Company.

Our Multikabel subsidiary in The Netherlands has been granted franchise
areas under the former telecommunications regulations. However, the current
regulations do not provide for exclusive franchise areas, and

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multiple parties
may be authorized to build cable networks in the same area. Although this has
not happened, we cannot assure you that multiple authorizations will not be
granted in the future, pursuant to which competitive services may be offered in
the areas in which we operate our network.

Our debt is at variable rates of interest or at rates of cash interest
which increase over time, so that rising interest rates could adversely affect
our cash flow

Our borrowings under our senior and second secured credit facilities are
at variable rates of interest. We currently have approximately 497,104,000 in
indebtedness with floating interest rates. We may also borrow additional money
with variable interest rates in the future. Increases in interest rates would
increase our interest expenses under these loans and the costs of refinancing
existing indebtedness and of issuing new debt. Accordingly, higher interest
rates would adversely affect cash flow and our ability to service our debt.
Additionally, the cash coupon of interest under our convertible second secured
term loan facility increases over time, which will also adversely affect cash
flow and our ability to service our debt.

During the last year, we have stopped large scale upgrading of our
networks in Germany and we may encounter longer-term competitive disadvantage
if our competitors continue to selectively upgrade their networks, which would
negatively impact our financial performance

In order to begin offering additional value-added services, we began to
upgrade our cable television networks to broadband networks in Germany on a
large scale during 2000. Because of the financing constraints and an initial
lack of success in generating sales of broadband services to our subscribers,
we have stopped upgrading these cable networks or constructing new broadband
networks on a large scale.

To the extent that our competitors in Germany, some of whom have
significantly greater financial resources than us, continue to selectively
upgrade their networks or construct new broadband networks during this period,
we will be at a competitive disadvantage in relation to the provision of
higher-value broadband services.

Because we depend on third parties for some of the broadband services we
offer, we may not be able to obtain or replace these services on reasonable
terms and we may have problems with these third parties.

We do not produce or own all of the broadband services we offer to our
subscribers in The Netherlands and Germany. In addition to not being able to
obtain or replace a sufficient number of those services on favorable terms, we
face a number of other risks.

In Germany, our competitors hold exclusive rights to programming that we
may wish to offer to our subscribers in the future, may limit the availability
of programming to us or may charge us fixed fees regardless of how many
subscribers sign up to receive this programming. In addition, regulatory
constraints may affect our ability to select programming we may want to provide. If we do not succeed in
obtaining a sufficient number of these new services, either independently or
with partners, on commercially reasonable terms, demand for our services would
be reduced and our revenues would decrease.

In The Netherlands, we recently migrated all our broadband Internet
subscribers to our own Internet service platform which relies to a large extent
on third party suppliers to assure continued service to our subscribers. We
expect a significant future increases in the number of our broadband Internet
subscribers, which carries the risk that this service and may incur technical
difficulties as a result of our reliance on third parties which are not under
our control. These technical problems could result in a loss of subscription
fees for broadband Internet access and have a material adverse effect on the
financial results of our Dutch operations.

Also in The Netherlands, we are currently dependent on Mediakabel for the
provision of our branded digital television product in The Netherlands.
Mediakabel is a consortium of cable companies in which we have a minority
interest and in which UPC, our largest shareholder, has a significant interest.
In the event one or more owners of Mediakabel fails to pay their operating and
service contributions, we may be required to increase our contributions in
order to ensure the continuation of the operations of Mediakabel.
Alternatively, the current Mediakabel digital television product may be reduced
to a smaller product offering, or we may be required to find an alternative
source

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for our digital television product, potentially on short notice. In
addition, if one or more of the owners fails to cooperate in the operation of
Mediakabel or Mediakabel is otherwise unable to continue to provide us with our
digital television product, we will also be required to find an alternative
source for that product in The Netherlands. The current Mediakabel operating
agreement expires in July 2004. We are examining the availability of
alternative means of delivering digital television signal in The Netherlands in
the event that we or any other owner in Mediakabel were to decide not to
continue that consortium. There can be no assurance that, if required, any
such alternative source could be identified in a timely fashion or at all.
Accordingly, any loss of our digital television product may result in loss of
revenue and subscribers in The Netherlands.

Lastly, in The Netherlands, we currently depend on Priority Telecom B.V, a
subsidiary of UPC for the provision of our telephony offerings. In the event
Priority and its interconnection partners, for example KPN, fail to deliver
services to us, the quality of service expected by our subscribers could be
materially impacted. This would result in subscriber dissatisfaction and the,
loss of subscribers and revenue from the sale of this product, which might
force us to find an alternative source to support these offerings in the
Netherlands. We cannot assure you that, if required, any of such alternative
sources could be identified on time or at all and on terms acceptable to us.

Our business plan assumes increasing demand for bandwidth-intensive
applications, and if the demand for these services does not increase as
expected it would negatively impact our financial performance

Our business plan assumes that the use of Internet, data services, cable
or Internet-based telephony services and other bandwidth-intensive applications
will increase substantially in Germany and in The Netherlands in the next few
years. We also believe that there will be increasing demand for telephony
services in the future. Based on this assumption, we have invested heavily in
the past, but due to the financing constraints which we are subject to, we
intend in the future to invest only selectively in Germany in upgrading our
networks to enable them to support broadband services. However, if the use of
bandwidth-intensive applications in those countries does not increase as
anticipated, or develops more slowly than anticipated, the demand for many of
our services will be lower than we currently anticipate, which would have a
negative impact on our pricing flexibility, results of operations and financial
condition.

In addition, we have limited experience in the market for telephony
services. Although difficulties arise when entering any new market, we believe
that the market for cable telephony services and Internet protocol-based
telephony services, also known as voice-over IP, may be particularly difficult
because of the high degree of competition, pricing pressures and the existence
of incumbent telephony operators. In addition, we expect to face competition
from wireless telephone carriers and new entrants to the European telephone
market.

If we are unable to respond to competitive pressures on a timely basis,
implement new technologies or penetrate new markets in response to changing
subscriber requirements, or if new or enhanced services offered by us do not
receive an acceptable level of market acceptance, we may not be able to compete
effectively.

We face increasing competition from satellite television and other
alternative methods of television signal delivery, which may limit our growth
and cause us to lose subscribers

As a result of competition for subscribers from other signal delivery
methods, we may be unable to increase our subscriber base or we may lose
subscribers. Our ability to obtain additional cable television subscribers in
areas where our networks have already been installed is limited by the
availability of traditional public over-the-air television signal from
land-based or terrestrial antennae. We also face increasing competition from
other methods of television signal delivery to the home, including:



| |  |  | digital terrestrial;                                                                        
| | - |  | --------------------------------------------------------------------------------------------
|
| |  |  | analog and digital satellite-delivered direct-to-home systems; and                          
|
| |  |  | satellite master antenna television systems, particularly in areas of low cable penetration.

Various companies in Germany and The Netherlands offer satellite digital
direct-to-home television operations. These companies may be able to use their
substantial financial resources and exclusive entertainment

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and sports
programming contracts to further penetrate the market and compete with us for
subscribers. In The Netherlands, licenses have been awarded for digital
terrestrial television, which will compete with our digital television
offering. In addition, we believe that we will face additional competition
from digital terrestrial television, which was commercially launched in Berlin
area in Germany in January 2003. In The Netherlands it has been postponed
towards spring 2003.

We may not be able to keep up with the rapid technological changes in the
cable television and broadband industries and may incur significant costs of
implementing new technologies

To remain competitive, we must continue to introduce new services and
enhance and improve the functionality, accessibility and features of our
networks. The cable television and broadband industries are subject to:



| |  |  | rapid and significant changes in technology;                                                                                 
| | - |  | -----------------------------------------------------------------------------------------------------------------------------
|
| |  |  | changes in use and customer requirements and preferences;                                                                    
|
| |  |  | frequent product and service introductions embodying new technologies; and                                                   
|
| |  |  | the emergence of new industry standards and practices
that could render existing proprietary technology and systems
obsolete.

We cannot predict the effect of technological changes on our business. In
addition, we cannot offer any assurance that we will be able to successfully
implement new technologies or adapt technologies to customer requirements in a
timely manner. Furthermore, the cost of implementing emerging technologies or
to change from one technology to another once implementation has started, is
significant when compared to the cash we have available after we make payments
on our indebtedness and our ability to fund implementation or change will most
likely be dependent upon our ability to obtain additional financing.

Our program suppliers may offer programming to our competitors exclusively
or on more favorable terms, and may require minimum payments for some
programming events, all of which could negatively impact our business

Program suppliers may offer programming exclusively or on more favorable
terms (both as to price and availability) to our competitors. We will continue
to face this competitive risk even if we succeed in increasing the number of
subscribers served by our own head-ends to reduce signal delivery fees payable
to Kabel Deutschland Gesellschaft mbH, the formerly wholly owned subsidiary of
Deutsche Telekom, that was recently sold to a group of investors lead by
Goldman Sachs, Apax and Providence only a few weeks ago. This risk may
intensify as satellite broadcasters continue to become more established in
Germany.

The operating margins and cash flows of our German operations may decline
as a result of increases in signal delivery expenses or customer
dissatisfaction due to inadequate network maintenance by private operators on
whom we rely

At December 31, 2002, approximately 50% of our subscribers in Germany were
served by networks that received programming under signal delivery contracts we
have with regional subsidiaries of Kabel Deutschland (and successor private
operators) as compared to over 60% of December 31, 2001. Under some of the
contracts we pay a fixed fee, which is not dependent on the number of actual
subscribers and connection points. We and Kabel Deutschland have a difference
of opinion on the basis of computation of fees arriving by us under some of our
signal delivery contracts with Kabel Deutschland relating to the amount of
signal delivery fees we owe. Kabel Deutschland interprets theses contracts as
permitting it to increase our signal delivery fees before the expiration of
certain current signal delivery contracts. We disagree with that
interpretation. If Kabel Deutschland is successful in enforcing its position,
our signal delivery fees could increase significantly. We may also have to pay
more fees under variable rate contracts, a number of which were subject to rate
increases in November 2002 when Kabel Deutschland revised its published fee
charts and increased our fees significantly. We expect that these increases
will continue in the near term. Any fee increases under programming signal
delivery contracts which cannot be captured by increased rates

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for our
subscribers may have an adverse effect on our operating margins and may lead to
a loss in subscribers who abandon cable television and instead rely on direct
television reception or other reception technologies.

If payments are assessed on our transmission of analog television
programming in Germany, our operating margins and cash flows will suffer unless
we can pass these additional costs on to subscribers

Historically, we have been in the business of providing analog television
programming to subscribers over our cable television networks in Germany. Like
other cable network operators in Germany, we have generally not had to pay
program providers for this analog programming. However, some or all of our
program providers could require us to pay for analog programming in the future.
If this occurs and we are unable to pass these charges on to subscribers, our
operating margins and cash flows would suffer.

We may have to pay copyright royalties for retransmitting programming to
our subscribers in Germany, which would reduce our German operating margins and
cash flows to the extent that they exceed the amounts we have accrued for
these royalties

Like other German cable network operators, we have not paid copyright
royalties for retransmission of programming we received from sources other than
Kabel Deutschland and successor private operators in the past. However, GEMA,
one of the German copyright collection agencies, has stated that it wants to
start collecting royalties from cable network operators and that it may collect
these royalties retroactively from July 1, 1997. Although our strategy of
building our own head-ends will reduce retransmission of the amount of
programming we receive from Kabel Deutschland and successor private operators,
it may not reduce our royalty payments if we are required to pay copyright
royalties on the transmission of programming we receive through our own
head-ends. We may also have to pay royalties in connection with our digital
programming and other products we offer to subscribers over our broadband
network. If these royalties exceed the amounts we have accrued or will accrue
for this purpose, our net income and cash flows will decrease. If royalties
were collected retroactively in amounts in excess of the accruals we have been
making since January 1, 2000, our net losses for the periods for which this
retroactive payment has to be made would increase.

Extensive government regulation of the broadband industry could restrict
the way we operate our business and could hinder our business plans

We will be subject to extensive regulatory controls and may, from time to
time, not be in compliance with all administrative and licensing requirements
of the regulatory authorities. In addition, we may have to comply with amended
or additional regulations in the future. Problems related to all of these
regulatory matters may restrict our ability to compete effectively. Changes in
German federal or state, or Dutch regulation of the licensing, construction and
operation of cable television or broadband networks, including the regulations
relating to licensing requirements, the operations of Kabel Deutschland and KPN
and interconnection arrangements, could restrict our business operations and
hinder our business plans.

Under the recent allocation of frequency bands in Germany we may be
prevented from transmitting over some of the frequency bands we currently use,
in which case our transition to new frequencies could prove to be difficult and
more costly than we currently estimate

In May 2002, three new ordinances governing the allocation, use and
assignment of frequencies took effect in Germany. The ordinance on the
allocation of frequencies addresses the free use of frequencies without an
individual permit, approval or other regulatory resolution. It allows the free
use of frequencies between 9 KHz and 30 MHz in and along conductors in our
cable networks under certain conditions. These conditions require that (1) the
disturbing radiation emitted by the conductors does not exceed identified
limits and (2) the frequencies are not used for security purposes, identified
by the German regulatory authority. If the above conditions are not met, then
the German regulatory authority will decide on a case by case basis whether we
may use the given frequency. The authority may also impose on us restrictions
or conditions prior to granting permission to use frequencies. In addition,
these same conditions will apply to frequencies between 30 MHz and 3 GHz
beginning on July 1, 2003. These regulations may prevent us from using some or
all of the relevant frequency bands to retransmit programming

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on our cable
networks. Should this occur, we may need to make investments in our German
networks in order to continue providing our current services.

If we are deemed to be market-dominating by the competition authorities
in Germany and The Netherlands, we will be subject to heightened regulation
that could restrict the fees we charge subscribers and restrict our operating
flexibility

Under German and Dutch telecommunications and competition law, we are
likely to be considered market-dominating in those regions in which we are
the only cable or broadband operator or, potentially, in which we provide a
high percentage of the available cable or broadband products and services. If
this occurs, the regulatory authority in those countries may have the right to
review our subscriber fees and object to any proposed increases. The authority
could also review and object to other terms of our subscriber agreements. If
approvals for fee increases or for the introduction of fee packages for new
services are delayed or refused, our operating margins, cash flow and
competitive position could suffer. In addition, if we are found to be
market-dominating, the regulatory authority could require that we provide third
parties with access to our networks on a large scale or change other aspects of
our operations. This may also negatively impact our business and financial
results.

German media authorities may require us to offer popular channels in
analog mode rather than exclusively in digital mode which could negatively
affect the growth and development of our digital cable television service

The success of our digital service will depend in large part upon our
ability to offer high quality digital programming. For instance, we may seek
to broaden our digital subscriber base by offering popular programming
exclusively through our digital service. However, we may be prevented from
implementing this strategy if German media authorities require us to offer this
programming in analog mode in addition to digital format. The availability of
the same programs in analog format may limit our ability to attract digital
subscribers and to increase cable subscription revenues.

We may become subject to Internet regulation in Germany and The
Netherlands, which could increase our costs or limit the services we provide to
subscribers

The provision of Internet services has, to date, not been materially
restricted by regulation in Germany and The Netherlands. However, in Germany a
number of Internet services are subject to regulation with respect to licensing
and notification requirements and content. If this does occur, it could result
in a loss of cable and broadband subscribers.

In addition, the legal and regulatory framework applicable to the Internet
is uncertain and may change. In particular, new laws and regulations may be
enacted and existing laws and regulations may be applied to the Internet and
e-commerce. For example, existing pressure to liberalize high-speed Internet
access in The Netherlands may become stronger in the future. New and existing
laws may cover issues like:



| |  |  | value-added sales or other taxes;                    
| | - |  | -----------------------------------------------------
|
| |  |  | user privacy;                                        
|
| |  |  | pricing controls;                                    
|
| |  |  | characteristics and quality of products and services;
|
| |  |  | consumer protection;                                 
|
| |  |  | cross-border commerce;                               
|
| |  |  | libel and defamation;                                
|
| |  |  | electronic signatures;                               
|
| |  |  | transmission security;                               

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| |  |  | copyright, trademark and patent infringement; and                  
| | - |  | -------------------------------------------------------------------
|
| |  |  | other claims based on the nature and content of Internet materials.

Any new laws and regulations or the uncertainty associated with their
enactment could increase our costs and hinder the development of our business
and limit the growth of our revenues.

Because we do not insure a substantial portion of our underground cable
networks, we may have to bear the full costs of any damage to those uninsured
networks, which may have a negative effect on our financial performance

Any catastrophe affecting a significant portion of our underground cable
networks could result in substantial uninsured losses and could have a material
adverse effect on our business and financial results. While we carry general
liability insurance on our properties, we do not insure a substantial portion
of our underground cable networks in Germany and we carry only minimal
insurance on the underground portion of our cable networks in The Netherlands.
We intend to continue to carry only general liability insurance on our
properties.

United States shareholders may have difficulties in making claims for any
breach of their rights because neither we nor most of the members of our
management or supervisory boards are in the United States

It may not be possible for investors to effect service of process within
the United States upon us or on the members of our management and supervisory
boards or to enforce in United States courts against us and them judgments
obtained in United States courts based upon civil liability provisions of the
federal securities laws of the United States. We have been advised by counsel
that enforceability in Germany of civil liabilities based on the laws of the
United States, including the federal securities laws, is subject to
restrictions or may not be obtained in original actions or in actions for
enforcement of judgments of United States courts. Accordingly, civil judgments
obtained in the United States may be unenforceable in Germany. These
difficulties are significant because we are organized as a joint stock
corporation under the laws of Germany and a majority of the members of our
management and supervisory board reside outside of the United States. In
addition, all of our assets and all or a substantial portion of the assets of
many of the members of our management and supervisory board are also located
outside of the United States.

Risks relating to UPCs ownership in us

The interests of UPC, our largest shareholder, may differ significantly
from your interests and the interests of our other shareholders

As of December 31, 2002, UPC owned approximately 25% of our shares. As
long as UPC continues to have a significant portion of our shares, and
depending on the number of shares represented by other shareholders at our
shareholders meetings, UPC and its affiliates UnitedGlobalCom, Inc. or UGC and
Liberty Media Corporation could exercise substantial influence over decisions taken at our
shareholders meetings. Other future shareholder decisions may relate to:



| |  |  | mergers or other business combinations;              
| | - |  | -----------------------------------------------------
|
| |  |  | material acquisitions or dispositions of assets;     
|
| |  |  | future issuances of shares or other securities;      
|
| |  |  | payment of dividends on our shares; and              
|
| |  |  | significant amendments to our articles of association

The interests of UPC, UGC and Liberty Media in deciding matters and the factors
each considers in exercising their influence could be different from your
interests and the interests of our other shareholders.

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UPCs ownership and the resulting interests of UGC and Liberty Media in us
may deter third parties from seeking to acquire control of us, including
transactions that may be economically beneficial to us and our shareholders and
any perception that UPCs shareholding in us is available for sale may cause a
reduction in the market price of our shares

UPCs ownership and the interests of its affiliates UGC and Liberty Media
in us reduce the likelihood that a third party would be able to obtain majority
control over us unless UPC sells its shares. As a result, UPCs interest may
have the effect of discouraging a third party from initiating a takeover bid
for our shares or otherwise attempting to gain control over us, including
transactions that may be economically beneficial to us and our shareholders.
Additionally, UPC is in the process of rescheduling its indebtedness and if it
was perceived to be a seller of its shareholding in us, the effect could be a
further reduction in the market price of our shares.

The member nominated by UPC to our supervisory board may also be a
director or officer of UPC or UGC, which may result in conflicts of interest
that could be resolved in a manner adverse to us

Currently, two of the nine members of our supervisory board are nominees
of UPC who are also directors or officers of UPC and/or UGC. These persons
have fiduciary duties, including duties of loyalty, to both companies, which
may result in conflicts of interest with respect to matters including
acquisitions, financings or other corporate opportunities that may be suitable
for both UPC and for us. In addition, these UPC nominees may own substantial
amounts of UPC or UGC capital stock and/or options to purchase shares of UPC or
UGC capital stock. There could be potential conflicts of interest when these
representatives are faced with decisions that could have different implications
for us and UPC or UGC. There are no specific policies in place with respect to
any conflicts that may arise. We expect conflicts to be resolved on a
case-by-case basis, and in a manner consistent with applicable law. However,
conflicts could be resolved in a manner adverse to us, which could harm our
business.






|ITEM 4. |  | INFORMATION ON THE COMPANY
|------- |  | --------------------------

A. History and Development of the Company

Our legal and commercial name is PrimaCom AG and we were incorporated on
December 30, 1998 upon the completion of the merger of our predecessor
companies, KabelMedia and Süweda. We are a stock corporation organized under
the laws of the Federal Republic of Germany. Our principal executive offices
are located at An der Ochsenwiese 3, Mainz 55124, Germany. Our telephone
number is +49 6131-9440. We maintain a website at www.primacom.de.
Information contained in our website does not constitute a part of this annual
report.

A description of our principal capital expenditures during the year 2002
and information concerning the principal capital expenditures currently in
progress and the method of financing is included in Item 5. B. Liquidity and
Capital Resources.

B. Business Overview

Who we are

Since KabelMedias inception in 1992, we have primarily owned, operated
and acquired cable television networks in Germany. On September 18, 2000, with
the acquisition of Multikabel, we expanded our operations from Germany to The
Netherlands. As of December 31, 2002 we owned and operated cable television
and broadband networks passing 1,977,958 homes and available to approximately
1,371,774 revenue-generating customers as follows:

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|                                     |  |         |           |                 |  |  |         | 
|------------------------------------ |  | ------- | --------- | --------------- |  |  | ------- | 
|                                     |  | Germany |           | The Netherlands
|                                     |  |         |           |                
|Cable networks (up to 450 MHz)       |  |         |           |                 |  |  |         | 
|Cable television homes passed        |  |         | 1,409,934 |                 |  |  |        | 
|Analog television subscribers        |  |         | 915,026   |                 |  |  |        | 
|Broadband network (862 MHz)          |  |         |           |                 |  |  |         | 
|Homes passed by fiber                |  |         | 236,624   |                 |  |  | 331,400 | 
|Ready for service homes              |  |         | 125,688   |                 |  |  | 331,400 | 
|Analog television subscribers        |  |         | 84,398    |                 |  |  | 306,345 | 
|Digital television subscribers       |  |         | 7,540     |                 |  |  | 4,088   | 
|Internet subscribers                 |  |         | 4,628     |                 |  |  | 48,917  | 
|Data communications subscribers(1)   |  |         |          |                 |  |  | 832     | 
|Total revenue generating subscribers |  |         | 1,011,592 |                 |  |  | 360,182 | 



---

|(1) |  | Includes 611 schools served by our Kennisnet product.
|--- |  | -----------------------------------------------------

We believe that we are the fifth largest private cable network operator in
Germany in terms of the number of direct and the first and one of the largest
private operators of broadband networks in Germany.

In Germany, we are currently offering our broadband subscribers digital
television, pay-per-view and high-speed Internet services to complement our
basic cable television offering. We currently offer our Dutch subscribers
digital television and high-speed Internet access, in addition to our basic
cable television offering and plan to launch a telephony product in the second
quarter of 2003. We also currently offer business subscribers in The
Netherlands leased lines data communications services.

Our strategy

Our objective is to enhance the value of our business by expanding and
promoting our broadband service offering, capitalizing on more efficient usage
of our existing networks in the German and Dutch cable television markets and,
to a lesser extent, selectively continuing to upgrade our cable television
networks in Germany. Our business strategy focuses on the following specific
goals:



| |  |  | Generate net profits by deferring capital expenditure while
enhancing internal revenue growth.As part of our strategy to
generate profits in the future, we have deferred significant
upgrades of our existing networks in Germany while seeking to
generate increased revenues by selectively increasing subscription
rates for our basic cable television services, primarily in
conjunction with the introduction of new programs and through the
continued use of marketing programs designed to increase subscriber
penetration of both our basic cable services and of our broadband
services to those customers already passed by our broadband
networks. In particular, we intend over time to increase monthly
service rates for basic cable television in the new German states
(the former East Germany) to levels similar to those in the old
German states (the former West Germany). Our ability to do so,
however, will strongly depend on our competitors pricing. In The
Netherlands, we now have greater pricing flexibility
because on January 31, 2003 we became exempt from pricing regulations
imposed by local municipalities on our basic level of cable television
services. We intend to add programs in order to generate higher
monthly subscription fees for our basic cable television product. We
will also focus on increasing the efficiency of our existing
operations. In the Netherlands, where broadband services have been
offered for a longer period of time and have achieved greater customer
acceptance, we intend to continue to build-out our networks to new
areas and to enhance our network to permit us to deliver more products
and services.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | Expand and promote our broadband service offering.We intend
to generate increased revenue by aggressively marketing our
broadband Internet access products and our digital television
products in both Germany and in The Netherlands. We will seek to
identify opportunities to enhance and re-price our broadband
products in order to reach a larger customer base. We will examine
the possibility of bundling video, data and voice products into one
offering as a means of increasing sales. We are aggressively
pursuing opportunities to supply our digital services to other cable
operators.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Launch new services over existing cable infrastructure.In
September 2002, our Dutch operations finalized its technical pilot
and started rolling out a hybrid IP/PSTN (Internet Protocol/Public
Switched Telephone Network) based telephony product. Starting April
2003, this service will be rolled out city-by-city, primarily
bundled with our broadband Internet access product.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  |  | Strengthen customer orientation.We believe that customer
orientation is important to our business in two ways: maintaining or
developing direct customer service, billing and marketing
relationships with the subscribers of our cable and broadband
services will enhance our ability to sell additional products and
services and generate incremental revenue. On the other hand, a
good and trustful relation with the housing associations is
important to establish basic services and to implement new models
for the distribution of new products, such as internet or
video-on-demand. We will continue to use a regional operating
structure designed to generate a subscriber-focused business
orientation. Each of our operating regions is managed by a regional
manager who is responsible for both subscriber and technical
services and local ongoing relationships with housing associations.
We believe that this regional operating structure enables us to be
more responsive to subscriber needs and to maintain strong
relationships with the housing associations and our subscribers.
This structure is complemented by a corporate sales office which
addresses the needs of our national accounts and which frequently
benchmarks sales results in all regions.
|
| |  |  | Increase revenues by increasing programming available to our
subscribers over our cable networks.We plan to generate additional
carriage fee revenues by entering into agreements with certain
programming providers who will pay us carriage fees for making their
programming available to our subscribers.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  |  | Improve efficiency and margins by streamlining operations.
We believe clustering strategy has produced and will continue to
produce efficiencies and synergies between our existing networks and
acquired cable networks. In accordance with our past practice, upon
completion of future acquisitions or asset swaps we will generally
implement extensive operational and organizational changes designed
to enhance operating cash flow and operating margins.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | Increase network ownership and reduce signal delivery fees.
In Germany, we continue to rely on Kabel Deutschland and successor
private operators to deliver programming signal to our cable
networks serving approximately 50% of our subscribers. We intend to
continue to reduce our dependence on Kabel Deutschland and successor
private operators by continuing to construct our own head-ends and
infrastructure where appropriate. We believe that selectively
installing our own head-ends and related infrastructure will reduce
our signal delivery fees and have a positive effect on our operating
results and quality of service.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Focus on attracting new subscribers.We have selectively
passed new homes and interconnected our various systems in and
around cities in Germany. The passing of these new homes may
provide us with opportunities to market our products and services
and then to connect new subscribers to our broadband network. We
also believe that this build-out and marketing strategy complements
our consolidation activities because smaller cable operators may not
have the technical or financial resources to compete in the broadband market and, as a result, may be
more inclined to cooperate with us.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | Extend the customer basis for new services.While we intend
to very selectively upgrade a portion of our German networks over
the next five years, we plan to bring our services to non-upgraded
homes. This may involve the implementation of a cable-independent
back channel (such as a telephone line), but in return will allow us
to capitalize on our experience regarding new services in areas
where the networks are fragmented.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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Our subscribers

We have subscribers in four primary operating regions in Germany and in
one operating region in The Netherlands. At December 31, 2002, we served our
subscribers in Germany from networks operated at level 2, level 3, level 4 (non
B-1), and level 4 (B-1) as well as from broadband networks. We served our
subscribers in The Netherlands almost exclusively from broadband networks. A
description of the levels referred to in the table below is set forth in the
section captioned Our NetworksGermany.

|                                     |                               |  |         |        |        |  |            |        |           |  |                 |        |       |  |          |         |  |  |         |   |  |  |           |         | 
|------------------------------------ | ----------------------------- |  | ------- | ------ | ------ |  | ---------- | ------ | --------- |  | --------------- | ------ | ----- |  | -------- | ------- |  |  | ------- | - |  |  | --------- | ------- | 
|                                     |                               |  |         |        |        |  |            |        |           |  |                 |        |       |  | Sachsen/ |         |  |  |         |   |  |  |          
|                                     |                               |  |         |        |        |  | Osnabrück/ |        | Wiesbaden |  | Sachsen-Anhalt/ |        |       |  |          |         |  |  |        
|                                     |                               |  | Berlin  |        | Aachen |  | Mainz      |        | Thüringen |  | Multikabel      |        | Total
|                                     |                               |  |         |        |        |  |            |        |           |  |                 |        |      
|Cable networks (up to 450 MHz)       |                               |  |         |        |        |  |            |        |           |  |                 |        |       |  |          |         |  |  |         |   |  |  |           |        
|Cable Television homes passed        |                               |  | 234,028 |        |        |  | 280,859    |        |           |  | 347,992         |        |       |  | 547,055  |         |  |  |        |   |  |  | 1,409,934 |        
|Analog subscribers                   |                               |  |         |        |        |  |            |        |           |  |                 |        |       |  |          |         |  |  |         |   |  |  |           |        
|                                     | Level 2 subscribers           |  |         | 72,768 |        |  |            | 23,900 |           |  |                 | 63,678 |       |  |          | 212,750 |  |  |         |  |  |  |           | 373,096 | 
|                                     | Level 3 subscribers           |  |         | 32,942 |        |  |            | 15,921 |           |  |                 | 8,174  |       |  |          | 172,647 |  |  |         |  |  |  |           | 229,684 | 
|                                     | Level 4 subscribers (non B-1) |  |         | 88,898 |        |  |            | 8,003  |           |  |                 | 12,083 |       |  |          | 22,173  |  |  |         |  |  |  |           | 131,157 | 
|                                     | Level 4 subscribers (B-1)     |  |         |       |        |  |            | 90,311 |           |  |                 | 90,778 |       |  |          |        |  |  |         |  |  |  |           | 181,089 | 
|Broadband networks (862 MHz)         |                               |  |         |        |        |  |            |        |           |  |                 |        |       |  |          |         |  |  |         |   |  |  |           |        
|Homes passed by fiber                |                               |  |        |        |        |  |           |        |           |  | 3,494           |        |       |  | 233,130  |         |  |  | 331,400 |   |  |  | 568,024   |        
|Ready for service homes              |                               |  |        |        |        |  |           |        |           |  | 3,494           |        |       |  | 122,194  |         |  |  | 331,400 |   |  |  | 457,088   |        
|Analog television subscribers        |                               |  |        |        |        |  |           |        |           |  | 716             |        |       |  | 83,682   |         |  |  | 306,345 |   |  |  | 390,743   |        
|Digital television subscribers       |                               |  |        |        |        |  |           |        |           |  | 129             |        |       |  | 7,411    |         |  |  | 4,088   |   |  |  | 11,628    |        
|Internet subscribers                 |                               |  |        |        |        |  |           |        |           |  | 121             |        |       |  | 4,507    |         |  |  | 48,917  |   |  |  | 53,545    |        
|Data communication subscribers       |                               |  |        |        |        |  |           |        |           |  |                |        |       |  |         |         |  |  | 832     |   |  |  | 832       |        
|Total revenue generating
subscribers |                               |  | 194,608 |        |        |  | 138,135    |        |           |  | 175,679         |        |       |  | 503,170  |         |  |  | 360,182 |   |  |  | 1,371,774 |        

Germany. We serve our subscribers primarily under long-term public
concession agreements with local governmental authorities and under private
concession agreements with housing associations that administer large housing
blocks. Many of our private concession agreements with housing associations
provide that we are the exclusive provider of cable services in the concession
area. We have direct billing and servicing relationships with approximately
83%, of our subscribers. We have indirect billing and servicing relationships
with approximately 17%, of our subscribers, whereby governmental authorities
and housing associations receive broadcasting signal from us and are
responsible for billing and collecting subscription fees. Most of our indirect
billing relationships are with recently acquired subscribers and we intend to
establish direct relationships with these subscribers in the future.

The Netherlands. Our Dutch subscribers reside in approximately 40
municipalities across the province of Noord-Holland, which is located in the
northwest region of The Netherlands and north of Amsterdam. We provide our
services under operating agreements with local municipalities. In accordance
with Dutch regulation, these contracts may not designate us as the exclusive
provider of cable services in these regions. We believe, however, that we are
the sole cable operator in each of the local neighborhoods in which we conduct
business. We maintain direct servicing relationships with all of our cable
subscribers in The Netherlands. We outsource billing of our analog cable
services to local energy companies. The billing of our digital and Internet
services is handled directly by us. We also manage the billing internally for
our business product offerings like data communications (leased lines),
Kennisnet and Broadband Office (Internet for B2B).

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Our networks

Germany

As described below, we operate a combination of level 2, level 3, level 4
(non B-1) and level 4 (B-1) cable networks, as well as broadband networks in
Germany. We intend to upgrade a portion of our cable networks to broadband
networks over the next five years.

Cable Television networks. Deutsche Telekoms historic monopoly position
in the German cable industry and the fact they only constructed networks to the
outside of a subscribers home or apartment building most of the time, has
resulted in the development of a dual ownership network structure serving cable
subscribers, whereby Kabel Deutschland typically owns the network from the
head-end to the subscriber connection point and private operators typically own
the in-house cabling. This dual ownership structure is distinct from the
single ownership cable structure prevalent in the United States and in most
European Union countries, in which private operators own the network in its
entirety, from the head-end to the in-house cabling. Cable networks in Germany
are therefore divided into categories, referred to as levels, depending on the
function the cable network has in the delivery of cable services to
subscribers.

(CABLE NETWORK GRAPHIC)

Level 4 networks. A network where the cable operators role is limited to
extending the cable network from the end of Deutsche Telekoms principal
transmission line (or that of a private cable operator who has purchased a
Deutsche Telekom operating company) at the front door of the home to the
subscriber is known as a level 4 network. In a level 4 network, the operators
role is limited to concluding and renewing subscription agreements, installing
the wiring in the home, billing, collecting and servicing subscribers. Level 4
networks are the result of the exercise by Deutsche Telekom of its historical
right of first refusal with respect to a coverage area. In these coverage
areas, Kabel Deutschland and successor private operators continue to own and
operate the head-end and the principal transmission lines. Cable network
operators are required to pay Kabel Deutschland a signal delivery fee pursuant
to agreements known as signal delivery contracts.

A variation in operating a level 4 network, which developed in the old
German states while Deutsche Telekom enjoyed its network monopoly prior to
August 1, 1996, is the so-called B-1 co-operation model. Because of its
monopoly position, Deutsche Telekom was able to grant exclusive licenses to
cable television operators in discrete geographic areas, which enabled those
operators to operate a level 4 network. Under the terms of these exclusive
licenses and based on the size of the geographic area covered by the license,
the cable operator committed itself to enrolling a pre-determined number of
subscribers. Licensing fees owed to Deutsche Telekom were typically calculated
on the basis of this pre-determined number of subscribers, whether or not the
cable operator actually succeeded in enrolling the subscribers.

Level 3 networks. A network where the cable network operator has entered
into a signal delivery contract with Kabel Deutschland and successor private
operators in lieu of owning and operating its own head-end is known as a level
3 network. In addition to performing the tasks of an operator under a level 4
agreement, the operator is responsible for delivering a signal from the
connection point of Kabel Deutschlands or successor private operators
networks to the front-door of the subscriber. In a level 3 network, cable network
operators are required to pay Kabel Deutschland and successor private operators
a fee for access to its network or for signal delivery.

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Level 2 networks. A network where the cable network operator owns and
operates the entire cable network, from the head-end to the in-house
connection, is known as a level 2 network. Level 2 networks are like the
networks operated by cable network operators in the United States and the
United Kingdom. Under a level 2 network, cable network operators do not pay
signal delivery fees to Kabel Deutschland and successor private operators, but
receive programming using terrestrial antennas and satellite dishes in their
own head-ends.

Substantially all of our cable television networks are capable of
distributing more than 40 channels and are constructed using star architecture.
Our cable television networks in Germany have the following technical
characteristics:



| |  |  | television signal is received by a Deutsche Telekom connection
point or the connection point of a private cable operator (level 3
and 4 networks) or by terrestrial antennae or satellite receivers at
one of our head-ends (level 2 networks);
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | received signal is delivered to the home through coaxial cable using bandwidths of up to 450 MHz; and                                                                                                                                          
|
| |  |  | transmitting of signal is one-way for our analog cable subscribers.                                                                                                                                                                            

Broadband networks. We believe we were the first operator in Germany to
begin upgrading its cable television networks to broadband networks and we are
one of the largest cable operators of broadband networks in Germany. We pass
approximately 1,409,000 homes and have upgraded approximately 125,000 homes in
the city of Mainz and the Sachsen/Sachsen-Anhalt/Thüringen region. We intend
to continue to upgrade selected portions of our German networks over the next
five years and to focus our upgrading activity on regions with higher
subscriber density.

Our broadband networks are 862 MHz two-way, high-speed networks capable of
delivering analog and digital cable television, telecommunications and
high-speed Internet and data services, including interactive services. The
following diagram summarizes the technical characteristics of our broadband
network.

(CABLE NETWORK GRAPHIC)

Our upgraded network in the city of Leipzig and other portions of the
Sachsen/Sachsen-Anhalt/Thüringen region are the model for our continuing
network upgrades with the exception of the digital playout facilities. We
intend to use the existing digital playout facilities and Internet servers
located at the Leipzig head-end to support Internet services, the tiering of
digital channels and pay-per-view services not only in the city of Mainz and
the Sachsen/Sachsen-Anhalt/Thüringen region but also in other regions in which we upgrade our
networks. Ultimately, we intend to install the necessary equipment at the
Leipzig head-end to support our future telephone offering. Our

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fiber backbone consists of a main ring that connects the upgraded cities and larger city-parts
to the master headend, and of smaller fiber structures that bring fiber from
the main ring to the fiber node areas that typically serve between 500 and 1000
homes. As we continue to add more of these fiber structures, the fiber optic
matrix will cover increasingly more portions of the city inside the main fiber
loop.

Fiber nodes are located at various points within this fiber optic matrix.
Each fiber node contains an optical receiver and transmitter where the optical
signal received from the head-end is converted to an electrical signal which is
transmitted over coaxial cable to the home and where electrical signal received
by coaxial cable from the home is converted to an optic signal and sent to the
head-end. Coaxial cables run from the nodes to the wall outlets of homes.
Each fiber node serves between 500 and 1,000 subscribers. Our digital set-top
boxes, provided by Galaxis Technology AG, enable subscribers to receive digital
television and high-speed Internet services. Subscribers who do not have a
digital set-top box but purchase high-speed Internet services will use a
stand-alone cable modem. The network provides a 65 MHz return path.

In those portions of a city where we do not have existing coaxial cable,
we lay coaxial cable from the fiber nodes to the homes of new subscribers.
Within the coaxial network, we have either replaced (in those cases where we
had existing coaxial networks) or installed (in those cases where we built new
coaxial networks) new electronic equipment that increases the total bandwidth
of the network to 862 MHz and allows for signals to be sent in from the
subscriber to the head-end in the return path that uses the bandwidth up to 65
MHz. As we continue our network upgrade, we intend to use the architecture
described above. As a result, there may be instances where our fiber optic
matrix covers portions of a city which are served by other cable operators and
where, prior to the upgrade, we did not pass any homes and did not have any
subscribers. We believe that passing these new homes will allow us to attract
new subscribers.

We believe that the clustering strategy which we have been pursuing will
also be beneficial in the context of our network upgrade as it will enable us
to achieve economies of scale. By focusing our upgrade on our most densely
populated clusters of network subscribers, we expect to minimize upgrade costs
per home. For example, we expect that the digital playout facilities and
Internet servers in Leipzig will serve the other regions we are planning to
upgrade, thereby reducing capital expenditure requirements in those regions.
We further believe our upgrade plans in Germany will reduce our dependence on
Kabel Deutschland or successor private network operators who have recently
purchased cable assets from Deutsche Telekom, for signal delivery. We believe
that reducing our signal delivery fees will have a positive effect on our
operating results and that greater control of our network will have a positive
effect on our programming flexibility, our quality of service, and our
penetration among broadband subscribers

The Netherlands

Substantially all of our network in The Netherlands is a fully upgraded,
two-way broadband network capable of delivering a full range of broadband
services including interactive digital television, high-speed Internet access
and telecommunications services. Approximately 9,000 of our 331,400 network
homes and approximately 8,000 subscribers are located in three geographic areas
that are not contiguous to the rest of our network and that have not been
upgraded. These homes receive programming signal from third-party head-ends
and we intend either sell these non-upgraded network homes over time or upgrade
them when commercially feasible. Our networks in The Netherlands serve
communities in the province of Noord Holland in the northwestern part of the
country, including the business areas surrounding Schiphol airport but not
including the main cities of Amsterdam, The Hague, Utrecht, Rotterdam or
Eindhoven. Unlike in Germany, where the ownership of cable networks is
frequently divided between Deutsche Telekom and private operators, networks in
The Netherlands are typically owned in their entirety by network operators. We
own substantially all of our distribution system from the head-end to the home
connection point available to our subscribers, with the exception of
approximately 92 kilometers of fiber optic cabling that we lease. Our network
in The Netherlands has the following characteristics:



| |  |  | A regional head-end located in Alkmaar receives television and
radio signal, converts this signal to optical signal and transmits it
to the fiber optic backbone.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |  |  | A fiber optic backbone, which passes the network region with
1,200 km of 862 MHz fiber optic cabling, transmits optical signal to
38 fiber hubs and 586 fiber nodes.                                 
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Fiber nodes convert optical signal to electrical signal of up
to 862 MHz and distribute this signal via coaxial cable to subscriber
homes.                                                           
|
| |  |  | Modems or media terminal adaptors and set-top boxes are located
on our subscribers homes premises, if the subscriber wishes to
receive high-speed Internet access, telephony or digital programming.

The fiber nodes receive additional local radio and television channels,
supplementing signal received from the head-end. Our set-top boxes, provided
by Sagem SA, enable subscribers to receive digital television. High-speed
Internet services are delivered to subscribers in cooperation with Multikabels
Internet service subsidiary using a Docsis IP cable modem system. Most of our
network in The Netherlands has a 60 MHz return path, with the exception of the
Communikabel region, which has a 65 MHz return path. Telecommunications
services are provided to business customers using our SDH and Ethernet-protocol
network. We intend to pass additional homes in our existing regions over time.
We recently completed installation of an uninterruptible power supply system
to support the future development of telephony services, which we intend to
commercially launch in the spring of 2003.

Programming and product offerings

Germany

Basic cable television. We offer two primary packages of basic cable
television programming services: a ground package and a standard package. The
ground package consists generally of network and public terrestrial television
signal available over the air in the concession area, and typically includes
between three and eight channels, depending on the service area. The standard
package consists primarily of satellite-delivered programming, and includes an
average of 32 television channels and 29 radio channels and a digital offer of
ARD/ZDF/Premiere, depending on the service area. Additionally, in some
markets, we offer either one or two additional packages of basic cable
television programming service. Approximately 95% of our subscribers subscribe
to at least the standard package of service.

The following sets forth the programming of nationwide channels typically
offered in our standard analog package, with exceptions depending on the
service area.

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|                     |  |                                         |  |                  |  |                                        
|-------------------- |  | --------------------------------------- |  | ---------------- |  | ---------------------------------------
|Channel              |  | Description                             |  | Channel          |  | Description                            
|                     |  |                                         |  |                  |  |                                        
|3Sat                 |  | ADR/ZDF, ORF and SRG news and
sports    |  | Onyx-tv          |  | Music and entertainment                
|ARD                  |  | General interest                        |  | ORB              |  | Regional news, sports
and entertainment
|ARD/ZDF digital      |  | General interest and entertainment      |  | Phoenix          |  | Documentary and
political events       
|ARTE                 |  | Cultural arts                           |  | Premiere Digital |  | Pay TV                                 
|Bayern 3             |  | Regional news, sports and
entertainment |  | Pro Sieben       |  | News and entertainment                 
|BR-Alpha             |  | Cultural and educational
programming    |  | QVC German       |  | Teleshopping                           
|DSF                  |  | German sports                           |  | Regional B1      |  | Regional news                          
|DW-Tv                |  | German programming broadcast
abroad     |  | RTL              |  | 24-hour entertainment                  
|Eurosport            |  | European sports                         |  | RTL 2            |  | Entertainment for young
people         
|Home Shopping Europe |  | Teleshopping                            |  | SAT 1            |  | 24-hour entertainment                  
|HR 3                 |  | Regional news, sports and
entertainment |  | Super RTL        |  | Entertainment                          
|Kabel 1              |  | Entertainment and movies                |  | SWR              |  | Regional news, sports
and entertainment
|Kika                 |  | Programming for children                |  | Tele 5           |  | Entertainment                          
|MDR 3                |  | Regional news, sports and
entertainment |  | Viva             |  | 24-hour music television               
|MTV                  |  | Music videos                            |  | Viva 2           |  | 24-hour music television               
|MTV2                 |  | Music videos                            |  | Vox              |  | News and entertainment                 
|n-tv                 |  | News and information                    |  | WDR              |  | Regional news, sports
and entertainment
|Nord 3               |  | Regional news, sport and
entertainment  |  | ZDF              |  | General interest                       
|News and information |  | News and information                    |  |                  |  |                                        

We receive our programming either directly from broadcasters via our own
head-end or indirectly from broadcasters through signal delivery contracts with
Kabel Deutschland and successor private operators. Approximately 50% of our
television subscribers are served by networks that obtain their programming
directly from broadcasters via our head-ends and approximately 50% of our
television subscribers are served by networks that obtain their programming
indirectly via Kabel Deutschland and successor private operators.

Current broadband product offering. We currently offer the following
broadband service to subscribers in Leipzig and other portions of the
Sachsen/Sachsen-Anhalt/Thüringen region that are connected to our upgraded
networks:

Current broadband product offering  Digital television. We believe we
were the first German cable operator to offer digital services to our
subscribers. We launched our digital television services in the city of Leipzig
in October and November of 2000. As of December 31, 2002, our digital offering
was available to approximately 125,000 homes which serve approximately 84,000
analog television subscribers, and approximately 7,500 digital set-top boxes
had been installed in subscriber homes and were paying customers. We intend to
continually expand and improve the range of channels included in our digital
television offering.

Our primatv digital offering is currently comprised of 43 television plus
24 radio channels channels in digital format and eight different packages with
additional digital channels as follows:

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|              |  |                  |  |                 |  |                  
|------------- |  | ---------------- |  | --------------- |  | -----------------
|primatv Basis |  | ARD              |  | ZDF             |  | Single TV        
|              |  | ARD Online Kanal |  | ZDFdokukanal    |  | CNN              
|              |  | SFB1             |  | ZDFinfokanal    |  | Deutsche Welle   
|              |  | Bayerisches FS   |  | ZDFtheaterkanal |  | Home Shopping    
|              |  | BR-alpha         |  | EuroNews        |  | Europe           
|              |  | EinsExtra        |  | Eurosport       |  | Sachsen Fernsehen
|              |  | EinsMuXx         |  | CNBC            |  | MTV              
|              |  | EinsFestival     |  | 3sat            |  | MTV2 POP         
|              |  | hessen fernsehen |  | arte            |  | n-tv             
|              |  | MDR Fernsehen    |  | Kinderkanal     |  | Onyx             
|              |  | NDR Fernsehen    |  | Phoenix         |  | QVC              
|              |  | ORB-Fernsehen    |  |                 |  | Tele 5           
|              |  | SR Fernsehen     |  |                 |  | TV5              
|              |  | Südwest BW       |  |                 |  | TW1              
|              |  | Südwest RP       |  |                 |  | Viva             
|              |  | WDR Fernsehen    |  |                 |  | Viva plus        

|                   |  |                 |  |                                                 
|------------------ |  | --------------- |  | ------------------------------------------------
|primatv Maxi*:     |  | primatv Family* |  | 13TH STREET, STUDIO UNIVERSAL; Club and BBC     
|                   |  | Prime           |  |                                                 
|                   |  | primatv Life*   |  | Extreme Sports, Fashion TV, Alice and MCM       
|                   |  | primatv Wissen* |  | Avante, BBC World, BahnTV and PLANET            
|                   |  | primatv Erotik  |  | The Adult Channel                               
|additional offers: |  | MTV-Paket       |  | MTV 2, MTV base, MTVhits!, VH-1 and VH-1 Classic
|                   |  | GoldStar Extra  |  | GoldStar TV and Heimatkanal                     
|                   |  | Bibel TV        |  | Bibel TV                                        
|                   |  | Other channels  |  | ORT International (Russian) and VTV4 (vietn.)   

*     Subscribers can subscribe to these four packages for a combined price
which is generally lower than the sum of the individual prices.

The basic offering primatv Basis is currently priced at a promotional
monthly subscription rate. Set-top box rental is included in the monthly
subscription fee and a one-time installation fee is charged only in the event
our service team installs the set-top box. primatv Basis contains non-crypted
digital channels. Access to these channels is available on every compatible
set-top-box. We rent a set-top box for a monthly fee. Customers can also
subscribe to primatv Maxi (including primatv Wissen, primatv Life, primatv
Family and primatv Erotik) for a package discount, two packages as offered by
MTV and GoldStar Extra and several stand-alone-channels (BibelTV,
ORT International, VTV4). As we introduce expanded and improved programming and
as penetration of our digital package service increases, we expect to target
selective rate increases for our digital offering. Customers using a set-top
box also have access to our electronic program guide.

Current broadband product offeringPay-per-view. Digital subscribers also
have access to up to 15 pay-per-view channels. The movies can be ordered by
subscribers using their remote control.

Current broadband product offeringprimaspeed Internet access. We launched
high-speed Internet services to both residential and business subscribers in
the fourth quarter of 1999. At December 31, 2002, we provided high-speed
Internet service to 4,628 subscriber. In November 2002 we relaunched the
Internet services under the new product name primaspeed, which integrated the
Internet service into the common primacom product names. Also in November we
introduced a new tarif, primaspeed start. Our high-speed Internet offering
includes the following broadband products:



| |  |  | Primaspeed Start.This package offers subscribers 24-hour
high-speed Internet access at up to two times the speed of ISDN, or
128Kbps (64 Kbps upstream). Included in the monthly fee is a data
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | volume of 500 Mbyte and e-mail account services with full support
from our customer service team. The customer is able
to buy the cable modem from us or rent it for a monthly fee.
Subscribers may also access our Internet portal for broadband services,
such as game servers and additional value-added services. The customer
is charged for additional data volume.                                                                                                                                                                                                                     
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Primaspeed Easy. This package offers subscribers 24-hour
high-speed Internet access at up to four times the speed of ISDN, or
256 Kbps (128 Kbps upstream). Included in the monthly fee is a data
volume of 1,500 Mbyte, 10 MB web space and e-mail account services
with full support from our customer service team. The customer is
able to buy the cable modem from us or rent it for a monthly fee.
Subscribers may also access our Internet portal for broadband
services, such as game servers and additional value-added services.
The customer is charged for additional data volume.
|
| |  |  | Primaspeed Pro. This package offers subscribers 24-hour
high-speed Internet access at up to 16 times the speed of ISDN, or
1,024 Kbps (256 Kbps upstream), for a fixed monthly fee. Included in
the monthly fee is a data volume of maximum 10,000 Mbyte, 10 MB web
space and e-mail account services with full support from our customer
service team. The customer is able to buy the cable modem from us or
rent it for a monthly fee. Subscribers may also access our Internet
portal for broadband services, such as game servers and additional
value-added services.                   
|
| |  |  | Unified messaging service. All packages include our Unified
Messaging Service. With this service, subscribers have access via the
Internet to their e-mail account. Via the Internet subscribers will
also be able to send SMS text messages to German mobile phones.
Subscribers are also able to store contacts in the online
contact-database and use the personal calendar.                                                                                                                                                                                                               

Current broadband product offeringData communications.We currently offer
and intend to further promote fixed data communications products to business
subscribers. These products take advantage of the fiber-rich, upgraded portions
of our network to offer leased lines and wholesale carrier services.

Interactive pay-per-view.We plan to offer email services on our
set-top-boxes in the future.

Future broadband product offerings.We intend to expand our existing
broadband product offering to include a range of additional broadband services.
Our planned offering of additional broadband products includes the following
primary services:



| |  |  | Video-on-demand.We intend to develop and introduce a range of
video-on-demand services to complement our existing Near Video on
Demand (pay-per-view offering). We expect to develop this offering
in cooperation with third-party providers of programming and
technology, and we intend to introduce these services to our
subscribers over the next two years.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Netherlands

Current broadband product offeringAnalog Television.Our analog
television offering includes two packages of television programming: a basic
package and a standard package. The basic package consists of 15 television
and 40 radio channels. The standard package consists of 38 television and 40
radio channels. Both packages carry a one-time installation fee. Almost all
of our analog subscribers purchase the standard package.

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The standard packages include the following channels, with exceptions in
some municipalities.

|                         |  |                               |  |                          |  |                            
|------------------------ |  | ----------------------------- |  | ------------------------ |  | ---------------------------
|Channel                  |  | Description                   |  | Channel                  |  | Description                
|                         |  |                               |  |                          |  |                            
|Nederland 1              |  | General Interest              |  | Regionet/ljmond TV       |  | General Interest (Regional)
|Nederland 2              |  | General Interest              |  | ZDF                      |  | General Interest (Germany) 
|Nederland 3              |  | General Interest              |  | WDR                      |  | General Interest (Germany) 
|Beeldmozaïek             |  | Overview of channel offerings |  | BBC 2                    |  | General Interest (UK)      
|Lokale
omroep/kabelkrant |  | Local cable channel           |  | RTL Television           |  | General Interest           
|VRT TV1                  |  | General Interest (Belgium)    |  | TCM                      |  | Classic Movies             
|Ketnet/Canvas            |  | General Interest (Belgium)    |  | TV Noord-Holland         |  | Local programming          
|ARD                      |  | General Interest (Germany)    |  | Phoenix/CNE              |  | Chinese channel            
|BBC 1                    |  | General Interest (UK)         |  | TMF                      |  | Music videos               
|TV5                      |  | General Interest (France)     |  | CNBC/Nat. Geographic     |  | News/Documentary           
|RAI Uno                  |  | General Interest (Italy)      |  | Eurosport                |  | Sports                     
|TVE                      |  | General Interest (Spain)      |  | Euronews                 |  | News                       
|TRT                      |  | Turkish channel               |  | Cartoon Network          |  | Children/General interest  
|MBC                      |  | Arabic channel                |  | Discovery Channel        |  | Documentary                
|RTL4                     |  | General Interest              |  | MTV Europe               |  | Music Videos               
|RTL 5 Nieuws & Weer      |  | News & Weather                |  | The Box                  |  | Music Videos               
|SBS 6                    |  | General Interest              |  | CNN                      |  | International News         
|                         |  |                               |  | BBC World                |  | International News         
|                         |  |                               |  | TFI                      |  | General Interest (France)  
|Yorin                    |  | General Interest              |  | Abonnee t.v. (Canal +1)  |  | Pay-per-view service       
|V8                       |  | General Interest              |  | Abonnee t.v. (Canal +2)  |  | Pay-per-view service       
|Kindernet/Net 5          |  | Children                      |  | Videorecorder-afstelling |  | Video outlet               
|Kabelkrant Nieuws TV     |  | News /Local                   |  | Decoderuitgang Canal+    |  | Pay-per-view service       

Current broadband product offering  Digital Television. We launched our
digital television product under the brand name Mr. Zap in May 2000. The
digital television product is widely available, and we provided digital service
to 4,088 subscribers as of December 31, 2002. We offer our digital television
product in cooperation with Mediakabel, a joint venture established by seven
Dutch cable operators, including us, for the purpose of introducing interactive
digital television to the Dutch cable market.

Due to the weaker performance than expected we have designed the digital
television package in 2002. We no longer provide a pay-per-view/ near
video-on-demand services and also stopped providing interactive games. We
currently only have a basic digital package and some special interest channels,
summarized as follows:

Basic Digital Package.

|                             |  |                                         
|---------------------------- |  | ----------------------------------------
|Adventure 1                  |  | Mezzo                                   
|Avante                       |  | Music Choice (40 digital music channels)
|BBC Prime                    |  | Nederland 1                             
|Bloomberg                    |  | Nederland 2                             
|Cartoon Network              |  | Nederland 3                             
|Club                         |  | Performance                             
|CNBC                         |  | Playboy/Adult Channel                   
|Discovery Civilization       |  | Private Blue                            
|Discovery Sci Trek           |  | Private Gold                            
|Discovery Travel & Adventure |  | Reality TV                              
|Eurosport News               |  | Sky news                                
|Extreme Sport                |  | Travel Channel                          
|Fashion TV                   |  | VH1                                     
|Hallmark                     |  |                                         

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| |  |  | Premium and special interest channels:
| | - |  | --------------------------------------

In addition to the basic digital package subscribers may purchase the
following premium and special interest channels:

|                 |  |                      
|---------------- |  | ---------------------
|CineNova         |  | Movie channel        
|Set Asia/ Zee TV |  | Hindustani television
|TVBS-E           |  | Chinese television   

Internet access. 48,367 residential subscribers and 550 business
subscribers receive always-on, high-speed Internet services as of December 31,
2002, as compared to 27,687 residential subscribers as of December 31, 2001.
We offer the following packages to our residential subscribers:



| |  |  | Easy package: Our always-on access, with speed of 64
Kbps downstream and 32 Kbps upstream, one e-mail account, with
limited data download capacity.                                                                                                                         
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Family package(introduced as of January 1, 2003): This
product provides Internet access speeds of 256 Kbps downstream and
128 Kbps upstream, e-mail services with also limited data download
capacity.                                                                        
|
| |  |  | Power package.This product provides Internet access
speeds of at least 768 Kbps downstream and 128 Kbps upstream.
Subscribers also benefit from unlimited download capacity
(applying an acceptable use policy), e-mail services, and
homepage capability with 15 Mb capacity.



| |  |  | Power Plus package.This product provides Internet
access speeds of at least 1.536 Kbps downstream and 256 Kbps
upstream. Subscribers also benefit from unlimited download
capacity (applying an acceptable use policy), e-mail services, a
home capability with 20 MB capacity and possibility of connecting
several personal computers.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Our packages for the business market are:



| |  |  | Broadband Office regular. This product provides Internet
access speeds of at least 768 Kbps downstream and 128 Kbps upstream
fixed IP-address, e-mail services, possibilities for connecting web
and e-mail server. 
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Broadband Office Premium. This product provides Internet
access speeds of at least 1536 Kbps downstream and 256 Kbps upstream
fixed IP-address, e-mail services, possibilities for connecting web
and e-mail server.

Data communications. We offer the following data communications products
to business subscribers:



| |  |  | CableLink.This service uses existing cable connections for
datacommunications with a choice of between 256 to 512 Kbps at a
fixed monthly price depending on the chosen speed and the distance
between the locations of the subscribers. This service provides the
security of a virtual private network.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | QualityLink.This service provides a dedicated fiber
connection for data communications at a fixed monthly price depending
on whether subscribers elect to receive speeds of 2, 10, 34, 155 or
622 Mbps.                                                                                                  
|
| |  |  | Internet Link. This service provides a dedicated fiber
connection to the Internet at a fixed monthly price depending on the
elected speed levels between 265 Kbps and STM 1 (140 Mbps).                                                                                                                  

Kennisnet intranet service. As of December 31, 2002, we connected 611
Dutch schools and educational institutions, libraries and museums to our
intranet service by linking our networks with other cable operators as compared
to 580 as of December 31, 2001. This intranet project provides such
institutions with network access and

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access to the Internet through an organization called Educatief Net B.V., or nl.tree, which is a joint venture of
several cable operators. nl.tree has obtained a contract from the Dutch
government covering the period until January 2004.

Future (broadband) product offerings. In the past we provided cable
telephony services on a pilot basis to approximately 50-100 subscribers in a
small area in the municipality of Den Helder. We stopped this pilot program in
2002. We are currently focusing on rolling out a hybrid IP/PSTN based telephony
service on a commercial basis during the remainder of 2003. The results of our
soft launch (as of October 2002) look promising, as we had 157 subscriber at
December 31, 2002. We expect that our telephony offering will include, apart
from the basic service, local, long distance and international calls,
voicemail, call identification, call waiting, call barring, call diversion and
three-way calling.

Sales, marketing and customer service

Germany

Our sales and customer service function is organized regionally in
Germany. We employ account managers to originate and service large account
relationships with housing associations and local governmental authorities. In
addition, we conduct direct sales at the individual subscriber level via
telesales and door-to-door sales. We employ sales representatives both directly
and as agents, some of which are housing associations. We maintain centralized
customer call centers in each of our operating regions, which enable us to
cost-effectively service a large number of subscribers in each regional
cluster. Customer call centers are available to handle new account and service
requests. We employ network operations staff and field technicians in each
region to handle new subscriber installations and service interruptions.
Moreover, we have installed a corporate sales unit which manages key accounts
on a national level, maintains relations to national associations of housing
corporations, real estate agents and benchmarks our regional sales offices.

The Netherlands

Members of our sales and marketing staff focus on a specific product
offering, such as our analog television offering and our digital offering, our
Internet and telephony products, our data communications product or our
Kennisnet intranet offering. This group works with product development and
technical staff to continuously improve the key features of our product
offering and to determine pricing strategies. Our marketing program includes
the following primary features:



| |  |  | Zo! Magazine: This quarterly publication is provided to all
residential subscribers and contains general news about Multikabel
and about new product offerings. New subscribers also receive a
welcome package outlining the full range of products available to
subscribers.    
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Datacom Magazine: Publication for our existing and potential
business customers, focusing on our leased line products offerings
and Internet products for the business market.                                                                                                   
|
| |  |  | MultiView channel: This television channel is included in all
our channel offerings and broadcasts the full range of products
available to our subscribers at all times.                                                                                                         
|
| |  |  | Multikabel website: Our local (Dutch) website also outlines our
product offerings and the possibility to our subscribers to purchase
our products on-line.                                                                                                                       
|
| |  |  | Direct mail and advertising: We have conducted targeted direct
mail and advertising campaigns specifically promoting our analog and
digital television offerings, our Internet and telephony offerings
and our data communications and Internet products for the business
market.
|
| |  |  | Outbound sales calls for both digital television and Internet.                                                                                                                                                                                                                   
|
| |  |  | Specific marketing campaigns such as member-gets-member offerings, introduction discounts.                                                                                                                                                                                       
|
| |  |  | Product bundling especially Internet and digital television, as well as Internet and telephony.                                                                                                                                                                                  

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Our customer call center, including the helpdesk, is open from 9:00 a.m.
to 9:00 p.m. on weekdays and from 10:00 a.m. to 5:00 p.m. on weekends to assist
subscribers with inquiries such as new services and billing-related inquiries,
and detailed questions about services offered for analog and digital
television, Internet and telephony. In addition, our customer call center cooperates with third-party call
centers to offer 24-hour assistance with service interruptions. We employ a
team of full-time service technicians, and also contract with third-party
technicians. In The Netherlands we are fully responsible for our own marketing
campaigns after the QuickNet acquisitions and the termination of the Sonera
contract for Internet and after taking over all customer services and marketing
activities from Mediakabel.

Our billing function for the analogue audio/video services is outsourced
to local utility companies. The billing for Internet services and telephony is
to a great extent an in-house service, although collection efforts and
mediation (telephony) are outsourced. Billing and collection efforts for the
business offerings and digital television are carried out by the company
itself.

Material contracts

Germany

Copyright royalties for television programming transmitted over our cable
television networks.Until 1998, we were able to receive our analog
programming, whether directly or indirectly, at no charge from the broadcaster
and without any formal agreement or contract with the broadcasters. The
applicable provisions of the German Copyright Act (Urheberrechtsgesetz)
regarding retransmission of programming were amended in 1998 to implement the
EC Directive on Cable and Satellite Broadcasting. This law provides for a
so-called compulsory license, which requires the broadcasters to permit cable
and broadband network operators to retransmit programming in return for payment
of a reasonable fee.

In 1998, the German Copyright Act was amended to require the payment of
copyright royalties for the retransmission of copyright-protected television
and radio programming by cable and broadband operators. The German Copyright
Act does not set forth the amount to be paid. GEMA, one of the German copyright
collecting societies, has been mandated by the other German copyright
collecting societies to collect these retransmission royalties. GEMA has
publicly announced its intention to collect royalty fees for television and
radio signal received terrestrially by cable and broadband operators
retroactively to July 1, 1997. We have been informed that the license fee for
terrestrial retransmission will be assessed if such terrestrial broadcast is
received on the network operators own head-ends, but not, however, if it is
received via Kabel Deutschland signal delivery points, in which case GEMA
considers the license fees payable by Kabel Deutschland to cover all
retransmission of copyright-protected programming.

In 1999, GEMA entered into a framework agreement with the Association of
Private Cable Operators e.V., or ANGA, which, among other things, provides for
the collection of license fees retroactively to July 1997. We believe that
under the ANGA and GEMA framework agreement, GEMA is not yet collecting license
fees for retransmission of satellite broadcasting from private cable and
broadband operators, but may choose to do so in the future. Members of ANGA who
accept this framework agreement receive a 20% reduction in the announced
standard fees, resulting in a general license fee equal to 4% of the monthly
subscription fees received by private operators from subscribers served by
level 2 and 3 networks. Value-added taxes are also due on the general license
fee.

We are not a member of ANGA and are in the process of negotiating a
contract with GEMA regarding the payment of royalties for retransmission of
programming. Starting in January 2000, we initiated a rate increase to cover
the possible imposition of GEMA fees and began accruing for what we believe are
appropriate royalty fees we may have to pay to GEMA. Our ability to recover any
retroactive copyright royalty fee from subscribers cannot be assured because we
may be unable to pass on copyright royalties assessed for past periods. We do
not believe any retroactive payment of copyright royalty fees will be material.

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We have been informed that for a number of years Kabel Deutschland has
been paying copyright royalties to GEMA for the retransmission of
copyright-protected terrestrial broadcasting. Kabel Deutschland has advised us
that it believes payment of this royalty permits Kabel Deutschland to allow
private cable system operators connected to Kabel Deutschland signal delivery
points to retransmit copyright-protected terrestrial broadcasting on level 4
networks. Kabel Deutschland has indemnified us in some instances against claims
by the German copyright collecting societies for copyright royalties for level
4 network retransmission. The copyright royalty paid by Kabel Deutschland does
not, however, cover retransmission of copyright-protected programming on level
2 and level 3 networks. The signal delivery contracts between us and Kabel
Deutschland with respect to level 3 networks expressly provide that we will
indemnify Kabel Deutschland in case of claims against Kabel Deutschland for
breaches by us.

Signal delivery payments to the regional companies of Kabel Deutschland
and successor private operators for television programming transmitted over our
cable television networks.For our level 3 and level 4 networks, we entered
into signal delivery contracts with the regional companies of Kabel Deutschland
prior to the sale by Kabel Deutschland of some of its cable networks. Where
Kabel Deutschland has retained its network it remains our contract partner but
where it has sold networks, successor private cable operators have assumed the
obligations of Kabel Deutschland under the signal delivery contracts and have
become our contract partners under the same terms as those contained in the
original signal delivery contracts. At December 31, 2002, approximately 48.5%
of our television subscribers were served by level 3 and level 4 networks,
which receive programming pursuant to signal delivery contracts, 50.5% of our
customers were served by own head ends and 0.7% were served by third party
delivery. In Leipzig, also historically a level 3 network, we operate an own
interactive network, that provides our subscriber with an own digital package,
high-speed Internet and pay-per-view services. Galaxis waived our obligation to
purchase the remainder of the set-top boxes. We intend to continue to
consolidate connection points and build head-ends to reduce signal delivery
fees paid to the regional companies of Kabel Deutschland and successor private
operators and to reduce the dependency involved at the price and product
offering.

The terms of our signal delivery contracts vary. Most signal delivery
contracts are for a fixed period, usually five to ten, and are subject to
negotiated renewal. We typically pay Kabel Deutschland and successor private
operators either a flat fee or a fee per subscriber that is determined by
reference to a published fee schedule based on the number of homes connected to
one connection point. A number of signal delivery contracts provide for an
escalation of fees during the first three to five years (Bauzeitenregelung) to
ease our initial network development costs. The escalation clauses in the
majority of these contracts have been reached. Rate increases by the regional
companies of Kabel Deutschland and successor private operators permitted under
the fee escalation clauses in a number of these signal delivery contracts could
result in an increase in the aggregate amount of signal delivery fees we pay to
Kabel Deutschland and successor private operators. On November 11, 2002 Kabel
Deutschland revised their published fee charts and increased the fees
significantly. Due to general agreements with regional companies of Kabel
Deutschland we were able to lower the increase partially. As in the past, we
have been mostly able to increase the monthly subscription rates paid by our
subscribers following this increase in signal delivery fees by Kabel
Deutschland and successor private operators. We expect that the dependency of
signal delivery contracts and the payment of signal delivery fees can be
reduced significantly with a further expansion of the delivery via own head
ends or longer term contracts with signal delivery providers.

Contracts for digital television programming transmitted over our
broadband networks.We have entered into contracts with the majority of the
program providers with whom we are required to enter into contracts to obtain
programming for our digital television packages and we are negotiating with the
remainder. In general, the terms of these contracts are from two to five years
and can be automatically extended for additional one year periods. Ten of our
agreements provide for the payment of a fixed fee per subscriber per month.
Four of our agreements provides for a monthly payment of 40% to 60% of the
revenues we generate from the channels which are subject to the agreement.

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In the event we wish to terminate our relationship with these program
providers, most of our contracts provide for termination by us if



| |  |  | less than 30% of our subscribers are interested in
subscribing;                                                                                                                                                                                                                         
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | research conducted by us results in a finding that the
delivery of the channel does not meet market expectations;                                                                                                                                                                       
|
| |  |  | the content of the channel violates the statutory
requirements of the territory; or                                                                                                                                                                                                     
|
| |  |  | if the programmer breaches its obligations under the
agreement. In addition, we may terminate the agreements if the
programmer fails to deliver transmission during 15 minutes a day
for a total of 14 days during a 90 day period or if we are obliged
to do so by a governmental body.

The contracts generally provide that the programmer may terminate only for
an uncured breach of the terms of the contract and upon 30 days written notice
to us.

Contract for pay-per-view movies, sports and other events.We have
entered into contracts with program providers including Telepool Europaisches
Fernsehprogrammkontor GmbH, Helkon Media AG and Universal Studios International
B.V. for the pay-per-view movies and other events we offer our subscribers.
These contracts are generally for short periods or for specific events and have
standard terms. Most of our agreements provide for the payment of a flat fee
per program.

Contract for set-top boxes.On April 1, 2000, we entered into an
agreement with Galaxis Technology AG, or Galaxis, for the purchase of the
set-top boxes required for our digital television offering. Pursuant to this
agreement, we agreed to purchase up to 50,000 set-top boxes from Galaxis of
which 17,000 have been produced and 14,000 have been delivered. Galaxis waived
our obligation to purchase the remainder of the set-top-boxes. If we need
additional boxes we expect to enter into another agreement possibly with
Galaxis. We have not entered into any agreements with other set top box
manufacturers which require us to purchase a specific number of set top boxes.

Concession agreements with our subscribers.In order to be able to provide
service to our subscribers, we have entered into public concession agreements
with local governmental authorities and private concession agreements with
housing associations that administer large housing blocks. The agreements with
governmental authorities were entered into prior to the enactment of the German
Telecommunications Act of August 1, 1996. We are generally not obligated to
make payments to local governmental authorities for the use we make of public
rights-of-way to deliver our services. Under the German Telecommunications
Act, holders of category 3 telecommunications licenses (which includes
broadband network operators like us) have the right to use public rights-of-way
free of charge for telecommunications lines serving public purposes provided
that the use does not unduly restrict the primary use of the public spaces.
Local building permits are required before new telecommunications lines are
laid or existing telecommunications lines are changed. The German
Telecommunications Act established a number of obligations related to this
free-of-charge use of public-rights-of-ways. As a result, since August 1,
1996, it has no longer been necessary for us to enter into public concession
agreements to obtain rights-of-way on public grounds. Therefore we are in the
process to negotiate new public concession agreements with the local
governmental authorities coordinating the planning and construction of the
telecommunication lines with respect to the provisions of the German
Telecommunications Act. Otherwise we are terminating the extant public
concession agreement because of inoperativeness under the German
Telecommunications Act.

Private concession agreements with housing associations provide us with
access to potential subscribers living in the housing blocks administered by
these authorities and also frequently provide us with the right to use the
respective private property owned by the housing associations. Individual
private concession agreements typically provide access to a relatively small
number of homes. As of December 31, 2002, our cable networks operated

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pursuant to a few hundred public concession agreements with local governmental
authorities and more than 3,000 private concession agreements with housing
associations.

Our private concession agreements typically contain standard conditions,
such as conditions of service and limitations on commencement and completion of
construction. Additionally, most of our concession agreements contain
provisions that permit us to raise the prices for our existing level of cable
services with reference to general inflation indices and to raise prices to
cover increased costs of programming. By timing rate increases to published
cost of living increases or the introduction of new or improved programming, we
have generally been able to increase the rates for our cable services without
the objection of the relevant contracting party.

Many of our private concession agreements with housing associations
provide that we are the exclusive provider of cable services in the concession
area. Although we generally do not pay concession fees on any of our cable
networks, in some cases we pay housing associations for billing and collecting
subscription fees from homes within the applicable apartment blocks under agreements entered into prior to our
acquisition of the related cable systems. In some limited cases, housing
associations rather than the subscribers receive the broadcasting signal as
part of their agreements with us. In these cases, the housing associations pay
subscriber fees to us but are otherwise entirely responsible for the handling
of subscriber relationships.

The Netherlands

Analog programming.We are not currently required to pay programming fees
for the channels included in our basic and standard analog packages, except for
the Discovery channel and Eurosport. In some instances, we receive programming
fees from broadcasters to carry their programming on our networks. We pay
royalty fees to BUMA/SENA, the Dutch copyright collection agency, for the
retransmission of programming over our network in The Netherlands.

The agreement with Discovery was entered into on February 2002 and ends on
January 31, 2005, subject to earlier termination with three months notice.
The agreement with Eurosport was entered into on January 1, 2003 for and ends
January 1, 2005. Both agreements cover analog and digital delivery of
programming.

Digital programming. In March 2000, Multikabel acquired a 15.71% share in
Mediakabel B.V., a consortium established by a group of Dutch cable television
operators in 1997 for the purpose of developing and introducing digital
broadcasting services in The Netherlands. Mediakabel provides a full range of
operational services to the consortium, in exchange for which each member of
the consortium, including Multikabel, pays a fee to Mediakabel based on the
number of subscribers in its service area. All revenues from digital
broadcasting services are recognized directly by Multikabel and all programming
fees are paid directly by Multikabel. In May 2000, Multikabel launched digital
audio and video services through its participation in Mediakabel. The initial
agreement with Mediakabel does not provide us with programming contracts for
our digital television offering.

After a complete restructuring of the Mediakabel organization, Multikabel
is directly responsible for its digital programming. In 2002, we entered into
several contracts with Mediakabel for delivering digital TV-signal.

Multikabel entered into an agreement with BUMA regarding the royalty fees
for the retransmission of digital programs. The agreement term was from
January 1, 2000 until December 31, 2001. The parties have undertaken to
negotiate an amended agreement during 2002, pending with the terms of the prior
agreement will continue to apply.

We have entered into agreements with a number of program providers for our
digital television offering. These agreements are standard and provide for the
payment of a fixed fee per subscriber per month. Most of our agreements, with
the exception of our agreement for the CineNova channel described below, have
terms ranging from one to three years, many of which may be renewed at our
option.

In February 2000, we entered into a contract with Europe MovieCo Partners
Limited for the provision of the CineNova channel. The agreement provides for
payment by us of a fixed fee for 50,000 subscribers which will

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increase to cover all of our subscribers in The Netherlands by October 31, 2003, regardless
of the actual number of our subscribers which are purchasing the CineNova
channel. This agreement has a term of seven years unless earlier terminated or
extended. Either party may terminate the agreement if six months prior to the
end of the fifth year (October 31, 2005), the CineNova channel does not have at
least 100,000 subscribers in the relevant distribution areas. If six months
prior to the end of the fifth year, the Cinenova channel has between 100,000
and 185,000 subscribers, Movieco may provide us with a written early
termination notice, upon receipt of which we will enter into good faith
negotiations to reduce the participation levels for the remaining years under
the agreement.

Internet services.On July 1, 2001 we entered into an Operating Agreement
with Chello Broadband Nederland B.V. for the provision of Internet services
such as transit, e-mail and news services to our subscribers. This contract
terminated in July 2002.

In July 2002 we migrated all of our subscribers to our own Internet
platform. We purchased and entered into standard maintenance agreements for
hardware and software programs related to the ISP platform servers and support.

In addition as part of the development of our own Internet platform we
entered into standard transit and peering arrangements with the international
carriers Cable & Wireless and Sprint.

We signed a standard framework agreement with Motorola Broadband
Communications for the delivery of cable modems for Internet. The Planhold
Group B.V. contracted with us for the installation of Internet access at
customer premises as well as several other services like breakdowns and
installation of media terminal adaptors for telephony.

Transfer and operating agreements.We entered into transfer and operating
agreements with 43 municipalities whereby we both own and operate the central
antennae installations located on land owned by the municipalities. Many of
these agreements are standard. They have an indefinite term and can be
terminated with a notice period of one year.

Competition in Germany and The Netherlands

The cable television and broadband businesses within Germany and The
Netherlands are highly competitive. We compete mainly for subscribers to cable
networks.

Competition for subscribers

In Germany, except in limited cases, overbuilding of secondary cable
networks does not occur. However, we do face competition for subscribers from:



| |  |  | a growing number of operators who deliver the same or similar
packages of television programming and other services on delivery
platforms that are different from ours including antennae, digital
direct-to-home (which can be both analog, or analog direct-to-home,
and digital, or digital direct-to-home), such as those offered by
Premiere, Canal +, and satellite master antenna television systems;
and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | providers of different products and services in those areas
where we operate our broadband networks, including Kabel Deutschland
and Premiere in Germany and Canal + (Canal Digital) and satellite in
The Netherlands, which offer other digital television services and,
through Deutsche Telekom in Germany and KPN in The Netherlands,
provide high-speed Internet and telephony services.                   

In both Germany and The Netherlands, the ability of viewers to receive
terrestrial broadcast television signal directly through antennae or otherwise,
impedes our ability to obtain additional cable television subscribers in areas
where our cable networks have already been installed. The extent to which we
are limited in obtaining

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additional subscribers varies depending on the quality
of the reception to the subscriber and the zoning restrictions in the
subscribers region. In addition, in The Netherlands we will face competition
from providers of terrestrial digital television in the near future.

Analog direct-to-home satellite users obtain programming from one of a
number of different satellites, including Astra and Eutelsat, in both Germany
and The Netherlands. In order to receive analog direct-to-home
satellite-delivered programming, the consumer must have an outdoor reception
dish, which generally is smaller and less expensive than the satellite dish
typically used in the United States. Analog direct-to-home satellite-delivered
services are widely available in Germany and The Netherlands, although the
current consumer base in The Netherlands is limited due to high cable
penetration. We believe that analog direct-to-home satellite-delivered
services will continue to provide significant competition in the future.
However, we believe cable television has a number of competitive advantages
over analog direct-to-home satellite-delivered services for the following
reasons:



| |  |  | Cable television does not involve an up-front cost for the
purchase of a dish and related equipment required for analog
direct-to-home.                                                                                                                                                                                                              
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Satellite dishes are often perceived as unsightly. Planning or
zoning laws and regulations, building rules and building lease
contracts often forbid satellite dishes being fixed to buildings
where cable television services are available.                                                                                                        
|
| |  |  | At present, there is generally a wider range of national,
regional and local programming available on cable networks. This is
due, in part, to the inability of analog direct-to-home reception
dishes to receive programming from multiple satellites at any given
time or to switch to a further satellite without being realigned by a
technician.
|
| |  |  | Cable service operators generally provide a local presence and
service to their subscribers.                                                                                                                                                                                                                                                         
|
| |  |  | Consumers have expressed concerns as to the level of fees that
they will be required to pay to providers of analog direct-to-home
satellite-delivered programming if and when digital direct-to-home
satellite signal is encrypted.                                                                                                                  
|
| |  |  | As cable television networks are upgraded, a full range of
broadband network products and services may be offered which will
build subscriber loyalty.                                                                                                                                                                                               

We believe that, should analog direct-to-home satellite signal be
encrypted, we would benefit from an increase in the number of subscribers as
former analog direct-to-home users seek alternative sources of television
programming. We believe that analog direct-to-home satellite-delivery service
may become more competitive with cable service if digital compression
technology is implemented in the industry such that satellite services can
provide more channels and direct specific programming to particular
subscribers. As we upgrade our cable television networks in Germany, we will
be able to offer substantially more programming alternatives and pay-per-view
services. Accordingly, we do not believe that our broadband networks will be
at a competitive disadvantage to either analog direct-to-home or digital
direct-to-home even if digital compression technology is implemented in the
satellite services.

In addition, we face competition from digital direct-to-home
satellite-delivered services. In The Netherlands, licenses have been awarded
for digital direct-to-home television, which will compete with our digital
television offering. During the last two years, Premiere has commenced digital
direct-to-home operations in the German market. We believe that digital
direct-to-home has not achieved significant penetration of the German market.
However, Premiere has exclusive programming, including sports contracts.
Therefore, we believe that additional penetration will be achieved by Premiere
and will result in a loss of subscribers to cable network operators in Germany,
including subscribers to our networks. The introduction of our digital
television and pay-per-view services will compete directly with Premiere. In
The Netherlands, digital direct-to-home operations currently exist on an even
smaller scale than in Germany.

Cable television networks also face competition from satellite master
antennal systems that serve condominiums, apartment buildings and other private
residential developments. These delivery methods are limited and are not able
to offer a full range of broadband services on a large scale.

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In addition to competition with providers of programming using different
platforms as described in the preceding paragraphs, we also compete for
subscribers with providers of different products and services in those areas
where we operate our broadband networks. Since we started offering digital
services in 2000, we have been competing with other digital television
services. Our primary competitor in Germany is Premiere. Premiere has several
exclusive long-term contracts with major film studios, program producers and
sports franchises for a substantial amount of entertainment and sports
programming. Premiere delivers its product in digital packages via Kabel
Deutschlands and its successors cable television network and pursuant to an
agreement entered into in 2002, via our cable network and direct-to-home via
satellite. We believe Premiere has a current market share of approximately 46%
of the digital television homes in Germany. In The Netherlands, UPC, our
largest shareholder, is the largest broadband operator, followed by Essent and
Casema. These three operators account for approximately 80% of the Dutch cable
market.

Once we commercially launch our hybrid IP/PSTN based telephony service we
will compete with several carrier select telephony companies and the Dutch
national operator KPN for fixed line services in The Netherlands. We will also
be competing with several wireless telephony services, many of which have
financial resources substantially in excess of ours.

With respect to high-speed Internet access, we compete with other access
alternatives, such as ADSL lines, standard dial-up services and dial-up
services over digital direct-to-home. We believe high-speed Internet access
over broadband networks has several competitive advantages over these
alternative Internet service access mechanisms, including convenience, access
speed and price. Our Internet service requires no dial-up time because the
subscriber can always be on-line, 24 hours a day. We believe Internet access
over broadband networks with a download capacity of up to 1024 kBit/s can be 10
to 16 times faster than access over ISDN. Finally, our product is, depending
on the tariff, priced on a flat fee basis with no additional costs or on a
fixed plus charge per additional data transfer for usage. From a pricing
standpoint, we believe our different tariff options of the product become
particularly attractive, compared to most other alternative access mechanisms,
to subscribers who use the service.

The extent to which a cable service is competitive depends, in part, on
the quality of the network and the cable operators ability to offer a greater
variety of programming at competitive prices to consumers than that available
through alternative delivery platforms. Advances in communications technology,
as well as changes in the marketplace and the regulatory environment, are
occurring constantly and their impact can not be predicted.

Litigation

In October 2001,
Media Equity Management, Inc. filed a complaint in the
United States state court against Vogtländische Kommunikations- und
Entwicklungs GmbH, Kabelfernsehen Meerane GmbH, Kabelfernsehen Oelsnitz GmbH,
Kabelfernsehen Zwenkau GmbH, Televis Grimma GmbH (a subsidiary of ours), TV-3,
and Mr. Midrowsky (former Televis Grimma GmbH shareholder). This complaint
seeks judgment pursuant to written loan agreements and/or promissory notes
and/or guaranty instruments against Vogtländische Kommunikations- und
Entwicklungs GmbH and Mr. Midrowsky for approximately $60,000; against
Vogtländische Kommunikations- und Entwicklungs GmbH, Kabelfernsehen Meerane
GmbH, Kabelfernsehen Oelsnitz GmbH, Televis Grimma GmbH, TV-3, and Mr.
Midrowsky for $3,200,000 and against Vogtländische Kommunikations- und
Entwicklungs GmbH, Kabelfernsehen Zwenkau GmbH, Televis Grimma GmbH, TV-3 for
$1,200,000. Media Equity Management, Inc. filed an amended complaint which added
the parties, Informat Leasing GmbH and us. This amended complaint alleged that
Informat Leasing GmbH was the successor to Kabelfernsehen Zwenkau GmbH by name
change and that we were the successor to Televis Grimma GmbH by merger. The
petition for relief was amended such that a request for judgment against us was
made in the sum of approximately $4,400,000 million. The lawsuit has been moved
from state court to U.S. district court. We believe there will be no ruling for
several months and that we will ultimately prevail.

In The Netherlands, we have a legal dispute with Canal+ about the carriage
or access fees, which Canal+ is obligated to pay us. Initially, the decision
by the district court (Kantongerecht) was in favor of us. However, Canal+
brought the legal dispute to the Dutch telecom regulator (OPTA) to provide a
judgement about the carriage fees

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charged by us. At the end of 2002, OPTA competed its review regarding the carriage fees charged by us. We expect the
decision from OPTA early in 2003.

In February 2003, the CEO of the Companys Dutch subsidiary, Multikabel,
submitted his resignation. In conjunction with the resignation, a claim was
filed against us for a severance payment. A court date has been set on March
13, 2003 to settle the claim. The court decision is expected for May 2003.

The Company is currently in negotiations with third parties for the
payment of current and past royalty fees. No formal settlement agreement has
been reached as to final payment. However, because the expected future payment
is probable and can be reasonably estimated, the Company has accrued
approximately 4,189,000, 2,563,000 and 1,073,000 as of December 31, 2002,
2001 and 2000, respectively.

The Company is part to routine litigation incidental to the normal conduct
of business. In the opinion of management, the outcome of and liabilities in
excess of what has been provided for related to these proceedings, in the
aggregate, are not likely to be material to the financial condition or results
of operations.

Regulation

The provision of analog and digital television, telephone, Internet/data
and broadcasting services is regulated in the countries in which we operate.
The scope of regulation varies from country to country, although in some
significant respects the regulation we are subject to is harmonized under the
regulatory structure of the European Union. Below is a summary of the
regulatory environment in the European Union, Germany and The Netherlands.

Regulation in Germany

Cable television licenses.The German Telecommunications Act came into
force on August 1, 1996. The Act is meant to foster competition, to ensure
adequate services nationwide and to establish an administration system for
bandwidth frequencies. The German Telecommunications Act ended the network
monopoly of Deutsche Telekom. Telecommunications services, including the
provision of transmission capacity, may now be provided by anybody subject to
the requirements established in the German Telecommunications Act. The German
Telecommunications Act sets forth licensing requirements for the operation of
transmission paths which extend beyond the borders of a single parcel of
property and which are used to offer telecommunications services to the public.
The establishment and operation of cable television and broadband networks
falls within the scope of the licensing requirements set forth in the German
Telecommunications Act.

The German Telecommunications Act establishes the following four different
license classes:



| |  |  | licenses for the operation of transmission lines for mobile
radio services to the public by the licensee or another entity
(license class 1: mobile radio license),                                                     
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | licenses for the operation of transmission lines for satellite
radio services to the public by the licensee or another entity
(license class 2: satellite radio license),                                               
|
| |  |  | licenses for the operation of transmission lines for
telecommunications services to the public by the licensee or another
entity, the provision of which is not covered by license classes 1 or
2 (license class 3), and
|
| |  |  | licenses for voice telephony services to the public based on
self-operated telecommunications networks (license class 4).                                                                                               

The operation of cable television networks, including those with two-way
transmission paths with reverse path capability, falls within license class 3.
We believe that we have obtained all material class 3 licenses required to
operate our business.

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Transmission lines for the operation of cable networks, including level 3
and level 4 system networks, which have been operated in accordance with the
legal provisions in effect prior to the entry into force of the German
Telecommunications Act continue to be authorized and do not need to be licensed
under the German Telecommunications Act. The operation of an in-house network
(level 4) does not require a license.

The German Telecommunications Act subjects telecommunications enterprises
that are deemed to be market dominating to special provisions. These
provisions cover, in particular, the regulation of tariffs, business terms and
conditions and the granting of open network access, including interconnection
obligations. Tariffs for telecommunications services of market-dominating
enterprises are subject to the review of the regulatory authority. These
tariffs have to be based on the costs of efficient service provision. Detailed
regulations are included in the Ordinance on Telecommunications Tariff
Regulation of October 1, 1996. The business terms and conditions for
telecommunications services subject to license and for universal services are
also subject to the regulatory authoritys control. The regulatory authority
has the right to object to business terms and conditions which are not in
conformance with relevant provisions of European Union law. Public
telecommunications carriers are required to interconnect their networks with
those of other carriers. Market-dominating public telecommunications carriers
are required to allow other users to access their networks or parts thereof.
Detailed regulations are included in the Ordinance on Special Network Access of
October 23, 1996.

The Telecommunication Customer Protection Ordinance of December 11, 1997
regulates the relationship between providers of telecommunications services and
their subscribers. It sets forth several specific obligations for
market-dominating providers and various obligations for all other providers. It
specifies, for example, rules for invoicing, universal services and quality
parameters. The Ordinance also invalidates contractual clauses which attempt
to limit subscribers rights under the Ordinance.

Under the German Telecommunications Act, a person offering
telecommunications services for which no license is required must notify the
regulatory authority within one month of the start-up, modification or
termination of operations. We believe that we have complied with this
notification obligation.

Retransmission and channel line-up provisions; media and Internet
services. The retransmission of cable television programs within Germany
through private cable television and broadband networks is regulated at the
joint-state level pursuant to The State Treaty on Broadcasting within the
united Germany, or the State Broadcasting Treaty, and at the state level
pursuant to the media laws of the various German states. The State Broadcasting
Treaty describes the various states authority to make decisions with respect
to the assignment and use of transmission capacities to be transformed into
generally binding law by way of the states media legislation. The State
Broadcasting Treaty also provides that the retransmission of cable television
programs which may be received nationwide and which have been produced in
accordance with applicable European legal provisions must be permitted by the
federal states within the framework of existing technical capabilities. With
the most recent amendments to the State Broadcasting Treaty, which entered into
force in April 2000, cable television networks are obligated to transmit
specific programs via digital technology (must-carry obligation)as long as
the aggregate transmission capacity for these transmissions does not exceed the
capacity of four analog television channels. In addition, cable network
operators must guarantee that one third of the capacity available in digital
technology is used to transmit a diverse selection of programs, including
special-interest channels foreign language channels that must be programs in
their choice of programs to be retransmitted (can-carry obligation). State
laws generally provide that the simultaneous retransmission of an unchanged and
complete cable television program is not subject to any licensing requirement,
but does subject the operator to an obligation to report the retransmission to
the relevant state media institution. Failure to comply with this reporting
obligation may result in a maximum fine of between approximately 255,000 and
approximately 511,000, depending on the German state in which the violation
occurs. To date, the state media authorities have not strictly enforced this
reporting obligation.

Broadcasting activity (which is defined to exclude the simultaneous and
unchanged retransmission of programming), such as the insertion of local
commercials, subjects the cable television or broadband operator to a different
regulatory regime. Private broadcasting companies require a broadcasting
license issued in accordance with the provisions of the State Broadcasting
Treaty and the media laws of the states. While the State Broadcasting Treaty
sets forth the framework for the regulation of private broadcasting, the state
media laws set forth detailed

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requirements with respect to diversity of
opinion, observation of constitutional principles, child protection,
professional ethics and restrictions on advertisement.

Private cable television and broadband operators are required to observe
channel line-up priorities established by the state media institutions under
the state media laws with reference to the technical capabilities of the cable
television or broadband networks in connection with the retransmission of cable
television programs. Channel line-up refers to the order in which the various
television and radio programs are fed into the channels of, and retransmitted
through, cable television networks. Generally, the channel line-up priority
has been established as follows:



| |  |  | programs which have been legally prescribed by the state;                                                                              
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | programs commonly received within the federal state
(i.e., those programs which may otherwise be received without
additional antennae);
|
| |  |  | programs which may be received locally with the use of additional antennae; and                                                        
|
| |  |  | all other programs.                                                                                                                    

In addition, a number of state media laws have established priorities for
programs falling within the last-mentioned category for programming produced
within the European Union. The European Commission has stated that
ranking decisions granting German programs a higher priority than programs
from outside Germany could be discriminatory and contrary to European law.

In the past, problems have existed due to the common use of some
frequencies by the receiving and distribution systems of cable operators, on
the one hand, and aeronautical radio navigation and public safety services on
the other hand. After lengthy discussions, the regulatory authority announced
in July 2000 that a compromise was reached between the regulatory authority,
the German Air Navigation Services Organization, Deutsche Telekom and the
German Association of Private Cable Operators known as ANGA. Pursuant to this
compromise, the air navigation services have relocated some of their operating
frequencies and have initiated international coordination of the operating
frequencies that are used at three German airports. In addition, Deutsche
Telekom has implemented a frequency offset. ANGA has requested its members
using extended band channel 24 for systems with their own head-end located in
the approach areas of German airports, to either implement a shift in frequency
or to check and ensure that their systems do not exceed the 20 dBpW radiation
disturbance limit that is part of this compromise.

This compromise has resulted in the adoption of three new ordinances
governing the allocation, use and assignment of frequencies. The three new
ordinances entered into force in May 2001. Pursuant to the ordinance on the
allocation of frequencies, the free use (i.e., the use without an individual
permit, approval or other regulatory resolution) of frequencies between 9 KHz
and 30 MHz in and along conductors, including the cable networks we operate, is
permitted provided that specified conditions are met. These conditions include
that (1) the disturbing radiation emitted by the conductors does not exceed
identified limits and (2) the frequencies are not used for security purposes,
as identified by the German regulatory authority. If the above conditions are
not met with respect to a frequency, the German regulatory authority will
decide on a case by case basis whether that frequency may be used and may
impose restrictions or conditions on that use. This regulation may prevent us
from using some or all of the relevant frequency bands to retransmit
programming over our cable networks. Should this occur, we may need to make
further investments in our German networks in order to continue providing our
current services.

With respect to frequencies between 30 MHz and 3 GHz, the above conditions
for the free use of frequencies in and along conductors will take effect on
July 1, 2003.

The German states have signed a State Treaty on new media services, or the
State Treaty on Media Services, which came into force in August 1997,
concurrently with the Teleservices Act. The State Treaty on Media Services and
the Teleservices Act basically constitute currently effective legislation
relevant to setting up and operating various types of Internet and
video-on-demand services. The State Treaty on Media Services imposes various
obligations on providers of media services, which are defined in the State
Treaty on Media Services as information and communication services addressed to
the general public. Teleservices are defined in the Teleservices

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Act as information and communication services for individual use on the basis of
telecommunication transmission. Media services include distribution services
offering direct sale or lease of objects or services, known as teleshopping,
distribution services in the form of television text, radio text or similar
text services and other call-services which offer text, sound or pictures in
electronically stored form. Providers of these media services include persons
who offer their own or third-party media services or who provide access to
media services. To the extent that we are considered a provider of media
services, we may be subject to obligations under the State Treaty on Media
Services. The State Treaty on Media Services includes, among other things,
rules on responsibility for content, advertising, data protection and
protection of children and young adults. Providers of tele services are
responsible under general laws for content which they make available to others.

The State Treaty on Media Services and the Teleservices Act have not, to
date, materially affected our ability to make independent business decisions
with respect to the rates charged for, or other matters relating to the
provision of, the services covered. There can be no assurance that legislation
will not materially influence our business decisions on these matters in the
future.

Telephony deregulation.The Telecommunications Act establishes licensing
requirements for the provision of voice telephony services to the public on the
basis of self-operated transmission paths. Regulations governing licenses for
voice telephony services came into effect in January 1998. If we offer voice
telephony or voice-over-IP services over our networks, we may have to obtain a
class 4 license, depending on how those services are provided.

Data Protection.Each of the German Telecommunications Act, the Act on
Data Protection in connection with Teleservices and the State Treaty on Media
Services contain provisions relating to data protection. In addition, the
Federal Act on Data Protection also applies. These laws set forth the rules on
how and under what conditions subscribers personal data may be collected,
processed, used and forwarded to third parties. Each of these activities
requires either the subscribers consent or a specific authorization in the
relevant laws. Another requirement is that personal data may be collected and
processed only for specific purposes, which must be disclosed to the
subscribers including the scope and the manner of processing data.

e-Commerce.In December 2001, the German Parliament adopted a new act on
electronic commerce. The act consists of various amendments to the current
Teleservices Act, the Act on Data Protection in connection with Teleservices
and the Act on Civil Procedure and seeks to harmonize these acts with the
provisions of the European Union e-Commerce Directive.

On January 1, 2002 the German Civil Code was amended. Under the so-called
update of the obligation law (Schuldrechtsmodernisierungsgesetz) new rules
were established, especially for the contract law in order to protect the
customer. Therefore all German enterprises were forced to revise their general
provisions no later than December 31, 2002. We have incorporated our new
general provisions in time with effect of January 1, 2003

Regulation in The Netherlands

Telecommunications and media services.The following regulatory regime in
The Netherlands applies to telecommunications and media services.



| |  |  | Regulatory framework. The liberalization of the Dutch
telecommunications and cable television sector has generally
proceeded at a quicker pace than required by the European Union
directives. The Dutch Telecommunications Act took effect, with the
exception of a few provisions, in December 1998 and further
liberalized these sectors. The Dutch Telecommunications Act governs,
among other things, the installation and operation of public
telecommunications networks, which include cable television networks,
and the provision of telecommunications services, including the
provision of telephone and Internet/data services. The provision of
media services through the cable television network, and more
specifically content, is regulated primarily by the Dutch Media Act,
as amended, and the Media Decree. The most important term in the
Media Act is program, defined as an electronic product containing
images or sound, meant to be broadcast to and designated to be
received by the general audience or a part thereof, except for data
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| |   |  | services, services that are only available on individual demand and
other interactive services. Agreements with municipalities and the
competition laws also impose restrictions on cable television
operators.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |   |  | Under the new Dutch Telecommunications Act, the regulatory
authority, known as OPTA, is charged with regulation and dispute
settlement in relation to the provision of telecommunications
networks and services. An appeal to a decision of OPTA has to be
filed exclusively at the District Court of Rotterdam. Under the
media laws, media service providers are subject to content
requirements, which are overseen by the Commissariaat voor de
Media.                                                                                                                                                                                                                                                                                      
|
| |  |  | Registration. The Dutch Telecommunications Act does not
require a license for the installation, maintenance or operation of a
cable network. Cable network operators need only to register with
OPTA. The registration does not give an operator any exclusive right.
Any registered person may install, maintain and operate a cable
network alongside an existing one. The Dutch Telecommunications Act
gives cable network operators and providers of other public
telecommunications networks, under a number of conditions and
restrictions, rights of way to install and maintain the network
concerned, which are identical to those previously exclusively
enjoyed by KPN, the incumbent telecommunications operator in The
Netherlands.
|
| |  |  | Ownership issues.The Dutch Telecommunications Act provides
that the ownership of cables that have been installed in public
and/or private grounds and are intended to be used for a public
telecommunications network or a cable television network is retained
by the provider of the public telecommunications network or cable
television network concerned. This provision is necessary because, as
a general rule under the Dutch Civil
Code, the cables would, by accession, become part of the grounds in
which they are installed and the owner of the grounds concerned would
own the cables.                                                                                                                                          
|
| |  |  | Programming. Pursuant to the Dutch Telecommunications Act and
the Media Act, a cable television network provider must transmit to
all its subscribers at least 15 programs for television and at least
25 programs for radio, called the basic package, including
approximately seven television and nine radio mandatory channels. The
Media Authority may grant a total or partial exemption from these
obligations if the provider does not have significant market power in
its area of coverage. The Media Authority may grant an exemption from
the obligation to transmit specified programs if the financial burden
on the provider would be unreasonably high.                                                                         
|
| |   |  | Our Dutch operating companies often purchased their cable
television networks from the local municipalities. Pursuant to
the terms of the agreements with the municipalities, our Dutch
operating companies were obligated to continue to provide basic
tier services of between 20 and 30 television channels, including
the 15 required under the media laws.                                                                                                                                                                                                                                                                                                                                                                                 
|
| |   |  | Cable television operators are allowed to transmit their own
programs within The Netherlands upon obtaining a broadcast
license from the Media Authority. The licensee must comply with
the advertising and sponsorship rules set forth in the media
laws, which are consistent with the European Union Television
Without Frontiers Directive.                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  |  | Program council. Each municipality has to establish a program
council, which is an independent authority and provides the cable
network operator with advice concerning the 15 television programs
and 25 radio programs in its basic package. The cable operator is
only allowed to deviate from the advice in a limited number of
onerous circumstances. The cable network operator may ask the program
council for non-binding advice concerning the programs distributed
outside the scope of the basic package. When several cable networks
are connected and, in principal, function as one cable network, a
joint program council may be established.                                                                                    
|
| |  |  | Monitoring media concentrations. The Dutch government recently
assigned the Media Authority a monitoring task with regard to, among
other things, media concentrations. The Media Authority has to report
on an annual basis on issues like vertical concentrations between
content producers, content providers and rights owners. Special focus
will be on sports and movie rights. The report may authorize the
Dutch Independent Telecommunications Authority and/or the Dutch
Competition Authority to take appropriate measures in this regard.                                                                                                                                                                                           

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| |  |  | Network access service providers. The Dutch government has
presented a policy memorandum (Kabel en consument: marktwerking en
digitalisering) in which it is stated that the government will
encourage competition in the near future between several types of
telecommunication infrastructures and competition on existing cable
infrastructures. Existing cable operators will have to allow
third-party service providers (e.g., Internet access providers) to
offer services to end users via their existing cable networks. This
implies, when the proposals are agreed upon, we would have to offer
third parties access to our networks in The Netherlands. Existing
competition regulation and the EU Open Network Provision directives,
or ONP, will be similarly applied to cable infrastructures.
Following the presentation of the policy memorandum, a proposed bill
was presented that formalizes the guidelines contained in the policy
memorandum. In connection with the bill, the Dutch competition
authority and OPTA issued a joint consultation on the Internet
market. The preliminary conclusion of the consultation is that there
is a separate market for broadband Internet access and/or Internet
network access. Depending on the outcome of the consultation and/or
the wording of the new bill, OPTA may be authorized to impose
obligations pursuant to the ONP regulation. However, these
obligations would not be imposed in an emerging market.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Network access program providers. In addition to the
guidelines in the proposed policy memorandum, OPTA will be authorized
to require designated cable network operators to provide transport
capacity to program providers. The proposed bill also appears to
regulate services that are closely linked with the program for which
access is requested.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  |  | Price regulation. The Media Act authorizes the competent
minister to set maximum price levels for basic tier services. This
authority has not, however, been exercised in The Netherlands.
Furthermore, often the municipality contracts regulate the maximum
subscription price for the duration of their contracts with
Multikabel.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               

Telephony and Internet/data services.The following regulatory regime
applies to telephony and Internet/data services.



| |  |  | Regulation framework. Until recently, the fixed
telecommunications infrastructure was a statutory monopoly of KPN. As
described above, the Dutch telecommunications sector has been
liberalized in advance of and in accordance with European Union
telecommunications policy and cable television networks may now be
used for the provision of all telecommunications services. Number
portability was introduced in The Netherlands in 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | Interconnection. The Dutch Telecommunications Act generally
implements European Union telecommunications policy on
interconnection.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  |  | Price regulation. While telephony services offered by a cable
company are not currently subject to price regulation, the prices of
its competitor, KPN, are. OPTA indicated that KPN should reduce its
end-user tariffs in accordance with principles of cost orientation as
set forth by OPTA during 1999. In September 1999, OPTA introduced its
new price cap mechanism, deciding that KPN was to reduce a basket of
its nominal end user rates (not including international rates) by
5.3% per year for the next three years. KPN may adjust its resulting
rates for inflation, which must lead to a net decrease of at least
3.3% in the first year. The fact that KPNs end-user tariffs for all
of its basic telephony services (with the exception of international
calls, but including ISDN) must be cost orientated may have a
negative effect on cable companies ability to compete.
|
| |   |  | In a decision on June 29, 2001, OPTA determined the
tariffs KPN may charge for interconnection with its fixed
telephony network in the period between July 1, 2001 through June
30, 2002. Some rates were decreased and others were increased or
were further broken down into cost components. The overall
impact of these changes on the costs for cable companies to
interconnect with KPN is uncertain.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  |  | Internet/data services. Under the Dutch Telecommunications
Act, Internet/data services are regulated as public
telecommunications services. As such, our Dutch operating systems
will have to register with OPTA as providers of public
telecommunications services and/or networks and our prices for these
services are not regulated.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

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e-Commerce. The following regulatory regime applies to e-Commerce in The
Netherlands



| |  |  | Copyright and related rights Directive.The European Union
Directive on copyright and related rights in the information society
and the amended proposal of May 1999 intend to ensure and harmonize a
high level of copyright protection for creators of copyright
protected works and related entities throughout the European Union
with respect to the transferability of copyright protected works.
The Copyright Directive will have particular importance for all
e-commerce. The Copyright Directive develops further the exclusive
distribution rights of copyright owners. It also creates some
exemptions from these exclusive distribution rights, such as by
distinguishing between digital and analog as well as temporary and
permanent copies and by granting some privileges for private use,
research and scientific purposes and public education. Further, the
Copyright Directive addresses the legal protection of technical
facilities for the protection of copyright works. The Copyright
Directive envisions an implementation into the national laws of the
Member States by December 31, 2001.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | e-commerce Directive. The recently adopted e-Commerce
Directive on legal aspects of information society services, and in
particular electronic commerce in the internal market, determines
some of the essential legal parameters for the development and
operation of e-commerce in the internal market. The Member States
have to implement the Directive into national legislation before
January 17, 2002. The e-Commerce Directive is not yet a part of
national law and the Dutch government has not yet prepared
legislation to implement the e-Commerce Directive.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  |  | Distance Contracts Directive. The Distance Contracts Directive
sets out the legal framework for consumer protection in some fields
of e-commerce (excluding, among others, financial services,
telecommunications services, transportation services and others).
Consumer protection, as regulated by the Distance Contracts
Directive, will be of relevance for direct and indirect e-commerce
transactions, in particular business-to-consumer transactions. Any
vendor engaging in business-to-consumer transactions in the European
Union must
make sure that the Vendors business is operated in conformity with
the minimum requirements of the Distance Contracts Directive, unless
member states set out higher legal thresholds with regard to
business-to-consumer transactions when implementing the Distance
Contracts Directive. In The Netherlands, no higher standards from
those in the Distance Contracts Directive, which was implemented by
act of December 21, 2000, were included in the Dutch Civil Code. The
Netherlands is in the process of implementing the Distance Contracts
Directive in the Dutch Civil Code. Germany did so on June 27, 2000.
The Distance Contracts Directive applies to each contract negotiated
at a distance between a professional business and a consumer and
involving the use of one or more means of distance communication. The
various means of communication have to be used as part of an organized
distance sales or service provision scheme not involving the
simultaneous presence of the supplier and the consumer. The aim of the
Distance Contracts Directive is to ensure that the means of distance
communication are not used to reduce the amount of information
provided to the consumer. Accordingly, the Distance Contracts
Directive determines the information that is required to be sent to
the consumer prior to the conclusion of an agreement or, ultimately,
during the performance of the contract or at the time of delivery of
the goods. The Distance Contracts Directive expressly states that the
consumer may not waive the rights conferred on him by the enactment of
this directive into national law.

Regulation in the European Union

All member states of the European Union, or EU, are required to enact
national legislation to implement directives issued by the EU. Regulations
issued by the EU have had, and will continue to have, a material effect on the
way in which cable operators offer services. For example, EU harmonization and
liberalization measures were responsible for cable operators being able to
offer telephony, Internet and video services.

In February 2002, the European Parliament adopted a New Regulatory
Framework, consisting of four Directives (Framework, Access and
Interconnection, Authorization and Universal Service). This new framework,
which also applies to cable television networks, attempts to decrease national
variations in regulations and licensing systems and further increase market
competition by harmonization of licensing procedures, reduction of
administrative fees, providing for easier access and interconnection, and
reduction of regulatory burdens for

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telecommunications companies. The member
states will have to implement the new regulatory framework within 15 months
after the implementation of the directives. We believe that we will benefit
from a simpler and more coherent regulatory regime for all of our services in
both The Netherlands and Germany.

Video servicesConditional access. In order to enable further competition
in pay television services and accelerated development of advanced television
services, the Council of the European Union and the European Parliament passed
the Advanced Television Standards Directive in 1995, which requires member
states to regulate the offering of conditional access systems, such as program
decoders used for the expanded basic tier services offered by many of our
operating companies. Providers of conditional access systems are required to
make them available on a fair, reasonable and non-discriminatory basis to other
television service providers, such as broadcasters. This obligation is carried
forward in the new Access and Interconnection Directive and adapted to recent
technological developments.

Regulation of the Internet and e-commerce.In June 2000, the European
Parliament and Council adopted a directive on a number of legal aspects of
information society services, in particular electronic-commerce, within the
European Union, known as the e-Commerce Directive. The purpose of the
e-Commerce Directive is to ensure the free movement of information society
services within the European Union. To achieve this purpose, the e-Commerce
Directive contains provisions regarding jurisdictional matters, authorization
of information society services, the scope of information to be provided within
the framework of information society service, the conclusion of contracts by
electronic means and the liability of service providers. As the provision of
Internet access, e-commerce, video-on-demand services, and, in particular, the
selling of goods on-line qualify as information society services, the
e-Commerce Directive will also have an impact on our business. To harmonize the
member states approach to jurisdictional issues, the e-Commerce Directive
introduced the rule of the home country of the information service provider.
This means that in the so-called coordinated field, a service provider is
subject only to the rules and regulations set by its home country. The
coordinated field concerns requirements that apply to the taking up of the
activity and the pursuit of the activity of a provider of information society
services, including the service providers liability. However, because of the
many exceptions to the rule of the home country, we intend to continue to
comply with the relevant laws and regulations which are in force in Germany and
The Netherlands. The e-Commerce Directive also contains provisions regulating
the liability of providers of information society services, i.e., providers of
mere conduit, caching and hosting services. These provisions prohibit the
member states to impose a general obligation on the providers of mere conduit,
caching and hosting services to monitor the information that they transmit.
Except for the directive on e-commerce, no other Internet-specific regulations
have been issued, to date, at the level of the European Union.

However, more stringent data protection requirements may be imposed by a
directive on Data Protection, which was also part of the regulatory package,
but has not been adopted to date. Among the issues discussed in this directive
are unsolicited marketing communications and the extent to which a network or
service operator may use traffic data from its customers for marketing purposes
or for the provision of value-added services. As currently drafted, the
directive requires prior consent from customers before any such activity may be
undertaken.

Telephone and Internet/data services

Liberalization of telecommunications services and infrastructure. A
central aim of the liberalization process has been to reduce the monopoly power
of the incumbent telecommunications operators in order to introduce competition
in the European telecommunications market. Liberalization measures have been
adopted under the European Union Treatys competition rules and harmonization
measures have been put in place through the adoption of Open Network Provision
directives, or ONP.

Cable Television Networks Directive.Following the European Commissions
Services Directive of June 1990, the exclusive rights of incumbent operators to
provide telecommunications services were gradually removed so that competing
operators and service providers would be entitled to offer all
telecommunications services other than public voice telephone. The incumbent
telecommunications operators invariably owned the national networks, however,
and the lack of an alternative infrastructure to provide these liberalized
services operated as a major barrier to entry into the market by competitors.
In an effort to overcome this barrier, in October 1995, the European Union
introduced the Cable Television Networks Directive, which required member
states to remove existing restrictions on the use of cable television networks
to provide telecommunications services other than public voice telephony
services. As a result, cable television operators became able to use their
networks to provide telecommunications services except for public voice

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telephony. In 1996, the European Commission issued the Full Competition
Directive, which required the European Community member states to remove all
remaining exclusive rights for the provision of telecommunications services
including voice telephony by January 1, 1998. The establishment and provision
of telecommunications networks were also liberalized under this directive. As a
result of this directive, we may establish and provide telecommunications
networks and/or services, including public voice telephone and Internet/data
services, through our cable networks, subject to obtaining the necessary
licenses and authorizations.

Under the Cable Television Networks Directive, telecommunications
operators that have exclusive rights to provide cable television network
infrastructure in a given area and achieve annual revenues in the relevant
telecommunications market of more than 50,000,000 must account separately for
their telecommunications services and any cable television services. In
Germany, under national law, the requirement to separate the accounting for the
various telecommunications and cable television operations applies to companies
which are, pursuant to the German Competition Act, in a dominant position on
any one sub-market within the telecommunications market, including the cable
television market. Unlike the European Union Directive, this requirement
applies independent from the level of revenues generated on these markets. We
will likely qualify as a market player having a dominant position on various
cable television markets in Germany and we will likely be required to separate
our accounting system into subsystems for each of the cable television
operations and other telecommunications operations. The German regulatory
authority may also impose guidelines on us as to the details of the accounting
separation. In The Netherlands, this requirement applies to all
telecommunications operators providing both cable television and other
telecommunications services under national law, irrespective of the
above-mentioned requirements. Should we achieve the requisite turnover in The
Netherlands, we would become subject to these requirements in that country as
well.

Interconnection. Because new telecommunications operators need to
interconnect their networks with the fixed public telephone network, the EC
Council of Ministers and the European Parliament adopted the Interconnection
Directive in 1997, which sets forth the general framework for interconnection,
including general obligations for telecommunications operators to interconnect
with their networks. The provisions of this directive form the basis of
telecommunications licensing, including any license we might hold or seek in
either Germany or The Netherlands. The directive contains provisions on number
portability, supplementary charges to contribute to the costs of universal
service obligations and other interconnection standards. As a result, if the
principles in the directive are fully applied, we should be able to
interconnect
with the public fixed network and other major telecommunications networks
on reasonable terms in order to provide these services when and if we choose to
provide them. There can be no assurance, however, that we will be able to
obtain from incumbent telecommunications operators interconnection on terms and
conditions or at prices satisfactory to us without protracted negotiations or
involvement in time-consuming regulatory proceedings.

The new Directive on Access and Interconnection will apply to all forms of
electronic communications networks, including cable television networks. This
means that, once this new directive is implemented, we will also be subject to
the obligation to negotiate and grant access to, and interconnection with, our
networks if requested by other authorized communications network operators
providing publicly available electronic communications services. Moreover, a
national regulatory authority may, under certain conditions, impose obligations
on us to grant access to, and use of, specific network elements and associated
facilities, inter alia in situations where the national regulatory authority
considers that denial of access or unreasonable terms and conditions having a
similar effect would hinder the emergence of a sustainable competitive market
at the retail level, or would not be in the end-users interest. In particular,
it will be possible to impose network access obligations on us to the extent
that is necessary to ensure accessibility for end-users to digital radio and
television broadcasting services.

Licensing. European Union telecommunications policy has also attempted to
harmonize the licensing requirements for the provision of public
telecommunications services. As a result of the Licensing Directive, which
became effective on December 31, 1997, member states are required to adopt
national legislation so that providers of telecommunications service generally
require either no authorization or a general authorization which is conditional
upon essential requirements, such as the security and integrity of the
networks operation. Licensing conditions and procedures must be objective,
transparent and non-discriminatory. Member states may issue individual licenses
in some situations. For example, the provision of public voice telephony
services and the establishment or provision of public telecommunication
networks may be subject to individual licenses. In addition, telecommunications
operators with significant market power may be required by member states to
hold individual licenses carrying more burdensome

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conditions than the authorizations held by other providers. Significant market power is typically
determined to be 25% or more of the relevant market. License fees can only
include administrative costs, except with respect to scarce resources where
additional fees are allowed.

The new directive on the authorization of electronic communications
networks and services, or the new Authorization Directive, once implemented by
the member states, will simplify, render more transparent and less expensive
the licensing of the establishment of electronic communications networks and
the provision of electronic communications networks and services, i.e., cable
television networks and services. Individual licenses will be required only in
connection with the assignment of radio frequencies and numbers. The new
Authorization Directive replaces the Licensing Directive.

Video services

     Video services through telecommunications networks. In Germany, the
concept of geographic franchise areas does not exist. Most of our operating
companies in Germany are one of several operators which may serve customers in
a given geographic area. Operators compete for long term service contracts
with Housing Associations. In The Netherlands, geographic franchises are
awarded. As with the telecommunications sector, the cost of building a network
to provide television services is a considerable disincentive to potential new
entrants in the television services market. Our operating companies may face
competition in the long term in their franchise areas from new entrants
providing television services through the infrastructure of incumbent
telecommunications operators and potential new entrants. In The Netherlands,
for example, where there are no restrictions on the use of telecommunications
infrastructure for the provision of cable television services, the incumbent
telecommunications operator is testing whether it will be able to provide
television services through its fixed networks.

     Conditional access. In order to enable further competition in pay
television services and accelerated development of advanced television
services, the EU Council and Parliament passed the Advanced Television
Standards Directive in 1995, which requires member states to regulate the
offering of conditional access systems, such as program decoders used for the
expanded basic tier services offered by many of our operating companies.
Providers of such conditional access systems are required to make them
available on a fair, reasonable and non-discriminatory basis to other
television service providers, such as broadcasters. This obligation is carried
forward in the new Access and Interconnection Directive.

     Broadcasting. The Television Without Frontiers Directive adopted in
October 1989 and amended in June 1997, is intended to introduce freedom of
broadcasting in the European Union. Generally, broadcasts emanating from and
intended for reception within a country have to respect the laws of that
country. Under the directive, EC member states are required to allow broadcast
signal of broadcasters in other member states to be freely transmitted within
their territory so long as the broadcaster complies with the law of the
originating, member state. The directive also establishes quotas for the
transmission of programming produced in Europe and programs made by European
producers who are independent of broadcasters. Television advertising and
sponsorship in member states must comply with specific minimum rules and
standards, although member states may set more detailed and stricter rules for
some matters.

In addition to the Television Without Frontiers Directive, the other
primary source of European regulation affecting television broadcasting is the
1989 European Convention on Transfrontier Television, or the Convention. The
Convention is effective in those countries that have ratified it. Germany has
ratified and The Netherlands has signed but not ratified the Convention. The
Convention currently provides that the country in which a broadcaster uplinks
its programming to the satellite has jurisdiction over that broadcaster.

A change to the Convention, or the Amendment, was agreed by parties to the
Convention in October 1998, but it will not enter into force until its
acceptance by France. The Amendment will bring the Convention into conformity
with the Television Without Frontiers Directives establishment test, providing
that a broadcaster should be regulated primarily by the authorities in the
member country in which the broadcaster is established. Additionally, the
Amendment would provide that when a broadcasters channel is wholly, or
principally, directed at a country other than where it is established, for the
purpose of evading the laws of that country in the areas covered by the
Convention, the broadcaster would become subject to the laws of the country of
reception. The Amendment allows parties to the Convention to designate that
some important events (e.g. major sporting events) cannot be broadcast

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exclusively by a single television station so as to deprive a large proportion
of the public of that member country from seeing the event live or on a
deferred coverage basis on free-to-air television.

C.     Organizational Structure

The following is a list of our significant subsidiaries and our proportion
of ownership interest in each subsidiary:

|                                                                       |  |               
|---------------------------------------------------------------------- |  | --------------
|                                                                       |  | % of Ownership
|                                                                       |  |               
|Organized under the laws of Germany                                    |  |               
|PrimaCom Verwaltungs GmbH                                              |  | 100.0         
|PrimaCom Management GmbH                                               |  | 100.0         
|PrimaCom Network & Operations GmbH                                     |  | 100.0         
|PrimaCom Region Dresden GmbH                                           |  | 100.0         
|PrimaCom Region Dresden GmbH & Co. KG                                  |  | 100.0         
|Zweite Kabelvision Management
Beteiligungs GmbH & Co. KG(1)            |  | 100.0         
|PrimaCom Angelbachtal GmbH                                             |  | 100.0         
|PrimaCom Angelbachtal GmbH & Co. KG                                    |  | 100.0         
|PrimaCom Südwest I GmbH                                                |  | 100.0         
|PrimaCom Südwest I GmbH & Co. KG                                       |  | 100.0         
|PrimaCom Region Magdeburg GmbH & Co. KG                                |  | 100.0         
|PrimaCom Region Wiesbaden GmbH                                         |  | 100.0         
|PrimaCom Aachen GmbH                                                   |  | 100.0         
|PrimaCom Kabelprojekt GmbH                                             |  | 100.0         
|PrimaCom Region Südwest II GmbH                                        |  | 100.0         
|PrimaCom Projektmanagement GmbH & Co. KG                               |  | 100.0         
|PrimaCom Region Leipzig GmbH
& Co. KG(2)                               |  | 100.0         
|PrimaCom Region Berlin GmbH & Co. KG                                   |  | 100.0         
|PrimaCom Osnabrück Beteiligungs-GmbH                                   |  | 76.0          
|PrimaCom Osnabrück GmbH & Co. KG                                       |  | 99.9          
|PrimaCom Nord GmbH                                                     |  | 100.0         
|PrimaCom Projektmanagement Verwaltungs GmbH                            |  | 100.0         
|KabelMedia Erste Fernsehkabelbeteiligungs Verwaltungs GmbH             |  | 100.0         
|KabelMedia Erste Fernsehkabelbeteiligungs GmbH & Co. KG                |  | 100.0         
|PrimaCom Berlin GmbH                                                   |  | 100.0         
|Kabel-Fernsehen Leipzig
Verwaltungs GmbH(3)                            |  | 100.0         
|PrimaCom Region Schwerin GmbH & Co. KG                                 |  | 100.0         
|PrimaCom Region Magdeburg GmbH                                         |  | 100.0         
|PrimaCom Schwerin GmbH                                                 |  | 100.0         
|RFH Regionalfernsehen Harz Verwaltungs-GmbH                            |  | 100.0         
|RFH Regionalfernsehen Harz GmbH & Co. KG                               |  | 100.0         
|PrimaCom Mettlach GmbH & Co. KG                                        |  | 100.0         
|PrimaCom Nettetal GmbH & Co. KG                                        |  | 100.0         
|PrimaCom Stormarn GmbH & Co. KG                                        |  | 100.0         
|PrimaCom Verl GmbH & Co. KG                                            |  | 100.0         
|PrimaCom Hessen GmbH                                                   |  | 100.0         
|PrimaCom Marketing & Development GmbH                                  |  | 100.0         
|PrimaCom Kabelbetriebsverwaltungsgesellschaft mbH                      |  | 100.0         
|PrimaCom Kabelbetriebsgesellschaft mbH & Co. KG Region Hoyerswerda     |  | 100.0         
|PrimaCom Kabelbetriebsgesellschaft mbH & Co. KG Region Leipzig         |  | 100.0         
|PrimaCom Kabelbetriebsgesellschaft mbH & Co. KG Region Plauen          |  | 100.0         
|PrimaCom Kabelbetriebsgesellschaft mbH & Co. KG Region Berlin          |  | 100.0         
|PrimaCom Kabelbetriebsgesellschaft mbH & Co. KG Region Südwest         |  | 100.0         
|PrimaCom Kabelbetriebsgesellschaft mbH & Co. KG Region Nordwest        |  | 100.0         
|KABELCOM Halberstadt Gesellschaft für Breitbandkabel-Kommunikation mbH |  | 72.6          

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|                                                          |  |               
|--------------------------------------------------------- |  | --------------
|                                                          |  | % of Ownership
|                                                          |  |               
|Decimus Beteiligungs- und Verwaltungsgesellschaft mbH     |  | 100.0         
|PrimaCom Rheinland-Pfalz GmbH                             |  | 100.0         
|PrimaCom Niedersachsen GmbH                               |  | 100.0         
|Telekommunikationsgesellschaft mbH  TKG Eisenhüttenstadt |  | 100.0         
|TV Halle Fernsehgesellschaft mbH                          |  | 25.0          
|MDF.1 Lokales Fernsehen Magdeburg GmbH                    |  | 24.5          
|primaTV broadcasting
GmbH(4)                              |  | 100.0         

|                                           |  |               
|------------------------------------------ |  | --------------
|                                           |  | % of Ownership
|                                           |  |               
|Organized under the law of The Netherlands |  |               
|PrimaCom Netherlands Holding B.V.          |  | 100.0         
|N.V. Multikabel                            |  | 99.9          
|Communikabel Holding B.V.                  |  | 99.9          
|Noord-Holland Digitaal B.V.                |  | 99.9          
|Mediakabel B.V.                            |  | 15.7          
|Educatief Net B.V.                         |  | 5.1           
|Communikabel N.V.                          |  | 99.9          
|QuickNet B.V.                              |  | 99.9          



|(1) |  | pending merger with PrimaCom Region Dresden GmbH & Co. KG as of
January 10.2001                          
|--- |  | ---------------------------------------------------------------------------------------------------------
|   
|(2) |  | pending merger with PrimaCom Kabelbetriebsgesellschaft mbH & Co.
KG Region Leipzig as of December 31.2002
|   
|(3) |  | pending merger with PrimaCom Management GmbH as of December 31
2002                                      
|   
|(4) |  | ownership hold by trustee                                                                                

D. Property and Equipment

In connection with the operation of our cable networks in Germany, we own
or lease property for signal reception sites (antenna towers and head-ends) and
business offices. Our central operation center is located in Mainz, Germany.
We operate our Wiesbaden/Mainz regional network from an office building of
approximately 3,000 square meters that we own in Mainz.

In connection with the operation of our cable networks in The Netherlands,
we own real property for signal distribution sites.

In Germany and The Netherlands we own substantially all of our cable and
broadband networks and we lease the remaining fiber optic cable pursuant to
long-term leases. Our owned cables and those we lease generally are buried in
underground ducts or trenches. The physical components of our networks require
maintenance and periodic upgrading to keep pace with technological advances.

We believe that our properties, both owned and leased, are in good
condition and are suitable and adequate for our business operations. All of our
operating assets are pledged as collateral under the senior secured credit
facility.

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ITEM 5. OPERATING AND FINANCIAL REVIEW AND PROSPECTS



| | A. | Operating Results
| | -- | -----------------

Overview

The following discussion refers to our financial performance for the year
ended December 31, 2002 as compared to our financial performance for the year
ended December 31, 2001 and our financial performance for the year ended
December 31, 2001 as compared to the financial performance for the year ended
December 31, 2000. It also contains a discussion of our liquidity and capital
resources from January 1, 2002 and for the near future.

We measure our financial performance in large part with reference to
EBITDA and adjusted EBITDA. We define EBITDA as earnings (loss) before
discontinued operations, extraordinary items, cumulative effect of change in
accounting principle, equity earnings (loss) in affiliate minority interests,
gain (loss) on disposal of fixed assets, net interest expense, income taxes and
depreciation and amortization. We define adjusted EBITDA as EBITDA plus
non-cash compensation expense related to share options and plus debt
refinancing expenses. Other participants in the cable and broadband industries
also use EBITDA and adjusted EBITDA, defined in a similar but often not exactly
comparable manner, as measures of performance. We believe that EBITDA and
adjusted EBITDA are useful supplements to net income and other income statement
data in understanding cash flows generated from operations that are available
for taxes, debt service and capital expenditures and because they are the most
commonly used measures in the cable television and broadband industries to
analyze and compare cable television and broadband companies on the basis of
operating performance, leverage and liquidity and because the senior secured
credit facility requires us to meet financial tests measured by EBITDA and
adjusted EBITDA. However, because these terms may not be defined by these
other companies in exactly the same way as defined by us or may reflect
different adjustments, analysis and comparison of these measures may be
difficult. EBITDA and adjusted EBITDA are not U.S. GAAP measures of income
(loss) or cash flow from operations and should not be considered as
alternatives to net income as an indication of its financial performance or as
alternatives to cash flow from operating activities as measures of its
liquidity. We include in this report a reconciliation of both EBITDA and
adjusted EBITDA to U.S. GAAP measures. We have historically maintained positive
EBITDA and adjusted EBITDA and expect to further grow those measures in the
future.

Significant Accounting Policies:The consolidated financial statements
are prepared in accordance with accounting principles generally accepted in the
United States, which require us to make estimates and assumptions (see Note 2
of the notes to the consolidated financial statements). We believe the
following significant accounting policies involve the most significant judgment
and estimates used in the preparation of our consolidated financial statements.

Impairment of property and equipment and intangible assets:In order to
assess impairment of property and equipment and intangible assets under U.S.
GAAP, we apply Statement Financial Accounting Standards (SFAS) No. 144,
Accounting for the Impairment or Disposal of Long-Lived Assets. If
management has concluded that impairment indicators exist, we test for
impairment by comparing the sum of the future undiscounted cash flows derived
from an asset or a group of assets to their carrying value. If the carrying
value of the asset or the group of assets exceeds the sum of the future
undiscounted cash flows, impairment is considered to exist and an impairment
charge will be measured and recorded. An impairment charge is measured using
an estimation of the assets fair value, typically using a discounted cash flow
method. During 2002, we recorded an impairment charge of 12,944,000 related
to cable network assets in our German segment compared to 7,654,000 related
goodwill in the German segment during 2001. In 2001, the Company applied the
requirements of SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed of, to test for impairment.

The identification of impairment indicators, the estimation of future cash
flows and the determination of fair values for assets or groups of assets
requires management to make significant judgments concerning the identification
and validation of impairment indicators, expected cash flows and applicable
discount rates. If actual results differ from these estimates, or if we adjust
these estimates in future periods, operating results could be significantly
affected. In calculating fair value based on discounted cash flows, the Company
makes significant estimates regarding the number of years of future cash flows,
discount rates, and revenues, costs, and expenses in

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future periods. The number of years of future cash flows was based on the
remaining useful life of the underlying assets, discount rates were determined
based on relevant market data and revenues, costs and expenses were based on
the Companys business plan.

Goodwill:In order to assess impairment of goodwill under U.S. GAAP, we
apply SFAS No. 142, Goodwill and Other Intangibles, which we adopted on January
1, 2002. SFAS 142, requires that goodwill (and intangible assets deemed to
have indefinite lives) no longer be amortized, but rather is tested annually
for impairment or more frequently if events and circumstances indicate that the
goodwill might be impaired. An impairment loss is recognized to the extent
that the carrying amount of goodwill exceeds its fair value.

In 2002, we were required to perform two impairment tests of goodwill.
The first impairment test performed as of January 1, 2002 indicated that
goodwill was not impaired. The second impairment test performed as of October
1, 2002, also indicated goodwill was not impaired.

In performing the impairment tests, the Company calculated the fair value
of goodwill based on estimated discounted cash flows, which requires management
to make significant judgments concerning the expected cash flows and applicable
discount rates. If actual results differ from these estimates, or if we adjust
these estimates in future periods, operating results could be significantly
affected. In calculating fair value based on discounted cash flows, the Company
makes significant estimates regarding the number of years of future cash flows,
discount rates, and revenues, costs, and expenses in future periods. The number
of years of future cash flows and discount rates were determined based on
relevant market data and revenues, costs and expenses were based on the
Companys business plan.

Deferred Taxes:Under U.S. GAAP, deferred taxes are recorded for
temporary differences, including the future tax benefit of net operating loss
carryforwards. In addition, under U.S. GAAP, we record a valuation allowance
to reduce our net deferred tax assets to the amount that will more likely than
not be realized. We have considered, for U.S. GAAP purposes, future taxable
income and ongoing prudent and feasible tax planning strategies in assessing
the need for a valuation allowance. In the event we were to determine that we
would be able to realize our deferred tax asset in the future in excess of
their recorded amounts, an adjustment to the deferred tax asset would increase
income in the period in which such determination was made. Similarly, should
we determine that it would not be able to realize all or part of our net
deferred tax asset in the future, an adjustment to the deferred tax asset would
be charged to expense in the period such determination was made. The
evaluation of net deferred tax assets requires considerable management
judgment.

Years ended December 31, 2002 and 2001

Revenues.Revenues primarily include monthly subscription fees and to a
lesser extent installation and connection fees related to our basic analog
cable television service and high speed Internet access. Revenue also includes
monthly subscription fees and to a lesser extent installation and connection
fees related to our digital television service, which in turn includes revenue
from both near-video and video-on-demand services. We also earn monthly
subscription fees for data communication services provided to small-and
medium-sized businesses and schools in The Netherlands. Other notable sources
of revenue include signal delivery fees charged to other cable television
operators for delivery of signal to their networks and carriage fees paid by
program producers for the distribution of their programs to our customers.

Revenues increased by 10.0% from 165,496,000 in 2001 to 182,042,000 in
2002. The primary factors which impacted revenue growth in 2001 were the
acquisition of QuickNet in The Netherlands in July 2001 and several small
networks in Germany in 2001, the increases of Internet services and rate
increases for basic analog cable television service.

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|                                                      |  |      |           |      |  |  |           | 
|----------------------------------------------------- |  | ---- | --------- | ---- |  |  | --------- | 
|                                                      |  | 2001 |           | 2002
|                                                      |  |      |           |     
|Homes passed by coaxial 450 MHz networks              |  |      | 1,404,049 |      |  |  | 1,409,934 | 
|Analog cable television subscribers served by 450 MHz |  |      | 904,452   |      |  |  | 915,026   | 
|Homes passed by fiber                                 |  |      | 560,819   |      |  |  | 568,024   | 
|Ready-for-service homes 862 MHz networks              |  |      | 440,883   |      |  |  | 457,088   | 
|Analog cable television subscribers served by 862 MHz |  |      | 400,042   |      |  |  | 390,743   | 
|Digital television subscribers                        |  |      | 11,875    |      |  |  | 11,628    | 
|Internet subscribers                                  |  |      | 34,078    |      |  |  | 53,545    | 
|Data communication subscribers                        |  |      | 788       |      |  |  | 832       | 
|                                                      |  |      |           |      |  |  |           | 
|Total revenue generating units                        |  |      | 1,351,235 |      |  |  | 1,371,774 | 
|                                                      |  |      |           |      |  |  |           | 

For the year ended December 31, 2001, Multikabel contributed 45,168,000
to our revenues. For the year ended December 31, 2002, Multikabel made a
contribution to revenues of 60,451,000. Increases in basic cable television
rates and customers, high-speed Internet access rates and customers, data
communication customers and other revenue account for the growth in
Multikabels revenues. In Germany, we increased revenues by 1.0% from
120,328,000 in 2001 to 121,591,000 in 2002. Rate increases account for the
small growth in Germany.

In relation to product segmentation, revenues contributed by our basic
analog cable television product increased by 3.3% from 145,440,000 in 2001 to
150,242,000 in 2002. Multikabel contributed 33,510,000 of analog cable
television revenues in 2002 compared to 31,018,000 in 2001. The organic
growth was derived from a small increase in average analog cable television
subscribers of 5,493 from 300,852 in 2001 to 306,345 in 2002 and an increase in
average revenue per subscriber from 8.60 to 9.20. Revenues derived from basic
analog cable television in Germany increased by 2.0% from 114,422,000 to
116,732,000. Increased monthly average revenues per subscriber from 9.46 in
2001 to 9.73 in 2002 accounts for the growth in analog revenues. We expect the
number of subscribers taking the basic analog cable television service to
remain stable over the coming years in The Netherlands and Germany.
Significant increases would only result from acquisitions in Germany and/or The
Netherlands, which we do not anticipate due to our financial constraints. We
expect to achieve single digit revenue growth through increasing rates for the
service to coincide with inflation or improvements in the product offering.

Revenues from high-speed Internet access services increased from
6,755,000 in 2001 to 19,128,000 in 2002. The primarily factors responsible
for the increase were the inclusion of Multikabels Internet subsidiary
QuickNet for a full year (acquired in July 2001) and increases in the number of
subscribers taking the service as well as rates charged for the service.

For the year ended 2001 Multikabel contributed 5,732,000 of high-speed
Internet access revenues compared to 17,711,000 in 2002. Strong growth in the
subscriber base for this product also made a significant contribution. Total
high-speed residential Internet subscribers in The Netherlands increased by
74.7% from 27,687 at December 31, 2001 to 48,917 at December 31, 2002.
Penetration of high-speed Internet access customers from ready-for-service
homes increased from 8.7% in 2001 to 15.0% in 2002. The other significant
contributor to revenue growth from the high-speed Internet access service in
Multikabel was the increase in average monthly revenue per subscriber from
22.41 in 2001 to 39.21 in 2002. The primary factor responsible for this
increase was the acquisition of QuickNet. Prior to July 1, 2001 QuickNet
provided high-speed Internet access services to our customers through an
affiliation agreement. Under the terms of this agreement, QuickNet directly
served the high-speed Internet customers and paid Multikabel approximately
8.50 per customer for the customers QuickNet served on our network. After our
acquisition of QuickNet on July 1, 2001, the affiliation agreement was
cancelled and Multikabel began to serve these customers directly. In addition
to this structural change, we were also able to increase the monthly rates for
the high-speed Internet service.

In Germany, revenues contributed from the high-speed Internet access
service increased by 38.5% from 1,023,000 in 2001 to 1,417,000 in 2002. The
primary factor was our increase in average customers provided with high-speed
Internet. At December 31, 2001, we served 6,391 Internet customers, which
consisted of 3,368 high-speed Internet customers and 3,023 dial-up customers
compared to 4,628 high-speed Internet customers at December 31, 2002. The
reduction in total internet customers was due to the closure of our dial up
business, which significantly reduced our cost structure, and enabled us to
focus our resources during the period on our broadband internet

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product line. Penetration of high-speed Internet access customers from
ready-for-service homes increased from 2.7% at December 31, 2001 to 3.7% at
December 31, 2002.

We expect high-speed Internet access subscribers and therefore penetration
to ready-for-service homes to continue to increase at strong growth rates over
the next two to five years in both The Netherlands and Germany. Average monthly
revenue per subscriber is expected to remain close to the current level.
Revenue growth from this sector should therefore remain strong over the next
two to five years.

Digital television revenues increased from 941,000 in 2001 to 1,270,000
in 2002. Multikabel contributed digital television revenues of 557,000 for
2002 compared to 712,000 for the year 2001. At December 31, 2001, Multikabel
served 5,102 digital television subscribers, compared to 4,088 at December 31,
2002. The decrease in revenues and subscribers is mainly a result of decreased
marketing attention and declining interest from our potential customers, mainly
due to the competition from our analog packages. We do not expect a substantial
growth in the digital television revenues in the near future, although we still
believe in the migration from analog towards digital. In Germany, revenue from
digital television increased from 229,000 in 2001 to 713,000 in 2002. An
increase in subscribers from 6,773 at December 31, 2001 to 7,540 at December
31, 2002 accounts for the growth. The average monthly revenue per digital
subscriber in Germany was 8.06 for 2002 compared to 6.24 for 2001. At
December 31, 2002 the penetration rate for digital subscribers to
ready-for-service homes was 6.0%. The growth in digital television subscribers
has not met our expectations at this point. We are constantly reviewing the
product to either make it more attractive to consumers or to reduce the cost
associated with delivering the product.

In The Netherlands, we receive revenues for data communication services we
provide to small-and medium-sized businesses and schools. Multikabel served
approximately 192 small-and medium-sized businesses and 580 schools at the end
of 2001, which contributed 3,559,000 of revenue for the year ended December
31, 2001. At year end 2002, Multikabel served 221 small- and medium- sized
businesses and 611 schools, which contributed 4,770,000 to revenue in 2002. We
supply 100% of the schools. We are currently serving a very small percentage of
the small-and medium-sized businesses in our franchise area. Throughout 2002,
we faced some development pressures due to the economic circumstances in the
business market. In the last quarter of 2002 we faced some positive
developments and the number of quotations and orders grew. We expect this
product offering to continue to grow at good rates for the next few years as
our penetration in the market of small- and medium-sized business increases.

Other revenues decreased by 2,169,000 from 8,801,000 in 2001 to
6,632,000 in 2002. Other revenue includes signal delivery fees charged to
other cable television operators for delivery of signal to their networks which
increased from 196,000 in 2001 to 246,000 in 2002. Carriage fees charged to
programmers for the distribution of their programs decreased from 1,904,000 in
2001 to 1,672,000 in 2002. Miscellaneous revenue, which is made up of several
items, decreased from 6,700,000 in 2001 to 4,714,000 in 2002.

The following table reconciles average revenue per subscriber (ARPU) to
our U.S. GAAP consolidated financial statements:

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|                          |          |  |         |           |                 |  |         |         |      |  |        |         |      |  |        |         |  |  |         |           |  |  |         |           | 
|------------------------- | -------- |  | ------- | --------- | --------------- |  | ------- | ------- | ---- |  | ------ | ------- | ---- |  | ------ | ------- |  |  | ------- | --------- |  |  | ------- | --------- | 
|                          |          |  | Germany |           | The Netherlands |  | Total  
|                          |          |  |         |           |                 |  |        
|                          |          |  | 2001    |           | 2002            |  | 2001    |         | 2002 |  | 2001   |         | 2002
|                          |          |  |         |           |                 |  |         |         |      |  |        |         |     
|Revenues ( in thousands) |          |  |         |           |                 |  |         |         |      |  |        |         |      |  |        |         |  |  |         |           |  |  |         |          
|                          | Analog   |  |         | 114,422   |                 |  |         | 116,732 |      |  |        | 31,018  |      |  |        | 33,510  |  |  |         | 145,440   |  |  |         | 150,242   | 
|                          | Digital  |  |         | 229       |                 |  |         | 713     |      |  |        | 712     |      |  |        | 557     |  |  |         | 941       |  |  |         | 1,270     | 
|                          | Internet |  |         | 1,023     |                 |  |         | 1,417   |      |  |        | 5,732   |      |  |        | 17,711  |  |  |         | 6,755     |  |  |         | 19,128    | 
|                          | Other    |  |         | 4,654     |                 |  |         | 2,729   |      |  |        | 7,706   |      |  |        | 8,673   |  |  |         | 12,360    |  |  |         | 11,402    | 
|                          |          |  |         |           |                 |  |         |         |      |  |        |         |      |  |        |         |  |  |         |           |  |  |         |           | 
|                          |          |  | 120,328 |           |                 |  | 121,591 |         |      |  | 45,168 |         |      |  | 60,451 |         |  |  | 165,496 |           |  |  | 182,042 |          
|                          |          |  |         |           |                 |  |         |         |      |  |        |         |      |  |        |         |  |  |         |           |  |  |         |           | 
|Average subscribers       |          |  |         |           |                 |  |         |         |      |  |        |         |      |  |        |         |  |  |         |           |  |  |         |          
|                          | Analog   |  |         | 1,007,946 |                 |  |         | 999,284 |      |  |        | 300,562 |      |  |        | 303,568 |  |  |         | 1,308,508 |  |  |         | 1,302,852 | 
|                          | Digital  |  |         | 3,058     |                 |  |         | 7,373   |      |  |        | 4,665   |      |  |        | 4,494   |  |  |         | 7,723     |  |  |         | 11,867    | 
|                          | Internet |  |         | 5,971     |                 |  |         | 6,134   |      |  |        | 21,315  |      |  |        | 37,646  |  |  |         | 27,286    |  |  |         | 43,780    | 
|ARPU (in )               |          |  |         |           |                 |  |         |         |      |  |        |         |      |  |        |         |  |  |         |           |  |  |         |          
|                          | Analog   |  |         | 9.46      |                 |  |         | 9.73    |      |  |        | 8.60    |      |  |        | 9.20    |  |  |         | 9.26      |  |  |         | 9.61      | 
|                          | Digital  |  |         | 6.24      |                 |  |         | 8.06    |      |  |        | 12.72   |      |  |        | 10.33   |  |  |         | 10.15     |  |  |         | 8.92      | 
|                          | Internet |  |         | 14.28     |                 |  |         | 19.25   |      |  |        | 22.41   |      |  |        | 39.21   |  |  |         | 20.63     |  |  |         | 36.41     | 

Operations.Operations primarily include signal delivery fees paid to
Kabel Deutschland and private successor network operators in Germany which now
include Kabel Deutschland for city connections, Internet feed, copyright
royalty expense, film license payments, labor and materials relates to the
repair and maintenance of our networks and other repair and maintenance
expenses relating to our networks. Operating costs increased by 9.7% from
44,195,000 in 2001 to 48,460,000 in 2002. The primary factor responsible for
the increase is the growth of the activities in The Netherlands, including the
QuickNet acquisition in July 2001, which incurred operating costs of
approximately 14,935,000 in 2002 compared to 11,605,000 in 2001. In our
German operations, operating costs increased by 2.9% from 32,590,000 in 2001
to 33,525,000 in 2002. The increases in signal delivery fees and repair and
maintenance costs were the primary reasons for this increase.

In total, operating costs directly associated with digital television,
high-speed Internet access and data communications services were approximately
10,931,000 in 2002 compared to 6,486,000 in 2001. Operating costs associated
with analog cable television were approximately 37,529,000 in 2002 compared to
37,709,000 in 2001. As a percentage of revenues, operating costs decreased
slightly from 26.7% in 2001 to 26.6% in 2002.

Selling, general and administrative.Selling, general and administrative
expenses primarily include salaries and wages of personnel directly involved in
the sales, general and administrative functions of our operating companies,
expenses of maintaining our operating offices, marketing expenses, costs of
consultants used to support our operating activities, automobile expenses,
certain cash management expenses, billing expenses, office supplies and other
expenses associated with the operation of our networks and services. Selling,
general and administrative expenses increased by 3.9% from 37,630,000 in 2001
to 39,101,000 in 2002. In the year ended December 31, 2002, selling, general
and administrative expenses related to Multikabel was 12,809,000 compared to
9,900,000 for 2001. In our German operations, selling, general and
administrative expenses decreased by 5.2% from 27,730,000 in 2001 to
26,292,000 in 2002.

Approximately 13,865,000 or 35.5% of our selling, general and
administrative expenses incurred in 2002 are directly related to our digital
television and high-speed Internet access businesses compared to 13,688,000 in
2001, the remaining 25,236,000 of selling, general and administrative expenses
compared to 23,942,000 in 2001 relate to the analog cable television business
in 2002. As a percentage of revenue, selling, general and administrative
expenses decreased slightly, from 22.7% in 2001 to 21.5% in 2002. We
implemented certain organizational changes in 2002 in order to control our
selling, general and administrative expenses. As a result, we expect selling,
general and administrative expenses to decrease as a percentage in revenues in
the future.

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Corporate Overhead.Corporate overhead consists of personnel expenses of
senior management, financial accounting, information technology, product
development, licensing fees paid for our billing, subscriber and financial
accounting systems, the cost of our corporate office and legal and accounting
expenses related to the operation of our corporate office. Non-cash
compensation expense related to our stock option plans is also included in
corporate overhead.

Corporate overhead decreased by 13.1% from 14,929,000 in 2001 to
12,976,000 in 2002. Non-cash compensation expenses associated with our stock
option plan decreased from 3,853,000 in 2001 to 1,377,000 in 2002. The
primary factor responsible for the decline was the expiration of the vesting
period of options issued at the IPO in February 1999 and a reduction in
personnel and associated options. In aggregate, non-cash compensation expense
accounted for 10.6% of total corporate overhead in 2002. Excluding the charge
for non-cash compensation expenses, corporate overhead increased by 523,000
from 11,076,000 in 2001 to 11,599,000 in 2002. As a percentage of revenue,
corporate overhead declined from 9.0% in 2001 to 7.1% in 2002. We intend to
keep the growth of corporate overhead expenses substantially below the growth
in revenue, and, therefore, we expect corporate overhead as a percentage of
revenues to continue to decline.

Debt refinancing.Debt refinancing was 2,432,000 in 2002 and relates to
advisory fees and legal expenses incurred in connection with the conversion of
the working capital facility into the convertible second secured loan
agreement.

Depreciation and amortization.Depreciation and amortization decreased by
18.9% from 118,360,000 in 2001 to 95,943,000 in 2002 primarily due to the new
rules on accounting for goodwill and other intangible assets. Under the new
rules beginning on January 1, 2002, goodwill is no longer amortized but is
subject to annual impairment testing. In 2002, we wrote-down in accordance with
SFAS No. 144 our long-lived assets to fair value by 12,944,000, which is
included in depreciation expense. In 2001, we wrote-down in accordance with
SFAS No. 121, goodwill to fair value by 7,654,000, which is included in
amortization expense.

Operating loss.Operating loss decreased by 32,748,000 from 49,618,000
in 2001 to 16,870,000 in 2002. The primary factors were the reduction in
non-cash compensation expenses related to our stock option plan and the
improved operating performance, which is primarily attributed to the high-speed
Internet access sector. Our digital television and high-speed Internet access
business segments contributed approximately 25,362,000 of revenues and
approximately 24,796,000 of costs and expenses in 2002, compared to
11,255,000 of revenues and 20,174,000 of costs and expenses, respectively, in
2001. Consequently these new services contributed and will contribute on a
growing degree positive EBITDA to our financial results.

Interest expense.Interest expense includes interest on our revolving
credit and convertible second secured borrowings, capital lease obligations and
other borrowings, changes in the fair market value of our interest rate
derivatives, payment of unused facility fees and the amortization of debt
issuance fees paid to obtain borrowings.

In total, average indebtedness increased from 797,011,000 in 2001 to
885,511,000 in 2002. The primary factors responsible for the increase in
average indebtedness were the payment of financing fees, increased interest
expenses related to the cash and the non-cash interest on the convertible
second secured borrowings, the payments of deferred purchase obligations and
the investments in selective upgrades of our networks in Germany. Interest
expense increased by 46,653,000 or 74.3% from 62,768,000 in 2001 to
109,421,000 in 2002. The primary factors responsible for the increase were the
write-off of approximately 12,264,000 of capitalized finance fees associated
with the reduction of the 1.0 billion revolving credit facility commitment by
375.0 million and the increased interest expense associated with the 375.0
million convertible second secured credit facility. The non-cash interest
expense due to the decrease in the fair value of our interest rate caps and
collars during 2002 was 860,000 compared to an expense of 2,906,000 in 2001.

The average amount outstanding under the revolving credit agreement
decreased from approximately 780,471,000 in 2001 to 559,501,000 in 2002,
primarily as a result of the repayment funded with borrowings under the
convertible second secured facility. The average cash interest rate on the
revolving credit bank borrowings decreased from 6.90% in 2001 to 5.70% in 2002.

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The convertible second secured bank facility, which was entered into on
March 26, 2002 had an initial borrowing of 375.0 million. The accrued non-cash
interest was 31,079,000 at December 31, 2002. The average outstanding balance
between March 26, 2002 and December 31, 2002 was 390,463,000. There were no
borrowings under this facility in 2001. The average interest rate on the
convertible second secured borrowings was 18.3% during the period from March
26, 2002 through December 31, 2002. Interest expense includes non-cash
write-off of capitalized finance fees and related advisory fees of 12,264,000
related to the modification of the 1.0 billion revolving credit facility.
Interest expense also includes non-cash amortization of other capitalized
finance and legal fees of 6,821,000 and non-cash interest expense on the
convertible second secured borrowings of 31,079,000.

Other income (expense). Early in 2002, we agreed to sell our remaining
investment in MainzKom, a local city carrier in the city of Mainz. At December
31, 2001, we wrote-down 1,452,000 of the equity investment and related note
receivable to net realizable value based on the subsequent sale of the
investment and forgiveness of debt in 2002. In 2001, the Company wrote-off
capitalized costs of 4,938,000 related to the unsuccessful merger with UPC
Germany and the cancelled high-yield note offering. In addition, we recorded
other income of 741,000 in 2001 relating to a partial recovery on a third
party note which originated from the sale of certain non-strategic cable
television subscribers in 1998. In 2002, we wrote-off capitalized costs and
expenses related to non-operating business of 993,000.

Loss from continuing operations before income taxes and other items.Loss
from operations before income taxes and other items increased by 9,249,000
from 118,035,000 in 2001 to 127,284,000 in 2002 for the reasons discussed in
the above sections.

Income tax benefit (expense).Income tax expense of 10,980,000 was
recorded in 2002 compared to an income tax benefit of 15,381,000 in 2001,
primarily related to additional valuation allowances related to the net
deferred tax assets in Germany.

Equity loss in affiliates.Equity loss in affiliates of 420,000
represents our share of the 2001 losses recorded by MainzKom.

Loss from operations before extraordinary loss and cumulative effect of
change in accounting principles.Loss from operations before extraordinary
loss and cumulative effect of changes in accounting principle increased from
103,162,000 in 2001 to 138,327,000 in 2002 for the reasons discussed in the
above sections.

Cumulative effect of change in accounting principle.In January 2001, the
Company recorded a charge of 946,000 to cumulative effect of change in
accounting principle upon the adoption of SFAS 133, Accounting for Derivatives
and Hedging Activities.

Net loss.Net loss increased from 104,108,000 in 2001 to 138,327,000 in
2002. The primary factor for the increase in the net loss was the increase in
non-cash depreciation and amortization coupled with the increase in interest
expense which exceeds the increase in results from operations. We expect the
future loss to decline as a result of continued improvement in our analog cable
and broadband products and services.

EBITDA/Adjusted EBITDA. In addition to other measurements, some of which
are reflected in its statement of operations data, we measure our financial
performance by EBITDA and adjusted EBITDA. We define EBITDA as earnings (loss)
before extraordinary items, cumulative effect of change in accounting
principle, discontinued operations, minority interests, net interest expense,
income taxes and depreciation and amortization. We define adjusted EBITDA as
EBITDA plus non-cash compensation expense related to stock options plus debt
refinancing expenses. We believe that EBITDA and adjusted EBITDA are meaningful
measures of performance because these are the most commonly used measures in
the cable television and broadband industries to analyze and compare cable
television and broadband companies on the basis of operating performance,
leverage and liquidity. EBITDA and adjusted EBITDA are not U.S. GAAP measures
of income (loss) or cash flow from operations and should not be considered as
alternatives to net income as an indication of our financial performance or as
alternatives to cash flow from operating activities as a measure of liquidity.
EBITDA increased from 68,742,000 for 2001 to 79,073,000 for 2002, primarily
as a result of the positive contribution of high-speed Internet access services
compared to the negative impact in the year 2001. Adjusted EBITDA increased
from 72,595,000 in 2001 to 82,882,000 in 2002.

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As a percent of revenue, EBITDA and adjusted EBITDA improved from 41.6% and
43.9% in 2001 to 43.4% and 45.5% in 2002 respectively. It is the Companys goal
to continue to grow its EBITDA and adjusted EBITDA while preserving its margins
in The Netherlands and further improving them in Germany its margins.

Years ended December 31, 2001 and 2000

Revenues.Revenues primarily include monthly subscription fees and to a
lesser extent installation and connection fees related to our basic analog
cable television service. Revenue also includes monthly subscription fees and
to a lesser extent installation and connection fees related to our high speed
Internet access service and digital television service, which in turn includes
revenue from both near-video and video-on-demand services. We also earn monthly
subscription fees for data communication services provided to small-and
medium-sized businesses and schools in The Netherlands. Other sources of
revenue include signal delivery fees charged to other cable television
operators for delivery of signal to their networks, carriage fees paid by
program producers for the distribution of their programs to our customers, and
other.

Revenues increased by 33.1% from 124,343,000 in 2000 to 165,496,000 in
2001. The primary factors which impacted revenue growth in 2001 were the
acquisition of Multikabel in The Netherlands in September 2000, QuickNet in The
Netherlands in July 2001 and several small networks in Germany, the increases
of Internet and digital services and rate increases for basic analog cable
television service.

|                                                      |  |      |           |      |  |  |           | 
|----------------------------------------------------- |  | ---- | --------- | ---- |  |  | --------- | 
|                                                      |  | 2000 |           | 2001
|                                                      |  |      |           |     
|Homes passed by coaxial 450 MHz networks              |  |      | 1,393,870 |      |  |  | 1,404,049 | 
|Analog cable television subscribers served by 450 MHz |  |      | 908,388   |      |  |  | 904,452   | 
|Homes passed by fiber                                 |  |      | 523,000   |      |  |  | 560,819   | 
|Ready-for-service homes 862 MHz networks              |  |      | 412,538   |      |  |  | 440,883   | 
|Analog cable television subscribers served by 862 MHz |  |      | 391,538   |      |  |  | 400,042   | 
|Digital television subscribers                        |  |      | 4,570     |      |  |  | 11,875    | 
|Internet subscribers                                  |  |      | 20,489    |      |  |  | 34,078    | 
|Data communication subscribers                        |  |      | 200       |      |  |  | 788       | 
|                                                      |  |      |           |      |  |  |           | 
|Total revenue generating subscribers                  |  |      | 1,325,185 |      |  |  | 1,351,235 | 
|                                                      |  |      |           |      |  |  |           | 

We acquired Multikabel on September 18, 2000. For the year ended December
31, 2000, we only included three months of Multikabels results of operations
beginning October 1, 2000. For the year ended December 31, 2000, Multikabel
contributed 8,838,000 to our revenues. For the year ended December 31, 2001,
Multikabel made a full years contribution to revenues of 45,168,000. For
comparative purposes, Multikabel recorded revenue for the entire year ended
December 31, 2000 of 33,359,000. Increases in basic cable television rates and
customers, high-speed Internet access rates and customers, digital television
customers, data communication customers and other revenue account for the
growth in Multikabels revenues. In Germany, we increased revenues by 4.2% from
115,505,000 in 2000 to 120,328,000 in 2001. Increases in basic cable
customers through acquisitions and increases in high-speed Internet access and
digital television customers, coupled with rate increases, account for the
growth.

In relation to product segmentation, revenue contributed by our basic
analog cable television product increased by 24.4% from 116,880,000 in 2000 to
145,440,000 in 2001. The primary factor responsible for the growth was the
inclusion of Multikabel for a full year in 2001. Multikabel contributed
31,018,000 of analog cable television revenue in 2001 compared to 7,268,000
in 2000. For comparison purposes, Multikabel generated 28,658,000 of basic
analog cable television revenue for the full year ended December 31, 2000. The
organic growth was derived from a small increase in average analog cable
television subscribers of approximately 4,314 from 296,538 in 2000 to 300,852
and an increase in average monthly revenue per subscriber from 8.20 to 8.60.
Revenue derived from basic analog cable television in Germany increased by 4.4%
from 109,612,000 to 114,422,000. An increase in average basic subscribers
under management of approximately 51,279 offset a decline in average monthly
revenue per subscriber from 9.60 in 2000 to 9.46 in 2001. The increases in
average subscribers under management resulted primarily from acquisition of
small cable television networks in Germany in 2000 and to a lesser extent in
2001. The decline in average monthly revenue per subscriber was the result of

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acquiring networks which had lower average revenue per subscriber at the time
of acquisition than our other networks.

Revenue from high-speed Internet access services increased from 745,000
in 2000 to 6,755,000 in 2001. The primarily factors responsible for the
increase were the inclusion of Multikabel for a full year, the acquisition of
QuickNet on July 1, 2001 and increases in the number of subscribers taking the
service and rates charged for the service.

For the year ended 2000 Multikabel contributed 370,000 of high-speed
Internet access revenues compared to 5,732,000 in 2001. For comparison
purposes, Multikabel generated 802,000 of high-speed Internet revenues for the
full year ended December 31, 2000. Strong growth in the subscriber base for
this product also made a significant contribution. Total high-speed Internet
subscribers in The Netherlands increased by 85.3% from 14,938 at December 31,
2000 to 27,687 at December 31, 2001. Penetration of high-speed Internet access
customers from ready-for-service homes increased from 5.0% in 2000 to 8.7% in
2001. The other significant contributor to revenue growth from the high-speed
Internet access service in Multikabel was the increase in average monthly
revenue per subscriber from 8.22 in 2000 to 22.41 in 2001. The primary factor
responsible for this increase was the acquisition of QuickNet. Prior to July 1,
2001 QuickNet provided high-speed Internet access services to our customers
through an affiliation agreement. Under the terms of this agreement, QuickNet
directly served the high-speed Internet customers and paid Multikabel
approximately 8.50 monthly per customer for the customers QuickNet served on
our network. After our acquisition of QuickNet on July 1, 2001, the affiliation
agreement was cancelled and Multikabel began to provide services to these
customers directly. In addition to this structural change, we were also able to
increase the monthly rates for the high-speed service.

In Germany, revenue contributed from the high-speed Internet access
service increased by 172.8% from 375,000 in 2000 to 1,023,000 in 2001. The
primary factor was our increase in an average number of customers. At December
31, 2000, we served 5,551 customers (including 4,240 dial-up customers)
compared to 6,391 (including 3,023 dial-up customers) at December 31, 2001.
Penetration of high-speed Internet access customers from ready-for-service
homes increased from 1.1% at December 31, 2000 to 2.7% at December 31, 2001.

Digital television revenue increased from 103,000 in 2000 to 941,000 in
2001. The increase came primarily from a full years contribution of Multikabel
in 2001 and significant growth in the subscriber base in The Netherlands and
Germany. Multikabel contributed digital television revenue of 87,000 for one
quarter of 2000 and 712,000 for the full year 2001. For comparison purposes,
Multikabel recorded full year digital television revenues of 116,000 in 2000.
At December 31, 2000, Multikabel served 4,230 digital television subscribers,
compared to 5,102 at December 31, 2001. A full years contribution from these
subscribers coupled with subscriber growth and an increase in average monthly
revenue per subscriber from 7.15 in 2000 to 12.72 in 2001 account for the
strong revenue growth for Multikabels digital product. In Germany, revenue
from digital television increased from 16,000 in 2000 to 229,000 in 2001. An
increase in subscribers from 339 at December 31, 2000 to 6,773 at December 31,
2001 accounts for the growth. The average monthly revenue per digital
subscriber in Germany was 6.24 for 2001. At December 31, 2001 the penetration
rate for digital subscribers to ready-for-service homes was 5.47%.

In The Netherlands, we receive revenues for data communication services we
provide to small-and medium-sized businesses and schools. Multikabel served
approximately 90 small-and medium-sized businesses and 110 schools at the end
of 2000, which contributed 424,000 of revenues for the fourth quarter of the
year ended December 31, 2000. At year end 2001, Multikabel served 192 small-
and medium- sized businesses and 580 schools, which contributed 3,559,000 to
revenues in 2001. We serve 100% of the schools. We are currently serving a very
small percentage of the small-and medium-sized businesses in our franchise
area.

Other revenues increased by 2,610,000 from 6,191,000 in 2000 to
8,801,000 in 2001. Other revenues include signal delivery fees which increased
from 163,000 in 2000 to 196,000 in 2001. Carriage fees charged to programmers
for the distribution of their programs increased to 1,904,000 in 2001 from
393,000 for one quarter in 2000. Miscellaneous revenues, which are made up of
several items, increased from 5,635,000 in 2000 to 6,700,000 in 2001. The
primary factor responsible for the growth was the inclusion of Multikabel for a
full year in 2001.

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Operations.Operations primarily include signal delivery fees paid to
Kabel Deutschland and private successor network operators in Germany for city
connections, Internet feed, copyright royalty expense, film license payments,
labor and materials relate to the repair and maintenance of our networks and
other repair and maintenance expenses related to our networks. Operations
costs increased by 43.5% from 30,794,000 in 2000 to 44,195,000 in 2001. The
primary factor responsible for the increase was the acquisition of Multikabel
and QuickNet, which incurred operating costs of approximately 11,605,000 in
2001 compared to 2,130,000 in 2000, which represented only one quarter of
Multikabels operations from October 1, 2000 to December 31, 2000. For
comparative purposes, Multikabel recorded operations costs for the entire year
ended December 31, 2000 of 8,443.000. In our German operations, operating
costs increased by 13.7% from 28,664,000 in 2000 to 32,590,000 in 2001. The
acquisition of small networks in Germany coupled with increases in signal
delivery fees, copyright royalties, labor and repair and maintenance costs were
the primary reasons for this increase.

In total, operating costs directly associated with digital television,
high-speed Internet access and data communications services were approximately
6,486,000 in 2001 compared to 4,512,000 in 2000. Operating costs associated
with analog cable television were approximately 37,709,000 in 2001 compared to
26,282,000 in 2000. As a percentage of revenues, operating costs increased
from 24.8% in 2000 to 26.7% in 2001.

Selling, general and administrative.Selling, general and administrative
expenses primarily include salaries and wages of personnel directly involved in
the sales, general and administrative functions of our operating companies,
expenses of maintaining our operating offices, marketing expenses, costs of
consultants used to support our operating activities, automobile expenses,
certain cash management expenses, billing expenses, office supplies and other
expenses associated with the operation of our networks and services. Selling,
general and administrative expenses increased by 34.5% from 27,981,000 in 2000
to 37,630,000 in 2001. The primary factor responsible for the increase was
the inclusion of Multikabels results for a full year in 2001 compared to one
quarter in 2000, and the acquisition of QuickNet on July 1, 2001. In the year
ended December 31, 2001 we recorded selling, general and administrative
expenses related to Multikabel of 9,900,000 compared to 2,187,000 for one
quarter of 2000. For comparative purposes Multikabel recorded selling, general
and administrative expenses for the entire year ended December 31, 2000 of
8,052,000. In our German operations, selling, general and administrative
expenses increased by 7.9% from 25,794,000 in 2000 to 27,730,000 in 2001.

Approximately 13,688,000 or 36.4% of our selling, general and
administrative expenses incurred in 2001 are directly related to our digital
television and high-speed Internet access businesses. The remaining
23,942,000 of selling, general and administrative expenses relate to the
analog cable television business. As a percentage of revenue, selling, general
and administrative expenses increased slightly, from 22.5% in 2000 to 22.7% in
2001.

Corporate Overhead.Corporate overhead consists of personnel expenses of
senior management, financial accounting, information technology, legal staff,
investor relations and product development. We also record in corporate
overhead the non-cash compensation expense related to our stock option plans.
Corporate overhead also includes the licensing fees paid for our billing,
subscriber and financial accounting systems, the cost of our corporate office
and legal and accounting expenses related to the operation of our corporate
office.

Corporate overhead decreased by 13.3% from 17,219,000 in 2000 to
14,929,000 in 2001. Non-cash compensation expense associated with our stock
option plan increased slightly from 3,558,000 in 2000 to 3,853,000 in 2001.
Non-cash charges related to our current stock option plan decline in 2002 as
substantially all of the existing options have vested. In aggregate, non-cash
compensation expense accounted for 25.8% of total corporate overhead in 2001.
The cash component of corporate overhead decreased by 2,585,000 from
13,661,000 in 2000 to 11,076,000 in 2001. As a percentage of revenue,
corporate overhead declined from 13.8% in 2000 to 9.0% in 2001.

Depreciation and amortization.Depreciation and amortization increased by
56.7% from 75,530,000 in 2000 to 118,360,000 in 2001. The primary factors
responsible for the increase were the Multikabel and QuickNet acquisitions and
the recording of a full years depreciation and amortization expense of
Multikabel, the German acquisitions and the increase depreciation expense
related to significant capital expenditures associated with the upgrade of our
networks in Germany. Of the total depreciation and amortization expense in
2001, approximately 69,722.000 relates to the depreciation of fixed assets
either acquired or constructed and 48,638,000 relates to the

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amortization of goodwill and other intangible assets. The Süweda merger
in 1998 and the Multikabel acquisition in 2000 account for 19,959,000 and
15,782,000 of the amortization expense in 2001, respectively. In accordance
with SFAS 121 we wrote-down our long-lived assets to fair value by 7,654,000
in 2001, which is included in amortization expense.

Operating loss.Operating loss increased by 22,437,000 from 27,181,000
in 2000 to 49,618,000 in 2001. The primary factor responsible for the
increase in operating loss was the increase in non-cash depreciation and
amortization expense of 42,830,000, which includes the 7,654,000 write-down.
The other major factor was losses associated with our digital television,
high-speed Internet access and data communication services. In total, these
business products contributed approximately 11,255,000 of revenue and
approximately 20,174,000 of costs and expenses in 2001.

Interest expense.Interest expense includes the interest accrued on our
bank borrowings, capital lease obligations and other borrowings, changes in the
fair market value of our interest rate derivatives, payment of unused facility
fees and the amortization of front end finance fees paid to obtain bank
borrowings. Interest expense increased by 36,595,000 from 26,173,000 in 2000
to 62,768,000 in 2001. The primary factor was an increase in average bank
debt outstanding from approximately 428,127,000 in 2000 to 797,011,000 in
2001. The primary factors responsible for the increase in average indebtedness
were the acquisition of Multikabel, the acquisition of QuickNet, the
acquisition of several small cable television networks in Germany and the
investment in the upgrade of our networks in Germany.

Interest expense includes non-cash expenses of 2,906,000 due to the
decrease in the fair value of our interest rate caps and collars during 2001.
Interest expense also include non-cash amortization of finance fees of
3,556,000.

Other income (expense). Other income includes the gains and losses on the
sale of certain non-core businesses in 2000 and 2001, the write-off of
capitalized costs and expenses related to the failed UPC Germany merger and the
costs and expenses related to the proposed issuance of high yield notes which
have been cancelled in light of market conditions. In 2000, we recorded other
income of 1,690,000 related to the sale of 15.4% of our holdings in MainzKom,
a local city carrier in the City of Mainz. In 2002, we agreed to sell our
remaining investment in MainzKom. In 2001, we wrote-down 1,452,000 of an
equity investment and related note receivable to net realizable value based on
the subsequent sale of the investment and forgiveness of debt in 2002. The
Company wrote-off capitalized costs of 4,938,000 related to the unsuccessful
merger with UPC Germany and the cancelled high-yield note offering. In
addition we recorded other income of 741,000 in 2001 relating to a partial
recovery on a third party note which originated from the sale of certain
non-strategic cable television subscribers in 1998.

Loss from continuing operations before income taxes and other items.Loss
from operations before income taxes and other items increased by 66,371,000
from 51,664,000 in 2000 to 118,035,000 in 2001 for the reasons discussed in
the above sections.

Income tax benefit (expense).Income tax benefit of 15,381,000 was
recorded in 2001. This compares to a tax expense of 4,258,000 in 2000.

Equity loss in affiliates.Equity loss in affiliates of 420,000
represents our share of the 2001 losses recorded by MainzKom.

Loss from operations before extraordinary loss and cumulative effect of
change in accounting principles.Loss from operations before extraordinary
loss and cumulative effect of changes in accounting principle increased from
56,144,000 in 2000 to 103,162,000 in 2001 for the reasons discussed in the
above sections.

Extraordinary loss, net of income tax.Extraordinary loss of 8,180,000
recorded in 2000 related to the refinancing of the Companys credit facilities
to acquire Multikabel. We wrote off all unamortized fees and expenses on the
credit facilities we cancelled as part of this refinancing. No extraordinary
loss was recorded in 2001.

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Cumulative effect of change in accounting principle.In January 2001, the
Company recorded a charge of 946,000 to cumulative effect of change in
accounting principle upon the adoption of SFAS 133, Accounting for Derivatives
and Hedging Activities.

Net loss.Net loss increased from 64,324,000 in 2000 to 104,108,000 in
2001. The primary factor for the increase in the net loss was the increase in
non-cash depreciation and amortization coupled with the increase in interest
expense which exceeds the increase in results from operations.

EBITDA/Adjusted EBITDA. In addition to other measurements, some of which
are reflected in its statement of operations data, we measure our financial
performance by EBITDA and adjusted EBITDA. We define EBITDA as earnings (loss)
before extraordinary items, cumulative effect of change in accounting
principle, discontinued operations, minority interests, net interest expense,
income taxes and depreciation and amortization. We define adjusted EBITDA as
EBITDA plus non-cash compensation expense related to stock options plus debt
refinancing expenses. We believe that EBITDA and adjusted EBITDA are meaningful
measures of performance because these are the most commonly used measures in
the cable television and broadband industries to analyze and compare cable
television and broadband companies on the basis of operating performance,
leverage and liquidity. EBITDA and adjusted EBITDA are not U.S. GAAP measures
of income (loss) or cash flow from operations and should not be considered as
alternatives to net income as an indication of our financial performance or as
alternatives to cash flow from operating activities as a measure of liquidity.
EBITDA increased from 48,349,000 for 2000 to 68,742,000 for 2001, primarily
as a result of the inclusion of Multikabel for a full year in 2001, which
contributed 23,663,000 to 2001 EBITDA, and the German acquisitions and reduced
losses related to digital television and high-speed Internet access services.
Adjusted EBITDA increased from 51,907,000 in 2000 to 72,595,000 in 2001. As
a percent of revenue, EBITDA and adjusted EBITDA improved from 38.9% and 41.8%
in 2000 to 41.6% and 43.9% in 2001.



| | B. |  | Liquidity and Capital Resources
| | -- |  | -------------------------------

We have historically relied on three sources for necessary funding:



| |  |  | cash flow from operations,           
| | - |  | -------------------------------------
|
| |  |  | sale-lease back transactions, and    
|
| |  |  | borrowings under its bank facilities.

Net cash provided by operating activities amounted to 31,091,000 in 2002
compared to 15,321,000 in 2001.

For the year ended December 31, 2002, we used cash for investing
activities of 37,012,000 compared to 80,552,000 in 2001. Net cash provided by
financing activities amounted to 3,790,000 in 2002 and 63,521,000 in 2001.

Of the approximately 36,861,000 we invested in capital expenditures for
the year ended December 31, 2002, the majority was invested to improve the
technical standards of our network in The Netherlands in order to prepare for
the launch of telephony services and to replace electronic components and
improve the technical standards of our networks in Germany. We have only
minimal commitments to make capital expenditures under the terms of our
concession or franchise agreements, but anticipate that we will also make
capital expenditures in the near future to selectively upgrade existing cable
systems. To the extent cash flow is not sufficient to fund our operating
expenses, debt service and capital expenditures, we expect to borrow the
necessary funds under our bank facility.

We believe that EBITDA and Adjusted EBITDA provide more meaningful
measures of fixed cost coverage than does a deficiency of earnings to fixed
charges. EBITDA and Adjusted EBITDA amounts in each period are not solely

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available to satisfy cash interest expense and may also be required for
other corporate purposes, including increases in working capital, principal
payments on debt and capital expenditures. EBITDA and Adjusted EBITDA for the
year ended December 31, 2002, was 79,073,000 and 82,882,000 respectively.
Included in EBITDA is 1,377,000 of non-cash compensation from our stock-option
plans and 2,432,000 of one-time debt refinancing expenses. Included in
interest expenses of 109,421,000 for the year ended December 31, 2002, was
non-cash write-off of capitalized financing fees of 12,264,000, non-cash
amortization of finance fees of 6,821,000, 31,079,000 capitalized non-cash
rate interest based on the convertible second secured facility and interest
expense of 860,000 due to the decrease in the fair value of our interest rate
caps and collars in of the year ended December 31, 2002.

At December 31, 2002, our aggregate consolidated indebtedness was
approximately 909,255,000, comprised of approximately 497,104,000 of senior
bank debt, 406,079,000 of convertible second secured debt, 5,616,000 of
capital leases obligations, and 456,000 of deferred purchase obligations. Our
debt instruments are described below.

On September 18, 2000, our wholly-owned subsidiary PrimaCom Management
GmbH entered into a 1,000,000,000 reducing senior secured revolving credit
facility with a number of lenders. The senior secured facility was put in place
to refinance all outstanding debt at that time, to fund the acquisition of
Multikabel, future capital expenditures and acquisitions and for other general
corporate purposes. Under the terms of the senior secured revolving credit
facility, our subsidiaries may borrow, repay and reborrow, up to the commitment
amounts, until December 31, 2009, when all amounts will become due and payable.
As required by a condition to the senior secured facility, PrimaCom AG also
entered into a 375,000,000 working capital facility concurrently with entering
into the senior secured facility. The working capital facility was intended as
a means by which PrimaCom AG could access longer-term unsecured debt financing,
which would benefit the lenders under the senior secured facility, in the event
the high yield note issuance contemplated by PrimaCom AG at the time was not
completed. The working capital facility was committed until May 15, 2001. At
that time, we or the senior secured facility lenders could request that the
working capital facility be drawn, with the proceeds being used to repay
borrowings under the senior secured facility. If the working capital facility
had been drawn, it would have converted to a loan or debt security with a
ten-year maturity. The interest rate on the working capital facility would have
been no less than 13% per annum and no greater than a cap based on current
trading yields of high yield securities issued by comparable companies. In the
event that the working capital facility remained outstanding beyond September
30, 2001, PrimaCom also agreed to issue contingent value rights which would
provide the facility holders with an economic benefit payable in cash
equivalent to that which they would have received had they exercised warrants
to acquire up to 5% of our equity capital at prices based on relevant market
values. Therefore we entered into a Contingent Value Right (CVR) Agreement,
which was a condition precedent to the obligations of the lenders under the
Senior Working Capital Facility. Pursuant to the CVR Agreement, we were
required, if requested on or before September 18, 2010, to make a payment in
either cash or common shares to the holders of each CVR Certificate equal to
the difference between the market price of a share of our common stock on the
date of exercise of such CVR and 110% of the market price of a share of such
common stock on the relevant release date, being September 30, 2001, December
31, 2001, March 31, 2002 and June 30, 2002, subject to the provisions of the
CVR Agreement, in particular various provisions protecting the holders of CVR
Certificates against dilution. The total number of CVRs to be issued under the
CVR Agreement equaled five percent of the outstanding number of our shares. The
total amount of CVRs to be issued under this assignment was 989,300.

Under the terms of the Revolving Credit Facility, our subsidiaries may
borrow, repay and reborrow, up to the commitment amounts until December 31,
2009, when all amounts will become due and payable.

We announced our proposed merger with UPC Germany on March 29, 2001 and
requested an extension of the commitment under the working capital facility
until the merger could be consummated. On May 15, 2001 the lenders under our
senior secured and working capital facilities agreed to an extension of the
commitment under the working capital facility until November 15, 2001. In
addition, we agreed with the lenders under the working capital facility to a
cap on cash interest of 16% and on total interest of 18%. It was also agreed
that on November 15, 2001 either we or the lenders under the senior secured
revolving credit facility could request that the working capital facility be
drawn. If drawn, the working capital facility would then have converted to a
ten-year security or loan.

On August 26, 2001, UPC notified us it would not vote in favor of our
merger with UPC Germany, and the merger was removed from the agenda of our
shareholders meeting held on August 28, 2001. Between September 18, 2000, on
which our credit facilities were entered into and August 2001, when the
proposed merger failed to

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proceed, the market for high-yield debt had deteriorated significantly for
broadband communications companies, as a result of which we concluded that it
was not realistic for us to seek to access that market in the near to medium
term. As a result, we immediately initiated negotiations with the lenders under
our senior secured revolving credit facility and working capital facilities,
with a view to amending certain terms of the working capital facility which
might in the future otherwise have resulted in non-compliance with financial
covenants included in those facilities if the working capital facility were
drawn in full. The lending commitment and date of any mandatory drawing under
the working capital facility were extended on three further occasions while
these negotiations progressed, upon payment by us of commitment and other fees
totaling approximately 25,000,000.

On March 26, 2002, we completed the refinancing of our senior secured
revolving credit and working capital facilities. The amended working capital
facility was conditionally replaced by a 375,000,000 convertible second
secured term loan facility, which was drawn down in full on March 26, 2002.
Those borrowings were used to repay an equivalent amount of outstanding
borrowings under the senior secured facility. In addition, the lending
commitment under the senior secured facility was reduced by the amount of the
borrowings under the convertible second secured term loan facility, to
625,000,000. Approval of the modifications to our debt facilities by our
shareholders was obtained on June 5, 2002.

The available commitment under the senior secured facility is to be
reduced in quarterly amounts beginning March 31, 2003 to the amounts reflected
below as of December 31 of the years indicated:

|  |  |                   |  |                          |             | 
|- |  | ----------------- |  | ------------------------ | ----------- | 
|  |  |                   |  | Available commitment ()
|  |  |                   |  |                         
| |  | December 31, 2002 |  |                          | 625,000,000 | 
| |  | December 31, 2003 |  |                          | 593,750,000 | 
| |  | December 31, 2004 |  |                          | 531,250,000 | 
| |  | December 31, 2005 |  |                          | 468,750,000 | 
| |  | December 31, 2006 |  |                          | 406,250,000 | 
| |  | December 31, 2007 |  |                          | 328,125,000 | 
| |  | December 31, 2008 |  |                          | 215,625,000 | 
| |  | December 31, 2009 |  |                          |            | 

The senior secured facility contains financial covenants common for
financings of this type. Our ability to borrow under the senior secured
facility depends on our continued compliance with these covenants. Breach of
these covenants may result in an event of default. In addition to the
requirement to meet certain financial covenants, there are restrictions on,
among other things:



| |  |  | Incurring debt,                                        
| | - |  | -------------------------------------------------------
|
| |  |  | encumbering revenues or assets,                        
|
| |  |  | lending funds to third parties or assuming liabilities,
|
| |  |  | disposing of assets, and                               
|
| |  |  | paying dividends or making distributions.              

The senior secured facility contains several events of default in addition
to the following:



| |  |  | amendment, suspension or termination of certain contracts which
results in a material adverse change, and
| | - |  | ---------------------------------------------------------------------------------------------------------
|
| |  |  | a regulatory change in the environment in which we operate,
which results in a material adverse effect.  

The occurrence of an event of default could result in all amounts
outstanding under the senior secured facility becoming immediately due and
payable and the limitation of further drawings under the senior secured

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facility. It could also result in the acceleration of amounts outstanding
under our other debt instruments, including the convertible second secured term
loan facility.

The senior secured facility is secured by, among other things, pledges or
assignments of receivables from subscribers, intercompany loans, partnership
interests and shares of our subsidiaries.

Amounts outstanding under the revolving credit facility bear interest at
the rate of EURIBOR in the case of amounts owing in Euro and LIBOR in the case
of amounts owing in a currency other than Euro plus a margin of between 0.75%
and 2.5%, depending on our ratio of total indebtedness to annualized Adjusted
EBITDA. At March 28, 2003 the applicable margin was 2.25%.

The convertible second secured term loan funded on March 26, 2002 and is
due and payable on March 31, 2010. The interest on this facility is divided
into cash and non-cash components. The non-cash interest is added to the
principal outstanding under the facility and will then incur further non-cash
interest as a principal amount. Cash interest begins to accrue at 8% and
increases to 12% over time and accrues only on the initial principal amount of
the facility, 375,000,000. All-in interest is initially 18% and increases to
20% over time. The cash, non-cash and all-in interest rates are set out on the
following schedule:

|                |  |  |   |  |  |                    |  |  |      |           |  |              |      |             |  |  |      |   |  | 
|--------------- |  |  | - |  |  | ------------------ |  |  | ---- | --------- |  | ------------ | ---- | ----------- |  |  | ---- | - |  | 
|                |  |  |   |  |  |                    |  |  |      | Cash Rate |  | Noncash Rate |      | All-in rate
|                |  |  |   |  |  |                    |  |  |      |           |  |              |      |            
|March 26, 2002  |  |  |  |  |  | September 30, 2002 |  |  | 8.0  | %         |  |              | 10.0 | %           |  |  | 18.0 | %
|October 1, 2002 |  |  |  |  |  | December 31, 2002  |  |  | 8.5  | %         |  |              | 10.5 | %           |  |  | 19.0 | %
|January 1, 2003 |  |  |  |  |  | March 31, 2003     |  |  | 9.5  | %         |  |              | 9.5  | %           |  |  | 19.0 | %
|April 1, 2003   |  |  |  |  |  | June 30, 2003      |  |  | 10.5 | %         |  |              | 8.5  | %           |  |  | 19.0 | %
|July 1, 2003    |  |  |  |  |  | September 30, 2003 |  |  | 11.5 | %         |  |              | 8.5  | %           |  |  | 20.0 | %
|October 1, 2003 |  |  |  |  |  | final maturity     |  |  | 12.0 | %         |  |              | 8.0  | %           |  |  | 20.0 | %

The convertible second secured term loan facility may be prepaid in whole
or in part at any time at our option and all accrued but unpaid non-cash
interest in excess of 18% for any period will be forgiven on the indebtedness
thereunder if the facility is repaid in full by December 31, 2004. Lenders who
were not party to the convertible second secured term loan when initially
funded on March 26, 2002 would receive a prepayment fee on any amount we prepay
to that lender of 3% of that amount during the first year of the loan, 2%
during the second year of the loan and 1% during the third year of the loan.

The outstanding but unvested contingent value rights under the original
facility have been cancelled, with the exception of rights providing the
lenders under the convertible second secured term loan facility with an
economic benefit payable in cash, equivalent to that which they would have
received had they exercised warrants to acquire 2.49% of PrimaCom AGs equity
capital at prices based on relevant market values. On June 5, 2002, our
shareholders approved that the contingent value rights can be replaced by a
bond with warrants granting however the right to convert into our shares at
exercise prices that had been defined in accordance with the conditions of the
unvested contingent value rights.

At any time on or after December 31, 2004, the lenders under the
convertible second secured loan term facility may opt to convert their
outstanding loans into shares of PrimaCom Management GmbH having a nominal
value determined by computing the ratio of the amount of debt being converted
to the quotient of twelve times EBITDA (defined as earnings before interest,
tax, depreciation and amortization) for the twelve month period through the end
of the most recent calendar quarter less the amount of then outstanding
consolidated debt of PrimaCom AG at the end of the most recent calendar quarter
plus the amount of debt then being converted, and the total nominal value of
all PrimaCom Management GmbH shares then outstanding. However, in no case will
the lenders under the convertible second secured term loan facility be
entitled to convert their loans under that facility into shares of PrimaCom
Management comprising more than 65% of the total nominal capital of PrimaCom
Management GmbH.

The convertible second secured term loan facility is guaranteed by
PrimaCom Management GmbH and is secured by second-ranking pledges (after the
pledges securing the senior facility) on the shares of the operating companies
owned by PrimaCom Management GmbH.

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Due to the restrictive nature of our debt covenants, we are working with
our lenders to create an alternative financial structure to resolve these
restrictions.

Contractual Obligations and Commercial Commitments

The following table represents our contractual cash obligations and other
commercial commitments as of December 31, 2002;

|                                   |  |                        |           |        |  |           |        |           |  |               |        |  |  |  |         |  |  |  |         | 
|---------------------------------- |  | ---------------------- | --------- | ------ |  | --------- | ------ | --------- |  | ------------- | ------ |  |  |  | ------- |  |  |  | ------- | 
|                                   |  | Payments Due by Period
|                                   |  |                       
|                                   |  |                        |           |        |  | Less than |        |           |  |               |        |  |  |  |         |  |  | 
|                                   |  | Total                  |           | 1 year |  | 1-3 years |        | 4-5 years |  | After 5 years
|                                   |  |                        |           |        |  |           |        |           |  |              
|                                   |  | (Euro in thousands)   
|Bank and other debt                |  |                        | 903,183   |        |  |           | 309    |           |  |               | 28,045 |  |  |  | 140,625 |  |  |  | 734,204 | 
|Signal Fees                        |  |                        | 103,929   |        |  |           | 19,563 |           |  |               | 35,715 |  |  |  | 28,174  |  |  |  | 20,477  | 
|Deferred Purchase Obligations      |  |                        | 456       |        |  |           | 456    |           |  |               |       |  |  |  |        |  |  |  |        | 
|Operating Leases                   |  |                        | 8,394     |        |  |           | 2,135  |           |  |               | 2,584  |  |  |  | 2,057   |  |  |  | 1,618   | 
|Capital Lease Obligations          |  |                        | 5,616     |        |  |           | 2,713  |           |  |               | 2,290  |  |  |  | 613     |  |  |  |        | 
|Film Contracts                     |  |                        | 3,890     |        |  |           | 1,135  |           |  |               | 2,755  |  |  |  |        |  |  |  |        | 
|                                   |  |                        |           |        |  |           |        |           |  |               |        |  |  |  |         |  |  |  |         | 
|Total Contractual Cash Obligations |  |                        | 1,025,468 |        |  |           | 26,311 |           |  |               | 71,389 |  |  |  | 171,469 |  |  |  | 756,299 | 
|                                   |  |                        |           |        |  |           |        |           |  |               |        |  |  |  |         |  |  |  |         | 

In addition to the total cash obligations above, we issued approximately
5,000,000 in letters of credit in connection with certain acquisitions.



|C. |  | Research and Development, Patents and Licenses, Etc.
|-- |  | ----------------------------------------------------

Not applicable.



|D. |  | Trend Information
|-- |  | -----------------

We expect that gains in Internet subscribers and rate increases especially
in The Netherlands as well as cost cutting measures in Germany and a stronger
focus on our sales activities will continue to have a positive impact on our
revenue and EBITDA.

The potential loss of any additional contracts with housing associations
in Germany or the continued loss of population in the New German States could
result in adverse effects for our basic cable television business during the
year. This would negatively impact our revenue and EBITDA.

We also intend to increase the channels we offer our digital television
subscribers in Germany and The Netherlands. We are also in the process of
evaluating our digital television product offerings. The subscriber acceptance
has not been as strong as expected and we continue to record significant
losses. If we discontinue or reduce the offering to improve the short term
prospects the long term upside could be significantly reduced. On the other
hand if we promote and market more in the short term to ensure long term
success we may suffer larger short term losses and we expect that the addition
of channels will result in an increase in the number of subscribers who
purchase our digital services. In Germany we will concentrate on the basic
analog products and our Internet offerings. The offerings of new services on
analog cable networks may have a significant impact on our future strategy.

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In general, we expect revenues and EBITDA to continue to grow much faster
in our operations in The Netherlands than in Germany in the next years. We
expect the EBITDA growth of our operations in Germany to be higher than the
increase in revenues.

Our capital expenditures will remain below historical levels as a result
of having reevaluated our network upgrading strategy in Germany. In The
Netherlands, we intend to move forward with telephony services starting in
April 2003. While our operations show strong results and EBITDA is sufficient
to finance our capital expenditures, we expect to increase our borrowings in
the next years in order to meet our interest payments from our two credit
facilities. Any conversion by our lenders from debt to equity will be crucial
in our efforts to also strengthen our financial position.




ITEM 6. DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES



|A. |  | Directors and Senior Management
|-- |  | -------------------------------

We have a two-tiered board consisting of the management board and the
supervisory board.

Management Board

The standing orders for the management board provide for allocation of
areas of responsibility among the members, and, within these areas of
responsibility, the members of the management board act independently.
However, under German law and the standing orders, management board members are
jointly responsible for all management board matters, even if they fall within
another members area of responsibility. Some decisions of the management
board may only be taken jointly by all members, including decisions concerning
the preparation of annual accounts, the calling of a supervisory board meeting,
transactions which require the consent of the supervisory board, guidelines and
plans for individual business areas, transactions of exceptional importance or
risk and all other matters which have not been allocated to any members
specific area of responsibility.

On September 30th, 2002 Mr. Paul Thomason resigned from the board of
management. Mr. Thomason was Chief Financial Officer. On April 22, 2002 the
appointment of Mr. Hans Wolfert as member of the Board of Management was
terminated. Mr. Wolfert was Chief Corporate Development Officer.

Listed below are the names, ages, responsibilities, dates of appointment
and experience of the members of the management board. The members of the
management board can be reached at PrimaCom AGs address.

|                   |  |     |    |                                  |  |                         |  |                
|------------------ |  | --- | -- | -------------------------------- |  | ----------------------- |  | ---------------
|                   |  | Age |    | Position on the management board |  | Date of Appointment    
|                   |  |     |    |                                  |  |                        
|Stefan Schwenkedel |  |     | 43 |                                  |  | Chief Financial Officer |  | March 1, 2002  
|Jens Kircher       |  |     | 39 |                                  |  | Chief Operating Officer |  | October 1, 2002

Prof. Dr. Schwenkedelwas appointed Chief Strategy and Development Officer
of PrimaCom AG as of March 1, 2002. With Paul Thomasons resigning from
PrimaCom AG as of September 30, 2002, Stefan Schwenkedel was appointed Chief
Financial Officer as of October 1,.2002. Stefan Schwenkedel has served on our
supervisory board as a vice chairman since December 31, 1998 until his
resignation on February 28, 2002 and from 1997 until October 2000 he served as
chairman of the supervisory board of AGFB, a principal shareholder of one of
our predecessor companies until it was merged into us in October 2000. Since
March 2000 until May 2002, he has also been the chairman of the supervisory
board of F.A.M.E Film and Music Entertainment AG in Munich and since May 2001
until May 2002 he served as vice chairman of the supervisory board of
Delta-System Media + Communication AG, Rödermark since September 2000, he has
been a member of the supervisory board of 2Venture AG in Bonn. Since 1996, he
has been professor of business administration and finance at the Fachhochschule
Wiesbaden(University of Applied Sciences in Wiesbaden). From 1993 to 1996, he
served as executive manager (chief financial officer) at Schöller-Budatej, the
Hungarian subsidiary of Schöller Lebensmittel GmbH & Co. KG, a company of the
Südzucker Group. During that time period, he was also a member of the
supervisory board of

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MIRSA AG in Albertirsa in Hungary. Prior to 1993, amongst other employment, he
worked in the German paper and printing industry.

Dr. Jens Kircherjoined PrimaCom on July 15, 2002 as Chief Technical
Officer. He was appointed to our management board effective October 1, 2002 and
assumed the duties of Chief Operating Officer. He studied physics in Karlsruhe,
Corvallis and Stuttgart. After his postgraduate education, Dr. Jens Kircher was
a visiting scientist in Berkeley working among other topics on optical data
communication and a staff scientist at the Max-Planck-Institute for Solid State
Research in Stuttgart working on superconductivity. After various assignments
in the automotive sector with Mannesmann and Robert-Bosch GmbH, Dr. Kircher
became senior officer at Bosch Broadband Networks. Among other things he was
responsible for the development and marketing of the new broadband services and
for corporate planning.

Supervisory board

Our articles of association and the rules of procedure determined by the
supervisory board govern how the supervisory board shall conduct its
activities. Currently, the members of the supervisory board must meet at least
twice within six months. Most supervisory board resolutions are passed by
simple majority vote. However, our articles of association require that until
December 31, 2003, the management board needs the approval of 75% of the
supervisory board members in connection with one or more increases of our share
capital by issuance of new shares for contribution in kind or contribution of
cash up to a maximum of 15,443,026. Moreover, in certain instances when the
standing orders of the management board require that the supervisory board
approve certain actions of the management board, a 75% supervisory board vote
is required. The supervisory board elects a chairman and two vice chairmen. The
chairman of the supervisory board is authorized to represent the supervisory
board and enforce resolutions in all legal matters.

Members of the supervisory board are currently divided into three classes
with two members in Class A, five members in Class B and two members in Class
C. The term of office of each member of Class A expires at the 2004
shareholders meeting to approve the actions taken by the supervisory board and
the term of office of each member of Class B will expire at the 2006
shareholders meeting to approve the actions taken by the supervisory board
except for Mr. Thoma and Mr. Eble, whose terms expire at the 2005 shareholders
meeting to approve the actions taken by the supervisory board. The term of
office of Class C will expire at the 2003 shareholders meetings to approve the
actions taken by the supervisory board. Members of the supervisory board are
elected to terms which expire at the shareholders meeting to approve the
actions taken by the supervisory board during the fourth year subsequent to the
beginning of their term of office. Members of the supervisory board replacing
members of any class will have the term applicable to that class. German law
provides that members of the supervisory board may be removed prior to the
expiration of their terms by 75% of the votes cast at a general shareholders
meeting.

On February 28, 2002, Prof. Dr. Schwenkedel, who was a member of Class B,
resigned from the supervisory board and joined the management board as Chief
Strategic and Development Officer effective March 1, 2002. James S. Hoch, who
was a member of Class B, resigned from the supervisory board on March 22, 2002.
They were replaced by Prof. Dr. Helmut Thoma and Heinz Eble.

The members of the supervisory board can be reached at PrimaCom AGs
address. Set forth below is information with respect to the nine current
members of our supervisory board.

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|                            |  |     |  |                                                                                                                                
|--------------------------- |  | --- |  | -------------------------------------------------------------------------------------------------------------------------------
|                            |  | Age |  | Principal Occupation                                                                                                           
|                            |  |     |  |                                                                                                                                
|Class A                     |  |     |  |                                                                                                                                
|Peter Bogner                |  | 42  |  | Chief Executive, The Bogner Organization                                                                                       
|Shane ONeill               |  | 41  |  | Chief Strategy
Officer and Member of Board of Management of UPC                                                                
|Class B                     |  |     |  |                                                                                                                                
|Christian Schwarz-Schilling |  | 72  |  | Retired Minister in the government of the
Federal Pepublic of Germany;
Managing Director of Dr Schwarz-Schilling
& Partner GmbH
|Michael Moriarty            |  | 41  |  | Managing Director of Investments of UPC                                                                                        
|Boris Augustin              |  | 34  |  | Market maker for Archelon Deutschland GmbH                                                                                     
|Helmut Thoma                |  | 63  |  | Lawyer                                                                                                                         
|Heinz Eble                  |  | 52  |  | Lawyer                                                                                                                         
|Class C                     |  |     |  |                                                                                                                                
|Brigitte Preuss             |  | 42  |  | General Manager of Parkschlösschen Bad
Wildstein GmbH                                                                          
|Klaus von Dohnanyi          |  | 72  |  | Consultant                                                                                                                     

Peter Bogner,has been a member of the supervisory board since August 28,
2001. Mr. Bogner is currently Chief Executive of The Bogner Organization, Santa
Monica, California, and is a member of the supervisory board of the
International Academy of Television Arts and Sciences. In December 1999, he
became a consultant to UPC. From 1993 to 1997, Mr Bogner was responsible for
international development and television strategy at Time Warner Inc. and was
involved in the establishment of free and pay television platforms. In 1997,
Mr. Bogner became a member of the Global Media Counsel of the United Nations.

Shane ONeillhas served on our supervisory board since August 28, 2001.
He joined UPC as managing director, strategy, acquisitions and corporate
development in November 1999. Prior to joining UPC, Mr. ONeill spent seven
years at Goldman Sachs in the New York, Sydney and London offices. Most
recently, Mr. ONeill was an executive director in the advisory group for
Goldman Sachs in London where he worked on a number of mergers and acquisitions
and corporate finance transactions for companies in the communications
industry, including UPC. Prior to joining Goldman Sachs, Mr. ONeill spent four
years at Macquarie Bank in Sydney as well as three years at KPMG in Dublin
where he qualified as a chartered accountant.

Dr. Christian Schwarz-Schillinghas served on our supervisory board as its
chairman since December 31, 1998. From 1996 to 1998, he was the head of the
advisory committee of Aquila Beteiligungs GmbH. From 1993 to 1997, he was
chairman of the supervisory board of Grundig AG and since 1993 he has served as
the managing director of Dr. Schwarz-Schilling & Partner Telecommunications
Consulting GmbH. Since 1995, he has been an international mediator for the
Federation Bosnia-Herzegovina. Since 1995 Dr. Schwarz-Schilling has been a
deputy member of the Foreign Affairs Committee of the German Parliament and
from 1995 to 1998, he was the chairman of the subcommittee for Human Rights and
Humanitarian Aid, and since 1998 the vice chairman of that committee. From 1994
to 1995, he was a member of the Foreign Affairs Committee of the German
Parliament and from 1993 to 1998, he has served as a deputy member of the
Committee for Economics of the German Parliament. From 1982 to 1992, he was the
Federal Minister of Post and Telecommunications of the Federal Republic of
Germany and has been serving as a Member of the German Parliament since 1976.
From 1957 to 1982, he was managing director of the family-owned Sonnenschein
Akkumulatorenfabrik Berlin/Büdingen GmbH. Since 1999, he has also been chairman
of the supervisory board of Mox Telecom AG and is a director of 2 Venture AG.

Michael Moriartyhas served on our supervisory board since June 5, 2002.
He is the Managing Director of Investments and Corporate Development for UPC.
From 1998 to 2000 he was the Managing Director of UPC in

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Hungary. From 1997 to
1998 Michael Moriarty was the Managing Director of UPC Slovakia and Romania. He
was also Vice President Operations for UPC Central Europe from 1995 to 1997.
Prior to joining UPC, Michael Moriarty was Director of Finance for Kabelkom in
Hungary which was owned by UPCs parent company UGC. Before joining UGC,
Michael Moriarty held a variety of positions at Westinghouse Broadcasting (USA)
for nine years.

Boris Augustinhas served on our supervisory board since December 30,
1998. Since October 1, 1998, he has been employed by Archelon Deutschland GmbH,
engaged in EUREX market making operations. From 1994 to 1998, he worked in the
financial services industry, including derivatives trading with Lehman Brothers
Bankhaus AG, Banque National de Paris (Deutschland) OHG, and Banque Paribas
(Deutschland) OHG. Mr. Augustin is the son of a sister of Wolfgang and Ludwig
Preuss, who are significant shareholders of ours.

Prof. Dr. Helmut Thomabecame a member of the supervisory board of
PrimaCom on April 18, 2002. He brings with him many years experience in the
media sector. After completion of his doctorate in law in 1962 he was employed
by various Viennese law firms. In 1966 Prof. Dr. Thoma became part of the legal
team at ORF and was the head of department from 1968 to 1973. In 1973 Prof. Dr.
Thoma joined Radio Luxemburg before moving to RTL Plus in 1983 where his most
recent position was as General Manager and Director of Programmes. In 1999 Dr.
Thoma became an advisor to the governor of North-Rhine Westphalia on
media-related issues of this state.

Heinz Eblehas been a member of the supervisory board of the company since
April 18th, 2002. From 1982 Mr. Eble has been practicing law in Mainz with the main focus on
representing and consulting companies in the Telecommunication sector. For 15
years he had been chairman of the supervisory board of Süweda AG.

Dr. Klaus von Dohnanyihas served on our supervisory board, the executive
committee of KabelMedia or a predecessor body carrying out comparable functions
since January 1996. In 1998, he was chairman of the supervisory board of
KabelMedia and from December 31, 1997 until 1998 he was chairman of the
executive committee of KabelMedia. Dr. von Dohnanyi has been Vice Chairman of
the supervisory board since December 10, 2002. Between 1954 and 1960, he worked
for Ford Motor Company, both in the United States and Germany. From 1960 to
1968, Dr. von Dohnanyi was a co-owner and managing director of the Institut für
Marktforschung und Unternehmensberatung Infratest, Munich (Market and Social
Research, Infratest) and, between 1968 and 1969, he was Permanent Secretary at
the German Ministry of Economics. Dr. von Dohnanyi was a Member of Parliament
in Bonn from 1969 to 1981, Parliamentary Undersecretary from 1969 to 1972, and
Minister for Science, Technology and Education from 1972 to 1974. From 1976 to
1981, he was Deputy Foreign Minister (Staatsminister), in Bonn (in charge of
European affairs). From 1981 to 1988, he was Governor of the City State of
Hamburg. From 1990 to 1994, Dr. von Dohnanyi was chairman of the board of
TAKRAF Heavy Machinery, Leipzig, and since 1994 he has been a special advisor
to the board of directors of the Treuhandanstalt(since January 1, 1995,
Bundesanstalt für Vereinigungsbedingte Sonderaufgaben) in Berlin. Dr. von
Dohnanyi is Chairman of Kirow AG and Wegweiser GmbH and a director of a:prico
AG.

Brigitte Preuss, the wife of Wolfgang Preuss, one of major shareholders of
PrimaCom, has served on our supervisory board since December 30, 1998 and as
the general manager of Kurhotel Parkschlösschen Bad Wildstein GmbH,
Traben-Trabach since January 1993. From July 1984 to December 1992, she served
in various positions at Süweda.

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B.     Compensation

On a yearly basis, the chairman of the supervisory board receives 40,903,
the vice chairmen receive 20,452 and each other member of the supervisory
board receives 10,226. In addition, each member of the supervisory board is
entitled to reimbursement for any reasonable business expenses incurred in the
performance of his or her duties. We will reimburse the members of the
supervisory board for any value-added taxes payable on their compensation.

For the year ending December 31, 2002, we paid an aggregate of 904,859 in
cash compensation to Paul Thomason, Hans Wolfert, Stefan Schwenkedel, and Jens
Kircher for their services as a member of the management board of the company.
We do not provide pension, retirement or similar benefits for the members of
our management board.

Our articles of association provide that for the benefit of the members of
the management and supervisory boards, the company bears the cost of liability
insurance coverage relating to their duties. To this end, we have renewed the
directors, officers and corporate liability insurance to cover general risks of
liability.

None of the members of our management board or supervisory board has
received any loans from us.

C.     Board Practices

The date of expiration of the current term of office and the period during
which the members of our management and supervisory boards have served in that
office are provided in subsection 6.A above. We have not entered into service
contracts with the members of our supervisory board and the service contracts
we have entered into with the members of our management board do not provide
for benefits upon termination of employment other than payments under
non-competition clauses.

The rules of procedure for the supervisory board provide that the
supervisory board may delegate any of its powers to a committee or committees
and require the establishment of an investment committee, a compensation
committee and an audit committee. However, the committees do not have the power
to make resolutions on behalf of the supervisory board and may only act in an
advisory capacity. The members of the committees are proposed by at least one
member of the supervisory board and elected by a simple majority of votes of
supervisory board members attending the meeting, provided, however, that a
majority of the members of the audit committee shall consist of independent
members of the supervisory board.

Investment committee

The investment committee consists of Mr. Augustin, Mr. Bogner, Mr. ONeill
and Prof. Dr. Thoma. The task of the investment committee is to consider and
evaluate matters submitted by our management as required by the standing orders
for management board, such as investment and financing plans by us or any of
our subsidiaries, disposition of assets or shares by us or any of our
subsidiaries, increases in capital, mergers and transactions between us or any
of our subsidiaries and any of our affiliates (other than transactions among us
and our wholly owned subsidiaries), all as proposed by our management, and to
make recommendations to the supervisory board.

Compensation committee

The compensation committee consists of Mr. Bogner, Mr. Moriarty, Mrs.
Preuss and Dr. Schwarz-Schilling. The task of the compensation committee is to
consider and evaluate the compensation payable to members of the management
board and any proposed stock option plans for employees and/or executives and
make recommendations to the supervisory board.

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Audit committee

The audit committee consists of Mr. Augustin, Mr. Eble and Mr. Moriarty.
The purpose of the audit committee to assist the supervisory board in
fulfilling its responsibilities to oversee the accounting and financial
reporting processes
at the Company. These include the oversight of the quality and integrity
the Companys consolidated financial statements and related disclosure, the
performance of its internal control and risk management and audit functions.
The committee further oversees the performance, qualifications and independence
of the external auditor. The committee also meets with representatives of
management and the external auditor at least twice annually.

Agreements with directors

Not applicable.

D.     Employees

At December 31, 2002, we had 470 full-time and approximately 59 part-time
employees in Germany and 154 full-time and 102 part-time employees in The
Netherlands. Our employees in Germany are not covered by a collective
bargaining agreement. However, 148 of our employees in Germany have voted to be
represented by works councils. 129 of our employees in The Netherlands are
covered by a collective labor agreement and have elected a works council.

The establishment and the powers of a works council in Germany are laid
down in the German Labor Management Relations Act. The works council represents
all employees except managerial employees and participates in the
decision-making process with management. It has rights to obtain information
and of consultation and co-operation and holds co-determination and veto
rights. Although the German Labor Management Relations Act does not override
the constitutional right of entrepreneurial freedom and to make fundamental
business decisions which are reserved to the employer, rights of
co-determination and veto rights may be exercised by the works council to block
certain management decisions. Particularly in respect of social matters
subject to the co-determination right, management needs the consent of the
works council (or the favorable decision of a conciliation board) to enforce
its decisions. Such social matters cover, among others, plant regulations and
behavior of employees, work hours, the terms of payment of remuneration,
vacation, monitoring devices, safety and health, social facilities, wages and
salaries. With respect to personnel matters, the German Labor Management
Relations Act covers all rights, from access to information to
co-determination. For example, personnel planning, job posting, hiring,
grouping, transferring employees and, significantly, the dismissal of employees
are covered. Prior to carrying out a change in relation to such personnel
matters, the employer must attempt to obtain the works councils consent. The
rights and functions of the works council of our employees in The Netherlands
are comparable to those of the German works councils, except that individual
hirings and dismissals are not subject to works council approval in The
Netherlands.

We consider our relations with our employees and with the works councils
in Germany and The Netherlands to be good.

E.     Share Ownership

To the best of our knowledge, the individual share ownership of the
persons named in subsection 6.B has not previously been disclosed to
shareholders or otherwise made public. Information about the aggregate share
ownership of members of our management and supervisory boards is set forth in
Item 7 below.

In February 1999, we adopted one stock option plan for the benefit of all
of our and our subsidiaries employees, known as the universal stock option
plan, and one stock option plan for our and our subsidiaries executive
officers, known as the executive stock option plan. The two stock option plans
provided for the issuance of stock options allowing eligible employees and
executive officers to acquire a total of 1,000,000 shares, including 300,000
shares under the universal stock option plan and 700,000 shares under the
executive stock option plan. In

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July 2000, we created two new stock option
plans, a universal plan with 150,000 options and an executive plan with 350,000
options. We may not grant options under the 2000 plans until all options under
the 1999 plans have been granted. The options granted under all of our stock
option plans entitle participants to subscribe for shares at a defined purchase
price. The initial option grants under the stock option plans have a purchase
price equal to the initial public offering price of our shares of 29.00. The
purchase price for stock options issued under the stock option plans after the
initial public offering of our shares equal the average closing price of our
shares at the Frankfurt Stock Exchange of the quarterly period
preceding the grant of the option rights. Each option is exercisable only
after a two-year period from the date of grant and only if the average daily
closing price of the shares, calculated as the average over the five
consecutive trading days on the Frankfurt Stock Exchange immediately prior to
the first option exercise, equals at least 120% of the relevant purchase price
of the option rights, adjusted to account for any capital increases or
reductions.

The options granted under the stock option plans vest over a three-year
period. One third of the options vest on the first anniversary of the grant and
the remaining options vest in equal monthly amounts over the next two years.
The vested options are exercisable after the second anniversary of the grant.
If the participants employment agreement terminates before the options vest in
full, the participants options will be vested only in the portion of options
computed by multiplying 1/36 times the number of full months of employment
between the date of option grant and the date of termination. The options
granted under the universal stock option plan permit participant employees to
purchase shares having an aggregate exercise price ranging between 50% and 100%
of the participants annual base salary at the date of option grant, depending
on his term of employment with us or one of our subsidiaries preceding the
option grant. The number of options granted to an executive participant is
dependent on that participants position in our organization. Each of the
members of the management board is entitled to options for 100,000 shares. The
options granted to other executives are for between 5,000 and 35,000 shares. At
December 31, 2002, there were a total of 1,015,670 options outstanding under
the two plans at a weighted average exercise price of 27.71.

The options under both the universal and executive stock option plans are
non-transferable, not inheritable, and expire on the termination of employment
of the participant for whatever reason if termination occurs within six months
of the date of option grant. We may require that participants not sell the
shares within a six-month period from the date when the options were exercised.
Apart from that, the participants in the universal stock option plan are not
restricted from selling the shares, subject to applicable securities laws.
However, the participants in the executive stock option plan are allowed to
exercise their option rights, to the extent that they have been accrued, wholly
or in part, and to sell shares (regardless of whether these shares have been
acquired in exercise of the option rights granted under the executive plan or
otherwise) only during an exercise period which begins one day after and ends
fifteen days after either a general meeting, the publication of a management
report or an annual report. In the event of a merger of us or a restructuring
of our capital, participants will be given replacement shares or rights of a
similar value. Options also lapse when the exercise period expires, which will
happen on the fifth anniversary of the option grant, and in the event of a levy
of execution by the participants creditors on the participants stock option
plan, or a bankruptcy of the participant or the termination of a participant
for cause.




ITEM 7. MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.     Major Shareholders

The following table sets forth certain information regarding the
beneficial ownership of our ordinary bearer shares by: (1) each person known by
us to own beneficially 5% or more of our ordinary bearer shares; and (2) all
members of our management and supervisory boards as a group. Our major
shareholders do not have different voting rights. Based on information
provided by the Bank of New York, as Depositary, we believe that 2,050,774 or
approximately 10.4% of our shares are held in the form of depositary shares in
the United States by six holders of record.

Except as indicated in the footnotes to this table, to our knowledge the
persons named in the table have sole voting and investment power with respect
to the shares shown as beneficially owned by them, subject to community
property laws where applicable. Except as noted, the address of each of the
persons named in the table is c/o PrimaCom AG, An der Ochsenwiese 3, 55124
Mainz, Germany.

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|                                                 |                     |        |           |             |  |  |       |       |  
|------------------------------------------------ | ------------------- | ------ | --------- | ----------- |  |  | ----- | ----- | -
|Name                                             |                     | Number |           | Percent (1)
|                                                 |                     |        |           |            
|Shareholders                                     |                     |        |           |             |  |  |       |      
|United Pan-Europe Communications.(2)             |                     |        | 4,948,039 |             |  |  | 24.99 | %    
|Wolfgang Preuss(3)                               |                     |        | 2,862,410 |             |  |  | 14.46 | %    
|Gartmore Investment Limited(4)                   |                     |        | 1,539,854 |             |  |  | 7.78  | %    
|                                                 |                     |        |           |             |  |  |       |      
|Total                                            |                     |        | 9,350,303 |             |  |  | 47.23 | %    
|Management and supervisory board members:        |                     |        |           |             |  |  |       |      
|                                                 | Boris Augustin      |        |           | 3,464       |  |  |       | (*    | )
|                                                 | Heinz Eble          |        |           | 39,358      |  |  |       | (*    | )
|                                                 | Michael Moriarty(5) |        |           |            |  |  |       |      |  
|                                                 | Shane ONeill(5)    |        |           | 4,948,039   |  |  |       | 24.99 | %
|                                                 | Brigitte Preuss(6)  |        |           | 166,997     |  |  |       | (*    | )
|Management and supervisory boards, as a group(7) |                     |        | 5,157,858 |             |  |  | 26.05 | %    



---

|(*) less than 1% |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|---------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                
|(1)              |  | Based upon 19,798,552 shares outstanding as of December 31, 2002, of
which 12,500 shares are treasury shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|                
|(2)              |  | Represents 4,932,139 shares and 31,800 American depositary shares are
held by UPC Facility B.V., a 100% subsidiary of United Pan-Europe
Communications N.V., which is a majority-owned subsidiary of UGC.
Although UGC has the power to elect all of the supervisory board members
of UPC, the members of the supervisory board have a fiduciary duty to all
shareholders of UPC and are subject to other Dutch corporate law
principles in their capacities as members of the supervisory board of UPC.
Based on the information provided by UPC in its filings with the U.S.
Securities and Exchange Commission, we believe that UPC purchased
3,510,385 of its shares on December 21, 1999, and made subsequent
purchases during the remainder of December 1999, January, February and
March 2000. The address of United Pan-Europe Communications N.V. is
Boeing Avenue 53, 1119 PE Schiphol Rijk, The Netherlands.
|                
|(3)              |  | We have been informed by Mr. Preuss that this includes 2,695,413 shares
over which Mr. Preuss has voting and investment power and 166,997 shares
that he holds in trust for Brigitte Preuss and over which they have shared
voting power. The address of Mr. Preuss is Am Hemel 16, 55124 Mainz,
Germany.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                
|(4)              |  | We have been informed by Gartmore, that the above shares are held in
various accounts of Gartmore Investment Limited. Gartmore Fund Managers
Limited, Gartmore Global Partners, Gartmore Mutual Fund Capital Trust,
Gartmore SA Capital Trust and Northpointe Capital LLC acting as investment
managers to the beneficial owners, who are various pension funds,
institutional clients, unit trust holders and investment and trust
shareholders. The securities are held for investment partners purposes and
the above are discretionary investment managers who have voting power and
disposal power over the shares.                                                                                                                                                                                                                                                                                               
|                
|(5)              |  | Mr. Michael Moriarty and
Mr. Shane ONeill are officers of United Pan-Europe Communications
N.V. (UPC), which is the 100% parent company of our shareholder UPC
Facility B.V. Messrs. Moriarty and ONeill are subject to
directions of UPC and UPC Facility B.V. with respect to voting UPCs
interest in PrimaCom AG and disclaim beneficial ownership in the
shares held by UPC except for their respective pecuniary interests in
UPC. The address of Messrs. ONeill and Moriarty is
1 Knightsbridge, 4th Floor, London, SWIX 7UP,
England.                                                                                                                                                                                                                                                                                                                                                                       
|                
|(6)              |  | Represents shares held in trust for Mrs Preuss by her husband, Wolfgang
Preuss, over which they have shared voting power. The address of Mrs
Preuss is Am Hemel 16, 55124 Mainz, Germany.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                
|(7)              |  | Includes 166,997 shares in which the beneficial owner has shared voting
power.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

The following table shows the number of shares and options held by the members
of the Management Board and Supervisory Board (Board of
Directors):

70



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Directors Dealings

|                                          |  |              |         |              |  |        |         |         |  |        |         |         |  |  |         |  |  |  |          |   |  |  |          |  
|----------------------------------------- |  | ------------ | ------- | ------------ |  | ------ | ------- | ------- |  | ------ | ------- | ------- |  |  | ------- |  |  |  | -------- | - |  |  | -------- | -
|                                          |  | December 31, |         | December 31, |  |       
|                                          |  | 2002         |         | 2001         |  | Change
|                                          |  |              |         |              |  |       
|                                          |  | shares       |         | options      |  | shares |         | options |  | shares |         | options
|                                          |  |              |         |              |  |        |         |         |  |        |         |        
|Executive Board                           |  |              |         |              |  |        |         |         |  |        |         |         |  |  |         |  |  |  |          |   |  |  |          |  
|Dr. Jens Kircher(1)                       |  |              |        |              |  |        | 100,000 |         |  |        |        |         |  |  |        |  |  |  |         |   |  |  | 100,000  |  
|Prof. Dr. Stefan Schwenkedel(2)           |  |              |        |              |  |        | 100,000 |         |  |        |         |         |  |  |         |  |  |  |          |   |  |  | 100,000  |  
|Paul Thomason (until September 30)(3)     |  |              |        |              |  |        |        |         |  |        | 146,969 |         |  |  | 100,000 |  |  |  | (146,969 | ) |  |  | (100,000 | )
|Hans Wolfert (until April 22)(4)          |  |              |        |              |  |        |        |         |  |        |        |         |  |  | 100,000 |  |  |  |         |   |  |  | (100,000 | )
|Supervisory Board                         |  |              |         |              |  |        |         |         |  |        |         |         |  |  |         |  |  |  |          |   |  |  |          |  
|Dr. Christian Schwarz-Schilling,
Chairman |  |              |        |              |  |        |        |         |  |        |        |         |  |  |        |  |  |  |         |   |  |  |         |  
|Dr. Klaus von Dohnanyi, Vice Chairman     |  |              |        |              |  |        |        |         |  |        |        |         |  |  |        |  |  |  |         |   |  |  |         |  
|Boris Augustin                            |  |              | 3,464   |              |  |        |        |         |  |        | 3,464   |         |  |  |        |  |  |  |         |   |  |  |         |  
|Peter Bogner                              |  |              |        |              |  |        |        |         |  |        |        |         |  |  |        |  |  |  |         |   |  |  |         |  
|Heinz Eble(5)                             |  |              | 39,358  |              |  |        |        |         |  |        |        |         |  |  |        |  |  |  | 39,358   |   |  |  |         |  
|Michael Moriarty(6)                       |  |              |        |              |  |        |        |         |  |        |        |         |  |  |        |  |  |  |         |   |  |  |         |  
|Shane ONeill                             |  |              |        |              |  |        |        |         |  |        |        |         |  |  |        |  |  |  |         |   |  |  |         |  
|Brigitte Preuss(7)                        |  |              | 166,997 |              |  |        |        |         |  |        | 166,997 |         |  |  |        |  |  |  |         |   |  |  |         |  
|Prof. Dr. Helmut Thoma(8)                 |  |              |        |              |  |        |        |         |  |        |        |         |  |  |        |  |  |  |         |   |  |  |         |  
|James Hoch(9)                             |  |              |        |              |  |        |        |         |  |        |        |         |  |  |        |  |  |  |         |   |  |  |         |  
|                                          |  |              |         |              |  |        |         |         |  |        |         |         |  |  |         |  |  |  |          |   |  |  |          |  
|Total                                     |  |              | 209,819 |              |  |        | 200,000 |         |  |        | 317,430 |         |  |  | 200,000 |  |  |  | (107,611 | ) |  |  |         |  



|(1) |  | Dr. Jens Kircher was
appointed to the Management Board
effective October 1, 2002. At this date he was granted 100,000 options                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Prof. Dr. Schwenkedel resigned from the Supervisory Board effective
February 28, 2002. At this date he had no -shares and no options.
Effective March 1, 2002 Prof. Dr. Schwenkedel was appointed to the
Management Board and was granted 100,000 options on
|   
|(3) |  | Paul Thomason resigned from the Management Board effective September 30,
2002. At this date he had 146,969 -shares and 100,000 options                                                                                                                      
|   
|(4) |  | Hans Wolferts appointment to the Management Board was terminated
effective April 22, 2002. At this date he did not have any -shares but had
100,000 options                                                                                                
|   
|(5) |  | Heinz Eble was appointed to the Supervisory Board effective April 18th,
2002. At this date he had 39,358 -shares but no options                                                                                                                             
|   
|(6) |  | Michael Moriarty was appointed to the Supervisory Board effective June 5,
2002. At this date he had no -shares and no options                                                                                                                               
|   
|(7) |  | The -shares held by Mrs. Preuss are held in trust for her by Mr. Wolfgang
Preuss. They have shared voting power over these shares.                                                                                                                          
|   
|(8) |  | Prof. Dr. Helmut Thoma was appointed to the Supervisory Board effective
April 18, 2002. At this date he had no -shares and no options.                                                                                                                      
|   
|(9) |  | James Hock resigned from the Supervisory Board effective March 22, 2002.
At this date he had no -shares and no options -.                                                                                                                                   

B.     Related Party Transactions

In October 2000, the merger of Aktiengesellschaft für Beteiligungen an
Telekommunikationsunternehmen (AGFB) into PrimaCom was registered with the
Commercial Register of the Amtsgericht (local court) of Mainz. AGFBs only
significant asset was its holding of 3,750,000 PrimaCom shares, all of which
were issued to AGFB shareholders when the merger was consummated. An
equivalent number of new PrimaCom shares were issued to AGFB shareholders in
the merger, reflecting the exchange ratio of one PrimaCom share for every
four AGFB shares.

On December 31, 2000, the Company acquired the shares of Friedrichsthal,
which was partially owned by Wolfgang Preuss, a shareholder of the Company.

The Company had a 245,000 loan payable to WVH Wohnungsbau- und
Wohnungsbaugenossenschaft Reidenau mbH, a minority shareholder of one of its
subsidiaries. The total amount due for this loan was paid on January 10,
2001.

The Company has a 15.7% investment in Mediakabel B.V., a consortium of
cable television operators in the Netherlands organized to provide digital
television services. The Company paid Mediakabel digital cable services fees
of approximately 1,056,000, 2,575,000 and 2,700,000 in 2000, 2001 and
2002, respectively.

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The Company uses services of BFE Nachrichtentechnik GmbH for
installation, repair and maintenance of cable networks, which is owned by
one of the Companys significant shareholders. In 2001 and 2002, the Company
paid approximately 788,000 and 424,000, respectively, for these services.

C.     Interests of Experts and Counsel

Not applicable.




ITEM 8. FINANCIAL INFORMATION

A.     Consolidated Statements and Other Financial Information

The consolidated statements and other financial information are provided
in Item 18 below.

B.     Significant Changes

No significant change has occurred since the date of the financial statements provided in Item 18 below.




ITEM 9. THE OFFER AND LISTING

A.     Offer and Listing Details

Since February 22, 1999, our ordinary bearer shares trade on the Neuer
Markt segment of the Frankfurt Stock Exchange under the symbol PRC and our
depositary shares were quoted on the National Market segment of the Nasdaq
Stock Market under the symbol PCAG until July 18, 2002. Since July 19, 2002 our
ADRs are quoted on the OTC bulletin board where liquidity is limited. Each
depositary share represents one-half of one of our ordinary bearer shares.

The Neuer Markt segment of the Frankfurt Stock Exchange will cease
to operate after December 31, 2003. Because the Neuer Markt is a sub-segment of
the Geregelter Markt, we will continue to be listed in Geregelter Markt after
that day. In the meantime we can remain in the Neuer Markt or enter into one of
two new segments of the Frankfurt Stock Exchange: the Prime Standard or the
General Standard. If we do not apply to be listed on Prime Standard or General
Standard, we will automatically be listed into the General Standard.

The table set forth below, for the periods indicated, shows the reported
high and low quoted prices for the ordinary bearer shares on the Frankfurt
Stock Exchange and for the American depositary shares on Nasdaq.

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|                              |  |                 |       |                          |  |      |       |     |  |  |       |  |  |  |       | 
|----------------------------- |  | --------------- | ----- | ------------------------ |  | ---- | ----- | --- |  |  | ----- |  |  |  | ----- | 
|                              |  | Nasdaq          |       | Frankfurt Stock Exchange
|                              |  |                 |       |                         
|                              |  | Nasdaq / OTC BB |       | Frankfurt Stock Exchange
|                              |  |                 |       |                         
|                              |  | High            |       | Low                      |  | High |       | Low
|                              |  |                 |       |                          |  |      |       |    
|                              |  | (in U.S.$)      |       | (in )                  
|Annual highs and lows         |  |                 |       |                          |  |      |       |     |  |  |       |  |  |  |       | 
|1999 (from February 22, 1999) |  |                 | 29.63 |                          |  |      | 15.00 |     |  |  | 64.00 |  |  |  | 29.50 | 
|2000                          |  |                 | 50.00 |                          |  |      | 5.13  |     |  |  | 99.00 |  |  |  | 11.60 | 
|2001                          |  |                 | 8.00  |                          |  |      | 1.40  |     |  |  | 17.90 |  |  |  | 2.38  | 
|2001                          |  |                 | 8.00  |                          |  |      | 1.40  |     |  |  | 17.90 |  |  |  | 2.38  | 
|2002                          |  |                 | 1.75  |                          |  |      | 0.15  |     |  |  | 3.80  |  |  |  | 0.31  | 
|Quarterly highs and lows      |  |                 |       |                          |  |      |       |     |  |  |       |  |  |  |       | 
|2001                          |  |                 |       |                          |  |      |       |     |  |  |       |  |  |  |       | 
|First Quarter                 |  |                 | 8.00  |                          |  |      | 5.38  |     |  |  | 17.90 |  |  |  | 10.60 | 
|Second Quarter                |  |                 | 6.63  |                          |  |      | 3.70  |     |  |  | 15.50 |  |  |  | 8.10  | 
|Third Quarter                 |  |                 | 4.70  |                          |  |      | 2.00  |     |  |  | 12.45 |  |  |  | 2.38  | 
|Fourth Quarter                |  |                 | 2.40  |                          |  |      | 1.40  |     |  |  | 5.60  |  |  |  | 2.68  | 
|Quarterly highs and lows      |  |                 |       |                          |  |      |       |     |  |  |       |  |  |  |       | 
|2002                          |  |                 |       |                          |  |      |       |     |  |  |       |  |  |  |       | 
|First Quarter                 |  |                 | 1.750 |                          |  |      | 0.650 |     |  |  | 3.80  |  |  |  | 1.34  | 
|Second Quarter                |  |                 | 0.850 |                          |  |      | 0.210 |     |  |  | 1.70  |  |  |  | 0.54  | 
|Third Quarter                 |  |                 | 0.289 |                          |  |      | 0.150 |     |  |  | 0.60  |  |  |  | 0.31  | 
|Fourth Quarter                |  |                 | 0.303 |                          |  |      | 0.157 |     |  |  | 0.61  |  |  |  | 0.32  | 
|Monthly highs and lows        |  |                 |       |                          |  |      |       |     |  |  |       |  |  |  |       | 
|2002                          |  |                 |       |                          |  |      |       |     |  |  |       |  |  |  |       | 
|September                     |  |                 | 0.203 |                          |  |      | 0.168 |     |  |  | 0.40  |  |  |  | 0.34  | 
|October                       |  |                 | 0.229 |                          |  |      | 0.157 |     |  |  | 0.46  |  |  |  | 0.32  | 
|November                      |  |                 | 0.303 |                          |  |      | 0.202 |     |  |  | 0.61  |  |  |  | 0.40  | 
|December                      |  |                 | 0.275 |                          |  |      | 0.192 |     |  |  | 0.57  |  |  |  | 0.37  | 
|2003                          |  |                 |       |                          |  |      |       |     |  |  |       |  |  |  |       | 
|January                       |  |                 | 0.236 |                          |  |      | 0.208 |     |  |  | 0.45  |  |  |  | 0.39  | 
|February                      |  |                 | 0.244 |                          |  |      | 0.193 |     |  |  | 0.45  |  |  |  | 0.36  | 
|March (through March 27)      |  |                 | 0.226 |                          |  |      | 0.187 |     |  |  | 0.41  |  |  |  | 0.35  | 

B.     Plan of Distribution

Not applicable.

C.     Markets

The information required by this item is set forth in 9.A above.

D.     Selling Shareholders

Not applicable.

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E.     Dilution

Not applicable.

F.     Expenses of the Issue

Not applicable.




ITEM 10. ADDITIONAL INFORMATION

A.     Share Capital

Not applicable.

B.     Memorandum and Articles of Association

We are filing our amended articles of association as Exhibit 3.1 to this
Form 20-F.

C.     Material Contracts

Our material contracts are described in Item 4.B above.

D.     Exchange Controls

Capital transfer or money transfer restrictions are possible in Germany on
the basis of United Nations, European Union, European Community and national
authorities. In essence restrictions are possible only in the area of financial
sanctions. Such restrictions are significantly governed by EU and or EC laws.
It applies accordingly there are in principle no restrictions on capital or
payment transactions between the EC and third party countries.

However, for statistical purposes only, every individual or corporation
residing in Germany must report to the German Central Bank (Deutsche
Bundesbank),subject only to certain exceptions, payments received from or made
to an individual or a corporation resident outside of Germany if the payment
exceeds 12,500 (or the equivalent in a foreign currency). This is covered in
detail in article 59 of the German foreign trade regulations
(Außenwirtschaftsverordnung, AWV). In addition, German residents must report
any claims against or any liabilities payable to non-residents if such claims
or liabilities, in the aggregate, exceed 5,000,000 (or the equivalent in a
foreign currency) at the end of a month. The treatment of remittance of
dividends, interest or other payments to nonresident holders of ordinary bearer
shares or depositary shares is described in subsection E below.

E.     Taxation

U.S. Federal Income Taxation

The discussion that follows describes the material United States federal
income tax consequences of the purchase, ownership, and disposition of our
shares or American Depositary Shares, or ADSs, but it does not purport to be a
comprehensive description of all of the tax considerations that may be relevant
to a decision to purchase, own, or dispose of shares or ADSs. In particular,
this discussion of United States federal income tax matters deals only with
holders that will hold shares or ADSs as capital assets and does not address
the tax treatment of the purchase, ownership, and disposition of shares or ADSs
under applicable state or local tax laws, or the laws of any jurisdiction other
than the United States. In addition, this discussion does not address special
federal income tax situations, such as the United States federal income tax
treatment of holders:
74Table of Contents



| |  |  | who are securities dealers, financial institutions,
insurance companies or tax exempt organizations;                                                                                                                                         
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |  | who are holding shares or ADSs as part of a hedging or
larger integrated financial or conversion transaction;                                                                                                                                
|
| |  |  | who are citizens or residents of a possession or
territory of the United States;                                                                                                                                                             
|
| |  |  | who are United States holders (as defined below) with a
currency other than the U.S. dollar as their functional currency;                                                                                                                    
|
| |  |  | who are holding shares or ADSs pursuant to certain
retirement plans;                                                                                                                                                                         
|
| |  |  | who are holding shares or ADSs pursuant to the exercise
of an employee stock option or otherwise as compensation; or                                                                                                                         
|
| |  |  | who own, directly or indirectly, 10% or more of our
voting stock. In addition, the discussion below does not address
the tax treatment of partnerships or persons who hold shares or
ADSs through a partnership or other pass through entity.

This discussion is based upon the federal income tax laws of the United
States as in effect on the date of this annual report, including the United
States Internal Revenue Code of 1986, as amended, or the Code, and the income
tax treaty between the United States and Germany, or the Treaty, which are
subject to change, possibly with retroactive effect. Subsequent developments
could have a material effect on this discussion.

For United States federal income tax purposes, a United States holder of
an ADS will be treated as the owner of the shares underlying the ADS.

United States holders

As used herein, a United States holder means a beneficial owner of shares
or ADSs who is a United States person. A United States person is, for United
States federal income tax purposes, (1) a citizen or resident of the United
States; (2) a corporation, or other entity treated as a corporation created or
organized in or under the laws of the United States or any state thereof; (3)
an estate or trust, the income of which is subject to United States federal
income tax regardless of its source; (4) a trust if a court within the United
States is able to exercise primary supervision over the administration of the
trust and one or more United States persons have the authority to control all
substantial decisions of the trust; or (5) a trust if it has an election in
effect to be treated as a United States person under United States federal
income tax law.

Taxation of dividends. Subject to the discussions below relating to
passive foreign investment companies, a United States holder will be required
to include in gross income as a dividend when received (or in the case of ADSs,
when received by the Depositary) the gross amount of any cash or the fair
market value of any property distributed by us in respect of our shares to the
extent of our current and accumulated earnings and profits as determined under
United States federal income tax principles, which may include certain earnings
and profits accumulated by our predecessors. Dividends paid in any currency
other than U.S. dollars will be translated into U.S. dollars at the spot rate
on the date the dividends are received (which for holders of ADSs, would be the
date such dividend is received by the Depositary), regardless of whether the
dividends are in fact converted into U.S. dollars on that date.

Gain or loss, if any, realized on a sale or other disposition of such
foreign currency will be ordinary income or loss and will generally be income
from sources within the United States for foreign tax credit limitation
purposes. If dividends paid in a foreign currency are converted into U.S.
dollars on the day such currency is received, United States holders generally
should not be required to recognize foreign currency gain or loss in respect of
the dividend income.

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A distribution with respect to our shares or ADSs in excess of our current
and accumulated earnings and profits, as determined under United States federal
income tax principles, will be treated as a tax-free return of basis in
the shares to the extent of the United States holders adjusted basis in
such shares, with the balance of the distribution, if any, treated as gain
realized by the United States holder from the sale, exchange or other
disposition of the shares.

Dividends paid by us will not be eligible for the dividends received
deduction generally allowed to domestic corporate shareholders.

Legislation has been introduced that would, if enacted, eliminate tax on
certain dividends received by U.S. holders. Under this proposal, dividends
would be excludable from income to the extent they are paid out of corporate
earnings that have been subject to full U.S. tax. The proposal would apply to
dividends paid by a foreign corporation only to the extent such corporation
earned income that was subject to U.S. tax or received dividends from U.S.
corporations that would have been excludable from income if received by a U.S.
holder. Based on our operations, we do not believe that, if this legislation
is enacted as proposed, our dividends would be exempt from U.S. tax.

The Treaty.Under German law, German corporations were required to
withhold tax on a distribution in 2001 of profits earned prior to 2001 in an
aggregate amount equal to 26.375% of the gross amount paid to resident and
nonresident stockholders, consisting of a 25% withholding tax plus a 5,5%
surtax thereon. German corporations must withhold tax at a rate of 21.1%,
consisting of 20% withholding tax and a 5.5% surtax thereon. In the case of a
United States holder, the German withholding tax is partially refunded under
the Treaty to reduce the withholding tax to 15% of the gross amount of the
dividend. In addition, so long as the German imputation system provides German
resident individual stockholders with a tax credit for corporate taxes with
respect to dividends paid by German corporations, the Treaty provides that
United States holders are entitled to a further refund equal to 5% of the gross
amount of the dividend. The German imputation system was abolished in 2002 and
consequently this amount will no longer be refundable as from 2002.

Thus, for each $100 of gross dividend paid by us to a United States holder
in 2003, such holder will initially receive $79,900 ($100 less 21.1 withholding
tax). If the United States holder also applies for the available refunds under
the Treaty German withholding tax is effectively reduced to $15 and the cash
received per $100 of gross dividend is $85. Thus, for each $100 of gross
dividend, the United States holder will include $100 in gross income and will
be entitled to a foreign tax credit of $15, subject to the general limitations
of United States federal income tax law.

For U.S. corporate shareholders who hold at least 10% of the shares in a
German corporation, the withholding tax rate is reduced to 5% plus a 5.5%
surtax thereon

German refund procedures.In order to obtain the 5% tax credit-related
refund, the refund of the German withholding tax in excess of 15%, and the
refund of the 5.5% German surtax, United States holders of shares must submit
to the German tax authorities directly (1) a claim for refund, (2) the original
bank voucher (or certified copy thereof) issued by the paying entity
documenting the tax withheld, and (3) an IRS Form 6166. The claim for refund
must be filed within four years from the end of the calendar year in which the
dividend is received.

Claims for refund are made on a special German claim for refund form,
which must be filed with the German tax authorities: Bundesamt für Finanzen,
Friedhofstrasse 1, 53225 Bonn, Germany. The German claim for refund forms may
be obtained from the German tax authorities at the same address, or from the
Embassy of the Federal Republic of Germany, 4645 Reservoir Road, N.W.
Washington D.C. 20007-1998.

U.S. holders may obtain an IRS Form 6166, which is a certification of the
United States holders last filed United States federal income tax return, by
filing a request with the office of the Director of the Internal Revenue
Service Center at the following address: Internal Revenue Service Center,
Philadelphia, Pennsylvania, Foreign Certificate Request, P.O. Box 16347,
Philadelphia, PA 19114-0447. Requests for certification are to be made in
writing and must include the United States holders name, social security
number or employer identification number, tax return form number, and tax
period for which certification is requested. The Internal Revenue Service will
send

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the certification (IRS Form 6166) directly to the United States holders.
The issued IRS Form 6166 will be valid for a period of three years from the
date of the last filed return to which it relates.

Refunds under the Treaty are not available in respect of shares or ADSs
held in connection with a permanent establishment or fixed base in Germany.

Taxation of disposition of shares or ADSs.Subject to the discussions
below relating to passive foreign investment companies, any gain or loss
realized and recognized by a United States holder on the sale or other
disposition of a share or an ADS (including upon our liquidation or dissolution
or as a result of a non-pro rata redemption of shares) will be subject to
United States federal income tax, as a capital gain or loss, on an amount equal
to the difference between such United States holders adjusted tax basis in the
share or ADS and the amount realized on disposition. A United States holders
adjusted tax basis in a share or ADS (as described above) will be reduced (but
not below zero) by the amount of any distribution that is treated as a return
of basis.

Any gain or loss recognized upon the sale or other disposition of a share
or an ADS will be long-term capital gain or loss if held for more than one
year. For non-corporate United States holders, the United States income tax
rate applicable to a net long-term capital gain currently will not exceed 20%.
For corporate United States holders, a capital gain is currently taxed at the
same rate as ordinary income. The deductibility of a capital loss, however, is
subject to limitations for both non-corporate and corporate United States
holders.

Foreign tax credit considerations.For United States federal income tax
purposes, United States holders, upon payment of a dividend, will be treated as
having received the amount of any German tax withheld, which is not refundable
(as described above), and as then having paid this tax over to Germany. As a
result of this rule, the amount of dividend included in a United States
holders gross income may be greater than the amount of cash actually received
(or receivable) by the United States holder.

Subject to the limitations and conditions set forth in the Code, United
States holders may claim a credit against their United States federal income
tax liability for German tax withheld from dividends or German tax imposed on
capital gains, if any, or, if they do not elect to credit any foreign income
tax for the taxable year, they may deduct such tax. For purposes of the foreign
tax credit limitation, foreign source income is classified into one of several
baskets, and the credit for foreign taxes on income in any basket is limited to
United States federal income tax allocable to that income. Dividends or capital
gains will generally constitute passive income or financial services income
for purposes of the foreign tax credit limitation. Dividends will generally
constitute foreign source income and currency gains and capital gains will
generally constitute United States source income. Capital loss will generally
be allocated against United States source income. Because capital gains will
generally constitute United States source income, as a result of the United
States foreign tax credit limitation, any German or other foreign income tax
imposed upon capital gains in respect of the shares may not be currently
creditable unless a United States holder had other foreign source income for
the year in the appropriate foreign tax credit limitation basket.

Passive foreign investment company rules.Special United States federal
income tax rules apply to holders of equity interests in a corporation
classified as a passive foreign investment company, or PFIC, under the Code. We
would constitute a PFIC for United States federal income tax purposes if 75% or
more of our gross income for a taxable year were to consist of passive income,
or 50% or more of our average assets held during a taxable year were to consist
of passive assets. We do not anticipate that we have or will have sufficient
passive income or assets in any year to constitute a PFIC.

If we were to constitute a PFIC, a United States holder could be subject
to a number of materially adverse United States tax consequences. Prospective
United States holders should consult with their own tax advisors regarding the
potential application of PFIC rules to them.

Non-United States holders

Subject to the discussion of United States backup withholding tax below, a
holder of shares or ADSs other than a United States holder will not be subject
to United States federal income or withholding tax on income derived

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by us, dividends paid to a stockholder or gains realized on the sale of shares or
ADSs, provided that: (1) such income items are not effectively connected with
the conduct by the non-United States holder of a trade or business within the
United States; (2) the non-United States holder is not or was not present in,
or does not have or did not have a permanent
establishment in, the United States; (3) there has not been a present or
former connection between the non-United States holder and the United States,
including, without limitation, such non-United States holders status as a
citizen or former citizen thereof or resident or former resident thereof; and
(4) in the case of a gain from the sale or disposition of shares or ADSs by an
individual, the non-United States holder is not present in the United States
for 183 days or more during the taxable year of the sale and certain other
conditions are met.

If a dividend, gain or income with respect to a share or ADS of a
non-United States holder is effectively connected with the conduct of a United
States trade or business (or attributable to a permanent establishment in the
United States, in the case of a holder who is a resident of a country which has
an income tax treaty with the United States), the non-United States holder may
be subject to United States income taxes on such dividend, gain or income at
the statutory rates provided for United States persons after deduction of
deductible expenses allocable to such effectively connected dividend, gain or
income. In addition, if such a non-United States holder is a foreign
corporation, it may be subject to a branch profits tax equal to 30% of its
effectively connected earnings and profits for the taxable year, as adjusted
for certain items, unless a lower rate applies under a United States income tax
treaty with the non-United States holders country of residence. For this
purpose, dividends, gain or income in respect of a share or ADS will be
included in earnings and profits subject to the branch profits tax if the
dividend, gain or income is effectively connected with the conduct of the
United States trade or business of the non-United States holder.

United States backup withholding tax and information reporting

Payments made by a U.S. paying agent or other United States intermediary
broker in respect of the shares or ADSs may be subject to information reporting
to the IRS and to backup withholding tax. Backup withholding will not apply,
however (i) to a holder who furnishes a correct taxpayer identification number
and makes any other required certification or (ii) to a holder who is otherwise
exempt from backup withholding (such as a corporation).

Any amounts withheld under the backup withholding rules from a payment to
a holder will be allowed as a refund or a credit against such holders United
States federal income tax, provided that the holder has complied with
applicable reporting obligations.

German Taxation

The following is a summary discussion of certain tax matters arising under
German tax law. The discussion does not purport to be a comprehensive
description of all of the tax considerations which may be relevant to a
decision to purchase and/or to sell our shares or ADSs. The discussion is based
on the tax laws of the Federal Republic of Germany as in effect on the date of
this annual report, which are subject to change, possibly with retroactive
effect.

The discussion is limited to the impact of income taxes on income from
dividends, capital gains, gift and inheritance tax under German law, and does
not address all aspects of German taxation. The discussion does not consider
any specific facts or circumstances that may apply to a particular investor. In
particular, this discussion does not comprehensively treat the tax
considerations that will be relevant to prospective investors who reside
outside Germany. Any person who is in doubt as to his tax position is urged to
consult a tax adviser before purchasing or selling shares or ADSs.

A short discussion of German corporate taxation precedes the discussion of
taxes applicable to shareholders. German tax law has undergone a fundamental
change due to a major tax reform which became effective in stages on January 1,
2001 and on January 1, 2002. Further changes are to be expected in the future.
As a result, the German tax law is transitory in certain respects.

Taxation of PrimaCom.From January 1, 2001 PrimaCom is subject to
corporate income tax at a rate of 25%. For the tax year 2003 the corporate
income tax rate is 26.5 % due to the Flutopfersolidaritätsgesetz

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(Solidarity Act for Flood Victims) This tax rate applies whether or not profits are
distributed. Certain foreign-source earnings are exempted from corporate income
tax. Effective in the 2002 tax year, dividends received by a corporation, and
profits it derives from the disposal of shares in corporations, will also be
exempted from corporate income tax.

In addition, German corporations are subject to a profit-related trade
tax, the exact amount of which depends on, among other things, the
municipalities in which the corporation maintains branches. Trade tax on income
is deductible as an operating expense for corporate tax assessment purposes.

In so far as the classification of PrimaComs capital for corporate income
tax purposes at December 31, 2000, reduced by ordinary distributions of
profits for previous years, still includes equity components which were subject
to corporate income tax in previous tax years at a rate of 45% or 40%,
respectively, then such equity components will be carried forward in the form
of a corporate income tax credit. The tax credit amounts currently to one-sixth
of the final balance of the equity component taxed at a rate of 40% (EK
40-Endbestand).

In the case of dividend distributions paid in the years 2002 to 2016,
which are deemed to have been paid out of the EK 40-Endbestand, both the
corporate income tax and the corporate income tax credit are reduced by
one-sixth of the respective EK 40-Endbestanddistributed. Corporate income tax
credits which have not been realized by 2016 will lapse. If certain tax-free
profits originating prior to 2001 are distributed within this 15-year period,
they will be subject to additional taxation at the level of the corporation.
Currently, this regime regarding the distribution of EK 40-Endbestand is in the
process of being changed by the Federal Government. While details regarding the
new regulations change monthly, it seems to be clear that the use of the EK
40-Endbestand will be restricted in the future. Possibly a minimum tax of the
distributing corporation will be implemented.

Taxation of dividendsDividends from profits earned since January 1, 2001.
In general, only half of the dividends paid to individual shareholders will be
subject to income tax (the half-income-method (Halbeinkünfteverfahren)) plus
5.5% surtax thereon. Correspondingly, only half of the expenses associated with
each shareholders participation are tax deductible. Dividends which are
considered to be repayments of capital for tax purposes are completely
tax-free, provided that the individual shareholder does not hold a substantial
participation as defined below (as of January 1, 2002, a participation of 1% or
more is considered substantial; see Taxation of dividendsDisposals from
January 1, 2002).

However, dividend payments to individual shareholders resident in Germany
(i.e., having their domicile or habitual abode in Germany) and whose shares are
held as private assets are generally tax-exempt, provided that the dividend
payments and the shareholders other investment income, less half the actual
income-related expenses (or blanket deduction for income-related expenses of
51 or 102 for married couples filing jointly), do not exceed the tax-free
savers tax allowance of 1,550 or 3,100 for married couples filing jointly).
A 5.5% surtax is levied on the assessed income tax of the shareholder.

If the shareholder is a corporation with its statutory seat or place of
management in Germany, dividends received will not be subject to corporate
income tax. If the shareholder is a bank or financial services institution
within the meaning of Sec. 1 para. 12 of the German Banking Act, and the shares
are accounted for in the trading books (Handelsbuch), then dividends are fully
taxable. This is also true with respect to shares of a finance company (as
defined by the Banking Act) purchased with the aim of making short-term gains
on such companys own account. The same rules apply to banks, financial
services institutions and finance companies having their seat in a member state
of the European Community or another country that is a signatory to the Treaty
on the European Economic Area. An exemption of dividend income from trade tax
is only granted if, at the beginning of the year, the shareholder held at least
10% of the registered share capital of the corporation distributing such
dividends.

German corporations must withhold, on behalf of their shareholders, tax
(capital yield tax) at a rate of 20.0% plus a 5.5% surtax thereon, representing
a total rate of 21.1% of the amounts distributed, irrespective of whether the
dividends are fully or partially tax-exempt to the shareholders. The
withholding tax is credited or refunded upon the shareholders tax assessment
on income.

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Dividends will be paid without deduction of withholding tax and surtax to
shareholders resident in Germany who have submitted to their custodial bank a
non-assessment certificate (Nichtveranlagungsbescheinigung) issued by the tax
office of their statutory seat or domicile. In addition, no deduction for
withholding tax will be made if the shareholder has submitted a withholding
exemption certificate (Freistellungsauftrag) to his bank, provided that the
exemption amount indicated in the certificate has not already been used up by
other investment income. The custodial bank may also pay dividends without deducting withholding tax and surtax
to tax-exempt corporations, provided a non-assessment certificate has been
submitted.

The half-income-method is, as a rule, also applied to individual
shareholders not resident in Germany. Dividend income of corporations not
resident in Germany is, in principle, tax-exempt. It is, however, at present
not clear whether this is also true if the shares are not held as part of the
assets of a permanent establishment (including a permanent representative) or a
fixed base in Germany, or whether, in these cases, capital yield tax will be
levied. Capital yield tax will be levied, at least initially, at a rate of 20%
(plus surtax thereon) on the full amount of the dividends. It remains to be
seen whether and how capital yield tax withheld will be refunded, either fully
or in part, in so far as the refund exceeds the amount provided for in the
applicable double taxation treaty, if any. Most German double taxation treaties
provide for a reduction of capital yield tax to 15% for dividend distributions
to shareholders whose shares are not held as part of the assets of a permanent
establishment in Germany and who are resident in a country which is party to a
double taxation treaty with Germany. The withholding tax is reduced by
refunding to the shareholder the difference between the total amount withheld,
including solidarity surcharge, less the withholding tax actually owed
according to the applicable double taxation treaty upon the shareholders
application to the Federal Tax Office (Bundesamt für Finanzen, Friedhofstrasse
1, 53225 Bonn).

Forms for refund requests can be obtained from the German tax authorities
or from German embassies and consulates in various countries. Most double
taxation treaties provide for a further reduction of capital yield tax on
dividends distributed to corporations not resident in Germany which hold at
least 25% (in some cases at least 10%) of the shares or, under some treaties,
voting shares of the distributing corporation. The same rule applies to
dividends distributed to parent companies resident in the European Community
within the meaning of EC Directive 90/435/EEC of the Council of July 23, 1990
(the Parent-Subsidiary Directive). Where dividends are distributed to EU
parent companies, upon request and provided that further requirements are met,
either the reduced withholding tax rate can be applied at the time of
distribution or the withholding tax may not have to be withheld at all.

If an individual shareholder holds shares as part of the business assets
of a permanent establishment in Germany, and the shareholder holds less than
one-tenth of the distributing companys share capital at the beginning of the
calendar year in which the dividend is paid, then such dividends will be
subject to trade tax in full, regardless of whether the shareholder is resident
in Germany.

Taxation of capital gainsDisposals from 2002 onwards.The taxation of
capital gains from the disposal of shares in a corporation whose fiscal year
corresponds to the calendar year are subject to considerable changes beginning
in 2002.

Half of the capital gains derived from the disposal of shares held by a
shareholder resident in Germany as part of business assets or by a shareholder
not resident in Germany as part of the assets of a permanent establishment or a
fixed base in Germany are taxable at the standard rates.

Half of the capital gains derived from shares held by shareholders
resident in Germany as part of their private assets are, however, only subject
to tax if the shares are sold within one year after their acquisition or after
the expiration of this period if the shareholder, at any time during the five
years immediately preceding the disposal, directly or indirectly held at least
1% of the nominal capital in the corporation (referred to as a substantial
participation). If the shareholder acquired the shares gratuitously, the
participations of the previous owner as well as the time he has held the shares
will also be taken into account.

Capital gains from the disposal of shares of a non-resident shareholder
whose shares do not form part of the assets of a permanent establishment or a
fixed base in Germany are only subject to tax if, at any time during the five
years immediately preceding the disposal, the shareholder has directly or
indirectly held at least 1% of the nominal capital of the subject corporation.
Most double taxation treaties to which Germany is a party provide for a
complete

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exemption from German taxation in this case. When determining the
respective participation rate, participations held prior to the effective date
of the legal changes will also be taken into account.

Capital gains of shareholders subject to corporate income tax will, as a
rule, be tax-exempt. The deductibility of losses from the disposal of shares
will be further limited or totally excluded.

If the shareholder is a bank or financial services institution within the
meaning of Sec. 1 para. 12 of the German Banking Act, and if the shares
disposed of are accounted for in the trading books (Handelsbuch), any capital
gains will be fully taxable. The same rule will apply if the shares disposed of
were acquired by a finance company within the meaning of the Banking Act with
the aim of realizing short-term profits for such companys own account. This is
also true for banks, financial services institutions and finance companies
having their seat in a member state of the European Community or another
country that is a signatory to the Treaty on the European Economic Area.

Please be aware that it is currently planned that all capital gains
realized as a result of the disposal of assets, including shares, will be
subject to income taxation of private individuals. A special tax rate of 15%
shall be applicable to such profits, unless the capital gains are already
subject to taxation as a result of the above-mentioned 1% rule, in which case
such rule supersedes the new rules of taxation. In either case 50% of the
capital gains resulting from the disposal of shares remain tax free. However,
such plans are not yet final, but are rather pending legislation and it is not
yet clear whether or not the proposed rules will come into effect. With respect
to non-resident shareholders, please keep in mind that most double taxation
treaties to which Germany is a party provide for an exemption from German
taxation.

Gift and inheritance tax.The transfer of shares to another person by way
of gift or succession is in principle only subject to German inheritance or
gift tax if:



|(a) |  | the decedent or donor, or the heir, the beneficiary or other transferee
has his/her residence or habitual abode in Germany at the time of the
transfer or is a German citizen who has not lived abroad for a continuous
period of more than five years without maintaining a residence in Germany;
or
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(b) |  | the shares are held by the decedent or donor as part of business assets
for which a permanent establishment is maintained in Germany or a
permanent representative is appointed; or                                                                                                                  
|   
|(c) |  | the decedent or donor at the time of the inheritance or gift, either
alone or together with persons close to him, directly or indirectly holds
at least 10% of the share capital of the German corporation.                                                                                          

The few German double taxation treaties on inheritance and gift tax that are
currently in force (e.g. the treaty with the United States) usually provide for
German gift and inheritance tax to be levied only in the cases described under
(a) and (b) above.

Other taxes.There are no German transfer tax, value added tax, stamp
duty or similar taxes on the purchase, sale or other disposal of shares. Wealth
tax is no longer levied for periods after January 1, 1997.

Effective January 1, 2000, if an individual or a corporation directly or
indirectly acquires 95% or more of the shares in PrimaCom, a 3.5% land transfer
tax will be levied on the value of all land which PrimaCom or one of its
subsidiaries owns.

F.     Dividends and Paying Agents

Not applicable.

G.     Statement by Experts

Not applicable.

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H. Documents on Display

We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. In accordance with these requirements, we
file reports and other information with the Securities and Exchange Commission.
These materials, including this annual report and the exhibits thereto, may be
inspected and copied at the Commissions Public Reference Room at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the Commissions regional offices
at 500 West Madison Street, Suite 1400,Chicago, Illinois 60661, and 233
Broadway New York, New York 10279. Copies of the materials may be obtained from
the Public Reference Room of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The public may obtain information
on the operation of the Commissions Public Reference Room by calling the
Commission in the United States at 1-800-SEC-0330. The Commission also
maintains a web site at http://www.sec.gov that contains reports, proxy
statements and other information regarding registrants that file electronically
with the Commission.

I. Subsidiary Information

Not applicable.






|ITEM 11. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- |  | ----------------------------------------------------------

We have a significant variable rate senior secured credit facility and as
a result could be significantly affected by changes in interest rates. In this
regard, changes in interest rates affect the interest paid on debt. To mitigate
the effect of changes in interest rates, we have entered into interest rate cap
agreements.

The following table provides information about our derivative financial
instruments and other financial instruments that are sensitive to changes in
interest rates. For debt obligations, the table presents principal cash flows
and related applicable floating rate indices by expected maturity dates. For
interest rate caps and floors, the table presents notional amounts and
weighted-average strike rates by contractual maturity dates. Notional amounts
are used to calculate the contractual cash flows to be exchanged under the
contract.

Interest Rate Sensitivity
Principal (Notional) Amount by Expected Maturity
Average Interest Rate/Cap Strike Price

|                                                                                                      |                           |  |         |   |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  |            |   | 
|----------------------------------------------------------------------------------------------------- | ------------------------- |  | ------- | - | ---- |  | ---- |  | ---- |  | ------ |  | ---------- |  | ------ |  | -------- |  | ------ |  |  |  | ------- |  |  |  | ------- |  |  |  | ---------- | - | 
|                                                                                                      |                           |  |         |   |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  | Fair Value
|                                                                                                      |                           |  |         |   |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  | December  
|                                                                                                      |                           |  | 2003    |   | 2004 |  | 2005 |  | 2006 |  | 2007   |  | Thereafter |  | Total  |  | 31, 2002
|                                                                                                      |                           |  |         |   |      |  |      |  |      |  |        |  |            |  |        |  |         
|Variable-Rate Revolving Credit
Facility ( in thousands)
Floating Rate Index LIBOR plus
0.75% - 2.50% |                           |  |        |   |      |  |     |  |      |  | 28,045 |  |            |  | 62,500 |  |          |  | 78,125 |  |  |  | 328,125 |  |  |  | 496,795 |  |  |  | 496,795    |  
|Interest Rate Derivative                                                                              |                           |  |         |   |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  |            |  
|                                                                                                      | Financial Instruments     |  |         |   |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  |            |   | 
|                                                                                                      | Related to Variable-Rate  |  |         |   |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  |            |   | 
|                                                                                                      | Revolving Credit Facility |  |         |   |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  |            |   | 
|Interest Rate Floors/Caps
( in thousands)                                                            |                           |  |         |   |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  |            |  
|Notional Amount                                                                                       |                           |  | 425,000 |   |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  |            |  
|Average Strike Rate(1)                                                                                |                           |  | 5.29    | % |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  |            |  
|Average Floor Rate(2)                                                                                 |                           |  | 3.76    | % |      |  |      |  |      |  |        |  |            |  |        |  |          |  |        |  |  |  |         |  |  |  |         |  |  |  | (4.473     | )



---

|(1) |  | Average strike rate of interest rate cap agreements.          
|--- |  | --------------------------------------------------------------
|   
|(2) |  | Average floor rate as to the 325,000,000 of notional account.

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|ITEM 12. |  | DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
|-------- |  | ------------------------------------------------------

Not applicable.




PART II






|ITEM 13. |  | DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
|-------- |  | -----------------------------------------------

Not applicable.






|ITEM 14. |  | MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITIES HOLDERS AND
USE OF PROCEEDS
|-------- |  | ------------------------------------------------------------------------------

Not applicable.






|ITEM 15. |  | CONTROLS AND PROCEDURES
|-------- |  | -----------------------

Within the 90 days prior to the filing date of this annual report on Form
20-F, we performed an evaluation, under the supervision and with the
participation of our management, of the effectiveness and design and operation
of our disclosure controls and procedures. Disclosure controls and procedures
are designed to ensure that the material financial and non-financial information required to be disclosed in our
annual report on Form 20-F and filed with the Securities and Exchange
Commission is recorded, processed, summarized and reported timely. In
designing and evaluating the disclosure controls and procedures, management
recognized that any controls and procedures, no matter how well designed and
operated can provide only reasonable, rather than absolute, assurance of
achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based upon that evaluation, our management
concluded that our disclosure controls and procedures are effective. Since the
date of the evaluation, there have been no significant changes in our internal
controls or in other factors that could significantly affect the controls.
Therefore, no corrective actions were taken.






|ITEM 16. |  | [RESERVED]
|-------- |  | ----------




PART III






|ITEM 17. |  | FINANCIAL STATEMENTS
|-------- |  | --------------------

Not applicable.

83



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|ITEM 18. |  | FINANCIAL STATEMENTS
|-------- |  | --------------------

84



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|ITEM 19. |  | EXHIBITS
|-------- |  | --------

|        |  |                                                                                |  | 
|------- |  | ------------------------------------------------------------------------------ |  | 
|Exhibit |  |                                                                                |  | 
|Number  |  | Description of Exhibit                                                        
|        |  |                                                                               
|3.1     |  | English translation of the Articles of Association                            
|3.2     |  | Standing Orders for the Management Board                                      
|3.3     |  | Rules for Procedure of the Supervisory Board                                  
|8.1     |  | List of subsidiaries                                                          
|13.1    |  | Certifications filed pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for
filing on Form 20-F and that it has duly caused and authorized the undersigned
to sign this annual report on its behalf.

| |  |                                                                                     
| |  | ------------------------------------------------------------------------------------
| |  | PRIMACOM AG                                                                         
|
| |  |                                                                                     
|
| |  | /s/ Jens KircherName: Jens Kircher
Title: Member of the management board            
|
| |  |                                                                                     
|
| |  | /s/ Stefan SchwenkedelName: Stefan Schwenkedel
Title: Member of the management board

Date: March 28, 2003

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CERTIFICATION

I, Stefan Schwenkedel, fulfilling functions of the principal executive
officer, and principal financial officer, certify that:

1.     I have reviewed this annual report on Form 20-F of PrimaCom AG;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules l3a-14 and 15d-14) for the registrant and have:



| | a. |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
| | c. |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
function):



| | a. |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003

| |  |                                                                                
| |  | -------------------------------------------------------------------------------
| |  | /s/ Stefan SchwenkedelStefan Schwenkedel                                       
|
| |  |                                                                                
|
| |  | Chief Financial Officer and fulfilling functions of principal executive officer

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| |                                                                                        
| | ---------------------------------------------------------------------------------------
| | I, Jens Kircher, fulfilling functions of the principal executive officer,
certify that:

1.     I have reviewed this annual report on Form 20-F of PrimaCom AG;

2.     Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

3.     Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

4.     The registrants other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules l3a-14 and 15d-14) for the registrant and have:



| | a. |  | designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this annual report
is being prepared;
| | -- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. |  | evaluated the effectiveness of the registrants disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this annual report (the Evaluation Date); and                                                                                                  
| | c. |  | presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;                                                                                                                        

5.     The registrants other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrants auditors and the audit committee of
registrants board of directors (or persons performing the equivalent
function):



| | a. |  | all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrants
ability to record, process, summarize and report financial data and
have identified for the registrants auditors any material weaknesses
in internal controls; and
| | -- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | b. |  | any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrants
internal controls; and                                                                                                                                        

6.     The registrants other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.

Date: March 28, 2003

| |  |                                                                                
| |  | -------------------------------------------------------------------------------
| |  | /s/ Jens Kircher                                                               
| |  |                                                                                
| |  | Jens Kircher                                                                   
| |  | Chief Operating Officer and
Fulfilling functions of principal
executive officer

87



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##### Table of Contents



Report of Independent Auditors

To the Board of Directors,
PRIMACOM AG

We have audited the accompanying consolidated balance sheets of PrimaCom
AG and subsidiaries as of December 31, 2000, 2001 and 2002 and the related
consolidated statements of operations, shareholders equity and cash flows for
each of the three years in the period ended December 31, 2002. These financial
statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in Germany and the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of PrimaCom AG
and subsidiaries at December 31, 2000, 2001 and 2002 and the consolidated
results of their operations and their cash flows for each of the three years in
the period ended December 31, 2002, in conformity with accounting principles
generally accepted in the United States.

As disclosed in the Note 2 to the consolidated financial statements, in
2002, the Company adopted statement of Financial Accounting Standards No.142,
Goodwill and Other Intangible Assets. Accordingly, the Company ceased
amortizing goodwill and indefinite lived intangible assets as of January 1,
2002.

| |                                                                
| | ---------------------------------------------------------------
| | /s/  ERNST & YOUNGERNST & YOUNG
Deutsche Allgemeine Treuhand AG

Frankfurt, Germany
March 28, 2003

F-1



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##### Table of Contents



PRIMACOM AG AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)

|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |         |  
|------------------------------------------------------------------------------------------------------ | --------------------------------------------------- |  | ------------------------ | ------ | ---- |  | -------- | ------- | ----------- |  | -------- | ------ | - |  | -------- | ------- | -
|                                                                                                       |                                                     |  | Years ended December 31,
|                                                                                                       |                                                     |  |                         
|                                                                                                       |                                                     |  | 2000                     |        | 2001 |  | 2002     |         | 2002       
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |            
|                                                                                                       |                                                     |  | Euro                     |        | Euro |  | Euro     |         | U.S.$      
|                                                                                                       |                                                     |  |                          |        |      |  |          |         | (unaudited)
|Revenues                                                                                               |                                                     |  | 124,343                  |        |      |  | 165,496  |         |             |  | 182,042  |        |   |  | 190,872  |        
|Operating costs and expenses:                                                                          |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|                                                                                                       | Operations                                          |  |                          | 30,794 |      |  |          | 44,195  |             |  |          | 48,460 |   |  |          | 50,810  |  
|                                                                                                       | Selling, general and administrative                 |  |                          | 27,981 |      |  |          | 37,630  |             |  |          | 39,101 |   |  |          | 40,998  |  
|                                                                                                       | Corporate overhead                                  |  |                          | 17,219 |      |  |          | 14,929  |             |  |          | 12,976 |   |  |          | 13,605  |  
|                                                                                                       | Debt refinancing                                    |  |                          |       |      |  |          |        |             |  |          | 2,432  |   |  |          | 2,550   |  
|                                                                                                       | Depreciation and amortization                       |  |                          | 75,530 |      |  |          | 118,360 |             |  |          | 95,943 |   |  |          | 100,597 |  
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|Total                                                                                                  |                                                     |  | 151,524                  |        |      |  | 215,114  |         |             |  | 198,912  |        |   |  | 208,560  |        
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|Operating loss                                                                                         |                                                     |  | (27,181                  | )      |      |  | (49,618  | )       |             |  | (16,870  | )      |   |  | (17,688  | )      
|Interest expense:                                                                                      |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|                                                                                                       | Convertible Second Secured Loan
non-cash interest   |  |                          |       |      |  |          |        |             |  |          | 31,079 |   |  |          | 32,586  |  
|                                                                                                       | Other bank interest and other interest              |  |                          | 26,173 |      |  |          | 62,768  |             |  |          | 78,342 |   |  |          | 82,142  |  
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|Total                                                                                                  |                                                     |  | 26,173                   |        |      |  | 62,768   |         |             |  | 109,421  |        |   |  | 114,728  |        
|Other income (expense)                                                                                 |                                                     |  | 1,690                    |        |      |  | (5,649   | )       |             |  | (993     | )      |   |  | (1,040   | )      
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|Loss from continuing operations before income
taxes and other items                                    |                                                     |  | (51,664                  | )      |      |  | (118,035 | )       |             |  | (127,284 | )      |   |  | (133,456 | )      
|Income tax benefit (expense)                                                                           |                                                     |  | (4,258                   | )      |      |  | 15,381   |         |             |  | (10,980  | )      |   |  | (11,514  | )      
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|Loss from operations before minority interest and
equity earnings                                      |                                                     |  | (55,922                  | )      |      |  | (102,654 | )       |             |  | (138,264 | )      |   |  | (144,970 | )      
|Minority interest in net income of subsidiaries                                                        |                                                     |  | (94                      | )      |      |  | (88      | )       |             |  | (63      | )      |   |  | (66      | )      
|Equity loss in affiliate                                                                               |                                                     |  | (128                     | )      |      |  | (420     | )       |             |  |         |        |   |  |         |        
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|Loss from operations before extraordinary loss and
cumulative effect of change in accounting
principle |                                                     |  | (56,144                  | )      |      |  | (103,162 | )       |             |  | (138,327 | )      |   |  | (145,036 | )      
|Extraordinary loss, net of income tax                                                                  |                                                     |  | (8,180                   | )      |      |  |         |         |             |  |         |        |   |  |         |        
|Cumulative effect of change in accounting
principle, net of income tax                                 |                                                     |  |                         |        |      |  | (946     | )       |             |  |         |        |   |  |         |        
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|Net loss                                                                                               |                                                     |  | (64,324                  | )      |      |  | (104,108 | )       |             |  | (138,327 | )      |   |  | (145,036 | )      
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|Loss per share:                                                                                        |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|                                                                                                       | Basic and diluted:                                  |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |         |  
|                                                                                                       | Loss from operations                                |  |                          | (2.85  | )    |  |          | (5.21   | )           |  |          | (6.99  | ) |  |          | (7.33   | )
|                                                                                                       | Extraordinary loss                                  |  |                          | (0.41  | )    |  |          |        |             |  |          |       |   |  |          |        |  
|                                                                                                       | Cumulative effect of change in accounting principle |  |                          |       |      |  |          | (0.05   | )           |  |          |       |   |  |          |        |  
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        
|Net loss                                                                                               |                                                     |  | (3.26                    | )      |      |  | (5.26    | )       |             |  | (6.99    | )      |   |  | (7.33    | )      
|                                                                                                       |                                                     |  |                          |        |      |  |          |         |             |  |          |        |   |  |          |        

See accompanying notes to consolidated financial statements.

F-2



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##### Table of Contents



PRIMACOM AG AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
(in thousands)

|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |        | 
|------------------------------------------ | ----------------------- |  | ------------ | ------ | ---- |  | --------- | ----------- | ----- |  | --------- | ------ |  |  | --------- | ------ | 
|                                           |                         |  | December 31,
|                                           |                         |  |             
|                                           |                         |  | 2000         |        | 2001 |  | 2002      |             | 2002 
|                                           |                         |  |              |        |      |  |           |             |      
|                                           |                         |  | Euro         |        | Euro |  | Euro      |             | U.S.$
|                                           |                         |  |              |        |      |  |           | (unaudited)
|Cash and cash equivalents                  |                         |  | 4,643        |        |      |  | 2,933     |             |       |  | 802       |        |  |  | 841       |       
|Trade accounts receivable  net            |                         |  | 6,796        |        |      |  | 8,997     |             |       |  | 6,876     |        |  |  | 7,209     |       
|Other current assets                       |                         |  | 16,113       |        |      |  | 10,762    |             |       |  | 8,735     |        |  |  | 9,159     |       
|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|Total current assets                       |                         |  | 27,552       |        |      |  | 22,692    |             |       |  | 16,413    |        |  |  | 17,209    |       
|Property and equipment  net               |                         |  | 559,581      |        |      |  | 576,695   |             |       |  | 520,225   |        |  |  | 545,458   |       
|Goodwill  net                             |                         |  | 357,754      |        |      |  | 320,095   |             |       |  | 359,686   |        |  |  | 377,132   |       
|Customer lists  net                       |                         |  | 56,067       |        |      |  | 53,055    |             |       |  | 47,890    |        |  |  | 50,213    |       
|Deferred income taxe  net                 |                         |  | 78,700       |        |      |  | 104,060   |             |       |  | 93,715    |        |  |  | 98,262    |       
|Other assets                               |                         |  | 28,722       |        |      |  | 48,409    |             |       |  | 47,789    |        |  |  | 50,107    |       
|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|TOTAL ASSETS                               |                         |  | 1,108,376    |        |      |  | 1,125,006 |             |       |  | 1,085,718 |        |  |  | 1,138,381 |       
|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|Accounts payable                           |                         |  | 26,786       |        |      |  | 25,157    |             |       |  | 16,147    |        |  |  | 16,930    |       
|Accrued expenses                           |                         |  | 24,608       |        |      |  | 32,151    |             |       |  | 42,847    |        |  |  | 44,925    |       
|Deferred revenue                           |                         |  | 2,736        |        |      |  | 2,225     |             |       |  | 1,610     |        |  |  | 1,688     |       
|Deferred purchase obligations              |                         |  | 4,228        |        |      |  | 10,984    |             |       |  | 456       |        |  |  | 478       |       
|Sale-leaseback obligations  current       |                         |  | 4,341        |        |      |  | 3,976     |             |       |  | 2,713     |        |  |  | 2,845     |       
|Related party liabilities                  |                         |  | 245          |        |      |  |          |             |       |  |          |        |  |  |          |       
|Bank and other debt  current              |                         |  | 955          |        |      |  | 554       |             |       |  | 309       |        |  |  | 324       |       
|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|Total current liabilities                  |                         |  | 63,899       |        |      |  | 75,047    |             |       |  | 64,082    |        |  |  | 67,190    |       
|Sale leaseback  obligations               |                         |  | 9,328        |        |      |  | 5,617     |             |       |  | 2,903     |        |  |  | 3,044     |       
|Deferred income taxes                      |                         |  | 30,531       |        |      |  | 42,621    |             |       |  | 82,544    |        |  |  | 86,549    |       
|Convertible Second Secured Loan            |                         |  |             |        |      |  |          |             |       |  | 406,079   |        |  |  | 425,775   |       
|Revolving credit facility and other
debt   |                         |  | 735,236      |        |      |  | 831,529   |             |       |  | 496,795   |        |  |  | 520,892   |       
|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|TOTAL LIABILITIES                          |                         |  | 838,994      |        |      |  | 954,814   |             |       |  | 1,052,403 |        |  |  | 1,103,450 |       
|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|Minority interest                          |                         |  | 198          |        |      |  | 200       |             |       |  | 273       |        |  |  | 286       |       
|SHAREHOLDERS EQUITY                       |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|Common stock  2.56 par value             |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|                                           | Authorized  31,692,792 |  |              |        |      |  |           |             |       |  |           |        |  |  |           |        | 
|                                           | Issued  19,786,052     |  |              | 50,582 |      |  |           | 50,582      |       |  |           | 50,582 |  |  |           | 53,036 | 
|Additional paid-in capital                 |                         |  | 354,838      |        |      |  | 359,754   |             |       |  | 361,131   |        |  |  | 378,647   |       
|Accumulated deficit                        |                         |  | (136,236     | )      |      |  | (240,344  | )           |       |  | (378,671  | )      |  |  | (397,038  | )     
|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|TOTAL SHAREHOLDERS EQUITY                 |                         |  | 269,184      |        |      |  | 169,992   |             |       |  | 33,042    |        |  |  | 34,645    |       
|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |                         |  | 1,108,376    |        |      |  | 1,125,006 |             |       |  | 1,085,718 |        |  |  | 1,138,381 |       
|                                           |                         |  |              |        |      |  |           |             |       |  |           |        |  |  |           |       

See accompanying notes to consolidated financial statements.

F-3



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##### Table of Contents



PRIMACOM AG AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)

|                                   |  |            |        |         |  |             |         |               |  |  |          |       |  |  |          |  
|---------------------------------- |  | ---------- | ------ | ------- |  | ----------- | ------- | ------------- |  |  | -------- | ----- |  |  | -------- | -
|                                   |  |            |        |         |  | Additional  |         |               |  |  |          | Total
|                                   |  | Registered |        | Paid-In |  | Accumulated |         | Shareholders
|                                   |  | Capital    |        | Capital |  | Deficit     |         | Equity       
|                                   |  |            |        |         |  |             |         |              
|                                   |  | Euro       |        | Euro    |  | Euro        |         | Euro         
|                                   |  |            |        |         |  |             |         |              
|Balance at December 31, 1999       |  |            | 50,435 |         |  |             | 350,067 |               |  |  | (71,912  | )     |  |  | 328,590  |  
|Issuance of shares in acquisition  |  |            | 179    |         |  |             | 1,543   |               |  |  |         |       |  |  | 1,722    |  
|Merger with AGFB                   |  |            | (32    | )       |  |             | (330    | )             |  |  |         |       |  |  | (362     | )
|Stock option compensation          |  |            |       |         |  |             | 3,558   |               |  |  |         |       |  |  | 3,558    |  
|Net loss                           |  |            |       |         |  |             |        |               |  |  | (64,324  | )     |  |  | (64,324  | )
|                                   |  |            |        |         |  |             |         |               |  |  |          |       |  |  |          |  
|Balance at December 31, 2000       |  |            | 50,582 |         |  |             | 354,838 |               |  |  | (136,236 | )     |  |  | 269,184  |  
|Release of contingent value rights |  |            |       |         |  |             | 1,063   |               |  |  |         |       |  |  | 1,063    |  
|Stock option compensation          |  |            |       |         |  |             | 3,853   |               |  |  |         |       |  |  | 3,853    |  
|Net loss                           |  |            |       |         |  |             |        |               |  |  | (104,108 | )     |  |  | (104,108 | )
|                                   |  |            |        |         |  |             |         |               |  |  |          |       |  |  |          |  
|Balance at December 31, 2001       |  |            | 50,582 |         |  |             | 359,754 |               |  |  | (240,344 | )     |  |  | 169,992  |  
|Stock option compensation          |  |            |       |         |  |             | 1,377   |               |  |  |         |       |  |  | 1,377    |  
|Net loss                           |  |            |       |         |  |             |        |               |  |  | (138,327 | )     |  |  | (138,327 | )
|                                   |  |            |        |         |  |             |         |               |  |  |          |       |  |  |          |  
|Balance at December 3, 2002        |  |            | 50,582 |         |  |             | 361,131 |               |  |  | (378,671 | )     |  |  | 33,042   |  
|                                   |  |            |        |         |  |             |         |               |  |  |          |       |  |  |          |  

See accompanying notes to consolidated financial statements.

F-4



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##### Table of Contents



PRIMACOM AG AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

|                                                                                            |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|------------------------------------------------------------------------------------------- |  | ------------------------ | -------- | ---- |  | ---- | ----------- | ----- |  |  | -------- | - |  |  | -------- | -
|                                                                                            |  | Years ended December 31,
|                                                                                            |  |                         
|                                                                                            |  | 2000                     |          | 2001 |  | 2002 |             | 2002 
|                                                                                            |  |                          |          |      |  |      |             |      
|                                                                                            |  | Euro                     |          | Euro |  | Euro |             | U.S.$
|                                                                                            |  |                          |          |      |  |      | (unaudited)
|Operating Activities                                                                        |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Net loss                                                                                    |  |                          | (64,324  | )    |  |      | (104,108    | )     |  |  | (138,327 | ) |  |  | (145,036 | )
|Adjustments to reconcile net loss to net cash
provided by operating activities:             |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Depreciation and amortization                                                               |  |                          | 75,530   |      |  |      | 118,360     |       |  |  | 95,943   |   |  |  | 100,597  |  
|Amortization of financing fees and other                                                    |  |                          | 6,064    |      |  |      | 4,072       |       |  |  | 6,991    |   |  |  | 7,330    |  
|Amortization of deferred revenue                                                            |  |                          | (29,076  | )    |  |      | (18,018     | )     |  |  | (16,527  | ) |  |  | (17,329  | )
|Non-cash interest expense  Convertible Second
Secured Loan                                 |  |                          |         |      |  |      |            |       |  |  | 31,079   |   |  |  | 32,586   |  
|Gain on sale of equity investment                                                           |  |                          | (1,689   | )    |  |      |            |       |  |  |         |   |  |  |         |  
|Loss on write-off of equity investment                                                      |  |                          |         |      |  |      | 1,452       |       |  |  |         |   |  |  |         |  
|Write-off of capitalized financing fees                                                     |  |                          | 8,180    |      |  |      |            |       |  |  | 14,696   |   |  |  | 15,409   |  
|Stock option compensation expense                                                           |  |                          | 3,558    |      |  |      | 3,853       |       |  |  | 1,377    |   |  |  | 1,444    |  
|Deferred income taxes                                                                       |  |                          | 3,000    |      |  |      | (13,270     | )     |  |  | 10,980   |   |  |  | 11,514   |  
|Other                                                                                       |  |                          | 230      |      |  |      | 200         |       |  |  | 78       |   |  |  | 80       |  
|Changes in assets and liabilities, net of
effects of business acquisitions and
disposition: |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Trade accounts receivable                                                                   |  |                          | (750     | )    |  |      | (1,311      | )     |  |  | 2,122    |   |  |  | 2,225    |  
|Other assets                                                                                |  |                          | (13,849  | )    |  |      | 5,113       |       |  |  | 5,081    |   |  |  | 5,327    |  
|Accounts payable                                                                            |  |                          | 11,988   |      |  |      | (1,675      | )     |  |  | (9,010   | ) |  |  | (9,448   | )
|Accrued expenses                                                                            |  |                          | (6,079   | )    |  |      | 3,512       |       |  |  | 10,696   |   |  |  | 11,215   |  
|Deferred revenue                                                                            |  |                          | 18,902   |      |  |      | 17,141      |       |  |  | 15,912   |   |  |  | 16,685   |  
|                                                                                            |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Net cash provided by operating activities                                                   |  |                          | 11,685   |      |  |      | 15,321      |       |  |  | 31,091   |   |  |  | 32,599   |  
|                                                                                            |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Investing Activities                                                                        |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Acquisitions of businesses and networks, net of
cash acquired                               |  |                          | (288,338 | )    |  |      | (15,878     | )     |  |  | (375     | ) |  |  | (393     | )
|Purchases of property and equipment                                                         |  |                          | (99,817  | )    |  |      | (68,636     | )     |  |  | (36,861  | ) |  |  | (38,649  | )
|Proceeds from sale of businesses                                                            |  |                          |         |      |  |      | 2,850       |       |  |  |         |   |  |  |         |  
|Proceeds from sale of property and equipment                                                |  |                          | 396      |      |  |      | 1,112       |       |  |  | 224      |   |  |  | 235      |  
|                                                                                            |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Net cash used in investing activities                                                       |  |                          | (387,759 | )    |  |      | (80,552     | )     |  |  | (37,012  | ) |  |  | (38,807  | )
|                                                                                            |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Financing Activities                                                                        |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Proceeds from credit facilities                                                             |  |                          | 995,388  |      |  |      | 95,000      |       |  |  | 42,000   |   |  |  | 44,037   |  
|Proceeds from term loan                                                                     |  |                          |         |      |  |      |            |       |  |  | 375,000  |   |  |  | 393,189  |  
|Repayments of bank debt and credit facilities                                               |  |                          | (600,351 | )    |  |      |            |       |  |  | (375,000 | ) |  |  | (393,189 | )
|Payments of other financing fees                                                            |  |                          | (25,753  | )    |  |      | (25,001     | )     |  |  | (22,211  | ) |  |  | (23,288  | )
|Repayments of related party liabilities                                                     |  |                          |         |      |  |      | (245        | )     |  |  |         |   |  |  |         |  
|Repayments of sale-leaseback obligations                                                    |  |                          | (3,582   | )    |  |      | (4,382      | )     |  |  | (3,977   | ) |  |  | (4,170   | )
|Payments of deferred purchase obligations                                                   |  |                          | (968     | )    |  |      | (3,072      | )     |  |  | (10,043  | ) |  |  | (10,530  | )
|Other                                                                                       |  |                          | 7,616    |      |  |      | 1,221       |       |  |  | (1,979   | ) |  |  | (2,075   | )
|                                                                                            |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Net cash provided by financing
activities                                                   |  |                          | 372,350  |      |  |      | 63,521      |       |  |  | 3,790    |   |  |  | 3,974    |  
|                                                                                            |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Net decrease in cash and
cash equivalents                                                   |  |                          | (3,724   | )    |  |      | (1,710      | )     |  |  | (2,131   | ) |  |  | (2,234   | )
|Cash and cash equivalents at beginning of year                                              |  |                          | 8,367    |      |  |      | 4,643       |       |  |  | 2,933    |   |  |  | 3,075    |  
|                                                                                            |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  
|Cash and cash equivalents at end of year                                                    |  |                          | 4,643    |      |  |      | 2,933       |       |  |  | 802      |   |  |  | 841      |  
|                                                                                            |  |                          |          |      |  |      |             |       |  |  |          |   |  |  |          |  

See accompanying notes to consolidated financial statements.

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|1. |  | BASIS OF PRESENTATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | PrimaCom AG, (PrimaCom) and subsidiaries (the Company), a German
stock corporation, was formed on December 30, 1998, by the merger (the
Merger) of Süweda Elektronische Medien- und Kabelkommunikations-AG
(Süweda) into KabelMedia Holding AG (KabelMedia), two similarly sized
German cable television network operators. At the date of the Merger,
KabelMedia was renamed PrimaCom AG. KabelMedia and Süweda, also German stock
corporations, had been in existence since 1992 and 1983, respectively. Under
U.S. GAAP, the Merger was accounted for under the purchase method of
accounting as a reverse acquisition by Süweda of KabelMedia even though
KabelMedia issued shares to Süwedas shareholders as consideration in the
Merger and is the surviving legal entity.                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | Since KabelMedias inception in 1992, the Company has primarily owned
and operated and acquired cable television networks in Germany. On
September 18, 2000, with the acquisition of N.V. Multikabel (Multikabel),
the Company expanded its operations from Germany to The Netherlands.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | Prior to December 31, 1999, the Company prepared and reported its
consolidated financial statements in Deutsche Marks (DM). With the
introduction of the Euro ( or Euro) on January 1, 1999, the Company has
presented the accompanying consolidated financial statements in Euro.
Accordingly, the Deutsche Mark consolidated financial statements for prior
periods have been restated into Euro using the official fixed conversion
rate of 1.00 = DM 1.95583. The consolidated financial statements will,
however, not be comparable to the Euro financial statements of other
companies that previously reported their financial information in a currency
other than Deutsche Mark. All amounts herein are shown in Euros and for the
year ended December 31, 2002 are also presented in U.S. dollars ($), the
latter being unaudited and presented solely for the convenience of the
reader at the rate of 0.95374 = $1.00, the Noon Buying Rate of the Federal
Reserve Bank of New York as per December 31, 2002. The translations should
not be construed as a representation that the amounts shown could have been,
or could be, converted into U.S. dollars at that or any other rate.
|  
|2. |  | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | Accounting Principles                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|  
|   |  | The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United States (U.S.
GAAP).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | Consolidation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | The consolidated financial statements include the accounts of PrimaCom
and its majority owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|  
|   |  | Cash Equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | All highly liquid investments purchased with an original maturity of
three months or less are considered cash equivalents.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|  
|   |  | Concentration of Credit Risk                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | Financial instruments that potentially subject the Company to
concentrated credit risks consist primarily of cash and trade receivables.
Credit risk on trade receivables is minimized as a result of the large and
diverse nature of the Companys customer base. The Company maintains most of
its cash and cash equivalents at international financial institutions in
Germany and the Netherlands.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|  
|   |  | Revenue Recognition                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|  
|   |  | Revenue is comprised primarily of revenue earned from subscription fees
and to a much lesser extent charges for installation and connections.
Subscription revenue is recognized at the time services are provided to                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

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| |  | customers. Charges for installation and connections are deferred and
amortized on a straight-line basis into income over the related service
agreements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Property and Equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Property and equipment are stated at cost and are comprised principally
of assets used in the development and operation of cable television systems.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|
| |  | Depreciation is provided using the straight-line method over estimated
useful lives as follows: cable television systems: 12 years; equipment and
fixtures: five to 10 years; buildings: 25 years; and purchased software:
three to five years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Repairs and maintenance are generally charged to expense during the
financial period in which they are incurred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|
| |  | In 2000, 2001 and 2002, the Company capitalized 2,645,000, 3,093,000
and 3,676,000, respectively, of interest costs related to the construction
of networks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | Goodwill and Customer Lists                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Goodwill represents the excess of cost over the fair value of net
assets of acquired businesses and, for acquisitions prior to July 1, 2001,
was amortized using the straight-line method over an average life of
approximately 12 years. In June 2001, the Financial Accounting Standards
Board issued SFAS No.141, Business Combinations, effective for acquisitions
initiated on or after July 1, 2001, and No.142, Goodwill and Other
Intangible Assets, effective for fiscal years beginning after December 15,
2001. SFAS No.141 requires that the purchase method of accounting be used
for all business combinations initiated after June 30, 2001, and includes
guidance on the initial recognition and measurement of goodwill and other
intangible assets arising from business combinations. SFAS No.142 requires
that goodwill (and intangible assets deemed to have indefinite lives) no
longer be amortized but will be subject to annual impairment tests. Other
intangible assets will continue to be amortized over their useful lives.
Accumulated amortization for goodwill at December 31, 2000, 2001 and 2002
was 53,121,000, 95,739,000 and 95,739,000, respectively.
|
| |  | On January 1, 2002, the Company adopted SFAS No. 141 and SFAS No. 142.
As a result, goodwill is no longer amortized but rather is tested annually
for impairment or more frequently if events and circumstances indicate that
the asset might be impaired. An impairment loss is recognized to the extent
that the carrying amount of goodwill exceeds its fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|
| |  | Upon adoption of SFAS No. 142, the Company performed the first of the
required impairment tests. Based on the results of that test, goodwill was
not determined to be impaired. Additionally, the Company performed the
first of the required annual impairment tests as of October 1, 2002. As a
result of that test, goodwill was not determined to be impaired.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | The Company determined fair value using the discounted cash flows
technique, which is subjective and requires management to use estimates of
future cash flows and discount rates. Because these estimates of future
cash flows are dependent on risks, uncertainties and other factors, the
Company will continue to evaluate its estimates, which could result in a
need to adjust the determination of fair value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | The following table presents net loss per share as if the provisions of
SFAS No. 142 had been applied as of January 1, 2001:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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|                                         |                                           |  |                   |         |      |  |      |          |   |  |  |          |  
|---------------------------------------- | ----------------------------------------- |  | ----------------- | ------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|                                         |                                           |  | December 31, 2002
|                                         |                                           |  |                  
|                                         |                                           |  | 2000              |         | 2001 |  | 2002
|                                         |                                           |  |                   |         |      |  |     
|Net loss: ( in thousand)                |                                           |  |                   |         |      |  |      |          |   |  |  |         
|                                         | Reported net loss                         |  |                   | (64,324 | )    |  |      | (104,108 | ) |  |  | (138,327 | )
|                                         | Goodwill amortization                     |  |                   | 26,305  |      |  |      | 35,057   |   |  |  |         |  
|                                         | Goodwill impairment charge                |  |                   |        |      |  |      | 7,654    |   |  |  |         |  
|                                         | Adjusted net loss                         |  |                   | (38,019 | )    |  |      | (61,397  | ) |  |  | (138,327 | )
|Basic and diluted loss per share (in ): |                                           |  |                   |         |      |  |      |          |   |  |  |         
|                                         | Reported basic and diluted loss per share |  |                   | (3.26   | )    |  |      | (5.26    | ) |  |  | (6,99    | )
|                                         | Goodwill amortization                     |  |                   | 1,33    |      |  |      | 1.77     |   |  |  |         |  
|                                         | Goodwill impairment charge                |  |                   |        |      |  |      | 0.39     |   |  |  |         |  
|                                         | Adjusted basic and diluted loss per share |  |                   | (1,93   | )    |  |      | (3.49    | ) |  |  | (6,99    | )

Customer lists were acquired by the Company in 2000 and 2001 primarily
as part of the Multikabel and Quicknet B.V. acquisitions, respectively. The
changes in the carrying value of customer lists for the year ended December
31, 2002 are as follows:

|                |                                       |  |                   |        |      |  |                  |        |   |  |  |         |  
|--------------- | ------------------------------------- |  | ----------------- | ------ | ---- |  | ---------------- | ------ | - |  |  | ------- | -
|                |                                       |  | December 31, 2002
|                |                                       |  |                  
|                |                                       |  | 2000              |        | 2001 |  | 2002            
|                |                                       |  |                   |        |      |  |                 
|                |                                       |  |                   |        |      |  | ( in thousands)
|Customer lists: |                                       |  |                   |        |      |  |                  |        |   |  |  |        
|                | Acquisition cost January 1,           |  |                   |       |      |  |                  | 57.267 |   |  |  | 59.240  |  
|                | Additions                             |  |                   | 57.267 |      |  |                  | 1.973  |   |  |  |        |  
|                | Disposals                             |  |                   |       |      |  |                  |       |   |  |  |        |  
|                | Accumulated amortization December 31, |  |                   | (1.200 | )    |  |                  | (6.185 | ) |  |  | (11.350 | )
|                |                                       |  |                   |        |      |  |                  |        |   |  |  |         |  
|                | Net carrying amount December 31,      |  |                   | 56.067 |      |  |                  | 53.055 |   |  |  | 47.890  |  
|                |                                       |  |                   |        |      |  |                  |        |   |  |  |         |  



| |  | Impairment of Long Lived and Identifiable Intangible Assets
| |  | -----------------------------------------------------------
|

The Company records impairment losses on long-lived assets used in
operations when events and circumstances indicate that the assets might be
impaired and undiscounted cash flows estimated to be generated by those
assets are less than the carrying amount of those assets.

During 2001, due to weak economic conditions of the cable television
market in Germany and recent decline in the Companys share price, the
Company determined that certain long-lived assets relating to specific
regional locations in the Companys German business segment might not be
recoverable. As a result, the Company calculated as required by Statement
of Financial Accounting Standards No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of (SFAS No.
121) the undiscounted cash flows attributable to these long-lived assets,
which included goodwill, and compared this total to the carrying value of
the long-lived assets. Based on this comparison, the Company determined
that these assets were no longer fully recoverable since the total
undiscounted cash flows were less than its carrying value.

As a result, the Company, using a discounted cash flow method,
calculated the fair value of these assets and recorded a charge, which is
included in depreciation and amortization expense, of 7,654,000 to reduce
the carrying value of goodwill to its fair value.

During 2002, due to the continued weak economic conditions of the cable
television market in Germany, the Company determined that certain long-lived
assets relating to specific regional locations in the Companys German
business segment might not be recoverable. As a result, the Company
calculated as required by Statement of Financial Accounting Standards No.
144, Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
No. 144) the undiscounted cash flows attributable to these long-lived
assets,

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| |  | which excluded goodwill, and compared this total to the carrying
value of the long-lived assets. Based on this comparison, the Company
determined that these assets were no longer fully recoverable since the
total undiscounted cash flows were less than its carrying value.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | As a result, the Company, using a discounted cash flow method,
calculated the fair value of these assets and recorded a charge, which is
included in depreciation and amortization expense, of 12,944,000 to reduce
the carrying value of cable network assets to its fair value. In calculating
fair value based on discounted cash flows, the Company makes significant
estimates regarding the number of years of future cash flows, discount
rates, and revenues, costs, and expenses in future periods. The number of years of
future cash flows were based on the remaining useful life of the underlying
assets, discount rates were determined based on market discount rates, and
revenues, costs and expenses were based on the Companys business plan.
|
| |  | Advertising Costs                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Advertising costs are charged to expense as incurred. The Company
incurred advertising costs in 2000, 2001 and 2002 totaling 4,271,000,
3,667,000 and 2,769,000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Stock Options                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|
| |  | The Company accounts for its stock option plans in accordance with
Statement of Financial Accounting Standards No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123). In accordance with SFAS No. 123,
compensation expense is recognized over the vesting period based on the fair
value of all stock-based awards on the date of the grant.                                                                                                                                                                                                                                                                                                                                                                                                          
|
| |  | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| |  | Deferred tax assets and liabilities are based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the
differences are expected to reverse. The effect of a change in tax rates on
deferred tax assets and liabilities is recognized in the period that
includes the enactment date. Deferred tax assets are reduced by a valuation
allowance when the Company cannot make the determination that it is more
likely than not that some portion or all of the related tax asset will be
realized.                                                                                                                                                   
|
| |  | Fair Value of Financial Instruments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | The carrying value of financial instruments such as cash, accounts
receivable and accounts payable approximates their fair value based on the
short-term maturities of these instruments. Due to the continued weak
economic conditions of the cable market in Germany and The Netherlands, the
Company believes that it currently is unable to refinance the bank and other
debt and therefore cannot determine its fair value. However, based upon the
recent refinancing that was completed in mid 2002, the Company maintains as
per yearend 2002 approximately 55% of its bank debt with interest marked to
EURIBOR and LIBOR rates and therefore the Company believes that the carrying
value of this portion of bank debt approximates fair value.          
|
| |  | Use of Estimates                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ
from those estimates.                                                                                                                                                                                                                                                                                                                                                                                                                                              
|
| |  | Reclassifications                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | Certain amounts in the prior years have been reclassified to conform
with the 2002 consolidated financial statement presentation.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

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|3. |  | SIGNIFICANT ACQUISITIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|-- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | 2000 Acquisitions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|  
|   |  | On January 1, 2000, the Company purchased cable television networks
from Regionalservice Kabelfernsehen GmbH (REKA) for total consideration of
approximately 3,323,000. The networks acquired from REKA passed
approximately 7,039 homes and served approximately 5,889 customers at the
time of the acquisition.                                                                                                                                                                                                                                                                                                                                                                                             
|  
|   |  | On January 1, 2000, the Company purchased cable television networks
from Ver.Di neue Medien GmbH (Ver.Di) for total consideration of
approximately 1,659,000. The networks acquired from Ver.Di passed
approximately 4,682 homes and served approximately 4,682 customers at the
time of the acquisition.                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | On June 16, 2000, the Company acquired 26% of the shares of MainzKom
Telekommunikation GmbH (MainzKom) for total consideration of approximately
1,150,000. MainzKom is a city carrier with approximately 90 kilometers of
fiber optic lines in Mainz and Wiesbaden, Germany.                                                                                                                                                                                                                                                                                                                                                                                                                                  
|  
|   |  | On July 1, 2000, the Company purchased cable television networks from
Antennendienst Cabel Tec GmbH (ADCT) for total consideration of
approximately 5,931,000. The networks acquired from ADCT passed
approximately 9,600 homes and served approximately 7,320 customers at the
time of the acquisition.                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | On August 1, 2000, the Company acquired the shares of Steinert und Kühn
GmbH & Co. KG (S&K) for total consideration of approximately 1,964,000.
S&K passed approximately 5,200 homes and served approximately 5,100
customers at the time of the acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|  
|   |  | On September 18, 2000, the Company acquired the shares of N.V.
Multikabel (Multikabel), a cable television operator based in the
Netherlands, for total cash consideration of approximately 250,600,000
(including acquisition expenses) and the assumption of approximately
124,300,000 of Multikabel debt, which was refinanced by the Company.
Multikabel passed approximately 318,000 homes and served approximately
297,000 customers at the time of the acquisition.                                                                                                                                                                                                                                   
|  
|   |  | On October 1, 2000, the Company purchased cable television networks
from Pfalzwerke AG (Pfalzwerke) for total consideration of approximately
4,581,000. The networks acquired from Pfalzwerke passed approximately
11,068 homes and served approximately 6,400 customers at the time of the
acquisition.                                                                                                                                                                                                                                                                                                                                                                                                      
|  
|   |  | On October 1, 2000, the Company acquired the shares of Komco
Kommunikationstechnik GmbH (Komco) for total consideration of
approximately 7,158,000. Komco passed approximately 19,573 homes and served
approximately 15,900 customers at the time of the acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | On October 1, 2000, the Company acquired 51% of the shares of Kutz
Kabel-Service GmbH (Kutz) for total consideration of approximately
1,180,000. Under the terms of the purchase agreement, the Company and Kutz
both had the option at certain dates to respectively buy or sell the
remaining 49% of the shares of Kutz for total consideration of approximately
3,415,000, which is recorded in deferred purchase obligations as of
December 31, 2001. On March 4, 2002, the former Kutz shareholders exercised
their option to sell the remaining 49% of its Kutz shares to the Company.
Kutz passed approximately 12,000 homes and served approximately 10,000
customers at the time of the acquisition.
|  
|   |  | On October 25, 2000, the Company acquired the shares of Televis Grimma
GmbH (Televis) for total cash consideration of approximately 10,819,000
and the future issuance of 70,000 PrimaCom shares, which at the time of the
acquisition had a market value of approximately 1,722,000, based on the
closing price on the Neuer Markt. Televis passed approximately 27,000 homes
and served approximately 24,000 customers at the time of the acquisition.
Upon registration of the shares in February 2001, the 70,000 PrimaCom shares
were issued to Televis.                                                                                                                                                
|  
|   |  | On December 31, 2000, the Company acquired the shares of Süweda
Betriebsgesellschaft für Kabelkommunikation im Saarland Kabelprojekt
Friedrichsthal KG (Friedrichsthal), which was partially                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

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| |  | owned by Wolfgang
Preuss, a shareholder of the Company for total consideration of 3,153,000.
Friedrichsthal serviced approximately 3,100 customers at the time of the
acquisition.                                                                                                                                                                                                                                                                                                                      
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | All acquisitions have been accounted for under the purchase method of
accounting and accordingly the results of operations of the acquired
business have been included in the consolidated financial statements since
the respective dates of acquisition. The 2000 acquisitions resulted in
goodwill of 143,552,000 (129,473,000 for the Multikabel acquisition), and
customer lists of 57,267,000 for the Multikabel acquisition. The goodwill
and customer lists are being amortized over 12 years.
|
| |  | The following unaudited proforma information for the years ended
December 31, 1999 and 2000 assumes the aforementioned 1999 and 2000
acquisitions occurred on January 1, 1999:                                                                                                                                                                                                                                                                                                                           

|                          |  |      |         |      |  |  |         |  
|------------------------- |  | ---- | ------- | ---- |  |  | ------- | -
|                          |  | 1999 |         | 2000
|                          |  |      |         |     
|Revenues ( in thousands) |  |      | 134,708 |      |  |  | 152,706 |  
|Net loss ( in thousands) |  |      | (64,713 | )    |  |  | (88,253 | )
|Net loss per share ()    |  |      | (3.38   | )    |  |  | (4.47   | )

2001 Acquisitions



| |  | On January 1, 2001, the Company acquired the shares of
Grossgemeinschafts-Antennenanlangen Lizenz und Betriebs GmbH (GGA) for
total consideration of approximately  2,213,000. GGA passed approximately
5,000 homes and served approximately 4,212 cable television subscribers at
the time of the acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On January 1, 2001, the Company acquired the shares of
Telekommunikations GmbH Kirchheimbolanden (TKK) for total consideration of
approximately  1,000,000. TKK passed approximately 4,120 homes and served
approximately 1,790 cable television subscribers at the time of the
acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|
| |  | On January 1, 2001, the Company signed an agreement to acquire 51% of
the shares of Telekommunikationsgesellschaft mbH Eisenhüttenstadt, (TKE)
for total consideration of approximately  26,000. After the municipal
supervisory authority had approved the transaction, a claim was filed
against the procedure of this sale. The court decided that the transaction
is valid and the Company received the written decision of the court. In
December 2001, the Company finalized the purchase of the 51% of TKE. Under
the terms of the purchase agreement, the Company and TKE both had the option
at certain dates to respectively buy or sell the remaining 49% of the shares
of TKE for total consideration of approximately 7,414,000. The Company
advanced approximately 2,045,000 to the shareholders of TKE and the
remaining purchase obligation amounting to approximately 5,369,000 is
recorded in deferred purchase obligations as of December 31, 2001. On
October 2, 2002 the former TKE shareholders exercised their option to sell
its remaining 49% shares of TKE to the Company for cash consideration of
approximately 4,869,000 and forgiveness of approximately 500,000 in loans
receivable. TKE passed approximately 11,700 homes and served approximately
10,300 customers at the time of the acquisition.
|
| |  | On April 1, 2001, the Company purchased cable television networks from
Kabelfernsehen Zwenkau GmbH (Zwenkau) for total consideration of
approximately 1,127,000. The networks acquired from Zwenkau passed
approximately 2,800 homes and served approximately 2,250 cable television
subscribers at the time of the acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | On July 1, 2001, the Company purchased cable television networks from
MULTICOM GmbH (MultiCom) for total consideration of approximately
1,024,000. The networks acquired from MultiCom passed approximately 1,335
homes and served approximately 1,335 cable television subscribers at the
time of the acquisition.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | On July 1, 2001, the Company acquired the shares of QuickNet, a
subsidiary of Sonera Plaza Netherlands B.V. for approximately 8,400,000.
Concurrent with the acquisition, PrimaCom sold a portion of the business to
Chello Broadband N.V. for approximately 2,850,000. QuickNet provided high
speed Internet access services to approximately 40,000 subscribers in The
Netherlands. Approximately 18,000 of QuickNets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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##### Table of Contents





| |  | subscribers have already
been served by PrimaComs broadband networks.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | On August 1, 2001, the Company acquired 51% of the shares of EBH
Service GmbH (EBH) for total consideration of approximately 26,000. Under
the terms of the purchase agreement, the Company and EBH both had the option
at certain dates to respectively buy or sell the remaining 49% of the shares
of EBH for total consideration of approximately 956,000. The Company
advanced approximately 865,000 to the Shareholders of EBH and the remaining
purchase obligation amounting to approximately 91,000 was recorded in
deferred purchase obligations as of December 31, 2001. On January 9, 2002,
the former EBH shareholders exercised their option to sell its remaining 49%
shares of EBH to the Company. EBH passed approximately 2,330 homes and
served approximately 2,150 customers at the time of the acquisition.
|
| |  | Effects of consolidation of Kutz, TKE and EBH                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | The put and the call options of Kutz, TKE and EBH are viewed on a
combined basis with the minority interest and are accounted for as financing
for the purchase by the Company. As a result, net income attributable to the
minority interest is allocated to PrimaCom, rather than to the minority
shareholder. Accordingly, the Company consolidated 100% of these companies
with an offsetting liability to purchase the remaining minority interest
owned by the remaining shareholders of these companies.                                                                                                                                                                                                                                                                                                                      
|
| |  | As a result, depreciation and amortization expense in 2001 is 385,000
higher, deferred purchase obligations are 8,875,000 higher and long-lived
assets are 11,820,000 higher.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| |  | The following unaudited proforma information for the years ended
December 31, 2000 and 2001 assumes the aforementioned 2000 and 2001
acquisitions occurred on January 1, 2000:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                          |  |      |         |      |  |  |          |  
|------------------------- |  | ---- | ------- | ---- |  |  | -------- | -
|                          |  | 2000 |         | 2001
|                          |  |      |         |     
|Revenues ( in thousands) |  |      | 137,949 |      |  |  | 172,722  |  
|Net loss ( in thousands) |  |      | (57,603 | )    |  |  | (103,694 | )
|Net loss per share ()    |  |      | (2.92   | )    |  |  | (5.24    | )



|4. |  | INVESTMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|   |  | Throughout 2001, the Company was actively pursuing the sale of its
MainzKom investment. On March 22, 2002, the Company sold its investment in
MainzKom for 562,000 to a third party. As a result, in 2001, the Company
recorded a charge to other expense of 1,452,000 to write-down this
investment to the agreed upon sales price.                                                                                                                                                      
|  
|5. |  | UPC                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|  
|   |  | On March 29, 2001, the Company entered into an agreement with United
Pan-European Communications N.V. (UPC), its largest shareholder, to
combine certain cable operations. On December 14, 2001, due to significant
changes in market conditions, the companies announced that they had agreed
to terminate the agreement effective December 15, 2001. Due to the
termination of the merger, the Company wrote-off approximately 4,938,000 of
capitalized costs to other expense in 2001.

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##### Table of Contents





|6. |  | ACCOUNTS RECEIVABLE                                 
|-- |  | ----------------------------------------------------
|  
|   |  | Trade accounts receivable consists of the following:

|                                  |  |                  |        |      |  |      |        |   |  |  |        |  
|--------------------------------- |  | ---------------- | ------ | ---- |  | ---- | ------ | - |  |  | ------ | -
|                                  |  | December 31,    
|                                  |  |                 
|                                  |  | 2000             |        | 2001 |  | 2002
|                                  |  |                  |        |      |  |     
|                                  |  | ( in thousands)
|Trade accounts receivable  gross |  |                  | 8,376  |      |  |      | 10,881 |   |  |  | 12,994 |  
|Allowance for doubtful accounts   |  |                  | (1,580 | )    |  |      | (1,884 | ) |  |  | (6,118 | )
|                                  |  |                  |        |      |  |      |        |   |  |  |        |  
|Trade accounts receivable  net   |  |                  | 6,796  |      |  |      | 8,997  |   |  |  | 6,876  |  
|                                  |  |                  |        |      |  |      |        |   |  |  |        |  

Accounts receivable are reported net of allowance for doubtful
accounts. The allowance for doubtful accounts reflects managements best
estimate of probable losses inherent in the account receivable balance.
Management determines the allowance based on known troubled accounts,
historical experience, and other currently available evidence. A summary of
activity in the allowance for doubtful accounts is as follows:

|                                 |                                      |  |                   |       |      |  |      |        |   |  |  |       |  
|-------------------------------- | ------------------------------------ |  | ----------------- | ----- | ---- |  | ---- | ------ | - |  |  | ----- | -
|                                 |                                      |  | December 31, 2002
|                                 |                                      |  |                  
|                                 |                                      |  | 2000              |       | 2001 |  | 2002
|                                 |                                      |  |                   |       |      |  |     
|                                 |                                      |  | ( in thousands) 
|Allowance for doubtful accounts: |                                      |  |                   |       |      |  |      |        |   |  |  |      
|                                 | Balance at the beginning of the year |  |                   | 1.662 |      |  |      | 1.580  |   |  |  | 1.884 |  
|                                 | Charged to cost and expenses         |  |                   | 799   |      |  |      | 1.544  |   |  |  | 4.243 |  
|                                 | Write-offs and other                 |  |                   | (881  | )    |  |      | (1.240 | ) |  |  | (9    | )
|                                 |                                      |  |                   |       |      |  |      |        |   |  |  |       |  
|                                 | Balance at the end of the year       |  |                   | 1.580 |      |  |      | 1.884  |   |  |  | 6.118 |  
|                                 |                                      |  |                   |       |      |  |      |        |   |  |  |       |  



|7. |  | PROPERTY AND EQUIPMENT
|-- |  | ----------------------



| |  |  | The components of property and equipment are as follows:
| |  |  | --------------------------------------------------------

|                              |  |                  |          |      |  |      |          |   |  |  |          |  
|----------------------------- |  | ---------------- | -------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|                              |  | December 31,    
|                              |  |                 
|                              |  | 2000             |          | 2001 |  | 2002
|                              |  |                  |          |      |  |     
|                              |  | ( in thousands)
|Cable television networks     |  |                  | 630,088  |      |  |      | 726,237  |   |  |  | 770,868  |  
|Equipment and fixtures        |  |                  | 54,658   |      |  |      | 55,838   |   |  |  | 56,624   |  
|Land and buildings            |  |                  | 4,227    |      |  |      | 4,281    |   |  |  | 4,378    |  
|Other                         |  |                  | 10,878   |      |  |      | 14,306   |   |  |  | 15,010   |  
|Construction in progress      |  |                  | 52,832   |      |  |      | 37,400   |   |  |  | 23,923   |  
|                              |  |                  |          |      |  |      |          |   |  |  |          |  
|Total                         |  |                  | 752,683  |      |  |      | 838,062  |   |  |  | 870,803  |  
|Less accumulated depreciation |  |                  | (193,102 | )    |  |      | (261,367 | ) |  |  | (350,578 | )
|                              |  |                  |          |      |  |      |          |   |  |  |          |  
|Property and equipment  net  |  |                  | 559,581  |      |  |      | 576,695  |   |  |  | 520,225  |  
|                              |  |                  |          |      |  |      |          |   |  |  |          |  



|   |  | Depreciation expense on property and equipment was 46,727,000,
69,722,000 and 90,154,000 for 2000, 2001 and 2002, respectively. In 2002,
depreciation expense includes approximately 12,944,000 for an impairment
charge of cable networks.                                                                                                                                                                                                                                                                                                                                                                                                                    
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|8. |  | SALE-LEASEBACK                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|  
|   |  | In March and October 1993, the Company entered into two master lease
agreements governing the terms of the majority of its cable network sale and
leaseback transactions. Under the March 1993 agreement, the sale and
leaseback transactions have a lease term of nine years and a monthly leasing
rate of approximately 1.6% of the original sales price. At the end of the
lease term, the Company has the option to extend leases under this agreement
for one year or to repurchase the cable networks at the higher of 10.0% of
the original sales price or the recorded net book value on the lessors
books. Under the October 1993 agreement, the sale and

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##### Table of Contents





| |  | leaseback
transactions have a lease term of nine years and a monthly leasing rate of
approximately 1.5% of the original sales price. The lessor has the right to
require the Company to repurchase the cable networks at the end of the lease
term at an amount equal to approximately 11.5% of the original sales price.
If the purchase option is not exercised, the lease automatically renews for
an additional three years.
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                            |  |                  |        |      |  |      |       |  |  |  |       | 
|------------------------------------------- |  | ---------------- | ------ | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                            |  | December 31,    
|                                            |  |                 
|                                            |  | 2000             |        | 2001 |  | 2002
|                                            |  |                  |        |      |  |     
|                                            |  | ( in thousands)
|Borrowings under sale-leaseback obligations |  |                  | 13,669 |      |  |      | 9,593 |  |  |  | 5,616 | 
|Current portion thereof                     |  |                  | 4,341  |      |  |      | 3,976 |  |  |  | 2,713 | 
|                                            |  |                  |        |      |  |      |       |  |  |  |       | 
|Non-current portion                         |  |                  | 9.328  |      |  |      | 5.617 |  |  |  | 2.903 | 
|                                            |  |                  |        |      |  |      |       |  |  |  |       | 



| |  | Future minimum payments under capital leases with initial or remaining
terms in excess of one year consisted of the following at December 31, 2002:
| |  | ---------------------------------------------------------------------------------------------------------------------------------------------------

|                                                    |  |            |       |  
|--------------------------------------------------- |  | ---------- | ----- | -
|                                                    |  | ( in     
|                                                    |  | thousands)
|                                                    |  |           
|2003                                                |  |            | 3,143 |  
|2004                                                |  |            | 1,536 |  
|2005                                                |  |            | 1,073 |  
|2006                                                |  |            | 607   |  
|2007                                                |  |            | 28    |  
|                                                    |  |            |       |  
|Total minimum lease payments                        |  |            | 6,387 |  
|Less interest                                       |  |            | (771  | )
|                                                    |  |            |       |  
|Present value of minimum capitalized lease payments |  |            | 5,616 |  
|                                                    |  |            |       |  



| |  |  | Assets under capital leases are included within property and equipment
as follows:
| |  |  | ----------------------------------------------------------------------------------

|                                                        |  |                  |         |      |  |      |         |   |  |  |         |  
|------------------------------------------------------- |  | ---------------- | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|                                                        |  | December 31,    
|                                                        |  |                 
|                                                        |  | 2000             |         | 2001 |  | 2002
|                                                        |  |                  |         |      |  |     
|                                                        |  | ( in thousands)
|Cable television networks Cable television networks     |  |                  | 27,991  |      |  |      | 29,320  |   |  |  | 29,320  |  
|Less accumulated depreciation Cable television
networks |  |                  | (12,329 | )    |  |      | (14,721 | ) |  |  | (17,168 | )
|                                                        |  |                  |         |      |  |      |         |   |  |  |         |  
|Cable television networksnet                           |  |                  | 15,662  |      |  |      | 14,599  |   |  |  | 12,152  |  
|                                                        |  |                  |         |      |  |      |         |   |  |  |         |  



|   |  | Depreciation expense on assets recorded under capital leases
approximated, 2,091,000, 2,392,000 and 2,447,000 in 2000, 2001 and 2002,
respectively.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|9. |  | BANK AND OTHER DEBT                                                                                                                                   



| |  |  | Bank and other debt consist of the following:
| |  |  | ---------------------------------------------

|                                 |  |                  |         |      |  |      |         |  |  |  |         | 
|-------------------------------- |  | ---------------- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                                 |  | December 31,    
|                                 |  |                 
|                                 |  | 2000             |         | 2001 |  | 2002
|                                 |  |                  |         |      |  |     
|                                 |  | ( in thousands)
|Borrowings under Senior Facility |  |                  | 727,500 |      |  |      | 822,500 |  |  |  | 489,500 | 
|Convertible Second Secured Loan  |  |                  |        |      |  |      |        |  |  |  | 406,079 | 
|Overdrafts                       |  |                  | 7,736   |      |  |      | 9,029   |  |  |  | 7,295   | 
|Other                            |  |                  | 955     |      |  |      | 554     |  |  |  | 309     | 
|                                 |  |                  |         |      |  |      |         |  |  |  |         | 
|Total bank and other debt        |  |                  | 736,191 |      |  |      | 832,083 |  |  |  | 903,183 | 
|Less current portion thereof     |  |                  | 955     |      |  |      | 554     |  |  |  | 309     | 
|                                 |  |                  |         |      |  |      |         |  |  |  |         | 
|Bank and other debt              |  |                  | 735,236 |      |  |      | 831,529 |  |  |  | 902,874 | 
|                                 |  |                  |         |      |  |      |         |  |  |  |         | 

F-14



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##### Table of Contents



On September 18, 2000, in connection with the acquisition of
Multikabel, the Company refinanced and cancelled its existing bank facility
and wrote-off the unamortized portion of the fees and expenses associated
with the canceled bank facility. The associated write-off resulted in an
extraordinary loss of 8,180,000 net of tax.

In connection with this refinancing, the Company entered into a credit
facility (hereafter the Facility) with a number of banks. The total
aggregate amount of the Facility was 1,000,000,000, comprised of a
985,000,000 Revolving Credit Facility and a 15,000,000 Overdraft Facility.

Under the terms of the Revolving Credit Facility and the Overdraft
Facility, the Company may borrow, repay and reborrow, up to the commitment
amounts, until December 31, 2009, when all amounts will become due and
payable.

Amounts outstanding under the Revolving Credit Facility bear interest
at the rate of EURIBOR in the case of amounts owing in Euro and LIBOR in the
case of amounts owing in a currency other than Euro plus a margin of between
0.75% and 2.5%, depending on the ratio of total indebtedness of the
Companys subsidiaries to annualized earnings before interest, tax,
depreciation and amortization (EBITDA).

The Facility is secured by, among other things, liens on receivables
from cable television subscribers, concession agreements, equipment and
interests in all shares of PrimaComs subsidiaries. In addition, the
Facility contains certain covenants, which, among other things, require the
Company to maintain specified ratios relating to cash flow and total debt.
Furthermore, there are restrictions on incurring debt, encumbering revenues
or assets, loaning funds to third parties or assuming liabilities, disposing
of properties and paying dividends or making distributions.

In addition, on September 18, 2000, the Company entered into a
375,000,000 Senior Working Capital Facility. The Senior Working Capital
Facility had a term of 10 years. On this date, the Company entered into a
Contingent Value Right (CVR) Agreement, which was a condition precedent to
the obligations of the lenders under the Senior Working Capital Facility.
Pursuant to the CVR Agreement, the Company is required, if requested on or
before September 18, 2010, to make a payment in either cash or the Companys
common shares to the holders of each CVR Certificate equal to the difference
between the market price of a share of common stock of PrimaCom on the date
of exercise of such CVR and 110% of the market price of a share of such
common stock on the relevant release date, being September 30, 2001,
December 31, 2001, March 31, 2002 and June 30, 2002, subject to the
provisions of the CVR Agreement, in particular various provisions protecting
the holders of CVR Certificates against dilution. The total number of CVRs
to be issued under the CVR Agreement equaled five percent of the outstanding
number of shares of the Company. The total amount of CVRs to be issued
under this assignment was 989,300.

In connection with the release of CVRs on September 30, 2001 and
December 31, 2001, the Company recorded 1,063,000 to other assets and
additional paid in capital for the fair value of the CVRs on those dates.
The amount capitalized in other assets will be amortized as bank debt
interest straight-line over the remaining life of the Senior Working Capital
Facility. Amortization expense relating to CVRs included in other assets
was approximately 19,000 and 147,000 in 2001 and 2002, respectively.

In 2001, the Company received commitments from groups of international
banks to amend its existing 1,000,000,000 Facility and 375,000,000 Senior
Working Capital Facility. These amendments restated certain terms and
conditions, including repayment and borrowing conditions and financial
covenants. The first amendment closed on May 15, 2001 and the Company paid
fees of approximately 7,813,000 in connection with this first amendment. On
November 15, 2001, a second amendment closed and the Company incurred fees
of approximately 6,875,000. In 2001 and 2002, the Company incurred fees
totaling approximately 14,688,000 and 7,388,000, respectively, in
connection with these amendments.

On March 26, 2002, the Company completed the modification of its
1,000,000,000 Facility and the 375,000,000 Senior Working Capital
Facility. The terms and conditions were renegotiated subject to the approval
of the Companys shareholders. Bank fees for the modification in 2002
amounted for 15,284,000. On June 5, 2002, the shareholders approved the
modification of the Facility and Senior Working Capital Facility.

F-15



---



##### Table of Contents



In connection with the modification of the 1,000,000,000 Facility and
375,000,000 Senior Working Capital Facility, the CVRs with March 31, 2002
and June 30, 2002 release dates were canceled. The CVRs, which were
released on September 30, 2001 and December 31, 2001, can be converted to
bonds with attached warrants with the same economic benefit to the holders
as the CVRs. Therefore, the carrying value of the CVRs included in other
assets and additional paid in capital remain unchanged as a result of the
modification.

The Senior Working Capital Facility was converted into a 375,000,000
Convertible Second Secured Term Loan Facility (Second Secured Loan), which
was utilized in full and those borrowings were used to repay an equivalent
amount of the outstanding borrowings under the 1,000,000,000 Facility. As a
result, the lending commitment under the 1,000,000,000 Facility was reduced
ahead of the original schedule by the amount of the 375,000,000 payment to
625,000,000. The Second Secured Loan is convertible to common shares of
PrimaCom Management GmbH at the option of the lenders based on predetermined
financial ratios at any time on and after December 31, 2004.

Under the terms of the modified Facility, the available commitment
amount is reduced in quarterly amounts to the amounts reflected below as of
December 31 of the years indicated:

|           |  |                   |         | 
|---------- |  | ----------------- | ------- | 
|Year ended |  | Commitment Amount
|           |  |                  
|           |  | ( in thousands) 
|2002       |  |                   | 625,000 | 
|2003       |  |                   | 593,750 | 
|2004       |  |                   | 531,250 | 
|2005       |  |                   | 468,750 | 
|2006       |  |                   | 406,250 | 
|2007       |  |                   | 328,125 | 
|2008       |  |                   | 215,625 | 
|2009       |  |                   |        | 

At December 31, 2002, the Company had issued letters of credit totaling
5,000,000 in connection with acquisitions, which limits the Companys
ability to borrow under the Revolving Credit Facility by an equivalent
amount. At December 31, 2002, the Company had unused availability under the
Revolving Credit Facility 115,500,000. The interest rates on the Revolving
Credit Facility were 5.40%  5.76% at December 31, 2002.

At December 31, 2002, the Company had unused availability under the
Overdraft Facility of 7,705,000. The interest rate on the Overdraft
Facility was 8.25% at December 31, 2002.

The Second Secured Loan balance bears an interest rate from 18.0% to
20.0% over the term of the loan. As of December 31, 2002, the interest rate
was 19.0%, which includes both a cash interest portion and a non-cash
interest portion. The Company is required to pay cash interest on a
quarterly basis on the principle amount of 375,000,000 at an interest rate
of 8.5% as per December 31, 2002. The remaining interest obligation is
capitalized to the outstanding loan amount and will be due upon repayment of
the Second Secured Loan.

As of June 5, 2002, the Company had approximately 23,584,000 and
24,515,000 of capitalized debt issuance costs related to the original
Facility and Senior Working Capital Facility, respectively. In addition,
the Company paid 15,284,000, in fees in connection with March 26, 2002
modification.

As a result of the modification, the Company recorded a charge of
approximately 12,264,000 to interest expense due to the decrease in the
borrowing capacity of the Facility commitment. The remaining balance of
debt issuance costs related to the Facility of 11,320,000 remained
capitalized in other assets and are amortized to interest expense over the
remaining term of the Facility. None of the previously capitalized debt
issuance costs related to the Senior Working Capital Facility were written
off, but instead remained capitalized and will be amortized into interest
expense over the term of the Second Secured Loan.

F-16



---



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Of the 15,284,000 in fees paid for the refinancing, the Company
capitalized 12,852,000, which will be amortized to interest expense over
the term of the refinanced debt agreements. The remaining fees of
approximately 2,432,000 paid for certain legal and consulting services for
the refinanced Senior Working Capital Facility were recorded as a charge in
operating costs and expenses.

As of December 31, 2000, 2001 and 2002, the Company had net capitalized
bank financing fees totaling approximately 19,329,000, 40,906,000 and
39,323,000, respectively, which are included in other assets. These
capitalized bank fees are being amortized as bank debt interest over the
remaining term of the Facility and Second Secured Loan. Amortization
expense for bank financing fees was 743,000, 3,422,000 and 17,812,000,
for 2000, 2001, and 2002, respectively.

Maturities of the bank and other debt for the next five years are:

|                          |  |                  |         | 
|------------------------- |  | ---------------- | ------- | 
|Year ended                |  | Maturities      
|                          |  |                 
|                          |  | ( in thousands)
|2003                      |  |                  | 309     | 
|2004                      |  |                  |        | 
|2005                      |  |                  | 28,045  | 
|2006                      |  |                  | 62,500  | 
|2007                      |  |                  | 78,125  | 
|Thereafter                |  |                  | 734,204 | 
|                          |  |                  |         | 
|Total bank and other debt |  |                  | 903,183 | 
|                          |  |                  |         | 

|                        |                            |  |                  |        |      |  |        |        |  |  |        |        | 
|----------------------- | -------------------------- |  | ---------------- | ------ | ---- |  | ------ | ------ |  |  | ------ | ------ | 
|                        |                            |  | December 31,    
|                        |                            |  |                 
|                        |                            |  | 2000             |        | 2001 |  | 2002  
|                        |                            |  |                  |        |      |  |       
|                        |                            |  | ( in thousands)
|Cash paid for interest: |                            |  |                  |        |      |  |        |        |  |  |        |       
|                        | Bank and other debt        |  |                  | 24,173 |      |  |        | 55,031 |  |  |        | 54,556 | 
|                        | Sale-leaseback transaction |  |                  | 1,544  |      |  |        | 1,323  |  |  |        | 828    | 
|                        |                            |  |                  |        |      |  |        |        |  |  |        |       
|                        |                            |  | 25,717           |        |      |  | 56,354 |        |  |  | 55,384 |       
|                        |                            |  |                  |        |      |  |        |        |  |  |        |       



|10. |  | FINANCIAL INSTRUMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | All derivative instruments are reported in the consolidated
financial statements at fair value. The fair value for all derivative
contracts is included in other assets or other liabilities and recorded
each period in the statement of operations or other comprehensive
income, depending on whether the derivative is designated as effective
as part of a hedged item and on the type of hedge transaction. Gains or
losses on derivative instruments reported in other comprehensive income
must be classified in the statement of operations in the period in which
net earnings (loss) are affected by the underlying hedged item and the
ineffective portion of all hedges is recognized in other income
(expense) in the statements of operations in the current period. These
new standards may result in additional volatility in reported earnings
(loss), other comprehensive income and accumulated other comprehensive
income. These rules became effective for the Company on January 1, 2001.
The Company recorded the effect of the transition to these new
accounting requirements as a change in accounting principle. The
transition adjustment resulted in a loss of 946,000, net of tax, from
the cumulative effect of a change in accounting principle. Pro forma
amounts for 2000 are not shown as it is not possible to determine such
effect.
|   
|    |  | The Company is exposed to market risk from changes in interest rates
which can impact its operating results and overall financial condition. The
Company manages its exposure to these market risks through its operating and
financing activities and, when deemed appropriate, through the use of
derivative financial instruments.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   
|    |  | The Company purchased interest rate-cap and floor agreements that
limit its exposure to increasing interest rates and are economic hedges
of borrowings under its variable-rate revolving credit facility during                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

F-17



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##### Table of Contents





| |  | the next five years. An interest rate-cap entitles the Company to
receive a payment from the counter-party equal to the excess, if any, of
the hypothetical interest expense (strike price) on a specified
notional amount at a current market interest rate over an amount
specified in the agreement. The only amount the Company is obligated to
pay to the counter-party is a contract premium. The Company has also
entered into an interest rate-cap agreement with a double strike price.
The first strike price of a double strike price is applicable until the
relevant interest rate indice exceeds the second strike price at which
time the second strike price becomes applicable. The premium of a double
strike cap is typically lower than that of a single strike cap. The
premium can also be lower in those instances where the agreement
includes an interest rate floor. The interest rate floor entitles the
counter-party to receive a payment from the Company should interest
rates drop below an agreed upon limit (floor), effectively limiting
the Companys potential benefit from falling interest rates. The strike
price of these agreements may exceed the current market levels at the
time they are entered into. The interest rate indices specified by the
agreements have been and are expected to be highly correlated with the
interest rates the Company incurs on its variable-rate revolving credit
facility.
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | These contracts do not qualify for special hedge accounting and are
therefore marked-to-market each period through earnings (loss) as a
component of interest expense. Interest expense relating to these the
change in fair value of these financial instruments was approximately
2,906,000 and 860,000, in 2001 and 2002, respectively. In 2002, the
Company recorded approximately 2,391,000 in additional interest expense
for payments to the counter-party as a result of interest rates falling
below the floor.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| |  | The following table sets forth the status of financial instruments as
of December 31, 2002:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  

|                   |  |                    |  |             |         |          |  |              |      |      |  |      |              |   |  |                  |      |       |  |  |        |      |  | 
|------------------ |  | ------------------ |  | ----------- | ------- | -------- |  | ------------ | ---- | ---- |  | ---- | ------------ | - |  | ---------------- | ---- | ----- |  |  | ------ | ---- |  | 
|                   |  |                    |  |             |         |          |  |              |      |      |  |      |              |   |  |                  |      |       |  |  |        | Fair
|                   |  |                    |  |             |         | Notional |  |              |      |      |  |      |              |   |  | Contract Premium |      | Value
|Effective Date     |  | Termination Date   |  | Amount (T) |         | Floor    |  | Strike Price |      | (T) |  | (T)
|                   |  |                    |  |             |         |          |  |              |      |      |  |     
|June 10, 1999      |  | June 10, 2004      |  |             | 25,000  |          |  |              | 2.50 | %    |  |      | 5.50         | % |  |                  | *200 |       |  |  | (50    | )   
|June 22, 1999      |  | June 24, 2004      |  |             | 25,000  |          |  |              |     |      |  |      | 4.35         | % |  |                  | 126  |       |  |  | (242   | )   
|July 20, 1999      |  | July 20, 2004      |  |             | 25,000  |          |  |              |     |      |  |      | 4.50% - 5.50 | % |  |                  | 131  |       |  |  | (126   | )   
|September 20, 1999 |  | September 22, 2004 |  |             | 25,000  |          |  |              | 2.75 | %    |  |      | 5.50         | % |  |                  | 105  |       |  |  | (213   | )   
|December 18, 2000  |  | December 18, 2003  |  |             | 62,500  |          |  |              | 4.65 | %    |  |      | 5.25         | % |  |                  |     |       |  |  | (1,165 | )   
|December 18, 2000  |  | December 18, 2003  |  |             | 62,500  |          |  |              | 4.55 | %    |  |      | 5.50         | % |  |                  |     |       |  |  | (1,227 | )   
|January 16, 2001   |  | January 16, 2004   |  |             | 50,000  |          |  |              | 2,50 | %    |  |      |             |   |  |                  |     |       |  |  |       |     
|January 16, 2001   |  | January 16, 2004   |  |             | 50,000  |          |  |              |     |      |  |      | 5.50         | % |  |                  |     |       |  |  | 43     |     
|January 16, 2001   |  | January 16, 2004   |  |             | 100,000 |          |  |              | 3.90 | %    |  |      |             |   |  |                  |     |       |  |  | (1,493 | )   



|* |  | This contract premium represents an upfront one-time payment for the
life of the contract. All other payments are paid annually over the life
of the contract.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------

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|11. |  | RELATED PARTY TRANSACTIONS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | In October 2000, the merger of Aktiengesellschaft für Beteiligungen an
Telekommunikationsunternehmen (AGFB) into PrimaCom was registered with the
Commercial Register of the Amtsgericht (local court) of Mainz. AGFBs only
significant asset was its holding of 3,750,000 PrimaCom shares, all of which
were issued to AGFB shareholders when the merger was consummated. An
equivalent number of new PrimaCom shares were issued to AGFB shareholders in
the merger, reflecting the exchange ratio of one PrimaCom share for every
four AGFB shares.
|   
|    |  | On December 31, 2000, the Company acquired the shares of
Friedrichsthal, which was partially owned by Wolfgang Preuss, a shareholder
of the Company.                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | The Company had a 245,000 loan payable to WVH Wohnungsbau- und
Wohnungsbaugenossenschaft Reidenau mbH, a minority shareholder of one of its
subsidiaries. The total amount due for this loan was paid on January 10,
2001.                                                                                                                                                                                                                                                                                                                              
|   
|    |  | The Company has a 15.7% investment in Mediakabel B.V., a consortium of
cable television operators in the Netherlands organized to provide digital
television services. The Company paid Mediakabel digital cable services fees
of approximately 1,056,000, 2,575,000 and 2,700,000 in 2000, 2001 and
2002, respectively.                                                                                                                                                                                                                              
|   
|    |  | The Company uses services of BFE Nachrichtentechnik GmbH for
installation, repair and maintenance of cable networks, which is owned by
one of the Companys significant shareholders. In 2001 and 2002, the Company
paid approximately 788,000 and 424,000, respectively, for these services.                                                                                                                                                                                                                                                          
|   
|12. |  | INCOME TAXES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   
|    |  | For financial reporting purposes, the Company and its consolidated
subsidiaries calculate their respective tax liabilities on a separate return
basis which are combined in the accompanying consolidated financial
statements.                                                                                                                                                                                                                                                                                                                          
|   
|    |  | The provisions for income tax benefit (expense) consisted of the
following:                                                                                                                                                                                                                                                                                                                                                                                                                                                                              

|                 |  |                          |        |      |  |      |        |  |  |  |         |  
|---------------- |  | ------------------------ | ------ | ---- |  | ---- | ------ |  |  |  | ------- | -
|                 |  | Years ended December 31,
|                 |  |                         
|                 |  | 2000                     |        | 2001 |  | 2002
|                 |  |                          |        |      |  |     
|                 |  | ( in thousands)        
|Current          |  |                          | (1,258 | )    |  |      | 2,111  |  |  |  |        |  
|Deferred         |  |                          | (3,000 | )    |  |      | 13,270 |  |  |  | (10,980 | )
|                 |  |                          |        |      |  |      |        |  |  |  |         |  
|Total income tax |  |                          | (4,258 | )    |  |      | 15,381 |  |  |  | (10,980 | )
|                 |  |                          |        |      |  |      |        |  |  |  |         |  



| |  | The components of loss before income taxes by jurisdiction are as
follows:
| |  | --------------------------------------------------------------------------

|                |  |                          |         |      |  |      |          |   |  |  |          |  
|--------------- |  | ------------------------ | ------- | ---- |  | ---- | -------- | - |  |  | -------- | -
|                |  | Years ended December 31,
|                |  |                         
|                |  | 2000                     |         | 2001 |  | 2002
|                |  |                          |         |      |  |     
|                |  | ( in thousands)        
|Germany         |  |                          | (44,410 | )    |  |      | (72,380  | ) |  |  | (69,744  | )
|The Netherlands |  |                          | (7,254  | )    |  |      | (45,655  | ) |  |  | (44,565  | )
|                |  |                          |         |      |  |      |          |   |  |  |          |  
|                |  |                          | (51,664 | )    |  |      | (118,035 | ) |  |  | (114,309 | )
|                |  |                          |         |      |  |      |          |   |  |  |          |  

F-19



---



##### Table of Contents





| |  | A reconciliation between the statutory tax rates of 51.8% for 2000 and
37.1% for 2001 and 2002 and the Companys effective tax rate is as follows:
| |  | --------------------------------------------------------------------------------------------------------------------------------------------------

|                                               |  |                          |         |      |  |      |         |   |  |  |         |  
|---------------------------------------------- |  | ------------------------ | ------- | ---- |  | ---- | ------- | - |  |  | ------- | -
|                                               |  | Years ended December 31,
|                                               |  |                         
|                                               |  | 2000                     |         | 2001 |  | 2002
|                                               |  |                          |         |      |  |     
|                                               |  | ( in thousands)        
|Computed income tax benefit at statutory rates |  |                          | 31,020  |      |  |      | 43,825  |   |  |  | 42,547  |  
|Non-deductible interest expense on trade taxes |  |                          | (2,156  | )    |  |      | (4,984  | ) |  |  | (7,674  | )
|Change in valuation allowance                  |  |                          | (8,290  | )    |  |      | (16,870 | ) |  |  | (60,382 | )
|Goodwill amortization                          |  |                          | (11,280 | )    |  |      | (16,024 | ) |  |  |        |  
|Change in corporate tax rate                   |  |                          | (15,074 | )    |  |      |        |   |  |  |        |  
|Finalization of prior year tax returns         |  |                          |        |      |  |      |        |   |  |  | 15,907  |  
|Other                                          |  |                          | 1,522   |      |  |      | 9,434   |   |  |  | (1,378  | )
|                                               |  |                          |         |      |  |      |         |   |  |  |         |  
|Total income tax (expense) benefit             |  |                          | (4,258  | )    |  |      | 15,381  |   |  |  | (10,980 | )
|                                               |  |                          |         |      |  |      |         |   |  |  |         |  



| |  | In 2000, tax legislation was enacted in Germany lowering the corporate
tax rate from 40% to 25%. The Company recorded a non-cash deferred tax
charge in 2000 amounting to 15,074,000 as a result of this change in the
tax rate.                                                               
| |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | In 2002, the Company finalized and amended corporate and trade tax
returns for certain of its subsidiaries. As a result, the Company recorded a
deferred tax benefit of 15,907,000 due to the increase the cumulative tax
loss carry forwards and recorded a corresponding valuation allowance.
|
| |  | In 2002, in connection with the finalization of the accounting for the
acquisition of its Multikabel subsidiary, the Company recorded additional
deferred tax liabilities and goodwill of approximately 39,000,000.                                                                            
|
| |  | The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and deferred tax liabilities as of
December 31, 2000, 2001 and 2002 are presented below:                                                                                             

|                          |                                  |  |                  |         |      |  |         |         |   |  |         |          |  
|------------------------- | -------------------------------- |  | ---------------- | ------- | ---- |  | ------- | ------- | - |  | ------- | -------- | -
|                          |                                  |  | December 31,    
|                          |                                  |  |                 
|                          |                                  |  | 2000             |         | 2001 |  | 2002   
|                          |                                  |  |                  |         |      |  |        
|                          |                                  |  | ( in thousands)
|Deferred tax assets:      |                                  |  |                  |         |      |  |         |         |   |  |         |         
|                          | Net operating loss carryforwards |  |                  | 55,109  |      |  |         | 99,997  |   |  |         | 149,272  |  
|                          | Property and equipment           |  |                  | 60,061  |      |  |         | 55,915  |   |  |         | 55,344   |  
|                          | Financial instruments            |  |                  |        |      |  |         | 1,488   |   |  |         | 1,821    |  
|                          | Other                            |  |                  |        |      |  |         |        |   |  |         | 1,000    |  
|                          |                                  |  | 115,170          |         |      |  | 157,400 |         |   |  | 207,437 |         
|                          | Less  valuation allowance       |  |                  | (36,470 | )    |  |         | (53,340 | ) |  |         | (113,722 | )
|                          |                                  |  |                  |         |      |  |         |         |   |  |         |          |  
|                          |                                  |  | 78,700           |         |      |  | 104,060 |         |   |  | 93,715  |         
|Deferred tax liabilities: |                                  |  |                  |         |      |  |         |         |   |  |         |         
|                          | Property and equipment           |  |                  | (30,001 | )    |  |         | (30,712 | ) |  |         | (49,382  | )
|                          | Intangibles                      |  |                  |        |      |  |         |        |   |  |         | (14,614  | )
|                          | Financing fees                   |  |                  |        |      |  |         | (11,909 | ) |  |         | (14,834  | )
|                          | Other                            |  |                  | (530    | )    |  |         |        |   |  |         | (3,714   | )
|                          |                                  |  |                  |         |      |  |         |         |   |  |         |          |  
|Net deferred tax asset    |                                  |  | 48,169           |         |      |  | 61,439  |         |   |  | 11,171  |         
|                          |                                  |  |                  |         |      |  |         |         |   |  |         |          |  



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As of December 31, 2002, the Company had available in Germany combined
cumulative tax loss carryforwards for corporate income tax of approximately
316,721,000 and for trade tax of approximately 223,190,000. In addition,
the Company had in the Netherlands cumulative tax loss carryforwards of
approximately 81,278,000. Under current German and Netherlands tax laws,
these loss carryforwards have an indefinite life and may be used to offset
future taxable income. Cash paid for income taxes was 1,656,000, and
2,128,000 2000 and 2001. In 2002, no cash was paid for income taxes.

F-20



---



##### Table of Contents





|13. |  | COMMITMENTS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | The Company obtains certain programming directly from Kabel Deutschland
through various signal delivery contracts. The signal delivery contracts
with Kabel Deutschland are generally for a fixed period of time and are
subject to negotiated renewal. Under these contracts the Company typically
pays Kabel Deutschland either a flat fee or a fee per customer that is
determined by reference to a published fee schedule. As of December 31,
2002, the Company had a total commitment of approximately 103,929,000
through 2010, the date upon which the last agreement expires. For the years
ended December 31, 2000, 2001 and 2002, total Kabel Deutschland fees
expensed amounted to approximately 20,617,000, 20,343,000 and 20,857,000,
respectively, and are included in operations expense.
|   
|    |  | The Company has entered into certain agreements with film providers to
purchase film rights through 2005. License expense relating to these film
right agreements was 361,000, 1,041,000 and 1,190,000 in 2000, 2001 and
2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | The Company leases other providers networks, certain office equipment
and vehicles. Lease terms generally range from three to five years with the
option to renew at varying terms. Rental expense was 1,900,000, 3,637,000
and 3,135,000 in 2000, 2001 and 2002, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | Future minimum payments under Kabel Deutschland commitments, film
commitments and non-cancelable operating leases with initial or remaining
terms in excess of one year consisted of the following at December 31, 2002:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|           |  |             |         |       |  |        |       |           |  |  |       |  |  |  |         | 
|---------- |  | ----------- | ------- | ----- |  | ------ | ----- | --------- |  |  | ----- |  |  |  | ------- | 
|           |  | Kabel       |         |       |  |        |       | Operating |  |  |       | 
|           |  | Deutschland |         | Films |  | Leases |       | Total    
|           |  | (T)        |         | (T)  |  | (T)   |       | (T)     
|           |  |             |         |       |  |        |       |          
|2003       |  |             | 19,563  |       |  |        | 1,135 |           |  |  | 2,135 |  |  |  | 22,833  | 
|2004       |  |             | 18,136  |       |  |        | 1,461 |           |  |  | 1,456 |  |  |  | 21,053  | 
|2005       |  |             | 17,579  |       |  |        | 1,294 |           |  |  | 1,128 |  |  |  | 20,001  | 
|2006       |  |             | 17,445  |       |  |        |      |           |  |  | 1,072 |  |  |  | 18,517  | 
|2007       |  |             | 10,729  |       |  |        |      |           |  |  | 985   |  |  |  | 11,714  | 
|Thereafter |  |             | 20,477  |       |  |        |      |           |  |  | 1,618 |  |  |  | 22,095  | 
|           |  |             |         |       |  |        |       |           |  |  |       |  |  |  |         | 
|Total      |  |             | 103,929 |       |  |        | 3,890 |           |  |  | 8,394 |  |  |  | 116,213 | 
|           |  |             |         |       |  |        |       |           |  |  |       |  |  |  |         | 



|14. |  | STOCK OPTION PLANS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | On February 22, 1999, the Company adopted a stock option plan for the
benefit of all its employees and the employees of its subsidiaries (the
1999 Universal Stock Option Plan) and a stock option plan for its
executive officers and the executive officers of the subsidiaries (the 1999
Executive Stock Option Plan). The two stock option plans provide for the
issuance of stock options allowing eligible employees and executive officers
to acquire shares. The Company has been authorized to issue a total of
1,000,000 shares including 300,000 shares under the 1999 Universal Stock
Option Plan and 700,000 shares under the 1999 Executive Stock Option Plan.                                                                                                                                                                                                                                                                                                                                                                                    
|   
|    |  | The options granted in 1999 and 2000 under both the 1999 Universal
Stock Option Plan and the 1999 Executive Stock Option Plan vest over a
three-year period. One third of the options vest on the first anniversary of
the grant and the remaining options vest in equal monthly amounts over the
next two years. The vested options are exercisable after the second
anniversary of the grant and expire on the fifth anniversary of the grant.
If the participants employment agreement terminates before the options vest
in full, the participants options will be vested only in the portions of
options computed by multiplying 1/36 times the number of full months of
employment between the date of the option grant and the date of termination.
Each option is exercisable only if the average daily closing price of the
shares, calculated as the average over the five consecutive trading days on
the Frankfurt Stock Exchange immediately prior to the first option exercise,
equals at least 120% of the respective exercise price of the option.

F-21



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| |  | In July 2000, the Company created two new stock option plans, the 2000
Universal Stock Option Plan with 150,000 options and the 2000 Executive
Stock Option Plan with 350,000 options. The Company may not grant options
under the 2000 plans until all the options under the 1999 plans have been
granted.
| |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  | Stock option activity as of December 31, 2002 is as follows:                                                                                                                                                                                                                                               

|                                         |  |           |           |        |  |                 |       |                  |  |  |       | 
|---------------------------------------- |  | --------- | --------- | ------ |  | --------------- | ----- | ---------------- |  |  | ----- | 
|                                         |  |           |           |        |  | Weighted        |       | Weighted average
|                                         |  |           |           |        |  | average         |       | fair value of   
|                                         |  |           |           |        |  | exercise        |       | options granted 
|                                         |  | Number of |           | price  |  | during the year
|                                         |  | Shares    |           | (in ) |  | (in )         
|                                         |  |           |           |        |  |                
|Outstanding at December 31, 1999         |  |           | 758,497   |        |  |                 | 31.44 |                  |  |  |       | 
|Granted                                  |  |           | 141,364   |        |  |                 | 53.81 |                  |  |  | 23.25 | 
|Exercised                                |  |           |          |        |  |                 |      |                  |  |  |       | 
|Expired                                  |  |           |          |        |  |                 |      |                  |  |  |       | 
|Forfeited                                |  |           | 25,813    |        |  |                 | 38.85 |                  |  |  |       | 
|                                         |  |           |           |        |  |                 |       |                  |  |  |       | 
|Outstanding at December 31, 2000         |  |           | 874,048   |        |  |                 | 34.38 |                  |  |  |       | 
|Granted                                  |  |           |          |        |  |                 |      |                  |  |  |       | 
|Exercised                                |  |           |          |        |  |                 |      |                  |  |  |       | 
|Expired                                  |  |           |          |        |  |                 |      |                  |  |  |       | 
|Forfeited                                |  |           | 31,694    |        |  |                 | 46.89 |                  |  |  |       | 
|                                         |  |           |           |        |  |                 |       |                  |  |  |       | 
|Outstanding at December 31, 2001         |  |           | 842,354   |        |  |                 | 33.90 |                  |  |  |       | 
|                                         |  |           |           |        |  |                 |       |                  |  |  |       | 
|Granted                                  |  |           | 200,000   |        |  |                 | 2.19  |                  |  |  | 0.48  | 
|Exercised                                |  |           |          |        |  |                 |       |                  |  |  |       | 
|Expired                                  |  |           |          |        |  |                 |       |                  |  |  |       | 
|Forfeited                                |  |           | 26,684    |        |  |                 | 23.34 |                  |  |  |       | 
|                                         |  |           |           |        |  |                 |       |                  |  |  |       | 
|Outstanding at December 31, 2002         |  |           | 1,015,670 |        |  |                 | 27.71 |                  |  |  |       | 
|                                         |  |           |           |        |  |                 |       |                  |  |  |       | 
|Options exercisable at December 31, 2002 |  |           | 712,736   |        |  |                 | 31.31 |                  |  |  |       | 



| |  | The options outstanding by range of exercise price at December 31, 2002 are
as follows:
| |  | ---------------------------------------------------------------------------------------

|                |  |             |           |                  |         |           |     |             |     |           |       |  |       |          |         |         |   |           |       |  |   | 
|--------------- |  | ----------- | --------- | ---------------- | ------- | --------- | --- | ----------- | --- | --------- | ----- |  | ----- | -------- | ------- | ------- | - | --------- | ----- |  | - | 
|Outstanding     |  | Exercisable
|                |  |            
|                |  |             |           |                  |         |           |     | Weighted-   |     |           |       |  |       |          |         |         |   | Weighted-
|                |  |             |           |                  |         |           |     | Average     |     | Weighted- |       |  |       |          |         | Average
|Range of        |  |             |           |                  |         | Remaining |     | Average     |     |           |       |  |       | Exercise
|Exercise Prices |  | Number      |           | Contractual Life |         | Exercise  |     | Number      |     | Price    
|()             |  | Outstanding |           | in years         |         | Price () |     | Outstanding |     | ()      
|                |  |             |           |                  |         |           |     |             |     |          
|                |  | 0.42        |           |                  | 100,000 |           |     |             | 4.7 |           |       |  | 0.42  |          |         |         |  |           |       |  |  | 
|                |  | 4.04        |           |                  | 100,000 |           |     |             | 4.2 |           |       |  | 4.04  |          |         |         |  |           |       |  |  | 
|29.00 - 47.41   |  |             | 712,736   |                  |         |           | 1.3 |             |     |           | 31.31 |  |       |          | 712,736 |         |   |           | 31,31 | 
|                |  | 49.19       |           |                  | 81,084  |           |     |             | 2.0 |           |       |  | 49.19 |          |         |         |  |           |       |  |  | 
|                |  | 62.31       |           |                  | 14,169  |           |     |             | 2.3 |           |       |  | 62.31 |          |         |         |  |           |       |  |  | 
|                |  | 81.87       |           |                  | 7,681   |           |     |             | 2.3 |           |       |  | 81.87 |          |         |         |  |           |       |  |  | 
|                |  |             |           |                  |         |           |     |             |     |           |       |  |       |          |         |         |   |           |       | 
|                |  |             | 1,015,670 |                  |         |           |     |             |     |           |       |  |       |          | 712,736 |         |   |           |       | 
|                |  |             |           |                  |         |           |     |             |     |           |       |  |       |          |         |         |   |           |       | 



| |  | Compensation expense totaled 3,558,000, 3,853,000 and 1,377,000
relating to the options issued in 2000, 2001 and 2002, respectively. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used:
| |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                           |  |           |          |           |  |           |            |   |  |  |          |  
|-------------------------- |  | --------- | -------- | --------- |  | --------- | ---------- | - |  |  | -------- | -
|                           |  | 2000      |          | 2001      |  | 2002     
|                           |  |           |          |           |  |          
|Risk free rate of interest |  |           | 3.2%-4.6 | %         |  |           | 4.6%-5.1   | % |  |  | 3.4%-5.1 | %
|Expected dividend yield    |  |           | 0.0      | %         |  |           | 0.0        | % |  |  | 0.0      | %
|Expected life              |  | 3.0 years |          | 3.0 years |  | 3.0 years
|Expected volatility        |  |           | 58.0     | %         |  |           | 58.0%-75.1 | % |  |  | 81       | %

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|15. |  | CONTINGENCIES                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | In October 2001, Media Equity Management, Inc. filed a complaint in the
United States state court against Vogtländische Kommunikations- und
Entwicklungs GmbH, Kabelfernsehen Meerane GmbH, Kabelfernsehen Oelsnitz
GmbH, Kabelfernsehen Zwenkau GmbH, Televis Grimma GmbH (a subsidiary of the
Company), TV-3 and Mr. Midrowsky, a former Televis Grimma GmbH shareholder.
This complaint seeks judgment pursuant to written loan agreements,
promissory notes and guaranty instruments against Vogtländische
Kommunikations- und Entwicklungs GmbH and Mr. Midrowsky for approximately
$60,000, against Vogtländische Kommunikations- und Entwicklungs GmbH,
Kabelfernsehen Meerane GmbH, Kabelfernsehen Oelsnitz GmbH, Televis Grimma
GmbH, TV-3 and Mr. Midrowsky for approximately $ 3,200,000 and against
Vogtländische Kommunikations- und Entwicklungs GmbH, Kabelfernsehen Zwenkau
GmbH, Televis Grimma GmbH, TV-3 for approximately $1,200,000. Media Equity
Management, Inc. filed an amended complaint which added two parties, Informat
Leasing GmbH and the Company. This amended complaint alleged that Informat
Leasing GmbH was the successor to Kabelfernsehen Zwenkau GmbH by name change
and the Company was the successor to Televis Grimma GmbH by merger. The
petition for relief was amended such that a request for judgment against the
Company was made in the sum of approximately $4,400,000. The lawsuit has
been moved from state court to U.S. district court. The Company believes
there will be no ruling for several months and that it will ultimately
prevail.
|   
|    |  | In The Netherlands, the Company has a legal dispute with Canal+ about
the carriage or access fees, which Canal+ is obligated to pay the Company.
Initially, the decision by the district court (Kantongerecht) was in favor
of the Company. However, Canal+ brought the legal dispute to the Dutch
telecom regulator (OPTA) to provide a judgement about the carriage fees
charged by the Company. At the end of 2002, OPTA competed its review
regarding the carriage fees charged by the Company. The Company expects the
decision from OPTA early in 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|    |  | In February 2003, the CEO of the Companys Dutch subsidiary,
Multikabel, submitted his resignation. In conjunction with the resignation,
a claim was filed against the Company for a severance payment. A court date
has been set on March 13, 2003 to settle the claim. The court decision is
expected for May 2003.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | The Company is currently in negotiations with third parties for the
payment of current and past royalty fees. No formal settlement agreement has
been reached as to final payment. However, because the expected future
payment is probable and can be reasonably estimated, the Company has accrued
approximately 4,189,000, 2,563,000 and 1,073,000 as of December 31, 2002,
2001 and 2000, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | The Company is part to routine litigation incidental to the normal
conduct of business. In the opinion of management, the outcome of and
liabilities in excess of what has been provided for related to these
proceedings, in the aggregate, are not likely to be material to the
financial condition or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   
|16. |  | SHAREHOLDERS EQUITY                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | The Company is incorporated as an Aktiengesellschaft (hereafter AG)
under German law. Registered capital of an AG is in the form of shares and
represents negotiable securities. The minimum capital requirement for an AG
is 50,000. The Company has authorized 31,692,792 shares. The Company has
issued 19,786,052 ordinary bearer shares with a pro rata share in the
registered capital of 2.56 per share. Each ordinary bearer share is
entitled to one vote.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | On February 23, 1999, the Company concluded the initial public offering
of 3,945,710 of its shares at an offering price of 29.00 per share and
$16.27 per American Depositary Share (ADS). The Company realized net
proceeds of approximately 103,425,000 from the offering. Subsequent to the
offering, the Companys shares commenced trading on the Neuer Markt, a
market segment of the Frankfurt Stock Exchange, under the symbol PRC and the
Companys American Depositary Shares (ADS), each representing one-half of
a share, commenced trading on the Nasdaq National Market under the symbol
PCAG.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

F-23



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|    |  | Dividends may only be declared and paid from the accumulated retained
earnings (after deduction of certain reserves) shown in the Companys annual
German statutory unconsolidated accounts. Such amounts differ from the total of shareholders deficiency as shown in the
consolidated financial statements as a result of the adjustments made to
present the consolidated financial statements in accordance with U.S. GAAP.
As of December 31, 2002, the Companys German statutory accounts reflect no
retained earnings available for distribution.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|17. |  | LOSS PER SHARE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|    |  | The following table sets forth the computation of basic and diluted
loss per share:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                                                                                           |  |                          |            |      |  |      |            |   |  |  |            |  
|------------------------------------------------------------------------------------------ |  | ------------------------ | ---------- | ---- |  | ---- | ---------- | - |  |  | ---------- | -
|                                                                                           |  | Years ended December 31,
|                                                                                           |  |                         
|                                                                                           |  | 2000                     |            | 2001 |  | 2002
|                                                                                           |  |                          |            |      |  |     
|Numerator:                                                                                 |  |                          |            |      |  |      |            |   |  |  |            |  
|Numerator for basic and diluted earnings per share
 loss from operations ( in thousands) |  |                          | (56,144    | )    |  |      | (103,162   | ) |  |  | (138,327   | )
|Denominator:                                                                               |  |                          |            |      |  |      |            |   |  |  |            |  
|Denominator for basic and diluted earnings per
share  weighted average shares             |  |                          | 19,726,195 |      |  |      | 19,777,805 |   |  |  | 19,786,052 |  
|                                                                                           |  |                          |            |      |  |      |            |   |  |  |            |  
|Basic and diluted loss from operations per share ()                                       |  |                          | (2.85      | )    |  |      | (5.21      | ) |  |  | (6,99      | )
|                                                                                           |  |                          |            |      |  |      |            |   |  |  |            |  



|    |  | Outstanding stock options and contingent value rights are excluded from
the loss per share calculation because the effect would be antidilutive.                                                                                                                                                                                                                                     
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|18. |  | SEGMENT DISCLOSURE                                                                                                                                                                                                                                                                                                                                                                   
|   
|    |  | Operating segments are defined as components of an enterprise about
which separate financial information is available that is evaluated
regularly by the chief operating decision maker, or decision-making group,
in deciding how to allocate resources to an individual segment and in
assessing performance of the segment.                                                       
|   
|    |  | The Company has two reportable segments based on geographic location:
Germany and The Netherlands. Both segments provide analog and digital cable
programming, high-speed Internet access and other network services.                                                                                                                                                                
|   
|    |  | Revenues from these four product categories are regularly reviewed by
the chief operating decision maker or decision making group. However, for
internal reporting purposes, the Company does not allocate operating costs
and expenses to these product categories to evaluate their performance.                                                                                   
|   
|    |  | The Company evaluates performance and allocates resources based on
profit or loss from operations before interest, taxes, depreciation and
amortization. All elimination amounts in the segments relate primarily to
intercompany transactions. The accounting policies of the reportable
segments are the same as those described in the summary of significant
accounting policies.

F-24



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##### Table of Contents



|                |                                     |              |         |           |           |      |         |         |           |  |         |         |           | 
|--------------- | ----------------------------------- | ------------ | ------- | --------- | --------- | ---- | ------- | ------- | --------- |  | ------- | ------- | --------- | 
|                |                                     |              |         | 2000      |           | 2001 |         | 2002   
|                |                                     |              |         |           |           |      |         |        
|Germany         |                                     |              |         |           |           |      |         |         |           |  |         |        
|                | Analog cable                        |              |         | 109,612   |           |      |         | 114,422 |           |  |         | 116,732 |          
|                | Digital cable                       |              |         | 16        |           |      |         | 229     |           |  |         | 713     |          
|                | High-speed internet                 |              |         | 375       |           |      |         | 1,023   |           |  |         | 1,417   |          
|                | Other revenue                       |              |         | 5,502     |           |      |         | 4,654   |           |  |         | 2,729   |          
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                |                                     |              | 115,505 |           |           |      | 120,328 |         |           |  | 121,591 |        
|The Netherlands |                                     |              |         |           |           |      |         |         |           |  |         |        
|                | Analog cable                        |              |         | 7,268     |           |      |         | 31,018  |           |  |         | 33,510  |          
|                | Digital cable                       |              |         | 87        |           |      |         | 712     |           |  |         | 557     |          
|                | High-speed internet                 |              |         | 370       |           |      |         | 5,732   |           |  |         | 17,711  |          
|                | Other revenue                       |              |         | 1,113     |           |      |         | 7,706   |           |  |         | 8,673   |          
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                |                                     |              | 8,838   |           |           |      | 45,168  |         |           |  | 60,451  |        
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                | Total revenues                      |              |         | 124,343   |           |      |         | 165,496 |           |  |         | 182,042 |          
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|Germany         |                                     |              | 22,424  |           |           |      | 22,702  |         |           |  | 17,871  |        
|The Netherlands |                                     |              | 4,757   |           |           |      | 26,916  |         |           |  | (1,001  | )      
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                | Total operating loss                |              |         | 27,181    |           |      |         | 49,618  |           |  |         | 16,870  |          
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|Germany         |                                     |              | 18,277  |           |           |      | 31,906  |         |           |  | 63,855  |        
|The Netherlands |                                     |              | 7,896   |           |           |      | 30,862  |         |           |  | 45,566  |        
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                | Total interest expense              |              |         | 26,173    |           |      |         | 62,768  |           |  |         | 109,421 |          
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|Germany         |                                     |              | 66,588  |           |           |      | 82,825  |         |           |  | 67,157  |        
|The Netherlands |                                     |              | 8,942   |           |           |      | 35,535  |         |           |  | 28,786  |        
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                | Total depreciation and
amortization |              |         | 75,530    |           |      |         | 118,360 |           |  |         | 95,943  |          
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|Germany         |                                     |              | 230,587 |           |           |      | 204,106 |         |           |  | 204,409 |        
|The Netherlands |                                     |              | 183,234 |           |           |      | 169,044 |         |           |  | 203,167 |        
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                | Total goodwill and customer lists   |              |         | 413,821   |           |      |         | 373,150 |           |  |         | 407,576 |          
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|Germany         |                                     |              | 627,455 |           |           |      | 633,045 |         |           |  | 584,032 |        
|The Netherlands |                                     |              | 374,669 |           |           |      | 365,209 |         |           |  | 352,270 |        
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                | Total long-lived assets             |              |         | 1,002,124 |           |      |         | 998,254 |           |  |         | 936,302 |          
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|Germany         |                                     |              | 721,925 |           |           |      | 733,445 |         |           |  | 623,063 |        
|The Netherlands |                                     |              | 386,451 |           |           |      | 391,561 |         |           |  | 462,655 |        
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                |                                     | Total assets |         |           | 1,108,376 |      |         |         | 1,125,006 |  |         |         | 1,085,718 | 
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|Germany         |                                     |              | 133,123 |           |           |      | 60,241  |         |           |  | 20,032  |        
|The Netherlands |                                     |              | 255,032 |           |           |      | 24,273  |         |           |  | 17,204  |        
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          
|                | Total capital expenditures          |              |         | 388,155   |           |      |         | 84,514  |           |  |         | 37,236  |          
|                |                                     |              |         |           |           |      |         |         |           |  |         |         |          



|19. |  | EURO CONVERSION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|    |  | Twelve member countries of the European Union have established fixed
conversion rates between their existing currencies (legacy currencies) and
one common currency, the Euro. The Euro is traded on currency exchanges and
was used in only certain transactions, such as electronic payments before
December 31, 2001. Beginning in January 2002, new Euro-denominated notes and
coins were issued, and legacy currencies were withdrawn from circulation.
The conversion to the Euro has eliminated currency exchange rate risk for
transactions between the member countries, which for the Company, primarily
consists of the Netherlands.

F-25



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##### Table of Contents





|    |  | The Company has reviewed and has made the required modifications to
their information systems based on the new currency. At December 31, 2001,
the conversion to the Euro has not resulted in any material adverse impact
on the Companys financial position or results of operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|20. |  | NEW ACCOUNTING STANDARDS                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   
|    |  | In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. SFAS No. 143 requires liability recognition for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. The Company adopted the provisions of
SFAS No. 143 effective January 1, 2003. The adoption of SFAS No. 143 is not
expected to have a material impact on the Consolidated Financial Statements.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|    |  | In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets (SFAS No. 144) which
supersedes SFAS No. 121, Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of. Among other changes, SFAS No.
144 provides updated guidance concerning the recognition and measurement of
an impairment loss for certain types of long-lived assets. The Company
adopted SFAS No. 144 during the first quarter of this fiscal year. Adoption
of this new accounting standard resulted in an impairment charge of
long-lived assets in the amount of approximately  12,944,000 for the year
end December, 31, 2002, which was recorded as additional depreciation
expense.                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | In April 2002, SFAS No. 145, Rescission of FASB Statements No. 4, 44
and 64, amendment of FASB Statement No. 13, and Technical Corrections
(SFAS 145) was issued. SFAS No. 145 rescinds SFAS No. 4 and No. 64, which
required gains and losses from extinguishment of debt to be classified as
extraordinary items. SFAS No. 145 also rescinds SFAS No. 44 since the
provisions of the Motor Carrier Act of 1980 are complete. SFAS No. 145 also
amends SFAS No. 13 eliminating inconsistencies in certain sale-leaseback
transactions. The provisions of SFAS No. 145 are effective for fiscal years
beginning after May 15, 2002. Any gain or loss on extinguishment of debt
that was classified as an extraordinary item in prior periods presented
shall be reclassified. The Company does not expect that the adoption of SFAS No.
145 will have a material effect on the Companys financial position or
results of operations.                                                                                                                                                                         
|   
|    |  | In June 2002, the Financial Accounting Standards Board issued SFAS No.
146, Accounting for Costs Associated with Exit or Disposal Activities.
SFAS No. 146 addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies Emerging Issues
Task Force (referred to as EITF) Issue No. 94-3 Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring). SFAS No. 146
requires that a liability for a cost associated with an exit or disposal
activity be recognized when the liability is incurred, not at the date of an
entitys commitment to an exit plan, as required under EITF Issue No. 94-3.
The provisions of SFAS No. 146 are effective for exit or disposal activities
initiated after December 31, 2002. The adoption of SFAS No. 146 may affect
the timing of recognizing future restructuring costs as well as the amounts
recognized under such costs, and is not expected to have a material impact
on the Consolidated Financial Statements.
|   
|    |  | In December 2002, the Financial Accounting Standards Board issued SFAS
No. 148, Accounting for Stock-Based CompensationTransition and
Disclosure. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based
Compensation to provide alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation. In addition, SFAS No. 148 amends the disclosure requirements
of SFAS No. 123 to require prominent disclosures in both annual and interim
financial statements about the method of accounting for stock-based employee
compensation and the effect of the method used on reported results. The
provisions of SFAS No. 148 are effective for financial statements for fiscal
years ending after December 15, 2002. The adoption of this standard did not
have a material impact on the Consolidated Financial Statements.                                                                                                                                                                                                  

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