Use these links to rapidly review the documentTABLE OF CONTENTS INDEX TO FINANCIAL STATEMENTS TABLE OF CONTENTS 3 TABLE OF CONTENTS 4



UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549FORM 20-F

|(Mark One)                                        |                                                                                               
|------------------------------------------------- | ----------------------------------------------------------------------------------------------
|o                                                 | REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
|OR                                               
|ý                                                 | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934          
|For the fiscal year ended March 31, 2008         
|OR                                               
|o                                                 | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934               
|For such transition period from to               
|OR                                               
|o                                                 | SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934   
|Date of event requiring this shell company report
|For such transition period from to               

Commission file number:333-137371

Kabel Deutschland GmbH(Exact name of Co-Registrant as specified in its charter)

Kabel Deutschland Vertrieb und Service GmbH & Co. KG(Exact name of Co-Registrant as specified in its charter)

Federal Republic of Germany

(Jurisdiction of incorporation or organization)

Betastraße 6-8
85774 Unterföhring
Germany
+49-89-960-100(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                |  | n/a                                      

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

None(Title of Class)

None(Title of Class)

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

€250 million 10.750% Senior Notes due 2014
$610 million 10.625% Senior Notes due 2014(Title of Class)

As
of March 31, 2008, the subscribed capital of KDG is held entirely by the sole shareholder Kabel Deutschland Holding GmbH and is represented by three shares in the
following amounts:

Shareholders

€Kabel Deutschland Holding GmbH

24,750Kabel Deutschland Holding GmbH

250Kabel Deutschland Holding GmbH

1,000,0001,025,000


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

o
Yes    ý No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.

o
Yes    ý No

NoteChecking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 from their obligations under those Sections.

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 reports), and (2) has been subject to such filing requirements for the past 90 days.

ý
Yes    o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of
"accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act. (Check one)

Large accelerated filer o

Accelerated filer o

Non-accelerated filer ý


Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP o

International Financial Reporting Standards as issued by the International Accounting Standards Board ý

Other o


If "Other" has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

o
Item 17    o Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o
Yes    ý No

(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)

Indicate
by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.

o
Yes    o No



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TABLE OF CONTENTS



PART I

1ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

1ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

1ITEM 3.

KEY INFORMATION

1ITEM 4.

INFORMATION ON THE COMPANY

29ITEM 4A.

UNRESOLVED STAFF COMMENTS

57ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

57ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

96ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

104ITEM 8.

FINANCIAL INFORMATION

109ITEM 9.

THE OFFER AND LISTING

109ITEM 10.

ADDITIONAL INFORMATION

110ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

120ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

120PART II

121ITEM 13.

DEFAULTS, DIVIDENDS, ARREARAGES AND DELINQUENCIES

121ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

121ITEM 15.

CONTROLS AND PROCEDURES

121ITEM 15T.

CONTROLS AND PROCEDURES

121ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT

122ITEM 16B.

CODE OF ETHICS

122ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

123ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

123ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

123PART III

124ITEM 17.

FINANCIAL STATEMENTS

124ITEM 18.

FINANCIAL STATEMENTS

124ITEM 19.

EXHIBITS

124SIGNATURES KDG

125SIGNATURES KDVS

126


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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

A.    Selected Financial Data

In this annual report on Form 20-F, 'Issuer', 'Registrant', 'we', 'us', 'our', 'Company', 'KDG' and other similar terms refer to Kabel
Deutschland GmbH and its consolidated subsidiaries, except where the context otherwise requires.

The
selected consolidated statements of operations and cash flow data set forth below for the fiscal years ended March 31, 2004, 2005, 2006, 2007 and 2008 and the selected
consolidated balance sheet data set forth below as of March 31, 2004, 2005, 2006, 2007 and 2008, in each case, for KDG have been derived from KDG's consolidated financial statements. KDG's
consolidated financial statements for fiscal years ended March 31, 2006, 2007 and 2008 are included in ITEM 17 Financial Statements of this annual report.

The
selected consolidated data presented below should be read in conjunction with our consolidated financial statements included in ITEM 17 Financial Statements of this annual report.

1

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Consolidated Statement of Operations

|                                |                                                            | Fiscal Year Ended March 31, |       
|------------------------------- | ---------------------------------------------------------- | --------------------------- | ------
|
|
|
|                                | Cable Access Revenue                                       |                             | 833.5 
|                                | TV/Radio Revenue                                           |                             | 108.1 
|                                | Internet & Phone Revenue                                   |                             | 1.2   
|                                | TKS Revenue                                                |                             | 19.3  
|                                |                                                            |                             |       
|Revenues                        |                                                            | 962.1                       |       
|                                | Cost of Services Rendered(2)                               |                             | (616.5
|                                | Other Operating Income                                     |                             | 33.9  
|                                | Selling Expenses(3)                                        |                             | (220.5
|                                | General and Administrative Expenses(4)                     |                             | (115.5
|                                |                                                            |                             |       
|Profit from Ordinary Activities |                                                            | 43.5                        |       
|                                | Interest Income                                            |                             | 4.0   
|                                | Interest Expense                                           |                             | (213.9
|                                | Accretion/Depreciation on Investments and Other Securities |                             | 0.0   
|                                | Income from Associates                                     |                             | 0.6   
|                                |                                                            |                             |       
|Loss Before Taxes               |                                                            | (165.8                      | )     
|Taxes on Income                 |                                                            | 13.9                        |       
|                                |                                                            |                             |       
|Net Loss                        |                                                            | (151.9                      | )     
|                                |                                                            |                             |       
|Other Financial Data            |                                                            |                             |       
|                                | Adjusted EBITDA(5)                                         |                             | 428.0 
|                                | Adjusted EBITDA margin(6)                                  |                             | 44.5  

---

2

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IFRS Reconciliation of Adjusted EBITDA to Profit from Ordinary Activities

|                                |  | Fiscal Year Ended March 31, |  
|------------------------------- |  | --------------------------- | -
|
|
|Adjusted EBITDA                 |  | 428.0                       |  
|Depreciation and Amortization   |  | (364.3                      | )
|MEP related non-cash Expenses   |  | (6.7                        | )
|Restructuring Expenses          |  | (13.5                       | )
|                                |  |                             |  
|Profit from Ordinary Activities |  | 43.5                        |  
|                                |  |                             |  

Consolidated Balance Sheet Data

|                         |                                        | As of March 31, |        
|------------------------ | -------------------------------------- | --------------- | -------
|
|
|
|                         | Cash & Cash Equivalents                |                 | 184.7  
|                         | Other Current Assets                   |                 | 240.4  
|                         | Intangible Assets                      |                 | 630.6  
|                         | Tangible Assets                        |                 | 1,028.2
|                         | Other Non-current Assets               |                 | 6.6    
|                         |                                        |                 |        
|Total Assets             |                                        | 2,090.5         |        
|                         |                                        |                 |        
|                         | Liabilities to Banks/Bondholders       |                 | 1,645.4
|                         | Other Liabilities                      |                 | 524.7  
|                         |                                        |                 |        
|Total Liabilities        |                                        | 2,170.1         |        
|                         |                                        |                 |        
|                         | Subscribed Capital                     |                 | 1.0    
|Equity(7)                |                                        | (79.6           | )      
|                         |                                        |                 |        
|Cash Flow Statement Data |                                        |                 |        
|                         | Cash Flow from Operating Activities    |                 | 354.6  
|                         | Cash Flow Used in Investing Activities |                 | (57.9  
|                         | Cash Flow Used in Financing Activities |                 | (280.5 

---

3

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Network Data, Subscribers and Revenue Generating Units

|                                                        |  | As of March 31, |  
|------------------------------------------------------- |  | --------------- | -
|
|
|Homes passed                                            |  | 15,300          |  
|% penetration(8)                                        |  | 63              | %
|Total Subscribers (Homes Connected)                     |  | 9,626           |  
|thereof Cable Access Subscribers                       |  | 9,626           |  
|thereof Kabel Internet und Phone Subscribers 'Solo'(9) |  | n/a             |  
|Cable Access RGUs (incl. TKS)(10)                       |  | 9,626           |  
|Digital Video Recorder RGUs (Kabel Digital+)            |  | n/a             |  
|Kabel Digital (pay TV) RGUs                             |  | 81              |  
|Kabel Internet RGUs                                     |  | 5               |  
|Kabel Phone RGUs                                        |  | 0               |  
|                                                        |  |                 |  
|Total RGUs(11)                                          |  | 9,712           |  
|                                                        |  |                 |  
|Upgrade                                                 |  |                 |  
|Homes Upgraded for 2-way-communication                  |  | n/a             |  
|Homes Connected Upgraded for 2-way-communication        |  | n/a             |  

---

|
|

|                       |  | Fiscal Year Ended March 31,
|---------------------- |  | ---------------------------
|
|
|ARPU(12)               |  |                            
|Cable Access(13)       |  | 7.07                       
|Kabel Digital+         |  | n/a                        
|Kabel Digital (pay TV) |  | n/a                        
|Kabel Internet         |  | n/a                        
|Kabel Phone            |  | n/a                        
|                       |  |                            
|Total Blended ARPU(14) |  | n/a                        
|                       |  |                            

---

4

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Operational Data

|                             |                              | Fiscal Year Ended March 31, |      
|---------------------------- | ---------------------------- | --------------------------- | -----
|
|
|Cable Access Revenue         |                              |                             |      
|                             | Subscription Fees            |                             | 817.0
|                             |                              | % of Total Revenues         |      
|                             | Installation Fees            |                             | 11.1 
|                             |                              | % of Total Revenues         |      
|                             | Other Revenue                |                             | 5.4  
|                             |                              | % of total revenues         |      
|                             |                              |                             |      
|TV/Radio Revenue             |                              |                             |      
|                             | Analog/Digital Carriage Fees |                             | 97.0 
|                             |                              | % of Total Revenues         |      
|                             | Playout Facility revenues    |                             | 7.6  
|                             |                              | % of Total Revenues         |      
|                             | Pay TV subscription fees     |                             | 3.5  
|                             |                              | % of Total Revenues         |      
|                             | Other digital revenues       |                             | 0.0  
|                             |                              | % of Total Revenues         |      
|                             |                              |                             |      
|Internet & Phone Revenue(15) |                              | 1.2                         |      
|                             |                              | % of Total Revenues         |      
|                             |                              |                             |      
|TKS Revenue                  |                              | 19.3                        |      
|                             |                              | % of Total Revenues         |      
|                             |                              |                             |      
|Total Revenues               |                              | 962.1                       |      
|                             |                              |                             |      

---

Exchange Rate Information

The functional and reporting currency of KDG is the Euro.

Foreign
currency transactions were converted to Euros at the exchange rate applicable on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
existing as of the balance sheet date are converted to Euros at the exchange rate of the European Central Bank on the balance sheet date. Currency differences resulting from these adjustments are
recognized in the consolidated statement of operations.

5

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Non-monetary assets and liabilities denominated in foreign currencies existing as of the balance sheet date, which are to be carried at fair value, were converted to Euros at
the rate as of the balance sheet date. The Company used the following exchange rates (spot rates):

USD Exchange Rates (in EUR per USD)

|                            |      | Average       |        | High   |        | Low    |        | Period-End
|--------------------------- | ---- | ------------- | ------ | ------ | ------ | ------ | ------ | ----------
|Fiscal Year Ended March 31, |      |               |        |        |        |        |        |           
|                            | 2004 |               | 1.1796 |        | 1.2630 |        | 1.0927 |           
|                            | 2005 |               | 1.2647 |        | 1.3621 |        | 1.1947 |           
|                            | 2006 |               | 1.2117 |        | 1.2957 |        | 1.1769 |           
|                            | 2007 |               | 1.2912 |        | 1.3318 |        | 1.2537 |           
|                            |      | October       |        | 1.4227 |        | 1.4447 |        | 1.4037    
|                            |      | November      |        | 1.4684 |        | 1.4874 |        | 1.4423    
|                            |      | December      |        | 1.4570 |        | 1.4741 |        | 1.4349    
|                            | 2008 |               | 1.4328 |        | 1.5812 |        | 1.3453 |           
|                            |      | January       |        | 1.4718 |        | 1.4895 |        | 1.4482    
|                            |      | February      |        | 1.4748 |        | 1.5167 |        | 1.4513    
|                            |      | March         |        | 1.5527 |        | 1.5812 |        | 1.5196    
|                            |      | July 25, 2008 |        |        |        |        |        |           

GBP Exchange Rates (in EUR per GBP)

|                            |      | Average       |        | High   |        | Low    |        | Period-End
|--------------------------- | ---- | ------------- | ------ | ------ | ------ | ------ | ------ | ----------
|Fiscal Year Ended March 31, |      |               |        |        |        |        |        |           
|                            | 2004 |               | 0.6926 |        | 0.7196 |        | 0.6659 |           
|                            | 2005 |               | 0.6834 |        | 0.7051 |        | 0.6626 |           
|                            | 2006 |               | 0.6823 |        | 0.6964 |        | 0.6742 |           
|                            | 2007 |               | 0.6783 |        | 0.6942 |        | 0.6633 |           
|                            |      | October       |        | 0.6961 |        | 0.7010 |        | 0.6913    
|                            |      | November      |        | 0.7090 |        | 0.7203 |        | 0.6924    
|                            |      | December      |        | 0.7206 |        | 0.7348 |        | 0.7107    
|                            | 2008 |               | 0.7116 |        | 0.7958 |        | 0.6740 |           
|                            |      | January       |        | 0.7473 |        | 0.7600 |        | 0.7413    
|                            |      | February      |        | 0.7509 |        | 0.7652 |        | 0.7416    
|                            |      | March         |        | 0.7749 |        | 0.7958 |        | 0.7605    
|                            |      | July 25, 2008 |        |        |        |        |        |           

B.    Capitalization and Indebtedness

Not applicable.

C.    Reasons for the Offer and Use of Proceeds

Not applicable.

D.    Risk Factors

The risks described below are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial
may also materially affect our business, financial condition or results of operations adversely. See also ITEM 4B Our BusinessThe Risk Management System for KDG.

6

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Risks Relating to Our Business

We operate in highly competitive industries, and competitive pressures could have a material adverse effect on our business.

We face significant competition from established and new competitors. In some instances, we compete against companies subject to less regulation and with better
access to financing, more comprehensive product offerings, greater personnel resources, greater brand name recognition and experience or longer-established relationships with regulatory authorities
and customers.

Cable Television.We may not be able to successfully compete in the cable television market. This market may also be
adversely affected by competition from other means of transmission and entertainment mediums. The market is becoming increasingly competitive, especially as new technologies emerge as viable
alternatives.





7

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Pay TV product providers.As we seek further subscribers to our new pay TV products, we may effectively be competing with
those providers of pay TV products that currently utilize our network to reach their own subscribers, in particular a major pay television provider in Germany. As a consequence, these digital product
providers may decide to use alternative distribution platforms, such as satellite, adversely affecting our ability to generate digital carriage fees, which we currently derive from digital product
providers for distributing their signals over our network.

Digital playout facility.We face competition with respect to the services provided by our digital playout facility as other
regional cable companies, Unity Media and Kabel Baden-Wuerttemberg (Kabel BW), have built their own playout facilities for packaging, encrypting and distribution of their digital television
programming. For example, Unity Media phased out the use of our services during 2006 and 2007, Kabel BW started to phase out the use of our services in the first quarter of 2008 and is expected to
discontinue using our services by the end of calendar year 2008.

Internet services.The Internet services business in Germany is highly competitive. We compete with companies that provide
low-speed and low priced Internet access services over traditional fixed telephone lines as well as Internet access distributed mostly over DSL. The major DSL service provider in Germany
is DTAG, the dominant and incumbent fixed-line telephony provider in Germany. We also compete with service providers that use other alternative technologies for Internet access, such as
two-way satellite systems, power line connections and various wireless access, including: wireless local area networks (WLAN) or wireless fidelity (WiFi) access, Universal Mobile
Telecommunication Services (UMTS), General Packet Radio Services (GPRS), an enlargement of global system for mobile communications (GSM) coverage areas, and point-to-multipoint
wireless access. In the future, additional access technologies will be launched that will further increase competition.

Residential telephony market.The market for residential telephony is highly competitive. The fixed-line
telephony market is increasingly under pressure from resellers, alternative carriers, declining

8

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mobile phone charges and alternative access technologies like Voice over Internet Protocol (VoIP) and Internet telephony offered via DSL or other broadband connections. The German market for
residential telephony services is relatively price sensitive and already on a low price level compared by international standards. We expect increasing competition, including price competition, from
traditional and non-traditional telephony providers in the future. Most alternative carriers rely on regulated wholesale services from DTAG for their own telephony services. These
wholesale services are currently subject to price regulation which commercially limits the ability of alternative carriers to lower prices on retail telephony markets. There can be no assurance that
these price regulations or other market regulations will remain in effect.

Failure to control customer churn may adversely affect our business.

Customer churn refers to those customers who stop subscribing to our services. Churn arises mainly as a result of relocation or death of subscribers, price
increases and competition. In addition, our customer churn rate may also increase as a result of competition from new technology access platforms or if we are unable to provide satisfactory service to
our customers. Any increase in customer churn may lead to both reduced revenues from direct-subscribers, housing associations and Level 4 operators and reduced revenues from broadcasters whose
carriage fees are related to the number of subscribers we reach with our network.

We may not be able to renew our existing contracts with Level 4 operators and housing associations upon their expiration on commercially
attractive terms, if at all, or attract new subscribers by entering into new contracts with Level 4 operators and housing associations.

The successful implementation of our business strategy depends, in part, upon how successful we are in renewing our existing agreements with Level 4
operators and housing associations on favourable terms upon their expiration or in attracting Level 4 operators and housing associations to enter into new contracts. A number of our largest
contracts with Level 4 operators are framework contracts and are due to expire between 2008 and 2012.

Under
those framework contracts, the terms and conditions of the signal delivery are set out. These terms and conditions in most cases do not include an obligation of the Level 4
operator to purchase our signal for a certain number of houses. In such cases, the Level 4 operator can choose to disconnect from our signal and obtain their signal from alternative sources,
such as a satellite provider, even before the end of the contract term.

Given, that some of these Level 4 operators are also our competitors in certain markets, it is possible, that we will experience continued disconnections from this customer group.

In
addition, since 2007 we have been subject to the so called Market 18 (as defined below). This regulation currently limits our pricing flexibility, which may have a negative impact on
the extension of existing contracts or new contracts with Level 4 operators.

When
existing contracts expire, Level 4 operators and housing associations may attempt to negotiate discounts. Level 4 operators and housing associations may also choose to
completely disconnect from our network and obtain their signal from alternative sources, such as a satellite provider. Some Level 4 operators and housing associations have chosen these
alternatives in the past.

Our
inability to renew our existing Level 4 and housing association contracts or enter into new contracts on commercially favorable terms, if at all, could lead to reduced sales
and lower margins and could have a material adverse effect on our business, financial condition and results of operations.

9

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Level 4 operators and large housing associations may seek to reduce their signal delivery costs through clustering, which could adversely affect
our profitability.

Our subscription fees are based on our published rate card, according to which the standard rates are linked to the number of subscribers per connection point.
Our fee schedule provides for higher discounts depending on the number of subscribers aggregated behind one connection point. In addition, Level 4 operators and large housing associations with
large subscriber clusters may have a better bargaining position, allowing them to negotiate for discounts on our published rate card or establish their own head-end and disconnect from our
network entirely.

If we fail to introduce and establish new or enhanced products and services successfully, our revenues and margins could be lower than expected.

Part of our business strategy is based on the expansion of the products and services we offer, including:



Digital cable television.KDG has secured and aims to secure TV distribution rights including certain rights for its pay TV
offering on a non-exclusive basis. We may not always be able to acquire the targeted rights or acquire them at economically attractive prices in the future. This might have a detrimental
effect on our ability to gain and retain pay TV as well as basic cable subscribers.

Internet & Phone.Internet & Phone markets are very competitive and any of the new or enhanced products or
services we introduce or have introduced may fail to achieve market acceptance or new or enhanced products or services introduced by our competitors may be more appealing to customers. As a
consequence, for example, if our new Internet offering is not successful, our basic cable subscribers may decide to discontinue using our services altogether and choose other TV distribution
platforms. This effect could be exacerbated by the fact that customer churn rates are generally higher for Internet & Phone services than for cable television services.

In addition, our Internet & Phone products and services may not generate profits for the time being and we may not be able to recover the investments, such as the costs of network
upgrades and marketing expenses, made to launch new products and services. Moreover, these new products and services may result in a decline of ARPU (Average Revenue per Unit) related to those
products and services, due to promotional offers that generate less revenue and result in lower margins, and Adjusted EBITDA, due to the costs of implementation, distribution and technology
enhancement of such products.

Internet &
Phone over broadband cable are relatively new products that might present unknown technological challenges both to our own systems and resources and to those of our
suppliers. In connection with the rollout of Internet & Phone we rely on third parties to upgrade the hardware of the end customers and to connect our telephony customers to the German
telephony networks. Demand for new products and services might exceed the capacities of these third parties creating a backlog of new customers to be connected and increased lead times which could in
turn result in increased customer churn. Further, there can be no assurance that these third parties will meet our expectations with respect to quality and lead times.

10

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Our
move towards pay television services may erode our ability to generate revenue from carriage fees, as our pay television contracts would typically require us to pay for programs
which we then resell to subscribers rather than having content providers pay us for transmission to the broadcaster's subscribers. If we fail to generate greater profits from our pay television
subscription revenues than we
would have achieved through providing carriage services to other operators, then our results of operations and financial condition, including our liquidity, will be adversely affected.

A
number of contracts for access to pay TV programs require us to pay prices for programs based on a guaranteed minimum number of subscribers, notwithstanding a lower number of actual
subscribers. Therefore, if we misjudge anticipated demand for programs, the profitability of our business may be impaired.

Consent of Level 4 operators and housing associations to market new products.We need the consent of Level 4
operators and housing associations in order to market our pay TV, Internet & Phone services to their end customers. Such marketing of pay television, Internet or phone access subscriptions is
not generally covered by our standard cable television signal delivery agreements. We have entered into agreements permitting us to market our pay TV services directly to end customers with many of
the Level 4 operators using our cable television services. With respect to the marketing of our Internet & Phone services we currently have an agreement with different Level 4
operators and a increasing number of housing associations. To the extent that we are unable to amend existing agreements or obtain new agreements with the remaining Level 4 operators and
housing associations, we may market our new products and services to our direct end customers only, which may adversely affect the penetration of our new products and services and may make the
offering of such new products and services uneconomical.

We rely on DTAG and certain of its affiliates for a significant part of our network.

While we compete with DTAG in a number of areas, we also rely on various long-term agreements with DTAG and certain of its affiliates that are
significant to our business, including for the lease of cable duct space for approximately 13% of our cable network as well as the use of fiber optic transmission systems and facility space. In
addition, we purchase the electrical power required for the operation of our network through DTAG. Our ability to offer our services to our customers depends on the performance of DTAG and its
affiliates of their respective obligations under these arrangements. In particular, we rely on DTAG to provide us with timely access to co-located facilities, especially for the purposes
of maintaining and repairing our network and avoiding or rectifying network outages. Our increasing direct competition with DTAG, caused by the introduction and growth of our Internet & Phone
products, could potentially have a negative impact on DTAG's performance of its obligations under these arrangements. Our rights under the Service Level Agreements (SLAs) cannot be assigned without
the consent of DTAG, other than in exceptional cases, as defined in the SLAs (see ITEM 10C Material Contracts). DTAG has the right to terminate such arrangements in certain circumstances and
under certain conditions. For example, if DTAG decides to discontinue using cable ducts carrying our cable without replacing the ducts it may terminate our rights to use the ducts unless we exercise
rights to purchase such ducts from DTAG. If DTAG replaces the ducts it must offer us space in the new ducts. If we fail to fulfill our payment obligations or are otherwise in breach of contract under
the SLAs, DTAG would be entitled to terminate the SLAs. The termination of any material portion or all of the SLAs by DTAG would seriously affect the value of our network or business. Continuing our
business upon such termination would, if possible at all, require a sizeable payment to purchase the relevant facility from DTAG or a sizeable investment to replicate the lost facilities or services
and could have a material adverse effect on our business, financial condition or





results of operations. In many cases we would not be able to find suitable alternative service providers at comparable cost or within a reasonable timeframe.

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We will need to lease additional fibre optic transmission capacity to execute our Internet & Phone plan.

As our Internet & Phone customer base grows, we are in the process of leasing additional fibre optic transmission capacity. In two regions (Bavaria and
Lower-Saxony), we have one sole supplier for leased lines. In other regions we may have to invest in constructing our own infrastructure to provide these services. Either of these options requires
substantial capital expenditure. Furthermore, if the number of subscribers increases faster than anticipated or if the average usage per subscriber exceeds our expectations, we may need to increase
our network capacity earlier than planned.

We depend on equipment and service suppliers that may discontinue their products or seek to charge us prices that are not competitive, either of which
may adversely affect our business and profitability.

We have important relationships with several suppliers of hardware and services that we use to operate our cable network and systems. In many cases, we have made
substantial investments in the equipment or software of a particular supplier, making it difficult for us in the short-term to change supply and maintenance relationships in the event that
our initial supplier refuses to offer us favorable prices or ceases to produce equipment or provide the support that our cable network and systems require. If equipment or service suppliers were to
discontinue their products or seek to charge us prices that are not competitive, our business and profitability could be materially and adversely affected. Furthermore, we rely upon outside
contractors, many of which are small, locally operating companies, to install our Internet & Phone equipment in subscribers' homes. Delays caused by these contractors, or quality issues
concerning these contractors, could lead to our customers' dissatisfaction and could produce additional churn or discourage potential new customers.

We may not be able to accurately predict or fulfill customer demand for our digital cable television customer premises equipment ("CPE").

As access to our digital cable television and Internet & Phone offerings requires a set-top box and a modem, respectively, we must accurately
predict the number of boxes or modems required to satisfy customer demand for these products. The long lead times between ordering and delivery make it
more important to predict and more difficult to fulfill, the customer demand for set-top boxes and modems accurately. We cannot assure that our orders will match actual demand. If we are
unable to successfully predict customer demand, we may be faced with a substantial amount of unsold set-top boxes or modems or alternatively missed sales opportunities. In response, we may
be forced to rely on additional markdowns or promotional sales to dispose of excess or slow-moving inventory, which could have a material adverse effect on our business, financial
condition, results of operations and cash flows.

We do not have guaranteed access to programs and are dependent on agreements with certain program providers, which may adversely affect our
profitability.

We do not produce our own content. For the provision of programs distributed via our cable television network we enter into agreements with program providers,
such as public and commercial broadcasters or providers of pay TV channels or pay-per-view content, all of these contracts having different durations. We generally derive
revenue under these contracts from "carriage fees" or "feed-in fees", in exchange for distributing the programs to our subscriber base. We cannot assure that we will be able to renew our
existing contracts with program providers on commercially favorable terms, if at all. In particular, we believe that, as we are dependent upon such carriers for provision of programs in order to
attract subscribers, program providers may have considerable power to renegotiate the fees that we charge for carriage of their product. Any lowering of the carriage fees that we receive from program
providers would adversely affect our results of operations. In addition, the loss of programs could negatively affect attractiveness of the programming delivered to our subscribers, which could have a
material adverse effect on our business and results of operations.

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We conclude agreements with various broadcasters for our pay TV services. The pricing of such programs differs from the pricing of analog and digital FTA programs in that we pay the
digital content providers for the digital programs they provide us at prices that may be affected by our ability to guarantee a minimum audience to such content providers or require us to guarantee a
minimum audience generally. In addition, if we do not meet certain subscriber targets with respect to these program contracts within 12 to 18 months after their respective launch, the content
providers may have the right to cancel or renegotiate these contracts. In the future, we will need to extend existing licenses and negotiate access to additional programs. Most premium content rights
are already held by competing distributors and, to the extent such competitors obtain content on an exclusive basis, the availability of programs to us could be limited. As a consequence, we may be
unable to obtain attractive content on favorable terms in the future, if at all which could have a material adverse effect on our business and results of operations. Our inability to obtain
attractively priced competitive programs/channels would reduce demand for our existing and planned pay TV services, limiting our ability to maintain or increase revenues from these services.

Failure to reach agreement with owners of copyright protected broadcast content may adversely affect our business.

Until the end of 2006 copyright expenses were governed by two primary contracts. Since January 2007 we have made a conditional payment (i) to VG Media on
the basis of a settlement agreement and (ii) to the former parties of the Kabelglobalvertrag on a voluntary basis. VG Media as well as the former parties of the Kabelglobalvertrag in 2007
published tariffs which would lead to significantly higher copyright expenses as compared to the past. Both tariffs are currently subject to arbitration proceedings which VG Media and the former
parties of the Kabelglobalvertrag have started against us. In the meantime, we continue to make the above mentioned conditional payments on a voluntary basis. The amounts of these interim payments are
less than the amounts that were paid until 2006 under the old contracts and would be payable under the aforementioned tariffs.

Our business is subject to rapid changes in technology and if we fail to respond to technological developments, our business may be adversely affected.

Technology in the cable television and telecommunications industry is changing rapidly. We will need to anticipate and react to these changes and to develop
successful new and enhanced products and services quickly enough for the changing market. This could result in the need to make substantial investments in new or enhanced technologies, products or
services, and we may not be able to adopt such technology due to insufficient funding to make the necessary capital expenditures or for other reasons, such as technological incompatibility with our
systems. In addition, new technologies may become dominant in the future, rendering our current systems obsolete. These include the provision of video signals by DSL providers and also the provision
of digital terrestrial television. Some of these technological changes may also be mandated by regulation. Our ability to adapt successfully to changes in technology in our industry and provide new or
enhanced services in a timely and cost-effective manner, or successfully anticipate the demands of our customers, will determine whether we will be able to increase or maintain our
subscriber base. If we fail to respond adequately to technological changes, we could lose subscribers and, as a result, our business would be materially and adversely affected.

Failure to upgrade or maintain our cable television network or make other network improvements could have a material adverse effect on our operations
and impair our financial condition.

Our current assumptions regarding the costs associated with upgrades and maintenance of our cable television network may prove to be inaccurate. In particular, we
intend to compete in providing Internet services on the basis of technologies that may be implemented with low costs and without

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extensive
upgrades to our existing network, which may not prove to be feasible on a network-wide basis. If capital expenditure exceeds our projections, for example because of the need to
replace aging network components, or our operating cash flow is lower than expected, we may be required to seek additional financing. Our inability to secure additional financing on satisfactory terms
(or at all) may adversely affect the maintenance of our cable television network and upgrades and other improvements to the network. This would negatively affect the service we provide to our
subscribers, which could result in negative publicity and the loss of subscribers, and adversely affect our ability to attract new subscribers.

In
addition, failure of Level 4 operators or housing associations to maintain their own networks could have adverse reputational consequences for us, as customers may assume that
we are responsible for maintenance of these networks and may terminate their subscription with us. Any new or enhanced products or services we introduce, including Internet & Phone, may require
an upgrade of these local and in-house networks, in which case we may be required to cover a portion, or all, of the costs of such upgrade.

The occurrence of events beyond our control could result in damage to our cable television network and digital playout facility.

If any part of our cable television network is subject to a flood, fire or other natural disaster, terrorism, a power loss or other catastrophe, our operations
and customer relations could be materially and adversely affected. In general, our network consists of a large number of independent sub-networks. These sub-networks are
usually built in a tree-structure. Although major casualties affecting individual sub-networks should not generally affect the entire network, this cannot be ruled out. Some of
our network is built in resilient rings to promote the continuity of network availability in the event of damage to our underground fibers, however, if any ring is cut twice in different locations,
transmission signals will not be able to pass through, which could cause significant damage to our business. Disaster recovery, security and service continuity protection measures that we have or may
in the future undertake, and our monitoring of network performance, may be insufficient to prevent losses. A substantial part of our cable network is not insured. Any catastrophe or other damage that
affects our network could result in substantial uninsured losses.

In
case of a breakdown of a satellite transponder or a complete loss of the entire satellite system, our digital playout facility (which transmits signals via satellite to the head ends
of our cable network) will be affected, interrupting the distribution of certain channels in the entire network until the transponder or system is fully operational again. Our transponder contract
does not provide for back-up transponder capacity in the event of a breakdown of a satellite transponder. The satellite link between our playout facility in Frankfurt am
Main/Rödelheim and the head ends is a particularly critical point as any failure of a transponder on this link or loss of control of the relevant satellite may affect all digital
channels.

In
the event of a power outage in our playout facility we may be unable to serve several or even all of our channels in the entire network even though we have back-up systems
in place for most of our technical equipment. In the event of a power outage in our network or other shortage, we usually do not have a back-up or alternative supply source. A power outage
in one segment of the network could cause sub-networks to shut down.

In
addition, our business is dependent on certain sophisticated critical systems, including our playout facility and billing and customer service systems. The hardware supporting those
systems is housed in a relatively small number of locations and if damage were to occur to any of these locations, or if those systems were to develop other problems, it could have a material adverse
effect on our business.

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The security of our encryption system is currently being compromised by illegal piracy.

We use a conditional access system to encrypt TV, radio and data that either form part of our free and pay TV offerings or that are marketed by third parties,
such as the above mentioned pay TV operator. A compromised security of the conditional access system might have a negative impact on the revenue generation of such services. As the security of our
current conditional access system is believed to be compromised by illegal piracy, we have decided to migrate to a new conditional access system, to be provided by our current supplier
Nagravision S.A. (Nagravision). Even though we require Nagravision to provide state-of-the-art security for the new conditional access system, the security
of the system could be compromised again by illegal piracy at some point in time.

The installation of a new information technology system and changes to our financial accounting systems and personnel may result in higher costs than
expected.

Higher expenses than initially anticipated can occur when assumptions turn out to be unrealistic or wrong regarding high time pressure, problems with data
migration, factual change requests during realization, changing ancillary conditions during the development, potential wrong adaptation of business processes or even lack of training related to the
new processes.

Our subscriber data may not be representative of our actual results and data.

As subscriber data (contracts, cancellation etc.) is partly entered manually in the systems, eg. by call center agents, process errors may occur. There might also
be erroneous subscriber data in the historical data set (previous system migration errors, data entry errors) of the source system. Subscriber figures are reported automatically by data warehouse
systems. As no software can be proven to be fault free, system anomalies/errors might affect reported data. Likewise, the extraction of subscriber data out of the source system might extract erroneous
data.

We depend on key personnel and may not be able to retain those employees or recruit additional qualified personnel.

As of March 31, 2008, approximately 15% of our workforce were civil servants and still have the right to cease working for us and return to DTAG or its
affiliates. An additional approximately 18% of our workforce has the right to return to DTAG or its affiliates until the end of 2008. However, this right can be exercised only under certain
circumstances such as corporate restructurings, reorganizations or insolvency.

Strikes or other industrial actions could disrupt our operations or make it more costly to operate our facilities.

We are exposed to the risk of strikes and other industrial actions. Approximately 22% of our employees are members of a labor union. Historically, we have enjoyed
good labor relationships and we are committed to maintaining these relationships. We take a constructive approach to union relationships, and have been able to secure the cooperation of the unions and
our workforce with regard to significant changes and the process of continuous improvements. We have negotiated various collective bargaining agreements directly with the labor union. These collective
bargaining agreements cover the general labor conditions of our employees (other than executives), such as working hours, holidays, termination, provisions and general payment schemes for wages.

In
April 2008, we entered into a new 24-month collective bargaining agreement with the labor union representing our unionized employees. As a result, wages for employees
increased by 3.7% from June 1, 2008 and will increase another 3.3% from April 1, 2009.

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U.S. military redeployment may adversely impact our TKS business.

Our TKS business operates a broadband and telephony telecommunications business that mainly serves NATO military bases in Germany. TKS is permitted to build and
maintain its networks on U.S. military bases located on premises owned by the Federal Republic of Germany pursuant to agreements with an agency representing the Federal Republic of Germany. In
the event that any of the U.S. military bases are vacated, the Federal Republic of Germany may terminate the applicable agreement with TKS. The U.S. military has announced that it is planning to
restructure its operations in Germany, which could
lead to a significant reduction in the number of American troops stationed in Germany. Any such reduction in U.S. military personnel or the closure of U.S. military bases in Germany would likely have
an adverse effect on TKS' results of operations.

Termination of Services for Deutsche Telekom AG (DTAG) may adversely affect our TKS business.

TKS is in discussions to extend the contract with DTAG but there is no assurance an agreement can be reached. If the contract is not extended it would be
detrimental to the TKS business.

We are acquiring assets which could potentially deliver less revenue and earnings than anticipated and we may not be able to integrate these assets in a
timely manner which may delay the roll out of Internet & Phone and not allow us to recognize anticipated synergies.

The anticipated synergies out of recent acquistions have not yet been validated. As of today the due dilligence as well as the appraisal of financials is still
ongoing. Differing network structures and underlying channel allocations could turn out to become major obstacles in the timing of the network upgrade and the roll-out of voice and
internet services.

Risks Relating to Regulatory and Legislative Matters

We are subject to significant government regulation which may increase our costs and otherwise adversely affect our business and further changes could
also adversely affect our business.

Our existing and planned activities as a cable network operator in Germany (including our Internet & Phone services) are subject to significant regulation
and supervision by various regulatory bodies, including state, federal and European Union (EU) authorities. Such governmental regulation and supervision as well as future changes in laws, regulations
or government policy (or in the interpretation or enforcement of existing laws or regulations) that affect us, our competitors or our industry, generally strongly influence our viability and how we
operate our business. Complying with existing regulations is burdensome and future changes may increase our operational and administrative expenses and limit our revenues. In particular, we are
subject to:



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Our
business would be materially and adversely affected if there were any adverse changes in relevant laws or regulations (or in their interpretation or enforcement) regarding, for
example, the imposition of access or resale obligations, price regulation, interconnection agreements, frequency allocation requirements or the imposition of universal service obligations, or any
change in policy allowing more favorable conditions for other operators. Our ability to introduce new products and services may also be affected if we cannot predict how existing or future laws,
regulations or policies would apply to such product or service.

In
the future, our Internet access and telephony business may be subject to new laws and regulations, the impacts of which are difficult to predict.

Furthermore,
the copyright holders, particularly certain collecting societies try to impose an obligation to block URLs if copyright infringements are committed on the underlying web
pages. Recently, similar political discussions have developed with respect to mandatory blocking by access providers of illegal content harmful to minors. Any new laws or regulations affecting the
Internet, or amendments to or new interpretations of existing laws and regulations to cover Internet related activities, could increase the costs of regulatory compliance to us or force us to change
our business practices or otherwise have a material adverse effect on our business.

Under
the current regulatory regime based on federal and European legislation, the Federal Network Agency (FNA) is entitled to impose certain obligations on operators of
telecommunications networks which have significant market power or which, despite the absence of significant market power, control end user access. Amongst other things, it may impose the obligation
on such operators to grant access to, or interconnection with, their telecommunications networks and to offer third parties the re-sale of their telecommunications services on a wholesale
basis. Moreover, the prices that operators with significant market power or operators controlling end user access charge to their competitors and customers may be subject to regulation.

In 2003, the European Commission had issued a recommendation identifying a number of markets potentially susceptible to ex-ante regulation. One of these markets concerned
broadcasting transmission services to deliver broadcast content to end-users (Market 18). In 2006 the FNA performed an analysis of this Market 18 as periodical part coming to the
conclusions



described in the next paragraph. At the end of 2007, the European Commission has revised the recommendation and has, inter alia, removed Market 18 from the list of markets warranting special
observation. This should have consequences for the review of the market analysis to be performed periodically by the FNA which is due in fall 2008. Depending on the outcome of such analysis, this
could lead to less strict regulation. However, it is too early to predict the consequences of such removal of Market 18 as of now.

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On the basis of the above analysis, the FNA has declared within a regulatory ordinance as of April 2007 that we have significant market power (SMP) in
the regional, network-based cable television markets in which we operate. In its decision the FNA has imposed certain remedies for the feed-in market for broadcasters
(Einspeisemarkt) and the signal delivery market to Level 4 operators (Signallieferungsmarkt). We
have filed complaints against this regulatory ordinance with the competent court. These cases are pending.

These
regulatory obligations (remedies) include for our feed-in market:



For
our signal delivery market to Level 4 operators the remedies include:



Furthermore,
in the future, it cannot be ruled out that we may be required to offer our services to third parties for resale on a wholesale basis. Granting such access or interconnection
would limit the bandwidth available for us to provide other products and services to customers served by our networks.

The
actual and possible future regulation could:



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Due to regulation, we do not have complete control over the prices that we charge to broadcasters or wholesale offers to Level 4 operators, and
this may adversely affect our future cash flows and profitability. This may also affect our pricing flexibility for housing associations and subscribers.

In
the case of an ex post review of our feed-in or signal delivery fees, the FNA may declare our fees invalid if it finds that they are abusive and may either direct us to
adjust our fees or provide for fees that are not abusive. Therefore, we may not be able to enforce future changes to our carriage and signal delivery fees. This may have an adverse impact on our
revenues, profitability of new products and services and ability to respond to changes in the cable television market.

We
presently utilize a range of rebate or volume-related pricing mechanisms. Due to actual regulation with regard to the feed-in and signal delivery market we may be
restricted from imposing or enforcing certain pricing mechanism. There is a potential risk that broadcasters may try to seek help from or initiate review proceedings by the FNA with respect to the
carriage fees charged by us. Volume-based discounts reflecting cost savings, one means of avoiding churn to competing infrastructures, are not affected. We cannot entirely rule out the possibility,
however, that, if other clauses were subjected to challenge within a regulatory proceeding, these clauses would be found to be unenforceable. In such cases, we could, under certain circumstances, be
found liable for fines or damages if these clauses were successfully challenged. This could adversely affect our competitiveness, financial condition and results of operations.

According
to the State Broadcasting Treaty, our analog and digital carriage fees are, in addition to the price regulation by FNA mentioned above, subject to certain notification
obligations to the state media authorities. The state media authorities are entitled to review whether the prices we apply are
restrictive or discriminatory with respect to certain content providers. As a result, we may be further constrained in respect of the pricing models we agree with content providers for both analog and
digital products and our results of operations may be adversely affected.

In
addition, we are prohibited from charging carriage fees to certain legally privileged radio and television channels operated by non-profit organizations.

We are required to carry certain programs on our network, which may adversely affect our competitive position and results of operations.

We are required to carry certain broadcasting and other channels on our cable system that we might not necessarily carry voluntarily. In the digital range, these
must-carry obligations currently apply to the bandwidth equivalent of four analog television channels. It is unclear whether as a consequence of changes in the law currently under
discussion, the must-carry obligations will encompass even greater portions of bandwidth in the future. In the analog range, the scope of the "must-carry" obligation varies
from state to state. In some states also television channels broadcasted via DTT fall, as asserted by the respective media authorities, within the scope of the must carry obligation, which therefore
takes up a significant portion of our analog bandwidth in such states.

We may become subject to more onerous must-carry rules upon a change in the current regulatory regimes. In the case of one federal state (Saarland), this risk has
materialized as the state legislator has remodeled the previously more liberal regime in favor of a stricter one. Re-allocation of analog capacity in various German federal states requires
at least to reach informal understandings with the competent state media authority, which decreases planning reliability and could have a material adverse effect on our business, considering that both
the digitization of a channel earmarked for future transmission of broadcasting or other media content and each network upgrade to establish Internet require a re-allocation of analog
capacity.

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Analog television and radio distribution may be phased out, which may adversely affect our competitive position and could result in increased costs or a
loss of revenue.

The German federal and state governments aim at a general switch-over from analog to digital distribution for all terrestrial television distribution
platforms. In accordance with the
Telecommunications Act and the regulations promulgated thereunder, the FNA is generally required to revoke all allocations of terrestrial frequencies for analog television transmission by 2010, and
for analog terrestrial frequency-modulated radio transmission by 2015. Even though the relevant provisions of the Telecommunications Act and related regulations are not directly applicable to us, as
the operation of cable television networks, in principle, does not require frequency allocations, we may be required to invest in the exchange of some of our head end equipment as some broadcasters
could cease to deliver their signals in analog format. In addition, future legislation or market needs may require us to digitize our entire cable network and may also require a hard
switch-over. Recent proposed changes in the law with potential adverse effects on our business aim at the mandatory digitization or even complete switch-off of a specified
number of analog channels in the lower frequency spectrum for security reasons (mitigating interference with air traffic etc.). The proposal provides for a digitization or switch-off in
steps until the year 2012. It is unclear as of now, to what extent and at which point in time the proposed steps will have to be realized.

The advent of digitization may promote new technologies that compete with us. For instance, although DTT has failed to become a strong competitor in the past, the German federal state
media authorities are currently promoting a switch-over from analog to digital terrestrial television. In all regions in which we operate our telecommunications cable networks (Berlin,
Brandenburg, Bremen, Lower Saxony, Hamburg, Schleswig-Holstein, Rhineland-Palatinate, Saarland, Bavaria, Mecklenburg-Western Pomerania, Saxony, Saxony-Anhalt and Thuringia) digital terrestrial
television is meanwhile available in both metropolitan and rural areas (in some parts of the latter confined to the transmission of public broadcasting channels). Plans announced by the public
broadcasters aim for a provision of 90% of the population with their channels via DTT by the end of 2008. The digital terrestrial television therefore covers almost all of the most densely populated
metropolitan areas in the regions in which we operate our cable networks. Hence, digital terrestrial television has to some extent and may continue to grow to a new competitive delivery system for
television programs. This in turn could adversely affect our results of operations and financial condition.

In
addition, we are dependent upon program providers for the provision of programming and, as the market moves towards digital transmission and a multiplication of digital platforms by
facility-based and/or non-facility based operators, we may find that we are unable to generate carriage fees for carrying digital programming at similar levels to those we obtain for
carrying analog programming, or at all. This could adversely affect our results of operations and financial condition.

Risks Relating to Our Indebtedness and Our Structure

Our high leverage and debt service obligations could materially and adversely affect our business, financial condition or results of operations.

We are highly leveraged and have significant debt service obligations. As of March 31, 2008, we had €1,965.6 million of indebtedness
(before netting with transaction costs and exchange rate effects), of which €1,150.0 million was a term loan facility ("Term Loan Facility" or "Tranche A"),
€66.0 million was indebtedness under a revolving credit facility ("Revolving Credit Facility" or "Tranche B", which was increased by €125 million
from €200.0 million to €325 million on July 19, 2007 and €755.6 million was indebtedness under the Senior Notes ("Senior
Notes"). Additionally, on October 30, 2007, we secured a senior add-on facility ("Senior Add-on Facility" or "Tranche C" and together with the Term Loan Facility
and the Revolving Credit Facility, the "Senior Credit Facility") in the amount of €650 million to fund the acquisition of CATV assets from the Orion Group. On April 30,
2008, we

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incurred €535.0 million of debt under this Tranche C to fund the acquisition of the CATV assets. As of May 9, 2008 the granted loan amount of the Senior
Add-on Facility was reduced by €115 million to €535 million from the original €650 million commitment. We anticipate
that our high leverage will continue for the foreseeable future.

Our
high leverage could have important consequences, including, but not limited to:



Any
of these or other consequences or events could have a material adverse effect on our ability to satisfy our debt obligations.

We
may incur substantial additional indebtedness in the future. The terms of the indentures governing the Senior Notes and the agreements governing our Senior Credit Facilities and the
agreements governing PIK loans entered into by our parent companies may restrict us from incurring additional indebtedness, but do not prohibit us from doing so. In addition, the terms of such
indentures and such credit agreement do not restrict our parent companies from incurring future indebtedness for any purpose, including the funding of further distributions to our ultimate
shareholders. The incurrence of additional indebtedness would increase the leverage-related risks described in this report.

We require a significant amount of cash to service our debt, and our ability to generate sufficient cash depends on many general economic, financial and
market factors beyond our control.

Our ability to make payments on and to refinance our debt, and to fund future operations and capital expenditures, will depend on our future operating performance
and ability to generate sufficient cash. This depends, to some extent, on many general economic, financial and market factors, many of which are beyond our control, as well as on other factors
discussed in these "Risk Factors". Considering those factors, we cannot assure that our business will generate sufficient cash flows from operations or that future debt and equity financing will be
available to us in an amount sufficient to enable us to pay our debts when due, or to fund our other liquidity needs.

Our
operating performance could be affected by a significant or prolonged economic downturn. Such downturn could adversely affect our business by reducing the demand for our services or
depressing pricing of those services. This could have a material adverse effect on our operating performance. Accordingly, our ability to service our debt may be affected and we may be unable to make
principal and interest payments on our outstanding debt service obligations when due. Moreover, recent times have seen a prolonged dislocation in the fixed income market, leading to significant
illiquidity and volatility in the leveraged loan, structured credit, mezzanine debt and high-yield bond markets. To the extent that such marketplace events continue, this may also have an
adverse impact on the availability of credit to our businesses. As a result, we may not be able to refinance our existing Senior Credit Facilities or to incur additional indebtedness to fund future
operations and capital expenditures.

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If our future cash flows from operations and other capital resources (including borrowings under the Senior Credit Facilities) are insufficient to pay our obligations as they mature or
to fund our liquidity needs, we may, inter alia, be forced to:



We
cannot assure that we would be able to accomplish any of these measures on a timely basis or on satisfactory terms, if at all. In addition, the terms of our debt, including the Senior
Notes and the Senior Credit Facilities, limit, and any future debt may limit, our ability to pursue any of these alternatives.

We depend on payments from our subsidiaries to make payments on the Senior Notes, and our subsidiaries will be subject to various restrictions on making
such payments.

Kabel Deutschland GmbH's main activity is the holding of ownership interests in Kabel Deutschland Vertrieb und Service GmbH & Co. KG
(KDVS) and Kabel Deutschland Vertrieb und Service Beteiligungs Verwaltungs GmbH (KDV), the general partner of KDVS. In addition, it provides certain





corporate services, in particular, accounting services, control management and legal services. KDG currently holds no material assets and has no sources of revenue other than the ownership interests
in its subsidiaries and the right to any dividends thereon. In addition, KDVS will be subject to corporate law restrictions on its ability to pay dividends. In particular, under sections 172
and 172a of the German Commercial Code (Handelsgesetzbuch), in conjunction with sections 30 and 31 of the German Act on Limited Liability
Companies (GmbH Gesetz), KDVS may neither make an upstream loan nor pay a dividend except to the extent that it has positive net equity calculated on
the basis of KDVS' commercial balance sheet on the date of the proposed distribution. Otherwise, the partnership's managing directors will be personally liable for any negative net equity, consisting
of any amounts distributed (either by way of loan or dividend) in excess of the partnership's net equity. This net equity may be increased by the contribution of further equity or by the accumulation
of operating profits by KDVS, and decreased by dividends or distributions from KDVS and by continued operating losses at KDVS. There can be no assurance that the dividend and distribution capacity of
KDVS will be adequate to service scheduled payments of interest and principal on the Senior Notes, particularly as we have a history of losses. In addition, the terms of the Senior Notes permit
further debt to be incurred by Kabel Deutschland GmbH, KDVS will also be required to service this debt by means of dividends or other distributions which are subject to the same restrictions.

If payments are not made by KDVS to Kabel Deutschland GmbH, for whatever reason, KDG may not have any other sources of funds available to it that would permit it to make payments
on the Senior Notes. In such event, holders of the Senior Notes would have to rely upon claims for payment under the guarantee, which is subject to the risks and limitations described below under
"Risks Relating to the Senior Notes, the Guarantee and the Security."

KDG only has a shareholder's claim in the assets of its subsidiaries. This shareholder's claim is junior to the claims that creditors or preferred stockholders of our subsidiaries have
against our subsidiaries. Holders of the Senior Notes will only be creditors of the issuer and KDVS, as guarantor of the Senior Notes. In the case of KDVS, any existing and future senior obligations
of KDVS, including all obligations under the Senior Credit Facilities, will be senior in right of payment to the Guarantee. In the case of subsidiaries that are not guarantors of the Senior Notes, all
the existing and future liabilities of these subsidiaries, including any claims of trade creditors and preferred stockholders, will

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be effectively senior to the Senior Notes. These subsidiaries include entities that are borrowers or guarantors under the Senior Credit Facilities.

We undertook an Asset Step-Up in the year 2004 and may undertake further Asset Step-Ups in the future that may be prejudicial to
our existing business and subject KDG to additional liability.

In accordance with the terms of the Senior Notes, we have undertaken an asset step-up (Asset Step-Up), whereby substantially all of the
assets of the company formerly known as Kabel Deutschland Vertrieb und Service GmbH & Co. KG, the initial guarantor of the Senior Notes
("OldKDS"), have been transferred to a newly incorporated asset corporation (AssetCo). Subsequently, OldKDS has been merged into KDG, and AssetCo was renamed Kabel Deutschland Vertrieb und
Service GmbH & Co. KG ("KDVS"). The purpose of the Asset Step-Up was to substitute a subsidiary with higher balance sheet equity (KDVS) for OldKDS in order to
facilitate, among other things, up-stream loans or dividend distributions from KDVS to KDG under German corporate law. See "We depend on payments from our subsidiaries to make payments on
the Senior Notes, and our subsidiaries will be subject to various restrictions on making such payments".

We believe that we have been able to transfer the material assets of OldKDS to KDVS, including OldKDS' rights under various SLAs with DTAG, without the need for the consent of our
counterparties. It can not be ruled out that consent from DTAG and other companies may have been required in connection with the Asset Step-Up and that we would therefore be in breach of
certain agreements by having purportedly transferred them to KDVS. The transfer of contracts to KDVS has not, under German law, relieved OldKDS of liability on those contracts and KDG has now become
liable under these contracts, including the Senior Credit Facilities.

The interests of our principal shareholders may be inconsistent with the interests of the holders of Senior Notes and of each other.

Private equity investment funds affiliated with or advised or managed by Providence indirectly own the vast majority of our equity. The interests of Providence
and its affiliates could conflict with other interests, particularly if we encounter financial difficulties or are unable to pay our debts when due. Providence and its affiliates could also have an
interest in pursuing acquisitions, divestitures, financings or other transactions that, in their judgment, could enhance their equity investments, although such transactions might involve risks to the
holder of the Senior Notes or other debt instruments. In addition, Providence and its affiliates may own businesses that directly compete with ours or may own businesses with interests that conflict
with ours.

We may pursue acquisitions that, if consummated, could adversely affect our business if we cannot effectively integrate these new operations.

We regularly engage in discussions regarding potential acquisitions. If we experience any difficulties in integrating acquired operations into our company, we may
incur higher costs than expected and not realize all the benefits of these acquisitions. In addition, our management may be distracted by such acquisitions and the integration of the acquired
businesses. Thus, if we consummate any further acquisitions, there could be a material adverse effect on our business, financial condition or results of operations.

We are subject to significant restrictive debt covenants which limit our operating flexibility.

The Senior Credit Facilities and the indenture governing the Senior Notes contain covenants significantly restricting our ability to, among other things:



23

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These
covenants could limit our ability to finance our future operations and capital needs and our ability to pursue acquisitions and other business activities that may be in our
interest.

The
Senior Credit Facilities also require us to maintain specified financial ratios and satisfy specified financial tests. Our ability to meet these financial ratios and tests may be
affected by events beyond our control and, as a result, we cannot ensure that we will be able to meet these ratios and tests. In the event of a default under the Senior Credit Facilities or certain
other defaults under other agreements, the lenders could terminate their commitments and declare all amounts owed to them to be due and payable. Borrowings under other debt instruments that contain
cross-default or cross-acceleration provisions, including the Senior Notes, may, as a result, also be accelerated and become due and payable. We may be unable to pay these debts in such circumstances.

The borrowings under our Senior Credit Facilities bear interest at floating rates that could rise significantly, increasing our costs and reducing our
cash flow.

The borrowings under our Senior Credit Facilities bear interest rates equal to EURIBOR, as adjusted periodically, plus a spread. This interest rate has been
raised and could continue to rise in the future, increasing our interest expense associated with these obligations, reducing cash flow available for capital expenditures and hindering our ability to
make payments.

We are exposed to foreign exchange risk that may adversely affect our financial condition and results of operations.

Because substantially all our revenues are denominated in Euro, we may become further exposed to foreign exchange risk by incurring debt in the future that is not
denominated in Euro. This risk could lead to increased cash requirements for debt service, higher leverage levels, greater levels of risk in relation to repaying or refinancing such debt when due, and
significant costs (including tax costs) incurred in order to hedge these risks. We are exposed under the USD bonds but are fully hedged.

Risks Associated with Financial Instruments

The Company is exposed to market risks from changes in interest rates and currency exchange 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 or required by other agreements, through the use of
derivative financial instruments. The
main strategy is to avoid or to mitigate risks, e.g. currency risks (by entering into currency swaps) or the risk of varying interest payments (by entering into payer swaps and buying caps).

Derivative
financial instruments are used exclusively for the purpose of hedging foreign currency and interest rate risks arising from operating, financing and investing activities. In
accordance with IAS 39, all derivative financial instruments are accounted for at fair value. Changes in the fair value of the derivative financial instruments for which hedge accounting is
used are either recorded in profit

24

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and
loss or in equity under the fair value reserve, depending on whether it is a fair value hedge or a cash flow hedge.

In
the interest rate swaps, the variable interest rates (EURIBOR) on the Company's bank loans are effectively exchanged for a fixed interest rate of 3.705% per annum. The Company
initially entered into interest rate swaps with a notional amount of €778.1 million which will be amortized through 2009. As per March 31, 2008, the notional amount was
€455.5 million.

These
swaps entitle the Company to receive a payment from the counterparty if the market variable interest rate exceeds the fixed interest rate, and obligate the Company to make a
payment to the counterparty if the fixed interest rate exceeds the market variable interest rate. These types of agreements are entered into to effectively convert the interest rates on the Company's
long-term liabilities to banks from variable to fixed.

In
2003 KDG also purchased interest rate caps with a cap level of 4.2% per annum with a notional amount of €259.4 which will be amortized through 2009. These caps entitle
the Company to receive a payment from the counterparty equal to the excess, if any, of the hypothetical interest expense on a specified notional amount at a current market interest rate over an amount
specified in the agreement.

With
respect to the Company's 2014 Senior Notes, the Company also entered into a hedge agreement swapping 100% of the US-Dollar denominated principal
(USD 610 million) and interest payments into Euro denominated principal and interest payments at a fixed rate over five starting in July 2004 with various banks. The agreed exchange rate
is USD 1.2066 for each EURO. The weighted average interest rate across all Euro denominated debt until July 2009 considering derivatives currently in place is 10.2046%.

Risks Relating to the Senior Notes, the Guarantee and the Security

German insolvency laws may preclude the recovery of payments due under the Senior Notes, the Guarantee or the Security.

Any insolvency proceedings with regard to the issuer, KDVS and KDV would most likely be based on and governed by the insolvency laws of Germany, the jurisdiction
under which the issuer and KDVS are organized and in which all of their assets are located. The provisions of such insolvency laws differ substantially from U.S. bankruptcy laws and may in many
instances be less favorable to holders of the Senior Notes than comparable provisions of U.S. law.

In
particular, the insolvency administrator ("Insolvenzverwalter") may challenge transactions which are deemed detrimental to insolvency
creditors which were effected prior to the commencement of insolvency proceedings. Such transactions can include the payment of any amounts to the holders of the Senior Notes as well as providing
credit support for their benefit. The administrator's right to challenge transactions can, depending on the circumstances, extend to transactions during the ten-year period prior to the
commencement of insolvency proceedings. In the event such a transaction were successfully avoided, the holders of the Senior Notes would be under an obligation to repay the amounts received or to
waive the guarantee of the Senior Notes by KDVS (the "Guarantee") or the security in form of the Senior Notes (the "Security"). In addition, a creditor who has obtained an enforcement order has the
right to avoid certain transactions, such as the payment of debt and the granting of security pursuant to the German Code on Avoidance
("Anfechtungsgesetz").

In
particular, a transaction (which term includes the provision of security or the payment of debt) may be avoided in the following cases:



25

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Generally,
the issuer, KDVS or KDV would be considered insolvent if it could not pay its debts as they became due or if its liabilities exceeded its assets. If the Senior Notes, the
Guarantee or the Security were avoided or held unenforceable for this or any other reason, you would cease to have any claim in respect of the Senior Notes, the Guarantee or the Security. Any amounts
obtained from a transaction that has been avoided would have to be repaid.

Creditors may not be able to enforce, or recover any amounts under the Guarantee or the Security due to subordination provisions, restrictions on
enforcement and releases.

The Guarantee is a senior subordinated guarantee, which means that it ranks behind, and will be expressly subordinated to, all of the existing and future senior
obligations of KDVS, including any obligations owed by KDVS under our Senior Credit Facilities and any new senior facilities. In addition, pursuant to the Intercreditor Agreement, the Guarantee will
not become due until the expiration of a period of 179 days, subject to certain exceptions. In the event of an enforcement of the security in favor of the lenders under our Senior Credit
Facilities or the new senior facilities, and in certain other circumstances, the Guarantee will be released without any consent of the holders of the Senior Notes or the Trustee.

26

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The
Security is second ranking after the security provided in favor of the lenders under the Senior Credit Facilities. In addition, in certain circumstances the collateral subject to the
Security, consisting of the partnership interests in KDVS and the shares in KDV may be pledged to other creditors on a basis that is superior to the claim of the Senior Notes or pursuant to which
other debt is entitled to share ratably in the collateral, such as in case of the issuance of additional notes. If you receive any proceeds of an enforcement of security prior to the satisfaction of
the claims of those that are superior to or ratable with those of the Senior Notes, you (or the Trustee on your behalf) will be required to turn over such proceeds until superior claims are satisfied
and until ratable claims are equally satisfied. Hence, you will recover less from the proceeds of an enforcement of the security than you otherwise would have.

In
addition, pursuant to the Intercreditor Agreement, the Security will also be subject to a standstill on enforcement of 179 days, subject to certain exceptions. In the event of
an enforcement of the security in favor of the lenders under our Senior Credit Facilities, subject to compliance with the Intercreditor Agreements, and in certain other circumstances, the Security may
be released without the need for any consent from the holders of the Senior Notes or the Trustee.

As
a result of these and other provisions governing the Guarantee and the Security and in the Intercreditor Agreement, you may not be able to recover any amounts under the Guarantee or
the Security in the event of a default on the Senior Notes.

It is possible that the Security may not be enforceable.

Under German law, a security interest may not be enforceable for the benefit of beneficiaries who are not a party to the relevant pledge agreement creating such
security interest. A pledge is a so-called "accessory" security interest ("akzessorische Sicherheit") which means that the existence of the
pledge is dependent on the existence of the underlying secured claim. At the same time, pledges require that the pledgee and the creditors be the same person. Pledges cannot be held on behalf of third
parties who do not hold the secured claim. The holders of interests in Senior Notes from time to time will not be party to such pledge agreements. In order to permit holders of Senior Notes from time
to time to have a secured claim, the Intercreditor Agreement to which the Note Trustee will become a party provides for the Security Trustee to be a joint and several creditor of each holder of Senior
Notes from the date of the issue of the Senior Notes until full repayment. The effect of this provision is to give the Security Trustee a pledge equal in amount to the aggregate principal amount of
the Senior Notes. The Security Trustee will undertake not to exercise that pledge without the consent of the Senior Notes Trustee. However, the Security Trustee's right to take any action to protect
or to preserve any rights under the Guarantee or the Security or to enforce any security interest created thereby as contemplated by the Intercreditor Agreement or the Security Documents (or to take
any act reasonably incidental to any of the foregoing) is not limited. This procedure has not yet been tested under German law, and we cannot assure you that it will eliminate or mitigate the risk of
the unenforceability of the pledge under German law.

Moreover,
under German law, in the event that KDG, KDVS or KDV entered into insolvency proceedings, the Security could also be subject to potential challenges under the "claw back"
provisions of German insolvency law (in addition to the avoidance rights described above). If any challenge to the validity or enforceability of the Security is successful, you may not be able to
recover any amounts under the Security.

You may not be able to enforce, or recover any amounts under the Guarantee due to restrictions on enforcement contained in German corporate law.

The enforcement of the Guarantee by any holder of the Senior Notes or the Trustee will be limited by virtue of specific limitation language within the Guarantee
reflecting the requirements under

27

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the
capital maintenance rules imposed by Sections 30 and 31 et seq. of the German Limited Liability Company Act. These capital maintenance rules prohibit the direct or indirect repayment of a
German limited liability company's registered share capital to its shareholders (including payments pursuant to guarantees or security in favor of the debt of such shareholders). Payments under the
Guarantee will be limited if, and to the extent, such payments would cause the net assets of KDVS' general partner's ("Komplementär"),
who is liable for the debt of KDVS, to fall below the amount of its registered share capital ("Stammkapital"). If such an event occurs, the Trustee is
not entitled to enforce the Guarantee save for the amount which may be enforced without diminishing the registered share capital of the general partner of KDVS. As a result and to the extent of any
such limitations, claims under the Guarantee will be effectively junior to the claims of direct creditors of KDVS, such as trade creditors and employees.

In
addition, German court rulings have recently held that the shareholder of a German limited liability company must not deprive a limited liability company of the liquidity necessary
for it to meet its own payment obligations. It is likely that these court rulings will also apply to payments of KDVS under the Guarantee to the extent such payments would deprive KDVS of the
liquidity to meet its own payment obligations. The limitations dictated by these court rulings on the enforcement of the Guarantee may further reduce the amount of any recovery of the Trustee for your
benefit under the Guarantee.

The refinancing of our Senior Credit Facilities could result in a release of the Security. Although the Security may be reinstated on substantially
similar terms, the Security could become void if, within three months of reinstatement, KDG or KDVS became insolvent.

The Intercreditor Agreement provides that, upon a release of the first-priority security in connection with a refinancing of the Senior Credit Facilities, whether
by operation of law or otherwise, the Security will be released. Although under our new senior facilities the Security will, immediately after new first-priority security has been granted to secure
our new senior facilities, be replaced by a new second-priority security on substantially the same terms as the Security, there will be a period of three months following the date in which such
replacement occurs during which, under German law, the transaction creating the new security may be avoided by an insolvency administrator if KDG or KDVS becomes insolvent. In certain circumstances
such period may extend to ten years prior to the commencement of insolvency proceedings (see "German insolvency laws may preclude the recovery of payments due under the Senior Notes, the Guarantee or
the Security").

We may not be able to finance a change of control offer required by the indenture.

The indenture governing the Senior Notes contains provisions relating to certain events constituting a "Change of Control". Upon the occurrence of a change of
control, KDG will be required to offer to repurchase all outstanding Senior Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest and additional amounts, if any,
to the date of repurchase. If a change of control were to occur, KDG may not have sufficient funds available, or may not be able to obtain the funds needed, to pay the purchase price for all of the
Senior Notes tendered by holders deciding to accept the repurchase offer. The restrictions in the instruments governing KDG's and its subsidiaries' existing and future indebtedness may also prohibit
the KDG from being provided with the funds necessary to purchase any Senior Notes prior to their stated maturity, including upon a change of control. In any case, third party financing would be
required in order to provide the funds necessary for the issuer to make the change of control offer. We may not be able to obtain such additional financing.

In
addition, the definition of "Change of Control" refers to a sale, lease or other disposition of "all or substantially all" of our assets to a person or group of persons. There is
little New York case law interpreting the phrase "all or substantially all" in the context of an indenture. Because there is no precise established definition of this phrase, your ability to require
us to repurchase such Senior Notes

28

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as
a result of a sale, lease or other disposition of all or substantially all of our assets to a person or group of persons may be uncertain.

You may have difficulty enforcing your rights against us and our directors and officers.

We are organized under the laws of Germany. Most of our directors and executive officers are non-residents of the United States and our assets and the
assets of most of our directors and executive officers are located outside the United States. As a result, it may not be possible for you to effect service of process within the United States upon us
and our directors and executive officers to enforce against us or them judgments obtained in U.S. courts predicated upon civil liability provisions of the federal securities laws of the United States.

ITEM 4.    INFORMATION ON THE COMPANY

A.    History and Development of the Company

Our legal and commercial name is Kabel Deutschland GmbH and we were incorporated under the laws of Germany on December 17, 2002. We were formed from
the combination of cable assets in six of the nine regional cable television regions previously operated by DTAG, together with other network assets owned by DTAG. We are a limited liability company
("GmbH") organized under the laws of the Federal Republic of Germany. Our principal executive offices are located at Betastraße 6-8, 85774 Unterföhring, Germany.
Our telephone number is +49-89-960-100. We are registered with the commercial register of the local court of Munich under number HRB 145837.

KDVS is a limited partnership and was formed under the laws of Germany on November 4, 2003 (date of entry in the commercial registerpartners' resolution already
adopted on October 16, 2003). The registered office of KDVS is Betastraße 6-8, 85774 Unterföhring, Germany. KDVS is registered with the commercial
register of the local court of Munich under number HRA 83902.

We
maintain websites at www.kabeldeutschland.de and www.kabeldeutschland.com. However, any information provided on our websites does not form part of this annual report and is not
incorporated by reference herein.

We are the largest cable operator in Germany, currently operating in 13 of the 16 federal states (with the exception of Hesse, North Rhine-Westphalia and
Baden-Württemberg), including Germany's three major cities of Berlin, Hamburg and Munich. KDG is the market leader in the German cable television business in terms of homes passed,
subscribers and revenue. KDG primarily provides cable access connections and also offers Internet & Phone services to its customers. Furthermore, KDG delivers digital television signals through
its digital playout center. KDG carries and offers its own pay TV packages and PPV ("Pay per view") as well as packages of an unaffiliated German pay television operator, and the
free-to-air digital programs offered by the public and private broadcasters.

We
have made significant investments primarily to upgrade of our network over the past three years. Our cash flows utilized in investments predominantly to upgrade our network for the
year ended March 31, 2006, 2007 and 2008 were €144.4 million, €268.8 million and €316.4 million, respectively. These have
been funded principally from operating cash flows. We expect to fund our capital expenditures to upgrade our network with cash flows from our operating activities, cash on hand, and if

29

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necessary,
from borrowings under the working capital facility Tranche B (as defined hereafter) under our Senior Credit Facility (as defined hereafter). See also ITEM 5B Liquidity and Capital
Resources.

Fiscal Year Ended March 31,2008

2007

2006(€ million)Cash Paid for Investments in Intangible Assets

(63.0
)
(63.6
)
(27.6
)Cash Paid for Investments in Property and Equipment

(253.4
)
(205.2
)
(116.8
)Investments Network and Operational Business

(316.4
)
(268.8
)
(144.4
)Cash Received from Sale of Investments

38.1

0.0

0.0Cash Paid for Acquisitions

(29.7
)
(5.1
)
(7.3
)Cash Paid for Investments in Financial Assets

(39.7
)
(6.8
)
(0.0
)Net Investments Acquisitions and Financial Assets

(31.3
)
(11.9
)
(7.3
)


In addition, in the course of the last financial year, we also made considerable acquisitions: (i) we acquired a 14.28% stake in Primacom
from Wolfgang Preuss (WP), resulting in KDG owning 18.6% in Primacom as of May 18, 2007 but selling off the stake to Orion in a tender offer as of September 26, 2007; and (ii) we
acquired networks serving approximately 1.1 million cable television subscribers in eight German federal states from Orion, as announced on September 20, 2007. The rescission period for
this transaction elapsed on December 21, 2007 and the transaction was closed on April 30, 2008. This acquisition was financed through securing an additional Tranche C (as defined
hereafter) under the Senior Credit Facility (as defined hereafter).

During the fiscal year 2007/2008 ended on March 31, 2008, KDG also reported several smaller acquisitions:



During
the fiscal year 2006/2007 ended on March 31, 2007, the Company reported the following acquisitions:



Since
March 31, 2008, on June 30, 2008, an additional purchase of 30.0% of the direct share of KMG Kabel Fernsehen Hannover GmbH, of 4.2% the indirect share of RKS
Niedersächsische Kabel-Servicegesellschaft GmbH & Co. KG and of 5.0% of the indirect share of RKS Niedersächsische
Kabel-Service-Beteiligungsgesellschaft GmbH was closed.

Please
note that the geographic distribution of these investments does not affect our business, as we are not operating within a certain geographic scope. See also ITEM 5B Liquidity and
Capital Resources.

As
from October 2007, the Federal Cartel Office (FCO) examined with regard to KDG's Pay TV offering (Kabel Digital Home) whether KDG is abusing a market dominant position. This
examination was closed in June 2008 as the FCO could not find indications for a dominant position of KDG in the

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market
for the acquisition of broadcasting rights of full TV channels nor for impediments of competition by KDG. See also ITEM 4B Business Overview.

B.    Business Overview

Our Business

Kabel Deutschland GmbH ("KDG") was founded on December 17, 2002 with its legal seat registered in Unterföhring (commercial register
Munich HRB 145837). The operating business is predominantly performed by Kabel Deutschland Vertrieb und Services GmbH & Co. KG ("KDVS"), a wholly owned subsidiary of KDG.

As of March 31, 2008, the Company's cable television network passed approximately 15.3 million homes (excluding TKS) and served approximately 8,845 thousand direct
and indirect cable subscribers.

Cable access subscribers are segmented into direct customers ("B2C"), indirect customers ("B2B") and wholesale customers. The loss in cable access subscribers primarily comes from the
wholesale segment which has, however, the lowest ARPU and has less impact on our EBITDA results. Pay TV growth continues to be strong. In 2006 PPV ("Pay per view") services were introduced. The
Company currently offers stand-alone Internet and stand-alone Phone products, however an overwhelming majority of new subscribers choose a bundled product. Internet and phone products may be
subscribed to even without subscribing to CATV services.

We generate revenue through subscription and distribution fees from our cable access business, our pay TV and PPV business, our broadband Internet & Phone business and from other
activities. Monthly subscription rates paid by our access customers depend on the number of subscribers connected at a network connection point. In general, single family direct customers pay a higher
monthly subscription fee on a per subscriber basis than Level 4 operators or housing associations that aggregate several subscribers behind one network connection point. The Company gives a 5%
discount to all customers who prepay the monthly subscription fee on an annual basis for the digital access product.

Level 4
operators typically resell the signal to housing associations but in some cases directly to end users. Housing associations provide the signal to individual tenants and
may or may not charge the tenants for the service. We also charge installation fees related to the connection of subscribers to the network. In addition to providing basic cable television services to
its subscribers, the Company charges television broadcasters carriage fees for delivering their television signals over the Company's network. These carriage fees are typically based on the number of
homes into which the signal is delivered. The Company also delivers and charges carriage fees for radio signals delivered over the network into subscriber homes.

Cable Access Business

Cable Access contains all activities and services linked to the customer's physical access to the Company's cable network either directly to end customers or
indirectly through commercial Level 4 operators or housing associations for which the Company charges a fee.

Cable
access is the basis for free and paid services offered by the Company, including TV and radio services.

Our
cable access business generates revenues through subscription fees, installation fees and other revenues. Through our cable access television business we generated
€867.1 million, or approximately 72.4%, of our total revenues for the twelve months ended March 31, 2008.



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TV/Radio

In addition to the cable access business described above, the Company offers its own pay TV packages. The Company's pay TV packages are branded as Kabel Digital
Home and Kabel Digital International. Kabel Digital Home offers more than 35 pay TV channels within seven genres (documentaries, movies and series, sports, entertainment, kids, music and adult). The
product portfolio Kabel Digital International comprises more than 40 foreign language Pay TV channels grouped in nine language-specific packages. The Company sells its pay TV packages directly to
consumers and to a lesser extent indirectly through certain Level 4 operators. We also sell our digital packages to an unaffiliated regional cable television operator. Under these wholesale
agreements the operator typically receives a discount to our listed retail subscription fee.

The
Company also delivers the pay TV packages of an unaffiliated pay TV operator. In addition to serving its own subscriber base our digital playout center also delivers digital video
signals to unaffiliated regional cable television operators in Germany for distribution to the subscribers served by these operators.

Our
TV/Radio business generates revenue through subscription fees, CPE sales, carriage fees and fees for services in connection with our digital playout facility.



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Internet & Phone

The Company can offer Internet & Phone services to those homes which are passed by its upgraded bi-directional network (630 MHz) and where the
Company has or can have a direct relationship with the customer, or where the Level 4 operators allow us to either directly or indirectly provide our services ("Marketable Homes"). As of
March 31, 2008, the Company passed approximately 11.0 million homes with upgraded network for increased capacity plus return path to enable a two-way communication. The
company offers stand-alone Internet and stand-alone Phone products, however most customers subscribe to bundled offerings of Internet & Phone together. As of March 31, 2008, the Company
served approximately 421 thousand subscribers which amount to approximately 393 thousand Internet and 361 thousand Phone RGUs.

TKSTelepost Kabel-Service Kaiserslautern GmbH & Co. KG

TKS, a wholly owned subsidiary of KDVS, provides cable access, Internet & Phone services to the NATO military personnel based in Germany. It also provides
billing services for telephone customers of DTAG who prefer English language bills.

Revenue Breakdown

The following table sets forth our revenues of our business segments for the fiscal years indicated. For more information regarding our revenues on a segment
basis, see ITEM 5A. Operating results.

Fiscal Year Ended March 31,2004

2005

2006

2007

2008(€ millions, except percentages)Cable Access revenues

833.5

86.6%

850.1

84.7%

839.3

82.9%

845.6

77.4%

867.1

72.4%TV/Radio revenues

108.1

11.3%

126.4

12.6%

137.8

13.5%

163.0

14.9%

179.8

15.0%Internet & Phone revenues

1.2

0.1%

2.8

0.3%

9.8

1.0%

56.5

5.2%

121.4

10.1%TKS revenues

19.3

2.0%

23.9

2.4%

25.2

2.6%

28.1

2.6%

28.6

2.4%Total Revenues

962.1

100.0%

1,003.2

100.0%

1,012.1

100.0%

1,093.2

100.0%

1,196.9

100.0%


Seasonality

Certain aspects of our business are subject to seasonal factors. For example, television usage, and the levels of new subscriptions for television services, is
typically lower during the summer months. Our customer churn rates include persons who disconnect service due to moving, resulting in a seasonal increase in our churn rates during the summer months
when higher levels of moves occur.

In
addition, we have a disproportionately high level of annual prepayments in the months between November and February, which results in higher cash flow from operations in these months
of the year.

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Raw Materials

Due to the nature of our business, raw materials and the sources and availability of raw materials, hence the price volatility of commodities etc., are not
relevant.

Our Markets

The German television market is the largest in Europe with about 35.0 million television homes (according to AGF/GfK). Cable television is the leading
television signal distribution platform in Germany, with approximately 18.7 million, or 53.4% of television homes using this delivery means, followed by satellite (approximately
14.9 million, or 42.6% of television homes) and terrestrial reception via antenna (approximately 1.4 million, or 4.0% of television homes). DTT and TV distribution via Internet were only
recently introduced in Germany.

In
Germany, analog terrestrial transmission provides viewers with 3 to 12 analog channels, depending on the area where the viewer is located. Digital terrestrial television, which has
replaced analog terrestrial television in most regions and can be received by almost 85% of all TV households via antenna (Dec. 2007), offers between 12 and 24 channels, depending on the area where
the viewer is located. Cable television typically offers 33 to 45 analog channels (depending on the region served) and more than 200 digital free and pay TV channels. Satellite television also offers
more channels than analog terrestrial transmission, typically up to 43 German language channels and several hundred international channels. Satellite and cable viewers also receive a variety of
digital programming, including pay television services, with satellite viewers typically receiving the highest number of channels. In the case of cable, and to some extent terrestrial and television,
subscribers also have access to the programming of smaller regional and local broadcasters.

Free television broadcasters pay fees for the terrestrial transmission of their programming and for transmission via satellite. Similarly, free television broadcasters pay carriage fees
to Level 3 cable network operators and also to some Level 4 cable network operators for the distribution of their programming on cable networks. In addition to carriage fees, cable
network operators are paid subscription fees either directly or indirectly from viewers receiving their television signals from cable television. We derive carriage fees for delivering digital as well
as analog programming, taking into



account the current special situation caused by simulcast on programming in analog and digital. In such cases the free television broadcasters pay the greater of analog and digital feed-in
fees.

For historic reasons, the German market developed around an ownership division between broadcasters (Level 1), regional and local cable distribution networks (Level 2 and
Level 3) and the in-house cable network (Level 4 networks). Whereas DTAG, and its predecessors constructed Level 2 and Level 3 networks (which we and the other
regional cable companies now own and operate) and, to a limited extent, also Level 4 in-house networks, most of the Level 4 networks consist primarily of in-house
wiring constructed by electricians, housing associations and local cable network operators, known as Level 4 operators. In recent years, some industry consolidation has occurred, such as
consolidation among Level 4 operators, the acquisition of small Level 4 operators by regional cable companies, the business combination of a large Level 4 operator with regional
cable companies and construction by some Level 4 operators of their own Level 3 networks. Although there may be further industry consolidation in the future, Level 4 operators
currently remain primarily resellers of signals received from us, the other regional cable companies and satellite operators. The German Level 4 market tends to be characterized by smaller
scale operators, although there are some larger operators.

We offer our services directly to homes or small apartment blocks (typically with 1 to 12 dwellings). We also offer our services indirectly through large housing associations and
Level 4 operators for resale to their own subscribers. Subscription fees per subscriber are generally higher for direct subscribers as compared to those generated from operators or housing
associations, both of which aggregate large numbers of subscribers behind individual connection points. Of our

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approximately 8.8 million cable access customers as of March 31, 2008, approximately 2.8 million have a direct contractual relationship with us (B2C), the remainder being tenants
of housing associations (B2B, approximately 3.5 million) or customers of Level 4 operators (wholesale, approximately 2.5 million).

We provide broadband Internet access and telephony services in some areas of our network. As of March 31, 2008, we served approximately 779 thousand pay TV RGUs,
361 thousand telephony RGUs and 393 thousand Internet RGUs. We offer broadband Internet products under the brand name Kabel Internet. We offer telephony service under the brand name
Kabel Phone.

Germany
is, by the total number of households, the largest Internet market in Europe. Technologies with transmission-line speeds higher than those for ISDN are generally
classified as broadband. These include all fixed-line technologies, such as DSL, fiber-to-the-home (FTTH) and Internet access via cable or power line.
In addition, satellite services and mobile technologies, such as UMTS, WLAN and WiMax, are usually also classified as broadband. Whereas analog dial-up modems may be used throughout
Germany to connect to the Internet, the availability of all other means of access may be limited in certain regions.

The
German broadband Internet market primarily comprises four access technologies: DSL, cable, power line and satellite, with DSL as the dominant access platform. The remaining Internet
subscribers use narrowband access technology, in particular analog dial-up services.

Despite rapid growth, broadband penetration is still relatively low compared with other European countries, mainly due to the fact that cable operators have only recently begun to offer
broadband Internet which for the first time has spurred infrastructure-based competition.

The
market for fixed-line residential telephony is well established in Germany and is the largest in Europe. The market also has a high digitization rate, DTAG clearly
dominates the market although, as a result of deregulation since 1998, the market share of DTAG has been decreasing both in terms of fixed-line telephone channels and minutes sold.
Furthermore, the introduction of VoIP services further opens up this market to allow Internet service providers to offer telephony in conjunction with broadband Internet services.

Our Network

In total, our network extends over more than 261 thousand kilometers throughout the regions in which we currently operate and it passes approximately
15.3 million households. DTAG and its predecessors constructed both the cable television and fixed-line telephony networks, and certain parts of the infrastructure (including cable
ducts, towers, fiber optic transmission systems and equipment locations) are shared by both the DTAG telephony service and our cable television businesses. We lease these assets from DTAG under the
SLAs. For a description of the SLAs, see ITEM 10C. Material Contracts. We rely on DTAG and certain of its affiliates for a significant part of our network.

Our standard analog cable television network was originally constructed using tree architecture to deliver 470 MHz one-way signals. Within this bandwidth in our network the
standard allocation uses 33 channels for analog and 19 channels for digital television services. We started to upgrade our current compression technology to a higher and enhanced modulation technology
(QAM 256) in September 2006. It allows us to assign up to 16 digital television program streams to one digital channel. We started to convert analog channels into digital channels by upgrading our
head end equipment to feed such channels. In these head ends one digital channel is assigned for HD-TV distribution.

Our
standard network is served by 52 master head ends that receive analog television broadcast signals from satellite, terrestrial or in some cases direct feeds from program providers or
broadcasters. The incoming signals are processed, assigned to channel positions and amplified for distribution. These 52 master head ends transmit the signals to approximately 370 supply areas,
primarily via fiber optic

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transmission.
We also have 738 local head ends (including Level 4 head ends) that receive signals or direct feeds from program providers or broadcasters for distribution independently of a
master head end. Approximately 320 of the master head ends and local head ends also receive digital signals via satellite from our digital playout center for distribution through the cable television
network. All master head ends and the vast majority of the local head ends are located in facilities owned by DTAG. We lease these facilities from DTAG under the SLAs. The received signals at the head
ends are distributed primarily by coaxial cable, but in some cases fiber optic, to approximately 2,200 hubs. In most cases we own the coaxial cable, but we typically lease the fiber optic network from
DTAG under the SLAs and other agreements. The hubs are pure distribution points where no content is added.

From
the hubs, A-lines (primarily extension lines) extend through public right of ways (öffentlich-rechtliche
Wegerechte) to approximately 2.2 million splitters. Extension lines and drops then extend the splitters to connection points. In total there are approximately
4.2 million connection points available on the network. In the case of multi-unit dwellings the connection point may be located in the basement of the building. At the connection
point, our own Level 4 network, housing associations or other Level 4 operators connect to our network. All third parties connecting to the network are required to meet our technical
standards.

In
general, the network is comprised of coaxial cables that are either buried in the ground or housed in cable ducts. The ducts are typically owned by DTAG and we lease duct space for
our network under the SLAs. The distribution plant is powered by approximately 133,500 amplifiers. With the exception of the duct and fiber, we operate all of the distribution plant and associated
electronics ourselves. We purchase the electrical power required to operate the master head ends, local head ends and amplifiers through DTAG under the SLAs. Purchasing the power from DTAG is
necessary because, in many cases, the same power source supplies DTAG's telephone plant and our cable plant. In general, DTAG sells the power to us at cost plus a margin of approximately 5%. We
believe that we would not be able to purchase power on better terms from another source because we benefit from DTAG's buying power.

Since
our formation we have upgraded additional portions of our Level 3 network based on a technology allowing us to transmit bi-directional 630
MHz-signals which enables us to deliver Internet & Phone services. This technology does not require fundamental changes to our network structure. To upgrade our Level 3
network we only need to replace the active components of the amplifiers and the hubs and install additional head end equipment to monitor and deliver Internet traffic. In addition, Internet &
Phone services typically also require an upgrade of the Level 4 in-house networks. Presently, the upgraded portion of our Level 3 network passes approximately
11 million homes. Based upon current upgrade projects, we expect to have approximately 12.0 million homes passed by our upgraded network by the end of March 2009.

In
addition to our upgrade project we are segmenting our Level 3 network step by step. We build own fiber solutions in order to penetrate the HFC network and reduce the number of
Level 3 Clusters. This segmentation upgrade is driven by customer growth. In some supply areas we use the spectrum of 862 MHz already and we plan to use the spectrum of 862 MHz in the following
years through the segmentation of the Level 3 network.

The German Cable Network

The structure of the German cable network is strongly influenced by historical factors, in particular the previous monopoly of DTAG and its predecessors on
telecommunication services until 1996 and the manner in which the subsequent deregulation of the telecommunications market was implemented. As

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a
result, the cable network in Germany can be divided into four functional levels, ranging from the content generation (broadcasters) to the distribution of the signal to the end customer.

LOGO

Level 1 encompasses the production of content, the transmission of the signal to the satellite Earth station or a terrestrial transmitter, and the up-link to the
satellite.

Level 2
is the part of the cable television network comprising (i) the down-link from the satellite or the terrestrial transmitter, (ii) the satellite or
terrestrial reception equipment, (iii) the signal distribution from the reception equipment to the master-head ends and the hubs, (iv) the master-head end and
head end functions and (v) the distribution of the signals from the head ends to the hubs.

Level 3
is the part of the cable television network which distributes the signal primarily via coaxial cable from Level 2 to the home connection points.

Level 4
is the part of the cable network which distributes the signal from the Level 3 connection point to the wall socket inside the home. Level 4 infrastructure
primarily consists of the in-house wiring.

The
vast majority of the Level 2 and Level 3 cable television network was constructed by DTAG's predecessor between 1980 and 1988. Another wave of construction activity
followed after the reunification of Germany in 1990. Due to political decisions of the German federal government, electricians, housing associations and Level 4 operators initially constructed
the majority of the Level 4 network infrastructure. This decision resulted in the development of a dual ownership network structure serving cable subscribers. This dual ownership structure is
distinct from the single ownership cable structure prevalent in the United States and in most EU countries, in which private operators own the network entirely, from the head end to the wall socket
inside the home.

Most
of the network infrastructure from Level 2 to Level 4 is one-way coaxial cable with a bandwidth of 470 MHz. Within this bandwidth in our network, the
standard allocation uses 33 channels for analog and 19 channels for digital television services. As a result of digital compression technologies, each digital channel can carry up to 12 program
streams (64 QAM) or up to 16 program streams (256 QAM), resulting in approximately 200 potential program streams. Technically, it is possible to convert every analog channel into a digital channel by
using specific digital head end equipment for such channels. In addition, this network infrastructure can be upgraded to permit the transmission of bi-directional 630
MHz-signals, thereby allowing Internet & Phone products to be distributed via the network.

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Since
DTAG's predecessors initially constructed both the fixed-line telephony networks and the cable television network, the telephony and cable television networks share a
high degree of common infrastructure, in particular cable ducts, co-location facilities, towers and fiber optic systems. Today, this infrastructure is owned by DTAG and we are permitted to
use it under long-term lease agreements. In addition, we purchase electrical power from DTAG. The relevant agreements with DTAG are an essential component of our operations and
historically have accounted for our single largest expense item each year. See section "Our Network" above.

Our Strengths

Cable is the Leading Medium for the Delivery of Television Services in Germany.    Approximately 18.7 million (53.4%) of
the approximately 35.0 million German television homes are connected to a cable television network allowing them to receive cable television services on their television screens without further
equipment or installation. As of March 31, 2008, our network passed approximately 15 million homes and we provided cable access television services to approximately 8.8 million
households (57.9% of the homes passed). This customer base is both large and diverse. Many of our housing association and Level 4 customers have entered into multi-year contracts
with us, and many of our direct customers (generally either individual homeowners or tenants in smaller multi-unit dwellings) prepay their subscription fees via direct debit on an annual,
quarterly or monthly basis.

Scope for Broadband Growth.    Broadband penetration in the German market of 21.2% is slightly above the OECD average of 18.8%
(according to OECD 2007). Based on our recent experience with broadband and telephony rollout, we believe there is a substantial growth opportunity for our broadband services. Our current pricing and
product offering are attractive in the German market and, given that we own our network, we believe we have margin and capacity advantages over some of our competitors. Currently, on our core product
we offer a price advantage of approximately 40% to the market leader's offering and, technologically our cable network is superior to the DSL-network used by our competitors in the market.

Experienced Management Team, Advisors and Shareholders.    Our management team and their advisors have significant experience in
the cable, television and telecommunications industries in Germany.

Dr. Adrian
v. Hammerstein has been Chief Executive Officer of Kabel Deutschland since May 2007. Most recently, Dr. v. Hammerstein was Chief Executive Officer at Siemens
Business Services. Prior to that, he has been Chief Executive Officer of Fujitsu Siemens Computers, group Chief Financial Officer of Information and Communications Products at Siemens AG and Chief
Financial Officer of the Open Enterprise Computing Division at Siemens Nixdorf.

The Chief Financial Officer of KDG, Paul Thomason joined KDG in 2003 and was previously CEO and CFO of Primacom and, prior to that, CFO of KabelMedia, a predecessor of Primacom.

Herbert Hribar has been Chief Operating Officer since November 2006. Before joining KDG, Mr. Hribar worked for the Swiss cable operator, Cablecom and at the Irish
telecommunication provider, Eircom.

In December 2005, Dr. Manuel Cubero del Castillo-Olivares was promoted to Managing Director for the Cable Television and Content areas. Since November 2006 he also has taken
responsibility for the Internet & Phone product area and since April 2007 for sales and marketing of the Company. Dr. Cubero brings several years of industry experience to this position,
having previously worked for Kirch Media Group in various management positions.

In
May 2005, Tony Ball joined the Company as Chairman of KDG's Advisory Board. Mr. Ball was formerly CEO of BSkyB, the largest pay-TV operator in the United Kingdom.

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Our principal owners are funds affiliated with or advised or managed by Providence Equity Partners ("Providence"). Providence provides us with telecommunications and media operating
experience and financial expertise.

Our Strategies

We currently hold a leading position in German television distribution. We aim to build on this market position and leverage our high quality infrastructure to
also become a leading provider of digital video, broadband Internet & Phone services in Germany. We plan to further strengthen our existing subscriber base and to increase the penetration in
our core markets by introducing new services and enhancing existing products. At the same time we are focusing on increasing the efficiency of our processes.

The
key components of our strategy are as follows:

Maintain Subscribers and Grow Number of Revenue Generating Units ("RGUs") through Enhanced Product Offerings



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Continued Increase of Our Sales Effectiveness



Continued Focus on Operational Excellence



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Material Contracts

We have entered into various long-term Service Level Agreements ("SLAs") with DTAG and certain of its affiliates that are significant to our business.
The various services offered by DTAG are defined under so-called "Term Sheets" that are part of the SLAs. For a complete list of material contracts see ITEM 10C "Material Contracts".

The Risk Management System for KDG

During the course of the previous business year, an organization-wide risk management system was introduced at Kabel Deutschland.

The
implementation of the risk management organization including the publication of the risk management manual and the assignment of functions to management was carried out in 2006.

The
risk management system is an integral component of all processes within our organization. It is designed to ensure that unplanned developments can be identified early and actively
controlled by management.

History has shown that KDG's risk environment can change quickly and unexpectedly as a result of various situations and influences. It is therefore necessary to be able to react quickly
so that no situation may cause substantial damage to the existence or have long-term impact on the assets, the financial position and earnings.

The
decisions made on the identification and the taking of risks are generally made in the operating units. The management of KDG are therefore also risk managers. This means that the
competencies for the responsibility and the control of risks lie with them. The system is supported by the central risk management unit which carries out risk controlling. The separation of functions
is thus ensured.

Risk
controlling has process responsibility and produces the quarterly reports for the Management Board which enable detailed transparency of the risk situation. In particular cases and
in the event of determined limits in the early warning system being exceeded, immediate reporting is put in place alongside the regular standard reports. Furthermore, risk controlling is responsible
for the continuous development of the risk management system and for setting organization-wide standards. Risks which overlap departments are also monitored here.

Regulation

German law and regulation draws a distinction between telecommunications and media laws. Telecommunications law applies to the establishment and operation of
technical infrastructures for communication. Media laws apply to the content of such communication.

Telecommunications Regulation

Telecommunications services and the operation of telecommunications networks are subject to the regulatory regime of the Telecommunications Act
("Telekommunikationsgesetz") of June 22, 2004 (the

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"Telecommunications
Act") and certain ordinances under the Telecommunications Act. These ordinances contain further provisions in respect of, and in addition to, certain sections of the
Telecommunications Act. The Telecommunications Act implements the European Regulatory Framework for Electronic Communications Networks and Services (the "Framework") that consists of, amongst other
things, the Framework Directive (2002/21/EC), the Authorization Directive (2002/20/EC), the Access Directive (2002/19/EC), the Universal Service Directive (2002/22/EC), and the Directive on Privacy
and Electronic Communications (2002/58/EC). The Framework with its various directives is currently under revision. Changes will most likely not become effective before the year 2009. It is further to
be expected that the member states will from then on have two years to transform such changes into their national law.

The
Telecommunications Act contains provisions regarding, among other things, (i) the establishment and powers of a regulatory body; (ii) notification requirements;
(iii) the granting of rights of way; (iv) the allocation of frequencies; (v) access obligations; (vi) the regulation of fees for the provision of telecommunications
services; and (vii) abusive behavior. In principle, regulation of access and fees applies to providers which have significant market power in the respective market. However, under certain
preconditions, the FNA may impose certain obligations on operators with control over end-user access even if those operators do not have significant market power.

Important
aspects concerning the regulation of access and fees for broadcasting and cable television markets are determined by a market definition and market analysis procedure which is
conducted by the FNA. The outcome of this market analysis must be in line with the Framework Directive (2002/21/EC) and further directives of the Framework. In particular, national regulators must
take into account the European Commission Recommendation (2003/311/EC) of May 8, 2003 (the "Recommendation") on relevant product and service markets within the electronic communications sector.
The recommendation presumes only one relevant market for the broadcasting sector:Broadcasting transmission services to deliver broadcast content to
end-userson the wholesale level (Market 18 of the Recommendation). In Germany, (i) the TV signal feed-in market and (ii) the market for
TV signal delivery to other operators are associated to this market pursuant to a final market analysis published by the FNA in October 2006. Nevertheless the FNA is entitled to define further markets
for regulation even though they are not listed in the Recommendation. At the end of 2007, the European Commission has revised the Recommendation and has removed, inter alia, Market 18 from the list of
markets warranting special observation. This should have consequences for the next periodical market analysis to be performed by the FNA.

Pursuant
to the current final market definition and market analysis published by the FNA in October 2006 and a regulatory ordinance published in April 2007, KDG, together with Kabel BW,
Unity Media and T-Systems, found to have SMP (i) in the TV signal feed-in market and (ii) the market for TV signal delivery to other operators.

In
addition, the Act on Radio Equipment and Telecommunications Terminal Equipment (Gesetz über Funkanlagen und
Telekommunikationsendeinrichtungen) of January 31, 2001, as amended, and the Act on Electromagnetic Compatibility of Equipment (Gesetz
über elektromagnetische Verträglichkeit von Geräten) of September 18, 1998, as amended, contain provisions applicable to the
operation of telecommunications networks and equipment. In particular, telecommunications equipment must satisfy health and safety requirements and conform to certain technical standards. It is
expected that the Act on Electromagnetic Compatibility of Equipment will be amended within 2007.

In
2006, DTAG announced its intention to build a fiber optic network in Germany's 50 largest cities. The FNA has announced that this network generally falls within its regulatory
competence, in particular with respect to the wholesale broadband Internet access market, so long as the products and services provided via this network are merely a substitute to existing products
and services. If the products and services provided via this network are deemed not to be mere substitutes for previously

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existing
products and services, then DTAG may operate this network without any regulation, for at least some initial period. In addition, pursuant to an amendment to the Telecommunications Act
effective since February 2007, new markets shall in the future be exempted from regulation upon the FNA's discretion. The term of this exemption period is also to be determined by the FNA upon its
discretion. The European Commission has raised serious concerns about the conformity of this regulatory exemption with the existing regulatory framework. After sending a letter of formal notice to
Germany on the grounds that Germany's approach could in effect grant a "regulatory holiday" to the incumbent fixed network operator as it would reduce the discretion of the German NRA and bypass the
consultation and consolidation mechanism provided for in the EU regulatory framework. The case was referred to the Court of Justice in the course of 2007.

The Regulatory Body

The FNA is responsible for the regulation of the German telecommunications market. It has various powers in respect of the enforcement of telecommunications laws
and ordinances. All decisions of the FNA may be challenged before the competent courts.

Notification Requirements

The operation of telecommunications networks and the provision of telecommunications services do not require any licenses from any regulatory body. However,
commercial operators of public telecommunications networks and commercial providers of telecommunications services for the general public have to notify the FNA of the commencement, any modification
and the termination of their business activities.

Granting of Rights of Way

Operators of public telecommunications networks that wish to use public streets, squares, bridges and public waters for the laying and operating of
telecommunications lines have to apply to the FNA for the granting of respective rights of way. In particular, the FNA has to determine whether the applicant has demonstrated sufficient professional
expertise, reliability and financial capability to operate telecommunications lines.

On
October 26, 2004, KDG was granted by the FNA all necessary rights of way throughout the territory in which it operates telecommunications networks.

Allocation of frequencies

In principle, a frequency allocation by the FNA is required for the use of frequencies. However, under the Frequency Range Allocation Plan Ordinance
("Frequenzbereichszuweisungs-planverordnungFreqBZPV"), frequencies in cable networks within the frequency range of 9 kHz to 3 GHz may be
used without allocation by the FNA provided that (i) the frequencies are not used in frequency ranges within which security relevant radio services are operated and (ii) electromagnetic
interferences do not exceed a specified threshold. In cases of these preconditions not being satisfied the FNA is authorized to issue specifications for the use of the relevant frequencies. The
operation of KDG's telecommunications cable networks may in the future either in general or in certain areas become subject to such specifications. Furthermore, KDG could be required to apply for
individual frequency allocations for its telecommunications cable networks. There are political considerations to amend the Ordinance (in a first step) to free up frequencies currently devoted to
broadcasting for mobile, stationary and/or wireless technologies in order to close existing gaps in broadband availability in Germany and to foster competition ("digital dividend"). Recent proposed
changes in a regulation concerning the protection of public telecommunication networks (Verordnung zum Schutz von öffentlichen Telekommunkationsnetzen und Sende
und EmpfangsanlagenSchuTSEV) aim at the

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mandatory
digitization or even complete switch-off of a specified number of analog channels in the lower frequency spectrum for security reasons (mitigating interference with air traffic
etc.). The proposal provides for a digitization or switch-off in steps until the year 2011. It is still unclear, to what extent and at which point in time the proposed steps will have to
be realized. The regulation is expected to become effective during the course of 2008.

Access Obligations

The FNA may impose on operators of public telecommunications networks with significant market power the obligation to grant other undertakings access for
providing telecommunications services to their telecommunications networks. In particular, the FNA may impose the obligation to grant access for certain telecommunications services on an unbundled
basis. For this purpose, the operator must offer access to its network in a manner that allows the other undertaking not to purchase any services that it does not require. Under certain preconditions,
the FNA may also impose access obligations on operators of telecommunications networks if those operators do not have significant market power but control end-user access.

Among
other things, the FNA is authorized to impose on operators of public telecommunications networks either having significant market power or controlling the end-user
access the obligation (i) to grant access to certain network components and certain facilities as designated by the FNA, and (ii) to offer the re-sale of their
telecommunications services on a wholesale basis. The FNA has discretion to determine whether access must be granted or re-sale
must be offered. However, any such obligation imposed by the FNA must be reasonable in light of the circumstances of each individual case and in line with the directives and recommendations of the
European Regulatory Framework.

Regardless
of whether or not an operator of public telecommunications networks has significant market power, it is obligated to offer any other operator upon its request the
interconnection of both parties' telecommunications networks provided the interconnection is technically feasible. KDG is subject to such obligation in respect of those parts of its telecommunications
networks that have bi-directional transmission capability.

If
the FNA were to impose the obligation on an operator to grant access to its telecommunications networks or to offer the re-sale of its telecommunications services on a
wholesale basis, and if any third-party requested an offer from such operator for access to its telecommunications networks or for re-sale of its telecommunications services and failed to
come to an agreement in this respect with such operator, the FNA would, upon application, be entitled to order the access or re-sale and provide for the terms and conditions (including
fees) of such access or re-sale. Moreover, if an operator possesses significant market power, the FNA, upon application, has the authority to order the interconnection of such operator's
and any third-party's public telecommunications networks and to provide for the terms and conditions (including fees) of such interconnection.

To
date the FNA has not imposed any obligations on KDG to grant third parties access to its telecommunications networks or to offer third parties the re-sale of its
telecommunications services on a wholesale basis.

Regulatory Framework

Before the revised Telecommunications Act of June 22, 2004 came into force, KDG was considered by the FNA, under the former Telecommunications Act of 1996,
to have a dominant position in the regional markets of (i) the feed-in of radio and television programs into telecommunications cable networks and (ii) the distribution of
radio and television programs via telecommunications cable networks to subscribers. In October 2006, the FNA has published the final market definition and market analysis for Market 18 based on the
Recommendation and a regulatory ordinance as of April 2007, according to which KDG, Kabel BW, Unity Media and T-Systems in each case are considered to

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have Significant Market Power (SMP) (i) in the market for analog and digital TV signal feed-in and (ii) the market for analog and digital TV signal delivery to other
operators. KDG has filed various complaints against this ordinance with the competent court where these matters are pending. Furthermore, as mentioned above, the European Commission has per the end of
2007 revised the Recommendation and has abolished Market 18. The consequences of such removal are unclear as of yet.

As
stated above, the European Regulatory Framework as a whole is currently under revision. Access obligations might therefore be modified on the European level which may have
consequences for the existing obligations and respective remedies administered by the FNA on the national level.

Regulation of Fees for Telecommunications Services

Under the Telecommunications Act, an operator of a telecommunications network which has significant market power must not abuse its position in the market when it
charges fees. In particular, it is deemed abusive if any such operator charges fees that (i) only prevail in the market due to the significant market power of the operator,
(ii) unjustifiably place its competitors at a significant competitive disadvantage, or (iii) are discriminatory. Amongst other things, an unjustified competitive disadvantage for the
competitors of the operator is presumed by law if the fees such operator charges its customers do not cover the costs of the relevant service.

Furthermore,
under the Telecommunications Act the fees for telecommunications services provided by an operator with significant market power or provided by an operator controlling the
end-user access may be subject to regulation by the FNA.

KDG's
fees for signal delivery to Level 4 operators and carriage of feed-in signals from broadcasters are subject to ex post regulation. During an ex post review, the
FNA examines the fees charged as to whether they are abusive. If any such fees are found to infringe the requirements of the Telecommunications Act, the FNA must declare such fees void and it may
either direct the affected operator to adjust its fees or provide for fees that are not abusive.

In
the case of an ex ante review, the operator is required to apply to the FNA for fees approval before the fees can be introduced in the market. The FNA examines the fees as to whether
they exceed the costs of efficient service provision. To date the FNA has not required us to submit any fee proposals and/or cost statements to it for an ex-antereview.

Abusive Behavior

In addition to prohibiting the charging of abusive fees, the Telecommunications Act provides for a general prohibition of abusive behavior in the
telecommunications markets by operators of telecommunications networks which possess significant market power. In particular, such abuse includes discriminatory and restrictive practices.

The
FNA may prohibit abusive behavior and declare particular agreements to be void. The FNA may also confiscate profits generated from abusive behavior if certain conditions are met.
Moreover, the FNA has the authority to impose an administrative fine on any company that fails to comply with its rulings as regards abusive behavior.

To
date the FNA has not objected to the business practices of KDG on the basis that they constituted abusive behavior.

Fixed-Line Telephony and Internet Access Regulation

With respect to the commercial provision of (narrowband) telephony services to end-customers based on a self-operated
fixed-line telecommunications network, the aforementioned provisions of the

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Telecommunications
Act as regards notification, granting of rights of way, allocation of frequencies, access obligations, regulation of fees and abusive behavior also apply. See "Telecommunications
Regulation". In particular, if the Company is deemed either to have significant market power in the relevant market or to control end-user access, the FNA may impose access obligations on
the Company, order the interconnection of end-customers or regulate the fees charged to end-customers.

Regulation of Call Termination Fees

As regards market 9 (call termination on individual public telephone networks of alternative network operators provided at a fixed
location) of the Recommendation, the Company is deemed to have significant market power pursuant to a ruling by the FNA of October 2007. The FNA had already deemed Unitymedia
and Kabel BW to have significant market power with respect to call termination in their telephone networks. Under said ruling, the fees for call termination services in our telecommunications network
are subject to anex-postreview by the FNA.

Interconnection

Alternative telephony service providers generally enter into an interconnection agreement with DTAG in order to allow their fixed-line telephony
customers to call subscribers of other fixed and mobile telecommunications networks and to be called by third parties. The fees DTAG charges for its interconnection services are subject to an
ex-ante review by the FNA. In addition, the FNA has ordered DTAG to publish a reference interconnection offer. DTAG's reference offer has been under review by the FNA. The currently
existing interconnection agreement between alternative telephony service providers and DTAG may be terminated by DTAG and replaced with a standardized agreement based on the reference interconnection
offer approved by the FNA. The Company has entered into an interconnection agreement with DTAG.

Pursuant to the above mentioned ruling by the FNA of October 2007, our company is likewise obligated to grant interconnection to alternative network operators seeking termination in our
network



on a transparent and non-discriminatory basis. This includes our obligation to publish a reference interconnection offer.

Consumer Protection

Pursuant to the Telecommunications Act and the Telecommunications Customer Protection Ordinance
("Telekommunikations-KundenschutzverordnungTKV") of December 11, 1997, KDG is obligated to comply with various provisions for the
special protection of end-users (customers) as regards, among other things, (i) the formation of agreements, (ii) the subject matter and the termination of contracts and
certain rights and obligations of the contracting parties and of third parties engaged in telecommunications traffic, (iii) quality of service, (iv) details of delivery periods,
(v) the operator's liability vis-à-vis the end-customers, (vi) the way in which reference is made to standard terms and conditions and
fees, (vii) requirements deriving from the Universal Service Directive, (viii) entries in directories and directory enquiry service databases, (ix) the blocking of the
subscriber's line, (x) itemized bills, (xi) out-of-court dispute resolution procedures for customers and (xii) declaration from property owners.

There exists a number of draft proposals to amend the Telecommunications Act and other federal acts with special regard to consumer protection issues. The legislator intends to implement
these proposals before the end of 2008. The proposed changes aim at, inter alia, facilitating the termination of agreements by end-users, stricter rules for operator customer acquisition
practices and enforcement of legal remedies, especially with regard to unwanted telephone marketing. The final shape of these provisions is not determined as of yet.

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Number Portability

Each public telephone network operator is obligated to enable its customers to retain their telephone number, in the case of geographic numbers, at a specific
location, and to allow for number portability.

Numbering Issues

The FNA is the competent authority for the numbering administration. It is responsible for structuring and configuring the national number space in Germany. The
FNA also allocates (technical) numbers to telecommunications network operators, telecommunications service providers and end-users. When KDG is allocated numbers (for example, local
numbers for end-customers or a technical number in order to implement number portability) it is obligated to comply with certain conditions (for example, with regard to the transfer of
numbers) as set out in the respective number allocation rules issued by the FNA. Furthermore, KDG has to observe certain statutory provisions with regard to premium-rate numbers. The FNA
is authorized to impose fines of up to €0.5 million in order to enforce its regulations on numbering.

Privacy of Telecommunications, Data Protection and Public Safety

Each provider of telecommunications services is obligated to maintain telecommunications privacy. This means that the content and detailed circumstances of
telecommunications, in particular the fact of whether or not a person is or was engaged in a telecommunications activity, shall not be disclosed to third parties.

In
addition, each operator of telecommunications services is obligated to protect the personal data of telecommunications subscribers and users in connection with the collection and use
of such data. The relevant sections of the Telecommunications Act provide for the collection and use of personal data.

Furthermore,
any person offering publicly available telephone services is obligated to provide all users with free access to emergency services by using the European-wide
emergency call number "112" and any additional national emergency call numbers.

Each
service provider is obligated to make appropriate technical arrangements or take other measures in order to protect the privacy of telecommunications and personal data and
telecommunications and data processing systems against (i) unauthorized access, (ii) any faults which would result in considerable harm to telecommunications networks and
(iii) external attacks and the effects of natural disasters. In addition, it is obligated to nominate a security commissioner
("Sicherheitsbeauftragten") and to draw up a security concept ("Sicherheitskonzept") setting out
(i) which telecommunications systems are to be used and which publicly available telecommunications services are provided, (ii) any potential hazards, and (iii) which technical
arrangements or other safeguards have been made or put in place or are planned.

Interception and Information Requests from Law Enforcement Authorities

Each operator of a telecommunications system on which publicly available telecommunications services are provided has to provide, at its own expense, technical
facilities for telecommunications interception by law enforcement authorities. The administrative and procedural details of the telecommunications interception are specified in the revised
Telecommunications Interception Ordinance ("Telekommunikations-Überwachungsverordnung"), whereas the technical details (for example,
relating to transmission protocols) are specified in the "Technical Guideline: requirements for the implementing of statutory telecommunications monitoring operations"
("Technische Richtlinie zur Beschreibung der Anforderungen an die Umsetzung gesetzlicher Maßnahmen zur Überwachung der

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Telekommunikation"). The FNA regularly updates the technical guideline in order to reflect developments in technology, such as the use of e-mail and VoIP, for
example.

Each
operator of a telecommunications network or provider of telecommunications services is obligated to collect and store certain data with regard to the telecommunications traffic
across its network in order to comply with statutory provisions related to law enforcement.

Telecommunications Contribution Charges

Telecommunications network operators and telecommunications service providers must pay a contribution charge to offset costs incurred by the activities of the
FNA. However, the FNA has not yet published its ordinance setting out the criteria determining the amount of the contribution charges. It is
likely that either market share or subscriber base will be a significant factor in calculating the amount of the contribution charges. It is also likely that the contribution charge will have
retroactive effect from June 26, 2004 when the current Telecommunications Act entered into force.

Internet Access

With respect to the commercial provision of Internet access services to end customers based on a self-operated fixed-line
telecommunications network, the same provisions of the Telecommunications Act apply as well. The regulations under the Telecommunications Act do not differentiate between content (voice telephony or
Internet data) transmitted via the telecommunications network.

Even
though the Recommendation does not provide for a national market for Internet access, the FNA has already conducted a market analysis with respect to Internet access services in
Germany. However, within this market analysis, the Company was not deemed to have any significant market power within the market for Internet access services. Therefore we are not subject to any
regulation due to the FNA's market analysis for the Internet access market.

With regard to the provision of Internet access via our network certain statutory provisions apply. Internet access providers are generally not obligated to monitor the content
transmitted via their telecommunications infrastructure if their role is strictly limited to the technical transport of the signals. Otherwise, certain monitoring obligations pursuant to the State
Broadcasting Treaty (see below) may apply. There are current political discussions to tighten the obligations of Internet access providers to block certain traffic, especially illegal content with
regard to protection of minors. The outcome of such discussions is unclear as of now. See also ITEM 4B. Provision of Telemedia Services.

Media Regulation

Regulation of the media is subject to the legislative authority of each of the German federal states
(Bundesländer). Each federal state has its own media law, all 16 federal states however, have also harmonized certain parts of their
media laws in the state broadcasting treaty concerning broadcasting and so-called telemedia services (Rundfunkstaatsvertrag, or State
Broadcasting Treaty). The State Broadcasting Treaty establishes the framework of the German broadcasting system. In particular, it provides for a regime designed to ensure that a diversity of views
and opinions is secured and delivered in the mix of public and private radio and television channels and their respective programming. The State Broadcasting Treaty, together with the media laws of
each of the federal states, regulates (i) the establishment and powers of regulatory bodies, (ii) the licensing of private broadcasters, (iii) notification requirements in
connection with the (re-)transmission of radio and television programs, and (iv) the allocation and use of transmission capacities and digital platforms. The State Broadcasting
Treatyand as a corollary the media laws of the
federal statesare under permanent revision, as the legislators see the need to adapt the law to technological and economical changes in the media field constantly.

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The
State Broadcasting Treaty has recently been amended to introduce a distinctive "platform" regulation and specific rules concerning the scale and scope of obligatory digital
retransmission of programs or bundles of programs. The scale and scope of such must-carry obligations has in certain parts been narrowed down which has a beneficial effect on our capacity
to manage digital bandwidth in our networks. The revised treaty will come into force on September 1, 2008. The European Directive 89/552/EEC on the provision of audiovisual media services,
which forms the basis of certain of the provisions in the State Broadcasting Treaty, has been amended per the end of 2007 (Audiovisual Media Services Directive). The amendments include reductions of
the regulatory burden on Europe's providers of TV and TV-like services to provide them with more flexibility for financing audiovisual content by new kinds of advertising. However, they
also include new definitions of linear and non-linear services which might have an effect on the German distinction between broadcasting and telemedia services in general and an adverse
bearing on the must-carry obligations, our near-video-on-demand and potential future on-demand services in particular. The amendments will
have to be transferred into national law by the end of 2009. The outcome and the implications are not yet clear as of now.

The
establishment, the functions and the obligations of the public broadcasters are regulated separately.

The Regulatory Bodies

As a rule, each German federal state has established its own independent regulatory body, the state media authority
("Landesmedienanstalt"), for the regulation of the private broadcasting sector and platform providers. The states of Berlin/Brandenburg and
Hamburg/Schleswig-Holstein have established a joint regulatory body. A number of joint committees among the state media authority exist to coordinate certain aspects of media regulation.

The
state media authorities are primarily responsible for the licensing and supervision of private broadcasters and the allocation of transmission capacities for radio and television
channels. In most states, they are also required to run, or to supervise, "open channels" (amateur radio and television channels). The state media authorities have the power to supervise the
compliance with, and to intervene against infringements of the provisions of the State Broadcasting Treaty regulating matters as the use of conditional access systems, application programming
interfaces and electronic program guides and the charging of fees from broadcasters and other content providers.

The
state media authorities have various powers to enforce compliance with the law. Any decisions of the state media authorities can be challenged before the competent administrative
courts. The regulatory body in the field of telecommunications, the FNA, has similar jurisdiction and powers with respect to the subject matters mentioned above. Such double regulation has a potential
adverse effect on our business.

License and Notification Requirements

Private broadcasters are required to obtain broadcasting licenses from the competent state media authority in accordance with applicable state laws. In contrast,
the operation of cable networks for the transmission of radio and television programs does not currently require a license from a state media authority. In certain states, however, a notification to
the state media authority is required in connection with the operation of cable networks. The new State Broadcasting Treaty will introduce a general notification requirement for digital platform
providers. In addition, the analog and/or digital transmission of radio and television channels transmitted via cable networks must be notified. The operators of cable networks and other relevant
parties are also required to notify the state media authorities of (i) the use of conditional access systems and electronic program guides, (ii) title to application programming
interfaces, and (iii) their feed-in fees. This requirement also applies with respect to subsequent changes of the foregoing.

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Allocation and Use of Transmission Capacities

The State Broadcasting Treaty sets forth the rules for the allocation and use of digital transmission capacities and digital platforms for television channels. In
addition, the allocation and use of analog transmission capacities for both radio and television channels and digital transmission of radio channels is governed by the laws of the respective states.
The State Broadcasting Treaty expressly clarifies that rules for the allocation and use of analog transmission capacities are permitted to be established by the states only to the extent that they are
necessary to meet clearly defined general interest objectives.

Art.
31 sec. 1 of the Universal Service Directive of the European Communities (the Universal Service Directive) is the blueprint of the before-mentioned clarification. It requires a
proportional "must-carry" regime and does not distinguish between analog and digital transmission of radio and television channels. In addition, the Universal Service Directive requires a
periodic review of the "must-carry" regime.

Consequently,
the State Broadcasting Treaty provides for a review of the currently applicable "must-carry" regime on a regular basis. Said requirements of the Universal
Service Directive must also be implemented into the other relevant legislation of the states. Therefore, the "must-carry" regime must be reviewed periodically on all national levels and
could become still less strict in the future, in particular with respect to the analog transmission of radio and television channels. In order to push this process of deregulation, the German cable
association (Deutscher Kabelverband) filed a complaint with the European Commission which in 2006 has led the European Commission to open formal
infringement proceedings against Germany. In its reply, Germany has rebutted the Commission's view asserting that the existing regimes are lawful. The Commission has, in principle, upheld its
position. The final outcome of this complaint has not yet been determined, as the case is resting until the European Court of Justice (see below) has come to a decision. Kabel Deutschland has filed a
suit against a ruling of September 2005 by the media authority of Lower-Saxony pursuant to which the full analog cable spectrum is allocated to the authorities decision under to the current regulatory
regime. The claim is based, inter alia, on the argument that the allocation of the full analog spectrum is a violation of the art. 31 sec. 1 of the Universal Service Directive. The administrative
court in charge of the matter has referred the case to the European Court of Justice for a preliminary ruling to have this (and other) questions answered. The outcome is unclear as of yet. A decision
is to be expected around by March 2008.

Allocation and Use of Analog Transmission Capacities

As stated above, regulations regarding the analog transmission of radio and television channels vary from state to state and cable network operators are generally
not entirely free to allocate analog channels in their networks. Rather, the state media authorities makein varying degrees in accordance with the respective state's media
lawallocation decisions regarding which programs will be carried over the cable networks, in keeping with the states' responsibility for ensuring that a diversity of views and opinions is
secured in the mix and delivery of channels and programming. Regulations as of now do not explicitly state whether cable network operators are entitled to decide the amount of capacity they devote or
use for the broadcasting of radio or television channels and which amount they devote or use for other services such as Internet access. However, the new State Broadcasting Treaty as of September 2008
will, at least for digital capacities, contain provisions confirming the cable operators' entitlement to make such allocation decision. It is also not clearly stated whether or not the cable network
operators can freely determine which capacities they use for analog and for digital transmission. Some of the state media authorities seem to be of the opinion that it is not the cable network
operators who are entitled to decide on these questions. Some state media laws or statutes of the state media authorities expressly state the number of cable channels that must be used for the analog
transmission of television programs. Channels will be given preference by the state media authorities if they are deemed to contribute to the diversity of views and opinions in the respective

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state
so that the state's mix of channels and programs reflects a range of political, religious, cultural, social and ethnic views.

In
general, state media authorities prioritize the allocations of channels based on the following order:



The
specific allocation of channels varies from state to state, and rules relating to the allocation of radio channels are usually somewhat less strict than those relating to television
channels. In certain states, the state media authorities make allocation decisions regarding all or almost all of the analog channels available in the network. In other states, the law defines a
number of "must-carry" channels, while the network operator is entitled to allocate the remainder of the capacity. An increasing number of states have adopted more liberal allocation
regimes which grant network operators the right to allocate a limited number of channels, subject to certain legal constraints and as long as such allocations do not conflict with the state media
authority's policy with respect to the diversity of opinions. In some cases, a certain portion of channels is given to the network operator to be allocated as they see fit under purely economic
considerations (within the confines of the general laws). Whereas the state of Bavaria went farthest in deregulating its media law to reduce the must-carry obligations to limited number of
channels. However, the recent past has also seen a re-regulation of previously more liberal regimes, such as in the state of Saarland.

In
those states where the state media law grants preference to channels that are terrestrially receivable within the state, the introduction of digital terrestrial television in several
metropolitan areas in Germany also affects the allocation of analog cable capacities. Digital terrestrial television (DTT) allows for the reception of 12 to 24 channels, which according to the
interpretation of the law by some media authorities leads to a "must-carry" status of the digital terrestrial channels. We have challenged in court such interpretation of the law in the
case of a September 2005 ruling by the media authority of Lower-Saxony (see already above). Because of doubts of the conformity of said interpretation with European law (especially art. 31 sec. 1 of
the Universal Service Directive), the court referred the case for a preliminary ruling to the European Court of Justice in June 2007. A ruling in our favor could potentially clear the way and provide
general guidelines for more liberal media laws in the states in the future. Broadcasters have the right to file a complaint with the relevant state media authority in the event that cable
network operators unlawfully refuse to transmit their signals. The state media authorities are vested with the power to order the transmission of channels upon such complaints, provided that the
respective broadcasters programs enjoy "must-carry" status or that the network has sufficient excess capacity. Whether or not the broadcasters, in particular those enjoying
"must-carry" status, are entitled to assert claims for distribution directly against the cable network operator is unclear. It is also not uncontested, yet asserted by us and now standard
practice, that a cable network operator's obligation to transmit "must-carry" programs is subject to the conclusion of a carriage agreement with the respective broadcaster. In the absence
of such a carriage agreement, it has proven difficult for the cable network operator to claim carriage fees.

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Allocation and Use of Digital Transmission Capacities

The State Broadcasting Treaty also governs the digital transmission of television channels. The State Broadcasting Treaty prioritizes the allocation of digital
transmission capacities in three different categories of channels:



As
mentioned above, the new State Broadcasting Treaty effective from September 1, 2008 will include a provision implicitly confirming that it is in the cable operator's discretion
to determine which portion of capacity they allocate to the transmission of radio and television channels and telemedia services on the one hand, and telecommunications services on the other.

The
cable network operator is not entitled to de-bundle the digital program packages of public and private broadcasters and to compile their contents and other programs into
new program packages for its own marketing without the broadcaster's consent. However, the Treaty as of September 2008 acknowledges the cable operator's right to make changes that serve to enhance
technical efficiency as long as such changes do not have negative effects on the agreed-upon delivery standard. It is uncertain whether this entitlement includes the right to encrypt the
digital broadcasting signal without the broadcaster's consent, in order to make sure that only entitled subscribers can watch the digital broadcasted contents.

The
rules regarding the allocation of digital transmission capacities for radio channels vary from state to state. The new Treaty as of September 2008 will however introduce unified
must-carry obligations for radio channels.

Use of Technical Digital Platforms

The operation of technical digital platforms for television is also governed by the State Broadcasting Treaty. A digital platform in the technical sense can be
defined as the entirety of all infrastructure and technical means (e.g. CAS, subscriber management, transmission paths, etc.), which enable customers to receive, and providers to distribute,
digital content of any kind. The new Treaty as of September 2008 will introduce a general platform regulation (see above) in an attempt to extend must-carry and related obligations to
other digital delivery systems as well.

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Providers
of telecommunication services via technical digital platforms, which distribute broadcast or comparable telemedia services, must guarantee that the distribution technology used
in the technical digital platform allows diversity of offers. They are prohibited from restricting or discriminating against broadcasters or providers of telemedia, in particular, through the use of
conditional access systems, application programming interfaces and navigators or pricing models. Moreover, providers of telecommunications services are required to notify the state media authorities
of the use of conditional access systems and navigators and of the title to any application programming interfaces. See "License and notification requirements".

The
Bavarian state media authority ("Bayerische Landesanstalt für neue MedienBLM") confirmed by order of
July 23, 2004 that the navigator offered by KDG at that time complied with the regulatory requirements of the predecessor version of the State Broadcasting Treaty. Furthermore, in dismissing an
objection to this order filed by an alliance of public broadcasters, the BLM stated that our navigator also satisfied the applicable regulatory requirements of the State Broadcasting Treaty as
amended. However, at the present time, KDG does not use or offer this navigator expect as in the original digital receiver population the navigator was designed for.

The
Telecommunications Act also includes provisions applicable to the use and the licensing of conditional access systems and application programming interfaces. As pointed out above,
the relationship between the provisions of the Telecommunications Act and of the State Broadcasting Treaty and between the authority of the FNA and the state media authorities has not been clarified
by the latest legislation.

Regulation of Fees

Under the State Broadcasting Treaty, fees for the transmission of radio and television channels and of telemedia services may not be restrictive or
discriminatory. It is unclear whether this requirement also applies to fees for the licensing of conditional access systems, application programming interfaces and electronic program guides. The new
Treaty as of September 2008 makes such interpretation more likely. The operators of cable networks are required to notify the state media authorities of their feed-in fees. See "License
and notification requirements". And the state media authorities are authorized to review these fees. State media authorities are required to consult with the FNA before they decide upon investigated
infringements of the State Broadcasting Treaty. However, due to the split of the legislative authority between the Federal government and the states, it is doubtful whether the introduction of
regulation by the state media authorities of the fees that operators of cable networks charge broadcasters is in line with German constitutional law.

Provision of Telemedia Services

Under German law, the provision of electronic content offerings other than broadcasting services or pure telecommunications services, such as electronic press,
teleshopping services, or video-on-demand offers, are regulated by the Telemedia Act in force since March 1, 2007
(Telemediengesetz) and the current State Broadcasting Treaty, likewise in force since March 1, 2007 (until that time, these services were
regulated as Media Services in a separate treaty). For the regulations to apply it does not matter whether the electronic content service is delivered via fixed-line telephony networks,
cable networks or other means of distribution or whether the delivery is based on the Internet Protocol or any other transmission standard. The former distinction between tele services and media
services has been abolished under the State Broadcasting Treaty and the Telemedia Act. These changes do not have substantial consequences for our business. Recent discussions concerning the
implementation of the revised Audiovisual Media Services Directive into German law until the end of 2009 (see above) may lead to changes in the differentiation between broadcasting and telemedia
services, the outcomes and effects of which are however unclear at the moment.

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The
provision of a telemedia service does not require a license from, or a notification to, any regulatory body, as long as it is not a telemedia service "comparable to broadcasting".
However, a notification to the state media authority of telemedia services distributed via typical television distribution platforms, such as cable networks, is best practice. In a decision, the
European Court of Justice has ruled that so called near-video-on-demand offers qualify as broadcasting services under European law. According to this decision
providers of near-video-on-demand services must comply with program quotas for European productions, which could make it difficult to furnish
near-video-on-demand offerings with "Hollywood blockbusters" only. This decision may also result in near-video-on-demand
operators in Germany being prohibited from incorporating adult content into their offerings because under German regulation such content is allowed in telemedia but not in broadcasting offerings.
Again, it is unclear what effect the revised Audiovisual Media Services Directive might have on German national media law in this regard.

In
this context, the State Treaty on the Protection of Minors in Broadcasting and Telemedia (Jugendmedienschutz-Staatsvertrag), as
amended, provides for the admissibility of adult content offerings under specified conditions, namely ensuring that such content is only made available to closed groups of users. The competent
regulatory bodies of the German states have issued guidelines how a provider of telemedia services can meet the legal conditions, e. g. by way of identification and age verification systems. As
regards the current adult content telemedia service available via KDG's digital platform, the regulatory bodies have found that the system installed by KDG fully meets the safeguarding conditions.

Zoning Laws

German zoning laws currently restrict the installation of satellite dishes in certain areas. In addition, contracts with residents of multi-unit
dwellings may, and usually do, prohibit tenants from attaching satellite dishes to their apartments if they are connected to a cable network. However, this may change in the future. The European
Commission published a communication claiming that the EU's rules on free movement of goods and services prohibit national restrictions on the individual reception of satellite television signals.
While restrictions on individuals resulting from contracts with housing associations do not fall under these rules, the EU's current communication seems to exhibit a determination to remove
this perceived barrier to the free movement of goods and services. As a result, German law may change in the future, which may ultimately result in an increase in the number of satellite users and
intensify competition with satellite providers.

Environmental

We are subject to a variety of laws and regulations relating to land use and environmental protection, including those governing the clean-up of
contaminated sites. For example, asbestos-containing materials and polychlorinated biphenyls have been identified at approximately 20 to 30 of the facilities which we lease from DTAG under the SLAs.
We believe these facilities have been refurbished by DTAG in accordance with applicable law.

While
we could incur costs, such as clean up costs, fines and third-party claims for property damage or personal injury, as a result of violations of environmental laws and regulations,
we believe that we are in substantial compliance with the applicable requirements of such laws and regulations.

Important Business Developments

During fiscal year 2007/2008 the Company continued with its strategy to become the leading triple play company in Germany. In order to attain this goal, among
others the following actions were taken:



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C.    Organizational Structure

As of March 31, 2008, the following is a list of our significant group companies and our proportion of share-holding in each company: See also ITEM 6E
Group Structure.

Fully consolidated companies (IFRS 3)

Registered office

Shareholding
in %1

Kabel Deutschland GmbH

Unterföhring2

Kabel Deutschland Verwaltungs GmbH

Unterföhring

100.003

Kabel Deutschland Vertrieb und Service GmbH & Co. KG

Unterföhring

100.004

Kabel Deutschland Breitband Services GmbH

Unterföhring

100.005

TKS Telepost Kabel-Service Kaiserslautern Beteiligungs-GmbH

Kaiserslautern

100.006

TKS Telepost Kabel-Service Kaiserslautern GmbH & Co. KG

Kaiserslautern

100.007

Leto GmbH

Berlin

100.00Companies consolidated at equity (IAS 28)8

KABELCOM Braunschweig Gesellschaft für Breitbandkabel-Kommunikation mit beschränkter Haftung

Braunschweig

24.009

KABELCOM Wolfsburg Gesellschaft für Breitbandkabel-Kommunikation mit beschränkter Haftung

Wolfsburg

24.0010

Kabelfernsehen München Servicenter Gesellschaft mit beschränkter HaftungBeteiligungsgesellschaft

Munich

24.0011

Kabelfernsehen München Servicenter GmbH & Co. KG

Munich

30.2212

Kabel-Service Berlin GmbH (Sold on April 30, 2008 with economic effect as of January 1, 2008)

Berlin

24.0013

RKS Niedersächsische Kabel-Service-Beteiligungsgesellschaft mbH

Hanover

43.8014

RKS Niedersächsische Kabel-Servicegesellschaft mbH
& Co. KG

Hanover

52.63


D.    Property and Equipment

The Company does not own land and buildings. All buildings are leased. Leasehold improvements have to be removed from many of our properties at the end of the
lease. These obligations are accrued by the Company and the respective amount is capitalized in property and equipment.

Most
of the Level 2, 3 and 4 equipment needed for the core operations is owned by KDG and amortized on a straight-line basis.

The
Company owns and operates an advanced digital play-out facility capable of delivering encrypted digital television signals via satellite up-links to all of
Germany.

In
many cases KDG leases space in the cable ducts of DTAG to house KDG's cable network. In relation to these leases, KDG is subject to contractual asset retirement obligations.
Depreciation is charged over the normal useful life of the respective assets.

Customer
premises equipment is presented as part of the technical equipment. For customer premises equipment classified as operating lease, historical costs include the present value of
estimated future costs and expenses necessary for the reverse logistics of the equipment after the termination of the contract with the customer.

The
Company has Level 4 equipment leased on a finance lease agreement which is capitalized as technical equipment in property and equipment. The Level 4 equipment is
amortized on a straight-line basis.

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Also,
the Company has satellite transponders leased on a finance lease agreement which are capitalized as technical equipment in property and equipment. The satellite transponders
equipment are amortized on a straight-line basis.

We
believe that our properties, both owned and leased, are in good condition and are suitable and adequate for our business operations.

The
Senior Credit Facility is secured by all the assets of KDVS. See also ITEM 10C Additional Information.

ITEM 4A.    UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 5.    OPERATING AND FINANCIAL REVIEW AND PROSPECTS

A.    Operating Results

We operate the business through four operating segments: Cable Access, TV/Radio, Internet & Phone, TKS and Reconciliation segment which primarily includes
central services and corporate activities.

We
measure our financial performance in large part with reference to EBITDA. We define EBITDA as profit from ordinary activities before depreciation, amortization, non-cash
compensation, which consists primarily of expenses related to our management equity programs and non-cash restructuring expenses (Adjusted EBITDA). Adjusted EBITDA is not a recognized
accounting term, does not purport to be an alternative to profit from ordinary activities or cash flow from operating activities and should not be used as a measure of liquidity. We believe Adjusted
EBITDA facilitates operating performance comparisons from period to period and company to company by eliminating potential differences caused by variations in tax positions (such as the impact on
periods or companies of changes in effective tax rates or net operating losses) and the age and book depreciation of tangible assets (affecting relative depreciation expense). Because other companies
may not calculate Adjusted EBITDA identically to us, our presentation of Adjusted EBITDA may not be comparable to similarly titled measures of other companies. In addition, Adjusted EBITDA is not
calculated in the same way that "Consolidated EBITDA" is calculated under the indenture governing the Notes or under the terms of our Senior Credit Facilities. However, Adjusted EBITDA is a commonly
used term to compare the operating activities of cable television companies.

Impact of Inflation and Exchange Rate Fluctuations

A portion of our costs is affected by inflation. We attempt to restrict increases in our costs below the rate of inflation through productivity improvements and
capital expenditure. However, general inflation affects costs for our competitors and us.

Our
functional and reporting currency is the Euro. We have almost no revenues, and almost no expenses or liabilities that are denominated in currencies other than the Euros other than
described below. We could incur significant currency exchange risks in relation to the Dollar denominated Senior Notes, although we fully hedged this exposure at the time of closing the Senior Notes
over the initial five years or up until the first call date in July of 2009. In the future, if we incur other debt denominated in other currencies, such as Dollar denominated bank or bond debt, we
could incur additional currency risk and related hedging costs.

The exchange rate underlying our five year currency hedge was fixed at USD/EUR 1.2066 until 2009. A 1.0% increase (decrease) in the USD/EUR exchange rate subsequently to that would
result in an incremental increased (decreased) notional amount to be repaid in 2014 of approximately €

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5.1 million. Further a 1.0% increase (decrease) in the USD/EUR exchange rate would result in an incremental increased (decreased) annual interest payment of approximately
€0.5 million after expiry of the currency hedge in 2009.

Interest Rate Risk

Our exposure to market risk for changes in interest rates relates primarily to our debt obligations. We have no cash flow exposure due to rate changes on the
Senior Notes because they will bear interest at a fixed rate.

As
of March 31, 2008, we had interest rate swaps with a notional amount of approximately €455.5 million which effectively exchanged the floating
EURIBOR-based interest rate into a fixed interest rate of 3.705% per annum. In addition, we had interest rate caps of 4.2% per annum with a notional amount of approximately
€151.8 million as of March 31, 2008. The remaining balance of the Senior Credit Facilities Tranche A and Tranche B of up to
€867.7 million was not hedged and is therefore subject to fluctuations in the EURIBOR-based interest rate.

A 100 basis points increase in the current EURIBOR rate would result in an increase of annual interest payments of €5.4 million and a 100 basis points decrease in
the current EURIBOR rate would result in a decrease of annual interest payments of €6.6 million, based on a notional amount of the swaps of
€455.5 million, notional amount of the cap of €151.8 million, €1,150.0 million debt outstanding and current EURIBOR levels of
approximately 4.4%. Excluding the existing swap and cap arrangements, a 100 basis points change in the current EURIBOR rate would result in a change of €11.5 million annual
interest payments.

With regard on effect on net income and equity, a 100 basis points increase in the current EURIBOR rate would result in a decrease of €8.6 million and a decrease
in the same amount would result in an increase in net income and equity of €8.2 million respectively.

Critical Accounting Estimates

The preparation of our financial statements requires management to apply accounting methods and policies that are based on difficult or subjective judgments,
estimates based on past experience and assumptions determined to be reasonable and realistic based on the related circumstances. The application of these estimates and assumptions affects the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period.
Actual results may differ from these estimates given the uncertainty surrounding the assumptions and conditions upon which the estimates are based.

We
have summarized below our accounting policies that require the more subjective judgment of our management in making assumptions or estimates regarding the effects of matters that are
inherently uncertain and for which changes in conditions may significantly affect our results of operations and financial condition. For more information see the Notes to our consolidated financial
statements included elsewhere in this Form 20-F.

Property and Equipment

Property and equipment are recognized at cost less accumulated depreciation and accumulated impairment losses. Borrowing costs are not capitalized. Rebates, trade
discounts and bonuses are deducted from the purchase price.

For
technical equipment located on leased property, historical costs include the present value of estimated future costs and expenses necessary for restoration of the leased property
after termination of the lease agreement.

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Leases

Operating lease

A lease is accounted for as an operating lease if all the risks and benefits incidental to ownership of the leased item remain with the lessor. Operating lease
payments are therefore recorded on a straight-line basis over the lease term as an expense in the consolidated statement of operations.

Operating Lease for Customer Premises Equipment (CPE)

To connect to Internet & Phone services as well as to receive digital TV, the Company leases the necessary equipment to customers. These leases for which
the Company is the lessor, are classified as operating leases. Therefore, the Company capitalizes the equipment as fixed assets based on acquisition cost and the cost of removing the asset at the end
of the lease. Over the useful life of 3 years, the assets are depreciated using the straight-line method.

Finance Lease

In accordance with IAS 17 "Leases", assets leased under finance leases are recorded at the lower of fair value at the inception of the lease or the present
value of the lease payments. The assets are depreciated using the straight-line method over the shorter of the estimated useful life or over the lease period. The obligations related to
future lease payments are recognized as liabilities.
Lease payments are apportioned between the finance charges and reductions of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges
are charged directly against income.

Subsequent Expenses

Rental costs are expensed. Repair and maintenance charges are expensed during the financial period in which they are incurred. The cost of significant renovations
and additions are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance will be realized by the
Company. Significant renovations are depreciated over the shorter of the remaining useful life of the related asset or the lease term.

Depreciation of Fixed Assets

Depreciation is calculated based on the straight-line method over each asset's estimated useful life as follows:

Buildings and leasehold improvements

3 to 25 yearsTechnical equipment and machines

3 to 20 yearsProperty and equipment

3 to 15 years


Gains and losses from derecognition of fixed assets are determined by deducting the carrying amount of the asset being sold from the proceeds
received at the time of derecognition. The results are included in other operating income or in the corresponding expense line item. The assets' residual values, useful lives and depreciation methods
are reviewed, and adjusted if appropriate at each financial year end.

Intangible Assets

Customer List

In connection with the initial acquisition of the cable business by the Company in March 2003, approximately €681.7 million of the purchase
price was allocated to the customer list. Further additions

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to
the customer list that occurred during the twelve months ended March 31, 2008 and in the previous years are primarily related to the acquisition of Level 4 companies and subscribers.
The weighted remaining useful life of the customer list is 3.92 years, 4.61 years and 5.55 years as of March 31, 2008, March 31, 2007 and March 31, 2006,
respectively.

Other Intangible Assets

Intangible assets which are purchased separately are recorded at cost. Intangible assets that have been acquired as part of an acquisition of a business are
capitalized at fair value if they can be reliably measured at the acquisition date.

Computer
software is recorded at cost as an intangible asset.

The
Company recognizes intangible assets developed internally (consisting of software used by the company) to the extent the criteria in IAS 38 "Intangible Assets" are met.
Development costs for internally generated intangible assets are recognized at cost to the extent the Company can demonstrate the technical feasibility of completing the asset, how the asset will
generate future economic benefit, the availability of resources to complete the asset and the ability to measure reliably the expenditure during the development. If the requirements for capitalization
are not fulfilled, development costs are expensed as incurred.

The
Company recognizes subscriber acquisition costs incurred to obtain new subscribers if the costs are directly attributable to obtaining specific contracts, are incremental, can be
measured reliably and meet the definition and recognition criteria of an intangible asset in accordance with IAS 38. Subscriber acquisition costs incurred to obtain new contracts without an
initial contract period (open-ended contracts) are expensed as incurred.

Following
initial recognition, intangible assets are carried at cost less any accumulated depreciation and any accumulated impairment loss.

Amortization of intangible assets

The estimated useful life of the customer list is based on the average number of terminations and the term of the average contract life of individual end users
who generate significant contribution margins.

The
amortization of other intangible assets with definite useful lives is based on the straight-line method over the assets' estimated useful lives. Amortization begins when
the intangible asset is ready for use.

The
Company recognizes subscriber acquisition costs incurred to obtain new subscribers. The Company amortizes these costs over the initial contract period except for contracts where
there is past evidence regarding the expected customer relationship period.

The
amortization expense is recognized in the statement of operations in the expense category consistent with the function of the intangible assets.

The
useful lives are estimated as follows:

Customer list

8.5 yearsSoftware and licenses

1 to 10 yearsSubscriber Acquisition Costs

1 to 8.5 years


The appropriateness of the useful life for the customer list is validated on an annual basis.

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Financial Instruments

Recognition and De-recognition of Financial Instruments

Financial assets and liabilities are recognized when the Company enters into a contractual relationship with the respective counterparty or issuer. A financial
asset is derecognized when:



A
financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

Where
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as a de-recognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is
recorded in the consolidated statement of operations.

Financial Assets

Financial assets in the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, or available-for-sale financial assets, as appropriate. When financial assets are initially recognized they are measured
at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Company determines the classification of its financial assets
after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. All purchases and sales of financial assets in the
ordinary course of business are recognized on the date on which control over the asset changes.

Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category "financial assets at fair value through profit or loss". Financial assets are held
for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated and effective hedging instruments. Gains or
losses on investments held for trading are recognized in the consolidated statement of operations.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are
carried at amortized cost using the effective interest method. Gains and losses are recognized in the consolidated statement of operations when the loans and receivables are extinguished or impaired
as well as through the amortization process.

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Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as
available-for-sale or are not classified in any of the three preceding categories. After initial recognition available-for-sale financial assets are
measured at fair value with gains or losses being recognized as a separate component of equity until the investment is sold or until the investment is determined to be impaired at which time the
cumulative gain or loss previously reported in equity is included in the statement of operations.

Financial Liabilities

Financial liabilities (loans) are initially recognized at cost which corresponds to the fair value of the given consideration received net of issue costs
associated with the financial liabilities. In subsequent periods, liabilities are measured at amortized cost using the effective interest method with the exception of derivative financial instruments
which are measured at their fair market value.

Derivative Financial Instruments

Derivative financial instruments are used exclusively for the purpose of hedging foreign currency and interest rate risks arising from financing activities. In
accordance with IAS 39 "Financial Instruments: Recognition and Measurement", all derivative financial instruments are accounted for at fair value
irrespective of the purpose or the intention for which they were incurred. Depending on whether it is a fair value hedge or a cash flow hedge, changes in the fair value of the derivative financial
instruments for which hedge accounting is used are either reported in the statement of operations or in the statement of changes in equity under cash flow hedge reserve. In the case of a fair value
hedge, the gains or losses from the measurement of derivative financial instruments at fair value and the gains or losses related to the underlying contracts are recognized in the consolidated
statement of operations. In the case of changes in the fair value of cash flow hedges which are used to offset future cash flow risks arising from underlying transactions or planned transactions and
which have proved to be 100% effective in accordance with IAS 39, unrealized gains and losses are initially recognized in equity as a cash flow hedge reserve.

If derivative financial instruments are not 100% effective, the difference between the fair value and the changes in fair value of the related underlying contract is recognized in the
consolidated statement of operations. The portion of the change in fair value not covered by the underlying transaction is immediately recognized in the consolidated statement of operations. If hedge
accounting cannot be used by the Company, the change in the fair value of derivative financial instruments is recorded in the consolidated statement of operations.

Equity Investments in Associates

Investments in associates are accounted for using the equity method at the investor's share of equity pursuant to IAS 28 "Investments in Associates". The
Company's share of income, reduced by distributions and amortization of write-ups in amortizable assets from purchase accounting is disclosed in the fixed asset register as a change in
equity investments.

Trade and Other Receivables

Trade and other receivables are disclosed at their nominal amount less bad debt allowances for any amounts deemed uncollectible. In relation to trade receivables,
a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Company will not be able to
collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognized when they
are assessed as uncollectible.

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Impairment

The carrying amount of intangible assets and property and equipment is reviewed at every balance sheet date to determine whether there are any indications of
impairment. If such indications exist or when annual impairment testing is required, the recoverable amount is estimated. Impairment is necessary when the carrying amount of an asset or the related
cash-generating unit exceeds the recoverable amount. The corresponding impairment is expensed.

If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between
the asset's carrying amount and recoverable amount, i.e. the higher of the present value of estimated future cash flows discounted at the financial asset's original effective interest rate and
fair value less cost to sell. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognized when they are assessed as uncollectible.

Determination of Recoverable Amount

The recoverable amount of an asset is the greater of its fair value less costs to sell and its value in use. Value in use is determined by discounting the
estimated future cash flows to be derived from continuing use of the asset up until its ultimate disposal. The discount rate is based on a pre-tax interest rate that reflects current
market assessments of the fair value of money and the risks specific to the asset.

For
assets to which no cash flows can be directly attributed, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

Reversal of Impairment Loss

Impairment losses on assets are reversed when assumptions relating to the recoverable amount of the assets change. Impairment losses are only reversed up to the
carrying amount of the asset which would have been recorded if the asset had been subject to standard depreciation without impairment.

Employee Benefits

Under the Company's pension plans, KDG provides employees post-employment benefits under a defined benefit plan. The benefits are unfunded.

The
present value of future claims of participants is estimated using actuarial methods based on the amount of benefit earned for their service in the current and prior periods. The
liabilities to be recognized in the consolidated balance sheet result from the present value of the defined benefit obligation adjusted for any actuarial gains or losses, and less any past service
cost not yet recognized. The discount rate is determined by reference to the capital markets and takes into account the expected maturity of the obligation. KDG engaged qualified external actuaries to
perform the necessary actuarial calculations. The obligation is determined using the projected unit credit method.

If
the benefits of the pension plan improve, the share of those plan improvements relating to the employees' previous years of service will be recognized as an expense on a
straight-line basis over the period in which the claims vest. If the claims have already vested, the prior service cost is expensed immediately.

In
measuring the obligations arising from the defined benefit plans, actuarial gains and losses arising after April 1, 2003 are not recognized in the consolidated statement of
operations until the cumulative outstanding amounts exceed a corridor of 10% (corridor approach) of the defined benefit obligation as of the measurement date. The portion of the amount exceeding the
corridor is amortized

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to
the consolidated statement of operations over the remaining average service life of the employees entitled to pensions.

Other Provisions

Other provisions are recognized in the consolidated balance sheet pursuant to IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" when a
legal or constructive obligation to a third party arises as a result of past events, an outflow of resources embodying economic benefits will be required to settle the obligation and the anticipated
amount of the provision can be reliably estimated. Non-current other provisions are stated at their discounted settlement value on the balance sheet date where the effect of the time value
of money is material.

Revenue and Other Income

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The
different types of revenue are recognized as follows:

Installation and Network Connection

Revenue from the installation of the cable connection and the network connection is recognized when the services have been rendered, the costs incurred can be
measured reliably and the Company is not obliged to provide any future network connection or installation services.

Rendering of Services

Revenue generated by the delivery of analog and digital pay products, internet and telephone services, as well as carriage fees and digital playout facility fees
paid by television broadcasters, are recognized when services have been provided, the costs incurred can be measured reliably and the Company is not obliged to provide any future services. Prepayments
are accounted for by deferring the received payments and amortizing them straight-line over the service period.

When
free months are offered to customers in relation to a subscription, the Company recognizes the total amount of billable revenue in equal monthly installments over the term of the
contract provided that the Company has the enforceable and contractual right to deliver the customer with the products after the promotional free month period. If free months are given without a
contract at the beginning
of a subscription period, the company does not recognize revenues during the free months as the customer's continuance is not assured.

Sale of Goods

Revenue for the sale of digital set-top boxes, cable modems, and other goods (Customer Premises EquipmentCPE) is recognized when the
significant risks and rewards of ownership of the goods have passed to the buyer. Costs in connection with returns are accounted for by accruing the respective amount. If the Company acts as an agent,
revenue is only recognized in the amount of the sales commissions.

Multiple Elements Arrangements

For bundled services in multiple element arrangements the Company recognizes revenue for each element on the basis of the relative fair value of each item in the
transaction, if there is an evidence of fair value.

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Share-Based Payments

The Company applies IFRS 2 "Share-Based Payment". Under IFRS 2, plans which result in share-based payment transactions have to be accounted for as
cash-settled if the interest holder will receive a payment in cash upon settlement rather than the underlying equity instruments. Due to the terms of the different programs at KDG, it is
highly likely that the general partner of Cayman Cable Holding L.P. (the Partnership) will exercise the existing repurchase option in most cases of the interest holders' termination of
employment and settle in cash. Alternatively, employees leaving the Company may have the option to put their vested interests to Cayman for cash. In the case of a put or call, the employee is
generally protected from decreases in fair value below their initial investment amount. For such cash-settled share-based payment transactions, IFRS 2 requires the entity to account
for share-based payments to management as personnel expense and a corresponding increase in other liabilities. For interests in the Management Equity Participation Program I (MEP I) and in the
Management Equity Participation Program IV (Indirect MEP IV), which are share acquisition programs the costs of cash-settled transactions are measured initially based on the notional
amount paid.

For
MEP II and III, as well as the MEP IV Option program and MEP V, which all are option programs, the costs of cash-settled transactions are measured initially at fair value
at the grant date using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted because it is typically not possible to reliably estimate the fair
value of employee services received. This fair value is expensed over the period until vesting with recognition of a corresponding liability.

For
all MEP programs the services received during the vesting periods and, therefore, the corresponding liabilities, are re-measured at each balance sheet date up to and
including the settlement date with changes in fair value recognized in the consolidated statement of operations.

Taxes on Income

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amounts are those that are enacted or substantively enacted by the balance sheet date.

Except
for those cases described below, deferred income tax is provided using the liability method on all temporary differences between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes at the balance sheet date.

Deferred
income tax liabilities are recognized for all taxable temporary differences, except:



Deferred
income tax assets are recognized for all temporary deductible differences, carry-forward of unused tax credits and unused tax losses to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized:



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The
carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset to be utilized.

Deferred
income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income
taxes relating to items recognized directly in equity are recognized in equity and not in the statement of operations.

Deferred
tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation authority.

Key Judgments and Estimation Uncertainty

The preparation of the consolidated financial statements in accordance with IFRS requires judgments and estimations to be made which have an effect on the
carrying amounts of recognized assets and liabilities, income and expenses and contingent liabilities. In some cases, the actual values may differ from the judgments and estimations. Changes are
recognized in the consolidated statement of operations when better information is available.

Key Judgments

In the process of applying KDG's accounting policies, management has made the following judgments, apart from those involving estimations, which have the most
significant effect on the amounts recognized in the consolidated financial statements.

Derivatives

The Company has entered into interest rate swaps, interest rate caps and currency swaps to hedge its risks resulting from exposure to changes in interest rates
and foreign currency rates. All of these derivative instruments have been accounted for in accordance with IAS 39 at fair value irrespective of the purpose or the intention for which they were
used. The currency swaps were classified as cash flow hedges.

Operating Leases for CPE

The Company offers products that contain signal delivery and the right to use hardware devices. The hardware devices are essential for the signal delivery to the
customer. Since the fulfillment of these arrangements is dependent on the use of a specific asset and the arrangements convey a right to use the asset, the contracts contain a lease in accordance with
IFRIC 4 (KDG as lessor).

Hardware
devices are recognized as equipment in accordance with IAS 16 and amortized over the useful life of three years.

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Operating Lease Cable Ducts

In certain cases KDG leases space in the cable ducts of Deutsche Telekom AG (DTAG) to house KDG's network cable. The Company has determined that it retains no
significant risks and rewards of ownership of these cable ducts and, therefore, accounts for the leases as operating leases. See Item 10C Material Contracts.

Finance Lease Transponders

The Company has leased specific satellite transponders in order to transmit audio and video signals. The Company has determined that the rights to use specific
transponders have been transferred and that the lease term of specific transponders covers the major part of the economic life of the transponders. Therefore, the Company has classified and accounted
for the leases as finance leases according to IAS 17.

Estimation Uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Derivatives

The fair values of the derivative financial instruments as of the balance sheet date have been estimated at the net present values (discounted by market yield
curves) of the future payments and using standard models (in the case of caps). The total fair values of the derivative financial instruments amounted to minus €116.3 million,
minus €53.2 million and minus €26.5 million as of March 31, 2008, March 31, 2007 and 2006, respectively.

Share-Based Payments

As of March 31, 2006 and for periods prior to this, it was management's intention to settle MEP I using the formula price as stated in the respective
limited partnership agreement. Effective April 19, 2006 and in connection with the 5th amendment to the limited partnership agreement, the controlling shareholders of Cayman Cable
modified the settlement terms of MEP I interests in Cayman Cable Holding L.P to better reflect current market value conditions, changing the settlement formula from an EBITDA formula with fixed
multiples to estimated fair value. The change in the fair price estimation resulted in an increase in personnel expenses in the amount of €36.8 million for the fiscal year ended
March 31, 2007.

Based on the 5th amendment to the limited partnership agreement, the fair value measurement for MEP IV interests is based on the same valuation methods as is used for MEP I.

The
measurement of the fair value at grant date with respect to the MEP II and MEP III option plans as well as to the MEP IV Option Program and MEP V is based on the Black-Scholes option
pricing model. The main parameters, the expected volatility of the values of the shares, the estimated term of the options and the risk free interest rate on grant date were estimated by the Company.

The
Company recognized expenses with respect to all MEP plans in an amount of €23.0 million, €41.8 million and
€19.2 million for the years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

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Internally Developed Software

The Company recognized intangible assets developed internally (consisting of software used by the Company) to the extent the criteria of IAS 38 were met.
Development costs for internally generated intangible assets are recognized at cost to the extent the assets are economically usable and the costs can be reliably measured. For the years ended
March 31, 2008, March 31, 2007 and March 31, 2006, respectively, approximately €2.5 million, €1.0 million and
€3.0 million of costs for internally developed software were capitalized.

Customer List

The customer list is primarily amortized on a straight-line basis over 8.5 years. The estimated useful life is based on the average number of
terminations and the term of the average contract life. The book value of the customer list amounted to €317.8 million, €382.4 million and
€460.5 million for the years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Provision for Pensions

With respect to the actuarial calculation of the provision for pensions, the Company estimated the future salary increases, future pension increases and the
discount rate. As of March 31, 2008, March 31, 2007 and March 31, 2006, the provision for pensions amounted to €29.1 million,
€24.2 million and €19.8 million, respectively.

Asset Retirement Obligations

The amount of the accrual is based on an estimate of the costs expected for the demolition and restoration of the technical facilities. Expectations regarding the
lessor waiving asset retirement performance requirements are factored into the calculation of best estimate of the obligation related to the leased cable ducts under IFRS. Approximately 93% of KDG's
obligations are related to technical equipment, including different kinds of cable and signal transmitting and receiving technology in cable ducts of DTAG. KDG assumes that 30% of the technical
equipment will be replaced by other technologies after 15 years. The remaining 70% of the technical equipment is expected to be restored after 30 years. The remaining 7% of the asset
retirement obligations are divided into accruals for furniture, fixtures and miscellaneous restoration obligations. The asset retirement obligations amounted to €20.7 million,
€20.6 million and €20.0 million as of March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Comparison of Operating Results for the fiscal years ended March 31, 2008 with March 31, 2007

Revenues

The following chart gives an overview of the Company's revenues for the fiscal year ended March 31, 2008 compared to the fiscal year ended March 31,
2007. Total revenues for the fiscal year

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ended
March 31, 2008 increased by €103.7 million or 9.5% to €1,196.9 million from €1,093.2 million for the fiscal year ended
March 31, 2007.

Fiscal Year Ended March 31,2008

2007(€ million)Cable Access

867.1

845.6TV/Radio

179.8

163.0Internet & Phone

121.4

56.5TKS

28.6

28.1Total Revenues

1,196.9

1,093.2


Cable Access

Cable Access contains all activities and services linked to the customer's physical access to the Company's cable network either directly to end customers or
indirectly through commercial Level 4 operators or housing associations for which the Company charges a fee.

Cable
access is the primary basis for free and paid services offered by the Company, including TV and radio services and Internet & Phone services. In September 2007, the Company
revised its strategy of requiring cable access as a basis for subscribing to Internet & Phone in order to reach customers not using cable television.

Our
cable access business generates revenues through subscription fees, installation fees and other revenues. Through our cable television access business we generated
€867.1 million or approximately 72.4% of our total revenues for the fiscal year ended March 31, 2008.



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Cable Access Revenues

Fiscal Year Ended
March 31,2008

2007(€ million)Cable Access Subscription Fees

854.1

833.8Installation Fees

7.6

7.0Other Revenues

5.4

4.8Total Cable Access Revenues

867.1

845.6


ARPU(16)

(€)Cable Access

7.79

7.31


---

As of March 31,RGUs2008

2007(in thousand)Cable Access

8,936

9,276


For the fiscal year ended March 31, 2008 cable access subscription fees increased by €20.3 million or 2.4% to
€854.1 million from €833.8 million for the fiscal year ended March 31, 2007. The increase in revenue
primarily results from a price increase implemented in March 2007. For new single family customers connecting to our network we offer a digital access product with a free set-top box. We
will continue to increase the digital penetration in our cable households served.

For
the fiscal year ended March 31, 2008 installation fees increased by €0.6 million or 8.6% to €7.6 million from
€7.0 million for the fiscal year ended March 31, 2007 primarily due to cost reimbursements received from housing associations for the upgrade of our two way capable
network.

For
the fiscal year ended March 31, 2008 other revenues increased by €0.6 million or 12.5% to €5.4 million from
€4.8 million for the fiscal year ended March 31, 2007. This is related to the completion of a construction project where we acted as a subcontractor and built the
Level 4 network for which we charged a housing association.

TV/Radio

In addition to the cable access subscription business described above, the Company offers its own pay TV product portfolio. The Company's pay TV packages are
branded as Kabel Digital Home and Kabel Digital International. Kabel Digital Home offers 39 basic pay TV channels within seven genres (documentaries, movies and series, sports, entertainment, kids,
music and erotic) primarily dedicated to a German speaking audience. Kabel Digital International comprises 43 foreign language Pay TV channels catering to the demand of Germany's ethnic populations.
The Company sells its pay TV packages directly to consumers and, to a lesser extent, indirectly through certain Level 4 operators and an unaffiliated regional cable television operator. Under
these agreements, the wholesale customer typically receives a discount to our listed retail subscription fee.

In
addition to serving its own subscriber base, the Company's digital playout center also delivers digital video signals to unaffiliated regional cable television operators in Germany
for distribution to the subscribers served by these operators. Among the operators that used the service previously, only

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one
remains from January 1, 2008. This operator is expected to discontinue the use of our digital playout services by the end of the calendar year 2008.

Our
TV/Radio business generates revenue through subscription fees, carriage fees, fees for services in connection with our digital playout facility and customer premise equipment (CPE;
e.g. receiver) sales.



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Revenues TV/Radio

Fiscal Year Ended
March 31,2008

2007(€ million)Pay TV Subscription Fees

69.9

55.6Analog/Digital Carriage Fees

100.0

99.6Playout Facility Fees

1.1

2.0Other Digital Revenues

8.8

5.8Total TV/Radio revenues

179.8

163.0


ARPU

(€)Pay TV

7.73

7.71Kabel Digital+

3.33

n/aTotal blended TV/Radio

7.55

7.71


As of March 31,RGUs2008

2007(in thousand)Pay TV

779

690Kabel Digital+

60

2Total TV/Radio RGUs

839

692


Pay TV subscription fees increased substantially by €14.3 million or 25.7% to €69.9 million in the
fiscal year ended March 31, 2008 from €55.6 million for the fiscal year ended March 31, 2007 primarily resulting from a rapidly growing subscriber base. We will
continue to strengthen our pay TV products to achieve further growth in the pay TV segment.

Carriage
fees increased by €0.4 million or 0.4% to €100.0 million in the fiscal year ended March 31, 2008 from
€99.6 million for the fiscal year ended March 31, 2007. The future development of carriage fees will depend on the number of subscribers connected to our network. Until
December 31, 2007 the Company paid a portion (approximately 38%) of certain revenues derived from digital carriage fees to the unaffiliated regional operators based on the number of subscribers
served. KDG recorded €4.9 million of pass through revenue as cost of services rendered for the fiscal year ended March 31, 2008 and €6.9 million in
the fiscal year ended March 31, 2007. These fees are now paid directly to the regional cable operators by the Pay TV operator.

Playout
facility fees decreased by €0.9 million or 45.0% to €1.1 million in the fiscal year ended March 31, 2008 from
€2.0 million for the fiscal year ended March 31, 2007. Revenues related to playout facility fees will continue to decrease and are expected to be completely eliminated by
the end of the year 2008.

Other
digital revenues increased by €3.0 million or 51.7% to €8.8 million in the fiscal year ended March 31, 2008 from
€5.8 million in the fiscal year ended March 31, 2007. This increase is primarily related to Kabel Digital+ revenues and is expected to continue in the future.

The
total blended TV/Radio ARPU decreased by €0.16 or 2.1% to €7.55 in the fiscal year ended March 31, 2008 compared to €7.71 in
the fiscal year ended March 31, 2007. In general the ARPU has decreased due to the introduction of Kabel Digital+, which is generally offered 3 months free of charge.

72

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Internet & Phone

The Company can offer Internet & Phone services to those homes which are passed by its upgraded bi-directional network (630 MHz) and where we
have the ability to market our products (Marketable Homes). As of March 31, 2008, the Company passed approximately 10.9 million homes with an upgraded network which had return path
capability to enable two-way communication. The Company offers Internet and Phone products independently; however, most customers subscribe to bundled offerings of Internet & Phone.
Prior to September 2007, the Internet & Phone product was only offered to customers who subscribed to cable television access; since then we also offer Internet & Phone to
non-cable television access subscribers. As of March 31, 2008, the Company served approximately 421 thousand subscribers which generated approximately 393 thousand
Internet and 361 thousand Phone RGUs.

Internet & Phone

Fiscal Year Ended March 31,2008

2007(€ million)Subscription Fees (recurring)

115.8

55.2Installation Fees and other non-recurring revenues

5.6

1.3Total Internet & Phone Revenues

121.4

56.5


ARPU

(€)Kabel Internet & Kabel Phone blended

19.11

21.53


As of March 31,RGUs2008

2007(in thousand)Kabel Internet

393

179Kabel Phone

361

152Total Internet & Phone RGUs

754

331


Revenues for Internet & Phone include recurring revenue from monthly subscription fees and non-recurring revenue from
installation fees and the sale of CPE.

In
the fiscal year ended March 31, 2008, subscription fees increased substantially by €60.6 million or 109.8% to €115.8 million from
€55.2 million for the fiscal year ended March 31, 2007. This increase was primarily due to the doubling of Internet & Phone RGUs.

In
the fiscal year ended March 31, 2008, installation fees and other non-recurring revenues increased by €4.3 million or 307.1% to
€5.6 million from €1.3 million for the fiscal year ended March 31, 2007. This increase is related to an installation fee which was introduced in
April 2007 by the company for all Internet & Phone products. Installation fees will continue to be a source of revenue.

The
Internet & Phone ARPU decreased by €2.42 or 11.2% to €19.11 in the fiscal year ended March 31, 2008 from €21.53 for the
fiscal year ended March 31, 2007 which was primarily driven by the decrease in price in order to be more competitive in the fast growing Internet & Phone market. Another reason is the
increasing percentage of subscribers taking bundled products which are generally offered at a discount price compared to prices for the stand-alone products.

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Going
forward, the Company expects Internet & Phone ARPU to stabilize over time as the market matures.

TKSTelepost Kabel-Service Kaiserslautern GmbH & Co. KG

TKS, a wholly owned subsidiary of KDVS, provides cable access, internet and phone services to NATO military personnel based in Germany. It also provides billing
services for telephone customers of Deutsche Telekom AG (DTAG) who prefer English language bills.

Additionally,
TKS sells certain telecommunication products in its shops to personnel on NATO military bases, such as prepaid mobile phones, cash cards, and telecommunication related
products and services.

TKS Revenues

Fiscal Year Ended March 31,2008

2007(€ million)Billing services revenues

7.2

8.5Internet Revenues

6.4

5.9Cable Television Revenues

4.6

5.0Mobile Phone Services

4.5

1.2Merchandise

4.0

6.6Phone Services

1.3

n/aOther Revenues

0.6

0.9Total TKS Revenues

28.6

28.1


Subscribers

As of March 31,2008

2007(in thousand)TKS Subscribers (cable TV)

44

44


TKS revenues increased by €0.5 million or 1.8% to €28.6 million for the fiscal year ended
March 31, 2008 from €28.1 million for the fiscal year ended March 31, 2007. The increase is primarily related to higher revenues from Mobile Phone Services and the
new TKS bundle product "surf'n talk" which was introduced in November 2007. Partly offsetting this positive impact was a decrease in revenues from billing services related to a reduction of military
personnel based in Germany and a decrease in sale of merchandise.

Expenses

The following chart gives an overview of the Company's expenses for the fiscal year ended March 31, 2008 compared to the fiscal year ended March 31,
2007. Total expenses for the fiscal year

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ended
March 31, 2008 increased by €43.3 million or 4.2% to €1,070.0 million from €1,026.7 million for the fiscal year ended
March 31, 2007.

Fiscal Year Ended March 31,2008

2007(€ million)Cost of Services Rendered

588.5

567.1Selling Expenses

352.8

318.7General and Administrative Expenses

128.7

140.9Total Expenses

1,070.0

1,026.7


Cost of Services Rendered

Cost of services renderedare costs related to the revenue generating business activities of the Company.

Fiscal Year Ended March 31,2008

2007(€ million)Cost of Materials and Services

314.0

288.2Personnel Expenses

44.2

63.0Depreciation and Amortization

154.7

133.1Other Cost and Expenses

75.6

82.8Total Cost of Services Rendered

588.5

567.1


In the fiscal year ended March 31, 2008, cost of services rendered increased by €21.4 million or 3.8% to
€588.5 million from €567.1 million for the fiscal year ended March 31, 2007.

Included
in cost of services rendered for the fiscal year ended March 31, 2008 are costs related to the restructuring of the technical department of
€5.5 million. These costs primarily relate to external service providers and should be eliminated as the restructuring process is finalized.

Cost of materials and servicesprimarily include Service Level Agreements with DTAG (SLA) which are related to the lease of duct space,
co-location facilities, fiber optic systems and energy. In addition to SLA payments, cost of materials and services include content expenses, maintenance of our network, conditional access
license expenses, special services for Internet & Phone and other materials and services. In the fiscal year ended March 31, 2008, cost of materials and services increased by
€25.8 million or 9.0% to €314.0 million from €288.2 million for the fiscal year ended March 31, 2007.

Expenses
for SLAs decreased by €4.5 million or 2.7% to €165.0 million for the fiscal year ended March 31, 2008 from
€169.5 million(17) in the fiscal year ended March 31, 2007. Due to the upgrade and roll out of our two way capable network in the state of Bavaria and Lower
Saxony the Company entered into agreements to lease a fibre backbone covering the region. The Company was partly able to offset the increased cost of this backbone through unit price reductions
related to other service level agreements.

---

75

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In the fiscal year ended March 31, 2008, content costs, primarily for pay TV activities, increased by €8.9 million
or 24.7% to €44.9 million from €36.0 million in the fiscal year ended March 31, 2007. The increase is related to subscriber growth and the addition
of certain channels.

Costs
for interconnect increased by €8.3 million or 102.5% to €16.4 million for the fiscal year ended March 31, 2008 from
€8.1 milion for the fiscal year ended March 31, 2007 related to the variable usage cost of phone subscribers. Interconnection costs will continue to rise with the number of
phone subscribers.

Network
expenses increased by €6.0 million or 73.2% to €14.2 million for the fiscal year ended March 31, 2008 from
€8.2 million for the fiscal year ended March 31, 2007 primarily due to the continued upgrade of our networks. As long as the Company continues to upgrade the network and
to add additional capacity, network costs will increase.

Costs
for installation of modems decreased by €4.2 million or 95.5% to €0.2 million for the fiscal year ended March 31, 2008 from
€4.4 million for the fiscal year ended March 31, 2007 due to the full impact of the capitalization of these costs which had started in November 2006.

Other
cost of materials and services increased by €11.3 million or 18.2% to €73.3 million for the fiscal year ended March 31, 2008
from €62.0 million for the fiscal year ended March 31, 2007. The increase primarily results from an increase of the maintenance costs and cost of materials from upgraded
networks and substantial growth in our Internet & Phone product offerings.

Personnel expensesinclude wages, salaries, social security and pension costs related to the technical staff as well as expenses for the
restructuring of the technical departments and non-cash expenses related to the Management Equity Participation program. In the fiscal year ended March 31, 2008 personnel expenses
include €2.4 million(18) for current restructuring. In the fiscal year ended March 31, 2007 €11.6 million were accrued for the
restructuring of the technical department. In the fiscal year ended March 31, 2008 personnel expenses include non-cash expenses related to the Management Equity Participation
program in the amount of €0.8 million compared to €0.3 million in the fiscal year ended March 31, 2007. Personnel expenses adjusted by the
Management Equity Participation program and restructuring expenses decreased by €10.1 million or 19.8% to €41.0 million in the fiscal year ended
March 31, 2008 from €51.1 million for the fiscal year ended March 31, 2007, primarily due to an achieved decrease in the number of employees as a result of the
restructuring of the technical departments.

---

Depreciation and amortizationexpenses primarily include the depreciation of the network,
capitalized leased transponders and the digital platform. In the fiscal year ended March 31, 2008, depreciation and amortization expenses increased by €21.6 million or
16.2% to €154.7 million from €133.1 million for the fiscal year ended March 31, 2007 primarily due to substantial investments made to upgrade the
network for two way capacity.

Other cost and expensesprimarily include copyright fees, fees paid to the "Bayerische Medienanstalt", IT, rent for technical
infrastructure and other miscellaneous expenses. In the fiscal year ended March 31, 2008, other cost and expenses decreased by €7.2 million or 8.7% to
€75.6 million from €82.8 million for the fiscal year ended March 31, 2007. This decrease primarily results from the abolition of the fees paid to
the "Bayerische Medienanstalt" due to a change in law which took effect on January 1, 2008 and decreased consulting expenses as the consulting process for restructuring measures was completed.

Excluding
the impact of non-cash amortization and depreciation and the MEP, total cash expenses included in cost of services rendered decreased by
€0.7 million or 0.2% to €433.0 million for the fiscal year ended March 31, 2008 from €433.7 million for the fiscal year
ended March 31, 2007.

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Selling Expenses

Selling expenses are expenses incurred to support the sales effort of the Company's products and services.

Fiscal Year Ended March 31,2008

2007(€ million)Cost of Materials and Services

26.1

27.1Personnel Expenses

71.4

70.5Depreciation and Amortization

115.5

96.0Other Cost and Expenses

139.8

125.1Total Selling Expenses

352.8

318.7


In the fiscal year ended March 31, 2008, selling expenses increased by €34.1 million or 10.7% to
€352.8 million from €318.7 million for the fiscal year ended March 31, 2007. This is primarily due to the items discussed below.

Cost of materials and servicesincluded in selling expenses are services related to the general distribution of our product packages. Cost
of materials and services decreased by €1.0 million or 3.7% to €26.1 million for the fiscal year ended March 31, 2008 from
€27.1 million for the fiscal year ended March 31, 2007.

Personnel expensesinclude wages, salaries, social security costs and pension costs related to the sales, marketing and call center
personnel as well as non-cash expenses related to the Management Equity Participation program and expenses for restructuring. In the fiscal year ended March 31, 2008 personnel
expenses include €1.6 million related to the Management Equity Participation program compared to €2.7 million for the fiscal year ended March 31,
2007. In the fiscal year ended March 31, 2008 minor amounts related to the restructuring expenses are included compared to €1.0 million for the fiscal year ended
March 31, 2007. Personnel expenses adjusted by the Management Equity Participation program and restructuring expenses increased by €3.0 million or 4.5% to
€69.8 million in the fiscal year ended March 31, 2008 from €66.8 million in the fiscal year ended March 31, 2007. The increase primarily
resulted from an increase in the number of call center employees and from scheduled salary increases.

Depreciation and amortizationexpenses primarily include the amortization of the customer list, capitalized sales commissions paid to the
Company's call center representatives, and CPE. The amortization period for the capitalized subscriber acquisition costs depends on the product offered and is 8.5 years for our access products
corresponding to the expected life average of the contracts and 12 or 24 months for our pay TV and Internet & Phone products corresponding to the fixed contract duration. Expenses
related to depreciation and amortization increased by €19.5 million or 20.3% to €115.5 million for the fiscal year ended March 31, 2008 from
€96.0 million for the fiscal year ended March 31, 2007 due to higher amortization of capitalized subscriber acquisition costs and CPE.

Other cost and expenseswithin selling expenses primarily include costs for advertising, marketing and sales support, bad debt expenses,
sales commissions and other miscellaneous expenses. These costs increased by €14.7 million or 11.8% to €139.8 million for the fiscal year ended
March 31, 2008 from €125.1 million for the fiscal year ended March 31, 2007 primarily due to increased bad debt. The bad debt expense increase is in line with the
overall increase in accounts receivable. During the year, stringent cross-functional programs to tighten the collection process have continued to further leverage accounts receivable control.
Collection of accounts receivable is expected to return to normal operating levels.

77

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Excluding
the impact of non-cash amortization and depreciation and the MEP, total cash expenses included in selling expenses increased by
€15.8 million or 7.2% to €235.7 million for the fiscal year ended March 31, 2008 from €219.9 million for the fiscal year
ended March 31, 2007.

General and Administrative Expenses

Fiscal Year Ended March 31,2008

2007(€ million)Personnel Expenses

64.5

76.1Depreciation and Amortization

23.8

17.5Other Cost and Expenses

40.4

47.3Total General and Administrative Expenses

128.7

140.9


General and administrative expensesare related to headquarter functions such as senior
management, legal, regulatory, finance, human resources, purchasing, IT and investor relations. These are expenses that are not directly allocated to cost of services rendered or selling expenses.
General and administrative expenses include personnel, consultants, IT, rent and depreciation and amortization of software.

In
the fiscal year ended March 31, 2008, general and administrative expenses decreased by €12.3 million or 8.7% to €128.7 million
from €141.0 million for the fiscal year ended March 31, 2007. This is primarily due to the items discussed below.

Personnel expensesinclude wages, salaries, social security costs and pension costs related to general and administrative personnel as
well as non-cash expenses related to the Management Equity Participation program and expenses for restructuring. In the fiscal year ended March 31, 2008 personnel expenses include
non-cash expenses related to the Management Equity Participation program in the amount of €20.6 million compared to €38.8 million in the
fiscal year ended March 31, 2007. In the fiscal year ended March 31, 2008 restructuring expenses in the amount of €0.2 million are included compared to
€1.8 million for the fiscal year ended March 31, 2007. Personnel expenses adjusted by the Management Equity Participation program and restructuring expenses increased by
€8.2 million or 23.1% to €43.7 million in the fiscal year ended March 31, 2008 from €35.5 million in the fiscal year ended
March 31, 2007. This increase is primarily resulting from an increase in the number of employees and from scheduled salary increases.

Depreciation and amortizationexpenses primarily include the depreciation and amortization of IT and standard software licenses. In the
fiscal year ended March 31, 2008, these expenses increased by €6.3 million or 36.0% to €23.8 million from €17.5 million for
the fiscal year ended March 31, 2007 primarily due to the amortization related to the Company's customer care and billing system, a new SAP system and other IT-applications.

Other cost and expenseswithin general and administrative expenses primarily include costs for IT, external consultants and other
miscellaneous expenses. In the fiscal year ended March 31, 2008, other cost and expenses decreased by €6.9 million or 14.6% to €40.4 million from
€47.3 million for the fiscal year ended March 31, 2007. This primarily results from a decrease in IT expenses.

Excluding
the impact of non-cash amortization and depreciation and the MEP, total cash expenses included in general and administrative expenses decreased by
€0.4 million or 0.5% to €84.3 million for the fiscal year ended March 31, 2008 from €84.7 million for the fiscal year ended
March 31, 2007.

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Profit from Ordinary Activities

Profit from ordinary activities for the fiscal year ended March 31, 2008 increased by €59.8 million or 75.0% to
€139.5 million from €79.7 million for the fiscal year ended March 31, 2007.

The
increase is primarily related to the issues discussed in the above sections.

Interest Income

Interest income is derived from our bank deposits. In the fiscal year ended March 31, 2008 interest income decreased by
€1.5 million or 41.7% to €2.1 million from €3.6 million in the fiscal year ended March 31, 2007.

Interest Expenses

Interest expenses include interest accrued on bank loans, the Company's 2014 Senior Notes, amortization of financing fees, interest on finance leases and other
interest. Interest expenses increased by €16.1 million or 10.3% to €171.8 million for the fiscal year ended March 31, 2008 from
€155.7 million for the fiscal year ended March 31, 2007. This increase is primarily related to increased expenses from the Senior Credit Facility by
€13.0 million.

Fiscal Year Ended March 31,2008

2007(€ million)Senior Notes

78.5

78.5Senior Credit Facility

81.6

68.6Amortization of Capitalized Finance Fees

8.3

9.8Finance Lease

2.9

2.7Pensions

1.4

1.2Asset Retirement Obligations

1.0

0.9Interest Hedge

(3.1
)
(8.7
)Other

1.2

2.7Total Interest Expenses

171.8

155.7


Outstanding interest bearing indebtedness as of March 31, 2008 increased by €60.0 million or 3.1% to
€1,965.6 million from €1,905.6 million as of March 31, 2007 due to a higher capital need for the network acquisition, investments and upgrade of
our network.

Accretion or Depreciation on Investments and other Securities

In the fiscal year ended March 31, 2008 expenses in the amount of €3.8 million were recorded, whereas in the fiscal year ended
March 31, 2007 income in the amount of €0.3 million was recorded. 2008 expenses result from a devaluation of the Company's current investments which were sold in October
2007.

Income from Associates

Income from associates increased by €0.5 million or 125.0% to €0.9 million for the fiscal year ended
March 31, 2008 from €0.4 million in the fiscal year ended March 31, 2007.

79

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Loss before Taxes

Loss before taxes decreased by €38.6 million or 53.8% to €33.1 million for the fiscal year ended March 31,
2008 from €71.7 million in the fiscal year ended March 31, 2007.

This
decrease is related to the issues discussed in the above sections.

Taxes on Income

Tax expenses amount to €0.7 million for the fiscal year ended March 31, 2008 compared to €27.5 million in the
fiscal year ended March 31, 2007. For the fiscal year ended March 31, 2008 taxes are comprised of deferred tax income in the amount of €0.1 million and current tax
expense of €0.8 million. For the fiscal year ended March 31, 2007 taxes are comprised of deferred tax expense in the amount of





€26.8 million and current tax expense of €0.7 million. As a result of the 2008 corporate tax reform, the combined income tax will be 29.79% from 2008. The
anticipated tax rate of 29.79% (2007 and 2006: 39.19%) is based on the corporate income tax rate of 15.0%, a solidarity surcharge of 5.5% on corporate income tax and a trade tax rate of 13.96%.

Net Loss

Net loss decreased by €65.4 million or 65.9% to €33.8 million for the fiscal year ended March 31, 2008 from
€99.2 million in the fiscal year ended March 31, 2007.

The
decrease is related to the issues discussed in the above sections.

Adjusted EBITDA

Earnings before interest, taxes, depreciation, amortization and non-cash compensation, which consists primarily of expenses related to our Management
Equity Participation Program and non-cash restructuring expenses (Adjusted EBITDA) increased by €75.3 million or 19.7% to €457.8 million in
the fiscal year ended March 31, 2008 from €382.5 million for the fiscal year ended March 31, 2007. The increase primarily relates to the rate increase implemented
in relation to the roll-out of the digital access product and the growth in subscription revenues from pay TV and Internet & Phone offerings. In regard to cost and expenses,
approximately €5.5 million of total cost and expenses are related to the restructuring of the technical department and are one-time in nature. Adjusted EBITDA is not
a recognized accounting term and should not be used as a measure of liquidity. However, Adjusted EBITDA is a common term used to compare the operating activities of cable television companies.

Fiscal Year Ended March 31,2008

2007(€ million)Profit from Ordinary Activities

139.5

79.7Depreciation and Amortization

293.9

246.6MEP related non-cash Expenses

23.0

41.8Restructuring Expenses

1.4

14.4Adjusted EBITDA

457.8

382.5


80

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Segment Reporting

The following table reflects the allocation of adjusted EBITDA to Cable Access, TV/Radio, Internet & Phone, TKS and Reconciliation(19) for
the fiscal year ended March 31, 2008:

---

Cable Access

TV/Radio

Internet & Phone

TKS

Reconciliation

Total(€ million)Profit/Loss from Ordinary Activities

271.1

28.4

(35.2
)
2.8

(127.6
)
139.5Depreciation and Amortization

207.9

20.2

39.0

1.7

25.1

293.9MEP related non-cash Expenses

1.8

0.1

0.4

0.1

20.6

23.0Restructuring Expenses

1.1

0.0

0.0

0.0

0.3

1.4Adjusted EBITDA

481.9

48.7

4.2

4.6

(81.6
)
457.8


Comparison of Operating Results for the fiscal years ended March 31, 2007 with March 31, 2006

Revenues



Fiscal Year Ended March 31,2007

2006(€ million)Cable Access Subscription Fees

833.8

829.1Installation Fees

7.0

5.7Other Revenues

4.8

4.5Total Cable Access Revenues

845.6

839.3


ARPU

(€)Cable Access

7.31

7.26


As of March 31,RGUs2007

2006(in thousand)Cable Access

9,276

9,559


For the fiscal year ended March 31, 2007 cable access subscription fees increased by €4.7 million or 0.6% to
€833.8 million from €829.1 million in the fiscal year ended March 31, 2006 which primarily resulted from the introduction of the new product
"Digitaler Kabelanschluss" with a higher price for our new customers in April 2006 and, to a lesser extent, a price increase for our existing customers in March 2007.

The
primary factor responsible for the increase of installation fees by €1.3 million or 22.8% to €7.0 million for the fiscal year ended
March 31, 2007 from €5.7 million for the fiscal year ended March 31, 2006 relates to higher installation fees for the new product "Digitaler Kabelanschluss"
implemented in April 2006.

81

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Fiscal Year Ended March 31,2007

2006(€ million)Analog/Digital Carriage Fees

99.6

99.0Pay TV Subscription Fees

55.6

27.7Playout Facility Fees

2.0

3.4CPE Sold

1.1

5.4Other Digital Revenues

4.7

2.3Total TV/Radio revenues

163.0

137.8


ARPU

(€)Pay TV

7.71

6.97


As of March 31,RGUs2007

2006(in thousand)Pay TV

692

479


The Company paid a portion (approximately 38%) of certain revenues from digital carriage fees to the unaffiliated regional operators based on the
number of subscribers served. KDG recorded
€6.9 million and €9.8 million pass through as cost of services rendered in the fiscal year ended March 31, 2007 and March 31, 2006,
respectively.

In
the fiscal year ended March 31, 2007, pay TV subscription fees increased substantially by €27.9 million or 100.7% to
€55.6 million compared to €27.7 million in the fiscal year ended March 31, 2006 resulting from a rapidly growing subscriber base.

Fees
received for the utilization of our playout facility decreased by €1.4 million or 41.2% to €2.0 million in the fiscal year ended
March 31, 2007 from €3.4 million in the fiscal year ended March 31, 2006. This was due to regional cable TV operators starting to operate their own digital playout
facilities and discontinuing the service provided by the Company.

The
primary factor for the decline of revenues from CPE sold by €4.3 million or 79.6% to €1.1 million in the fiscal year ended
March 31, 2007 from €5.4 million in the fiscal year ended March 31, 2006 was related to aggressive product offers at a higher ARPU but with a free set top box
included.

The
average ARPU increased by €0.74 or 10.6% to €7.71 in the fiscal year ended March 31, 2007 from €6.97 in the fiscal year ended
March 31, 2006. This was primarily based on a price increase on certain pay TV products in June 2006.

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Fiscal Year Ended March 31,2007

2006(€ million)Subscription Fees (recurring)

55.2

9.1Installation Fees and other non-recurring revenues

1.3

0.7Total Internet & Phone Revenues

56.5

9.8


ARPU

(€)Kabel Internet

16.30

21.08Kabel Phone

28.02

27.40Kabel Internet & Kabel Phone blended

21.53

23.20


As of March 31,RGUs2007

2006(in thousand)Kabel Internet

179

61Kabel Phone

152

40Total Internet & Phone RGUs

331

101


In the fiscal year ended March 31, 2007, total Internet & Phone revenues increased by €46.7 million or almost
fivefold to €56.5 million from €9.8 million in the fiscal year ended March 31, 2006. This increase was due to a sharp rise in the number of RGUs
for Internet & Phone products.

The
Phone ARPU increased by €0.62 or 2.3% to €28.02 in the fiscal year ended March 31, 2007 from €27.40 in the fiscal year ended
March 31, 2006 and the Internet ARPU decreased by €4.78 or 22.7% to €16.30 in the fiscal year ended March 31, 2007 from €21.08 in the
fiscal year ended March 31, 2006. Both changes were driven by the increasing percentage of subscribers taking bundled products which were generally offered at a discount compared to prices for
the stand-alone products.

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Fiscal Year Ended March 31,2007

2006(€ million)Billing services revenues

8.5

8.6Merchandise

6.6

7.5Internet Revenues

5.9

3.0Cable Television Revenues

5.0

5.3Mobile Phone Services

1.2

0.0Other Revenues

0.9

0.8Total TKS Revenues

28.1

25.2


As of March 31,Subscribers2007

2006(in thousand)TKS Subscriber (cable TV)

44

38


In the fiscal year ended March 31, 2007, TKS revenues increased by €2.9 million or 11.5% to
€28.1 million from €25.2 million in the fiscal year ended March 31, 2006 primarily due to higher revenues from Internet services and the new
product TKS-Mobile.

Expenses

The following chart gives an overview on the Company's expenses for the fiscal year ended March 31, 2007 compared to the fiscal year ended March 31,
2006. Total expenses for the fiscal year ended March 31, 2007 increased by €157.2 million or 18.1% to €1,026.7 million from
€869.5 million in the fiscal year ended March 31, 2006.

Fiscal Year Ended March 31,2007

2006(€ million)Cost of Services Rendered

567.1

490.1Selling Expenses

318.7

277.0General and Administrative Expenses

140.9

102.4Total Expenses

1,026.7

869.5


84

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Cost of Services Rendered

Fiscal Year Ended March 31,2007

2006(€ million)Cost of Materials and Services

288.2

257.5
(20)Personnel Expenses

63.0

53.4
(20)Depreciation and Amortization

133.1

117.4Other Cost and Expenses

82.8

61.8Total Cost of Service Rendered

567.1

490.1


---

In the fiscal year ended March 31, 2007, cost of services rendered increased by €77.0 million or 15.7% to
€567.1 million from €490.1 million in the fiscal year ended March 31, 2006. This was primarily due to the relevant items discussed below.

Cost of materials and servicesincreased by €30.7 million or 11.9% to €288.2 million in the
fiscal year ended March 31, 2007 from €257.5 million in the fiscal year ended March 31, 2006.

In
the fiscal year ended March 31, 2007 content costs increased by €16.0 million or 80.0% to €36.0 million from
€20.0 million in the fiscal year ended March 31, 2006 which was in line with subscriber growth.

Costs
for Interconnect increased by €7.1 million to €8.1 million in the fiscal year ended March 31, 2007 from
€1.0 million in the fiscal year ended March 31, 2006. This was related to the variable usage of Phone subscribers. Interconnection costs will continue to rise with the
number of Phone subscribers.

Expenses
for CPE (modems) and its installation increased by €5.7 million in the fiscal year ended March 31, 2007 from €4.6 million in
the fiscal year ended March 31, 2006 related to the connection of new subscribers. In November 2006 the Company changed the standard customer contract for Internet & Phone so that the
CPE now remains in possession of the Company.

Network
expenses increased by €4.1 million for the fiscal year ended March 31, 2007 due to the continued upgrade of additional networks.

Personnel expensesincluded non-cash expenses related to the Management Equity Participation program in the amount of
€0.3 million in the fiscal year ended
March 31, 2007 compared to €0.6 million in the fiscal year ended March 31, 2006. The expenses related to the restructuring amounted to
€11.6 million for the fiscal year ended March 31, 2007 compared to €4.2 million in the fiscal year ended March 31, 2006 due to further
restructuring of the technical department. Personnel expenses adjusted by the Management Equity Participation program and restructuring expenses increased by €2.4 million or
4.9% to €51.1 million in the fiscal year ended March 31, 2007 from €48.7 million in the fiscal year ended March 31, 2006. This increase was
related to regularly scheduled salary increases which became effective in the beginning of 2006.

Depreciation and amortizationexpenses primarily include the depreciation of the network, capitalized leased transponders and the digital
platform. In the fiscal year ended March 31, 2007, depreciation and amortization expenses increased by €15.7 million or 13.4% to €133.1 million
from €117.4 million in the fiscal year ended March 31, 2006 primarily due to the investments related to the upgrade of the network for Internet & Phone.

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Other cost and expensesincreased by €21.0 million or 34.0% to €82.8 million in the fiscal
year ended March 31, 2007 from €61.8 million in the fiscal year ended March 31, 2006. This was primarily related to costs for ongoing projects to improve the
efficiency of our operating business especially in the technical department and to additional costs for IT in relation to the Internet & Phone roll-out.

Excluding
the impact of non-cash amortization and depreciation and the MEP, total cash expenses included in cost of services rendered increased by
€61.6 million or 16.6% to €433.7 million for the fiscal year ended March 31, 2007 from €372.0 million for the fiscal year
ended March 31, 2006.

Selling Expenses

Fiscal Year Ended March 31,2007

2006(€ million)Cost of Materials and Services

27.1

19.4Personnel Expenses

70.5

70.4Depreciation and Amortization

96.0

88.2Other Cost and Expenses

125.1

99.0Total Selling Expenses

318.7

277.0


In the fiscal year ended March 31, 2007, selling expenses increased by €41.7 million or 15.1% to
€318.7 million from €277.0 million in the fiscal year ended March 31, 2006. This was primarily due to the items discussed below.

Cost of materials and servicesincreased by €7.7 million or 39.7% to €27.1 million in the
fiscal year ended March 31, 2007 from €19.4 million in the fiscal year ended March 31, 2006 which was primarily related to increased CPE expenses in connection
with the launch of the new product "Digitaler Kabelanschluss" in April 2006.

Personnel expensesincluded non-cash expenses related to the Management Equity Participation program in the amount of
€2.7 million in the fiscal year ended March 31, 2007 compared to €8.8 million in the fiscal year ended March 31, 2006. The expenses related
to a planned restructuring amounted to €1.0 million for the fiscal year ended March 31, 2007 compared to €2.0 million in the fiscal year ended
March 31, 2006. Personnel expenses adjusted by the Management Equity Participation program and restructuring expenses increased by €7.2 million or 12.1% to
€66.8 million in the fiscal year ended March 31, 2007 from €59.6 million in the fiscal year ended March 31, 2006 and primarily resulted from
an
increase in the number of employees and also from scheduled salary increases implemented in the beginning of 2006.

Depreciation and amortizationexpenses increased by €7.8 million or 8.8% to €96.0 million in
the fiscal year ended March 31, 2007 from €88.2 million in the fiscal year ended March 31, 2006 due to higher investments in capitalized subscriber acquisition
costs.

Other cost and expensesincreased by €26.1 million or 26.3% to €125.1 million in the fiscal
year ended March 31, 2007 from €99.0 million in the fiscal year ended March 31, 2006 primarily due to an increase in marketing and advertising expenses, expenses
for sales support and bad debt expenses.

Excluding
the impact of non-cash amortization and depreciation and the MEP, total cash expenses included in selling expenses increased by
€39.9 million or 22.2% to €219.9 million for the fiscal year ended March 31, 2007 from €180.0 million for the fiscal year
ended March 31, 2006.

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General and Administrative Expenses

Fiscal Year Ended March 31,2007

2006(€ million)Personnel Expenses

76.1

41.1Depreciation and Amortization

17.5

15.2Other Cost and Expenses

47.3

46.1Total General and Administrative Expenses

140.9

102.4


General and administrative expenses increased by €38.5 million or 37.6% to €140.9 million in the
fiscal year ended March 31, 2007 from €102.4 million in the fiscal year ended March 31, 2006.

Personnel expensesincluded non-cash expenses related to the Management Equity Participation program in the amount of
€38.8 million in the fiscal year ended March 31, 2007 compared to €9.8 million in the fiscal year ended March 31, 2006. The expenses related
to the restructuring amounted to €1.8 million for the fiscal year ended March 31, 2007. Personnel expenses adjusted by the Management Equity Participation program and
restructuring expenses increased by €4.2 million or 13.4% to €35.5 million in the fiscal year ended March 31, 2007 from
€31.3 million in the fiscal year ended March 31, 2006 primarily resulted from an increase in the number of employees and also from a tariff increase consummated in the
beginning of 2006.

Depreciation and amortizationincreased by €2.3 million or 15.1% to €17.5 million in the
fiscal year ended March 31, 2007 from €15.2 million in the fiscal year ended March 31, 2006 primarily due to the amortization related to the Company's customer
care and billing system and other IT-applications.

Other cost and expensesincreased by €1.2 million or 2.6% to €47.3 million in the fiscal
year ended March 31, 2007 from €46.1 million in the fiscal year ended March 31, 2006. This increase primarily resulted from an increase in IT expenses.

Excluding the impact of non-cash amortization and depreciation and the MEP, total cash expenses included in General and administrative expenses increased by
€7.2 million



or 9.3% to €84.7 million for the fiscal year ended March 31, 2007 from €77.5 million for the fiscal year ended March 31, 2006.

Profit from Ordinary Activities

Profit from ordinary activities for the fiscal year ended March 31, 2007 decreased by €75.4 million or 48.6% to
€79.7 million from €155.1 million in the fiscal year ended March 31, 2006.

The
decrease was primarily related to the issues discussed in the above sections.

Interest Income

Interest income was primarily derived from bank deposits. In the fiscal year ended March 31, 2007 interest income increased by
€0.8 million or 28.6% to €3.6 million from €2.8 million in the fiscal year ended March 31, 2006.

Interest Expenses

Interest expenses include interest accrued on bank loans, the Company's 2014 Senior Notes, amortization of financing fees, interest on finance leases and other.
Interest Expenses decreased by €59.4 million or 27.6% to €155.7 million for the fiscal year ended March 31, 2007, compared to
€215.1 million in the fiscal year ended March 31, 2006. This decrease primarily resulted from the

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write-off
of financing fees in the fiscal year ended March 31, 2006 related to the previous senior credit facility which was refinanced on May 12, 2006.

Fiscal Year Ended March 31,2007

2006(€ million)Senior Notes

78.5

78.5Senior Credit Facility

68.6

72.2Amortization of Capitalized Finance Fees

9.8

66.9Finance Lease

2.7

2.7Pensions

1.2

1.0Asset Retirement Obligations

0.9

0.7Transaction Cost for Bridge Facility

0.0

7.5Interest Hedge

(8.7
)
(16.8
)Other

2.7

2.4Total Interest Expenses

155.7

215.1


Included in interest expenses for the fiscal year ended March 31, 2006 was a positive adjustment of €17.0 million
related to a retroactive de-designation of the Company's hedge relationship.

Outstanding
interest bearing indebtedness as of March 31, 2007 decreased by €75.8 million or 3.8% to €1,905.6 million from
€1,981.4 million as of March 31, 2006 due to the refinancing of our previous senior credit facilities at a reduced level on May 12, 2006. At the time of
refinancing the Company used excess cash to lower the required debt needs.

Accretion or Depreciation on Investments and other Securities

Income from accretion or depreciation on investments and other securities for the fiscal year ended March 31, 2007 increased by
€0.4 million compared to the fiscal year ended March 31, 2006. In the fiscal year ended March 31, 2007 income in the amount of €0.3 million
was recorded whereas in the fiscal year ended March 31, 2006 expenses in the amount of €0.1 million were recorded.

Income from Associates

For the fiscal year ended March 31, 2007 income decreased by €51 thousand or 10.4% to €440 thousand from
€491 thousand in the fiscal year ended March 31, 2006.

Taxes

Taxes for the fiscal year ended March 31, 2007 increased by €15.8 million or 135.0% to €27.5 million from
€11.7 million in the fiscal year ended March 31, 2006. Taxes were comprised of deferred tax expenses in the amount of €26.8 million and current
income tax expenses in the amount of €0.7 million.

Net Loss

Net loss for the fiscal year ended March 31, 2007 increased by €30.7 million or 44.8% to €99.2 million from
€68.5 million in the fiscal year ended March 31, 2006.

The
increase in net loss was related to the issues discussed in the above sections.

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Adjusted EBITDA

Earnings before interest, taxes, depreciation, amortization, non-cash compensation, which consists primarily of expenses related to our Management
Equity Participation Program and non-cash restructuring expenses (Adjusted EBITDA) decreased by €18.8 million or 4.7% to €382.5 million in the
fiscal year ended March 31, 2007 from €401.3 million in the fiscal year ended March 31, 2006. The decrease primarily related to increased operating costs in
connection with the roll out and increased sales activities of Internet & Phone. Adjusted EBITDA is not a recognized accounting term and should not be used as a measure of liquidity. However,
Adjusted EBITDA is a common term used to compare the operating activities of cable television companies.

Fiscal Year Ended March 31,2007

2006(€ million)Profit from Ordinary Activities

79.7

155.1Depreciation and Amortization

246.6

220.8MEP related non-cash Expenses

41.8

19.2Restructuring Expenses

14.4

6.2Adjusted EBITDA

382.5

401.3


Segment Reporting

The following table reflects the allocation of Adjusted EBITDA to Cable Access, TV/Radio, Internet & Phone, TKS and Reconciliation for the fiscal year
ended March 31, 2007:

Cable Access

TV/Radio

Internet & Phone

TKS

Reconciliation

Total(€ million)Profit/Loss from Ordinary Activities

238.3

13.2

(51.9
)
8.3

(128.2
)
79.7Depreciation and Amortization

202.9

12.9

12.2

1.4

17.2

246.6MEP related non-cash Expenses

1.6

0.0

0.0

0.0

40.2

41.8Restructuring Expenses

12.9

0.0

0.0

0.0

1.5

14.4Adjusted EBITDA

455.7

26.1

(39.7
)
9.7

(69.3
)
382.5


Subsequent Events

On April 30, 2008, KDG closed the acquisition of several companies from the Orion Group with 1.1 million CATV subscribers. The FCO approved the
transaction which was signed during the fiscal year on April 4, 2008. The purchase price amounted to approximately €500.0 million and was fully funded through an increase
in KDG's Senior Credit Facility. The transaction covers the acquisition of several entities listed below.

An
additional 30.0% direct share of KMG and indirect share of 4.2% of RKS Niedersächsische Kabel-Servicegesellschaft mbH & Co. KG and 5.0% of RKS
Niedersächsische Kabel-Service-Beteiligungsgesellschaft mbH was closed on June 30, 2008.

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In
total, the acquisitions include the following entities at the stated percentage of voting equity:

Directly
held:

Tele Columbus Nord GmbH

100.0
%KMG KABEL-FERNSEHEN HANNOVER GmbH

100.0
%KABELCOM Braunschweig Gesellschaft für Breitbandkabel-Kommunikation mbH

75.6
%KABELCOM Wolfsburg Gesellschaft für Breitbandkabel-Kommunikation mbH

72.5
%Kabel Deutschland Süd GmbH (previously Cor H Erste GmbH)

100.0
%Kabel Deutschland West GmbH (previously Cor H Zweite GmbH)

100.0
%Kabel Deutschland Nord GmbH (previously Cor H Dritte GmbH)

100.0
%


Indirectly held:

AEP Plückhahn Kabel GmbH

100.0
%RKS Niedersächsische Kabel-Servicegesellschaft mbH & Co. KG

47.4
%RKS Niedersächsische Kabel-Service-Beteiligungsgesellschaft mbH

56.2
%Urbana Teleunion Rostock GmbH & Co. KG

70.0
%Verwaltung Urbana Teleunion Rostock GmbH

50.0
%


Please note that the purchase price of the various transactions is based on financial information which is currently being prepared. Therefore,
neither assets and liabilities nor contingent liabilities of the acquired entities can be presented at this point in time. As a result, it is impracticable to disclose the purchase price.

As of April 30, 2008 the Company sold and transferred its share in Kabel-Service-Berlin GmbH to Tele Columbus GmbH for total consideration of €13.0
million.

As
of April 30, 2008 an amount of €535.0 million was drawn down under the Senior Add-on Facility. On the same day, the Company entered into an
additional floating to fix interest rate swap. This swap with a fixed rate of 4.410% per annum has a notional amount of €250.0 million and a one year duration. As of
May 9, 2008 the granted loan amount of the Senior Add-on Facility was reduced by €115.0 million to €535.0 million from
€650.0 million originally.

In
April 2008, we entered into a new 24-month collective bargaining agreement with the labor union representing our unionized employees. As a result, wages for employees
increased by 3.7% from June 1, 2008 and will increase another 3.3% from April 1, 2009.

On
May 7, 2008, the Company announced that they have agreed with pay-TV operator Premiere on a new five year contract running until 2012. The contract governs the
feed-in of the existing Premiere pay-TV channels over the Company's cable network.

On
May 14, 2008, the Company announced that the cooperation with Nagravision will be continued and Nagravision's new coding system will be introduced in autumn 2008.

See
also ITEM 4A History and Development of the Company.

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B.    Liquidity and Capital Resources

COVENANTS

The Senior Credit Facilities and the indenture governing the Senior Notes contain covenants significantly restricting our ability to, among other things:



These
covenants could limit our ability to finance our future operations and capital needs and our ability to pursue acquisitions and other business activities that may be in our
interest.

The
Senior Credit Facility is subject to several affirmative and negative covenants including, but not limited to, the following range over time:

Test

RequirementEBITDA to Net Interest

1.75 x3.00 xSenior Net Debt to EBITDA

4.00 x2.00 x


As of March 31, 2008 the ratio of EBITDA to Net Interest amounted to 2.81. The ratio of Senior Net Debt to EBITDA amounted to 2.61.

Our
ability to meet these financial ratios and tests may be affected by events beyond our control and, as a result, we cannot ensure that we will be able to meet these ratios and tests.
In the event of a default under the Senior Credit Facilities or certain other defaults under other agreements, the lenders could terminate their commitments and declare all amounts owed to them to be
due and payable. Borrowings under other debt instruments that contain cross-default or cross-acceleration provisions, including the Senior Notes, may, as a result, also be accelerated and become due
and payable. We may be unable to pay these debts in such circumstances.

The
2014 Senior Notes are subject to several affirmative and negative covenants which are generally less strict than under the Senior Credit Facility. The 2014 Senior Notes contain
covenants including but not limited to limitations on indebtedness, limitations on asset disposals, limitations on distributions
and reporting requirements. Each of the covenants is subject to a number of important exceptions and qualifications.

Our
principal source of liquidity on an ongoing basis is our operating cash flow. Our ability to generate cash depends on our future operating performance, which in turn depends to some
extent on general economic, financial, industry, regulatory and other factors, many of which are beyond our control, as well as the other factors discussed in ITEM 3D "Risk Factors." In particular,
our new emphasis on pay TV and Internet & Phone services could lead to increased volatility in our cash flows.

For
our strategy of investing in digital cable television and Internet & Phone services, we will need to devote considerable resources to our development, distribution and
marketing efforts. As a result, our principal uses of cash will be for incremental operational expenditures, to fund the development, marketing and distribution of the new products, capital
expenditures for upgrading for bi-directionality of our network, as well as to fund working capital and our interest bearing debt service.

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On
July 19, 2007, KDG increased its €200.0 million Revolving Credit Facility by €125 million to €325 million.

On
October 30, 2007 KDG secured a Tranche C under the Senior Credit Facilities in the amount of €650 million for an acquisition of Level 4
assets from Orion Cable announced on September 20, 2007. As per March 31, 2008, the transaction was still waiting final approval from the FCO and the €650 million
Tranche C was undrawn. On closing of the transaction on April 30, 2008, the Tranche C was drawn in the amount of €535 million and the remaining
€115 million cancelled on May 9, 2008.

For further information on the balance of borrowings and maturity please refer to ITEM 17.

In
addition to our operating cash flows and cash on our balance sheet, we will have access to credit under the working capital facility under the Tranche B (see above, subject to
certain conditions). In our opinion, our working capital is sufficient for our present requirements.

Although
we believe that our expected cash flows from operations, together with headroom under the revolver, will be adequate to meet our anticipated liquidity and debt service needs, we
cannot be
certain that our business will generate sufficient cash flows from operations or that future debt and equity financing will be available in an amount sufficient to enable KDG to pay debts on maturity,
including the Senior Notes, or to fund the digital cable television rollout, our network upgrade, or our other liquidity needs. See ITEM 3D "Risks relating to our indebtedness and our structure".

Cash flow for the Fiscal Year Ended March 31, 2008 compared to the Fiscal Year Ended March 31, 2007

As of March 31, 2008 our cash balance amounted to €15.5 million and we had €259.0 million of credit available
under our revolver.

The
following table shows a condensed version of our cash flow for the periods ended March 31, 2006, 2007 and 2008:

Fiscal Year Ended March 31,2008

2007

2006(€ million)Cash Flow from Operating Activities

444.7

360.0

399.3Net Cash used in Investing Activities

(345.4
)
(276.4
)
(148.1
)Net Cash used in Financing Activities

(137.9
)
(254.9
)
(158.8
)Change in Cash and Cash Equivalents

(38.6
)
(171.2
)
92.5Cash and Cash Equivalents at the beginnig of the period

54.1

225.1

132.8Accretion/Depreciation on Investments and Other Securities

0.0

0.3

(0.1
)Cash and Cash Equivalents at the end of the period

15.5

54.1

225.1


Cash flow from Operating Activities

Our cash flow provided from operating activities in the fiscal year ended March 31, 2008 increased by €84.7 million or 23.5% to
€444.7 million from €360.0 million in the fiscal year ended March 31, 2007. This increase was driven by a significant lower net loss as a result of
the revenue growth of 9.5% compared to the fiscal year ended March 31, 2007 and the containment of costs and expenses. The increase of the Company's revenues is mainly caused by higher
Internet & Phone revenues. The increase of the cash flow provided from operating activities is also affected by an increase of trade payables.

In the fiscal year ended March 31, 2007 our cash flow provided from operating activities decreased by €39.3 million or 9.8% to €360.0
million from €399.3 million in the fiscal year ended March 31, 2006. The decrease of the cash flow provided from operating activities was mainly caused by an increase of

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net loss as a result of higher cost of services rendered, selling expenses as well as general and administrative expenses based on the accelerated roll-out of its Internet & Phone
services.

Net Cash used in Investing Activities

Net cash used in investing activities increased by €69.0 million or 25.0% to €345.4 million for the fiscal year
ended March 31, 2008 from €276.4 million for the fiscal year ended March 31, 2007. The increase was primarily
related to increased investments in our network to pass additional homes with two way capability and increased sales and installation of premium services.

In
the fiscal year ended March 31, 2007, net cash used in investing activities increased by €128.3 million or 86.5% to
€276.4 million from €148.1 million for the fiscal year ended March 31, 2006.

Net cash used in Financing Activities

Net cash used in financing activities amounted to €137.9 million in the fiscal year ended March 31, 2008. Included in the cash flow
from financing activities are proceeds of €391.0 million from Tranche B and repayments of €331.0 million. €177.1 million was
used to pay interest and transaction costs.

Net
cash used in financing activities amounted to €254.9 million in the fiscal year ended March 31, 2007. Included was the repayment of
€75.8 million of our senior credit facilities in relation to the refinancing in May 2006.

This
new Senior Credit Facility is now comprised of three tranches. As of May 12, 2006, the Senior Credit Facility was comprised of two tranches; a
€1,150.0 million Term Loan Facility (Tranche A) and a €200.0 million Revolving Credit Facility (Tranche B), which was increased to
€325.0 million on July 19, 2007. Tranche A and Tranche B mature on September 30, 2012. On October 30, 2007, we secured a third
Tranche C under the Senior Credit Facility. The original amount available under Tranche C was €650.0 million, which was reduced by
€115.0 million to €535.0 million on May 9, 2008. The final maturity date of Tranche C is March 31, 2013.

KDG
is highly leveraged and has significant debt service obligations. We believe that the funds generated from operations, together with existing cash and equivalents and revolving
credit facility availability will be sufficient to meet operating and debt service requirements. We regularly assess our investment management approach in view of our current and potential future
needs.

Our
ability to make payments on and to refinance our debt, and to fund future operations and capital expenditures, will depend on our future operating performance and ability to generate
sufficient cash. This depends, to some extent, on many general economic, financial and market factors, many of which are beyond our control, as well as on other factors discussed in ITEM 3D "Risk
Factors". Considering those factors, we cannot assure that our business will generate sufficient cash flows from operations or that future debt and equity financing will be available to us in an
amount sufficient to enable us to pay our debts when due, or to fund our other liquidity needs.

Capital Expenditures

In the fiscal year ended March 31, 2008, capital expenditures amounted to approximately €353.4 million. Of this amount the Company
used approximately €175.4 million for the upgrade of the network for internet & phone services.

Capital
expenditures related to IT systems, licenses, software and intangible assets amounted to €63.0 million for the fiscal year ended March 31, 2008.

Included
in the capital expenditures are network acquisitions in the amount of €29.9 million. Thereof €20.9 million were allocated to
customer list and €9.0 million to fixed assets. Financial assets in the amount of €4.6 million were related to the Orion acquisition, which is also
mentioned in the Subsequent Events section.

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During
the fiscal year ended March 31, 2008, KDG entered into a contract for the lease of an additional transponder. Therefore an amount of €2.4 million was
capitalized and will be depreciated over the lease term.

C.    Research and Development, Patents and Licenses, etc.

The Company has not undertaken any significant research or development over the past three years. Therefore, there were no significant amounts spent on
company-sponsored research and development activities during each of the fiscal years ended March 31, 2006, 2007 and 2008.

D.    Trend Information

See ITEM 5A Operating Results and 5 B Liquidity and Capital Resources.

E.    Off-Balance Sheet Arrangements

There are no significant off-balance sheet arrangements that are likely to have a current or future effect on our financial condition, results of
operations, liquidity, capital expenditure or capital resources.

Purchase Obligations

On September 17 and 18, 2007 Kabel Deutschland signed a purchase agreement with Orion to acquire approximately 1.2 million cable television
subscribers. The closing occurred with effect from April 30, 2008. The scope of the transaction was reduced to approximately 1.1 million cable television subscribers and the purchase
price was reduced from approximately €585.0 million to approximately €500.0 million. Please note that the purchase price of the various transactions is
based on financial information which is currently being prepared. Therefore, neither assets and liabilities nor contingent liabilities of the acquired entities can be presented at this point in time.
As a result, it is impracticable to disclose the purchase price.

F.     Tabular Disclosure of Contractual Obligations

Payments Due by PeriodTotal

Less than
1 year

13 years

35 years

More than
5 years(€ million)1. Long-term Debt Obligations(21)

2,761.7

211.1
(22)
294.3

1,382.7
(23)
873.62. Agreements with DTAG and Subsidiaries

634.0

237.4

278.6

32.2

85.83. License, Rental and Operating Lease Commitments

96.3

29.7

35.6

25.5

5.54. Other

116.7

106.6

7.4

1.0

1.75. Purchase Agreements

500.0

500.0
(24)




Total

4,108.7

1,084.8

615.9

1,441.4

966.6


---

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G.    Safe Harbor

Forward-looking statements

This annual report includes forward-looking statements. These forward-looking statements include all matters that are not historical facts. These forward-looking
statements can be identified by the use of forward-looking terminology, including terms such as "anticipate", "believe", "could", "estimate", "expect", "intend", "may", "plan", "predict", "project",
"will" and similar terms and phrases, including references to assumptions. They appear in a number of places throughout this annual report and include statements regarding our intentions, beliefs or
current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industry in which we operate.

By
their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution
you that forward-looking statements are by no means guarantees of future performance and that our actual results of operations, financial condition and liquidity and the development of the industry in
which we operate may differ materially from those made in or suggested by the forward-looking statements contained in this annual report. In addition, even if our results of operations, financial
condition and liquidity and the development of the industry in which we operate are consistent with the forward-looking statements contained in this annual report, those results or developments may
not be indicative of results or developments in subsequent periods.

Important
factors that could cause those differences include, but are not limited to:



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

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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.

Please
read the sections of this annual report entitled ITEM 3D Risk Factors, ITEM 4B Business Overview, ITEM 5A Operating Results and ITEM 5B Liquidity and Capital Resources for a
complete picture of factors that could affect our future performance and the industry in which we operate. In light of these risks, uncertainties and assumptions, the forward-looking events described
in this annual report may not occur.

We
are subject to the reporting requirements of the U.S. Securities Exchange Act of 1934, as amended, (the Exchange Act), and we are required to make periodic reports to the U.S.
Securities and Exchange Commission (SEC) about KDG and KDG's business that are publicly available. In addition, we are subject to the ongoing reporting requirements of the Irish Stock Exchange. Apart
from any requirements pursuant to these laws and rules we have no obligation to update publicly or revise any forward-looking statements in this annual report, whether as a result of new information,
future events or otherwise. You are cautioned not to rely unduly on forward-looking statements when evaluating the information presented in this annual report.

We
operate in an industry in which it is difficult to obtain precise industry and market information. We have generally obtained the market and competitive position data in this annual
report from industry publications and from surveys or studies conducted by third party sources.

We
believe that these industry publications, surveys and studies are reliable. However, we cannot assure you of the accuracy and completeness of such information and we have not
independently verified such industry and market data.

In
addition, in many cases we have made statements in this annual report regarding our industry and our position in the industry based on our experience and our own investigation of
market conditions. We cannot assure you that any of these assumptions are accurate or reflect our position in the industry correctly, and none of our internal surveys or information have been verified
by any independent sources.

ITEM 6.    DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.    Directors and Senior Management

In accordance with German corporate law we are managed by a Management Board
(Geschäftsführung) and supervised by a Supervisory Board (Aufsichtsrat).
These two boards are separate. No individual may be a member of both boards.

The
Management Board is responsible for the day-to-day management of our business. The Supervisory Board appoints members of the Management Board and is
authorized to remove members from the Management Board. The principal function of the Supervisory Board is to monitor the Management Board. The Management Board is obligated to report to the
Supervisory Board on our business activities and strategy regularly, and the Supervisory Board may request additional reports at any time. The Management Board must obtain prior approval from the
Supervisory Board with respect to certain material matters, but the Supervisory Board is generally not entitled to assume management functions or interfere with the day-to-day
management of our business. In addition, the Management Board of KDV is advised by KDV's Advisory Board. No family relationships exist between the members of any of our Management Board, Supervisory
Board or KDV's Advisory Board.

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Our Management Board

Our Management Board currently consists of four members. The following table sets out the name, age, position and the year of appointment for each of the members
of our Management Board.

Name

Born

Position

Year first
appointedDr. Adrian v. Hammerstein

1953

Chairman of the Management Board,
Chief Executive Officer since May 2007

2007Paul Thomason

1955

Chief Financial Officer

2003Dr. Manuel Cubero del Castillo-Olivares

1963

Chief Commercial Officer

2005Herbert H. Hribar

1951

Chief Operating Officer

2006


Dr. Adrian v. Hammersteinhas been Chairman of the Management Board and Chief Executive
Officer of Kabel Deutschland since May 2007. He holds a doctorate in economics and has been working as an executive in the sector of information and communications for 20 years. Most recently,
Dr. v. Hammerstein was Chief Executive Officer at Siemens Business Services, an IT service provider. Before that, Dr. v. Hammerstein managed the business of Fujitsu Siemens Computers for
five years, first as CFO then as CEO. Under his management, the joint venture evolved into a profitable and recognized supplier of IT hardware and infrastructure. Former stages of his occupational
history have been group Chief Financial Officer of Information and Communications Products at Siemens AG, Chief Financial Officer of the Open Enterprise Computing Division at Siemens Nixdorf and
System Business Finance Manager at Digital Equipment.

Paul Thomasonis Chief Financial Officer and has been a member of the Management Board since 2003. From 1999 to 2002, he held the position
of Chief Financial Officer at Primacom. Between 1996 and 1998 Mr. Thomason served as Chief Financial Officer of KabelMedia, a predecessor to PrimaCom. Prior to joining KabelMedia,
Mr. Thomason served as Senior Vice President of the First Union National Bank (Wachovia) in Charlotte, North Carolina, where he was responsible for the bank's media investment and loan
portfolio. Mr. Thomason received a BA in Business Administration from Georgia State University.

Dr. Manuel Cubero del Castillo-Olivareshas been Vice President at Kabel Deutschland since November 2003. He was appointed Managing
Director, responsible for Cable TV and content in December 2005. Since November 2006 he also takes responsibility for the product segment Cable Internet & Phone. Since April 2007 he is also
responsible for sales and marketing. This includes sales to private customers, small and medium-sized companies, large corporations, and housing associations. Before joining KDG he held various
positions within the German media-company Kirch Group. He was among other positions responsible for the digital playout center and managing director of Beta Technik Beteiligungs-GmbH. He
was also founder and managing director of an Internet betting company in Austria and worked as a consultant. Dr. Cubero holds a doctorate degree in physics from Darmstadt Technical University,
Germany, and an MBA from INSEAD Business School in Fontainebleau, France. He has been President of Cable Europe (European Cable Communications Association) since February 2006.

Herbert Hribarhas been a member of the Management Board since November 2006. As Chief Operating Officer he is responsible for operations
at Kabel Deutschland. He is in charge of Central Engineering, Technical Services, IT and Customer Services. Before joining KDG Herbert Hribar worked for the Swiss cable network operator Cablecom,
where he was responsible for the operation and modernization of the cable network as well as marketing and sales in his position as managing director. Among other things Mr. Hribar improved the
performance of Internet & Phone services at Cablecom, including network planning and customer service. Previous to his position at Cablecom, Mr. Hribar worked for the Irish
telecommunication-provider Eircom.

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Our Supervisory Board

Our Supervisory Board currently consists of twelve members, comprising six shareholder representatives and six employee representatives. Each Supervisory Board
member has been appointed for a renewable term of five years. The shareholder representatives have the ultimate right to elect the Chairman of the Supervisory Board. Resolutions of the Supervisory
Board generally require a simple majority of the votes cast. In case of a tie-vote, the Chairman has an additional vote.

The
following table sets out the name, age, position and the year of appointment for each of the members of our Supervisory Board.

Name

Born

Position

Year first
appointedProf. Dr. Heinz Riesenhuber

1935

Chairman

2004Sibylle Spoo

1961

Member; Vice Chairman
(since September 6, 2007)

2003Walter Ruland

1957

Vice Chairman
(until September 6, 2007);
Member

2003John Hahn

1958

Member

2003Biswajit Subramanian

1965

Member

2003Frank Sauerland

1968

Member
(until December 31, 2007)

2003Toni Krüger

1961

Member

2003Petra Hesse

1965

Member

2005Tony Ball

1955

Member

2006Torsten Winkler

1971

Member

2006Robert Sudo

1976

Member

2006Norbert Michalik

1960

Member

2006Joachim Pütz

1953

Member

Since January 2,
2008


Shareholder Representatives:

Prof. Dr. Heinz Riesenhuber

Chairman of the BoardTony Ball

External AdvisorJohn Carl Hahn

Providence Equity, Managing DirectorBiswajit Anna Subramanian

Providence Equity, Managing DirectorRobert Sudo

Providence Equity, Senior AssociateTorsten Winkler

Providence Equity, Director


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Employee Representatives:

Walter Ruland

Technical Secretary for Telecommunication
(Technischer Fernmeldehauptsekretär)
Vice Chairman of the BoardToni Krüger

Engineering Employee
(Technischer Angestellter)Frank Sauerland

Secretary of Workers Union
(Gewerkschaftssekretär)
(until December 31, 2007)Joachim Pütz

Secretary of Workers Union
(Gewerkschaftssekretär)
(since January 2, 2008)Sibylle Spoo

Secretary of Workers Union
(Gewerkschaftssekretärin)Petra Hesse

Chairman of Workers Council for Region
Niedersachsen/Bremen
(Betriebsratsvorsitzende der Region Niedersachsen/Bremen)Norbert Michalik

Executive Employee
(leitender Angestellter)


Prof. Dr. Heinz Riesenhuberwas appointed Chairman of our Supervisory Board in December 2004. He
is a member of the German Federal Parliament since 1976. He is also in the Supervisory Boards of EVOTEC AG and of, Frankfurter Allgemeine Zeitung GmbH in the Verwaltungsrat of HBM BioVentures
AG and in other Boards. From 1982 to 1993 he served as the German Federal Minister for Research and Technology. Prior to 1982, Mr. Riesenhuber was CEO of Synthomer Chemie GmbH Frankfurt
and Erzgesellschaft mbH (a subsidiary of Metallgesellschaft AG). Mr. Riesenhuber is an honorary Professor of Johann-Wolfgang-Goethe-University Frankfurt and holds a Ph.D. in chemical
engineering.

Sibylle Spoois an employee representative and has been a member of the Supervisory Board since 2003. Ms. Spoo works at the ver.di
Bundesverwaltung (federal administration of the German union representing the public sector employees) as head of the workers participation and industry politics.
Prior to this she was a secretary of the works council at the German postal union. Ms. Spoo is also a member of the Management Board of T-Systems Nova GmbH.

Walter Rulandis an employee representative and has been a member of the Supervisory Board since 2003. Mr. Ruland has been the
chairman of the works council for the region of Bavaria since 2000 and the vice chairman of our group works council. Prior to 2000 Mr. Ruland was a broadband cable technician.

John Hahnis a shareholder representative and has been a member of the Supervisory Board since 2003. Mr. Hahn is a managing
director of Providence Equity Partners Limited and he is responsible for Providence's European investment activities. He is also a director of Nordic Cable Acquisition Company (com hem), Digital
Platform lletisim Hizmetleri (Digiturk), Grupo Corporativo Ono and Volia Cable. Prior to joining Providence in 2000, Mr. Hahn was a Managing Director at Morgan Stanley. Prior to
Morgan Stanley, Mr. Hahn worked with Price Waterhouse and Federal Data Corporation. Mr. Hahn received a Master of Business Administration from the Anderson School at the

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University
of California at Los Angeles and a Bachelor of Business Administration from the University of Notre Dame.

Biswajit Subramanianis a shareholder representative and has been a member of the Supervisory Board since 2003. Mr Subramanian is a
managing director of Providence Equity Advisors India Private Limited and is a director of the board of Idea Cellular Ltd. Previously he was a member of the board of directors of eircom
Limited, Ireland, and its holding company Valentia Telecommunications. Before joining Providence, he was a vice president at Morgan Stanley & Co. International Ltd. in the
European telecommunications investment banking team and, prior to that, worked at Credit Suisse First Boston, McKinsey & Co., and Intel Corporation. Mr. Subramanian received an
MBA from the Wharton School of the University of Pennsylvania, a Master's degree in electrical engineering from the University of California Santa Barbara and a Bachelor's degree in electrical
engineering from the Indian Institute of Technology.

Frank Sauerlandis an employee representative and has been a member of the Supervisory Board since 2003. Mr. Sauerland is the head
of department of the telecommunications section at ver.di (German Union representing the public sector employees) in North-Rhine Westphalia. He is also assigned to ver.di's national department of
tariff policy where he negotiates nationwide tariff agreements, including with DTAG. With effect from December 31, 2007 Mr. Sauerland retired from the Supervisory Board.

Toni Krügeris an employee representative and has been a member of the Supervisory Board since 2003.
Mr. Krüger has worked in the cable industry for 20 years. Since our spin-off from DTAG Mr. Krüger represents the interests of our
employees on a full-time basis as a member of our group works council.

Petra Hesseis an employee representative and has been a member of the Supervisory Board since July 2005. Ms. Hesse worked for the
controlling department of Deutsche Telekom AG and joined Kabel Deutschland in 1999. She has been representing the employees' interests as chairwoman of the works council of the region Lower
Saxony/Bremen since 2002.

Tony Ballwas appointed to the Supervisory Board in 2006 following the completion of the Acquisition and became Chairman of the KDV's
Advisory Board in June 2005. Previously he was CEO of BSkyB plc (2001-2005) and before that CEO of Fox-Liberty Networks (1998-2000). He is a board member of
the London 2012 Olympic Delivery Authority, a director of ONO SA (Spain), Canal Digitaal Satelliet (Netherlands) and a trustee of the Media Trust. Mr Ball received an MBA from Kingston
University and an honorary doctorate from Middlesex University. He is a Fellow of the Royal Television Society.

Torsten Winklerwas appointed to our Supervisory Board in 2006 following the completion of the Acquisition Mr. Winkler is a
Director of Providence Equity Partners Limited and is a member of the London-based team responsible for Providence's European investment activities. Prior to joining Providence Mr. Winkler
worked for Morgan Stanley Dean Witter in corporate finance and mergers & acquisitions, where he focused on the telecommunications and technology industries. Mr. Winkler received Bachelor
of Science degrees in Mathematics and Industrial Engineering from Karlsruhe University and a Master of Engineering Economic Systems & Operations Research degree from Karlsruhe University.

Robert Sudowas appointed to our Supervisory Board in 2006 following the completion of the Acquisition. Mr. Sudo is a Senior
Associate of Providence Equity Partners Limited and is a member of the London-based team responsible for Providence's European investment activities. Prior to joining Providence Mr. Sudo worked
as an Analyst for Goldman Sachs in mergers & acquisitions and corporate finance. He received a Diploma in Business Administration from HHL Leipzig Graduate School of Management.

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Norbert Michalikis an employee representative and has been a member of the Supervisory Board since 2006. Mr. Michalik is the head
of our Internal Audit/Risk management and SOX Compliance department. He is responsible for an independent and objective assurance activity designed to add value and improve on organization's
operations by bringing a systematic, disciplined approach to evaluate and improve the effectiveness of the internal control system (ICS), control and governance processes. He studied economics (main
focuses on accounting and controlling) at the University in Duisburg.

Joachim Pützis an employee representative and has been a member of the Supervisory Board since January 2008.
Mr. Pütz is working as Secretary of Workers Union at ver.di (German Union representing the public sector employees) in Berlin.

According
to the Articles of Association the members of the Supervisory Board are appointed until the end of the shareholder meeting that decides on the discharge for the fourth fiscal
year after the start of the term, whereby the fiscal year in which the term begins is not included.

The shareholder representatives were appointed by shareholder resolution of July 24, 2003 with effect as of September 8, 2003 (being the date of the registration by the
commercial registry of the change of the articles of association regarding the codetermined supervisory board of September 8, 2003), i.e. during the fiscal year ended March 31,
2004. Thus, the term of the shareholder representatives terminates with the end of the shareholder meeting that decides on the discharge for the fiscal year ending March 31, 2008,
i.e. approximately July or August of 2008 (an exact date is not yet fixed).

The
first six employee representatives were appointed by compensatory appointment of the local court of Munich on August 1, 2003 ("gerichtliche
Ersatzbestellung"). In the meantime, Mr. Karl Vollmert (May 2005), Mr. Erwin Sauermann (August 2006) and Mr. Frank Sauerland (December 2007) have left the
board. Therefore, the local court of Munich has appointed Ms. Petra Hesse (July 2005), Mr. Norbert Michalik (September 2006) and Mr. Joachim Pütz (January 2008) as
new members. The compensatory appointment by court ends as soon as the fault has been remedied, i.e. as soon as the missing employee representatives have been elected and have accepted their
election. Currently, there is no official date for an election. (However, an election is in preparation for around October 2008).

KDV's Advisory Board

KDV's Advisory Board currently consists of five members. Two of these members are shareholder representatives and three are external advisors. The Advisory Board
advises the Management Board and approves principal strategy decisions.

Name

Year first
appointedJohn Hahn

2003Biswajit Subramanian

2003Ian West

2003Prof. Dr. Heinz Riesenhuber

2004Tony Ball

2006


For details onTony Ball,Prof. Dr. Heinz
Riesenhuber,John HahnandBiswajit Subramanian, please see above under ITEM 6A
"Our Supervisory Board".

Ian Westhas been a member of the Advisory Board since September 2003. Mr. West is Founder and Chairman of the
nettv247.com Ltd group, specialising in internet TV and also Co-Founder & Vice-Chairman of Top Up TV founded in 2003 in the UK. Mr. West has held senior
management and board positions at both BSkyB and its subsidiaries (1989  2000) and ntl (2001  2003), as well as being an advisor/investor with a
range of private equity companies and via his own stand alone investments in a range of companies. Mr. West has a BA (honors) in Business Studies and is a member of the Chartered Institute of
Marketing.

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B.    Compensation

The aggregate compensation paid to the members of our Management Board for the year ended March 31, 2008 amounted to approximately
€2.1 million.(25)

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In the same period, the remuneration of the Supervisory Board members was €48 thousand and the remuneration of the Advisory
Board members was €285 thousand.

We
also maintain a directors' and officers' insurance policy with respect to the members of our Management Board and senior officers.

In the fiscal year ended March 31, 2008, €324 thousand were set aside by the Company for pension, retirement or similar benefits.

Benefits

Annual Bonus

In addition to Base Salary, Managing Directors have the opportunity to earn a target bonus of up to 100% of Base Salary. This target bonus differs according to
the individual Service Agreement, but is not lower than 80% of Base Salary. The annual bonus paid to the Management in the fiscal year ended March 31, 2008, amounted to
€1.4 million.

Annual
bonus payments were determined by the Remuneration Committee of the Supervisory Board based on the achievement of company and individual goals. 1/3 of the bonus
target relates to company goals, 2/3 relate to performance based on individual objectives.

Non-cash benefits

All Managing Directors are entitled to a company car including petrol, mobile phone, private health insurance and the company pension scheme with immediate
non-forfeitability. Apart from that, there are no direct benefits in kind to the Management.

Managing Directors' service contracts

Service contracts differ individually concerning notice periods but can mainly be terminated with a notice period of three months to the end of a calendar month.

C.    Board Practices

In addition to the supervision of our Management Board by the Supervisory Board and Advisory Board, certain decisions of our Management Board are subject to prior
shareholder approval in accordance with our Management Board's rules of procedure. The managing directors of Cable Holding S.à.r.l. have the authority to grant such approval. In many
cases, however, their approval requires prior consent of Cable Holding S.à.r.l.'s advisory board. This advisory board currently consists of three members.

Benefits for Directors

No benefits are paid to directors upon termination of employment.(25)

Audit committee

KDV's Advisory Board has decided to establish an audit committee. The current members of the audit committee are Torsten Winkler, Robert Sudo and Roderik
Schlosser. The purpose of the audit committee is to assist the Advisory Board in fulfilling its responsibilities to oversee the accounting and

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financial
reporting processes at the Company. These responsibilities include the oversight of the quality and integrity of the Company's consolidated financial statements and related disclosure and
its internal control, risk management and audit functions. The committee furthermore oversees the performance, qualifications and independence of the external auditor. The audit committee meets with
representatives of management and the external auditor at least twice annually.

D.    Employees

The following table sets forth our head-count numbers as of March 31, 2004, 2005, 2006, 2007 and 2008:

As of March 31,2004

2005

2006

2007

2008Sales & Marketing

467

602

659

560
(26)
464Network and Infrastructure

1,258

1,160

1,194

1,105

948Overhead

291

274

282

318

475Call Center

322

363

433

701

707
(27)TKS

129

141

149

155

154Total Employees

2,467

2,540

2,717

2,839

2,748


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As
of March 31, 2008, approximately 15% of our workforce were civil servants and still had the right to cease working for us and return to work for DTAG or its affiliates. An
additional approximately 18% of our workforce had the right to return to DTAG or its affiliates until the end of 2008. However, this right can be exercised only under certain circumstances such as
corporate restructurings, reorganizations or insolvency.

Approximately
22% of our employees are members of a labor union. Historically, we have enjoyed good labor relationships and we are committed to maintaining these relationships. We take a
constructive approach to union relationships and have been able to secure the cooperation of the unions and our workforce with regard to significant changes and the process of continuous improvements.
We have negotiated various collective bargaining agreements directly with the labor union. These collective bargaining agreements cover the general labor conditions of our employees (other than
executives), such as working hours, holidays, termination, provisions and general payment schemes for wages.

In
February 2007, we entered into a new 15-month collective bargaining agreement with the labor union representing our unionized employees. As a result, wages for employees
increased by 2.5% from March 1, 2007. At the same time we signed a collective agreement with the labor union concerning a "collective severance plan" with defined rules in case of possible
upcoming restructuring measures. For the Technical Operation unit we also negotiated several shop floor agreements to reduce work force, costs and modernize work conditions.

In April 2008, we entered into a new 24-month collective bargaining agreement with the labor union representing our unionized employees. As a result, wages for employees
increased by 3.7% from June 1, 2008 and will increase by another 3.3% from April 1, 2009.

E.    Share Ownership

On February 6, 2006, Providence Equity Partners, which has significant experience in investing in the telecommunications and media sectors and which had
invested in the initial acquisition of KDG, completed the acquisition of the beneficial ownership interests in our parent company, Cayman Cable

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Holding L.P., previously owned by Apax and GS Capital Partners as well as those of several minority investors. Following this acquisition, Providence and its co-investing party
Ontario Teachers' Pension Plan Board now own approximately 96% of the entity that indirectly controls the Company, with the remainder owned by members of our management.

Our group structure

KDG's sole shareholder is Kabel Deutschland Holding GmbH which in turn is wholly owned by Cable Holding S.à.r.l., Luxembourg. Cable Holding
S.à.r.l. is wholly owned by Cayman Cable Holding L.P., a limited partnership under Cayman law. The general partner of Cayman Cable Holding L.P. is Cayman Cable
Holding G.P. Co. Ltd., a corporation under Cayman law. Cayman Cable Holding G.P. Co. Ltd. has the primary responsibility for the management of the limited
partnership.

LOGO

ITEM 7.    MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

The tables in this section present information regarding the beneficial ownership of our shares as of March 31, 2008 by each person who is known by us to
own shares of Cayman Cable Holding G.P. Co. Ltd. and partnership interests in Cayman Cable Holding L.P. (the "Partnership").

The
amounts and percentages of shares beneficially owned by each shareholder are reported on the basis of SEC rules governing the determination of beneficial ownership, and the
information is not necessarily indicative of beneficial ownership for any other purposes. Under such rules, a person is
deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of a security, or investment power, which includes the
power to dispose of or direct the disposition of a security, and includes securities for which a person holds the right to acquire beneficial ownership within 60 days. Except as otherwise
indicated in the footnotes to the table below, we believe each beneficial owner named in the table has sole voting or investment power with respect to all shares beneficially owned by that owner. For
a discussion of voting rights, see ITEM 7B "Partnership Arrangements".

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A.    Major Shareholders

As of March 31, 2008, the shareholder of Cayman Cable Holding G.P. Co. Ltd. is:

Number
of Shares

Percentage
of SharesProvidence

270

100
%


For any significant changes in ownership percentage by major shareholders see ITEM 6E "Share Ownership".

Major Interest Holders

As of March 31, 2008, the principal partnership interest holders of Cayman Cable Holding L.P. are the following:

Number of Investor
Common LP Interests

Number of Management
Common LP Interests(28)

Number of Options
Representing Interest
in Management
Common LP InterestsProvidence(29)

919,696Ontario Teachers' Pension Plan Board

80,304Direct MEP I(30)



3,736,186Indirect MEP I(31)



440,853MEP II and MEP III(32)





434,896MEP IV(33)



540,758

2,037,738MEP V(34)





481,688


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KDG's
record holder is Cayman Cable Holding L.P. and therefore, there are no host country holders of record. Management Common LP Interests and the Investor
Common LP Interests rank equally as to entitlement to distributions and voting rights.

B.    Related Party Transactions

Partnership Arrangements

The Limited Partners of Cayman Cable Holding L.P. (the Partnership) entered into an amended and restated exempted limited partnership agreement on
February 8, 2006 following the Acquisition. This agreement (the "Partnership Agreement") sets out the terms of the investment of the Limited Partners in the Partnership. Under the Partnership
Agreement the primary right to manage and control the affairs of the Partnership assets, including its investment in KDG, is vested in the general partner of the Partnership, Cayman Cable
Holding G.P. Co. Limited, an entity wholly owned by Providence (the "GP"). The limited partners in the Partnership have no independent right to manage separately from the GP
although they have certain very limited consent rights. In relation to the votes cast by the limited partners each holder of an LP Interest (being an Investor Common LP Interest or a
Management Common LP Interest) has one vote for each LP Interest it is deemed to hold. No limited partners have a right to board seats on KDG or its subsidiaries.

Management Equity Programs

The Company has five Management Equity Programs (MEP I, MEP II, MEP III, MEP IV and MEP V) in place. MEP I provides interests in the Partnership, the
parent company of KDG, MEP II and III provide options on interests in the Partnership. MEP IV provides indirect interests in the Partnership and options on indirect interests in the Partnership. MEP V
provides options on interests in the Partnership if certain events take place. The interests and options on interests of certain members of our Management Equity Programs were purchased by Providence
in connection with the Acquisition. There are no special voting rights for MEP I, MEP II, MEP III , MEP IV and MEP V.

MEP I

The management of KDG participates in the Partnership, in part directly, as limited partner of the Partnership (Direct MEP I) and in part indirectly,
through interests in Kabel Management Beteiligungs-GbR, a separate partnership which is itself a limited partner in the Partnership (Indirect MEP I). The terms of both programs are
substantially the same.

The members of both the Direct MEP I and the Indirect MEP I were required to pay a capital contribution upon admission. The Partnership and the Kabel Management
Beteiligungs-GbR, respectively, have financed up to 70% of the managers' contributions with a loan from the Partnership. Interest accrues on such loans at a rate between 3.0% and 5.5% per
annum, compounded annually, and is repayable in accordance with an amortization schedule in the relevant agreement. The managers are entitled to distributions. With distributions by the Partnership
and Kabel Management Beteiligungs GbR to the Managers dated March 29 and November 19, 2004 (such distributions financed through the sale of shares in the subsidiary Cable Holding
S.à.r.l.), the granted loans were settled. Put or call provisions apply to the managers' Management Common LP Interests in the event that such managers cease to be employed by
KDG or its subsidiaries.

Owners
of Management Common LP Interests may not transfer their interests in the Partnership. Providence has a "right of first refusal" with respect to any transfer of interests
held by Ontario Teachers' Pension Plan Board. Ontario Teachers' Pension Plan Board also has the right to "tag" on any transfer of interests by Providence, apart from certain permitted transfers.
Notwithstanding the foregoing, no transfers shall be valid or effective if the transfer would violate any applicable securities laws or it would cause the Partnership to lose any of its exemptions or
favorable treatment under the

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U.S.
Federal income tax laws, ERISA or the U.S. Investment Company Act of 1940. Cayman Cable Holding G.P. Co. Ltd. may also decide to issue new partnership interests to new
limited partners under certain circumstances.

MEP II and MEP III

MEP II and MEP III are option programs that differ from MEP I in the exercise price and grant date only. Under these programs the participants were granted
options on interests in the Partnership.

MEP IV

Further management of KDG participate in the Partnership indirectly through interests in Kabel Management Beteiligungs (MEP IV) GbR, a separate partnership
which is itself a limited partner in the Partnership (Indirect MEP IV). Options were also issued under MEP IV on interests in the Partnership. The terms of both the MEP IV option program and the
indirect MEP IV program are substantially the same.

The
members of the indirect MEP IV were required to pay a capital contribution upon admission. The Partnership and the Kabel Management Beteiligungs (MEP IV) GbR, respectively,
have financed 80% of the managers' contributions with a loan from the Partnership. Interest accrues on such loans at a rate of 5.0% per annum, compounded annually. The managers are entitled to
distributions. Put or call provisions apply to the managers' Management Common LP Interests in the event that such managers cease to be employed by KDG or its subsidiaries.

MEP V

MEP V is an option program that grants an option to purchase limited partnership interests (Management Common LP Interests) in the Partnership if Kabel
Deutschland GmbH (or its parent entity) is listed or sold to a third party, therefore allowing the management to potentially benefit from any relevant listing or sale. The General Partner also
has discretion to allow options to become exercisable on an earlier date where any transaction occurs which would materially affect the value of options. Any unused options expire ten years from the
date of the grant of such options.

Grant date

The grant date determines the point in time at which the fair value of the services of the management is measured. The managers who are members of the Direct MEP
I participate in Cayman Cable Holding L.P. with a deemed grant date of March 13, 2002. The managers who are members of the Indirect MEP I participate with a deemed grant date of
November 27, 2002. For one limited partner in the Partnership the deemed grant date is September 7, 2003. For some of the additionally issued interests in 2006 the deemed grant date is
April 2, 2005, for the rest the grant date is February 2, 2006. For the managers who are members of the MEP IV program, the grant date is March 29, 2007.

Certain Relationships and Related Party Transaction

The holders of preferred limited partnership interests (subsequently exchanged for Investor Common A LP Interests) were originally entitled to receive a
preferred share of any distributions of the Partnership, up to an amount of €5,873.53 per Partnership interest, plus interest. Following a one-time distribution made by the
Partnership in March 2004, the preferred distribution rights were satisfied in full. Following an amendment to the Partnership agreement on May 21, 2007 and a sub-division of the
Investor Common LP Interests on that date, the Management Common LP Interests and the Investor Common LP Interests rank equally as to entitlement to distributions and voting
rights.

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Shareholder Loan

On March 29, 2004, KDG granted a loan of €150.0 million to its shareholder, Cable Holding S.à.r.l., and made a
€118.4 million distribution to Cable Holding S.à.r.l. KDG has waived repayment of this loan (including accrued interest) and the loan has been terminated.

Management Equity Participation Programs

Part of the management of KDG, including two members of the supervisory board, participates in Cayman Cable Holding L.P. either by means of the equity
participation program set out in the amended and restated exempted limited partnership agreement dated May 21, 2007 (Equity Participation Program), or by means of Kabel Management
Beteiligungs-GbR and Kabel Management Beteiligungs (MEP IV) GbR, separate partnerships which are themselves limited partners in Cayman Cable Holding L.P. (Management Scheme).
The terms of the programs are substantially the same. Most of the managers who are members of the Equity Participation Program participate in Cayman Cable Holdings L.P. with effect from
March 13, 2003. The managers who are members of the Management scheme participate with effect from November 27, 2002 and March 29, 2007. The members of both programs were required
to pay a capital contribution upon admission. Up to 80% of the managers' contributions were financed by a loan from Cayman Cable Holding L.P.

Financial Advisory Arrangements

Affiliates of Apax, GS Capital Partners and Providence acted as our financial advisors in connection with the formation of KDG in March 2003 and the refinancing
of our bridge facility in October 2003, which has now been repaid. In connection with these consulting and advisory services, the three advisors each received fees amounting to approximately
€8.3 million.

These
advisors have also acted as advisors in connection with our refinancing in July 2004 and they advised us in connection with the failed acquisitions of ish, iesy and Kabel BW. In
consideration for
these services they received a total fee of approximately €6.1 million. In addition, we formerly paid an annual fee of €100 thousand to each of the three
advisors to cover reasonable travel and other customary expenses. Following the Acquisition, the advisory arrangements with Apax and GS Capital Partners have been terminated. We will continue to pay
an advisory fee to Providence and Ontario Teachers' Pension Plan Board. Providence and Ontario Teachers' Pension Plan Board may in the future provide additional services, for which they will receive
customary fees in compliance with our financing documents.

Other Transactions

Prof. Dr. Heinz Riesenhuber obtained separate loans in the amounts of €70 thousand and €379 thousand with an
interest rate of 5.5% p.a. from Cayman Cable Holding L.P. As of March 31, 2008, approximately €128 thousand remained outstanding including accrued interest.

Dr. Adrian v. Hammerstein obtained a loan with an interest rate of 5.0% p.a. in the amount of €1.2 million from Cayman Cable Holding L.P., accrued
interest as of March 31, 2008 amounted to €51 thousand. Dr. Manual Cubero obtained a loan with an interest rate of 5.5% p.a. in the amount of
€960 thousand from Cayman Cable Holding L.P., accrued interest as of March 31, 2008 amounted to €43 thousand. The principal amount of each
of these loans is outstanding.

In
April and May 2007 KDVS entered into loan agreements with Cayman Cable Holding. The first agreement of €1.0 million with an interest rate of 6.0% p.a. payable
on February 1 of each year (or 11.0% p.a. on the overdue amount if the borrower fails to pay any amount), entered into on April 4, 2007 was fully drawn at the same date. The second
agreement from May 21, 2007 provides for loans of up to €19.0 million with an interest rate of 6.0% p.a. payable on April 15 of each year (or 11.0% p.a.

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on
the overdue amount if the borrower fails to pay any amount) in total to be drawn in tranches based on request and subject to management and board approval. The first tranche of
€8.0 million was drawn at inception, a second tranche of €1.5 million was drawn on May 25, 2007 and a third tranche of
€2.0 million was drawn on December 18, 2007 totaling to €11.5 million on March 31, 2008. The cash loaned to the holding company was used in
relation to purchases of MEP interests from management leaving the company.

C.    Interests of Experts and counsel

Not applicable.

ITEM 8.    FINANCIAL INFORMATION

A.    Consolidated statements and other financial information

See ITEM 17 Financial Statements.

B.    Significant Changes

See ITEM 17 Financial Statements.

ITEM 9.    THE OFFER AND LISTING

A.    Offer and Listing Details

All of our common stocks is owned by our parent company, Cayman Cable Holding L.P. (See ITEM 7 Major Shareholders and Related Party Transactions). There is
no established public trading market for our common stocks. We did not declare dividends on our common stocks during the past two fiscal years. Our ability to pay dividends on our common stocks is
restricted by our Senior Credit Facilities, the PIK loan facility on Holding Company Level, the indentures governing our 2014 Senior Notes and certain other agreements governing our indebtedness (See
ITEM 17 Financial Statements). Any
determination to pay dividends in the future will be at the discretion of our board of directors and will be dependent upon our results of operations, financial condition, contractual restrictions and
other factors deemed relevant by our board of directors.

B.    Plan of Distribution

Not applicable.

C.    Markets

The Senior Notes are currently listed on the Irish Stock Exchange and registered with the SEC.

D.    Selling Shareholder

Not applicable.

E.    Dilution

Not applicable.

F.     Expenses of the Issue

Not applicable.

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ITEM 10.    ADDITIONAL INFORMATION

A.    Share Capital

Not applicable.

B.    Memorandum and Articles of Association

There have been no changes to our Memorandum and Articles of Association during the last financial year. Please refer to the information provided for in our
previous annual report in Form 20-F.

C.    Material Contracts

Senior Credit Facility

On May 12, 2006, KDG entered into a new Senior Credit Facility. As from May 16, 2006, this agreement was comprised of two tranches, a
€1,150.0 million Term Loan Facility and a €200.0 million Revolving Credit Facility. Tranche A and Tranche B mature on March 31, 2012.
The Senior Credit Facility is secured by all the assets of Kabel Deutschland Vertrieb und Service GmbH & Co. KG ("KDVS") and a first pledge on 100% of the shares of KDVS which are
owned and offered as security by Kabel Deutschland GmbH under its guarantee. The carrying amount of KDVS' shares amounts to €3.3 million. At closing Facility A was fully
drawn and the proceeds (€1,150.0 million), along with available cash (€75.9 million) were used to repay and extinguish the existing bank facility.

On
June 22, 2007 the amount of Tranche B was increased by €125.0 million to €325.0 million. Tranche B may be borrowed,
repaid and re-borrowed up until one month prior to the final maturity date. Borrowings under Tranche B may be used for general corporate purposes. As of March 31, 2008,
€60.0 million were borrowed under Tranche B.

On
October 22, 2007, KDG entered into a Senior Add-on Facility accession agreement for a Tranche C in the amount of €650.0 million. The
purpose of the facility was the funding of the acquisition of CATV assets from the Orion Group. On April 30, 2008, KDG drew €535.0 million under the facility to fund the
acquisition. The remaining availability was cancelled. The final maturity date of Tranche C is March 31, 2013.

Interest
rates on the Senior Credit Facility are based on one, two, three or six months EURIBOR plus a margin.

The margin on the Senior Credit Facility is based on the ratio of consolidated senior net borrowings to consolidated EBITDA (as defined in the Senior Credit Facility agreement) as
follows:

Ratio of Consolidated Total Net Borrowings to Consolidated EBITDA

Margin
(percent. p.a.)Greater than 4:1

2.00Less than or equal to 4:1, but greater than 3.5:1

1.875Less than or equal to 3.5:1

1.75


The margin on the Senior Credit Facility, Tranche C is 3.25%.

KDG
pays an annual commitment fee of 0.625% on the undrawn commitment under Tranche B.

The
Senior Credit Facility is subject to several affirmative and negative covenants including, but not limited to, the following range over time:

Test

RequirementEBITDA to Net Interest

1.75x3.00xSenior Net Debt to EBITDA

4.00x2.00x


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Mandatory prepayments are required in case of (i) a change of control, public flotation or sale of the business, (ii) certain third
party receipts, (iii) the sale of shares on the public market (if consolidated total senior net borrowings to consolidated EBITDA is greater than or equal 2:1).

At March 31, 2008, €1,150.0 million was outstanding under Tranche A at an interest rate of approximately 6.1% and
€60.0 million was outstanding under Tranche B. On the same date, Tranche C of €650.0 million was undrawn. On April 30, 2008, KDG drew
€535.0 million with the closing of the acquisition of assets from Orion Group. As of May 9, 2008 the granted loan amount of the Senior Add-on Facility was
reduced by €115.0 million to €535.0 million. The Company entered into interest rate caps and swaps in order to mitigate the exposure to interest rate
risks.

SLAs with DTAG

We have entered into various long-term Service Level Agreements with DTAG and certain of its affiliates that are significant to our business, in
particular for the lease of cable duct space for approximately 13% of our cable network as well as the use of fiber optic transmission systems, tower and facility space. In addition, we purchase the
electrical power required for the operation of our network through DTAG under such agreements. The various services offered by DTAG are defined under so-called "Term Sheets" that are part
of the SLAs. Generally, the term of the SLAs is unlimited, but the Term Sheets are subject to certain termination rights and, according to German law, lease agreements are subject to a termination
right of either party after a term of 30 years. We renegotiated with DTAG in January 2003 to reduce our payments under the SLAs. Our total operational expenditures under the SLAs for the year
ended March 31, 2008, amounted to €161.0 million. We believe our payments under the SLAs, coupled with other contracted services with DTAG affiliates, make us one of the
larger customers of DTAG.

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The following chart provides an overview of the services covered by the SLAs:

|SLA Term Sheet |                                        | Service |                                                                                                                                                                                                                                | Duration |                                                                                     | Approx. annual cost
(based on 2007
figures) |                                                                                                                                                               | Termination rights
|-------------- | -------------------------------------- | ------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ | -------- | ----------------------------------------------------------------------------------- | ------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------
|1.             | Co-use of cable ducts                  |         | Usage of cable ducts within DTAG's conduit system for existing broadband cable lines (13% of our coaxial cable is located in cable ducts leased from DTAG under this Term Sheet; the remainder is directly buried
underground. |          | Unlimited                                                                           |                                             | €102 million; possible increases based on actual cost, but subject to a cap at the German consumer price index ("CPI") rate until 2015.                       |                   
|2.             | Offer of co-use of further cable ducts |         | Non-binding offer to lease additional cable duct capacities in existing or newly built systems at pre-determined prices. The offer is subject to individual agreements for specific cable ducts.                               |          | Term of offer unlimited but offer can be terminated by DTAG upon 12 months' notice. |                                             | €1.7 million; possible increases based on actual cost, but subject to a cap at the German CPI rate until 2015.                                                |                   
|3.             | Fiber optic transmission system        |         | DTAG provides for the distribution of receiving certain analog and digital broadcasting signals via fiber optic transmission systems.                                                                                          |          | Unlimited                                                                           |                                             | €3.6 million; possible increases based on actual cost, but subject to a cap at the German CPI rate until 2015.                                                |                   
|4.             | Rental spaces for network equipment    |         | Lease of space of DTAG's premises which are used for broadband equipment such as transmission equipment, satellite receivers, antennae and microwave equipment.                                                                |          | Unlimited                                                                           |                                             | €4.6 million; (if the landlord is a third party, fees are those paid to that third party plus a margin of 5%), plus €5.2 million for rental of antenna space. |                   
|5.             | Electrical power supply                |         | Purchase of electrical power from DTAG required for the operation of our network equipment.                                                                                                                                    |          | Unlimited                                                                           |                                             | €19.1 million; equal to price paid by DTAG plus a margin of 5%.                                                                                               |                   
|15.            | Rental rooms for network equipment     |         | Framework agreement for the lease of rooms which are used for broadband equipment such as transmission equipment, satellite receivers, antennae and microwave equipment.                                                       |          | Unlimited                                                                           |                                             | €4 million.                                                                                                                                                   |                   

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As DTAG has decided to gradually terminate the operation of its so-called OPAL fiber optic transmission system between December 31, 2004 and December 31, 2007,
we will have to find alternative transmission capabilities if we wish to serve the affected subscribers in the future. However, we have taken precautions in the SLAs for a proper transition to any
such alternative systems. We extended the contract for OPAL with the same financial conditions until December 31, 2010. As of December 31, 2005 we had approximately 130 thousand
subscribers in the OPAL areas.

In
2004 we entered into two agreements with DTAG:



In
November 2007 we entered into the following agreements with DTAG:



Other Supply Agreements

Transponder Capacity for Our Digital Television Platform

A key component of our digital television platform is the up-link and transponder capacity needed to transmit the digital signals from our playout
facility in Frankfurt am Main/Rödelheim to our local head ends and the head ends of the other regional cable companies. We currently sublease these mainly from T-Systems, a
subsidiary of DTAG, and, as of January 1, 2006, partly from SES ASTRA. The contract with T-Systems for seven transponders terminates in 2013. We also lease five transponders from
SES ASTRA, which have a minimum term until 2012. As we develop additional digital products, additional transponder capacity may be required.

Conditional access system for digital television

Our digital free-to-air cable access offering (except for the public broadcasters' channels), our pay TV packages and the offering of an
unaffiliated pay TV operator that is distributed over our network are only offered to the subscribers of these services based on a conditional access system. The conditional access system (consisting
of certain head end functionalities in the digital playout system

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and
a smart card for each subscriber's CPE which is delivered to the customer upon request for digital free-to-air television or subscription to pay television services) is
necessary to encrypt (on the network side) and to decrypt (on the subscriber side) digital television and radio content. This system allows operators to provide pay TV services and the respective
billing on an individual subscriber basis. Once we activate the subscriber's smart card, the encrypted digital signal is decoded, decompressed and converted to an analog signal and can be viewed by
the respective subscriber.

Cable set-top boxes

As part of our launch of our digital television services we entered into agreements with various producers of set-top boxes for the activation and
presentation of Kabel Deutschland products as well as the use of the trademark "Kabel Digital". On February 1, 2005, we announced the implementation of a self-certification process
for Kabel Digital set-top boxes. In order to be "Kabel Digital geeignet" (Kabel Digital ready), the producers have to self-certify that their boxes provide copyright protection
(a requirement of the content providers), comply with parental control requirements required by law and are compatible with the specification of our conditional access system. The inclusion of other
functions, like an electronic program guide, interactive TV interfaces or other software features are at the discretion of the producers. The self-certification should simplify and shorten
the introduction of new cable set-top boxes and help to avoid shortages.

Call center framework agreements

In addition to our internal call center, we have assigned 8 external service providers with various call center activities based on framework agreements. The
contracts with the service providers are basic agreements and have no defined volume per annum.

DelphiWizard/Infinys® Series 3 Rating and Billing (IRB)

The new application DELPHI is an enhancement of SMILE system with workforceand trouble ticket functionality. We have a support and maintenance
agreement with the vendor of an annual volume of €1.2 million. New developments and adoptions of the software are subject of still ongoing negotiations. The program is called
Next Generation Billing System (NGBS) with new components for the account and receivables functionality (SAP- RMCA) and billing (IRB V4.0).

Webhosting and unified messaging

In December 2006 Kabel Deutschland started to offer webhosting and unified messaging services to its customers. Both services are outsourced to service providers.
Currently about 232 thousand customers of Kabel Deutschland are using these services. It is planned to insource webhosting and unified messaging without an agreed deadline.

Telecommunication

All billing related to telephone and Internet services that Kabel Deutschland is offering to its customers was outsourced. In December 2006, Kabel Deutschland
decided to insource these services. Therefore, the existing vendor contract was replaced by a transaction agreement which regulated the migration of telephone numbers and all services to Kabel
Deutschland. This contract was amended in February 2008 to shorten the transition phase. In addition, Kabel Deutschland entered into various interconnection contracts with other network operators
including the DTAG. By end of March 2008 about 99.5% of telephone numbers and services were migrated to Kabel Deutschland.

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D.    Exchange Controls

There are currently no legal restrictions in Germany on international capital movement and foreign-exchange transactions, except in limited embargo circumstances
relating to certain areas, entities or persons as a result of applicable resolutions adopted by the United Nations and the European Union.

For
statistical purposes, however, every individual or corporation residing in Germany must report to the German Federal Reserve Bank ("Deutsche
Bundesbank") any payment received from or made to a non-resident corporation or individual if the payment exceeds €12.5 thousand (or the
equivalent in a foreign currency). Additionally, corporations and individuals residing in Germany must report to the German Federal Reserve Bank any claims against or any liabilities payable to a
non-resident corporation or individual exceeding an aggregate amount of €5.0 million (or the equivalent in a foreign currency) at the end of every calendar month.

E.    Taxation

The following summary of certain German income tax considerations for holders of the Senior Notes (the "Noteholders") is based on the effective tax law at the
date of this filing which may change, even with retroactive effect. The summary does not describe all tax considerations that may be relevant for an individual's decision to purchase and exchange
Senior Notes. It is not a substitute for tax advice.

German Tax Considerations

Prospective purchasers and current holders of Senior Notes are advised to consult their own tax advisors for the tax consequences of the purchase, the exchange,
the ownership and the disposition of Senior Notes, including the effect of any state or local taxes under the tax laws of the Federal Republic of Germany as well as in each other country of which they
are residents.

The summary will also outline the amendments regarding the new tax regime of investment income and capital gains as it will come into effect from January 1, 2009.

Tax Residents (Tax treatment until December 31, 2008)

Interest payments

Interest paid to a Noteholder resident in Germany (a person whose residence, habitual abode, statutory seat, or place of effective management and control is
located in Germany) is subject to German personal or corporate income tax. On the basis of the assessed personal or corporate income tax, solidarity surcharge
("Solidaritätszuschlag") of 5.5% is levied. In addition, if Senior Notes are held as assets of a German commercial business, any interest
is subject to trade tax. Accrued interest ("Stückzinsen") paid by an individual upon the acquisition of Senior Notes may give rise to
negative income and may, therefore, reduce a Noteholder's personal tax liability.

If
Senior Notes are held in a custodial account which the Noteholder maintains with a bank or financial services institution in Germany, including branches of foreign banks or financial
services institutions in Germany (the "Disbursing Agent""inländische auszahlende Stelle"), such Disbursing Agent will
withhold tax ("Zinsabschlag") at a rate of 30% of the gross amount of all interest payments to the Noteholder plus 5.5% solidarity surcharge
("Solidaritätszuschlag") thereon. As a result, 31.65% of the gross amount of interest paid to a Noteholder will be withheld by the
Disbursing Agent.

The
tax withheld by the Disbursing Agent will be credited against the Noteholder's total annual tax burden for German personal or corporate income tax purposes.

The
Issuer of the Senior Notes, unless it qualifies as Disbursing Agent, is not obliged under German law to withhold any withholding tax from the interest payments.

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Sale or Redemption of Senior Notes

Senior Notes as private assets

If the Senior Notes are held as private assets, according to recent changes in the jurisprudence of the Federal Fiscal Court, gains and losses from the sale or
redemption of financial innovations providing for a stated yield ("Emissionsrendite")such as the Senior Notesare taxable only
as gains from private sales transactions. Therefore, gains from the sale or redemption of the Senior Notesexcept for accrued interest
("Stückzinsen")are taxable and losses are deductible only if the Senior Notes were held for not more than one year by the
private investor. Gains from private sales transactions are fully taxable, provided that such gainsalone or together with other gains from private sales transactionsequal or
exceed €600. Gains falling short of this threshold are tax exempt. Losses realized within the one year period described above, can only be set off against other gains from private
sales transactions. To the extent such a set off is not possible in the calendar year in which the loss has been realized, such loss can be carried back one year or can be carried forward into future
years without any limitation andsubject to certain restrictionscan be set off against gains from private sales transactions generated in other assessment periods. In case the
Senior Notes are held for more than one year, gains from the sale or the redemption are not taxable provided that the Senior Notes are held as private assets. Conversely, any loss is also not
recognized for tax purposes.

To
the extent the Senior Notes are denominated in a currency other than Euro (USD), the gains from the sale or redemption (except for accrued interest) are computed as the excess of the
proceeds from the sale or redemption expressed in Euro over the purchase price expressed in Euro where the Euro amounts are determined on the basis of the prevailing foreign exchange rate.

If
Senior Notes are held in a custodial account maintained with a Disbursing Agent since the acquisition of the Senior Notes, tax is deducted at a rate of 30% (plus solidarity surcharge
of 5.5% thereon) from the excess of the proceeds arising from the sale or redemption over the purchase price paid for the Senior Notes. If custody has changed since the acquisition of the Senior
Notes, tax is withheld from the amount equal to 30% of the proceeds arising from the sale or redemption of the Senior Notes. In computing the tax to be withheld, the Disbursing Agent may deduct any
accrued interest paid by the Noteholder to the Disbursing Agent during the calendar year of the taxable gain from the basis of assessment. The tax withheld will be credited against the Noteholder's
annual tax liability for personal income tax purposes.

The
Issuer of the Senior Notes, unless it qualifies as Disbursing Agent, is not obliged under German law to withhold any withholding tax from the sale or redemption proceeds.

Senior Notes as business assets

Gains from the sale or redemption of the Senior Notes are subject to income tax or corporate income tax as well as solidarity surcharge and trade tax if the
Senior Notes are held as assets of a German commercial trade or business. Losses are fully deductible when realized.

The
procedure of the withholding tax deduction on payments from the sale or redemption of the Senior Notes is similar to the procedure outlined above for private investors.

Any
withholding tax withheld is credited against the Noteholder's personal or corporate income tax liability in the course of the tax assessment procedure. Any potential surplus for the
benefit of the Noteholder will be paid out to the Noteholder.

The
Issuer of the Senior Notes is not obliged to withhold any withholding tax from the proceeds from the sale or redemption of the Senior Notes under German law, unless it qualifies as
Disbursing Agent.

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Tax Residents (Tax treatment from January 1, 2009 onward)

The Business Tax Reform Act 2008 dated August 14, 2007 (BGBl. I 2007, p. 1912)amongst otherschanges the taxation of investment
income for a German tax resident private investor significantly.

Interest Payments

Senior Notes as private assets

Current interest payments from the Senior Notes qualify as investment income pursuant to Sec. 20 para. 1 No. 7 EStG and are subject to tax at
a rate of 25% (plus solidarity surcharge).

If
the Senior Notes are held in custody with or administered by a German Disbursing Agent current interest payments are subject to a tax at a rate of 25% (plus solidarity surcharge) that
is withheld by such institution. The list of entities qualifying as Disbursing Agent is enlarged by including securities trading companies or securities trading banks as of 1.1.2009 onward. The
withholding tax is definitive (flat tax;Abgeltungsteuer) i.e. the withholding tax is satisfying the personal income tax of the Noteholder.
Noteholders having a lower personal income tax rate may include the capital investment income in their personal income tax return to achieve a lower tax rate. Income not subject to a definitive
withholding tax will be subject to a special tax rate of 25% (plus solidarity surcharge) upon assessment.

The
Issuer of the Senior Notes is not obliged to withhold any withholding tax from the interest payments under German law, unless it qualifies as Disbursing Agent.

Senior Notes as business assets

If the Senior Notes are held as business assets any current interest payments from the Senior Notes qualify as business income and are subject to personal or
corporate income tax plus solidarity surcharge. Further, such interest payments are recognized for trade tax purposes.

The
procedure of the withholding tax deduction on interest payments is similar to the procedure outlined above for private Noteholders. Any withholding tax withheld is credited against
the Noteholder's personal or corporate income tax liability in the course of the tax assessment procedure. Any potential surplus for the benefit of the Noteholder will be paid out to the Noteholder.

The
Issuer of the Senior Notes is not obliged to withhold any withholding tax from the interest payments under German law, unless it qualifies as Disbursing Agent.

Sale or Redemption of Senior Notes

Senior Notes as private assets

Capital gains from the sale or redemption of the Senior Notes qualify as investment income pursuant to Sec. 20 para. 2 No. 7 EStG and are
subject to personal income tax plus solidarity surcharge. Losses from the sale or redemption of the Senior Notes can only be off-set against other investment income. In the event that an
off-set is not possible in the assessment period in which the losses have been realized, such losses can be carried forward into future assessment periods only and can be
off-set against investment income generated in future assessment periods.

To
the extent the Senior Notes are denominated in a currency other than Euro (USD), the gains and losses are computed as the excess of the proceeds from the Senior Note's sale or
redemption expressed in Euro over the purchase price expressed in Euro where the Euro amounts are determined on the basis of the foreign exchange rate as of the acquisition date and the sale or
redemption date respectively.

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If
the Senior Notes are held in custody with or administered by a German credit institution, financial services institution (including a German permanent establishment of such foreign
institution), securities trading company or securities trading bank, a tax at a rate of 25% (plus solidarity surcharge thereon) is withheld by such institution upon sale or redemption of the Senior
Notes. The withholding tax is imposed on the excess of the proceeds from the sale or redemption over the purchase price paid for the Senior Notes, if the Senior Notes were held in custody by such
institution since their acquisition. If custody has changed since the acquisition and the acquisition data is not proved, the tax at a rate of 25% (plus solidarity surcharge) will be imposed on an
amount equal to 30% of the proceeds from the sale or redemption of the Senior Notes. The withholding tax is definitive, i.e. the withholding tax is satisfying the personal income tax of the
Noteholder. Noteholders having a lower personal income tax rate may include the capital investment income in their personal income tax return to achieve a lower tax rate. Income not subject to a
definitive withholding tax (e.g. since there is no German custodian institution) will be subject to a special tax rate of 25% (plus solidarity surcharge) upon assessment.

The
Issuer of the Senior Notes, unless it qualifies as Disbursing Agent, is not obliged under German law to withhold any withholding tax upon the sale or redemption of the Senior Notes.

Senior Notes as business assets

If the Senior Notes are held as business assets capital gains from the sale or redemption of the Senior Notes qualify as business income and are subject to
personal or corporate income tax plus solidarity surcharge. Further, such gains and losses are recognized for trade tax purposes.

The
procedure of the withholding tax deduction is similar to the procedure outlined above for private Noteholders. Any withholding tax withheld is credited against the Noteholder's
personal income tax liability in the course of the tax assessment procedure. Any potential surplus for the benefit of the Noteholder will be paid out to the Noteholder. No withholding tax deduction
applies where the Senior Notes are held by a corporation.

No
withholding tax is to be deducted by the Issuer of the Senior Notes upon the sale or redemption of the Senior Notes, unless it qualifies as Disbursing Agent.

Transition Rules

The above flat tax regime applies (i) to Senior Notes acquired from January 1, 2009 onward, (ii) to interest income received from
January 1, 2009 onward, (iii) to gains/losses from the sale or redemption of Senior Notes acquired prior to January 1, 2009 provided the gains/losses are generated from
January 1, 2009 onward.

Non-residents

Interest paid to a Noteholder and capital gains realized by a Noteholder not resident in Germany will generally not be taxable in Germany and no tax will be
withheld (even if the Senior Notes are kept with a Disbursing Agent). Exceptions apply, however, if (i) the Senior Notes are held as a business asset of a German permanent establishment or by a
permanent representative of the non-resident Noteholder, if (ii) the interest income of such Senior Notes does otherwise constitute German source income (such as income from the
letting and leasing of certain German situs property) or if (iii) the non-resident Noteholder does not comply with the procedural rules to prove his status as a non-tax
resident. In these cases, the Noteholder not
resident in Germany will be subject to a tax regime similar to that described above under "German Tax ConsiderationsTax Residents."

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Inheritance and gift tax

The receipt of Senior Notes in case of succession upon death, or by way of a gift among living persons is subject to German inheritance and/or gift tax, if the
deceased, donor and/or the recipient is a German resident. German inheritance and gift tax is also triggered, if neither the deceased, the donor nor the recipient of the Senior Notes are German
residents, if the Senior Notes are attributable to German business activities and if for such business activities a German permanent establishment is maintained or a permanent representative is
appointed in Germany. In specific situations, German expatriates that were tax residents in Germany may be subject to inheritance and gift tax. Double taxation treaties may provide for exceptions to
the domestic inheritance and gift tax regulations.

Other taxes

No stamp, issue, registration or similar direct or indirect taxes or duties will be payable in Germany in connection with the issuance, delivery or execution of
the Senior Notes. Currently, net assets tax is not levied in Germany.

EU Directive on the Taxation of Savings Income

Directive 2003/48/EC of the Council of the European Union, relating to the taxation of savings income, became effective on July 1, 2005. Under this
directive, if a paying agent for interest on a debt claim is resident in one member state of the European Union and an individual who is the beneficial owner of the interest is a resident of another
member state, then the former member state will be required to provide information (including the identity of the recipient) to authorities of the latter member state. "Paying agent" is defined
broadly for this purpose and generally includes any agent of either the payor or the payee. Belgium, Luxembourg and Austria have opted instead to withhold tax on the interest during a transitional
period (initially at a rate of 15% but rising in steps to 35% after six years), subject to the ability of the individual to avoid withholding tax through voluntary disclosure of the investment to the
individual's member state. In addition, certain non-members of the European Union (Switzerland, Liechtenstein, Andorra, Monaco and San Marino), as well as dependent and
associated territories of the United Kingdom and the Netherlands, have adopted equivalent measures effective on the same date, and some (including Switzerland) have exercised the option to apply
withholding taxes as described above.

F.     Dividends and Paying Agents

Not applicable.

G.    Statement by Experts

Not applicable.

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 annual reports
and other information with the SEC. You may review a copy of these materials, including this annual report and its exhibits, at the Commission's Public Room at the following location:

Public
Reference Room
450 Fifth Street, N.W.
Room 1580
Washington, D.C. 20549

119

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Please
call the SEC at 1-800-SEC-0330 for further information on the public reference room. Copies of these materials can also be obtained by mail at
prescribed rates from the Public Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549.

The
Commission also maintains a website at http://www.sec.gov that contains reports, proxy statements and other information regarding registrants that file electronically with the
Commission. Our filings with the SEC are also available to the public through the SEC's web site.

I.     Subsidiary Information

Not applicable.

ITEM 11.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

See ITEM 3D Risk Factors and ITEM 5A Operating Results.

ITEM 12.    DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

Not applicable.

120

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PART II

ITEM 13.    DEFAULTS, DIVIDENDS, ARREARAGES AND DELINQUENCIES

Not applicable.

ITEM 14.    MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15.    CONTROLS AND PROCEDURES

Not applicable.

ITEM 15T.    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's disclosure controls and procedures (as defined in rule 13a-15(e) of the Securities Exchange Act of 1934) are designed in a way that the
information required to be disclosed in reports under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our principal executive and principal financial
officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. We have, under the supervision and with the participation of our management,
including the CEO and CFO (our principal executive and financial officers), performed an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Securities Exchange
Act rule 15d-15(e)) as of March 31, 2008. Based on this evaluation, we concluded as of such date that, our disclosure controls and procedures were effective to ensure that
information required to be disclosed by Kabel Deutschland GmbH in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported
within the time periods specified in the SEC's rules and forms.

Management's Annual Report on Internal Control over Financial Reporting and Attestation Report of Registered Public Accounting Firm

Our Management is also responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting
is defined in rule 13a-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, our chief executive and chief financial
officer, and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:



121

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Our
management assessed the effectiveness of our internal control over financial reporting as of March 31, 2008. In making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the Internal Control-Integrated Framework. Based on our assessment, management concluded that, as of
March 31, 2008 our internal control over financial reporting is effective based on those criteria.

This
annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not
subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit the company to provide only management's report in this annual report.

Change in Internal Control over Financial Reporting

During the period covered by this annual report on Form 20-F, there have been changes relating to material weaknesses identified in prior year
in the areas of accounting for derivatives and the completeness of the flow of information related to the management equity participation program ("MEP"). Since these issues were identified the
company has provided more training to those performing the controls operating for derivative accounting and implemented additional review procedures. For MEP the company redesigned the process to
ensure the correct and complete communication of changes between the administrators of the program and the accounting department. As a result of the remediation actions, the material weaknesses did no
longer exist as of March 31, 2008. There were no other changes in the Company's internal control over financial reporting that have materially affected or are reasonably likely to materially
affect KDG's internal control over financial reporting.

Limitations

There are inherent limitations to the effectiveness of any system of disclosure and internal controls, including the possibilities of faulty judgments in
decision-making, simple error or mistake, fraud, the circumvention of controls by individual acts or the collusion of two or more people, or management override of controls. Accordingly, even an
effective disclosure and internal control system can provide only reasonable assurance with respect to disclosures and financial statement preparation. Furthermore, because of changes in conditions,
the effectiveness of a disclosure and internal control system may vary over time.

ITEM 16A.    AUDIT COMMITTEE FINANCIAL EXPERT

One of the members of the Supervisory Board and the Audit Committee, Torsten Winkler, has an extensive knowledge of financial and economic matters. Prior to
joining Providence Mr. Winkler worked for Morgan Stanley Dean Witter in Corporate Finance and Mergers & Acquisitions, where he focused on telecommunication and technology industries.
Nevertheless, he currently does not meet all criteria to be qualified as an Audit Committee financial expert, as defined in the Corporate Governance Code. Therefore no Audit Committee financial expert
has been currently designated.

ITEM 16B.    CODE OF ETHICS

The Company has adopted a Code of Ethics ("Code") that applies to the Company and its officers in order to promote honesty, integrity, transparency and ethical
conduct in our officers' performance of their management responsibilities. For a full version, please refer to Exhibit 11 of this report. Please note that we amended our Code during the fiscal
year ended March 31, 2008, effective as of February 2008, in order to clarify the group of people to whom the Code applies. Accordingly, the Code now specifies that the officers covered by the
Code include the managing directors (including the chief executive officer and the chief financial officer), the director of finance and any other directors directly

122

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reporting
to the managing directors. Also, the Code now specifies that all conflicts or potential conflicts of interest should immediately be reported to the supervisory board and/or, in addition, the
advisory board. No further changes were made to the Code. Please also refer to the information provided in our previous annual report in Form 20-F for further details on our Code.

ITEM 16C.    PRINCIPAL ACCOUNTANT FEES AND SERVICES

Auditor's Remuneration

a      Audit Fees

Fees for audit services totaled approximately €1.3 million in 2007/08 and approximately €1.6 million in 2006/07,
including fees associated with the annual audits and statutory audits required.

b      Audit-Related Fees

Fees for audit-related services totaled approximately €1.5 million in 2007/08 and approximately €0.7 million in
2006/07. Audit-related services principally include due diligence in connection with acquisitions, internal controls review and information systems audits.

c      Tax Fees

Fees for tax services, including tax compliance and tax advice, totaled approximately €0.3 million in 2007/08 and
€0.3 million in 2006/07.

d      Other Services than a to c

Not applicable.

e      Audit Committee's Pre-Approval Policy

Our Audit Committee has adopted rules of procedures, which include policies and procedures for the pre-approval of audit and non-audit
services rendered by our independent public accountants. Pre-approval is given on an individual basis. The procedures prohibit retention of the independent public accountants to perform
the prohibited non-audit functions defined in Section 201 of the Sarbanes-Oxley Act or the rules of the SEC, and also consider whether proposed services are compatible with the
independence of the public accountants. All fees incurred described in this Item 16C have been approved in accordance with these policies and procedures.

f       Accountant's Engagement

Not applicable.

ITEM 16D.    EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E.    PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

Not applicable.

123

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PART III

ITEM 17.    FINANCIAL STATEMENTS

See pages F-1 to F-146.

ITEM 18.    FINANCIAL STATEMENTS

The Registrant has responded to ITEM 17 Financial Statements in lieu of responding to this item.

ITEM 19.    EXHIBITS

|Exhibit
Number |  | Description of Exhibit                                                               
|-------------- |  | -------------------------------------------------------------------------------------
|1              |  | Memorandum and Articles of Association(35)                                           
|11             |  | Code of Ethics                                                                       
|12.1           |  | Certification Rule 13A-14(A) CEO Kabel Deutschland GmbH                              
|12.2           |  | Certification Rule 13A-14(A) CFO Kabel Deutschland GmbH                              
|12.3           |  | Certification Rule 13A-14(A) CEO Kabel Deutschland Vertrieb und Service GmbH & Co. KG
|12.4           |  | Certification Rule 13A-14(A) CFO Kabel Deutschland Vertrieb und Service GmbH & Co. KG
|13.1           |  | Certification Rule 13A-14(B) CEO Kabel Deutschland GmbH                              
|13.2           |  | Certification Rule 13A-14(B) CFO Kabel Deutschland GmbH                              
|13.3           |  | Certification Rule 13A-14(B) CEO Kabel Deutschland Vertrieb und Service GmbH & Co. KG
|13.4           |  | Certification Rule 13A-14(B) CFO Kabel Deutschland Vertrieb und Service GmbH & Co. KG
|15.1           |  | Report of Independent Registered Public Accounting Firm                              
|15.2           |  | Report of Independent Registered Public Accounting Firm                              

---

124

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SIGNATURES KDG

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.

|KABEL DEUTSCHLAND GMBH |  |  | 
|---------------------- |  |  | 

|
|

|Signature                                                                               |  | Title                    |  | Date         
|--------------------------------------------------------------------------------------- |  | ------------------------ |  | -------------
|                                                                                        |  |                          |  |              
|/s/DR. ADRIAN V. HAMMERSTEINName: Dr. Adrian v.
Hammerstein                             |  | Chief Executive Officer  |  | July 29, 2008
|/s/PAUL THOMASONName: Paul Thomason                                                     |  | Chief Financial Officer  |  | July 29, 2008
|/s/HERBERT R. HRIBARName: Herbert R. Hribar                                             |  | Chief Operating Officer  |  | July 29, 2008
|/s/DR. MANUEL CUBERO DEL CASTILLO-OLIVARESName: Dr. Manuel Cubero del
Castillo-Olivares |  | Chief Commercial Officer |  | July 29, 2008

125

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SIGNATURES KDVS

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.

|KABEL DEUTSCHLAND VERTRIEB UND SERVICE GMBH & CO. KG
|----------------------------------------------------

|
|

|Signature                                                                               |  | Title                    |  | Date         
|--------------------------------------------------------------------------------------- |  | ------------------------ |  | -------------
|                                                                                        |  |                          |  |              
|/s/DR. ADRIAN V. HAMMERSTEINName: Dr. Adrian v.
Hammerstein                             |  | Chief Executive Officer  |  | July 29, 2008
|/s/PAUL THOMASONName: Paul Thomason                                                     |  | Chief Financial Officer  |  | July 29, 2008
|/s/HERBERT R. HRIBARName: Herbert R. Hribar                                             |  | Chief Operating Officer  |  | July 29, 2008
|/s/DR. MANUEL CUBERO DEL
CASTILLO-OLIVARESName: Dr. Manuel Cubero del
Castillo-Olivares |  | Chief Commercial Officer |  | July 29, 2008

126

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INDEX TO FINANCIAL STATEMENTS



Kabel Deutschland GmbH, Unterföhring

F-2Consolidated Balance Sheet as of March 31, 2008

F-3Consolidated Statement of Operations for the period from April 1, 2007 to March 31, 2008

F-4Consolidated Statement of Cash Flows for the period from April 1, 2007 to March 31, 2008

F-5Statement of Changes in Consolidated Equity for the period from April 1, 2007 to March 31, 2008

F-6Notes to the Consolidated Financial Statements as of March 31, 2008

F-7Analysis of Fixed Assets for the period from April 1, 2007 to March 31, 2008

F-74Kabel Deutschland Vertrieb und Service GmbH & Co. KG, Unterföhring

F-77Consolidated Balance Sheet as of March 31, 2008

F-78Consolidated Statement of Operations for the period from April 1, 2007 to March 31, 2008

F-80Consolidated Statement of Cash Flows for the period from April 1, 2007 to March 31, 2008

F-81Statement of Changes in Consolidated Equity for the period from April 1, 2007 to March 31, 2008

F-82Notes to the Consolidated Financial Statements as of March 31, 2008

F-83Analysis of Fixed Assets for the period from April 1, 2007 to March 31, 2008

F-144


F-1

---





Kabel Deutschland GmbH  Unterföhring



Consolidated Financial Statements  March 31, 2008

F-2

---





Kabel Deutschland GmbH, Unterföhring



Consolidated Balance Sheet as of March 31, 2008

Note

March 31,
2008

March 31,
2007

as adjusted
March 31,
2006€

T€

T€AssetsCurrent AssetsCash and Cash Equivalents

4.1

15,463,180.34

54,108

225,092Trade Receivables

4.2

130,878,150.44

101,370

120,799Receivables from Shareholders

4.2

0.00

0

351Receivables from Affiliates

4.2

922,287.39

1,019

1,566Receivables from Associates

4.2

30,626.08

108

590Inventories

4.3

26,201,007.25

24,265

13,453Receivables from Tax Authorities

4.4

6,881,441.70

6,266

1,473Other Current Assets

4.5

7,272,260.92

8,771

14,111Prepaid Expenses

4.5

19,902,659.66

20,698

19,081Total Current Assets



207,551,613.78

216,605

396,516Non-Current AssetsIntangible Assets

4.6

431,878,171.92

477,343

519,685Property and Equipment

4.7

1,085,952,093.47

986,608

902,711Equity Investments in Associates

4.8

6,353,712.31

5,681

5,562Other Non-Current Financial Assets



4,631,722.13

7,510

492Deferred Tax Assets

3.8

536,715.71

366

396Other Non-Current Assets



4,239,178.00

5,414

603Prepaid Expenses



11,165,915.60

5,959

0Total Non-Current Assets



1,544,757,509.14

1,488,881

1,429,449Total Assets



1,752,309,122.92

1,705,486

1,825,965Equity and LiabilitiesCurrent LiabilitiesCurrent Financial Liabilities

4.11

25,674,112.53

36,997

97,473Trade Payables



218,293,051.20

175,518

160,690Liabilities to Affiliates



0.00

0

3,795Liabilities to Associates



323,445.57

324

323Other Current Provisions

4.13

6,492,952.18

18,107

9,288Liabilities due to Income Taxes

3.8

12,960,638.80

14,157

19,419Deferred Income

4.10

199,510,078.76

216,818

246,744Other Current Liabilities

4.9

59,640,025.79

60,399

69,499Total Current Liabilities



522,894,304.83

522,320

607,231Non-Current LiabilitiesSenior Notes

4.11

603,839,675.37

672,782

715,771Non-Current Financial Liabilities

4.11

1,311,989,077.42

1,186,042

1,174,886Deferred Tax Liabilities

3.8

87,531,231.00

82,660

49,951Provisions for Pension

4.12

29,148,389.51

24,171

19,798Other Non-Current Provisions

4.13

22,270,375.16

21,246

20,212Other Non-Current Liabilities

4.14

105,379,733.89

92,352

47,515Deferred Income



1,825,366.74

270

0Total Non-Current Liabilities



2,161,983,849.09

2,079,523

2,028,133Equity

4.15Subscribed Capital



1,025,000.00

1,025

1,025Capital Reserve



49,590,255.94

45,415

40,840Cash Flow Hedge Reserve



1,288,398.15

(6,293
)
(13,403
)Available-for-Sale Reserve



0.00

625

0Accumulated Deficit



(984,472,685.09
)
(937,129
)
(837,861
)Total Equity (Deficit)



(932,569,031.00
)
(896,357
)
(809,399
)Total Equity and Liabilities



1,752,309,122.92

1,705,486

1,825,965


The accompanying notes to this balance sheet form an integral part to these
consolidated financial statements.

F-3

---





Kabel Deutschland GmbH, Unterföhring


Consolidated Statement of Operations
for the Period from April 1, 2007 to March 31, 2008

Note

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

as adjusted
Apr. 1, 2005-
Mar. 31, 2006€

T€

T€Revenues

3.1

1,196,869,804.27

1,093,179

1,012,133Cost of Services Rendered

3.2

(588,460,907.65
)
(567,090
)
(490,055
)thereof depreciation/amortization T€154,676 (prior year T€133,123; for the fiscal year ending March 31, 2006 T€117,428)Other Operating Income

3.3

12,613,561.34

13,215

12,522Selling Expenses

3.4

(352,836,091.48
)
(318,652
)
(277,047
)thereof depreciation/amortization T€115,478 (prior year T€95,983; for the fiscal year ending March 31, 2006 T€88,155)General and Administrative Expenses

3.5

(128,667,045.33
)
(140,954
)
(102,422
)thereof depreciation/amortization T€23,795 (prior year T€17,512; for the fiscal year ending March 31, 2006 T€15,161)Profit from Ordinary Activities



139,519,321.15

79,698

155,131Interest Income

3.7

2,056,845.25

3,563

2,774Interest Expense

3.7

(171,839,017.02
)
(155,670
)
(215,100
)Accretion/Depreciation on Investments and other Securities



(3,712,461.37
)
265

(127
)Income from Associates



899,286.66

440

491Loss before Taxes



(33,076,025.33
)
(71,704
)
(56,831
)Taxes on Income

3.8

(763,708.01
)
(27,565
)
(11,667
)Net loss for the period



(33,839,733.34
)
(99,269
)
(68,498
)


The accompanying notes to this statement of operations form an integral part to these
consolidated financial statements.

F-4

---





Kabel Deutschland GmbH, Unterföhring



Consolidated Statement of Cash Flows    for the Period from April 1, 2007 to March 31, 2008

Note

April 1, 2007-
March 31, 2008

April 1, 2006-
March 31, 2007

as adjusted
April 1, 2005-
March 31, 2006T€

T€

T€1. Cash flows from operating activitiesNet loss



(33,840
)
(99,269
)
(68,498
)Adjustments to reconcile net loss to cash provided by operations:Taxes on income



764

27,564

11,667Interest expense



171,839

155,670

215,100Interest income



(2,057
)
(3,563
)
(2,774
)Accretion/Depreciation and amortization on fixed assets



293,949

246,618

220,744Accretion/Depreciation on investments and other securities



3,712

(265
)
127Gain/Loss on disposal / sale of fixed assets (intangible assets; property and equipment; financial assets)



822

1,878

271Income from associates



(899
)
(440
)
(491
)Compensation expense relating to share-based payments



23,042

41,791

19,232457,332

369,984

395,378Changes in assets and liabilities:Increase (-)/decrease (+) of inventories



(1,936
)
(10,812
)
(5,902
)Increase (-)/decrease (+) of trade receivables



(29,507
)
19,429

(39,341
)Increase (-)/decrease (+) of other assets



4,544

1,513

(802
)Increase (+)/decrease (-) of trade payables



42,691

22,363

33,231Increase (+)/decrease (-) of other provisions



(11,658
)
8,965

1,032Increase (+)/decrease (-) of deferred income



(15,753
)
(29,656
)
3,225Increase (+)/decrease (-) of provisions for pensions



3,582

3,187

1,199Increase (+)/decrease (-) of other liabilities



(2,125
)
(14,531
)
15,355Cash provided by operations



447,170

370,442

403,375Income taxes paid (-)/received (+)



(2,487
)
(10,461
)
(4,031
)Net cash from operating activities



444,683

359,981

399,3442. Cash flows from investing activitiesCash received from disposal/sale of fixed assets (intangible assets; property and equipment; financial assets)



258

876

223Cash received from sale of investments



38,076

0

0Cash paid for investments in intangible assets



(63,020
)
(63,571
)
(27,569
)Cash paid for investments in property and equipment



(253,413
)
(205,194
)
(116,829
)Cash paid for acquisitions

1.3.2

(29,696
)
(5,092
)
(7,310
)Cash paid for investments in financial assets



(39,666
)
(6,790
)
(9
)Interest received



1,777

3,085

2,666Dividends received from associates



227

321

766Net cash used in investing activities



(345,457
)
(276,365
)
(148,062
)3. Cash flows from financing activitiesCash payments to shareholders



(13,504
)
0

0Cash received/paid non-current financial liabilities



391,000

1,205,000

(652
)Cash repayments of non-current financial liabilities



(331,000
)
(1,205,000
)
0Cash repayments of current financial liabilities



0

(75,848
)
0Cash payments for reduction of finance lease liabilities



(7,240
)
(5,610
)
(4,473
)Interest and transaction costs paid



(177,127
)
(173,407
)
(153,695
)Net cash used in financing activities



(137,871
)
(254,865
)
(158,820
)4. Cash and cash equivalents at the end of the periodChanges in cash and cash equivalents (subtotal of 1 to 3)



(38,645
)
(171,249
)
92,462Accretion/Depreciation on investments and other securities



0

265

(127
)Cash and cash equivalents at the beginning of the period



54,108

225,092

132,757Cash and cash equivalents at the end of the period

4.1

15,463

54,108

225,092Additional InformationInvestments relating to capital lease



2,447

15,311

0Other non cash investments



0

0

0


The accompanying notes to this statement of cash flows form an integral part to these
consolidated financial statements.

F-5

---





Kabel Deutschland GmbH, Unterföhring



Statement of Changes in Consolidated Equity    for the Period from April 1, 2007 to March 31, 2008

|                                                                           |  | Note |  | Subscribed capital |  | Capital reserve |  | Cash flow hedge reserve |   | Available-for-sale reserve |   | Accumulated deficit |   | Equity (Deficit) |  
|-------------------------------------------------------------------------- |  | ---- |  | ------------------ |  | --------------- |  | ----------------------- | - | -------------------------- | - | ------------------- | - | ---------------- | -
|
|Balance as of March 31, 2005                                               |  |      |  | 1,025              |  | 35,890          |  | (22,369                 | ) | 0                          |   | (769,362            | ) | (754,816         | )
|Additions relating to share-based payment                                  |  |      |  | 0                  |  | 4,950           |  | 0                       |   | 0                          |   | 0                   |   | 4,950            |  
|Changes in fair value of hedging instruments (net of tax)                  |  | 5.5  |  | 0                  |  | 0               |  | 17,286                  |   | 0                          |   | 0                   |   | 17,286           |  
|Retrospective effect of applying IAS 8 to interest swap accounting         |  |      |  | 0                  |  | 0               |  | (8,320                  | ) | 0                          |   | 0                   |   | (8,320           | )
|Net loss of the period                                                     |  |      |  | 0                  |  | 0               |  | 0                       |   | 0                          |   | (68,498             | ) | (68,498          | )
|                                                                           |  |      |  |                    |  |                 |  |                         |   |                            |   |                     |   |                  |  
|Total income and expense for the period                                    |  |      |  |                    |  |                 |  | 8,966                   |   | 0                          |   | (68,498             | ) | (59,532          | )
|                                                                           |  |      |  |                    |  |                 |  |                         |   |                            |   |                     |   |                  |  
|Balance as of March 31, 2006                                               |  |      |  | 1,025              |  | 40,840          |  | (13,403                 | ) | 0                          |   | (837,860            | ) | (809,398         | )
|Additions relating to share-based payment                                  |  |      |  | 0                  |  | 4,575           |  | 0                       |   | 0                          |   | 0                   |   | 4,575            |  
|Changes in fair value of hedging instruments (net of tax)                  |  | 5.5  |  | 0                  |  | 0               |  | 7,110                   |   | 0                          |   | 0                   |   | 7,110            |  
|Changes in fair value of financial assets classified as available-for-sale |  |      |  | 0                  |  | 0               |  | 0                       |   | 624                        |   | 0                   |   | 624              |  
|Net loss of the period                                                     |  |      |  | 0                  |  | 0               |  | 0                       |   | 0                          |   | (99,269             | ) | (99,269          | )
|                                                                           |  |      |  |                    |  |                 |  |                         |   |                            |   |                     |   |                  |  
|Total income and expense for the period                                    |  |      |  |                    |  |                 |  | 7,110                   |   | 624                        |   | (99,269             | ) | (91,535          | )
|                                                                           |  |      |  |                    |  |                 |  |                         |   |                            |   |                     |   |                  |  
|Balance as of March 31, 2007                                               |  |      |  | 1,025              |  | 45,415          |  | (6,293                  | ) | 624                        |   | (937,129            | ) | (896,358         | )
|Additions relating to share-based payment                                  |  |      |  | 0                  |  | 4,175           |  | 0                       |   | 0                          |   | 0                   |   | 4,175            |  
|Transactions with parents                                                  |  |      |  | 0                  |  | 0               |  | 0                       |   | 0                          |   | (13,504             | ) | (13,504          | )
|Changes in fair value of hedging instruments (net of tax)                  |  | 5.5  |  | 0                  |  | 0               |  | 7,582                   |   | 0                          |   | 0                   |   | 7,582            |  
|Changes in fair value of financial assets classified as available-for-sale |  |      |  | 0                  |  | 0               |  | 0                       |   | (624                       | ) | 0                   |   | (624             | )
|Net loss of the period                                                     |  |      |  | 0                  |  | 0               |  | 0                       |   | 0                          |   | (33,840             | ) | (33,840          | )
|                                                                           |  |      |  |                    |  |                 |  |                         |   |                            |   |                     |   |                  |  
|Total income and expense for the period                                    |  |      |  |                    |  |                 |  | 7,582                   |   | (624                       | ) | (33,840             | ) | (26,882          | )
|                                                                           |  |      |  |                    |  |                 |  |                         |   |                            |   |                     |   |                  |  
|Balance as of March 31, 2008                                               |  |      |  | 1,025              |  | 49,590          |  | 1,289                   |   | 0                          |   | (984,473            | ) | (932,569         | )
|                                                                           |  |      |  |                    |  |                 |  |                         |   |                            |   |                     |   |                  |  

The accompanying notes to this statement of changes in consolidated equity form an
integral part to these consolidated financial statements.

F-6

---





Notes to the Consolidated  Financial Statements for    Kabel Deutschland GmbH  as of March 31, 2008

F-7

---





1.

General

F-101.1

Acknowledgement

F-101.2

Basis of Presentation

F-101.3

Consolidation

F-111.4

Currency Translation

F-132.

Accounting and Valuation Methods

F-132.1

Property and Equipment

F-132.2

Intangible Assets

F-142.3

Financial Instruments

F-152.4

Inventories

F-172.5

Trade and Other Receivables

F-172.6

Cash and Cash Equivalents

F-172.7

Impairment

F-182.8

Equity

F-182.9

Employee Benefits

F-182.10

Other Provisions

F-192.11

Trade Payables and Other Liabilities

F-192.12

Revenue and Other Income

F-192.13

Share-Based Payments

F-202.14

Taxes on Income

F-202.15

Key Judgments and Estimation Uncertainty

F-212.16

Accounting Standards Recently Issued by the IASB

F-233.

Notes to the Statement of Operations

F-263.1

Revenues

F-263.2

Cost of Services Rendered

F-273.3

Other Operating Income

F-273.4

Selling Expenses

F-283.5

General and Administrative Expenses

F-283.6

Personnel Expenses

F-283.7

Interest Expense and Income

F-303.8

Taxes on Income

F-314.

Notes to the Balance Sheet

F-344.1

Cash and Cash Equivalents

F-344.2

Receivables

F-344.3

Inventories

F-354.4

Receivables from Tax Authorities

F-354.5

Other Current Assets and Prepaid Expenses

F-364.6

Intangible Assets

F-364.7

Property and Equipment

F-374.8

Equity Investments in Associates

F-384.9

Other Current Liabilities

F-394.10

Deferred Income

F-394.11

Financial Liabilities (current and non-current) and Senior Notes

F-394.12

Provisions for Pension

F-424.13

Other Provisions (current and non-current)

F-444.14

Other Non-Current Liabilities

F-464.15

Equity

F-46


F-8

---



5.

Other Notes

F-475.1

Other Financial Obligations and Contingencies

F-475.2

Related Parties

F-485.3

Segment Reporting

F-515.4

Share-Based Payments

F-545.5

Financial Instruments

F-625.6

Group Companies

F-705.7

Particular Events after the Balance Sheet Date

F-715.8

Management and Supervisory Board

F-725.9

Other Mandatory Disclosures According to German Commercial Code

F-735.10

Authorization of Financial Statements

F-73


F-9

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1.     General

Kabel Deutschland GmbH (KDG GmbH) was founded on December 17, 2002. KDG GmbH's registered office is in Unterföhring,
Betastraße 6-8 (commercial register of Munich HRB 145837), Germany. On December 2, 2004, Cable Holding S.à.r.l. (LuxCo) contributed its 100% interest in
KDG GmbH to its wholly-owned subsidiary Kabel Deutschland Holding GmbH (KDG HoldCo, formerly Kabel Deutschland Holding GmbH & Co. KG), founded on November 29,
2004, commercial register Munich HRB 155690, in exchange for an increase in its shareholders' equity in KDG HoldCo valued at a total of T€1,133,098 and a note receivable from KDG
HoldCo in an amount of T€382,400. On January 19, 2005, KDG HoldCo was converted into a limited liability company (Gesellschaft mit beschränkter Haftung
-GmbH-) effective as of January 1, 2005. LuxCo is wholly-owned by Cayman Cable Holding LP, George Town, Cayman Islands (Cayman Cable) which is owned by Providence
Equity Partners, London, United Kingdom, the ultimate parent. KDG GmbH and its subsidiaries (KDG or the Company) is the market leader in the German cable television business in terms of homes
passed, subscribers and revenues. The Company primarily provides cable access connections, offering up to 41 analog TV channels and up to 36 VHF radio stations. Furthermore, KDG delivers digital
television signals through its digital playout center. KDG carries and offers its own digital pay program packages, packages of an unaffiliated German pay television operator, and the digital programs
offered by the public and private broadcasters. The Company also offers internet and telephony services to its customers.

1.1   Acknowledgement

The consolidated financial statements of KDG GmbH for the three years ended March 31, 2008, have been prepared in accordance with International
Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated financial statement also comply with the regulations under German Commercial Law
pursuant to Sec. 315a (3) German Commercial Code. All IFRSs issued by the IASB, effective at the time of preparing the consolidated financial statements and applied by KDG GmbH, have
been adopted for use in the European Union (EU) by the European Commission. Therefore the consolidated financial statements also comply with IFRS as adopted by the EU.

1.2   Basis of Presentation

The Company's fiscal year is the twelve month period ending March 31.

The
consolidated financial statements and notes are presented in Euros and all values are rounded to nearest thousand (T€) except where otherwise stated. The Company's
financial statements have been prepared using consistent accounting and consolidation methods for all periods presented. The Company's statement of operations has been prepared using the cost of sales
method under IFRS. The consolidated financial statements have been prepared on a historical cost basis except for derivative financial instruments and liabilities related to its Management Equity
Participation Program that have been measured at fair value.

The
preparation of financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates.

Prior to March 31, 2007 the Company assessed hedge effectiveness of an interest rate swap in a cash flow hedge by applying the "change in variable cash flow method". Following the
publication in the March 2007 IFRIC update of the IFRIC Agenda decision on "IAS 39Financial Instruments:

F-10

---



Recognition and MeasurementAssessing hedge effectiveness of an interest rate swap in a cash flow hedge" the Company has reconsidered its accounting treatment
applied to those transactions and decided to adopt the treatment set out in the IFRIC agenda decision. Accordingly, the Company had adjusted its financial statements as of March 31, 2007 and
comparative periods to reflect the fact that hedge accounting has no longer been historically applied and has, therefore, recorded all changes in fair value of the interest rate swap through profit
and loss. This change in accounting treatment has been accounted for retroactively. This adjustment resulted in a decrease in other comprehensive income of T€8,320, a decrease in
interest expense of T€13,682 and an increase in deferred tax expense of T€5,362 for the fiscal year ended March 31, 2006.

With
respect to changes in estimates regarding asset retirement obligations, refer to note 4.7 and 4.13.

1.3   Consolidation

1.3.1 Scope of Consolidation

In the fiscal year ended March 31, 2008, the Company acquired Leto GmbH. As of May 9, 2007, Schramm Elektro und Antennen GmbH and as
of July 10, 2007, HOT-Kabelservice Gesellschaft mit beschränkter Haftung (both were Level 4 operators) were merged with Kabel Deutschland Vertrieb und
Service GmbH & Co. KG. KDG's consolidated financial statements as of March 31, 2008 are comprised of KDG GmbH and six consolidated subsidiaries (fiscal year ended
March 31, 2007: seven consolidated subsidiaries; fiscal year ended March 31, 2006: six consolidated subsidiaries). Investments are consolidated if KDG GmbH directly or indirectly
owns more than 50% of the outstanding voting rights of an entity and if the investments are under the control of KDG GmbH as defined by IAS 27 "Consolidated and Separate Financial
Statements".

1.3.2 Changes in the Consolidation Group and Acquisitions

Share Acquisition

The accounting for business combinations in the KDG consolidated financial statements is performed according to IFRS 3 "Business Combinations" by
allocating the cost of a business combination to the acquiree's identifiable assets, liabilities and contingent liabilities at their fair value at the time of the acquisition. Any difference between
the cost and the fair value is goodwill or badwill.

As
of March 1, 2008, the Company acquired 100% of the shares of Leto GmbH, an unlisted company based in Berlin, Germany, specialized in supplying multimedia for the housing
industries, especially the provision and management of cable access for subscribers of Level 4 operators.

F-11

---



The
fair value of the identifiable assets and liabilities of Leto GmbH as at the date of acquisition and the corresponding carrying amounts immediately before the acquisition
were:

Fair value
recognised
on acquisition

Previous
carrying
valueT€

T€Customer List

5,094

4,418Property and equipment

4,342

4,342Cash and Cash equivalents

10

10Trade receivables

22

22Other current assets

79

79Deferred expenses

4

49,551

8,875Liabilities to Affiliates

(9
)
(9
)Other provision

(34
)
(34
)Deferred income tax liabilites

(202
)
0(245
)
(43
)Net assets

9,306

8,832Total consideration (in cash)

9,306


From the date of acquisition, Leto GmbH had a positive impact in terms of revenue of T€190 and of T€12 to
the net profit/loss of the Company. If the combination had taken place at the beginning of the year, the net loss for the Company would have been T€33,902 and revenue from continuing
operations would have been T€1,199,350.

With
regard to business combinations that were effected after the balance sheet date but before the financial statements are authorized for issue the Company refers to
Section 5.7.

Asset Acquisitions

In the fiscal year ended March 31, 2008, the Company acquired approximately 63,610 subscribers and the major part of the associated technical CATV
Level 4 network infrastructure from RKS Süd-West GmbH for total aggregate consideration of approximately T€20,270. The aggregate purchase price
of the transactions resulted in an increase in customer list of T€15,653 and an increase of technical equipment of T€4,617.

The
Company acquired an additional 599 subscribers from several small Level 4 companies for total aggregate consideration of approximately T€192. The aggregate
purchase price of the transactions resulted in an increase in customer list of T€189 and an increase of technical equipment of T€3.

Asset
acquisitions did not include the assumption of any liabilities or other financial obligations.

1.3.3 Basis of Consolidation

Intercompany transactions, balances and unrealized gains on transactions between KDG GmbH and its subsidiaries are eliminated in consolidation. The
accounting policies of the consolidated subsidiaries are consistent with the policies adopted by KDG GmbH. Acquisitions are accounted for using the purchase method of accounting.

Subsidiaries
are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control
ceases.

F-12

---



Companies
in which KDG GmbH has significant influence over the business and the financial policies as defined by IAS 28 "Investments in Associates" are recorded in the
consolidated financial statements using the equity method. Intercompany profits and losses of associated companies are eliminated in consolidation in relation to their shareholding ratio.

1.4   Currency Translation

The functional and reporting currency of KDG is the Euro.

Foreign
currency transactions were converted to Euros at the exchange rate applicable on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
existing as of the balance sheet date are converted to Euros at the exchange rate of the European Central Bank on the balance sheet date. Currency differences resulting from these adjustments are
recognized in the consolidated statement of operations.

Non-monetary assets and liabilities denominated in foreign currencies existing as of the balance sheet date which are to be carried at fair value were converted to Euros at
the rate as of the balance sheet date. The Company used the following exchange rates (spot rates):

March 31,
2008

March 31,
2007

March 31,
20061€

US$ 1.5812

US$ 1.3318

US$ 1.21041€

GBP 0.7958

GBP 0.6798

GBP 0.6964


2.     Accounting and Valuation Methods

2.1   Property and Equipment

2.1.1 Property and Equipment

Property and equipment are recognized at cost less accumulated depreciation and accumulated impairment losses. Borrowing costs are not capitalized. Rebates, trade
discounts and bonuses are deducted from the purchase price.

For
technical equipment located on leased property, historical costs include the present value of estimated future costs and expenses necessary for restoration of the leased property
after termination of the lease agreement.

2.1.2 Leases

Operating lease

A lease is accounted for as an operating lease if all the risks and benefits incidental to ownership of the leased item remain with the lessor. Operating lease
payments are therefore recorded on a straight-line basis over the lease term as an expense in the consolidated statement of operations.

Operating lease for Customer Premises Equipment (CPE)

To get connection to Internet & Phone services as well as to receive digital TV, the Company leases the necessary equipment to the customers. These leases
for which the Company is the lessor, are classified as an operating lease. Therefore, the Company capitalizes the CPE as fixed assets based on acquisition cost and the cost of removing the asset at
the end of the lease. Over the useful life of 3 years, the assets are depreciated using the straight-line method.

F-13

---



Finance lease

In accordance with IAS 17 "Leases", assets leased under finance leases are recorded at the lower of fair value at the inception of the lease or the present
value of the lease payments. The assets are depreciated using the straight-line method over the shorter of the estimated useful life
or over the lease period. The obligations related to future lease payments are recognized as liabilities. Lease payments are apportioned between the finance charges and reductions of the lease
liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged directly against income.

2.1.3 Subsequent Expenses

Rental costs are expensed. Repair and maintenance charges are expensed during the financial period in which they are incurred. The cost of significant renovations
and additions are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance will be realized by the
Company. Significant renovations are depreciated over the shorter of the remaining useful life of the related asset or the lease term.

2.1.4 Depreciation of Fixed Assets

Depreciation is calculated based on the straight-line method over each asset's estimated useful life as follows:

Buildings and leasehold improvements

3 to 25 yearsTechnical equipment and machines

3 to 20 yearsProperty and equipment

3 to 15 years


Gains and losses from derecognition of fixed assets are determined by deducting the carrying amount of the asset being sold from the proceeds
received at the time of derecognition. The results are included in other operating income or in the corresponding expense line item. The assets' residual values, useful lives and depreciation methods
are reviewed, and adjusted if appropriate at each financial year end.

2.2   Intangible Assets

2.2.1 Customer List

In connection with the initial acquisition of the cable business by the Company in March 2003, approximately T€681,659 of the purchase price was
allocated to the customer list. Further additions to the customer list that occurred during the twelve months ended March 31, 2008 and in the previous years are primarily related to the
acquisition of Level 4 companies and subscribers. The weighted remaining useful life of the customer list is 3.92 years, 4.61 years and 5.55 years as of March 31,
2008, March 31, 2007 and March 31, 2006, respectively.

2.2.2 Other Intangible Assets

Intangible assets which are purchased separately are recorded at cost. Intangible assets that have been acquired as part of an acquisition of a business are
capitalized at fair value if they can be reliably measured at the acquisition date.

Computer
software is recorded at cost as an intangible asset.

The
Company recognizes intangible assets developed internally (consisting of software used by the company) to the extent the criteria in IAS 38 "Intangible Assets" are met.
Development costs for internally generated intangible assets are recognized at cost to the extent the Company can

F-14

---



demonstrate
the technical feasibility of completing the asset, how the asset will generate future economic benefit, the availability of resources to complete the asset and the ability to measure
reliably the expenditure during the development. If the requirements for capitalization are not fulfilled, development costs are expensed as incurred.

The
Company recognizes subscriber acquisition costs incurred to obtain new subscribers if the costs are directly attributable to obtaining specific contracts, are incremental, can be
measured reliably and meet the definition and recognition criteria of an intangible asset in accordance with IAS 38. Subscriber acquisition costs incurred to obtain new contracts without an
initial contract period (open-ended contracts) are expensed as incurred.

Following
initial recognition, intangible assets are carried at cost less any accumulated depreciation and any accumulated impairment loss.

2.2.3 Subsequent Expenses

Subsequent investments in intangible assets will be capitalized if they qualify for recognition as an intangible asset.

2.2.4 Amortization of intangible assets

The estimated useful life of the customer list is based on the average number of terminations and the term of the average contract life of individual end users
who generate significant contribution margins.

The
amortization of other intangible assets with definite useful lives is based on the straight-line method over the assets` estimated useful lives Amortization begins when
the intangible asset is ready for use.

The
Company recognizes subscriber acquisition costs incurred to obtain new subscribers. The Company amortizes these costs over the initial contract period except for contracts where
there is past evidence regarding the expected customer relationship period.

The
amortization expense is recognized in the statement of operations in the expense category consistent with the function of the intangible assets.

The
useful lives are estimated as follows:

| | Customer list                |  | 8.5 years  
|- | ---------------------------- |  | -----------
| | Software and licenses        |  | 1-10 years 
| | Subscriber Acquisition Costs |  | 1-8.5 years

The appropriateness of the useful life for the customer list is validated on an annual basis.

2.3   Financial Instruments

Recognition and Derecognition of Financial Instruments

Financial assets and liabilities are recognized when the Company enters into a contractual relationship with the respective counterparty or issuer. A financial
asset is derecognized when:



F-15

---







A financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

Where
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability, and the difference in the respective carrying amounts is recorded in the
consolidated statement of operations.

Financial Assets

Financial assets in the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, or available-for-sale financial assets, as appropriate. When financial assets are initially recognized they are measured
at fair value plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Company determines the classification of its financial assets
after initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. All purchases and sales of financial assets in the
ordinary course of business are recognized on the date on which control over the asset changes.

Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category "financial assets at fair value through profit or loss". Financial assets are held
for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated and effective hedging instruments. Gains or
losses on investments held for trading are recognized in the consolidated statement of operations.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are
carried at amortized cost using the effective interest method. Gains and losses are recognized in the consolidated statement of operations when the loans and receivables are extinguished or impaired
as well as through the amortization process.

Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as
available-for-sale or are not classified in any of the three preceding categories. After initial recognition available-for-sale financial assets are
measured at fair value with gains or losses being recognized as a separate component of equity until the investment is sold or until the investment is determined to be impaired at which time the
cumulative gain or loss previously reported in equity is included in the statement of operations.

Financial Liabilities

Financial liabilities (loans) are initially recognized at cost which corresponds to the fair value of the given consideration received net of issue costs
associated with the financial liabilities. In subsequent periods, liabilities are measured at amortized cost using the effective interest method with the exception of derivative financial instruments
which are measured at their fair market value.

F-16

---



Derivative Financial Instruments

Derivative financial instruments are used exclusively for the purpose of hedging foreign currency and interest rate risks arising from financing activities. In
accordance with IAS 39 "Financial Instruments: Recognition and Measurement", all derivative financial instruments are accounted for at fair value
irrespective of the purpose or the intention for which they were incurred. Depending on whether it is a fair value hedge or a cash flow hedge, changes in the fair value of the derivative financial
instruments for which hedge accounting is used are either reported in the statement of operations or in the statement of changes in equity under cash flow hedge reserve. In the case of a fair value
hedge, the gains or losses from the measurement of derivative financial instruments at fair value and the gains or losses related to the underlying contracts are recognized in the consolidated
statement of operations. In the case of changes in the fair value of cash flow hedges which are used to offset future cash flow risks arising from underlying transactions or planned transactions and
which have proved to be 100% effective in accordance with IAS 39, unrealized gains and losses are initially recognized in equity as a cash flow hedge reserve.

If
derivative financial instruments are not 100% effective, the difference between the fair value and the changes in fair value of the related underlying contract is recognized in the
consolidated statement of operations. The portion of the change in fair value not covered by the underlying transaction is immediately recognized in the consolidated statement of operations. If hedge
accounting cannot be used by the Company, the change in the fair value of derivative financial instruments is recorded in the consolidated statement of operations.

Equity Investments in Associates

Investments in associates are accounted for using the equity method at the investor's share of equity pursuant to IAS 28 "Investments in Associates". The
Company's share of income, reduced by distributions and amortization of write-ups in amortizable assets from purchase accounting is disclosed in the fixed asset register as a change in
equity investments.

2.4   Inventories

Raw materials, consumables, supplies, finished goods and merchandise are recorded at the lower of cost or net realizable value. Cost is generally determined using
a moving average cost.

2.5   Trade and Other Receivables

Trade and other receivables are disclosed at their nominal amount less bad debt allowances for any amounts deemed uncollectible. In relation to trade receivables,
a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties
of the debtor) that the Company will not be able to collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance
account. Impaired debts are derecognized when they are assessed as uncollectible.

2.6   Cash and Cash Equivalents

Cash and cash equivalents are mainly comprised of cash on hand and other short-term, highly liquid investments with an original maturity of three
months or less. Cash on hand and in bank and other are carried at nominal value.

For
purposes of the consolidated cash flow statement cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

F-17

---



2.7   Impairment

The carrying amount of intangible assets and property and equipment is reviewed at every balance sheet date to determine whether there are any indications of
impairment. If such indications exist or when annual impairment testing is required, the recoverable amount is estimated. Impairment is necessary when the carrying amount of an asset or the related
cash-generating unit exceeds the recoverable amount. The corresponding impairment is expensed.

If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between
the asset's carrying amount and recoverable amount, i.e. the higher of the present value of estimated future cash flows discounted at the financial asset's original effective interest rate and
fair value less cost to sell. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognized when they are assessed as uncollectible.

2.7.1 Determination of Recoverable Amount

The recoverable amount of an asset is the greater of its fair value less costs to sell and its value in use. Value in use is determined by discounting the
estimated future cash flows to be derived from continuing use of the asset up until its ultimate disposal. The discount rate is based on a pre-tax interest rate that reflects current
market assessments of the fair value of money and the risks specific to the asset.

For
assets to which no cash flows can be directly attributed, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

2.7.2 Reversal of Impairment Loss

Impairment losses on assets are reversed when assumptions relating to the recoverable amount of the assets change. Impairment losses are only reversed up to the
carrying amount of the asset which would have been recorded if the asset had been subject to standard depreciation without impairment.

2.8   Equity

Subscribed capital and the capital reserve are stated at nominal value. Capital reserves are set up for additional paid in capital and for changes relating to
share-based payments.

2.9   Employee Benefits

Under the Company's pension plans, KDG provides employees post-employment benefits under a defined benefit plan. The benefits are unfunded.

The
present value of future claims of participants is estimated using actuarial methods based on the amount of benefit earned for their service in the current and prior periods. The
liabilities to be recognized in the consolidated balance sheet result from the present value of the defined benefit
obligation adjusted for any actuarial gains or losses, and less any past service cost not yet recognized. The discount rate is determined by reference to the capital markets and takes into account the
expected maturity of the obligation. KDG engaged qualified external actuaries to perform the necessary actuarial calculations. The obligation is determined using the projected unit credit method.

If
the benefits of the pension plan improve, the share of those plan improvements relating to the employees' previous years of service will be recognized as an expense on a
straight-line basis over the period in which the claims vest. If the claims have already vested, the prior service cost is expensed immediately.

F-18

---



In
measuring the obligations arising from the defined benefit plans, actuarial gains and losses arising after April 1, 2003 are not recognized in the consolidated statement of
operations until the cumulative outstanding amounts exceed a corridor of 10% (corridor approach) of the defined benefit obligation as of the measurement date. The portion of the amount exceeding the
corridor is amortized to the consolidated statement of operations over the remaining average service life of the employees entitled to pensions.

2.10 Other Provisions

Other provisions are recognized in the consolidated balance sheet pursuant to IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" when a
legal or constructive obligation to a third party arises as a result of past events, an outflow of resources embodying economic benefits will be required to settle the obligation and the anticipated
amount of the provision can be reliably estimated. Non-current other provisions are stated at their discounted settlement value on the balance sheet date where the effect of the time value
of money is material.

2.11 Trade Payables and Other Liabilities

Trade payables and other liabilities are recorded at amortized cost.

2.12 Revenue and Other Income

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Company and the revenue can be reliably measured. The
different types of revenue are recognized as follows:

Installation and network connection

Revenue from the installation of the cable connection and the network connection is recognized when the services have been rendered, the costs incurred can be
measured reliably and the Company is not obliged to provide any future network connection or installation services.

Rendering of services

Revenue generated by the delivery of analog and digital pay products, internet and telephone services, as well as carriage fees and digital playout facility fees
paid by television broadcasters, are recognized when services have been provided, the costs incurred can be measured reliably and the Company is not obliged to provide any future services. Prepayments
are accounted for by deferring the received payments and amortizing them straight-line over the service period.

When
free months are offered to customers in relation to a subscription, the Company recognizes the total amount of billable revenue in equal monthly installments over the term of the
contract provided that the Company has the enforceable and contractual right to deliver the customer with the products after the promotional free month period. If free months are given without a
contract at the beginning of a subscription period, the company does not recognize revenues during the free months as the customer's continuance is not assured.

Sale of goods

Revenue for the sale of digital set-top boxes, cable modems, and other goods (Customer Premises EquipmentCPE) is recognized when the
significant risks and rewards of ownership of the goods have passed to the buyer. Costs in connection with returns are accounted for by
accruing the respective amount. If the Company acts as an agent, revenue is only recognized in the amount of the sales commissions.

F-19

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Multiple Elements Arrangements

For bundled services in multiple element arrangements the Company recognizes revenue for each element on the basis of the relative fair value of each item in the
transaction, if there is an evidence of fair value.

2.13 Share-Based Payments

The Company applies IFRS 2 "Share-Based Payment". Under IFRS 2, plans which result in share-based payment transactions have to be accounted for as
cash-settled if the interest holder will receive a payment in cash upon settlement rather than the underlying equity instruments. Due to the terms of the different programs at KDG, it is
highly likely that the general partner of Cayman Cable Holding L.P. (the Partnership) will exercise the existing repurchase option in most cases of the interest holders' termination of
employment and settle in cash. Alternatively, employees leaving the Company may have the option to put their vested interests to Cayman for cash. In the case of a put or call, the employee is
generally protected from decreases in fair value below their initial investment amount. For such cash-settled share-based payment transactions, IFRS 2 requires the entity to account
for share-based payments to management as personnel expense and a corresponding increase in other liabilities. For interests in the Management Equity Participation Program I (MEP I) and in the
Management Equity Participation Program IV (Indirect MEP IV), which are share acquisition programs the costs of cash-settled transactions are measured initially based on the notional
amount paid.

For
MEP II and III, as well as the MEP IV Option program and MEP V, which all are option programs, the costs of cash-settled transactions are measured initially at fair value
at the grant date using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted because it is typically not possible to reliably estimate the fair
value of employee services received. This fair value is expensed over the period until vesting with recognition of a corresponding liability.

For
all MEP programs the services received during the vesting periods and, therefore, the corresponding liabilities, are re-measured at each balance sheet date up to and
including the settlement date with changes in fair value recognized in the consolidated statement of operations.

2.14 Taxes on Income

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amounts are those that are enacted or substantively enacted by the balance sheet date.

Except
for those cases described below, deferred income tax is provided using the liability method on all temporary differences between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes at the balance sheet date.

Deferred
income tax liabilities are recognized for all taxable temporary differences, except:



Deferred
income tax assets are recognized for all temporary deductible differences, carry-forward of unused tax credits and unused tax losses to the extent that it is probable that
taxable profit will be

F-20

---



available
against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized:



The
carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset to be utilized.

Deferred
income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income
taxes relating to items recognized directly in equity are recognized in equity and not in the statement of operations.

Deferred
tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation authority.

2.15 Key Judgments and Estimation Uncertainty

The preparation of the consolidated financial statements in accordance with IFRS requires judgments and estimations to be made which have an effect on the
carrying amounts of recognized assets and liabilities, income and expenses and contingent liabilities. In some cases, the actual values may differ from the judgments and estimations. Changes are
recognized in the consolidated statement of operations when better information is available.

2.15.1 Key Judgments

In the process of applying KDG's accounting policies, management has made the following judgments, apart from those involving estimations, which have the most
significant effect on the amounts recognized in the consolidated financial statements.

Derivatives

The Company has entered into interest rate swaps, interest rate caps and currency swaps to hedge its risks resulting from exposure to changes in interest rates
and foreign currency rates. All of these derivative instruments have been accounted for in accordance with IAS 39 at fair value irrespective of the purpose or the intention for which they were
used. The currency swaps were classified as cash flow hedges.

Operating Leases for CPE

The Company offers products that contain signal delivery and the right to use hardware devices. The hardware devices are essential for the signal delivery to the
customer. Since the fulfillment of these arrangements is dependent on the use of a specific asset and the arrangements convey a right to use the asset, the contracts contain a lease in accordance with
IFRIC 4 (KDG as lessor).

F-21

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Hardware
devices are recognized as equipment in accordance with IAS 16 and amortized over the useful life of three years.

Operating lease cable ducts

In certain cases KDG leases space in the cable ducts of Deutsche Telekom AG (DTAG) to house KDG's network cable. The Company has determined that it retains no
significant risks and rewards of ownership of these cable ducts and, therefore, accounts for the leases as operating leases.

Finance lease transponders

The Company has leased specific satellite transponders in order to transmit audio and video signals. The Company has determined that the rights to use specific
transponders have been transferred and that the lease term of specific transponders covers the major part of the economic life of the transponders. Therefore, the Company has classified and accounted
for the leases as finance leases according to IAS 17.

2.15.2 Estimation Uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Derivatives

The fair values of the derivative financial instruments as of the balance sheet date have been estimated at the net present values (discounted by market yield
curves) of the future payments and using standard models (in the case of caps). The total fair values of the derivative financial instruments amounted to T€-116,346,
T€-53,191 and T€-26,461 as of March 31, 2008, March 31, 2007 and 2006, respectively.

Share-based payments

As of March 31, 2006 and for periods prior to this, it was management's intention to settle MEP I using the formula price as stated in the respective
limited partnership agreement. Effective April 19, 2006 and in connection with the 5th amendment to the limited partnership agreement, the controlling shareholders of
Cayman Cable modified the settlement terms of MEP I interests in Cayman Cable Holding L.P to better reflect current market value conditions, changing the settlement formula from an EBITDA formula with
fixed multiples to estimated fair value. The change in the fair price estimation resulted in an increase in personnel expenses in the amount of T€36,836 for the fiscal year ended
March 31, 2007.

Based on the 5th amendment to the limited partnership agreement, the fair value measurement for MEP IV interests is based on the same valuation methods as is used
for MEP I.

The
measurement of the fair value at grant date with respect to the MEP II and MEP III option plans as well as to the MEP IV Option Program and MEP V is based on the Black-Scholes option
pricing model. The main parameters, the expected volatility of the values of the shares, the estimated term of the options and the risk free interest rate on grant date were estimated by the Company.

The
Company recognized expenses with respect to all MEP plans in an amount of T€23,042, T€41,791 and T€19,232 for the years ended
March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

F-22

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Internally Developed Software

The Company recognized intangible assets developed internally (consisting of software used by the Company) to the extent the criteria of IAS 38 were met.
Development costs for internally generated intangible assets are recognized at cost to the extent the assets are economically usable and the costs can be reliably measured. For the years ended
March 31, 2008, March 31, 2007 and March 31, 2006, respectively, approximately T€2,528, T€1,048 and T€3,042 of costs for internally
developed software were capitalized.

Customer List

The customer list is primarily amortized on a straight-line basis over 8.5 years. The estimated useful life is based on the average number of
terminations and the term of the average contract life. The book value of the customer list amounted to T€317,813, T€382,387 and T€460,483 for the years
ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Provision for Pensions

With respect to the actuarial calculation of the provision for pensions, the Company estimated the future salary increases, future pension increases and the
discount rate. As of March 31, 2008, March 31, 2007 and March 31, 2006, the provision for pensions amounted to T€29,148, T€24,171 and
T€19,798, respectively.

Asset Retirement Obligations

The amount of the accrual is based on an estimate of the costs expected for the demolition and restoration of the technical facilities. Expectations regarding the
lessor waiving asset retirement performance requirements are factored into the calculation of best estimate of the obligation related to the leased cable ducts under IFRS. Approximately 93% of KDG's
obligations are related to technical equipment, including different kinds of cable and signal transmitting and receiving technology in cable ducts of DTAG. KDG assumes that 30% of the technical
equipment will be replaced by other technologies after 15 years. The remaining 70% of the technical equipment is expected to be restored after 30 years. The remaining 7% of the asset
retirement obligations are divided into accruals for furniture, fixtures and miscellaneous restoration obligations. The asset retirement obligations amounted to T€20,665,
T€20,562 and T€19,964 as of March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

2.16 Accounting Standards Recently Issued by the IASB

The Company applied all IFRSs and IFRIC interpretations issued by the IASB, London, that are effective as of March 31, 2008, and applicable to the Company.
The designation IFRS also includes all valid IAS. All interpretations of the IFRIC, formerly the SIC, were also applied.

Accounting Standards recently issued by the IASB and applied by the Company

In addition to the IFRSs and IFRIC Interpretations already applied by the Company in the fiscal year ending March 31, 2007, it has adopted the following
amended IFRS standards and IFRIC interpretation during the year ending March 31, 2008. The following standard did have an effect on the financial statements of the Company:

IFRS 7
"Financial Instruments: Disclosures"



F-23

---





The
following interpretation did not have any effect on the financial statements of the Company:

IFRIC 11
"IFRS 2 Group and Treasury Share Transactions"



Accounting Standards recently Issued by the IASB and not yet applied by the Company

The Company has not applied the following IFRS and IFRIC interpretations that have been issued and have been endorsed by the EU but are not effective as of
March 31, 2008:

In
November 2006, the IASB issued IFRS 8 "Operating Segments". The standard requires an entity to report financial and descriptive information about its reportable segments.
IFRS 8 requires identification of operating segments based on internal reports that are regularly reviewed by the entity's chief operating decision maker in order to allocate resources to the
segment and assess its performance. The standard also requires an explanation of how segment profit or loss and segment assets and liabilities are measured for each reportable segment. IFRS 8
requires an entity to report information about revenues derived from its products or services, about the countries in which it earns revenues and holds assets, and about major customers. The
provisions of IFRS 8 are effective for annual periods beginning on or after January 1, 2009. The Company expects to adopt the amended IFRS 8 beginning April 1, 2009. It is
not expected that the adoption of IFRS 8 will have a material impact on the Company's results of operations, financial position or cash flow.

The
Company has not applied the following IFRSs and IFRIC interpretations that have been issued but have not yet been endorsed by the EU and are not effective as of March 31,
2008:

In
September 2007, the IASB issued a revised version of IAS 1 "Presentation of Financial Statements: A Revised Presentation", which has to be applied to annual periods beginning
on or after January 1, 2009. Early adoption is not expected. The intention of the revision is to improve the users' ability to analyse and compare the information given in financial statements.
IAS 1 requires a Statement of Comprehensive Income and under certain circumstances the presentation of the opening balance sheet of the comparative period. The initial application of the
revised IAS 1 will have an effect on the presentation of the consolidated financial statements.

In
March 2007, the IASB issued a revised version of IAS 23 "Borrowing Costs". The revised standard requires an entity to capitalize borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets as a part of the costs of that asset. Under this standard an entity does not have to capitalize borrowing costs relating to qualifying
assets measured at fair value, or to inventories that are manufactured or produced in large quantities on a repetitive basis, even if they take a substantial time to produce. The revised Standard is
effective for annual periods beginning on or after January 1, 2009. The Company expects to adopt the amended IAS 23 beginning April 1, 2009. It is not expected that the adoption
of amendments will have a material impact on the Company's operations, financial position or cash flow.

In
January 2008, the IASB issued a revised version of IAS 27 "Consolidated and Separate Financial Statements", which has to be applied to annual periods beginning on or after
July 1, 2009.

F-24

---



Early
adoption is not expected. The changes in this Standard relate to the accounting for non-controlling (minority) interest and are not expected to have any effect on the Company's
results of operations, financial position or cash flow.

In
February 2008, the IASB published amendments to IAS 32 and IAS 1 "Puttable Financial Instruments and Obligations Arising on Liquidation", which have to be applied to
annual periods beginning on or after January 1, 2009. Early adoption is not expected. These amendments require certain financial instruments that represent a residual interest in the net assets
of an entity, which would otherwise be classified as financial liabilities, to be classified as equity, if both the financial instrument and the capital structure of the issuing entity meet certain
conditions. IAS 1 has been amended to include additional disclosure requirements. It is not expected that the adoption of the amendments will have a material impact on the Company's results of
operations, financial position or cash flow.

In
January 2008, the IASB published an amendment to IFRS 2 "Share-Based Payment: Vesting Conditions and Cancellations", which has to be applied to annual periods beginning on or
after January 1, 2009. Early adoption is not expected. This amendment clarifies the definition of vesting conditions in share-based payments and stipulates that all cancellations of share-based
payments should receive identical accounting treatment, regardless of the party responsible for cancellation. The adoption of this revision is not expected to have a material impact on the Company's
results of operations, financial position or cash flow.

In
January 2008, the IASB published a revised version of IFRS 3 "Business Combinations", which has to be applied to annual periods beginning on or after July 1, 2009. Early
adoption is not expected. Major changes are: (a) the requirement that the assets acquired, the liabilities assumed, and equity interests be consistently measured at fair value on the
acquisition date, (b) All items of consideration transferred by the acquirer are measured and recognized at fair value at the acquisition date, including contingent consideration,
(c) transaction costs incurred in an acquisition are recognized in the statement of operations as incurred, (d) the option of measuring any non-controlling interest in the
entity at fair value, and (e) new disclosures are required. The changes must be applied prospectively and will affect future acquisitions.

In
November 2006, the IFRIC issued the interpretation IFRIC 12, "Service Concession Agreements". The interpretation addresses how service concession operators should apply
existing IFRSs to account for the obligations they assume and rights they receive in service concession arrangements. In one type of such an arrangement, the operator receives a financial asset,
i.e., an unconditional contractual right to receive cash or another financial asset from the government in return for constructing or upgrading a public sector asset. In the other type of such
an arrangement, the operator receives an intangible asset, i.e., a right to charge for the use of the public sector asset that it contracts or upgrades. A right to charge users is not an
unconditional right to receive cash because the amounts are contingent to the extent to which the public uses the service. IFRIC 12 allows for the possibility that both types of
arrangements may exist within a single contract. To the extent that the government has given an unconditional guarantee to pay for the construction of the public sector asset, the operator owns a
financial asset. To the extent that the operator has to rely on the public using the service in order to obtain payment, the operator owns an intangible asset. IFRIC 12 applies for all annual
periods beginning on or after January 1, 2008. The Company expects to adopt IFRIC 12 beginning April 1, 2008. The adoption of this interpretation is not expected to have a
material impact on the Company's results of operations, financial position or cash flow.

In
June 2007, the IFRIC issued the interpretation IFRIC 13 "Customer Loyalty Programs", which has to be applied for annual periods beginning on or after July 1, 2008. Early
adoption is not expected. The interpretation addresses accounting by entities that grant loyalty award credits to customers who

F-25

---



buy
other goods or services. It is not expected that the adoption of the interpretation will have a material impact on the Company's results of operations, financial position or cash flow.

The
IFRIC issued IFRIC 14 "The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction" in July 2007. The standard is effective for annual periods
beginning on or after January 1, 2009. Early adoption is not expected. The interpretation addresses the interaction between a minimum funding requirement and the limit placed by
paragraph 58 of IAS 19 on the measurement of the defined benefit asset or liability. It is not expected that the adoption of the interpretation will have any impact on the Company's
results of operations, financial position or cash flow.

In
July 2008, the IFRIC issued the Interpretation IFRIC 15 "Agreements for the Construction of Real Estate" which has to be applied for annual periods beginning on or after
January 1, 2009 and is to be applied retrospectively. Early adoption is not expected. IFRIC 15 provides guidance on how to determine whether an arrangement for the construction of real
estate is within the scope of IAS 11 "Construction contracts" or IAS 18 "Revenue" and when revenue from the construction should be recognized. It is not expected that the adoption of the
interpretation will have any effect on the Company's results of operation, financial position or cash flow.

In
July 2008, the IFRIC issued the Interpretation IFRIC 16 "Hedges of a Net Investment in a Foreign Operation" which has to be applied for annual periods beginning on or after
October 1, 2008. Early adoption is not expected. IFRIC 16 clarifies that the presentation currency does not create an exposure to which an entity may apply hedge accounting.
Consequently, a parent entity may designate as a hedged risk only the foreign exchange differences arising from a difference between its own functional currency and that of its foreign operation. It
is not expected that the adoption of the interpretation will have any effect on the Company's results of operation, financial position or cash flow.

3.     Notes to the Statement of Operations

3.1   Revenues

Revenues were generated in Germany as follows:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Cable access revenues

867,066

845,562

839,276TV/Radio revenues

179,802

162,987

137,839Internet revenues

48,591

24,241

7,008Phone revenues

72,776

32,299

2,842TKS revenues

28,635

28,090

25,1681,196,870

1,093,179

1,012,133


Cable access revenuesare primarily made up of monthly subscription fees paid for access to our
network and the delivery of analog and digital signals to both our direct and indirect subscribers. We also receive one time fees for the installation of a cable television or network connection.

TV/Radio revenuesare primarily generated by subscription fees paid by our customers for our pay TV digital packages, Kabel Digital
International, Kabel Digital Basic and Kabel Digital Home. The Company sells its pay TV packages on a subscription basis directly to consumers and indirectly through certain Level 4 operators.
Additional revenues are generated by sales of CPE, digital and analog carriage fees and fees for the use of the digital platform.

Internet revenuesare primarily comprised of monthly subscription fees for internet services and, to a much lesser extent, revenues from
one time installation fees and the sale of CPE.

F-26

---





Phone revenuesare primarily comprised of monthly subscription fees and variable fees based on usage and, to a much lesser extent,
revenues from one time installation fees and the sale of CPE.

TKS revenuesprimarily relate to revenues generated by TKS Telepost Kabel-Service Kaiserslautern GmbH & Co. KG (TKS)
for providing cable television, Internet & Phone services to the NATO military personnel based in Germany. It also provides billing services for telephone customers of Deutsche
Telekom AG (DTAG) who prefer English language bills. Additionally, TKS sells certain telecommunication products in its shops to personnel on NATO military bases such as prepaid mobile phones,
cash cards, and telecommunication related products and services.

3.2   Cost of Services Rendered

Fiscal Year Ended March 31,2008

2007

2006(in T€)Cost of materials and services

313,976

288,120

257,357thereof service level agreements

164,992

169,486

169,715Personnel expenses

44,171

63,018

53,449Depreciation and amortization

154,676

133,123

117,428thereof intangible assets

4,943

4,976

4,342thereof tangible assets

149,733

128,147

113,086Other cost and expenses

75,638

82,829

61,821Total Cost of Service Rendered

588,461

567,090

490,055


Cost of services rendered include primarily costs of materials and services, including charges related to service level agreements for services
provided by DTAG as well as personnel expenses, depreciation and amortization and other cost and expenses. These other costs and expenses are primarily comprised of copyright expenses, IT support and
other miscellaneous expense. In the fiscal year ended March 31, 2007, personnel expenses included accrued expenses for restructuring in the amount of T€11,639.

3.3   Other Operating Income

Other operating income amounts to T€12,613, T€13,215 and T€12,522, respectively, for the years ended
March 31, 2008, March 31, 2007 and March 31, 2006, and primarily consists of administrative fees charged to customers who do not pay their subscription fee by direct debit
amounting to T€3,024, T€3,348 and T€3,103, respectively, for the years ended March 31, 2008, March 31, 2007 and March 31, 2006, and
insurance recoveries related to damaged property, marketing subsidies and other income amounting to T€3,502, T€3,897 and
T€3,195 for the years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

F-27

---



3.4   Selling Expenses

Fiscal Year Ended March 31,2008

2007

2006(in T€)Cost of materials and services

26,080

27,139

19,418Personnel expenses

71,445

70,515

70,425Depreciation and amortization

115,478

95,983

88,155thereof intangible assets

104,525

92,783

86,631thereof tangible assets

10,953

3,200

1,524Other cost and expenses

139,833

125,015

99,049Total Selling Expenses

352,836

318,652

277,047


Selling expenses primarily consist of costs of materials and services, personnel expenses for sales and marketing employees, depreciation and
amortization expense primarily relating to the customer list and other cost and expenses including marketing and advertising expenses, sales commissions and other miscellaneous expenses.

3.5   General and Administrative Expenses

Fiscal Year Ended March 31,2008

2007

2006(in T€)Personnel expenses

64,453

76,065

41,134Depreciation and amortization

23,795

17,512

15,161thereof intangible assets

19,783

13,941

11,938thereof tangible assets

4,012

3,571

3,223Other cost and expenses

40,419

47,377

46,127Total General and Administative Expenses

128,667

140,954

102,422


General and administrative expenses which are related to headquarter functions primarily include personnel expenses related to headquarter
personnel, depreciation and amortization for IT and standard software licenses and other cost and expenses including external consulting expense, IT-support and other miscellaneous
expenses.

3.6   Personnel Expenses

Personnel expenses are comprised of the following:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Wages and salaries

152,005

179,202

136,265Social security

28,064

30,396

28,743180,069

209,598

165,008


F-28

---



Included in wages and salaries:

Fiscal Year Ended March 31,2008

2007

2006(in T€)MEP

23,042

41,791

19,232thereof cost of services rendered

797

295

584thereof selling expense

1,687

2,731

8,846thereof general and administrative expenses

20,558

38,765

9,802Restructuring

2,593

14,381

6,205thereof cost of services rendered

2,383

11,639

4,193thereof selling expense

5

987

2,012thereof general and administrative expenses

205

1,755

0


For further information regarding restructuring plans see Section 4.13.

Included
in social security:

Fiscal Year Ended March 31,2008

2007

2006(in T€)Personnel expenses related to defined benefit pension plan

3,781

3,477

2,431thereof cost of services rendered

1,120

1,030

1,158thereof selling expense

1,499

1,368

626thereof general and administrative expenses

1,162

1,079

647Statutory social security contribution

19,710

20,458

19,494thereof cost of services rendered

6,419

7,725

7,438thereof selling expense

8,578

8,611

8,071thereof general and administrative expenses

4,713

4,122

3,985


For the fiscal years ended March 31, 2008, 2007 and 2006, social security included T€10,003, T€8,420 and
T€8,007, respectively, for expenses related to the defined contribution plans from the governmental pension scheme.

During
the years ended March 31, 2008, March 31, 2007 and March 31, 2006, an average of 2,702, 2,781 and 2,625, respectively, people were employed.

F-29

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3.7   Interest Expense and Income

Interest Expenses

Fiscal Year Ended March 31,2008

2007

2006(in T€)Interest Expenses on financial instruments that are not at fair value through profit or lossSenior Notes

78,465

78,465

78,465Senior Credit Facility

81,645

65,670

62,305Amortization of Capitalized Finance Fees

8,296

9,819

66,900Transaction Costs for Bridge Facility

0

0

7,535Finance Lease

2,873

2,675

2,657Other

588

1,704

2,396Interest Expenses/Income on financial instruments at fair value through profit or loss

(3,122
)
(5,718
)
(6,900
)Interest expense on provisions and non-financial liabilitiesPensions

1,395

1,186

1,019Asset Retirement Obligations

999

888

723Other

700

981

0Total Interest Expenses

171,839

155,670

215,100


Interest expense includes interest accrued on bank loans, the Company's 2014 Senior Notes, amortization of financing fees, interest on finance
leases and other.

Interest
expenses on financial instruments at fair value through profit or loss includes net interest payments to the counterparties of interest rate swaps and caps as well as effects
from fair value measurement of such financial instruments. Included in interest expenses for the fiscal year ended March 31, 2006 is a positive adjustment related to a retroactive
de-designation of the Company's hedge relationship.

(See
the definition of all terms above in Section 4.11 and 5.5).

Interest Income

Interest income for the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006 amounts to T€2,057,
T€3,563 and T€2,774, respectively, and primarily relates to interest income on bank deposits. Of the total interest income, amounts of
T€45, T€603 and T€0 relate to non-financial assets and liabilities mainly in connection with tax issues. Interest income will remain a small
contributor to the Company's operating results in the future.

F-30

---



3.8   Taxes on Income

Major components of income tax expense for the years ended March 31, 2008, March 31, 2007 and March 31, 2006 are:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Consolidated statement of operationsCurrent income taxCurrent income tax charge

1,985

2,907

2,701Prior year income tax charge/release

(1,118
)
(2,138
)
427Deferred income taxRelating to origination and reversal of temporary differences

(104
)
26,796

8,539Income tax expense (+)/ income (-) reported in consolidated statement of operations

763

27,565

11,667


|
|

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Consolidated statement of changes in equityDeferred income taxNet deferred income on revaluation of hedges

(12,446
)
(13,421
)
18,580Net loss/profit on revaluation of financial instruments

17,048

18,003

(12,803
)Income tax benefit (-)/expense (+) reported in equity

4,602

4,582

5,777


As a result of the 2008 corporate tax reform, the combined income tax will be 29.79% from 2008. The anticipated tax rate of 29.79% (2007 and 2006:
39.19%) is based on the corporate income tax rate of 15%, a solidarity surcharge of 5.5% on corporate income tax and a trade tax rate of 13.96%.

F-31

---



A
reconciliation of income taxes for the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006, determined using a combined statutory rate of 29.79%
for corporate and trade tax to actual income tax expense as recorded on the statement of operations, is as follows:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Loss (-) before income tax

(33,076
)
(71,705
)
(56,831
)Notional tax income at KDG's statutory income tax rate of 29.79% (2007 and 2006: 39.19%)

(9,852
)
(28,101
)
(22,272
)Adjustments in respect of current income tax of previous years

(1,118
)
(2,138
)
427Unrecognized tax losses

9,958

30,679

16,587Non-deductible expenses

15,722

25,940

17,324Tax-free income portions

(255
)
(77
)
0Tax-rate changes

(13,461
)
0

0Other

(231
)
1,262

(399
)Income tax benefit (-)/expense (+) according to the statement of operations

763

27,565

11,667


F-32

---



Deferred income taxes

Deferred income taxes at March 31, 2008, March 31, 2007 and March 31, 2006 relate to the following:

Consolidated statement of operationsConsolidated balance sheetApr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 20062008

2007

2006T€

T€

T€

T€

T€

T€Deferred income tax liabiltiesDebt issuance cost

18,357

24,157

16,512

(5,800
)
7,645

(25,660
)Fair value adjustments customer list

16,983

28,103

32,626

(11,321
)
(5,884
)
(2,748
)Accelerated depreciation for tax purposes

94,354

95,038

57,824

(684
)
37,214

43,120Asset Retirement Obligation

6,491

9,083

5,021

(2,592
)
4,062

(1,038
)Fair value adjustments fixed assets

0

1,751

4,500

(1,751
)
(2,749
)
261Intangible assets

2,323

3,149

3,725

(826
)
(576
)
238Financial instruments

35,673

18,625

622

0

0

0Finance lease contracts

0

0

88

0

(88
)
(97
)Revenue Recognition

9,795

6,479

0

3,316

6,479

0Other

71

88

0

(17
)
88

0Gross deferred income tax liabilities

184,047

186,473

120,918Offsetting with deferred tax assets

(96,517
)
(103,814
)
(70,967
)Net deferred income tax liability

87,530

82,659

49,951Deferred income taxTangible assets

571

0

0

(571
)
0

0Hedges

33,839

20,559

10,498

(834
)
3,360

6,601Receivables

9,988

17,027

12,165

7,039

(4,862
)
(3,781
)Other accruals

1,526

65

1,435

(1,461
)
1,370

(578
)Pension

1,372

1,191

748

(181
)
(443
)
125Finance Lease contracts

1,170

1,319

1,080

149

(239
)
(298
)Tax loss carryforwards

48,588

64,018

45,437

15,430

(18,580
)
(7,606
)Gross deferred income tax assets

97,054

104,179

71,363Offsetting with deferred tax liabilities

(96,517
)
(103,814
)
(70,967
)Net deferred income tax asset

537

365

396Deferred income tax charge







(104
)
26,797

8,539


For the years ended March 31, 2008, March 31, 2007 and March 31, 2006, deferred tax assets on corporate income tax loss carry
forwards of KDG in the amount of T€268,229 T€219,621 and T€145,433, respectively and trade tax loss carry forwards of KDG in the amount of
T€43,987, T€47,550 and T€55,261, respectively were recognized. In accordance with IAS 12, the Company has assessed that the deferred tax assets
for these tax loss carry forwards are probable to be realized under consideration of the German minimum taxation rules. The tax loss carry forwards do not expire under current law.

F-33

---





Deferred tax assets on further corporate income tax loss carry forwards of KDG in an amount of approximately T€280,000, T€250,000 and
T€250,000, respectively for the years ended March 31, 2008, March 31, 2007 and March 31, 2006 and trade tax loss carry forwards in the amount of approximately
T€226,000, T€176,000 and T€79,000, respectively have not been recognized due to uncertain recoverability.

Liabilities due to Income Taxes

The liabilities due to income taxes of T€12,961, T€14,157 and T€19,419, respectively for the years ended
March 31, 2008, March 31, 2007 and March 31, 2006 in the balance sheet relate to corporate and trade tax.

4.     Notes to the Balance Sheet

4.1   Cash and Cash Equivalents

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Cash at banks

15,463

54,108

175,471Short-term deposits

0

0

49,621


Cash and cash equivalents are primarily comprised of cash bank balances and money market funds.

4.2   Receivables

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Gross Trade receivables

215,206

160,683

160,630Bad debt allowance

(84,328
)
(59,313
)
(39,831
)Trade Receivables

130,878

101,370

120,799Receivables from Affiliates

922

1,019

1,566Receivables from Associates

31

108

590Receivables from Shareholders

0

0

351953

1,127

2,507


Balance at
Beginning of
Period

Provision for
Bad Debt

Deduction/
Write-Offs
and other
Charges

Balance at
End of PeriodT€

T€

T€

T€Fiscal year ended March 31, 2008Allowance for doubtful accounts

(59,313
)
(39,324
)
14,309

(84,328
)Fiscal year ended March 31, 2007Allowance for doubtful accounts

(39,831
)
(25,014
)
5,532

(59,313
)Fiscal year ended March 31, 2006Allowance for doubtful accounts

(48,356
)
(6,691
)
15,216

(39,831
)


F-34

---



As of March 31, the analyses of trade receivables that were past due but not impaired were as follows:

Carrying amount past due but not impaired
at the reporting dateNot
past due

Less than
30 days

3160 days

6190 days

More than
90 days

Total(in T€)March 31, 2008

48,220

47,173

8,033

5,444

22,008

82,658March 31, 2007

34,420

28,398

19,556

12,326

6,670

66,950


Receivables with an invoice amount of T€50,739, T€14,974 and T€11,036, excluding VAT, at
March 31, 2008, March 31, 2007 and March 31, 2006, respectively, were individually determined to be impaired and were written off by 100%.

Accounts
receivable past due but not impaired are expected to ultimately be collected.

Also
no indications of defaults are recognizable for accounts receivable that are neither past due nor impaired.

All
receivables were pledged as security in accordance with the Senior Credit Facility Agreement (see 4.11 Financial Liabilities) at March 31, 2008, March 31, 2007 and
March 31, 2006.

4.3   Inventories

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Raw materials, consumables and supplies

6,138

2,949

2,409Work in process

74

0

71Finished goods and merchandise

19,989

21,316

10,973thereof carried at net realizable value

1,293

1,723

68226,201

24,265

13,453


Due to an increase in number of customers and therefore an increase in demand of digital cable access, inventory of finished goods has been
reduced. These are capitalized in fixed assets. The total amount of inventories recognized as an expense amount to T€20,580, T€26,020 and T€28,863 for
the years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively. Expenses for inventory allowances related to obsolete inventory were approximately
T€69, T€258 and T€1,009, respectively. Inventories in an amount of T€7,238, T€6,373 and T€3,829 were
pledged in accordance with the Senior Credit Facility Agreement (see 4.11 Financial Liabilities) at March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

4.4   Receivables from Tax Authorities

Receivables from tax authorities relate to corporate income tax, trade tax and solidarity tax contributions and amounted to T€6,881,
T€6,266 and T€1,473 as of March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

F-35

---



4.5   Other Current Assets and Prepaid Expenses

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€VAT refund claims

530

4,321

4,351Creditors with debit balances

1,653

1,768

1,238Deposits

2,422

1,691

1,385Withholding tax

0

0

1,651Security withheld

357

357

357Payments in advance

1,387

0

0Miscellaneous other receivables

923

634

5,129Current prepaid expensesDeferred Costs for Equipment located at customer locations

6,571

9,916

8,342Insurance

1,780

2,937

3,303Other

11,552

7,846

7,43627,175

29,470

33,192


As of March 31, 2008, other current prepaid expenses primarily consisted of prepaid cost for transaction cost, interest, fees and
contributions, broadband fees and prepaid expenses for maintenance.

4.6   Intangible Assets

Software and Licenses and other Contractual and Legal Rights

Software and licenses primarily consist of software licenses for standard business software and costs related to the customer care and billing system. The
software is being amortized on a straight-line basis over three to six years through October 2010.

Beginning
April 1, 2006, the Company modified the conditions related to the minimum duration of customer contracts. Due to this modification, the Company began to capitalize the
related sales commissions of its sales agents and the costs of call center representatives based on future contractual revenue streams. The amortization period of these amounts is 8.5 years for
cable access contracts, which is based on the estimated average life of an access customer relationship, and 12 or 24 months for digital pay and Internet & Phone contracts which is based
on the fixed term period of those customer contracts. Amortization is calculated based on the straight-line method. For the fiscal years ended March 31, 2008 and March 31,
2007, sales commissions in an amount of T€28,091 and T€17,384, respectively, were capitalized in software and licences and other contractual and legal rights. The
amortization of sales commissions was T€13,507 and T€4,806 for the fiscal years ended March 31, 2008 and March 31, 2007, respectively.

Internally Developed Software

For the years ended March 31, 2008, March 31, 2007 and March 31, 2006 approximately T€2,528, T€1,048 and
T€3,042, respectively, of costs for internally developed software were capitalized. For the fiscal year ended March 31, 2008, costs for internally developed software comprised
of T€795 for internally developed software and T€1,733 for prepayments for internally developed software. These amounts relate to costs incurred in the further
development of company-specific software applications, particularly for its customer care and billing systems (CCB), Smile BK and digital pay TV. The software of CCB is being amortized over a period
of 6 years, the software of Smile BK and digital pay are being amortized over a period of 4 years. The remaining useful life of all internally developed software is between
0.53.5 years.

F-36

---



Customer List

For the years ended March 31, 2008, March 31, 2007 and March 31, 2006 the Company recorded additions in the customer list of
T€20,936, T€5,713 and T€6,178, respectively. The remaining useful life of the customer list is between 3.58.5 years.

For
further information relating to intangible assets, reference is made to the fixed asset register in Appendix 1, Appendix 2 and Appendix 3.

4.7   Property and Equipment

Asset Retirement Obligation

In many cases KDG leases space in the cable ducts of DTAG to house KDG's cable network. Related to these leases, KDG is subject to contractual asset retirement
obligations. The costs were estimated at T€17,477 and were capitalized as of April 1, 2003. Further additions related to new asset retirement obligations in an amount of
T€723 were recognized as of March 31, 2008. Depreciation is charged over the normal useful life of the respective assets which resulted in a depreciation expense of
T€1,398, T€1,509 and T€1,260 for the years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Due
to a change in estimate with respect to the interest rate as of March 31, 2008 and March 31, 2007 the capitalized costs were reduced by an amount of
T€2,308 and T€1,182, respectively.

Operating Lease for CPE

To get connection to internet and phone services as well as to receive digital pay TV, the Company leases the necessary equipment to the customers. These leases,
for which the Company is the lessor, are classified as operating leases. Therefore, the Company capitalizes the CPE as fixed assets based on acquisition cost and the cost of removing the asset at the
end of the lease. Over the useful life of 3 years the assets are depreciated using the straight-line method. In the Fixed Asset Schedule CPE is presented as part of technical
equipment. For the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006, the net book value of CPE amounted to T€22,468, T€4,352
and T€0, respectively.

Finance Lease

As of March 31, 2008, the Company leased certain transponders under finance leases through 2012. As of March 31, 2008, March 31, 2007 and
March 31, 2006, the net book value of the capitalized transponders totaled T€33,136, T€38,449 and T€28,802, respectively. During the fiscal year
ended March 31, 2008, March 31, 2007 and March 31, 2006, KDG recorded depreciation expense of T€7,759, T€5,664 and T€4,735,
respectively. The Company also recorded interest expense related to these finance leases of T€2,853, T€2,504 and T€2,473 for the fiscal years ended
March 31, 2008, 2007 and 2006, and paid T€7,197, T€5,145 and T€3,973, to reduce the financial liability, respectively.

There
is an option to extend the contract duration related to the lease of certain transponders by another five year period by mutual agreement of the parties, which must be reached at
least six months before the expiry of the first five year period.

F-37

---



Future
minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

2008

2007

2006Minimum
payments

Present
value of
payments

Minimum
payments

Present
value of
payments

Minimum
payments

Present
value of
paymentsT€

T€

T€

T€

T€

T€Within one year

10,645

8,228

10,008

7,184

7,083

4,740After one year but not more than five years

32,113

28,836

39,481

34,141

25,843

20,635After five years

0

0

536

534

6,982

6,693Total minimum lease payments

42,758

37,064

50,025

41,859

39,908

32,068Less amounts representing finance charges

5,694



8,166



7,840Present value of minimum lease payments

37,064



41,859



32,068


For further information relating to property and equipment, reference is made to the fixed asset registers in Appendix 1, Appendix 2
and Appendix 3.

4.8   Equity Investments in Associates

The carrying value of equity investments in associates is increased by the Company's share of income and reduced by dividends received. Net additions from
associates amounted to
T€672, net additions from associates amounted to T€120 and net deductions to associates amounted to T€276 for the years ended March 31, 2008,
March 31, 2007 and March 31, 2006, respectively, and reflect KDG's share of income recorded by associates in the amount of T€899, T€440 and
T€491, and the receipt of dividends in the amount of T€227, T€320 and T€766, respectively. The fiscal year of all associates is the
period from January 1 to December 31.

Associates' accumulated balance sheets

Dec. 31,
2007

Dec. 31,
2006

Dec. 31,
2005T€

T€

T€Assets

113,635

103,230

91,273Liabilities

94,505

86,846

72,337


Associates' accumulated revenue and profit

Jan. 1-
Dec. 31,
2007

Jan. 1-
Dec. 31,
2006

Jan. 1-
Dec. 31,
2005T€

T€

T€Revenue

78,852

71,203

70,799Profit

1,442

737

3,300


For further information relating to financial assets, reference is made to the fixed asset register in Appendix 1, Appendix 2 and
Appendix 3.

F-38

---



4.9   Other Current Liabilities

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Liabilities for personnel expenses

32,090

28,627

30,385Value added and employment taxes

10,116

7,742

10,393Finance leases

8,228

7,184

4,740Liabilities for other taxes

0

1,617

3,069Debtors with credit balances

818

7,882

2,831Miscellaneous other Liabilities

8,388

7,347

18,08159,640

60,399

69,499


4.10 Deferred Income

Deferred income primarily consists of customer prepayments on a quarterly, semi-annual or annual basis.

4.11 Financial Liabilities (current and non-current) and Senior Notes

Current financial liabilities

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Accrued interest related toSenior Credit Facility

6,311

17,335

76,928Senior Notes

16,966

18,885

19,616Senior Add-on Facility

1,264

0

0Other

1,133

777

929Current financial liabilities

25,674

36,997

97,473


As of March 31, 2006, current financial liabilities included the current repayment obligation of the Senior Credit Facility amounting to
T€76,928, thereof T€75,704 related to the refinancing and T€1,224 related to accrued interest.

Non-current financial liabilities

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Financial LiabilitiesSenior Credit Facility

1,191,404

1,127,436

1,147,822Swap (see note 5.5)

120,585

58,606

27,0641,311,989

1,186,042

1,174,886Senior Notes

603,840

672,782

715,771


F-39

---



Senior Credit Facility

The Senior Credit Facility developed as follows:

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Amount payable Tranche A

1,150,000

1,150,000

1,225,848Amount payable Tranche B

60,000

0

0Financing and transaction costs, Tranche A

(25,932
)
(25,932
)
(85,733
)Accretion of Tranche A

7,336

3,368

83,4111,191,404

1,127,436

1,223,526Thereof current

0

0

75,704Thereof non-current

1,191,404

1,127,436

1,147,822


On May 12, 2006, KDVS entered into a Senior Credit Facility agreement. This agreement was comprised of two facilities, a
T€1,150,000 term loan facility (Tranche A) and a T€200,000 revolving credit facility (Tranche B). Tranche A and Tranche B mature on
March 31, 2012 (together the Senior Credit Facility). On July 19, 2007 the Company amended its Senior Credit Facility and increased Tranche B to T€325,000 under
the same terms and conditions as the original Tranche B. The Senior Credit Facility is secured by all the assets of Kabel Deutschland Vertrieb und Services GmbH & Co. KG
(KDVS) and a first pledge on 100% of the shares of KDVS which are owned and offered as security by Kabel Deutschland GmbH under its guarantee. The carrying amount of KDVS' shares amounts to
T€3,278,200. Since the closing date, Tranche A (T€1,150,000) has been fully drawn.

Tranche B
may be borrowed, repaid and re-borrowed up until one month prior to the final maturity date. Borrowings under Tranche B may be used for general
corporate purposes. As of March 31, 2008, T€60,000 was outstanding under Tranche B.

The
financing and transaction costs related to Tranche B are shown under non-current prepaid expenses in the amount of T€3,679 and under current
prepaid expenses in the amount of T€767.

Interest
rates on the Senior Credit Facility are based on one, two, three or six months EURIBOR plus a margin.

The
margin on the Senior Credit Facility is based on the ratio of consolidated senior net borrowings to consolidated EBITDA (as defined in the Senior Credit Facility agreement) as
follows:

Ratio of Consolidated Total Net Borrowings to Consolidated EBITDA

Margin
(percentage
per annum)Greater than 4:1

2.00Less than or equal to 4:1, but greater than 3.5:1

1.875Less than or equal to 3.5:1

1.75


As of March 31, 2008 the ratio of Consolidated Senior Net Borrowings to Consolidated EBITDA amounted to 2.61:1. Therefore, the applicable
margin was 1.75% as of March 31, 2008. KDG pays an annual commitment fee of 0.625% on the undrawn commitment under Tranche B.

The
Senior Credit Facility is subject to several affirmative and negative covenants including, but not limited to, the following:

Test

RequirementEBITDA to Net Interest

1.75x3.00xSenior Net Debt to EBITDA

4.00x2.00x


F-40

---



As
of March 31, 2008 the ratio of EBITDA to Net Interest amounted to 2.81. The ratio of Senior Net Debt to EBITDA amounted to 2.61.

Mandatory
prepayments are required in case of (i) a change of control, public flotation or sale of the business, (ii) certain third party receipts and (iii) the sale
of shares on the public market (if consolidated total senior net borrowings to consolidated EBITDA is greater than or equal 2:1).

At
March 31, 2008, T€1,150,000 was outstanding under Tranche A at an interest rate of approximately 6.14%. At March 31, 2008,
T€60,000 was outstanding under Tranche B at an interest rate of approximately 6.1127%. The Company entered into interest rate caps and swaps in order to mitigate the exposure to
interest rate risks, although these are not accounted for as hedges.

Senior Add-on Facility

On October 22, 2007 KDVS signed a T€650,000 Senior Add-on Facility or Tranche C, restricted for usage in acquisitions
which ranks pari-passu with the existing T€1,150,000 Senior Credit Facility.

The
Senior Add-on Facility matures in March 2013 and carries a coupon of EURIBOR + 325bps. The Tranche C can be cancelled in part or completely at any
time. The Facility has the same financial covenants as the existing Term Loan Facility.

As
of March 31, 2008, Tranche C is unfunded. Since January 22, 2008, KDVS has paid an annual commitment fee of 1% on the undrawn commitment under Tranche C.

The
financing and transaction costs related to Tranche C are shown under non-current prepaid expenses in the amount of T€6,647.

Senior Notes

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Amount payable

755,553

755,553

755,553Financing and transaction cost

(42,587
)
(42,587
)
(42,587
)Accretion

10,644

7,342

4,392Exchange rate effect

(119,770
)
(47,526
)
(1,587
)603,840

672,782

715,771


On July 2, 2004, KDG GmbH issued T€250,000 of its 10.75% Senior Notes (Euro Notes) due in 2014 and
TUSD 610,000 of its 10.625% Senior Notes (US $ Notes) due in 2014 (together 2014 Senior Notes). The dollar denominated Senior Notes were swapped into Euros using a currency swap.

Interest
on the 2014 Senior Notes is payable every six months on January 1 and July 1. The principle becomes due and payable on July 1, 2014. The 2014 Senior Notes
contain several financial covenants including but not limited to limitations on indebtedness, limitations on asset disposals and limitations on distributions and reporting requirements.

The
Indenture governing the Notes limits, among other things, our ability to:



F-41

---





Each
of the covenants is subject to a number of important exceptions and qualifications. See "Description of the NotesCertain Covenants." in the Registration Statement.

At
any time prior to July 1, 2009, KDG GmbH may redeem all or part of the 2014 Senior Notes by paying a "make whole premium" which is the sum of:



At
any time after July 1, 2009, the following redemption prices apply beginning on the day after July 1 in each of the following years:

Redemption PriceEuro Notes

US $ Notes2009

105.375%

105.313%2010

103.583%

103.542%2011

101.792%

101.771%2012 and thereafter

100.000%

100.000%


The 2014 Senior Notes are subject to several affirmative and negative covenants which are less strict than under the Senior Credit Facility.

4.12 Provisions for Pension

The following tables summarize the components of net benefit expense recognized in the statement of operations and the funded status and amounts recognized in the
balance sheet for the respective plans:

Net benefit expenses recognized in the consolidated statement of operations

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Current service cost

3,637

3,302

2,409Interest expense

1,395

1,186

1,019Net actuarial losses

144

273

22Plan disbursements

0

(98
)
0Other

0

0

0Net benefit expense

5,176

4,663

3,450


The expenses arising from the accrual of interest on pension obligations are recorded in interest expense.

F-42

---



The
recognized expense is recorded in the following items in the statement of operations:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Cost of services rendered

1,120

1,030

1,158Selling expenses

1,499

1,368

626General and administrative expenses

1,162

1,079

647Interest expense

1,395

1,186

1,0195,176

4,663

3,450


Benefit Liability

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Defined benefit obligation

29,119

29,149

26,385Unrecognized actuarial gains (losses)

29

(4,978
)
(6,587
)Benefit liability

29,148

24,171

19,798


The Company has several defined benefit pension plans for different groups of employees (collective agreement (CA) employees,
non-collective agreement (NCA) employees and other). The majority of the plans are average salary plans, which are in accordance with regulations applicable for public servants. These
plans were continued with substantially the same terms upon the purchase of the business from DTAG. The plans for other employees represent individual commitments.

The
annual contributions for CA and NCA employees amount to 2.5% of their contractually agreed annual fixed salaries. The annual contributions for NCA employees increase by 9% for
salaries lying above the income threshold for contributions to the statutory pension scheme. Each contribution is translated into an insured sum.

The
insured sum is calculated by multiplying the contribution by the respective age factor of the employee and is credited to a pension account. From the age of 61 to the onset of
retirement, each employee receives an additional annual bonus sum amounting to 6% of the most recent pension account balance. The contribution rates for individual pension commitments are determined
on an individual basis.

Changes in the present value of the defined benefit obligation are as follows:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Defined Benefit Obligation at April 1

29,149

26,385

19,441Current Service Cost

3,637

3,302

2,409Interest Cost

1,395

1,186

1,019Actual Benefit Payments

(199
)
(72
)
(142
)Acquisition/Business Combination

0

(316
)
(1,050
)Actuarial (Gains)/Losses

(4,863
)
(1,336
)
4,708Defined Benefit Obligation at March 31

29,119

29,149

26,385


F-43

---



The principal assumptions used in determining pension benefit obligations for the Company plans are shown below:

Underlying actuarial assumptions

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006%

%

%Discount rate as of March 31

5.65

4.80

4.50Future salary increases

3.25

2.75

2.753.50Future pension increases

1.001.50

1.001.50

1.001.50Staff turnover

4.50

5.00

5.00


Amounts for the current and previous four periods are as follows:

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006

Mar. 31,
2005

Mar. 31,
2004T€

T€

T€

T€

T€Defined benefit obligation

29,119

29,149

26,385

19,441

20,007Plan assets

0

0

0

0

0(Deficit)/surplus

29,119

29,149

26,385

19,441

20,007Experience adjustments on plan liabilities

(626
)
210

0

0

0


4.13 Other Provisions (current and non-current)

Balance
as of
April 1,
2007

Utilization

Reversal

Addition

Interest

Balance
as of
March 31,
2008T€

T€

T€

T€

T€

T€Anniversary payments

226

(57
)
0

15

0

184Asset retirement obligations

21,020

(330
)
(32
)
1,686

(258
)
22,086Restructuring

14,636

(12,293
)
(1,465
)
1,286

0

2,164Legal fees and litigation costs

1,750

0

0

151

0

1,901Other

1,721

(727
)
(52
)
1,486

0

2,428Total provisions

39,353

(13,407
)
(1,549
)
4,624

(258
)
28,763


Other provisions can be segregated into current obligations (T€6,493) and non-current obligations
(T€22,270).

Restructuring
provisions are shown as adjusted by additions that were utilized or reversed within the same year.

Balance
as of
April 1,
2006

Utilization

Reversal

Addition

Interest

Balance
as of
March 31,
2007T€

T€

T€

T€

T€

T€Anniversary payments

249

(27
)
0

4

0

226Asset retirement obligations

19,964

(41
)
0

1,391

(294
)
21,020Restructuring

6,439

(6,065
)
(40
)
14,302

0

14,636Legal fees and litigation costs

1,807

(35
)
(433
)
411

0

1,750Other

1,041

0

(100
)
780

0

1,721Total provisions

29,500

(6,168
)
(573
)
16,888

(294
)
39,353


F-44

---





Other provisions can be segregated into current obligations (T€18,107) and non-current obligations (T€21,246).

Due
to a change in estimate with respect to the interest rate as of March 31, 2007, the reduction in interest of T€294 related to asset retirement obligations
consists of T€1,182 for the change in estimate and T€888 for the accretion in interest, which is considered in interest expense.

Balance
as of
April 1,
2005

Utilization

Reversal

Addition

Interest

Balance
as of
March 31,
2006T€

T€

T€

T€

T€

T€Anniversary payments

254

(29
)
0

24

0

249Asset retirement obligations

18,041

(929
)
0

2,129

723

19,964Restructuring

2,470

(811
)
(1,425
)
6,205

0

6,439Legal fees and litigation costs

1,563

(86
)
0

330

0

1,807Other

3,490

(4,580
)
0

2,131

0

1,041Total provisions

25,818

(6,435
)
(1,425
)
10,819

723

29,500


Other provisions can be segregated into current obligations (T€9,288) and non-current obligations
(T€20,212).

Provisions for restructuring

The following development of restructuring provisions includes effects that were utilized or reversed within the same year.

At
the end of fiscal year ended March 31, 2006, KDVS announced a restructuring plan affecting the regional technical departments, the central marketing department and the sales
department. As of March 31, 2007, T€2,455 remained as a restructuring provision of which T€2,165 was utilized and T€54 were reversed during the
fiscal year ended March 31, 2008. Based on the final negotiations related to this restructuring, the restructuring accrual increased by T€202 and personnel expense in the same
amount was recorded. As of March 31, 2008 the restructuring provision amounted to T€438.

Additional
restructuring plans for the centralization of the regional IT-departments from various regions to Unterföhring, the outsourcing of parts of the
IT-department and the reorganization of the regional technical departments were announced by KDBS. The provision for restructuring amounted to T€1,735 as of
March 31, 2007. At the end of fiscal year March 31, 2008, the total provision amounted to T€1,292 due to a utilization of T€648, a reversal of
T€860 and additional accruals of T€1,065. Amounts recorded were accrued as personnel expenses.

As
of March 31, 2007, KDVS announced an additional restructuring plan relating to the regional technical departments. As of March 31, 2007 T€10,412 remained
as a restructuring provision. In the fiscal year ended March 31, 2008 the provision increased by T€1,598 due to the finalization of the negotiations related to this
restructuring which was recorded as personnel expense. Furthermore an amount of T€10,941 was utilized and an amount of T€651 was reversed during the fiscal year ended
March 31, 2008. As of March 31, 2008 T€418 remained as a restructuring provision.

Additionally,
a KDG restructuring program entered into prior to April 1, 2005 had remaining accruals of T€34 and T€16 as of March 31, 2007
and March 31, 2008.

Provisions for asset retirement obligation

All asset retirement obligation calculations utilize an inflation rate of 2.01% (20-year-OECD- average) and a
risk-free interest refinancing rate of 5.65% (prior period: 4.8% and for the period

F-45

---



ended
March 31, 2006: 4.5%). The obligation is accreted to the expected payment amount using the effective interest method.

Approximately
93% of KDG's obligations are related to technical equipment, including different kinds of cable and signal transmitting and receiving technology in cable ducts of DTAG. KDG
assumes that 30% of the technical equipment will be replaced by other technologies after 15 years. The remaining 70% of the technical equipment is expected to be replaced after 30 years.

The
remaining 7% of the asset retirement obligations are divided into accruals for furniture and fixtures and miscellaneous restoration obligations.

A
change in estimate with respect to the interest rate as of March 31, 2008 resulted in a decrease of the provision amounting to T€2,308. Further additions for new
asset retirement obligations recognized as of March 31, 2008 increased the provision by T€723.

Other

Provisions for other primarily include provisions for obligations due to onerous contracts and premature cancellation of contracts.

4.14 Other Non-Current Liabilities

Mar. 31,
2008

Mar. 31,
2007

Mar.31,
2006T€

T€

T€Finance leases

28,836

34,675

27,328Liabilities related to share-based payments (MEP)

76,544

57,677

20,187105,380

92,352

47,515


4.15 Equity

Subscribed capital and capital reserves are stated at nominal value. Shareholders have paid in the full amount of subscribed capital and capital reserves.

Subscribed capital

As of March 31, 2008, the subscribed capital of KDG GmbH is held entirely by the sole shareholder Kabel Deutschland Holding GmbH and is
represented by three shares in the following amounts (unchanged since April 1, 2003):

Shareholder

€ per shareKabel Deutschland Holding GmbH

24,750Kabel Deutschland Holding GmbH

250Kabel Deutschland Holding GmbH

1,000,0001,025,000


Capital reserve

For the years ended March 31, 2008, March 31, 2007 and March 31, 2006, changes in the capital reserve relate to share-based payments of
T€10,665, T€4,575 and T€4,950, respectively resulting from the repurchase of interests granted under the Company's interest programs and the repurchase
of interests granted by the Company for exercised options under the Company's option programs.

F-46

---



Additionally,
due to interests granted under the Indirect MEP IV, the capital reserve decreased by T€6,489 as of March 31, 2008 (prior year: T€0, for the fiscal
year ended March 31, 2006: T€0).

Cash flow hedge reserve

Changes in the fair value of the currency cash flow hedges are recognized directly in equity under cash flow hedge reserve. The accumulated amount is released to
profit or loss insofar as the hedged transaction affects profit or loss of the year.

Available-for-sale reserve

Changes in the fair value of financial assets classified as available-for-sale are recognized directly in equity under
available-for-sale reserve.

Accumulated deficit

For the years ended March 31, 2008, March 31, 2007 and March 31, 2006, the net loss of the period was T€33,840,
T€99,269 and T€68,498 respectively.

Included
in this amount are loans granted to Cayman Cable Holding L.P. in its capacity as parent of Kabel Deutschland GmbH in the amount of T€13,504 as of
March 31, 2008 repayable on March 2016. The granted loans are classified as transactions with parents and therefore included in Equity.

5.     Other Notes

5.1   Other Financial Obligations and Contingencies

Leasing and Rental Obligations

KDG has entered into several long-term service agreements with DTAG as well as its subsidiary T-Systems International GmbH. These
agreements include but are not limited to usage and access agreements for underground cable ducts, fiber optic cables, co-location facilities and energy. The agreements have primarily
fixed prices, either based on a monthly or unit basis, and are valid for up to thirty years. However, KDG can terminate the agreements with a notice period of 12 to 24 months.

The
financial obligations as of March 31, 2008, March 31, 2007 and March 31, 2006 include the obligations arising due to the earliest possible termination date of
KDG and are as follows:

|      |                                                 |         |         |         | March 31, 2008
Due |        |        |           |         |         | March 31, 2007
Due |         |        
|----- | ----------------------------------------------- | ------- | ------- | ------- | ------------------ | ------ | ------ | --------- | ------- | ------- | ------------------ | ------- | -------
|
|
|1.    | Agreements with DTAG and subsidiaries           |         | 237,391 |         | 310,822            |        | 85,845 |           | 634,058 |         | 209,623            |         | 292,102
|2.    | License, rental and operating lease commitments |         | 29,736  |         | 61,075             |        | 5,472  |           | 96,283  |         | 44,490             |         | 77,802 
|3.    | Other                                           |         | 606,595 |         | 8,395              |        | 1,700  |           | 616,690 |         | 30,554             |         | 18,380 
|      |                                                 |         |         |         |                    |        |        |           |         |         |                    |         |        
|Total |                                                 | 873,722 |         | 380,292 |                    | 93,017 |        | 1,347,031 |         | 284,667 |                    | 388,284 |        
|      |                                                 |         |         |         |                    |        |        |           |         |         |                    |         |        

F-47

---



March 31, 2006
DueDue
up to
1 year

between
1 and
5 years

more
than
5 years

Total(in T€)1. Agreements with DTAG and subsidiaries

206,980

272,378

24,591

503,9492. License, rental and operating lease commitments

62,050

79,605

26,246

167,9013. Other

22,152

45,234

2,293

69,679Total

291,182

397,217

53,130

741,529


The lease payments for cable ducts are T€103,492, T€103,450 and T€103,928 for the fiscal years
ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively. While the Company has the legal right to cancel the agreements for the lease of the cable ducts with a
notice period of 1224 months, the technological requirements to replace leased capacity represent economic penalties which would result in the reasonably assured renewal of the
leases for a certain period of time. Management expects that for 30% of the leased capacity the economic penalties will require renewal of the contracts for 15 years, when the Company believes
it will have the ability to replace the capacity. This results in a non-cancelable lease term of 15 years for this portion of the leased cable ducts. For the remaining 70%, the
lease term is expected to include all renewal periods under the agreement, resulting in a non-cancelable lease term of 30 years through March 31, 2033, after which time the
lease can be cancelled at the option of DTAG. As of March 31, 2008, 2007 and 2006 the total financial obligations for cable ducts amounted to T€2,116,935,
T€2,220,200 and T€2,323,465, respectively.

In
the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006, KDG had leasing expenses amounting to T€167,890,
T€176,058 and T€173,783, respectively.

The
increase of other financial obligations in the fiscal year ended March 31, 2008 related to the purchase agreement with Orion Cable signed during the fiscal year. The Company
refers to Section 5.7.

Contingencies

On December 16, 2003, KDG received notice from Arbeitsgemeinschaft Kabel (ARGE Kabel), a copyright collection agency representing three collecting
societies (GVL, VG Wort, VG Bild-Kunst), which indicated that the Company could owe up to approximately T€3,000. This represents 40% of the amount paid to VG Media for
copyright fees for the fiscal year ended December 31, 2003. The Company believes these fees should be paid by GEMA and VG Media as a condition to certain agreements between these two collecting
societies and the Company. Therefore the Company has refused to make the payment. In September 2007, the Munich Regional Court dismissed the claim. However, ARGE Kabel filed its appeal with the Munich
Higher Regional Court. The proceedings in the second instance are still pending but Management believes the lower court ruling will be confirmed.

General Risks

In the course of its business activities, the Company faces general economic risks due to relationships with customers, suppliers and employees. In addition,
general risks exist regarding obligations under legal and tax authorities. Currently there are no proceedings related to these risks.

5.2   Related Parties

In accordance with IAS 24, persons or companies which are in control of or controlled by KDG GmbH must be disclosed, unless they are already
included as consolidated companies in KDG GmbH's consolidated financial statements. Control exists if a shareholder owns more than one

F-48

---



half
of the voting rights in KDG GmbH or, by virtue of an agreement, has the power to control the financial and operating policies of KDG GmbH's management.

The
disclosure requirements under IAS 24 also extend to transactions with associated companies as well as transactions with persons who have significant influence on
KDG GmbH's financial and operating policies, including close family members and intermediate entities. Significant influence is deemed to be exerted by persons holding an interest in
KDG GmbH of 20% or more, a seat on the management board or the supervisory board, or other key management positions.

The
transactions of KDG with associated companies are all attributable to the ordinary activities of these respective entities.

The parent company of KDG GmbH is KDG HoldCo. The latter company is wholly-owned by LuxCo, which in turn is wholly-owned by Cayman Cable. Cayman Cable is owned by Providence
Equity Partners, the ultimate parent.

The
KDG Financials are consolidated into the direct parent's Group Accounts of KDG HoldCo and the group accounts of the indirect parent LuxCo.

Related Party Transactions

KDG GmbH conducted the following transactions with related parties in the fiscal years ended March 31, 2008, 2007 and 2006 (in T€).

Cayman Cable

Kabel Holding GmbH

LuxCo

KABELCOM Braunschweig(36)2007/
2008

2006/
2007

2005/
2006

2007/
2008

2006/
2007

2005/
2006

2007/
2008

2006/
2007

2005/
2006

2007/
2008

2006/
2007

2005/
2006Goods and services sold

0

0

0

0

0

0

0

0

0

3,099

2,963

2,492Goods and services purchased

0

(253
)
0

0

0

0

0

1

(16
)
167

150

82Interest income

0

0

0

0

99

0

37

37

37

0

0

0Interest expense

0

0

0

0

0

0

0

0

0

0

0

0Receivables

0

253

807

0

0

351

797

760

722

0

94

0Liabilities

0

0

3,393

0

0

0

0

0

0

0

0

0


---

KABELCOM Wolfsburg(37)

RKS GmbH & Co. KG(38)

Kabel-Service-Berlin(39)

Kabelcenter München(40)2007/
2008

2006/
2007

2005/
2006

2007/
2008

2006/
2007

2005/
2006

2007/
2008

2006/
2007

2005/
2006

2007/
2008

2006/
2007

2005/
2006Goods and services sold

1,571

1,798

1,671

202

133

0

1

152

69

906

0

0Goods and services purchased

129

160

129

4

5

0

7

9

17

0

0

0Interest income

0

0

0

0

0

0

0

0

0

0

0

0Interest expense

0

0

0

0

0

0

0

0

0

0

0

0Receivables

0

0

0

0

0

0

0

14

11

31

0

579Liabilities

0

1

0

323

323

323

0

0

0

0

0

0


F-49

---



Most of the significant contracts with associated companies are signal delivery agreements concluded in the ordinary course of business.

Transactions with Members of the Management Board and the Supervisory Board

Supervisory Board

The Supervisory Board Members received remuneration in the amount of T€48, T€68 and T€67 for the fiscal years
ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Certain
Supervisory Board Members participate in the Company's Management Equity Participation Program and hold interests in Cayman Cable Holding L.P. of approximately 2.76%. In
the fiscal year ended March 31, 2008, March 31, 2007 and March 31, 2006, the holders of those interests have received non-cash share-based payments due to changes in
the carrying amount of the underlying interests in the amount of T€9,270, T€14,680 and T€3,023, respectively.

In
total the Supervisory Board Members received remuneration of T€9,318, T€14,748 and T€3,090 for the fiscal year ended March 31,
2008, March 31, 2007 and March 31, 2006, respectively.

Management

Management received short-term employee benefits of T€3,594 , T€3,871 and T€3,129 as well as
post-employment benefits in the amount of T€300, T€383 and T€377 for the fiscal years ended March 31, 2008, March 31, 2007 and
March 31, 2006, respectively.

Additionally,
Management participates in the Company's Management Equity Participation Program and holds interests in Cayman Cable Holding L.P. of 1.28% upon which they have
received non-cash share-based payments due to changes in the measurement of the carrying amount of the underlying interests in the fiscal year ending March 31, 2008 in the amount of
T€3,451. Cash paid for the repurchase of interests from former members of Management totaled T€7,557 during the period ended March 31, 2008. During the fiscal
year ending March 31, 2007, non-cash share-based payments to members of the Management amounted to T€15,913. In the fiscal year ended March 31, 2006,
Management has not received any share-based payments due a negative change in the measurement of the carrying amount of the underlying interests. Cash paid for the repurchase of interests from
Management totaled T€5,159 during the period ended March 31, 2006.

In total, Management received remuneration in the amount of T€14,902, T€20,167 and T€8,665 for the fiscal years ended March 31,
2008, March 31, 2007 and March 31, 2006, respectively.

Former Members of Management and their surviving dependents

For former Members of Management and their surviving dependents related to pension claims liabilities of T€129, T€144 and
T€147 have been recorded for the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Other transactions with Members of the Management Board and the Supervisory Board

Prof. Dr. Heinz Riesenhuber obtained separate loans in the amounts of T€70 and T€379 with an interest rate of 5.5% p.a. from
Cayman Cable Holding L.P. As of March 31, 2008, approximately T€128 remained outstanding including accrued interest.

Dr. Adrian v. Hammerstein obtain a loan with an interest rate of 5.0% p.a. in the amount of T€1,200 from Cayman Cable Holding L.P., accrued interest as of
March 31, 2008 amounted to T€51. Dr. Manuel Cubero obtained a loan with an interest rate of 5.5% p.a. in the amount of T€960 from Cayman Cable Holding
L.P., accrued interest as of March 31, 2008 amounted to T€43. The principal amount of each of these loans is outstanding.

F-50

---



Transactions with Shareholders

In the fiscal year ended March 31, 2008, Providence Equity Partners (ultimate Shareholder) received Management fees, Director fees and Transaction fees in
the total amount of T€1,671 (prior year: T€1,882, for the fiscal year ended March 31, 2006: T€100).

5.3   Segment Reporting

For the purposes of segment reporting, KDG's activities are split into business segments in accordance with IAS 14. Business segments are the primary
reporting format. This breakdown is based on the internal management and reporting system and takes into account the different risks and earnings structures of the business segments.

The
business activities of KDG and its subsidiaries focus on the operation of cable television networks in Germany. Risks and rewards do not differ within Germany. Therefore, operations
do not need to be segmented into geographical segments and the secondary reporting format is not required.

Segment
information on intangible and tangible fixed assets, receivables, liabilities and profit or loss is provided in the primary reporting format. This segment information is obtained
using the same disclosure and measurement methods as for the consolidated financial statements. There are no significant relationships between the individual segments, and therefore no intersegment
relationships need to be eliminated. Any intrasegment relationships have been eliminated.

Cable Accesscontains all activities and services linked to the customer's physical access to the Company's cable network either directly
to end customers or indirectly through commercial Level 4 operators or housing associations for which the Company charges a fee.

Cable
television access is the basis for free and paid services offered by the Company, including TV and radio services, Internet & Phone services. Recently the Company revised
its strategy of requiring
cable access as a basis for subscribing to Internet & Phone. Non-cable access customers may now subscribe to Internet & Phone services.

The
Company's cable access business generates revenues through subscription fees, installation fees and other revenues.

TV/Radio

In addition to the access cable television business described in the above section, the Company offers its own pay TV packages. The Company sells its pay TV
packages directly to consumers and to a lesser extent indirectly through certain Level 4 operators. The company sells pay TV packages to an unaffiliated regional cable television operator.

The
Company also delivers the pay TV packages of an unaffiliated pay TV operator. In addition to serving its own subscriber base our digital playout center also delivers digital video
signals to unaffiliated regional cable television operators in Germany for distribution to the subscribers served by these operators. Among the operators that used the service previously, only one
remains from January 1, 2008. This operator is expected to discontinue the use of the Company's digital playout services by the end of the calendar year 2008.

Our
TV/Radio business generates revenue through subscription fees, CPE sales, carriage fees and fees for services in connection with our digital playout facility.

Internet & Phone

The Company can offer Internet & Phone services to those homes which are passed by its upgraded bi-directional network (630 MHz) and where the
Company has or can have a direct

F-51

---



relationship
with the customer, or where the Level 4 operators allow us to either directly or indirectly provide our services (Marketable Homes).

TKSTelepost Kabel-Service Kaiserslautern GmbH & Co. KG

TKS, a wholly-owned subsidiary of KDVS, provides cable television, Internet and Phone services to the NATO military personnel based in Germany. It also provides
billing services for telephone customers of Deutsche Telekom AG (DTAG) who prefer English language bills. Additionally, TKS sells certain telecommunication products in its shops to personnel on NATO
military bases such as prepaid mobile phones, cashcards, and telecommunication related products and services.

Reconciliation

Reconciliation includes all headquarter functions of the Company such as managing directors, legal and regulatory, finance, human resources, internal audit,
corporate communication, investor relations, purchasing, IT and intercompany elimination.

F-52

---





The segment reporting is as follows:

|
|

|                                        |  | Cable Access |  | TV/Radio  |  | Internet & Phone | 
|--------------------------------------- |  | ------------ |  | --------- |  | ---------------- | 
|
|
|Revenues                                |  | 867,066      |  | 845,562   |  | 839,276          | 
|Profit or loss from ordinary activities |  | 271,100      |  | 238,302   |  | 273,635          | 
|Net finance cost                        |  | 0            |  | 0         |  | 0                | 
|Depreciation on investments             |  |              |  |           |  |                  | 
|Income from associates                  |  | 0            |  | 0         |  | 0                | 
|Taxes on income                         |  | 0            |  | 0         |  | 0                | 
|Net loss for the fiscal year            |  |              |  |           |  |                  | 
|Fixed assets                            |  | 1,098,821    |  | 1,228,322 |  | 1,328,982        | 
|Trade Receivables                       |  | 63,813       |  | 73,719    |  | 93,933           | 
|Unallocated                             |  | 0            |  | 0         |  | 0                | 
|                                        |  |              |  |           |  |                  | 
|Assets                                  |  | 1,162,634    |  | 1,302,041 |  | 1,422,915        | 
|                                        |  |              |  |           |  |                  | 
|Depreciation and amortization           |  | 207,855      |  | 202,892   |  | 192,400          | 
|Additions fixed assets                  |  | 95,279       |  | 101,020   |  | 60,307           | 
|Trade Payables                          |  | 80,897       |  | 80,881    |  | 90,637           | 
|Other current liabilities               |  | 15,175       |  | 24,840    |  | 21,142           | 
|Provisions for Pension                  |  | 15,441       |  | 16,093    |  | 13,183           | 
|Current and non-current provisions      |  | 20,622       |  | 33,399    |  | 26,398           | 
|Deferred Income                         |  | 195,390      |  | 216,493   |  | 246,658          | 
|Other non-current liabilities           |  | 4,362        |  | 2,771     |  | 2,575            | 
|Unallocated                             |  | 0            |  | 0         |  | 0                | 
|                                        |  |              |  |           |  |                  | 
|Liabilities                             |  | 331,887      |  | 374,477   |  | 400,593          | 
|                                        |  |              |  |           |  |                  | 

|
|

|                                        |  | TKS    |   | Reconciliation |  | Total Group | 
|--------------------------------------- |  | ------ | - | -------------- |  | ----------- | 
|
|
|Revenues                                |  | 28,635 |   | 28,090         |  | 25,168      | 
|Profit or loss from ordinary activities |  | 2,803  |   | 8,274          |  | 3,384       | 
|Net finance cost                        |  | (20    | ) | 0              |  | 0           | 
|Depreciation on investments             |  | 0      |   | 0              |  | 0           | 
|Income from associates                  |  | 0      |   | 0              |  | 0           | 
|Taxes on income                         |  | 154    |   | 0              |  | 0           | 
|Net loss for the financial year         |  |        |   |                |  |             | 
|Fixed assets                            |  | 6,765  |   | 6,674          |  | 5,092       | 
|Trade Receivables                       |  | 6,867  |   | 2,872          |  | 11,363      | 
|Unallocated                             |  | 0      |   | 0              |  | 0           | 
|                                        |  |        |   |                |  |             | 
|Assets                                  |  | 13,632 |   | 9,546          |  | 16,455      | 
|                                        |  |        |   |                |  |             | 
|Depreciation and amortization           |  | 1,700  |   | 1,393          |  | 1,478       | 
|Additions fixed assets                  |  | 1,791  |   | 3,006          |  | 1,395       | 
|Trade Payables                          |  | 3,901  |   | 3,599          |  | 2,080       | 
|Other current liabilities               |  | 2,554  |   | 1,208          |  | 1,035       | 
|Provisions for Pension                  |  | 343    |   | 457            |  | 374         | 
|Current and non-current provisions      |  | 85     |   | 0              |  | 12          | 
|Deferred Income                         |  | 65     |   | 325            |  | 86          | 
|Other non-current liabilities           |  | 536    |   | 0              |  | 0           | 
|Unallocated                             |  | 0      |   | 0              |  | 0           | 
|                                        |  |        |   |                |  |             | 
|Liabilities                             |  | 7,484  |   | 5,589          |  | 3,587       | 
|                                        |  |        |   |                |  |             | 

The total amount of additions to fixed assets due to acquisitions (T€34,505) (see 1.3) is reported in the segment Cable
Access for the fiscal year ended March 31, 2008.

F-53

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5.4   Share-Based Payments

Management Equity Participation (MEP) Programs

At March 31, 2008, the Company has five Management Equity Participation Programs (MEP I, MEP II, MEP III, MEP IV and
MEP V) in place. MEP I provides direct and indirectvia Kabel
Management Beteiligungs GbRownership in Cayman Cable Holding L.P., the parent company of KDG and LuxCo. MEP II and III provide options in Cayman Cable Holding L.P.
interests. MEP IV is split into an interest program providing indirectvia Kabel Management Beteiligungs- (MEP IV) GbRownership in Cayman Cable
Holding L.P. and an option program providing options in Cayman Cable Holding L.P. interests. MEP V also provides options in Cayman Cable Holding L.P. interests. Certain
employees (including senior executives) of the Company receive remuneration in the form of share-based payment transactions.

MEP I

Certain members of KDG GmbH Management and the Supervisory Board participate in the Cayman Cable Holding L.P. directly as limited partners (the
Direct Management Equity Program Idirect MEP I) and certain members participate indirectly through interests in Kabel Management Beteiligungs GbR, a separate partnership
which is itself a limited partner in Cayman Cable Holding L.P. (the Indirect Management Equity Program Iindirect MEP I). The terms of both programs are substantially the
same.

On
February 11, 2004, Cayman Cable Holding G.P. Co. Ltd. (the general partner) and the limited partners of the Partnership entered into a second amended and
restated limited partnership agreement. This agreement sets forth the structure relating to the governance and ownership of the Partnership and the terms of the direct MEP I. Under the direct
MEP I, certain members of Management and the Supervisory Board were admitted to the Partnership as limited partners holding common interests in the Partnership. Other members of Management were
admitted to the program through ownership in Kabel Management Beteiligungs GbR, a limited partner in the Partnership holding common interests in the Partnership.

The
members both of the direct MEP I and indirect MEP I were required to pay a capital contribution upon admission. The direct MEP I and the indirect MEP I
members have financed up to 70% of the members' contributions with a loan from the Partnership.

Interest
accrues on such loans at a rate between 3.0% and 5.5% per annum, compounded annually, and is repayable in accordance with an amortization schedule in the relevant agreement. The
members are entitled to proceeds resulting from the sale of shares in LuxCo by Cayman L.P. With these proceeds the granted loans were repaid.

Put
or call provisions apply to the members' Partnership interests in the event that such member ceases to be employed by KDG GmbH or its subsidiaries.

Certain
limits apply with respect to the transfer of interests in the Partnership. Limited partners are not permitted to transfer their interests in the Partnership (subject to certain
exceptions for affiliate transfers and transfers to subsidiaries or family vehicles) without the consent of the general partner, Cayman Cable Holding G.P. Co. Ltd. Such consent
may be given subject to conditions or restrictions or may be withheld at the general partner's absolute discretion. Notwithstanding the foregoing, no transfers shall be valid or effective if the
transfer would violate any applicable securities laws or it would cause the Partnership to lose any of its exemptions or favorable treatment under the U.S. Federal income tax laws, ERISA or the
U.S. Investment Company Act of 1940.

As
of April 19, 2006, Cayman Cable Holding L.P. agreed to assume obligations under PIK-Notes issued by P4 Cayman Cable Ltd. As a result of that, the
Partnership decided to adjust the number of

F-54

---



interests
to reflect the decrease in the value of MEP I members shares resulting in the issuance of additional interests to the MEP I holders. The number of interests additionally issued
as an adjustment without any consideration was 724,102 in the direct MEP I and 136,227 in the indirect MEP I.

During
the fiscal year ended March 31, 2008, 629,790 interests in Cayman Cable Holding L.P. of members of the direct MEP I and 83,972 interests of members of
indirect MEP I were sold by the respective members. These interests were repurchased by Cayman Cable Holding L.P. at an average price of €12.00 per interest in direct
MEP I and €14.66 per interest in indirect MEP I. Since Cayman Cable Holding L.P. repurchased these interests for cash and has not required KDG to fund the
repurchase, the liabilities related to these interests have been treated as a contribution from the parent when settled, resulting in an increase in capital reserve of T€8,789.

Grant date

The grant date determines the point in time at which the fair value of the services of the members of MEP is measured. The persons who are members of the
direct MEP I participate in Cayman Cable Holding L.P. with a grant date as of March 13, 2003. The persons who are members of the indirect MEP I participate with a grant
date as of November 27, 2003. For one limited partner in the Partnership the grant date was October 1, 2003. The grant date for 14,250 of the additional 2,259,723 interests granted
during the fiscal year ending March 31, 2006 was February 28, 2006. For the other 2,245,473 interests which were granted on February 2, 2006, Cayman Cable Holding L.P.
awarded the holders immediate additional vesting as if the interests had been granted on April 26, 2005.

On
April 19, 2006, Cayman Cable Holding L.P. granted the holders of interests an additional year vesting. As a result, the vested part of the interests of the MEP I
holders increased by 25% in addition to the scheduled vesting.

Number of interests granted

As of March 31, 2008, Management holds direct and indirect interests of 3.74% and 0.44%, respectively, in the Cayman Cable Holding L.P. The total
consideration paid for these interests amounts to T€13,957 and T€312, respectively.

Measurement

Under the direct MEP I as of March 13, 2003, the fair value of the interests at March 31, 2008 amounts to T€15,074 (prior
year: T€19,432). Under the indirect MEP I as of November 27, 2003, the fair value of the interests in Kabel Management Beteiligungs GbR, which is valued by the fair value
of its contribution in the Cayman Cable Holding L.P. amounts to T€6,463 (prior year: T€6,151). The fair value of the interests of the new members of direct
MEP I granted in February 2006 at March 31, 2008 amounts to T€39,699 (prior year: T€31,737).

At
each balance sheet date through March 31, 2006, the carrying value of the repurchase obligation related to vested MEP I interests has been based on a formula defined in
the partnership agreement for fair price estimation of the respective shares, which have been negotiated between the partners and are documented in the partnership agreement (third amendment) and a
letter of grant (for certain of the interests granted in February 2006). Effective April 19, 2006 and in connection with the 5th amendment to the limited partnership
agreement, the controlling shareholders of Cayman Cable modified the settlement terms of MEP I interests in Cayman Cable Holding L.P to change the settlement formula from an EBITDA formula with
fixed multiples to a fair value based model. The difference between repurchase obligation as computed at each reporting date and the consideration for the interests is accounted for as personnel
expense. This amount is recognized over a vesting period of four years commencing at grant date using the accelerated recognition method in accordance with IFRS 2 whereby 25% are vested at each
anniversary. Therefore the program is split into 4 different

F-55

---



layers,
for which fair value is calculated at each reporting date. As of March 31, 2008, March 31, 2007 and March 31, 2006 T€61,229, T€56,146 and
T€6,906, respectively have vested. The liability was recorded in other liabilities. Included in these amounts is the contribution made by the members of MEP I since such
contributions are a liability in case of the sale of the interests. Due to changes in the fair value of the interests and due to additional vesting, the Company recognized an increase in expenses and
an increase in other liabilities for the fiscal year ended March 31, 2008 in the amount of T€13,695 (prior year (including the change from a formula based price to a fair value
based price): T€37,585). Additionally, T€207 was recognized as a increase in personnel expense due to the sale of interests resulting in a net income effect in total of
T€13,902.

MEP II and III

MEP II and MEP III are option programs that differ in the exercise price only. Under these programs, the participants were granted options on
interests in the Cayman Cable Holding L.P.

As
of April 19, 2006, Cayman Cable Holding L.P. agreed to assume obligations under PIK-Notes issued by P4 Cayman Cable Ltd. As a result of this equity
restructuring, the Partnership adjusted the number of options to reflect the decrease in value of the underlying interests resulting in the issuance of additional options to the MEP II and III
holders. The number of options issued for that adjustment was 26,961 in MEP II and 109,344 in MEP III. At the same time, the strike price for the options was adjusted by the same
proportion to keep the total strike price constant. The value of the total outstanding options before and after this adjustment was the same.

Number of options granted

In May 2006, KDG granted 300,000 additional options at a strike price of €7.01 each.

As
of March 31, 2008, a total of 434,897 options have been granted to the participants in MEP II and MEP III representing a 0.43% interest in the Cayman Cable
Holding L.P.

Grant date and terms

The maximum term of the options is ten years after grant date. The options will be forfeited if they are not exercised. The weighted average remaining life of the
options is 1.97 years as of March 31, 2008.

On
April 19, 2006, Cayman Cable Holding L.P. granted the holders of existing optionsexcept the holders of the options granted in March 2006an
additional year vesting. As a result, the vested part of those options within MEP II and MEP III increased by 25% in addition to the scheduled vesting.

Method and extent of exercise

The options will become immediately vested and exercisable upon any of the following events:



In
addition, the general partner of Cayman Cable Holding L.P. may, at its absolute discretion, allow options to become exercisable, in whole or in part, prior to an exit event if
any other transaction occurs which would materially affect the value of the options.

F-56

---



The
general partner may decide that, instead of procuring the issue or transfer of interests in Cayman Cable Holding L.P. (LP interests) on exercise of an option that it
will:



Any
other transfer of options is restricted to certain limited options (e.g. ceasing employment). Any transfer of an option otherwise than permitted in this program would cause
the option to lapse.

Measurement

The measurement of the fair value at grant date and each consecutive reporting period is based on the Black-Scholes option pricing model. The main parameters are
the estimated fair value of the interests, expected volatility of the values of the interests, the estimated term of the options and the risk free interest rate on grant date (based on the estimated
average life of the options of five years). The grant
of the options is not dependent on market conditions, whereby expected future distributions have been included in the calculation.

The
volatility was estimated at 25% by benchmarking historical volatilities of listed international cable companies that are comparable regarding the parameters that typically influence
the volatility.

The
strike prices are €1.17 for MEP II and €4.53 for MEP III and €0.83 for options granted in March 2006. The strike price
for the options granted in May 2006 is €7.01.

|
|

|                        |  | Number of options |  | Risk free
interest
rate at
grant
date |  | Fair
value of
option at
grant
date |  | Fair
value of
shares at
grant
date |  | Fair
value of
option at
measurement
date
|----------------------- |  | ----------------- |  | ------------------------------------- |  | ---------------------------------- |  | ---------------------------------- |  | ----------------------------------------
|
|
|October 1, 2004 MEP II  |  | 161,962           |  | 0                                     |  | 0                                  |  | 0                                  |  | 161,962                                 
|January 1, 2005 MEP III |  | 62,985            |  | 0                                     |  | 0                                  |  | 0                                  |  | 62,985                                  
|June 1, 2005 MEP III    |  | 149,964           |  | 0                                     |  | 0                                  |  | 0                                  |  | 149,964                                 
|March 31, 2006 MEP III  |  | 59,986            |  | 0                                     |  | 0                                  |  | 0                                  |  | 59,986                                  
|May 22, 2006 MEP III    |  | 300,000           |  | 0                                     |  | 0                                  |  | 300,000                            |  | 0                                       
|                        |  |                   |  |                                       |  |                                    |  |                                    |  |                                         
|                        |  | 734,897           |  | 0                                     |  | 0                                  |  | 300,000                            |  | 434,897                                 
|                        |  |                   |  |                                       |  |                                    |  |                                    |  |                                         

F-57

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|
|

|                         |  | Number of options |  | Risk free
interest
rate at
grant
date |  | Fair
value of
option at
grant
date |  | Fair
value of
shares at
grant
date |  | Fair
value of
option at
measurement
date
|------------------------ |  | ----------------- |  | ------------------------------------- |  | ---------------------------------- |  | ---------------------------------- |  | ----------------------------------------
|
|
|October 1, 2004 MEP II   |  | 135,000           |  | 0                                     |  | 26,961                             |  | 0                                  |  | 0                                       
|January 1, 2005 MEP III  |  | 52,500            |  | 0                                     |  | 10,485                             |  | 0                                  |  | 0                                       
|February 2, 2005 MEP III |  | 140,000           |  | 0                                     |  | 27,960                             |  | 0                                  |  | 167,960                                 
|May 1, 2005 MEP III      |  | 180,000           |  | 0                                     |  | 35,949                             |  | 0                                  |  | 215,949                                 
|June 1, 2005 MEP III     |  | 125,000           |  | 0                                     |  | 24,964                             |  | 0                                  |  | 0                                       
|March 31, 2006 MEP III   |  | 50,000            |  | 0                                     |  | 9,986                              |  | 0                                  |  | 0                                       
|May 22, 2006 MEP III     |  | 0                 |  | 300,000                               |  | 0                                  |  | 0                                  |  | 0                                       
|                         |  |                   |  |                                       |  |                                    |  |                                    |  |                                         
|                         |  | 682,500           |  | 300,000                               |  | 136,305                            |  | 0                                  |  | 383,909                                 
|                         |  |                   |  |                                       |  |                                    |  |                                    |  |                                         

---

For MEP II and III the Company recognized compensation expense and a corresponding increase in other liabilities in the amount of
T€1,940 in fiscal year ended March 31, 2008, of which the entire amount has vested. None of the options granted have been cancelled since granting. Therefore, all options shown
are outstanding as of year end March 31, 2008 of which 382,409 vested and 52,488 remain unvested.

The
net book value of the liability relating to MEP II and III at March 31, 2008 amounts to T€5,252.

Indirect MEP IV

Since March 2007, an additional management participation plan has been implemented, including options on interests in the Partnership (MEP IV option program) and
interests in the Partnership which are held indirectly via Kabel Management Beteiligungs- (MEP IV) GbR (Indirect MEP IV). Kabel Management Beteiligung- (MEP IV) GbR is itself a limited
partner in the Partnership.

The
general rules of the indirect MEP IV plan are substantially the same as for the indirect MEP I. All members of the indirect MEP IV were admitted to the program through
ownership in Kabel Management Beteiligungs- (MEP IV) GbR, a limited partner in the Partnership holding common interests in the Partnership.

The
members of the indirect MEP IV were required to pay a capital contribution upon admission. The Partnership and the Kabel Management Beteiligungs- (MEP IV) GbR, respectively,
have financed 80% of the managers' contributions with a loan from the Partnership. Interest accrues on such loan at a rate of 5.0% per annum, compounded annually, and is repayable in accordance with
an amortization schedule in the relevant agreement. The members are entitled to proceeds received by them in respect of their interests.

Put
or call provisions apply to the members' Partnership interests in the event that such member ceases to be employed by KDG GmbH or its subsidiaries.

The
total number of interests in Kabel Management Beteiligungs- (MEP IV) GbR issued under the Indirect MEP IV amounts to 540,758. During the fiscal year ended March 31,
2008, none of these interests were sold by the respective members.

Grant date

The grant date determines the point in time at which the fair value of the services of the members of MEP is measured. The persons who are members of the indirect
MEP IV participate in Kabel Management Beteiligungs- (MEP IV) GbR with a grant date as of March 29, 2007.

F-58

---





Number of interests granted

As of March 31, 2008, the members of that management participation plan indirectly hold interests in Cayman Cable Holding L.P. of 0.54%. The total
consideration paid for these interests amounts to T€6,489.

Measurement

Under the indirect MEP IV as of March 29, 2007, the fair value of the interests at March 31, 2008 amounts to T€7,928.

As
for the MEP I, the carrying amount of the repurchase obligation related to vested MEP IV interests at each reporting date is measured based on estimated fair value. This amount is
recognized over a vesting period of four years commencing at grant date using the accelerated recognition method in accordance with IFRS 2 whereby 25% are vested at each anniversary. Therefore
the program is split into 4 different layers, for which fair value is calculated at each reporting date. As of March 31, 2008, T€7,238 have vested. The liability was recorded in
other liabilities. Included in these amounts is the contribution made by the members of indirect MEP IV since such contributions are a liability in case of the sale of the interests. Due to changes in
the fair value of the interests and due to additional vesting, the Company recognized an increase in expenses and an increase in other liabilities for the fiscal year ended March 31, 2008 in
the amount of T€749.

MEP IV Option Program

Under the MEP IV Option Program, the participants were granted options on interests in the Cayman Cable Holding L.P. The terms and conditions of this
management participation plan are substantially the same as for the other option programs.

Number of options granted

During the fiscal year ended March 31, 2008 and in conjunction with the implementation of the additional plan, 2,085,908 options have been granted.
Furthermore, 48,170 options have been called in that period based on the regulations in the amended and restated Cayman Cable Holding L.P. option planMEP IV.

As
of March 31, 2008, a total of 2,037,738 options have been granted to the participants in MEP IV representing a 2.04% interest in the Cayman Cable Holding L.P.

Grant date and terms

The options under the MEP IV Option program have been issued with a grant date as of March 29, 2007. The weighted average remaining life of the options is
3.99 years as of March 31, 2008.

Method and extent of exercise

The Options will become immediately vested and exercisable upon any of the following events:



after
which they will lapse if unexercised.

F-59

---



In
addition, the general partner of Cayman Cable Holding L.P. may, at its absolute discretion, allow options to become exercisable, in whole or in part, prior to an exit event.

The
general partner may decide that, instead of procuring the issue or transfer of interests in Cayman Cable Holding L.P. (LP interests) on exercise of an option that it will:



Any
other transfer of options is restricted to certain limited options (e.g. ceasing employment). Any transfer of an option otherwise than permitted in this program would cause
the option to lapse.

Measurement

The measurement of the fair value at grant date and each consecutive reporting period is based on the Black-Scholes option pricing model. The main parameters are
the estimated fair value of the interests, expected volatility of the values of the interests, the estimated term of the options and the risk free interest rate on grant date (based on the estimated
average life of the options of five years). The grant of the options is not dependent on market conditions, whereby expected future distributions are included in the calculation.

The
volatility was estimated at 25% by benchmarking historical volatilities of listed international cable companies that are comparable regarding the parameters that typically influence
the volatility.

The
strike price is €12.00 for all options in the MEP IV Option Program.

Number of optionsRisk free interest rate at grant date

Fair value of option at grant date

Fair value of shares at grant dateGrant date

March 31, 2007

Granted

Called

Exercised

March 31, 2008

Fair value of option at measurement date(%)

in T€

in T€

in T€March 29, 2007 MEP IV Option Program

0

2,085,908

48,170

0

2,037,738

4.00

7,165

24,447

10,509


For the MEP IV Option Program, the Company recognized compensation expense and a corresponding increase in other liabilities in the amount of
T€5,514 in fiscal year ended March 31, 2008, of which the entire amount has vested. None of the options granted have been cancelled since granting. Therefore all options shown
are outstanding as of year end March 31, 2008 of which 509,435 vested and 1,528,303 remain unvested. The net book value of the liability relating to the MEP IV Option Program at
March 31, 2008 amounts to T€5,473.

MEP V

Under MEP V, the participants were granted options on interests in the Cayman Cable Holding L.P. The terms and conditions of this management participation
plan are substantially the same as for the other option programs.

F-60

---



Number of options granted

During the fiscal year ended March 31, 2008 and in conjunction with the implementation of the additional plan, 481,688 options have been granted. All these
options representing a 0.48% interest in the Cayman Cable Holding L.P. are outstanding as of March 31, 2008.

Grant date and terms

The options under MEP V have been issued with a grant date as of December 3, 2007. The weighted average remaining life of the options is 4.67 years
as of March 31, 2008.

Method and extent of exercise

The options will become immediately vested and exercisable upon any of the following events:



after
which they will lapse if unexercised.

In
addition, the general partner of Cayman Cable Holding L.P. may, at its absolute discretion, allow options to become exercisable, in whole or in part, prior to an exit event.

The
general partner may decide that, instead of procuring the issue or transfer of interests in Cayman Cable Holding L.P. (LP interests) on exercise of an option that it will:



Any
other transfer of options is restricted to certain limited options (e.g. ceasing employment). Any transfer of an option otherwise than permitted in this program would cause
the option to lapse.

Measurement

The measurement of the fair value at grant date and each consecutive reporting period is based on the Black-Scholes options pricing model. The main parameters are
the estimated fair value of the interests, expected volatility of the values of the interests, the estimated term of the options and the risk free interest rate on grant date (based on the estimated
average life of the options of five years). The grant of the options is not dependent on market conditions, whereby expected future distributions are included in the calculation.

F-61

---



The
volatility was estimated at 25% by benchmarking historical volatilities of listed international cable companies that are comparable regarding the parameters that typically influence
the volatility.

The
strike price is €14.66 for all options in the MEP V Option Program.

Number of optionsRisk free interest rate at grant date

Fair value of option at grant date

Fair value of shares at grant dateGrant date

March 31, 2007

Granted

Called

Exercised

March 31, 2008

Fair value of option at measurement date(%)

in T€

in T€

in T€December 3, 2007 MEP V

0

481,688

0

0

481,688

3.90

2,127

7,062

2,014


For MEP V, the Company recognized compensation expense and a corresponding increase in other liabilities in the amount of T€524 in
fiscal year ended March 31, 2008, of which the entire amount has vested. None of the options granted have been cancelled since granting. Therefore all options shown are outstanding as of year
end March 31, 2008 of which none vested and 481,688 remain unvested. The net book value of the liability relating to the MEP V Option Program at March 31, 2008 amounts to
T€524.

5.5   Financial Instruments

KDG is exposed to market risks from changes in interest rates and currency exchange rates which can impact its operating results and overall financial condition.
KDG manages its exposure to these market risks through its operating and financing activities and, when deemed appropriate or required by other agreements, through hedging strategies that utilize
derivative financial instruments. The main strategy is to avoid or to mitigate risks, e.g. currency risk by entering in currency swaps or the risk of variable interest payments by entering into
interest rate swaps and buying caps. Derivative instruments are only used to hedge existing or prospective transactions.

Of
KDG's financial instruments, only the Senior Notes bear fixed interest and a fair value interest rate risk, whereas the bank loans bear cash flow interest rate risks.

The
Company has incurred debt that is denominated in various currencies, primarily via bond issues and bank borrowings. The total notional amount of debt denominated in USD is
TUSD 610,000 as of March 31, 2008, March 31, 2007 and March 31, 2006. As a result, KDG is exposed to risks from changes in interest rates and exchange rates.

Risks
are initially hedged by way of naturally closed positions in which the values or the cash flows of primary financial instruments are matched in terms of maturity and amounts. Any
residual risks are mitigated by way of conventional derivative financial instruments.

F-62

---



As
of the balance sheet date, derivative financial instruments consisted of the following: (notional amounts):

March 31, 2008

March 31, 2007

March 31, 2006T€

T€

T€Interest Rate SwapsWithin one year

75,960

71,863

67,988One to five years

379,568

455,528

527,391More than 5 years

0

0

0Total

455,528

527,391

595,379Interest Rate CapWithin one year

25,320

23,954

22,663One to five years

126,523

151,843

175,797More than 5 years

0

0

0Total

151,843

175,797

198,460Currency SwapsWithin one year

0

0

0One to five years

505,553

505,553

505,553More than 5 years

0

0

0Total

505,553

505,553

505,553Total nominal volume

1,112,924

1,208,741

1,299,392


The nominal volume is the sum total of all purchase and sale amounts of the interest rate and currency derivatives. The nominal amounts are equal
to the volume of the hedged items.

Changes
in the fair value of the currency swaps are recognized directly in equity under cash flow hedge reserve. The accumulated amount is released to profit or loss insofar as the
hedged transaction affects profit or loss of the year.

Interest Rate Swaps and Caps

Approximately T€1,037,500 borrowed under the Company's initial senior loan facility in 2003 was used to fund the acquisition of the cable
television business. The interest rate volatility related to these outstanding loans was mitigated with a combination of interest rate swaps and caps at the time the bank loans were incurred. The
loans were extended by the lending banks subject to the condition that the Company would enter into appropriate interest rate swaps and interest caps.

With
the interest rate swaps, the variable interest rates (EURIBOR) on KDG's bank loans were effectively exchanged for a fixed interest rate of 4.0495% per annum. KDG initially entered
into interest rate swaps with a notional amount of T€778,125 which will be amortized until 2015. These swaps entitle KDG to receive a payment from the counterparty if the variable
market
interest rate exceeds the fixed interest rate, and oblige KDG to make a payment to the counterparty if the fixed interest rate exceeds the variable market interest rate. These types of agreements are
entered into to effectively convert the interest rates on a portion of KDG's long-term liabilities to banks from variable to fix. In 2003, KDG also purchased interest rate caps with a cap
level of 4.2% per annum with a notional amount of T€259,375 which will be amortized until 2015. These caps entitle KDG to receive a payment from the counterparty equal to the excess,
if any, of the hypothetical interest expense on a specified notional amount at a current market interest rate over an amount specified in the agreement.

F-63

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In September 2004, KDG restructured its interest rate swaps and caps. The restructured derivatives now mature June 2009 compared to the original maturity, and the effective interest rate
on the swaps was reduced from 4.0495% to 3.705% as of September 29, 2004.

Currency Swaps

KDG GmbH issued TUSD 610,000 of 10.625% Senior Notes on July 2, 2004. Interest payment dates are semi-annual each
January 1 and July 1, commencing in January 2005. Interest accrues from the issue date of the notes on July 2, 2004. The Senior Notes are not callable until after the fifth
anniversary of the issuance date.

KDG GmbH
entered into a derivative agreement swapping 100% of the US dollar-denominated principal and interest payments into Euro-denominated principal and interest
payments at a fixed rate over five consecutive years with various banks. The agreed exchange rate is US dollar 1.2066 for each Euro. The weighted average Euro fixed rate considering derivatives
currently in place is 10.2046%. The Cross Currency swap matures on July 1, 2009.

Credit Risk

Credit risk is the risk of a financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It arises
principally from receivables from customers. The exposure to credit risk is influenced mainly by the individual characteristics of each customer.

For
all payments underlying the financial instruments, collateral must be requested, credit ratings/references obtained and a track record of prior business relations used in order to
minimize the credit risk depending on the nature and extent of the respective payments. Without taking into account any collateral or other credit enhancements, the carrying amount of financial assets
represents the maximum exposure to credit risk.

Impairment
losses are recognized for any credit risks associated with the financial assets. The credit risk associated with derivative financial instruments is minimized in that only
counterparties with top credit ratings are selected. For this reason, the general credit risk relating to the derivatives used by the Company is not considered to be significant. No concentration of
credit risks from business relations with individual debtors is evident.

Interest Rate Risk

KDG's interest payment risk is mitigated by the derivatives described. As of year-end 2006, 2007 and 2008, all of the interest-bearing liabilities are
due in 5 years, which is why the interest rate derivative structure is long term.

Liquidity risk

Liquidity risk represents the risk that liquidity reserves will prove to be insufficient to meet financial obligations in a timely manner. In order to ensure
liquidity the Company has unused Senior Credit Facilities and other lines of credit amounting to T€909,000 T€200,000 and T€50,000 at March 31,
2008, March 31, 2007 and March 31, 2006, respectively. In the fiscal year 2008 an amount of T€650,000 is included which relates to the Senior
Add-on-Facility.

Future
cash outflows arising from financial liabilities that are recognized in the Consolidated Balance Sheet are presented in the following table. This includes payments to settle the
liabilities and interest payments as well as cash outflows from cash settled derivatives with a negative market value. Financial liabilities that are repayable on demand are included on the basis of
the earliest date of

F-64

---



repayment.
Cash flows for variable interest liabilities are determined with reference to the market conditions at the balance sheet date.

March 31, 2008

Up to 1 year

Between 1 and 3 years

Between 3 and 5 years

After 5 years

TotalT€

T€

T€

T€

T€Senior Notes

78,465

156,930

156,929

873,250

1,265,574Financial liabilities

70,350

133,369

1,223,810

0

1,427,529Trade payables

218,293

0

0

0

218,293Finance lease liabilities

10,645

21,285

10,828

0

42,758Other liabilities

3,463

0

0

0

3,463Derivative financial liabilities

9,910

107,351

0

0

117,261Total

391,126

418,935

1,391,567

873,250

3,074,878


March 31, 2007

Up to 1 year

Between 1 and 3 years

Between 3 and 5 years

After 5 years

TotalT€

T€

T€

T€

T€Senior Notes

78,465

156,930

156,930

951,715

1,344,040Financial liabilities

77,593

136,677

1,293,386

0

1,507,656Trade payables

175,518

0

0

0

175,518Finance lease liabilities

10,008

19,889

19,592

536

50,025Other liabilities

8,460

0

0

0

8,460Derivative financial liabilities

3,196

54,877

0

0

58,073Total

353,240

368,373

1.469.908

952.251

3,143,771


March 31, 2006

Up to 1 year

Between 1 and 3 years

Between 3 and 5 years

After 5 years

TotalT€

T€

T€

T€

T€Senior Notes

78,465

156,930

156,930

1,030,180

1,422,505Financial liabilities

1,271,803

143,383

65,988

1,291,031

2,772,205Trade payables

160,690

0

0

0

160,690Finance lease liabilities

7,083

12,952

12,891

6,982

39,908Other liabilities

7,878

0

0

0

7,878Derivative financial liabilities

2,937

0

0

0

2,937Total

1,528,856

313,265

235,809

2,328,193

4,406,123


Capital management

The primary objective of the Company's capital management is to ensure that it maintains a strong credit rating to reduce risks from its highly leveraged
financing structure.

This
is monitored using the debt covenants of the Senior Credit Facility and the indenture of the Senior Notes.

The
Company's ability to make payments and to refinance its debt, and to fund future operations and capital expenditures, will depend on future operating performance and the ability to
generate sufficient cash. Accordingly the Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions.

F-65

---



Carrying amounts of Financial Instruments

The following table presents the carrying amounts of financial instruments according to categories of IAS 39:

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Financial assets at fair value through profit or loss

4,239

5,414

603Loans and Receivables

148,956

158,379

353,035Available-for-Sale financial assets

0

7,510

492153,195

171,303

354,130Financial liabilities at fair value through profit or loss

0

0

3,844Financial liabilities measured at amortised cost

2,163,259

2,079,799

2,156,6982,163,259

2,079,799

2,160,542


The category Available-for-Sale financial assets in the prior years included equity instruments measured at amortized cost
because they did not have a quoted market price and their value could not be measured reliably amounting to T€156 and T€492 for the years ended March 31, 2007
and 2006, respectively.

The
following table shows net gains or losses of financial instruments according to categories of IAS 39 recognized in the Consolidated Statement of Operations:

Fiscal Year Ended March 31,2008

2007

2006T€

T€

T€Financial assets and liabilities at fair value through profit or loss

(1,175
)
8.655

16.919Loans and Receivables

(27,964
)
(19.695
)
(8.447
)Available-for-Sale financial assets

2,337

0

0Financial liabilities measured atAmortised cost

72,244

45,939

(32,669
)45,442

34,899

(24,197
)


Net gains or losses on financial assets and liabilities at fair value through profit or loss include the effects from the fair value measurement
of the derivatives that are not part of a hedge accounting relationship.

Net
gains and losses on loans and receivables comprise mainly impairment losses and reversals.

Net
gains or losses of Available-for-Sale financial assets result from the sale of interests in other companies. In the fiscal year 2008 the amount relates to the
sale of Primacom.

Net
gains and losses on financial liabilities measured at amortised cost include effects from foreign currency translation and from early settlement.

Net
gains and losses on financial liabilities measured at amortised cost include effects from foreign currency translation from the Senior Notes denominated in USD which is accounted for
under hedge accounting provisions. The effects are completely compen-sated through the hedging instruments.

F-66

---



Fair Values of Financial Instruments

The following table presents the carrying amounts and fair values of financial assets and liabilities included in each balance sheet item.

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006Category according to IAS 39

Carrying Amount

Fair Value

Carrying Amount

Fair Value

Carrying Amount

Fair ValueT€

T€

T€

T€

T€

T€Financial assets measured at cost or amortized costCash and Cash Equivalents

LaR

15,463

15,463

54,108

54,108

225,092

225,092Trade Receivables

LaR

130,878

130,878

101,370

101,370

120,799

120,799Receivables from Affiliates

LaR

922

922

1,019

1,019

1,917

1,917Receivables from Associates

LaR

31

31

108

108

590

590Other Current assets

LaR

1,662

1,662

1,774

1,774

4,637

4,637Other Financial Assets*

AfS

0

0

156

0

492

0Financial assets measured at fair valueOther Financial Assets

AfS

0

0

7,354

7,354

0

0Other non-current AssetsDerivatives without a hedging relationship

FAHfT

4,239

4,239

5,414

5,414

603

603Financial liabilities measured at cost or amortized costCurrent Financial Liabilities

FLAC

25,674

25,674

36,997

36,997

97,473

97,473Trade payables

FLAC

218,293

218,293

175,518

175,518

160,690

160,690Liabilities to Associates

FLAC

323

323

324

324

323

323Other Current LiabilitiesOther financial liabilities

FLAC

3,140

3,140

8,398

8,398

3,760

3,760Finance lease liabilities

n/a

8,228

8,228

7,184

7,184

4,740

4,740Senior Credit Facility

FLAC

1,191,404

1,191,404

1,127,436

1,127,436

1,223,526

1,223,526Senior Notes

FLAC

603,840

624,996

672,782

804,915

715,771

836,376Other non-current LiabilitiesFinance lease liabilities

n/a

28,836

28,744

34,675

34,587

27,328

27,250Financial liabilities measured at fair valueNon-current Financial LiabilitiesDerivatives without a hedgingrelationship

FLHfT

0

0

0

0

3,844

3,844Derivatives with a hedging relationship

n/a

120,585

120,585

58,606

58,606

23,220

23,220


---

F-67

---



The terms have the following respective meanings:

"LaR"
refers to Loans and Receivables

"AfS"
refers to Available-for-Sale

"FAHfT"
refers to Financial Assets Financial Assets Held for Trading

"FLAC"
refers to Financial Liabilities Measured at Amortized Cost

"FLHfT"
refers to Financial Liabilities Held for Trading

The
carrying amounts of the Company's cash and cash equivalents, money market funds, trade receivables and payables, short-term loans, as well as other current liabilities,
in view of their short terms as of March 31, 2008, 2007, and 2006, are effectively equal to their fair values as they have interest rates based on variable interest rates that change in line
with the market. Using a discounted cash flow analysis based on the current lending rate for an identical loan term, the fair value of the Company's long-term, fixed-rate
liabilities is estimated as the net present value of future payments, using yield curves obtained by banks and money market observations. Due to the complexity inherent in such an estimate, the
estimate may not necessarily reflect actual market values. Different market assessments or procedures may therefore significantly influence the fair value estimate.

The
fair value of the Euro denominated portion of the Senior Notes as of March 31, 2008 amounts to approximately T€245,000 (98.00% of the nominal value). The fair
value of the US dollar denominated portion of the Senior Notes amounts to approximately T€379,996 (98.50% of nominal value). These values are determined by reference to published price
quotations. With respect to the carrying amounts of the financial assets and liabilities please refer to the respective sections in the Notes.

The
fair values of the derivative financial instruments as of the balance sheet date have been estimated as net present values (discounted by market yield curves) of the future payments
and using standard models (in the case of caps). They are as follows:

Instrument

Nominal amount
March 31, 2008

Fair value
March 31, 2008

Recognized in statement of operations April 1, 2007- March 31, 2008

Recognized in equity April 1, 2007- March 31, 2008T€

T€

T€

T€Interest rate swap

455,528

3,625

(1,358
)
0Interest rate cap

151,843

614

183

0Currency swap

505,553

(120,585
)
72,244

12,184Total

1,112,924

(116,346
)
71,069

12,184Deferred Taxes

0

0

0

(4,602
)Total

1,112,924

(116,346
)
71,069

7,582


F-68

---



Instrument

Nominal amount
March 31, 2007

Fair value
March 31, 2007

Recognized in statement of operations April 1, 2006- March 31, 2007

Recognized in equity April 1, 2006- March 31, 2007T€

T€

T€

T€Interest rate swap

527,391

4,983

8,827

0Interest rate cap

175,797

432

(172
)
0Currency swap

505,553

(58,606
)
(35,386
)
11,694Total

1,208,741

(53,191
)
(26,731
)
11,694Deferred Taxes

0

0

0

(4,583
)Total

1,208,741

(53,191
)
(26,731
)
7,111


Instrument

Nominal amount
March 31, 2006

Fair value
March 31, 2006

Recognized in statement of operations April 1, 2005- March 31, 2006

Recognized in equity April 1, 2005- March 31, 2006T€

T€

T€

T€Interest rate swap

595,379

(3,844
)
17,165

0Interest rate cap

198,460

603

(246
)
0Currency swap

505,553

(23,220
)
(29,488
)
14,663Total

1,299,392

(26,461
)
(12,569
)
14,663Deferred Taxes

0

0

0

(5,697
)Total

1,299,392

(26,461
)
(12,569
)
8,966


Amounts removed from equity and recognized in income for currency swaps that are part of cash flow hedge accounting according to the tables above
are included in interest expense or interest income, respectively.

Prior to March 31, 2007 the Company assessed hedge effectiveness of an interest rate swap in a cash flow hedge by applying the "change in variable cash flow method". Following the
publication in the March 2007 IFRIC update of the IFRIC Agenda decision on "IAS 39Financial Instruments: Recognition and
MeasurementAssessing hedge effectiveness of an interest rate swap in a cash flow hedge" the Company has reconsidered its accounting treatment applied to those
transactions and decided to adopt the treatment set out in the IFRIC agenda decision. Accordingly, the Company had adjusted its financial statements as of March 31, 2007 and comparative periods
to reflect the fact that hedge accounting has no longer been historically applied and has, therefore, recorded all changes in fair value of the interest rate swap through profit and loss. This change
in accounting treatment has been accounted for retroactively. This adjustment resulted in a decrease in other comprehensive income of T€8,320, a decrease in interest expense of
T€13,682 and an increase in deferred tax expense of T€5,362 for the fiscal year ended March 31, 2006.

Sensitivity analysis

KDG prepares sensitivity analysis that shows how net income and equity would have been affected by changes in the relevant market risk variables that were
reasonably possible at the reporting date.

Foreign currency risks result from the US dollar-denominated Senior Notes as described in Note 4.11. Future cash flows for the repayment of the principal and interest payments are
fully hedged with derivative instruments that are accounted for as cash flow hedges through to July 2009. A 1% increase (decrease) in the USD/EUR exchange rate subsequently to that would result in an
incremental increased (decreased) notional amount to be repaid in 2014 of approximately



T€5,100. Further a 1% increase (decrease) in the USD/EUR exchange rate would result in an incremental increased (decreased) annual interest payment of approximately
T€500 after expiry of the currency hedge in 2009.

F-69

---





Interest rate risks result from the variable interest rates (EURIBOR) on KDG's bank loans and are hedged with interest rate swaps and caps that are accounted for at fair value through
profit or loss. In determining the sensitivity concerning interest rate risks the fair values for interest rate swaps and caps were calculated based on the hypothetical market interest rates with the
resulting effects on net income and equity. The effect of interest rate changes on interest expense for bank loans with variable interest rates is calculated based on the risk exposure at the balance
sheet date. Excluded from the analysis is the fixed rate Senior Note that is measured at amortised cost so that changes in interest rates do not effect net income. Under this approach and assuming
constant foreign exchange rate the interest rate sensitivity is as follows.

Effect on net income and equityParallel increase of the interest curve of 100 basis points

Parallel decrease of the interest curve of 100 basis points(in T€)March 31, 2008Bank loans with variable interest rate

(12,100
)
12,100Derivative financial instruments

3,523

(3,851
)(8,577
)
8,249March 31, 2007Bank loans with variable interest rate

(11,500
)
11,500Derivative financial instruments

6,469

(6,190
)(5,031
)
5,310


5.6   Group Companies

Registered office

Share-holding in %Fully consolidated companies (IFRS 3)1
Kabel Deutschland GmbH

Unterföhring2
Kabel Deutschland Verwaltungs GmbH

Unterföhring

100.003
Kabel Deutschland Vertrieb und Service GmbH & Co. KG

Unterföhring

100.004
Kabel Deutschland Breitband Services GmbH

Unterföhring

100.005
TKS Telepost Kabel-Service Kaiserslautern Beteiligungs-GmbH

Kaiserslautern

100.006
TKS Telepost Kabel-Service Kaiserslautern GmbH & Co. KG

Kaiserslautern

100.007
Leto GmbH

Berlin

100.00


F-70

---



Registered office

Share-
holding
in %Companies consolidated at equity (IAS 28)8
KABELCOM Braunschweig Gesellschaft für Breitbandkabel-Kommunikation mit beschränkter Haftung

Braunschweig

24.009
KABELCOM Wolfsburg Gesellschaft für Breitbandkabel-Kommunikation mit beschränkter Haftung

Wolfsburg

24.0010
Kabelfernsehen München Servicenter Gesellschaft mit beschränkter HaftungBeteiligungsgesellschaft

Munich

24.0011
Kabelfernsehen München Servicenter GmbH & Co. KG

Munich

30.2212
Kabel-Service Berlin GmbH
(Sold on April 30, 2008 with economic effect as of January 1, 2008)

Berlin

24.0013
RKS Niedersächsische Kabel-Service-Beteiligungsgesellschaft mbH

Hanover

43.8014
RKS Niedersächsische Kabel-Servicegesellschaft mbH & Co. KG

Hanover

52.63


RKS Niedersächsische Kabel-Servicegesellschaft mbH & Co. KG is consolidated at equity although KDG GmbH holds
a share of over 50%. This is due to the fact that KDG GmbH has only voting rights of 50% regarding material decisions and, therefore, has no control over the company.

5.7   Particular Events after the Balance Sheet Date

On April 30, 2008, KDG closed the acquisition of several companies from the Orion Group with 1.1 million CATV subscribers. The FCO approved the
transaction which was signed during the fiscal year on April 4, 2008. The purchase price amounted to approximately T€500,000 and was fully funded through an increase in KDG's
Senior Credit Facility. The transaction covers the acquisition of several entities listed below.

An
additional 30% direct share of KMG and indirect share of 4.225% of RKS Niedersächsische Kabel-Servicegesellschaft mbH & Co. KG and 5% of RKS
Niedersächsische Kabel-Service-Beteiligungsgesellschaft mbH was closed on June 30, 2008.

In
total, the acquisitions include the following entities at the stated percentage of voting equity:

Directly
held:

Tele Columbus Nord GmbH

100.00
%KMG KABEL-FERNSEHEN HANNOVER GmbH

100.00
%KABELCOM Braunschweig Gesellschaft für Breitbandkabel- Kommunikation mbH

75.58
%KABELCOM Wolfsburg Gesellschaft für Breitbandkabel- Kommunikation mbH

72.49
%Kabel Deutschland Süd GmbH (previously Cor H Erste GmbH)

100.00
%Kabel Deutschland West GmbH (previously Cor H Zweite GmbH)

100.00
%Kabel Deutschland Nord GmbH (previously Cor H Dritte GmbH)

100.00
%


Indirectly held:

AEP Plückhahn Kabel GmbH

100.00
%RKS Niedersächsische Kabel-Servicegesellschaft mbH & Co. KG

47.38
%RKS Niedersächsische Kabel-Service-Beteiligungsgesellschaft mbH

56.20
%Urbana Teleunion Rostock GmbH & Co. KG

70.00
%Verwaltung Urbana Teleunion Rostock GmbH

50.00
%


Please note that the purchase price of the various transactions is based on financial information which is currently being prepared. Therefore,
neither assets and liabilities nor contingent liabilities of

F-71

---



the
acquired entities can be presented at this point in time. As a result, it is impracticable to disclose the purchase price.

As of April 30, 2008 the Company sold and transferred its share in Kabel-Service-Berlin GmbH to Tele Columbus GmbH for total consideration of
T€13,000.

As
of April 30, 2008 an amount of T€535,000 was drawn down under the Senior Add-on Facility. On the same day, the Company entered into an additional
floating to fix interest rate swap. This swap with a fixed rate of 4.410% per annum has a notional amount of T€250,000 and a one year duration. As of May 9, 2008 the granted
loan amount of
the Senior Add-on Facility was reduced by T€115,000 to T€535,000 from T€650,000 originally.

In
April 2008, we entered into a new 24-month collective bargaining agreement with the labor union representing our unionized employees. As a result, wages for employees
increased by 3.7% from June 1, 2008 and will increase another 3.3% from April 1, 2009.

On
May 7, 2008, the Company announced that they have agreed with pay-TV operator Premiere on a new five year contract running until 2012. The contract governs the
feed-in of the existing Premiere pay-TV channels over the Company's cable network.

On
May 14, 2008, the Company announced that the cooperation with Nagravision will be continued and Nagravision's new coding system will be introduced in autumn 2008.

5.8   Management and Supervisory Board

Management

|Dr. Adrian von Hammerstein              |  | Chairman of the Management Board,
Chief Executive Officer
|--------------------------------------- |  | ---------------------------------------------------------
|Paul Thomason                           |  | Chief Financial Officer                                  
|Dr. Manuel Cubero del Castillo-Olivares |  | Chief Commercial Officer                                 
|Herbert R. Hribar                       |  | Chief Operating Officer                                  

Supervisory Board

Shareholder Representatives:

|Prof. Dr. Heinz Riesenhuber |  | Chairman of the Board               
|--------------------------- |  | ------------------------------------
|Tony Ball                   |  | External Advisor                    
|John Carl Hahn              |  | Providence Equity, Managing Director
|Biswajit Anna Subramanian   |  | Providence Equity, Managing Director
|Robert Sudo                 |  | Providence Equity, Senior Associate 
|Torsten Winkler             |  | Providence Equity, Director         

F-72

---



Employee Representatives:

|Walter Ruland    |  | Technical Secretary for Telecommunication
(Technischer Fernmeldehauptsekretär)
Vice Chairman of the Board            
|---------------- |  | ---------------------------------------------------------------------------------------------------------------------
|Toni Krüger      |  | Engineering Employee
(Technischer Angestellter)                                                                      
|Frank Sauerland  |  | Secretary of Workers Union
(Gewerkschaftssekretär) until December 31, 2007                                           
|Sibylle Spoo     |  | Secretary of Workers Union
(Gewerkschaftssekretärin)                                                                 
|Petra Hesse      |  | Chairman of Workers Council for Region Niedersachsen/Bremen
(Betriebsratsvorsitzende der Region
Niedersachsen/Bremen)
|Norbert Michalik |  | Executive Employee
(leitender Angestellter)                                                                          
|Joachim Pütz     |  | Secretary of Workers Union
(Gewerkschaftssekretär) since January 2, 2008                                             

5.9   Other Mandatory Disclosures According to German Commercial Code

Auditor's remuneration

During the fiscal year ended March 31, 2008, the Company expensed the following amounts for services of its auditor:

| | Audit fees:         |  | T€1,266
|- | ------------------- |  | -------
| | Audit-related fees: |  | T€1,501
| | Tax fees:           |  | T€250  

5.10 Authorization of Financial Statements

The consolidated financial statements were released for publication on July 25, 2008 (date of management authorization for issue to the supervisory board).

Unterföhring, July 25, 2008
Kabel Deutschland GmbH

|Dr. Adrian von Hammerstein
Chief Executive Officer               |  | Paul Thomason
Chief Financial Officer    
|---------------------------------------------------------------- |  | -----------------------------------------
|Dr. Manuel Cubero del Castillo-Olivares
Chief Commercial Officer |  | Herbert R. Hribar
Chief Operating Officer

F-73

---





Kabel Deutschland GmbH, Unterföhring

Appendix 1 to the Notes

Analysis of Fixed Assets for Period from April 1, 2007 to March 31, 2008

|     |  |                        |                                                              |  | Acquisition and production costs |  | Accumulated depreciation and amortization |  | Net book value
|---- |  | ---------------------- | ------------------------------------------------------------ |  | -------------------------------- |  | ----------------------------------------- |  | --------------
|
|
|I.   |  | Intangible assets      |                                                              |  |                                  |  |                                           |  |               
|     |  | 1.                     | Software and Licences and other Contractual and Legal Rights |  | 151,699,402.32                   |  | 0.00                                      |  | 52,696,913.36 
|     |  | 2.                     | Internally generated software                                |  | 13,837,173.00                    |  | 0.00                                      |  | 2,527,960.15  
|     |  | 3.                     | Customer List                                                |  | 715,426,567.68                   |  | 20,936,112.22                             |  | 111,394.43    
|     |  | 4.                     | Prepayments                                                  |  | 10,926,153.95                    |  | 0.00                                      |  | 7,683,386.95  
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 891,889,296.95                   |  | 20,936,112.22                             |  | 63,019,654.89 
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|II.  |  | Property and equipment |                                                              |  |                                  |  |                                           |  |               
|     |  | 1.                     | Buildings on non-owned land                                  |  | 7,185,148.98                     |  | 0.00                                      |  | 2,573,705.68  
|     |  | 2.                     | Technical equipment                                          |  | 1,603,466,977.78                 |  | 8,962,186.68                              |  | 194,121,088.50
|     |  | 3.                     | Other equipment, furniture and fictures                      |  | 62,883,526.27                    |  | 0.00                                      |  | 9,545,309.13  
|     |  | 4.                     | Construction in progress                                     |  | 50,619,484.08                    |  | 0.00                                      |  | 49,620,116.66 
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 1,724,155,137.11                 |  | 8,962,186.68                              |  | 255,860,219.97
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|III. |  | Financial Assets       |                                                              |  |                                  |  |                                           |  |               
|     |  | 1.                     | Equity investments in Associates                             |  | 5,820,595.03                     |  | 0.00                                      |  | 0.00          
|     |  | 2.                     | Other                                                        |  | 7,509,863.31                     |  | 4,606,721.62                              |  | 0.00          
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 13,330,458.34                    |  | 4,606,721.62                              |  | 0.00          
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 2,629,374,892.40                 |  | 34,505,020.52                             |  | 318,879,874.86
|     |  |                        |                                                              |  |                                  |  |                                           |  |               

F-74

---



Kabel Deutschland GmbH, Unterföhring

Appendix 2 to the Notes

Analysis of Fixed Assets for Period from April 1, 2006 to March 31, 2007

|     |  |                        |                                                              |  | Acquisition and production costs |  | Accumulated depreciation and amortization |  | Net book value
|---- |  | ---------------------- | ------------------------------------------------------------ |  | -------------------------------- |  | ----------------------------------------- |  | --------------
|
|
|I.   |  | Intangible assets      |                                                              |  |                                  |  |                                           |  |               
|     |  | 1.                     | Software and Licences and other Contractual and Legal Rights |  | 100,549,175.37                   |  | 0.00                                      |  | 52,348,547.59 
|     |  | 2.                     | Internally generated software                                |  | 12,789,484.77                    |  | 0.00                                      |  | 1,047,688.23  
|     |  | 3.                     | Customer List                                                |  | 709,713,538.37                   |  | 5,713,029.31                              |  | 0.00          
|     |  | 4.                     | Prepayments                                                  |  | 2,719,177.16                     |  | 0.00                                      |  | 10,174,463.03 
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 825,771,375.67                   |  | 5,713,029.31                              |  | 63,570,698.85 
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|II.  |  | Property and equipment |                                                              |  |                                  |  |                                           |  |               
|     |  | 1.                     | Buildings on non-owned land                                  |  | 5,340,718.78                     |  | 0.00                                      |  | 1,777,558.40  
|     |  | 2.                     | Technical equipment                                          |  | 1,425,843,167.38                 |  | 741,174.20                                |  | 162,952,692.29
|     |  | 3.                     | Other equipment, furniture and fixtures                      |  | 51,138,809.34                    |  | 0.00                                      |  | 12,794,280.71 
|     |  | 4.                     | Construction in progress                                     |  | 39,748,427.85                    |  | 0.00                                      |  | 42,979,545.25 
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 1,522,071,123.35                 |  | 741,174.20                                |  | 220,504,076.65
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|III. |  | Financial assets       |                                                              |  |                                  |  |                                           |  |               
|     |  | 1.                     | Equity investments in Associates                             |  | 5,820,595.03                     |  | 0.00                                      |  | 0.00          
|     |  | 2.                     | Others                                                       |  | 491,561.62                       |  | 0.00                                      |  | 7,414,800.37  
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 6,312,156.65                     |  | 0.00                                      |  | 7,414,800.37  
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 2,354,154,655.67                 |  | 6,454,203.51                              |  | 291,489,575.87
|     |  |                        |                                                              |  |                                  |  |                                           |  |               

F-75

---



Kabel Deutschland GmbH, Unterföhring

Appendix 3 to the Notes

Analysis of Fixed Assets for Period from April 1, 2005 to March 31, 2006

|     |  |                        |                                                              |  | Acquisition and production costs |  | Accumulated depreciation and amortization |  | Net book value
|---- |  | ---------------------- | ------------------------------------------------------------ |  | -------------------------------- |  | ----------------------------------------- |  | --------------
|
|
|I.   |  | Intangible assets      |                                                              |  |                                  |  |                                           |  |               
|     |  | 1.                     | Software and Licences and other Contractual and Legal Rights |  | 77,890,029.69                    |  | 0.00                                      |  | 20,803,016.04 
|     |  | 2.                     | Internally generated software                                |  | 9,747,676.00                     |  | 0.00                                      |  | 3,041,808.77  
|     |  | 3.                     | Customer List                                                |  | 696,615,984.17                   |  | 5,605,485.01                              |  | 572,624.92    
|     |  | 4.                     | Prepayments                                                  |  | 1,367,755.27                     |  | 0.00                                      |  | 3,151,260.98  
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 785,621,445.13                   |  | 5,605,485.01                              |  | 27,568,710.71 
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|II.  |  | Property and equipment |                                                              |  |                                  |  |                                           |  |               
|     |  | 1.                     | Buildings on non-owned land                                  |  | 4,489,044.69                     |  | 0.00                                      |  | 1,222,223.28  
|     |  | 2.                     | Technical equipment                                          |  | 1,333,122,659.69                 |  | 1,704,994.47                              |  | 69,221,542.14 
|     |  | 3.                     | Other equipment, furniture and fixture                       |  | 40,495,864.46                    |  | 0.00                                      |  | 9,313,050.27  
|     |  | 4.                     | Construction in progress                                     |  | 24,976,304.54                    |  | 0.00                                      |  | 38,999,884.68 
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 1,403,083,873.38                 |  | 1,704,994.47                              |  | 118,756,700.37
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|III. |  | Financial assets       |                                                              |  |                                  |  |                                           |  |               
|     |  | 1.                     | Equity investments in Associates                             |  | 5,820,595.03                     |  | 0.00                                      |  | 0.00          
|     |  | 2.                     | Other financial assets                                       |  | 7,531,492.32                     |  | 0.00                                      |  | 9,158.37      
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 13,352,087.35                    |  | 0.00                                      |  | 9,158.37      
|     |  |                        |                                                              |  |                                  |  |                                           |  |               
|     |  |                        |                                                              |  | 2,202,057,405.86                 |  | 7,310,479.48                              |  | 146,334,569.45
|     |  |                        |                                                              |  |                                  |  |                                           |  |               

F-76

---





Kabel Deutschland Vertrieb und Service GmbH & Co. KG
Unterföhring





Consolidated Financial Statements
March 31, 2008

F-77

---



Kabel Deutschland Vertrieb und Service GmbH & Co. KG, Unterföhring

Consolidated Balance Sheet as of March 31, 2008

Note

March 31,
2008

March 31, 2007

as adjusted March 31, 2006€

T€

T€AssetsCurrent AssetsCash and Cash Equivalents

4.1

15,422,425.30

54,108

223,070Trade Receivables

4.2

130,530,330.70

101,158

120,789Receivables from Affiliates

4.2

0.00

256

38Receivables from Associates

4.2

0.00

0

0Inventories

4.3

26,201,007.25

24,265

13,453Receivables from Tax Authorities

4.4

2,336,106.04

751

236Other Current Assets

4.5

5,861,418.14

7,266

9,189Prepaid Expenses

4.5

18,221,205.19

18,263

16,553Total Current Assets



198,572,492.62

206,067

383,328Non-Current AssetsIntangible Assets

4.6

431,395,118.82

476,426

517,957Property and Equipment

4.7

1,085,509,095.67

986,022

902,062Equity Investments in Associates

4.8

1,331,888.06

1,630

1,858Other Non-Current Financial Assets



4,631,721.62

7,446

352Deferred Tax Assets

3.9

536,715.71

366

396Non-Current Financial Assets



4,239,178.00

5,414

604Prepaid Expenses



11,165,915.60

5,959

0Total Non-Current Assets



1,538,809,633.48

1,483,263

1,423,229Total Assets



1,737,382,126.10

1,689,330

1,806,557


The accompanying notes to this balance sheet form an integral part to these
consolidated financial statements.

F-78

---



Kabel Deutschland Vertrieb und Service GmbH & Co. KG, Unterföhring

Consolidated Balance Sheet as of March 31, 2008 (Continued)

Note

March 31,
2008

March 31, 2007

as adjusted March 31, 2006€

T€

T€Equity and LiabilitiesCurrent LiabilitiesCurrent Financial Liabilities

4.11

8,708,002.92

18,112

77,123Trade Payables



210,407,870.54

167,907

146,269Payments on Account



0.00

0

0Liabilities to Associates



0.00

0

0Other Current Provisions

4.13

5,583,664.83

18,054

9,194Liabilities due to Income Taxes

3.9

12,959,549.80

14,157

18,705Deferred Income

4.10

199,489,029.71

216,818

246,744Other Current Liabilities

4.9

48,038,951.83

50,633

58,170Total Current Liabilities



485,187,069.63

485,681

556,205Non-Current LiabilitiesNon-Current Financial Liabilities

4.11

1,191,404,077.42

1,127,436

1,151,666Deferred Tax Liabilities

3.9

55,777,639.96

57,272

39,013Provisions for Pension

4.12

25,849,548.20

21,579

17,959Other Non-Current Provisions

4.13

22,268,257.53

21,244

20,210Capital attributable to the Limited Partners

4.15

2,185,500,000.00

1,882,600

1,420,000Other Non-Current Liabilities

4.14

36,072,239.35

36,494

28,082Deferred Income



1,825,366.74

270

0Total Non-Current Liabilities



3,518,697,129.20

3,146,895

2,676,930EquitySubscribed Capital

4.16

1,000.00

1

1Capital Reserve

4.16

27,327,266.28

29,728

26,577Available-for-Sale Reserve

4.16

0.00

625

0Accumulated Deficit

4.16

(2,293,830,339.01
)
(1,973,600
)
(1,453,156
)Total Equity (Deficit)



(2,266,502,072.73
)
(1,943,246
)
(1,426,578
)Total Equity and Liabilities



1,737,382,126.10

1,689,330

1,806,557


The accompanying notes to this balance sheet form an integral part to these
consolidated financial statements.

F-79

---





Kabel Deutschland Vertrieb und Service GmbH & Co. KG, Unterföhring

Consolidated Statement of Operations

for the period from April 1, 2007 to March 31, 2008

Note

Apr. 1, 2007- Mar. 31, 2008

Apr. 1, 2006- Mar. 31, 2007

as adjusted
Apr. 1, 2005- Mar. 31, 2006€

T€

T€Revenues

3.1

1,196,869,804.27

1,093,179

1,012,133Cost of Services Rendered

3.2

(588,460,907.65
)
(567,090
)
(489,504
)thereof depreciation/amortization T€154,676 (prior year T€133,123; for the fiscal year ending March 31, 2006 T€117,428)Other Operating Income

3.3

13,118,184.24

14,354

12,298Selling Expenses

3.4

(352,836,091.48
)
(318,663
)
(271,542
)thereof depreciation/amortization T€115,478 (prior year T€95,983; for the fiscal year ending March 31, 2006 T€88,155)General and Administrative Expenses

3.5

(104,075,255.21
)
(99,456
)
(87,096
)thereof depreciation/amortization T€23,136
(prior year T€16,313; for the fiscal year ending March 31, 2006 T€14,771)Profit from Ordinary Activities



164,615,734.17

122,323

176,289Interest Income

3.7

1,943,519.16

2,875

3,867Interest Expense

3.7

(89,908,595.49
)
(73,510
)
(133,699
)Accretion/Depreciation on Investments and other Securities



(3,712,461.37
)
265

(127
)Income from Associates



(141,941.48
)
(40
)
(27
)Expense due to Changes in Capital Attributable to the Limited Partners

3.8

(302,900,000.00
)
(462,600
)
(80,000
)Loss before Taxes



(230,103,745.01
)
(410,687
)
(33,697
)Taxes on Income

3.9

281,522.63

(19,351
)
(11,318
)Net loss for the period



(229,822,222.38
)
(430,038
)
(45,015
)


The accompanying notes to this statement of operations form an integral part to these
consolidated financial statements.

F-80

---





Kabel Deutschland Vertrieb & Service GmbH & Co. KG, Unterföhring        Consolidated Statement of Cash Flows        for the Period from April 1, 2007 to
March 31, 2008

|                                                                                                               |                                                                                                          | Note  |  | April 1, 2007-
March 31, 2008 |         | April 1, 2006-
March 31, 2007 |         | as adjusted
April 1, 2005-
March 31, 2006 |        
|-------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------- | ----- |  | ----------------------------- | ------- | ----------------------------- | ------- | ----------------------------------------- | -------
|
|1. Cash flows from operating activities                                                                        |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Net income (+)/loss (-)                                                                                        |                                                                                                          |       |  | (229,822                      | )       | (430,038                      | )       | (45,015                                   | )      
|Adjustments to reconcile net income/net loss to cash provided by operations:                                   |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|                                                                                                               | Taxes on income                                                                                          |       |  |                               | (282    | )                             | 19,351  |                                           | 11,318 
|                                                                                                               | Interest expense                                                                                         |       |  |                               | 89,909  |                               | 73,510  |                                           | 133,699
|                                                                                                               | Interest income                                                                                          |       |  |                               | (1,944  | )                             | (2,875  | )                                         | (3,867 
|                                                                                                               | Accretion/Depreciation and amortization on fixed assets                                                  |       |  |                               | 293,290 |                               | 245,419 |                                           | 220,354
|                                                                                                               | Accretion/Depreciation on investments and other securities                                               |       |  |                               | 3,712   |                               | (265    | )                                         | 127    
|                                                                                                               | Gain/Loss on disposal/sale of fixed assets (intangible assets; property and equipment; financial assets) |       |  |                               | 758     |                               | 2,096   |                                           | 270    
|                                                                                                               | Income from associates                                                                                   |       |  |                               | 142     |                               | 40      |                                           | 28     
|                                                                                                               | Compensation expense relating to share-based payments                                                    |       |  |                               | 3,016   |                               | 4,216   |                                           | 6,708  
|                                                                                                               | Fair value increase (decrease) of capital attributed to the limited partners                             |       |  |                               | 302,900 |                               | 462,600 |                                           | 80,000 
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|                                                                                                               |                                                                                                          |       |  | 461,679                       |         | 374,054                       |         | 403,622                                   |        
|Changes in assets and liabilities:                                                                             |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|                                                                                                               | Increase (-)/decrease (+) of inventories                                                                 |       |  |                               | (1,936  | )                             | (10,812 | )                                         | (5,902 
|                                                                                                               | Increase (-)/decrease (+) of trade receivables                                                           |       |  |                               | (29,372 | )                             | 19,631  |                                           | (39,340
|                                                                                                               | Increase (-)/decrease (+) of other assets                                                                |       |  |                               | 3,792   |                               | (3,632  | )                                         | 4,003  
|                                                                                                               | Increase (+)/decrease (-) of trade payables                                                              |       |  |                               | 42,417  |                               | 29,173  |                                           | 31,381 
|                                                                                                               | Increase (+)/decrease (-) of other provisions                                                            |       |  |                               | (12,514 | )                             | 9,006   |                                           | 802    
|                                                                                                               | Increase (+)/decrease (-) of deferred income                                                             |       |  |                               | (15,774 | )                             | (29,656 | )                                         | 3,226  
|                                                                                                               | Increase (+)/decrease (-) of provisions for pensions                                                     |       |  |                               | 3,029   |                               | 2,555   |                                           | 642    
|                                                                                                               | Increase (+)/decrease (-) of other liabilities                                                           |       |  |                               | (3,547  | )                             | 4,301   |                                           | 17,357 
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Cash provided by operations                                                                                    |                                                                                                          |       |  | 447,774                       |         | 394,620                       |         | 415,791                                   |        
|Income taxes paid (-)/received (+)                                                                             |                                                                                                          |       |  | (4,637                        | )       | (10,270                       | )       | (7,535                                    | )      
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Net cash from operating activities                                                                             |                                                                                                          |       |  | 443,137                       |         | 384,350                       |         | 408,256                                   |        
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|2. Cash flows from investing activities                                                                        |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Cash received from disposal/sale of fixed assets (intangible assets; property and equipment; financial assets) |                                                                                                          |       |  | 258                           |         | 584                           |         | 216                                       |        
|Cash received from sale of investments                                                                         |                                                                                                          |       |  | 38,076                        |         | 0                             |         | 0                                         |        
|Cash paid for investments in intangible assets                                                                 |                                                                                                          |       |  | (62,956                       | )       | (63,420                       | )       | (26,589                                   | )      
|Cash paid for investments in property and equipment                                                            |                                                                                                          |       |  | (253,395                      | )       | (205,042                      | )       | (116,603                                  | )      
|Cash paid for acquisitions                                                                                     |                                                                                                          | 1.3.2 |  | (29,696                       | )       | (5,093                        | )       | (7,310                                    | )      
|Cash received from contribution of sub-divisions                                                               |                                                                                                          |       |  | 0                             |         | 0                             |         | 2                                         |        
|Cash paid for investments in financial assets                                                                  |                                                                                                          |       |  | (39,666                       | )       | (6,769                        | )       | (9                                        | )      
|Interest received                                                                                              |                                                                                                          |       |  | 1,701                         |         | 2,777                         |         | 2,788                                     |        
|Dividends received from associates                                                                             |                                                                                                          |       |  | 156                           |         | 188                           |         | 208                                       |        
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Net cash used in investing activities                                                                          |                                                                                                          |       |  | (345,522                      | )       | (276,775                      | )       | (147,297                                  | )      
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|3. Cash flows from financing activities                                                                        |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Cash payments to shareholders                                                                                  |                                                                                                          |       |  | (90,408                       | )       | (100,995                      | )       | (90,371                                   | )      
|Cash received non-current financial liabilities                                                                |                                                                                                          |       |  | 391,000                       |         | 1,205,000                     |         | 0                                         |        
|Cash repayments of non-current financial liabilities                                                           |                                                                                                          |       |  | (331,000                      | )       | (1,205,000                    | )       | (652                                      | )      
|Cash repayments of current financial liabilities                                                               |                                                                                                          |       |  | 0                             |         | (75,848                       | )       | 0                                         |        
|Cash payments for reduction of finance lease liabilities                                                       |                                                                                                          |       |  | (7,240                        | )       | (5,610                        | )       | (4,473                                    | )      
|Interest and transaction costs paid                                                                            |                                                                                                          |       |  | (98,653                       | )       | (94,349                       | )       | (75,010                                   | )      
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Net cash used in financing activities                                                                          |                                                                                                          |       |  | (136,301                      | )       | (276,802                      | )       | (170,506                                  | )      
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|4. Cash and cash equivalents at the end of the period                                                          |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Changes in cash and cash equivalents (subtotal of 1 to 3)                                                      |                                                                                                          |       |  | (38,686                       | )       | (169,227                      | )       | 90,453                                    |        
|Accretion/Depreciation on investments and other securities                                                     |                                                                                                          |       |  | 0                             |         | 265                           |         | (127                                      | )      
|Cash and cash equivalents at the beginning of the period                                                       |                                                                                                          |       |  | 54,108                        |         | 223,070                       |         | 132,744                                   |        
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Cash and cash equivalents at the end of the period                                                             |                                                                                                          | 4.1   |  | 15,422                        |         | 54,108                        |         | 223,070                                   |        
|                                                                                                               |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Additional Information                                                                                         |                                                                                                          |       |  |                               |         |                               |         |                                           |        
|Investments relating to capital lease                                                                          |                                                                                                          |       |  | 2,447                         |         | 15,311                        |         | 0                                         |        
|Other non cash investments                                                                                     |                                                                                                          |       |  | 0                             |         | 0                             |         | 0                                         |        

The accompanying notes to this statement of cash flows form an integral part to these
consolidated financial statements.

F-81

---





Kabel Deutschland Vertrieb und Service GmbH & Co. KG, Unterföhring

Statement of Changes in Consolidated Equity

for the Period from April 1, 2007 to March 31, 2008

|                                                                               |  | Note |  | Limited
Partnership
capital |  | Capital
reserve |   | Cash flow
hedge reserve |   | Available-
for-sale
reserve |   | Accumulated
deficit |   | Equity
(Deficit) |  
|------------------------------------------------------------------------------ |  | ---- |  | --------------------------- |  | --------------- | - | ----------------------- | - | --------------------------- | - | ------------------- | - | ---------------- | -
|
|Balance as of March 31, 2005                                                   |  | 4.16 |  | 0                           |  | 14,279          |   | 0                       |   | 0                           |   | (1,305,017          | ) | (1,290,738       | )
|Changes in fair value of hedging instruments (net of tax)                      |  |      |  | 0                           |  | 0               |   | 11,367                  |   | 0                           |   | 0                   |   | 11,367           |  
|Capital contributions                                                          |  |      |  | 1                           |  | 4,360           |   | 0                       |   | 0                           |   | 0                   |   | 4,361            |  
|Additions relating to share-based payment                                      |  |      |  | 0                           |  | 7,938           |   | 0                       |   | 0                           |   | 0                   |   | 7,938            |  
|Retrospective effect of applying                                               |  |      |  |                             |  |                 |   |                         |   |                             |   |                     |   |                  |  
|IAS 8 to interest swap accounting                                              |  |      |  | 0                           |  | 0               |   | (11,367                 | ) | 0                           |   | 0                   |   | (11,367          | )
|Retrospective change in accordance with IAS 8 due to transactions with parents |  |      |  | 0                           |  | 0               |   | 0                       |   | 0                           |   | (103,124            | ) | (103,124         | )
|Net profit of the period                                                       |  |      |  | 0                           |  | 0               |   | 0                       |   | 0                           |   | (45,015             | ) | (45,015          | )
|                                                                               |  |      |  |                             |  |                 |   |                         |   |                             |   |                     |   |                  |  
|Total income and expense for the period                                        |  |      |  |                             |  |                 |   | 0                       |   | 0                           |   | (45,015             | ) | (45,015          | )
|                                                                               |  |      |  |                             |  |                 |   |                         |   |                             |   |                     |   |                  |  
|Balance as of March 31, 2006                                                   |  | 4.16 |  | 1                           |  | 26,577          |   | 0                       |   | 0                           |   | (1,453,156          | ) | (1,426,578       | )
|Changes in fair value of hedging instruments (net of tax)                      |  |      |  | 0                           |  | 0               |   | 0                       |   | 0                           |   | 0                   |   | 0                |  
|Capital contributions                                                          |  |      |  | 1                           |  | 0               |   | 0                       |   | 0                           |   | 0                   |   | 1                |  
|Additions relating to share-based payment                                      |  |      |  | 0                           |  | 3,151           |   | 0                       |   | 0                           |   | 0                   |   | 3,151            |  
|Transactions with parents                                                      |  |      |  | 0                           |  | 0               |   | 0                       |   | 0                           |   | (90,407             | ) | (90,407          | )
|Changes in fair value of financial assets classified as available-for-sale     |  |      |  | 0                           |  | 0               |   | 0                       |   | 624                         |   | 0                   |   | 624              |  
|Net profit of the period                                                       |  |      |  | 0                           |  | 0               |   | 0                       |   | 0                           |   | (430,037            | ) | (430,037         | )
|                                                                               |  |      |  |                             |  |                 |   |                         |   |                             |   |                     |   |                  |  
|Total income and expense for the period                                        |  |      |  |                             |  |                 |   | 0                       |   | 624                         |   | (430,037            | ) | (429,413         | )
|                                                                               |  |      |  |                             |  |                 |   |                         |   |                             |   |                     |   |                  |  
|Balance as of March 31, 2007                                                   |  | 4.16 |  | 1                           |  | 29,728          |   | 0                       |   | 624                         |   | (1,973,600          | ) | (1,943,247       | )
|Changes in fair value of hedging instruments (net of tax)                      |  |      |  | 0                           |  | 0               |   | 0                       |   | 0                           |   | 0                   |   | 0                |  
|Capital contributions                                                          |  |      |  | 1                           |  | 0               |   | 0                       |   | 0                           |   | 0                   |   | 1                |  
|Additions relating to share-based payment                                      |  |      |  | 0                           |  | (2,401          | ) | 0                       |   | 0                           |   | 0                   |   | (2,401           | )
|Transactions with parents                                                      |  |      |  | 0                           |  | 0               |   | 0                       |   | 0                           |   | (90,408             | ) | (90,408          | )
|Changes in fair value of financial assets classified as available-for-sale     |  |      |  | 0                           |  | 0               |   | 0                       |   | (624                        | ) | 0                   |   | (624             | )
|Net profit of the period                                                       |  |      |  | 0                           |  | 0               |   | 0                       |   | 0                           |   | (229,822            | ) | (229,822         | )
|                                                                               |  |      |  |                             |  |                 |   |                         |   |                             |   |                     |   |                  |  
|Total income and expense for the period                                        |  |      |  |                             |  |                 |   | 0                       |   | (624                        | ) | (229,822            | ) | (230,446         | )
|                                                                               |  |      |  |                             |  |                 |   |                         |   |                             |   |                     |   |                  |  
|Balance as of March 31, 2008                                                   |  | 4.16 |  | 1                           |  | 27,327          |   | 0                       |   | 0                           |   | (2,293,830          | ) | (2,266,502       | )
|                                                                               |  |      |  |                             |  |                 |   |                         |   |                             |   |                     |   |                  |  

The accompanying notes to statement of changes in consolidated equity form an integral part to these
consolidated financial statements.

F-82

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Notes to the Consolidated  Financial Statements for    Kabel Deutschland Vertrieb und Service GmbH & Co. KG  as of March 31, 2008

F-83

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1.

General

F-861.1

Acknowledgement

F-861.2

Basis of Presentation

F-861.3

Consolidation

F-871.4

Currency Translation

F-892.

Accounting and Valuation Methods

F-892.1

Property and Equipment

F-892.2

Intangible Assets

F-902.3

Financial Instruments

F-912.4

Inventories

F-932.5

Trade and Other Receivables

F-932.6

Cash and Cash Equivalents

F-932.7

Impairment

F-942.8

Equity

F-942.9

Capital attributable to the Limited Partners

F-942.10

Employee Benefits

F-952.11

Other Provisions

F-952.12

Trade Payables and Other Liabilities

F-952.13

Revenue and Other Income

F-952.14

Share-Based Payments

F-962.15

Taxes on Income

F-972.16

Key Judgments and Estimation Uncertainty

F-972.17

Accounting Standards Recently Issued by the IASB

F-1003.

Notes to the Statement of Operations

F-1033.1

Revenues

F-1033.2

Cost of Services Rendered

F-1043.3

Other Operating Income

F-1043.4

Selling Expenses

F-1043.5

General and Administrative Expenses

F-1053.6

Personnel Expenses

F-1053.7

Interest Expense and Income

F-1063.8

Expense/Income due to Changes in Capital attributable to the Limited Partners

F-1073.9

Taxes on Income

F-1074.

Notes to the Balance Sheet

F-1094.1

Cash and Cash Equivalents

F-1094.2

Receivables

F-1094.3

Inventories

F-1104.4

Receivables from Tax Authorities

F-1114.5

Other Current Assets and Prepaid Expenses

F-1114.6

Intangible Assets

F-1114.7

Property and Equipment

F-1124.8

Equity Investments in Associates

F-1134.9

Other Current Liabilities

F-1144.10

Deferred Income

F-1144.11

Financial Liabilities (current and non-current)

F-1144.12

Provisions for Pension

F-1164.13

Other Provisions (current and non-current)

F-118


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4.14

Other Non-Current Liabilities

F-1204.15

Capital attributable to the Limited Partners

F-1204.16

Equity

F-1205.

Other Notes

F-1215.1

Other Financial Obligations and Contingencies

F-1215.2

Related Parties

F-1235.3

Share-Based Payments

F-1265.4

Financial Instruments

F-1345.5

Group Companies

F-1425.6

Particular Events after the Balance Sheet Date

F-1425.7

Management

F-1435.8

Authorization of Financial Statements

F-143


F-85

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1.     General

Kabel Deutschland Vertrieb und Service GmbH & Co. KG (KDVS), formerly Kabel Asset GmbH & Co. KG, was founded on
October 16, 2003. KDVS' registered office is in Unterföhring, Betastraße 6-8 (commercial register of Munich HRA 83902), Germany. Since its formation, KDVS
has been a wholly-owned subsidiary of Kabel Deutschland GmbH, Unterföhring (KDG) which is owned by Cayman Cable Holding L.P., George Town, Cayman Islands (Cayman Cable).
Cayman Cable was controlled by a consortium consisting of Apax, Goldman Sachs Capital Partners and Providence as of March 31, 2003, 2004 and 2005. As of February 8, 2006, Providence
acquired all shares of Cayman Cable held by Apax and Goldman Sachs Capital Partners.

Kabel
Deutschland Vertrieb und Service GmbH & Co. KG and its subsidiaries (KDVS Group or the Group) is the market leader in the German cable television business in
terms of homes passed, subscribers and revenues. The Group primarily provides cable access connections, offering up to 41 analog TV channels and up to 36 VHF radio stations. The KDVS Group also
delivers digital television signals through its digital playout center. The KDVS Group carries and offers its own digital pay TV program packages, packages of an unaffiliated German pay television
operator, and the digital programs offered by the public broadcasters. The Group also offers internet and telephony services to our customers.

1.1   Acknowledgement

The consolidated financial statements of KDVS for the three years ended March 31, 2008, have been prepared in accordance with International Financial
Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB). The consolidated financial statement also comply with the regulations under German Commercial Law pursuant
to Sec. 315a (3) German Commercial Code. All IFRSs issued by the IASB, effective at the time of preparing the consolidated financial statements and applied by the Group, have been adopted for
use in the European Union (EU) by the European Commission. Therefore the consolidated financial statements also comply with IFRS as adopted by the EU.

1.2   Basis of Presentation

As of March 29, 2006 (effective April 1, 2006) KDVS changed its fiscal year end from December 31 to March 31. Therefore, the period
from January 1, 2006 to March 31, 2006 is a stub period. The fiscal year end of the shareholder KDG, is March 31. As KDVS is the guarantor of KDG's debt the KDVS' consolidated
financial statements are presented for the twelve month period ending March 31 (fiscal year ended March 31).

The
amounts in the consolidated financial statements and notes are presented in Euros and all values are rounded to nearest thousand (T€) except where otherwise stated.
The Group's financial statements have been prepared using consistent accounting and consolidation methods for all periods presented. The Group's statement of operations has been prepared using the
cost of sales method under IFRS. The consolidated financial statements have been prepared on a historical cost basis except for derivative financial instruments and liabilities related to its
Management Equity Participation Program that have been measured at fair value.

The
preparation of financial statements in conformity with International Financial Reporting Standards requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. Although these estimates are based on management's best knowledge of current events and actions, actual results ultimately may differ from those estimates.

F-86

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Prior to March 31, 2007 the Group assessed hedge effectiveness of an interest rate swap in a cash flow hedge by applying the "change in variable cash flow method". Following the
publication in the March 2007 IFRIC update of the IFRIC Agenda decision on "IAS 39Financial Instruments: Recognition and
MeasurementAssessing hedge effectiveness of an interest rate swap in a cash flow hedge" the Group has reconsidered its accounting treatment applied to those
transactions and decided to adopt the treatment set out in the IFRIC agenda decision. Accordingly, the Group had adjusted its financial statements as of March 31, 2007 and comparative periods
to reflect the fact that hedge accounting has no longer been historically applied and has, therefore, recorded all changes in fair value of the interest rate swap through profit and loss. This change
in accounting treatment has been accounted for retroactively. This adjustment resulted in a decrease in other comprehensive income of T€8,320, a decrease in interest expense of
T€13,682 and an increase in deferred tax expense of T€5,362 for the fiscal year ended March 31, 2006.

With
respect to changes in estimates regarding the asset retirement obligation please refer to note 4.7 and 4.13.

1.3   Consolidation

1.3.1 Scope of Consolidation

In the fiscal year ended March 31, 2008 the Group acquired Leto GmbH. As of May 9, 2007, Schramm Elektro und Antennen GmbH and as of
July 10, 2007, HOT-Kabelservice Gesellschaft mit beschränkter Haftung (both were Level 4 operators) were merged with the Group. KDVS' consolidated financial
statements as of March 31, 2008 are comprised of KDVS and five consolidated subsidiaries (fiscal year ended March 31, 2007: six consolidated subsidiaries; fiscal year ended
March 31, 2006: five consolidated subsidiaries). Investments are consolidated if KDVS directly or indirectly owns more than 50% of the outstanding voting rights of an entity and if the
investments are under the control of KDVS as defined by IAS 27 "Consolidated and Separate Financial Statements".

The
legal restructurings of the direct and indirect subsidiaries of KDG, which took place in the years ended March 31, 2006 and 2005, were treated as transactions involving
entities under common control. KDVS accounted for these transactions in a manner similar to the application of the pooling-of-interest method. As such, the legal structure of
the KDVS Group as of March 31, 2006 was also applied to the Group as of March 31, 2005 and April 1, 2004 as basis for the consolidation.

1.3.2 Changes in the Consolidation Group and Acquisitions

Share Acquisition

The accounting for business combinations in the KDVS consolidated financial statements is performed according to IFRS 3 "Business Combinations" by
allocating the cost of a business combination to the acquiree's identifiable assets, liabilities and contingent liabilities at their fair value at the time of the acquisition. Any difference between
the cost and the fair value is goodwill or badwill.

As
of March 1, 2008, the Group acquired 100% of the shares of Leto GmbH, an unlisted company based in Berlin, Germany, specialized in supplying multimedia for the housing
industries, especially the provision and management of cable access for subscribers of Level 4 operators.

F-87

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The
fair value of the identifiable assets and liabilities of Leto GmbH as at the date of acquisition and the corresponding carrying amounts immediately before the acquisition
were:

Fair value
recognised
on acquisition

Previous
carrying
valueT€

T€Customer List

5,094

4,418Property and equipment

4,342

4,342Cash and Cash equivalents

10

10Trade receivables

22

22Other current assets

79

79Deferred expenses

4

49,551

8,875Liabilities to Affiliates

(9
)
(9
)Other provision

(34
)
(34
)Deferred income tax liabilites

(202
)
0(245
)
(43
)Net assets

9,306

8,832Total consideration (in cash)

9,306


From the date of acquisition, Leto GmbH had a positive impact in terms of revenue of T€190 and of T€12 to
the net profit/loss of the Group. If the combination had taken place at the beginning of the year, the net loss for the Group would have been T€229,884 and revenue from continuing
operations would have been T€1,199,350.

With
regard to business combinations that were effected after the balance sheet date but before the financial statements are authorized for issue the Group refers to Section 5.7.

Asset Acquisitions

In the fiscal year ended March 31, 2008, the Group acquired approximately 63,610 subscribers and the major part of the associated technical CATV
Level 4 network infrastructure from RKS
Süd-West GmbH for total aggregate consideration of approximately T€20,270. The aggregate purchase price of the transactions resulted in an increase in
customer list of T€15,653 and an increase of technical equipment of T€4,617.

The
Group acquired an additional 599 subscribers from several small Level 4 companies for total aggregate consideration of approximately T€192. The aggregate
purchase price of the transactions resulted in an increase in customer list of T€189 and an increase of technical equipment of T€3.

Asset
acquisitions did not include the assumption of any liabilities or other financial obligations.

1.3.3 Basis of Consolidation

Intercompany transactions, balances and unrealized gains on transactions between KDVS and its subsidiaries are eliminated in consolidation. The accounting
policies of the consolidated subsidiaries are consistent with the policies adopted by KDVS. Acquisitions are accounted for using the purchase method of accounting.

Subsidiaries
are fully consolidated from the date of acquisition, being the date on which the Group obtains control, and continue to be consolidated until the date that such control
ceases.

F-88

---



Companies
in which KDVS has significant influence over the business and the financial policies as defined by IAS 28 "Investments in Associates" are recorded in the consolidated
financial statements using the equity method. Intercompany profits and losses of associated companies are eliminated in consolidation in relation to their shareholding ratio.

1.4   Currency Translation

The functional and reporting currency of KDVS Group is the Euro.

Foreign
currency transactions were converted to Euros at the exchange rate applicable on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies
existing as of the balance sheet date are converted to Euros at the exchange rate of the European Central Bank on the balance sheet date. Currency differences resulting from these adjustments are
recognized in the consolidated statement of operations.

Non-monetary assets and liabilities denominated in foreign currencies existing as of the balance sheet date which are to be carried at fair value were converted to Euros at
the rate. The Group used the following exchange rates (spot rates):

March 31, 2008

March 31, 2007

March 31, 20061€

US$ 1.5812

US$ 1.3318

US$ 1.21041€

GBP 0.7958

GBP 0.6798

GBP 0.6964


2.     Accounting and Valuation Methods

2.1   Property and Equipment

2.1.1 Property and Equipment

Property and equipment are recognized at cost less accumulated depreciation and accumulated impairment losses. Borrowing costs are not capitalized. Rebates, trade
discounts and bonuses are deducted from the purchase price.

For
technical equipment located on leased property, historical costs include the present value of estimated future costs and expenses necessary for restoration of the leased property
after termination of the lease agreement.

2.1.2 Leases

Operating lease

A lease is accounted for as an operating lease if all the risks and benefits incidental to ownership of the leased item remain with the lessor. Operating lease
payments are therefore recorded on a straight-line basis over the lease term as an expense in the consolidated statement of operations.

Operating lease for Customer Premises Equipment (CPE)

To get connection to Internet & Phone services as well as to receive digital TV, the Group leases the necessary equipment to the customers. These leases
for which the Group is the lessor, are classified as an operating lease. Therefore, the Group capitalizes the CPE as fixed assets based on acquisition cost and the cost of removing the asset at the
end of the lease. Over the useful life of 3 years the assets are depreciated using the straight-line method.

F-89

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Finance lease

In accordance with IAS 17 "Leases", assets leased under finance leases are recorded at the lower of fair value at the inception of the lease or the present
value of the lease payments. The assets are depreciated using the straight-line method over the shorter of the estimated useful life or over the lease period. The obligations related to
future lease payments are recognized as liabilities. Lease payments are apportioned between the finance charges and reductions of the lease liability so as to achieve a constant rate of interest on
the remaining balance of the liability. Finance charges are charged directly against income.

2.1.3 Subsequent Expenses

Rental costs are expensed. Repair and maintenance charges are expensed during the financial period in which they are incurred. The cost of significant renovations
and additions are included in the carrying amount of the asset when it is probable that future economic benefits in excess of the originally assessed standard of performance will be realized by the
Group. Significant renovations are depreciated over the shorter of the remaining useful life of the related asset or the lease term.

2.1.4 Depreciation of Fixed Assets

Depreciation is calculated based on the straight-line method over each asset's estimated useful life as follows:

Buildings and leasehold improvements

3 to 25 yearsTechnical equipment and machines

3 to 20 yearsProperty and equipment

3 to 15 years


Gains and losses from derecognition of fixed assets are determined by deducting the carrying amount of the asset being sold from the proceeds
received at the time of derecognition. The results are included in other operating income or in the corresponding expense line item. The assets' residual values, useful lives and depreciation methods
are reviewed, and adjusted if appropriate at each financial year end.

2.2   Intangible Assets

2.2.1 Customer List

In connection with the initial acquisition of the cable business by the Group in March 2003, approximately T€681,659 of the purchase price was
allocated to the customer list. Further additions to the customer list that occurred during the twelve months ended March 31, 2008 and in the previous years are primarily related to the
acquisition of Level 4 companies and subscribers. The weighted remaining useful life of the customer list is 3.92 years, 4.61 years and 5.55 years as of March 31,
2008, March 31, 2007 and March 31, 2006, respectively.

2.2.2 Other Intangible Assets

Intangible assets which are purchased separately are recorded at cost. Intangible assets that have been acquired as part of an acquisition of a business are
capitalized at fair value if they can be reliably measured at the acquisition date.

Computer
software is recorded at cost as an intangible asset.

The
Group recognizes intangible assets developed internally (consisting of software used by the Group) to the extent the criteria in IAS 38 "Intangible Assets" are met.
Development costs for internally generated intangible assets are recognized at cost to the extent the Group can demonstrate

F-90

---



the
technical feasibility of completing the asset, how the asset will generate future economic benefit, the availability of resources to complete the asset and the ability to measure reliably the
expenditure during the development. If the requirements for capitalization are not fulfilled, development costs are expensed as incurred.

The
Group recognizes subscriber acquisition costs incurred to obtain new subscribers if the costs are directly attributable to obtaining specific contracts, are incremental, can be
measured reliably and meet the definition and recognition criteria of an intangible asset in accordance with IAS 38. Subscriber acquisition costs incurred to obtain new contracts without an
initial contract period (open-ended contracts) are expensed as incurred.

Following
initial recognition, intangible assets are carried at cost less any accumulated depreciation and any accumulated impairment loss.

2.2.3 Subsequent Expenses

Subsequent investments in intangible assets will be capitalized if they qualify for recognition as an intangible asset.

2.2.4 Amortization of intangible assets

The estimated useful life of the customer list is based on the average number of terminations and the term of the average contract life of individual end users
who generate significant contribution margins.

The
amortization of other intangible assets with definite useful lives is based on the straight line method over the assets' estimated useful lives. Amortization begins when the
intangible asset is ready for use.

The
Group recognizes subscriber acquisition costs incurred to obtain new subscribers. The Group amortizes these costs over the initial contract period except for contracts where there is
past evidence regarding the expected customer relationship period.

The
amortization expense is recognized in the statement of operations in the expense category consistent with the function of the intangible assets.

The
useful lives are estimated as follows:


Customer list

8.5 years
Software and licenses

110 years
Subscriber Acquisition Costs

18.5 years


The appropriateness of the useful life for the customer list is validated on an annual basis.

2.3   Financial Instruments

Recognition and Derecognition of Financial Instruments

Financial assets and liabilities are recognized when the Group enters into a contractual relationship with the respective counterparty or issuer. A financial
asset is derecognized when:



F-91

---





A
financial liability is derecognized when the obligation under the liability is discharged or cancelled or expires.

Where
an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified, such
an exchange or modification is treated as a derecognition of the original liability and the recognition of a new liability,
and the difference in the respective carrying amounts is recorded in the consolidated statement of operations.

Financial Assets

Financial assets in the scope of IAS 39 are classified as either financial assets at fair value through profit or loss, loans and receivables,
held-to-maturity investments, or available-for-sale financial assets, as appropriate. When financial assets are initially recognized, they are measured
at fair value, plus, in the case of investments not at fair value through profit or loss, directly attributable transaction costs. The Group determines the classification of its financial assets after
initial recognition and, where allowed and appropriate, re-evaluates this designation at each financial year-end. All purchases and sales of financial assets in the ordinary
course of business are recognized on the date on which control over the asset changes.

Financial assets at fair value through profit or loss

Financial assets classified as held for trading are included in the category "financial assets at fair value through profit or loss". Financial assets are held
for trading if they are acquired for the purpose of selling in the near term. Derivatives are also classified as held for trading unless they are designated and effective hedging instruments. Gains or
losses on investments held for trading are recognized in the consolidated statement of operations.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are
carried at amortized cost using the effective interest method. Gains and losses are recognized in the consolidated statement of operations when the loans and receivables are extinguished or impaired
as well as through the amortization process.

Available-for-sale financial assets

Available-for-sale financial assets are those non-derivative financial assets that are designated as
available-for-sale or are not classified in any of the three preceding categories. After initial recognition available-for-sale financial assets are
measured at fair value with gains or losses being recognized as a separate component of equity until the investment is sold or until the investment is determined to be impaired at which time the
cumulative gain or loss previously reported in equity is included in the statement of operations.

Financial Liabilities

Financial liabilities (loans) are initially recognized at cost which corresponds to the fair value of the given consideration received net of issue costs
associated with the financial liabilities. In subsequent

F-92

---



periods,
liabilities are measured at amortized cost using the effective interest method with the exception of derivative financial instruments which are measured at their fair market value.

Derivative Financial Instruments

Derivative financial instruments are used exclusively for the purpose of hedging foreign currency and interest rate risks arising from financing activities. In
accordance with IAS 39 "Financial Instruments: Recognition and Measurement", all derivative financial instruments are accounted for at fair value irrespective of the purpose or the intention
for which they were incurred. Depending on whether it is a fair value hedge or a cash flow hedge, changes in the fair value of the derivative financial instruments for which hedge accounting is used
are either reported in the statement of operations or in the statement of changes in equity under cash flow hedge reserve. In the case of a fair value hedge, the gains or losses from the measurement
of derivative financial instruments at fair value and the gains or losses related to the underlying contracts are recognized in the consolidated statement of operations. In the case of changes in the
fair value of cash flow hedges which are used to offset future cash flow risks arising from underlying transactions or planned transactions and which have proved to be 100% effective in accordance
with IAS 39, unrealized gains and losses are initially recognized in equity as a cash flow hedge reserve.

If
derivative financial instruments are not 100% effective, the difference between the fair value and the changes in fair value of the related underlying contract is recognized in the
consolidated statement of
operations. The portion of the change in fair value not covered by the underlying transaction is immediately recognized in the consolidated statement of operations. If hedge accounting cannot be used
by the Group, the change in the fair value of derivative financial instruments is recorded in the consolidated statement of operations.

Equity Investments in Associates

Investments in associates are accounted for using the equity method at the investor's share of equity pursuant to IAS 28 "Investments in Associates". The
Group's share of income, reduced by distributions and amortization of write-ups in amortizable assets from purchase accounting is disclosed in the fixed asset register as a change in
equity investments.

2.4   Inventories

Raw materials, consumables, supplies, finished goods and merchandise are recorded at the lower of cost or net realizable value. Cost is generally determined using
a moving average cost.

2.5   Trade and Other Receivables

Trade and other receivables are disclosed at their nominal amount less bad debt allowances for any amounts deemed uncollectible. In relation to trade receivables,
a provision for impairment is made when there is objective evidence (such as the probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to
collect all of the amounts due under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognized when they
are assessed as uncollectible.

2.6   Cash and Cash Equivalents

Cash and cash equivalents are mainly comprised of cash on hand and other short-term, highly liquid investments with an original maturity of three
months or less. Cash on hand and in bank and other are carried at nominal value.

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---



For
purposes of the consolidated cash flow statement cash and cash equivalents consist of cash and cash equivalents as defined above, net of outstanding bank overdrafts.

2.7   Impairment

The carrying amount of intangible assets and property and equipment is reviewed at every balance sheet date to determine whether there are any indications of
impairment. If such indications exist or when annual impairment testing is required, the recoverable amount is estimated. Impairment is necessary when the carrying amount of an asset or the related
cash-generating unit exceeds the recoverable amount. The corresponding impairment is expensed.

If there is objective evidence that an impairment loss on loans and receivables carried at amortized cost has been incurred, the amount of the loss is measured as the difference between
the asset's carrying amount and recoverable amount, i.e. the higher of the present value of estimated future cash flows discounted at the financial asset's original effective interest rate and
fair value less cost to sell. The carrying amount of the receivable is reduced through use of an allowance account. Impaired debts are derecognized when they are assessed as uncollectible.

2.7.1 Determination of Recoverable Amount

The recoverable amount of an asset is the greater of its fair value less costs to sell and its value in use. Value in use is determined by discounting the
estimated future cash flows to be derived from continuing use of the asset up until its ultimate disposal. The discount rate is based on a pre-tax interest rate that reflects current
market assessments of the fair value of money and the risks specific to the asset.

For
assets to which no cash flows can be directly attributed, the recoverable amount is determined for the cash-generating unit to which the asset belongs.

2.7.2 Reversal of Impairment Loss

Impairment losses on assets are reversed when assumptions relating to the recoverable amount of the assets change. Impairment losses are only reversed up to the
carrying amount of the asset which would have been recorded if the asset had been subject to standard depreciation without impairment.

2.8   Equity

Limited partnership capital and the capital reserve are stated at nominal value after the reclassification of the capital attributable to Limited Partners which
is recored as a liability and accounted at fair value. Capital reserves contain contributions from partners and changes relating to share-based payments.

2.9   Capital attributable to the Limited Partners

Financial instruments which grant the holder a right of repayment of the capital contributed to the partnership are classified as liabilities in accordance with
IAS 32 "Financial Instruments". KDVS and its legal predecessors have been structured in the legal form of commercial partnerships in which the limited partners can obligate the partnership to
repay capital contributions and the related attributable profit interest by exercising a legal right of notice.

The rights of the limited partners to the net assets of the partnerships are therefore reported in the IFRS consolidated financial statements of KDVS as liabilities under the item
"Capital attributable to the Limited Partners". The liability is measured at the present value of the repayment right of the limited partner that, in accordance with the provisions of the partnership
agreements, amounts to 2/3 of the fair value of the interest in the limited partnership. The fair value of the interest is determined by reference to market transactions or by applying
the discounted cash flow method (DCF method).

F-94

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2.10 Employee Benefits

Under the Group's pension plans, KDVS provides employees post-employment benefits under a defined benefit plan. The benefits are unfunded.

The
present value of future claims of participants is estimated using actuarial methods based on the amount of benefit earned for their service in the current and prior periods. The
liabilities to be recognized in the consolidated balance sheet result from the present value of the defined benefit obligation adjusted for any actuarial gains or losses, and less any past service
cost not yet recognized. The discount rate is determined by reference to the capital markets and takes into account the expected maturity of the obligation. KDVS engaged qualified external actuaries
to perform the necessary actuarial calculations. The obligation is determined using the projected unit credit method.

If
the benefits of the pension plan improve, the share of those plan improvements relating to the employees' previous years of service will be recognized as an expense on a
straight-line basis over the period in which the claims vest. If the claims have already vested, the prior service cost is expensed immediately.

In
measuring the obligations arising from the defined benefit plans, actuarial gains and losses arising after April 1, 2003 are not recognized in the consolidated statement of
operations until the cumulative outstanding amounts exceed a corridor of 10% (corridor approach) of the defined benefit obligation as of the measurement date. The portion of the amount exceeding the
corridor is amortized to the consolidated statement of operations over the remaining average service life of the employees entitled to pensions.

2.11 Other Provisions

Other provisions are recognized in the consolidated balance sheet pursuant to IAS 37 "Provisions, Contingent Liabilities and Contingent Assets" when a
legal or constructive obligation to a third party arises as a result of past events, an outflow of resources embodying economic benefits will be required to settle the obligation and the anticipated
amount of the provision can be reliably estimated. Non-current other provisions are stated at their discounted settlement value on the balance sheet date where the effect of the time value
of money is material.

2.12 Trade Payables and Other Liabilities

Trade payables and other liabilities are recorded at amortized cost.

2.13 Revenue and Other Income

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group and the revenue can be reliably measured. The different
types of revenue are recognized as follows:

Installation and network connection

Revenue from the installation of the cable connection and the network connection is recognized when the services have been rendered, the costs incurred can be
measured reliably and the Group is not obliged to provide any future network connection or installation services.

Rendering of services

Revenue generated by the delivery of analog and digital pay products, internet and telephone services as well as carriage fees and digital playout facility fees
paid by television broadcasters are recognized when services have been provided, the costs incurred can be measured reliably and the

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Group
is not obliged to provide any future services. Prepayments are accounted for by deferring the received payments and amortizing them straight-line over the service period.

When
free months are offered to customers in relation to a subscription, the Group recognizes the total amount of billable revenue in equal monthly installments over the term of the
contract provided that the Group has the enforceable and contractual right to deliver the customer with the products after the promotional free month period. If free months are given without a
contract at the beginning of a subscription period, the Group does not recognize revenues during the free months as the customer's continuance is not assured.

Sale of goods

Revenue for the sale of digital set-top boxes, cable modems, and other goods (Customer Premise EquipmentCPE) is recognized when the
significant risks and rewards of ownership of the goods have passed to the buyer. Costs in connection with returns are accounted for by accruing the respective amount. If the Group acts as an agent,
revenue is only recognized in the amount of the sales commissions.

Multiple Elements Arrangements

For bundled services in multiple element arrangements the Group recognizes revenue for each element on the basis of the relative fair value of each item in the
transaction, if there is an evidence of fair value.

2.14 Share-Based Payments

The Group applies IFRS 2 "Share-Based Payment". Under IFRS 2, plans which result in share-based payment transactions have to be accounted for as
cash-settled if the interest holder will receive a payment in cash upon settlement rather than the underlying equity instruments. Due to the terms of the different programs at KDVS, it is
highly likely that the general partner of Cayman Cable Holding L.P. (the Partnership) will exercise the existing repurchase option in most cases of the interest holders' termination of
employment and settle in cash. Alternatively, employees leaving the Group may have the option to put their vested interests to Cayman for cash. In the case of a put or call, the employee is generally
protected from decreases in fair value below their initial investment amount. For such cash-settled share-based payment transactions, IFRS 2 requires the entity to account for
share-based payments to management as personnel expense and a corresponding increase in other liabilities. For interests in the Management Equity Participation Program I (MEP I) and in the
Management Equity Participation Program IV (Indirect MEP IV) which are share acquisition programs the costs of cash-settled transactions are measured initially based on the notional
amount paid.

For
MEP II and III as well as the MEP IV Option program and MEP V, which all are option programs, the costs of cash-settled transactions are measured initially at fair value
at the grant date using the Black-Scholes model taking into account the terms and conditions upon which the instruments were granted because it is typically not possible to reliably estimate the fair
value of employee services received. This fair value is expensed over the period until vesting with recognition of a corresponding liability.

For
all MEP programs the services received during the vesting periods and, therefore, the corresponding liabilities are re-measured at each balance sheet date up to and
including the settlement date with changes in fair value recognized in the consolidated statement of operations.

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2.15 Taxes on Income

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities. The tax rates and tax laws
used to compute the amounts are those that are enacted or substantively enacted by the balance sheet date.

Except
for those cases described below, deferred income tax is provided, using the liability method on all temporary differences between the tax basis of assets and liabilities and their
carrying amounts for financial reporting purposes at the balance sheet date.

Deferred
income tax liabilities are recognized for all taxable temporary differences, except:



Deferred
income tax assets are recognized for all temporary deductible differences, carry-forward of unused tax credits and unused tax losses to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax credits and unused tax losses can be utilized:



The
carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow all or part of the deferred income tax asset to be utilized.

Deferred
income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realized or the liability is settled, based on tax rates
(and tax laws) that have been enacted or substantively enacted at the balance sheet date.

Income
taxes relating to items recognized directly in equity are recognized in equity and not in the statement of operations.

Deferred
tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set off current tax assets against current tax liabilities and the deferred taxes
relate to the same taxable entity and the same taxation authority.

2.16 Key Judgments and Estimation Uncertainty

The preparation of the consolidated financial statements in accordance with IFRS requires judgments and estimations to be made which have an effect on the
carrying amounts of recognized assets and liabilities, income and expenses and contingent liabilities. In some cases, the actual values

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may differ from the judgments and estimations. Changes are recognized in the consolidated statement of operations when better information is available.

2.16.1 Key Judgments

In the process of applying KDVS' accounting policies, management has made the following judgments, apart from those involving estimations, which have the most
significant effect on the amounts recognized in the consolidated financial statements.

Derivatives

The Group has entered into interest rate swaps, interest rate caps and currency swaps to hedge its risks resulting from exposure to changes in interest rates and
foreign currency rates. All of these derivative instruments have been accounted for in accordance with IAS 39 at fair value irrespective of the purpose or the intention for which they were
used. The currency swaps were classified as cash flow hedges.

Operating Leases for CPE

The Group offers products that contain signal delivery and the right to use hardware devices. The hardware devices are essential for the signal delivery to the
customer. Since the fulfillment of these arrangements is dependent on the use of a specific asset and the arrangements convey a right to use the asset, the contracts contain a lease in accordance with
IFRIC 4 (KDVS as lessor).

Hardware
devices are recognized as equipment in accordance with IAS 16 and amortized over the useful life of three years.

Operating lease cable ducts

In certain cases KDVS leases space in the cable ducts of Deutsche Telekom AG (DTAG) to house KDVS' network cable. The Group has determined that it retains
no significant risks and rewards of ownership of these cable ducts and, therefore, accounts for the leases as operating leases.

Finance lease transponders

The Group has leased specific satellite transponders in order to transmit audio and video signals. The Group has determined that the rights to use specific
transponders have been transferred and that the lease term of specific transponders covers the major part of the economic life of the transponders. Therefore, the Group has classified and accounted
for the leases as finance leases according to IAS 17.

Capital attributable to the Limited Partners

The rights of the limited partners to the net assets of the partnership are recorded as liability (under the item "Capital attributable to the Limited Partners").
If the limited partner (KDG) left KDVS, KDVS would not exist in the same way as before. Management expects that KDVS would not continue its business. As in that case no deductible temporary difference
would arise KDVS did not recognize any deferred tax assets due to the revalued limited partnership.

2.16.2 Estimation Uncertainty

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date that have a significant risk of causing a
material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

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Derivatives

The fair values of the derivative financial instruments as of the balance sheet date have been estimated at the net present values (discounted by market yield
curves) of the future payments and using standard models (in the case of caps). The total fair values of the derivative financial instruments amounted to T€4,239,
T€5,415 and T€-3,241 as of March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Share-based payments

As of March 31, 2006 and for periods prior to this, it was management's intention to settle MEP I using the formula price as stated in the respective
limited partnership agreement. Effective April 19, 2006 and in connection with the 5th amendment to the limited partnership agreement, the controlling shareholders of
Cayman Cable modified the settlement terms of MEP I interests in Cayman Cable Holding L.P to better reflect current market value conditions, changing the settlement formula from an EBITDA
formula with fixed multiples to estimated fair value. The change in the fair price estimation resulted in an increase in personnel expenses in the amount of T€1,493 for the fiscal year
ended March 31, 2007.

Based on the 5th amendment to the limited partnership agreement, the fair value measurement for MEP IV interests is based on the same valuation methods as is used
for MEP I.

The
measurement of the fair value at grant date with respect to the MEP II and MEP III option plans as well as to the MEP IV Option Program and MEP V is based on the Black-Scholes option
pricing model. The main parameters, the expected volatility of the values of the shares, the estimated term of the options and the risk free interest rate on grant date were estimated by the Group.

The
Group recognizes expenses with respect to all MEP plans in an amount of T€3,017, T€4,217 and T€4,483 for the years ended
March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Internally Developed Software

The Group recognized intangible assets developed internally (consisting of software used by the Group) to the extent the criteria of IAS 38 were met.
Development costs for internally generated intangible assets are recognized at cost to the extent the assets are economically usable and the costs can be reliably measured. For the years ended
March 31, 2008, March 31, 2007 and March 31, 2006, respectively, approximately T€2,528, T€1,048 and T€3,042 of costs for internally
developed software were capitalized.

Customer List

The customer list is primarily amortized on a straight-line basis over 8.5 years. The estimated useful life is based on the average number of
terminations and the term of the average contract life. The book value of the customer list amounted to T€317,813, T€382,387 and T€460,483 for the years
ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Provision for Pensions

With respect to the actuarial calculation of the provision for pensions, the Group estimated future salary increases, future pension increases and the discount
rate. As of March 31, 2008, March 31, 2007 and March 31, 2006, the provision for pensions amounted to T€25,849, T€21,579 and
T€17,959, respectively.

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Asset Retirement Obligations

The amount of the accrual is based on an estimate of the costs expected for the demolition and restoration of the technical facilities. Expectations regarding the
lessor waiving asset retirement performance requirements are factored into the calculation of best estimate of the obligation related to the leased cable ducts under IFRS. Approximately 93% of KDVS'
obligations are related to technical equipment, including different kinds of cable and signal transmitting and receiving technology in cable ducts of DTAG. KDVS assumes that 30% of the technical
equipment will be replaced by other technologies after 15 years. The remaining 70% of the technical equipment is expected to be restored after 30 years. The remaining 7% of the asset
retirement obligations are divided into accruals for furniture, fixtures and miscellaneous restoration obligations. The asset retirement obligations amounted to T€20,665,
T€20,562 and T€19,964 as of March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

2.17 Accounting Standards Recently Issued by the IASB

The Group applied all IFRSs and IFRIC interpretations issued by the IASB, London, that are effective as of March 31, 2008, and applicable to the Group. The
designation IFRS also includes all valid IAS. All interpretations of the IFRIC, formerly the SIC, were also applied.

Accounting Standards recently issued by the IASB and applied by the Group

In addition to the IFRSs and IFRIC Interpretations already applied by the Group in the fiscal year ending March 31, 2007, it has adopted the following
amended IFRS standards and IFRIC interpretation during the year ending March 31, 2008. The following standard did have an effect on the financial statements of the Group:



The
following interpretation did not have any effect on the financial statements of the Group:



Accounting Standards recently Issued by the IASB and not yet applied by the Group

The Group has not applied the following IFRS and IFRIC interpretations that have been issued and have been endorsed by the EU but are not effective as of
March 31, 2008:

In
November 2006, the IASB issued IFRS 8 "Operating Segments". The standard requires an entity to report financial and descriptive information about its reportable segments.
IFRS 8 requires identification of operating segments based on internal reports that are regularly reviewed by the entity's chief operating decision maker in order to allocate resources to the
segment and assess its

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performance.
The standard also requires an explanation of how segment profit or loss and segment assets and liabilities are measured for each reportable segment. IFRS 8 requires an entity to
report information about revenues derived from its products or services, about the countries in which it earns revenues and holds assets, and about major customers. The provisions of IFRS 8 are
effective for annual periods beginning on or after January 1, 2009. The Group expects to adopt the amended IFRS 8 beginning April 1, 2009. It is not expected that the adoption of
IFRS 8 will have a material impact on the Group's results of operations, financial position or cash flow.

The
Group has not applied the following IFRSs and IFRIC interpretations that have been issued but have not yet been endorsed by the EU and are not effective as of March 31, 2008:

In
September 2007, the IASB issued a revised version of IAS 1 "Presentation of Financial Statements: A Revised Presentation", which has to be applied to annual periods beginning
on or after January 1, 2009. Early adoption is not expected. The intention of the revision is to improve the users' ability to analyse and compare the information given in financial statements.
IAS 1 requires a Statement of Comprehensive Income and under certain circumstances the presentation of the opening balance sheet of the comparative period. The initial application of the
revised IAS 1 will have an effect on the presentation of the consolidated financial statements.

In
March 2007, the IASB issued a revised version of IAS 23 "Borrowing Costs". The revised standard requires an entity to capitalize borrowing costs directly attributable to the
acquisition, construction or production of qualifying assets as a part of the costs of that asset. Under this standard an entity does not have to capitalize borrowing costs relating to qualifying
assets measured at fair value, or to inventories that are manufactured or produced in large quantities on a repetitive basis, even if they take a substantial time to produce. The revised Standard is
effective for annual periods beginning on or after January 1, 2009. The Group expects to adopt the amended IAS 23 beginning April 1, 2009. It is not expected that the adoption of
amendments will have a material impact on the Group's operations, financial position or cash flow.

In
January 2008, the IASB issued a revised version of IAS 27 "Consolidated and Separate Financial Statements", which has to be applied to annual periods beginning on or after
July 1, 2009. Early adoption is not expected. The changes in this Standard relate to the accounting for non-controlling (minority) interest and are not expected to have any effect
on the Group's results of operations, financial position or cash flow.

In February 2008, the IASB published amendments to IAS 32 and IAS 1 "Puttable Financial Instruments and Obligations Arising on Liquidation", which have to be applied to
annual periods beginning on or after January 1, 2009. Early adoption is not expected. These amendments require certain financial instruments that represent a residual interest in the net assets
of an entity, which would otherwise be classified as financial liabilities, to be classified as equity, if both the financial instrument and the capital structure of the issuing entity meet certain
conditions. IAS 1 has been amended to include additional disclosure requirements. The Group currently evaluates the effect of the new standard. The assessment of a possible reclassification to
liabilities has not been finalized.

In
January 2008, the IASB published an amendment to IFRS 2 "Share-Based Payment: Vesting Conditions and Cancellations", which has to be applied to annual periods beginning on or
after January 1, 2009. Early adoption is not expected. This amendment clarifies the definition of vesting conditions in share-based payments and stipulates that all cancellations of share-based
payments should receive identical accounting treatment, regardless of the party responsible for cancellation. The adoption of this revision is not expected to have a material impact on the Group's
results of operations, financial position or cash flow.

In
January 2008, the IASB published a revised version of IFRS 3 "Business Combinations", which has to be applied to annual periods beginning on or after July 1, 2009. Early
adoption is not expected.

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Major
changes are: (a) the requirement that the assets acquired, the liabilities assumed, and equity interests be consistently measured at fair value on the acquisition date, (b) All
items of consideration transferred by the acquirer are measured and recognised at fair value at the acquisition date, including contingent consideration, (c) transaction costs incurred in an
acquisition are recognized in the statement of operations as incurred, (d) the option of measuring any non-controlling interest in the entity at fair value, and (e) new
disclosures are required. The changes must be applied prospectively and will affect future acquisitions.

In
November 2006, the IFRIC issued the interpretation IFRIC 12, "Service Concession Agreements". The interpretation addresses how service concession operators should apply
existing IFRSs to account for the obligations they assume and rights they receive in service concession arrangements. In one type of such an arrangement, the operator receives a financial asset,
i.e., an unconditional contractual right to receive cash or another financial asset from the government in return for constructing or upgrading a public sector asset. In the other type of such
an arrangement, the operator receives an intangible asset, i.e., a right to charge for the use of the public sector asset that it contracts or upgrades. A right to charge users is not an
unconditional right to receive cash because the amounts are contingent to the extent to which the public uses the service. IFRIC 12 allows for the possibility that both types of arrangements
may exist within a single contract. To the extent that the government has given an unconditional guarantee to pay for the construction of the public sector asset, the operator owns a financial asset.
To the extent that the operator has to rely on the public using the service in order to obtain payment, the operator owns an intangible asset. IFRIC 12 applies for all annual periods beginning
on or after January 1, 2008. The Group expects to adopt IFRIC 12 beginning April 1, 2008. The adoption of this interpretation is not expected to have a material impact on the
Group's results of operations, financial position or cash flow.

In
June 2007, the IFRIC issued the interpretation IFRIC 13 "Customer Loyalty Programs", which has to be applied for annual periods beginning on or after July 1, 2008. Early
adoption is not expected. The interpretation addresses accounting by entities that grant loyalty award credits to customers who buy other goods or services. It is not expected that the adoption of the
interpretation will have a material impact on the Group's results of operations, financial position or cash flow.

The
IFRIC issued IFRIC 14 "The Limit on a Defined Benefit Asset Minimum Funding Requirements and their Interaction" in July 2007. The standard is effective for annual periods
beginning on or after January 1, 2009. Early adoption is not expected. The interpretation addresses the interaction between a minimum funding requirement and the limit placed by
paragraph 58 of IAS 19 on the measurement of the defined benefit asset or liability. It is not expected that the adoption of the interpretation will have any impact on the Group's
results of operations, financial position or cash flow.

In
July 2008, the IFRIC issued the Interpretation IFRIC 15 "Agreements for the Construction of Real Estate" which has to be applied for annual periods beginning on or after
January 1, 2009 and is to be applied retrospectively. Early adoption is not expected. IFRIC 15 provides guidance on how to determine whether an arrangement for the construction of real
estate is within the scope of IAS 11 "Construction contracts" or IAS 18 "Revenue" and when revenue from the construction should be recognized. It is not expected that the adoption of the
interpretation will have any effect on the Group's results of operation, financial position or cash flow.

In
July 2008, the IFRIC issued the Interpretation IFRIC 16 "Hedges of a Net Investment in a Foreign Operation" which has to be applied for annual periods beginning on or after
October 1, 2008. Early adoption is not expected. IFRIC 16 clarifies that the presentation currency does not create an exposure to which an entity may apply hedge accounting.
Consequently, a parent entity may designate as a hedged risk only the foreign exchange differences arising from a difference between its own functional currency and that of its foreign operation. It
is not expected that the adoption of the interpretation will have any effect on the Group's results of operation, financial position or cash flow.

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3.     Notes to the Statement of Operations

3.1   Revenues

Revenues
were generated in Germany as follows:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Cable access revenues

867,066

845,562

839,276TV/Radio revenues

179,802

162,987

137,839Internet revenues

48,591

24,241

7,008Phone revenues

72,776

32,299

2,842TKS revenues

28,635

28,090

25,1681,196,870

1,093,179

1,012,133


Cable access revenuesare primarily made up of monthly subscription fees paid for access to our
network and the delivery of analog and digital signals to both our direct and indirect subscribers. We also receive one time fees for the installation of a cable television or network connection.

TV/Radio revenuesare primarily generated by subscription fees paid by our customers for the Group's pay TV digital packages, Kabel
Digital International, Kabel Digital Basic and Kabel Digital Home. The Group sells its pay TV packages on a subscription basis directly to consumers and indirectly through certain Level 4
operators. Additional revenues are generated by sales of CPE, digital and analog carriage fees and fees for the use of the digital platform.

Internet revenuesare primarily comprised of monthly subscription fees for internet services and, to a much lesser extent, revenues from
one time installation fees and the sale of CPE.

Phone revenuesare primarily comprised of monthly subscription fees and variable fees based on usage and, to a much lesser extent,
revenues from one time installation fees and the sale of CPE.

TKS revenuesprimarily relate to revenues generated by TKS Telepost Kabel-Service Kaiserslautern GmbH & Co. KG (TKS)
for providing cable television, Internet & Phone services to the NATO military personnel based in Germany. It also provides billing services for telephone customers of Deutsche
Telekom AG (DTAG) who prefer English language bills. Additionally, TKS sells certain telecommunication products in its shops to personnel on NATO military bases such as prepaid mobile phones,
cash cards, and telecommunication related products and services.

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3.2   Cost of Services Rendered

Fiscal Year Ended March 31,2008

2007

2006(in T€)Cost of materials and services

313,976

288,120

257,357thereof service level agreements

164,992

168,506

169,715Personnel expenses

44,171

63,018

53,449Depreciation and amortization

154,676

133,123

117,428thereof intangible assets

4,943

4,976

4,342thereof tangible assets

149,733

128,147

113,086Other cost and expenses

75,638

82,829

61,821Total Cost of Service Rendered

588,461

567,090

490,055


Cost of services rendered include primarily costs of materials and services, including charges related to service level agreements for services
provided by DTAG as well as personnel expenses, depreciation and amortization and other cost and expenses. These other costs and expenses are primarily comprised of copyright expenses, IT support and
other miscellaneous expense. In the fiscal year ended March 31, 2007, personnel expenses included accrued expenses for restructuring in the amount of T€11,639.

3.3     Other Operating Income

Other operating income amounts to T€13,118, T€14,354 and T€12,298, respectively, for the years ended
March 31, 2008, March 31, 2007 and March 31, 2006, and primarily consists of administrative fees charged to customers who do not pay their subscription fee by direct debit
amounting to T€3,024, T€3,348 and T€3,103, respectively, for the years ended March 31, 2008, March 31, 2007 and March 31, 2006, and
insurance recoveries related to damaged property, marketing subsidies and other income amounting to T€3,502, T€3,897 and T€3,195 for the years ended
March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

3.4   Selling Expenses

Fiscal Year Ended March 31,2008

2007

2006(in T€)Cost of materials and services

26,080

27,139

19,418thereof digital boxes sold

12,619

9,587

3,109Personnel expenses

71,445

70,526

65,055Depreciation and amortization

115,478

95,983

88,155thereof intangible assets

104,525

92,783

86,631thereof tangible assets

10,953

3,200

1,524Other cost and expenses

139,833

125,015

98,914Total Selling Expenses

352,836

318,663

271,542


Selling expenses primarily consist of costs of materials and services, personnel expenses for sales and marketing employees, depreciation and
amortization expense primarily relating to the customer list and
other cost and expenses including marketing and advertising expenses, sales commissions and other miscellaneous expenses.

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3.5   General and Administrative Expenses

Fiscal Year Ended March, 312008

2007

2006(in T€)Personnel expenses

22,178

19,116

16,262Depreciation and amortization

23,136

16,313

14,771thereof intangible assets

19,286

12,946

11,763thereof tangible assets

3,850

3,367

3,008Other cost and expenses

58,761

64,027

56,063Total General and Administrativ Expense

104,075

99,456

87,096


General and administrative expenses which are related to headquarter functions primarily include personnel expenses related to headquarter
personnel, depreciation and amortization for IT and standard software licenses and other cost and expenses including external consulting expense IT-support and other miscellaneous
expenses.

3.6   Personnel Expenses

Personnel expenses are comprised of the following:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar.31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Wages and salaries

112,646

124,969

107,813Social security

25,148

27,691

26,451137,794

152,660

134,264


Included in wages and salaries:

Fiscal Year Ended March 31,2008

2007

2006(in T€)MEP

3,017

4,217

4,483thereof cost of services rendered

797

295

91thereof selling expense

1,687

2,743

1,343thereof general and administrative expenses

533

1,179

3,049Restructuring

2,593

14,381

6,205thereof cost of services rendered

2,383

11,639

4,193thereof selling expense

5

987

2,012thereof general and administrative expenses

205

1,755

0


For further information regarding restructuring plans see Section 4.13.

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Included
in social security:

Fiscal Year Ended March 31,2008

2007

2006(in T€)Personnel expenses related to defined benefit pension plan

3,096

2,734

1,665thereof cost of services rendered

1,120

1,030

961thereof selling expense

1,499

1,368

284thereof general and administrative expenses

477

336

420


During the years ended March 31, 2008, March 31, 2007 and March 31, 2006, an average of 2,488, 2,585 and 2,400, respectively,
people were employed.

3.7   Interest Expense and Income

Interest Expenses

Fiscal Year Ended March 31,2008

2007

2006(in T€)Interest Expenses on financial instruments that are not at fair value through profit or lossSenior Credit Facility

81,645

65,670

62,305Amortization of Capitalized Finance Fees

4,995

6,869

66,489Transaction Costs for Bridge Facility

0

0

7,523Finance Lease

2,873

2,675

2,657Other

579

1,081

0Interest Expenses/Income on financial instruments at fair value through profit or loss

(3,122
)
(5,718
)
(6,900
)Interest expense on provisions and non-financial liabilitiesPensions

1,242

1,064

902Asset Retirement Obligations

999

888

723Other

698

981

0Total Interest Expenses

89,909

73,510

133,699


Interest expense includes interest accrued on bank loans, amortization of financing fees, interest on finance leases and other.

Interest
expenses on financial instruments at fair value through profit or loss includes net interest payments to the counterparties of interest rate swaps and caps as well as effects
from fair value measurement of such financial instruments. Included in interest expenses for the fiscal year ended March 31, 2006 is a positive adjustment related to a retroactive
de-designation of the Group's hedge relationship.

(See
the definition of all terms above in Section 4.11 and 5.4).

Interest Income

Interest income for the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006 amounts to T€1,944,
T€2,875 and T€3,867, respectively, and primarily relates to cash pooling. Of the total interest income, amounts of T€2, T€3 and
T€0 relate to non-financial assets and liabilities mainly in connection with tax issues. In April 2004 the cash pooling was transferred to KDVS. As a result, all of KDVS'
cash receipts were remitted to KDG and all cash disbursements were funded by KDG.

F-106

---



3.8   Expense/Income due to Changes in Capital attributable to the Limited Partners

The expense of T€302,900 (prior year: expense of T€462,600; period ended March 31, 2006: T€80,000) is based
on changes in the fair value of the liability for "Capital attributable to the Limited Partners".

3.9   Taxes on Income

Major components of income tax expense for the years ended March 31, 2008, March 31, 2007 and March 31, 2006 are:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar.31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Consolidated statement of operationsCurrent income taxCurrent income tax charge

1,985

2,907

2,701Prior year income tax charge/release

(399
)
(469
)
(194
)Deferred income taxRelating to origination and reversal of temporary differences

(1,867
)
16,913

8,811Income tax expense (+)/income (-) reported in consolidated statement of operations

(281
)
19,351

11,318


No deferred taxes were recorded in equity in the period under review.

As
a result of the 2008 corporate tax reform, the combined income tax rate will be 29,79% from 2008. Subsidiaries of the KDVS group are corporations which are subject to corporate income
tax and trade tax. The combined tax rate for these corporations is 29.79% which deviates from the expected tax rate of KDVS group.

A
reconciliation of income taxes for the years ended March 31, 2008, March 31, 2007 and March 31, 2006, determined using a combined statutory rate of 13.96% for
corporate and trade tax to actual income tax expense as recorded on the statement of operations, is as follows:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Profit (+)/loss (-) before income tax

(230,104
)
(410,687
)
(33,775
)Notional tax income at KDVS' s statutory income tax rate of 13.96% (2007 and 2006: 17.4%)

(32,123
)
(71,460
)
(5,877
)Adjustments in respect of current income tax of previous years

(399
)
(469
)
(194
)Unrecognized tax losses/gains

(1,337
)
3,053

(70
)Non-deductible expenses

53,102

92,884

25,749Tax-free income portions

(5
)
(12
)
0Special business expenses

(6,631
)
(8,404
)
(8,268
)Corporate income tax of subsidiary

394

3,670

372Tax-rate changes

(12,934
)Other

(348
)
(198
)
(398
)Income tax benefit (-)/expense (+) according to the statement of operations

(281
)
19,351

11,318


F-107

---



In the reporting year, the effects of the 2008 coporate income tax reform in Germany led to an one-time deferred tax income. The
anticipated tax rate of 13.96% (2007: 17.4%) is based only on the trade tax rate of 13.96%.

The
special business expense includes expenses and income, respectively, of the partners which are subject to taxation at the level of the partnership.

Deferred income taxes

Deferred income taxes at March 31, 2008, March 31, 2007 and March 31, 2006 relate to the following:

Consolidated balance sheet

Consolidated statement of operations2008

2007

2006

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€

T€

T€

T€Deferred income tax liabiltiesDebt issuance cost

4,145

4,593

685

(448
)
3,908

(10,976
)Fair value adjustments customer list

7,960

12,478

14,486

(4,719
)
(3,385
)
(1,228
)Accelerated depreciation for taxpurposes

44,223

42,195

25,674

2,028

16,521

19,146Asset Retirement Obligation

3,107

4,033

2,229

(926
)
1,804

(461
)Fair value adjustments fixed assets

0

778

1,998

(778
)
(1,220
)
116Intangible assets

2,302

3,140

3,725

(838
)
(585
)
238Revenue Recognition

6,052

3,791

0

2,261

3,791

0Finance lease contracts

0

0

39

0

(39
)
(43
)Hedges

604

942

0

(338
)
942

0Other

34

38

0

(4
)
38

0Gross deferred income tax liabilities

68,427

71,988

48,836Offsetting with deferred tax assets

(12,649
)
(14,716
)
(9,823
)Net deferred income tax liability

55,778

57,272

39,013Deferred income taxHedges

0

0

394

0

394

3,204Receivables

4,681

7,560

5,401

2,879

(2,159
)
(1,679
)Tangible assets

261

0

0

(261
)
0

0Other accruals

858

81

1,015

(777
)
934

(508
)Pension

810

685

1,039

(125
)
354

(438
)Finance Lease contracts

1,170

1,319

1,080

149

(239
)
(298
)Tax loss carryforwards

5,406

5,436

1,290

30

(4,146
)
1,738Gross deferred income tax assets

13,186

15,081

10,219Offsetting with deferred tax liabilities

(12,649
)
(14,716
)
(9,823
)Net deferred income tax asset

537

365

396Deferred income tax charge







(1,867
)
16,913

8,811


F-108

---





As of March 31, 2008, deferred tax assets on corporate income tax loss carryforwards of KDVS in the amount of T€1,561 (prior year T€0; period
ending March 31, 2006: T€1,106) and trade tax loss carryforwards of KDVS in the amount of T€36,953 (prior year: T€42,434; period ending
March 31, 2006: T€6,029) were recognized. Pursuant to IAS 12, the Group has assessed that the deferred tax assets for these tax loss carryforwards are probable to be
realized under consideration of the German minimum taxation rules. The tax loss carryforwards do not expire under current law.

Deferred
tax assets on further corporate income tax loss carryforwards of KDVS in an amount of approximately T€1,041 (prior year: T€0; prior year ending
March 31,2006: T€6,509) and trade tax loss carry forwards of KDVS in the amount of T€24,635 (prior year: T€28,289; prior year ending
March 31, 2006: T€9,792) have not been recognized due to uncertain recoverability.

Liabilities due to Income Taxes

The liabilities due to Income Taxes of T€12,960 (prior year: T€14,157; period ending March 31, 2006:
T€18,705) in the balance sheet relate to corporate and trade tax.

4.     Notes to the Balance Sheet

4.1   Cash and Cash Equivalents

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Cash at banks

15,422

54,108

173,449Short-term deposits

0

0

49,621


Cash and cash equivalents are primarily comprised of cash bank balances and money market funds.

4.2   Receivables

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Gross Trade receivables

214,858

160,434

160,583Bad debt allowance

(84,328
)
(59,276
)
(39,794
)Trade Receivables

130,530

101,158

120,789Receivables from Affiliates

0

256

38Receivables from Associates

0

0

0Receivables from Shareholders

0

0

288,3710

256

288,409


F-109

---



|
|

Balance at Beginning of Period

Provision for Bad Debt

Deduction/Write-Offs and other Charges

Balance at End of PeriodT€

T€

T€

T€Fiscal year ended March 31, 2008Allowance for doubtful accounts

(59,276
)
(39,324
)
14,272

(84,328
)Fiscal year ended March 31, 2007Allowance for doubtful accounts

(39,794
)
(25,014
)
5,532

(59,276
)Fiscal year ended March 31, 2006Allowance for doubtful accounts

(48,356
)
(6,691
)
15,253

(39,794
)


As of March 31, the analyses of trade receivables that were past due but not impaired were as follows:

Carrying amount past due but not impaired at the reporting dateNot
past due

less than 30 days

31-60 days

61-90 days

more than 90 days

Total(in T€)March 31, 2008

47,872

47,173

8,033

5,444

22,008

82,658March 31, 2007

34,208

28,398

19,556

12,326

6,670

66,950


Receivables with an invoice amount of T€50,739, T€14,937 and T€10,999 excluding VAT at
March 31, 2008, March 31, 2007 and March 31, 2006, respectively, were individually determined to be impaired and were written off by 100%.

Accounts
receivable past due but not impaired are expected to ultimately be collected.

Also
no indications of defaults are recognizable for accounts receivable that are neither past due nor impaired.

All
receivables were pledged as security in accordance with the Senior Credit Facility Agreement (see 4.11 Financial Liabilities) at March 31, 2008, March 31, 2007 and
March 31, 2006.

4.3   Inventories

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Raw materials, consumables and supplies

6,138

2,949

2,409Work in process

74

0

71Finished goods and merchandise

19,989

21,316

10,973thereof carried at net realizable value

1,293

1,723

68226,201

24,265

13,453


Due to an increase in number of customers and therefore an increase in demand of digital cable access, inventory of finished goods has been
reduced. These are capitalized in fixed assets. The total amount of inventories recognized as an expense amount to T€20,580, T€26,020 and T€28,863 for
the years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively. Expenses for inventory allowances related to obsolete inventory were approximately
T€69, T€258 and T€1,009, respectively. Inventories in an amount of T€7,238, T€6,373 and T€3,829 were
pledged in accordance with the Senior Credit Facility Agreement (see 4.11 Financial Liabilities) at March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

F-110

---



4.4   Receivables from Tax Authorities

Receivables from tax authorities relate to corporate income tax, trade tax and solidarity tax contributions and amounted to T€2,336,
T€751 and T€236 as of March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

4.5   Other Current Assets and Prepaid Expenses

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Withholding tax

0

0

1,651Creditors with debit balances

1,649

1,713

912Deposits

1,623

891

586Security withheld

357

357

357VAT refund claims

529

3,581

0Payments in advance

1,041

0

0Miscellaneous other receivables

663

724

5,683Current prepaid expenses:Deferred Costs for Equipment Located at customer locations

6,571

9,915

8,342Insurance

205

649

788Other

11,445

7,699

7,42324,083

25,529

25,742


As of March 31, 2008, other current prepaid expenses primarily consisted of prepaid cost for transaction, interest, fees and contributions,
Broadband fee and prepaid expenses for maintenance.

4.6   Intangible Assets

Software and Licenses and other Contractual and Legal Rights

Software and licenses primarily consist of software licenses for standard business software and costs related to the customer care and billing system. The
software is being amortized on a straight-line basis over three to six years through October 2010.

Beginning
April 1, 2006, the Group modified the conditions related to the minimum duration of customer contracts. Due to this modification, the Group began to capitalize the
related sales commissions of its sales agents and the costs of call center representatives based on future contractual revenue streams. The amortization period of these amounts is 8.5 years for
cable access contracts, which is based on the estimated average life of an access customer relationship, and 12 or 24 months for pay TV and Internet & Phone contracts which is based on
the fixed term period of those customer contracts. Amortization is calculated based on the straight-line method. For the fiscal years ended March 31, 2008 and March 31, 2007,
sales commissions in an amount of T€28,091 and T€17,384, respectively, were capitalized in software and licences and other contractual and legal rights. The
amortization of sales commissions was T€13,507 and T€4,806 for the fiscal years ended March 31, 2008 and March 31, 2007, respectively.

Internally Developed Software

For the years ended March 31, 2008, March 31, 2007 and March 31, 2006, approximately T€2,528, T€1,048 and
T€3,042, respectively, of costs for internally developed software were capitalized. For the fiscal year ended March 31, 2008, costs for internally developed software comprised
of T€795 for internally developed software and T€1,733 for prepayments for internally developed software. These amounts relate to costs incurred in the further
development of group-specific software applications,

F-111

---



particularly for its customer care and billing systems (CCB), Smile BK and digital pay TV. The software of CCB is being amortized over a period of 6 years, the software of Smile BK and digital
pay are being amortized over a period of 4 years. The remaining useful life of all internally developed software is between 0.5-3.5 years.

Customer List

For the years ended March 31, 2008, March 31, 2007 and March 31, 2006 the Group recorded additions in the customer list of
T€20,936, T€5,713 and T€6,178, respectively. The remaining useful life of the customer list is between 3.5 - 8.5 years.

For
further information relating to intangible assets, reference is made to the fixed asset register in Appendix 1, Appendix 2 and Appendix 3.

4.7   Property and Equipment

Asset Retirement Obligation

In many cases KDVS leases space in the cable ducts of DTAG to house KDVS` cable network. Related to these leases, KDVS is subject to contractual asset retirement
obligations. The costs were estimated at T€17,477 and were capitalized as of April 1, 2003. Further additions related to new asset retirement obligations in an amount of
T€723 were recognized as of March 31, 2008. Depreciation is charged over the normal useful life of the respective assets which resulted in a depreciation expense of
T€1,398, T€1,509 and T€1,260 for the years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Due
to a change in estimate with respect to the interest rate as of March 31, 2008 and March 31, 2007, the capitalized costs were reduced by an amount of
T€2,308 and T€1,182, respectively.

Operating Lease for CPE

To get connection to internet and phone services as well as to receive digital pay TV, the Group leases the necessary equipment to the customers. These leases for
which the Group is the lessor, are classified as operating leases. Therefore, the Group capitalizes the CPE as fixed assets based on acquisition cost and the cost of removing the asset at the end of
the lease. Over the useful life of 3 years the assets are depreciated using the straight-line method. In the Fixed Asset Schedule CPE is presented as part of technical equipment.
For the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006, the net book value of CPE amounted to T€22,468, T€4,352 and
T€0, respectively.

Finance Lease

As of March 31, 2008, the Group leased certain transponders under finance leases through 2012. As of March 31, 2008, March 31, 2007 and
March 31, 2006, the net book value of the capitalized transponders totaled T€33,136, T€38,449 and T€28,802, respectively. During the fiscal year
ended March 31, 2008, March 31, 2007 and March 31, 2006, KDVS recorded depreciation expense of T€7,759, T€5,664 and T€4,735,
respectively. The Group also recorded interest expense related to these finance leases of T€2,853, T€2,504 and T€2,473 for the fiscal year ended
March 31, 2008, 2007 and 2006, and paid T€7,197, T€5,145 and T€3,973, to reduce the financial liability, respectively.

There
is an option to extend the contract duration related to the lease of certain transponders by another five year period by mutual agreement of the parties, which must be reached at
least six months before the expiry of the first five year period.

F-112

---





Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

2008

2007

2006Minimum payments

Present value of payments

Minimum payments

Present value of payments

Minimum payments

Present value of paymentsT€

T€

T€

T€

T€

T€Within one year

10,645

8,228

10,008

7,184

7,083

4,740After one year but not more than five years

32,113

28,836

39,481

34,141

25,843

20,635After five years

0

0

536

534

6,982

6,693Total minimum lease payments

42,758

37,064

50,025

41,859

39,908

32,068Less amounts representing finance charges

5,694



8,166



7,840Present value of minimum lease payments

37,064



41,859



32,068


For further information relating to property and equipment, reference is made to the fixed asset registers in Appendix 1, Appendix 2
and Appendix 3.

4.8   Equity Investments in Associates

The carrying value of equity investments in associates is increased by the Group's share of income and reduced by dividends received. Net deductions to associates
amounted to T€298, T€227 and T€236, for the years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively, and
reflect KDVS' share of income recorded by associates in the amount of T€-142, T€-40 and T€-28, and the receipt of
dividends in the amount of T€156, T€187 and T€208, respectively. The fiscal year of all associates is the period from January 1 to
December 31.

Associates' accumulated balance sheets

Dec. 31, 2007

Dec. 31, 2006

Dec. 31, 2005T€

T€

T€Assets

9,386

8,671

8,296Liabilities

6,736

6,103

6,228


|
|

Associates' accumulated revenue and profit

Jan. 1-
Dec. 31, 2007

Jan. 1-
Dec. 31, 2006

Jan. 1-
Dec. 31, 2005T€

T€

T€Revenue

10,377

9,764

9,406Profit

733

651

780


For further information relating to financial assets, reference is made to the fixed asset registers in Appendix 1, Appendix 2 and
Appendix 3.

F-113

---



4.9   Other Current Liabilities

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Liabilities for personnel expenses

26,410

23,795

24,684Value added and employment taxes

8,038

7,397

10,138Finance leases

8,228

7,184

4,740Liabilities for other taxes

0

724

3,069Debtors with credit balances

818

7,882

2,831Miscellaneous other Liabilities

4,545

3,651

12,70848,039

50,633

58,170


4.10 Deferred Income

Deferred income primarily consists of customer prepayments on a quarterly, semi-annual or annual basis.

4.11 Financial Liabilities (current and non-current)

Current financial liabilities

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Accrued interest related toSenior Credit Facility

6,311

17,335

76,928Senior Add-on Facility

1,264

0

0Other

1,133

777

195Current financial liabilities

8,708

18,112

77,123


As of March 31, 2006, current financial liabilities included the current repayment obligation of the Senior Credit Facility amounting to
T€76,928, thereof T€75,704 related to the refinancing and T€1,224 related to accrued interest.

Non-current financial liabilities

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Financial LiabilitiesSenior Credit Facility

1,191,404

1,127,436

1,147,822Swap (see note 5.4)

0

0

3,8441,191,404

1,127,436

1,151,666


F-114

---



Senior Credit Facility

The Senior Credit Facility developed as follows:

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006T€

T€

T€Amount payable Tranche A

1,150,000

1,150,000

1,225,848Amount payable Tranche B

60,000

0

0Financing and transaction costs, Tranche A

(25,932
)
(25,932
)
(85,733
)Accretion of Tranche A

7,336

3,368

83,4111,191,404

1,127,436

1,223,526Thereof current

0

0

75,704Thereof non-current

1,191,404

1,127,436

1,147,822


On May 12, 2006, KDVS entered into a Senior Credit Facility agreement. This agreement was comprised of two facilities, a
T€1,150,000 term loan facility (Tranche A) and a T€200,000 revolving credit facility (Tranche B). Tranche A and Tranche B mature on
March 31, 2012 (together the Senior Credit Facility). On July 19, 2007 the Group amended its Senior Credit Facility and increased Tranche B to T€325,000 under the
same terms and conditions as the original Tranche B. The Senior Credit Facility is secured by all the assets of Kabel Deutschland Vertrieb und Services GmbH & Co. KG (KDVS)
and a first pledge on 100% of the shares of KDVS which are owned and offered as security by Kabel Deutschland GmbH under its guarantee. The carrying amount of KDVS' shares amounts to
T€3,278,200. Since the closing date, Tranche A (T€1,150,000) has been fully drawn.

Tranche B
may be borrowed, repaid and re-borrowed up until one month prior to the final maturity date. Borrowings under Tranche B may be used for general
corporate purposes. As of March 31, 2008, T€60,000 was outstanding under Tranche B.

The
financing and transaction costs related to Tranche B are shown under non-current prepaid expenses in the amount of T€3,679 and under current
prepaid expenses in the amount of T€767.

Interest
rates on the Senior Credit Facility are based on one, two, three or six months EURIBOR plus a margin.

The
margin on the Senior Credit Facility is based on the ratio of consolidated senior net borrowings to consolidated EBITDA (as defined in the Senior Credit Facility agreement) as
follows:

Ratio of Consolidated Total Net Borrowings to Consolidated EBITDA

Margin
(percentage per annum)Greater than 4:1

2.00Less than or equal to 4:1, but greater than 3.5:1

1.875Less than or equal to 3.5:1

1.75


As of March 31, 2008 the ratio of Consolidated Senior Net Borrowings to Consolidated EBITDA amounted to 2.61:1. Therefore, the applicable
margin was 1.75% as of March 31, 2008. KDVS pays an annual commitment fee of 0.625% on the undrawn commitment under Tranche B.

F-115

---



The
Senior Credit Facility is subject to several affirmative and negative covenants including, but not limited to, the following:

Test

RequirementEBITDA to Net Interest

1.75x3.00xSenior Net Debt to EBITDA

4.00x2.00x


As of March 31, 2008 the ratio of EBITDA to Net Interest amounted to 2.81. The ratio of Senior Net Debt to EBITDA amounted to 2.61.

Mandatory
prepayments are required in case of (i) a change of control, public flotation or sale of the business, (ii) certain third party receipts, (iii) the sale of
shares on the public market (if consolidated senior total net borrowings to consolidated EBITDA is greater than or equal 2:1).

At
March 31, 2008, T€1,150,000 was outstanding under Tranche A at an interest rate of approximately 6.14%. At March 31, 2008,
T€60,000 was outstanding under Tranche B at an interest rate of approximately 6.1127%. The Group entered into interest rate caps and swaps in order to mitigate the exposure to
interest rate risks, although these are not accounted for as hedges.

Senior Add-on Facility

On October 22, 2007 KDVS signed a T€650,000 Senior Add-on Facility or the Tranche C, restricted for usage in
acquisitions which ranks pari-passu with the existing T€1,150,000 Senior Credit Facility.

The
Senior Add-on Facility matures in March 2013 and carries a coupon of EURIBOR + 325bps. The Tranche C can be cancelled in part or completely at any
time. The Facility has the same financial covenants as the existing Term Loan Facility.

As
of March 31, 2008, Tranche C is unfunded. Since January 22, 2008, KDVS has paid an annual commitment fee of 1% on the undrawn commitment under Tranche C.

The
financing and transaction costs related to Tranche C are shown under non-current prepaid expenses in the amount of T€6,647.

4.12 Provisions for Pension

The following tables summarize the components of net benefit expense recognized in the statement of operations and the funded status and amounts recognized in the
balance sheet for the respective plans:

Net benefit expenses recognized in the consolidated statement of operations

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Current service cost

2,956

2,578

1,663Interest expense

1,242

1,064

902Net actuarial losses

124

233

2Plan disbursements

16

(77
)
0Other

0

0

0Net benefit expense

4,338

3,798

2,567


The expenses arising from the accrual of interest on pension obligations are recorded in interest expense.

F-116

---



The
recognized expense is allocated to the following items of the statement of operations:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Cost of services rendered

1,120

1,030

961Selling expenses

1,499

1,368

284General and administrative expenses

477

336

420Interest expense

1,242

1,064

9024,338

3,798

2,567


Benefit Liability

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Defined benefit obligation

25,596

25,931

23,675Unrecognized actuarial (gains) losses

253

(4,352
)
(5,716
)Benefit liability

25,849

21,579

17,959


The Group has several defined benefit pension plans for different groups of employees (collective agreement (CA) employees,
non-collective agreement (NCA) employees and other). The majority of the plans are average salary plans, which are in accordance with regulations applicable for public servants. These
plans were continued with substantially the same terms upon the purchase of the business from DTAG. The plans for other employees represent individual commitments.

The
annual contributions for CA and NCA employees amount to 2.5% of their contractually agreed annual fixed salaries. The annual contributions for NCA employees increase by 9% for
salaries lying above the income threshold for contributions to the statutory pension scheme. Each contribution is translated into an insured sum.

The
insured sum is calculated by multiplying the contribution by the respective age factor of the employee and is credited to a pension account. From the age of 61 to the onset of
retirement, each employee receives an additional annual bonus sum amounting to 6% of the most recent pension account balance. The contribution rates for individual pension commitments are determined
on an individual basis.

Changes in the present value of the defined benefit obligation are as follows:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006T€

T€

T€Defined Benefit Obligation at April 1

25,931

23,675

17,199Current Service Cost

2,956

2,578

1,663Interest Cost

1,242

1,064

902Actual Benefit Payments

(81
)
(39
)
(113
)Acquisition/Business Combination

30

(217
)
(287
)Actuarial (Gains)/Losses

(4,482
)
(1,130
)
4,311Defined Benefit Obligation at March 31

25,596

25,931

23,675


F-117

---



The principal assumptions used in determining pension benefit obligations for the Group plans are shown below:

Underlying actuarial assumptions:

Apr. 1, 2007-
Mar. 31, 2008

Apr. 1, 2006-
Mar. 31, 2007

Apr. 1, 2005-
Mar. 31, 2006%

%

%Discount rate as of March 31

5.65

4.80

4.50Future salary increases

3.25

2.75

2.753.50Future pension increases

1.001.50

1.001.50

1.001.50Staff turnover

4.50

5.00

5.00


Amounts for the current and previous four periods are as follows:

Mar. 31,
2008

Mar. 31,
2007

Mar. 31,
2006

Mar. 31,
2005

Mar. 31,
2004T€

T€

T€

T€

T€Defined benefit obligation

25,596

25,931

23,675

17,199

18,567Plan assets

0

0

0

0

0(Deficit)/surplus

25,596

25,931

23,675

17,199

18,567Experience adjustments on plan liabilities

(715
)
277

0

0

0


4.13 Other Provisions (current and non-current)

Balance as of April 1, 2007

Utilization

Reversal

Addition

Interest

Balance as of March 31, 2008T€

T€

T€

T€

T€

T€Anniversary payments

224

(56
)
0

14

0

182Asset retirement obligations

21,020

(330
)
(32
)
1,686

(258
)
22,086Restructuring

14,636

(12,328
)
(1,465
)
1,305

0

2,148Legal fees and litigation costs

1,750

0

0

151

0

1,901Other

1,668

(674
)
(52
)
593

0

1,535Total provisions

39,298

(13,388
)
(1,549
)
3,749

(258
)
27,582


Other provisions can be segregated into current obligations (T€5,584) and non-current obligations
(T€22,268).

Restructuring
provisions are shown as adjusted by additions that were utilized or reversed within the same year.

Balance as of April 1, 2006

Utilization

Reversal

Addition

Interest

Balance as of March 31, 2007T€

T€

T€

T€

T€

T€Anniversary payments

246

(25
)
0

3

0

224Asset retirement obligations

19,964

(41
)
0

1,391

(294
)
21,020Restructuring

6,393

(6,059
)
0

14,302

0

14,636Legal fees and litigation costs

1,807

(35
)
(436
)
414

0

1,750Other

994

0

(100
)
774

0

1,668Total provisions

29,404

(6,160
)
(536
)
16,884

(294
)
39,298


F-118

---



Other provisions can be segregated into current obligations (T€18,054) and non-current obligations
(T€21,244).

Due
to a change in estimate with respect to the interest rate as of March 31, 2007, the reduction in interest of T€294 related to asset retirement obligations
consists of T€1,182 for the change in estimate and T€888 for the accretion in interest which is considered in interest expense.

Balance as of April 1, 2005

Utilization

Reversal

Addition

Interest

Balance as of March 31, 2006T€

T€

T€

T€

T€

T€Anniversary payments

247

(24
)
0

23

0

246Asset retirement obligations

18,041

(929
)
0

2,129

723

19,964Restructuring

1,874

(605
)
(1,081
)
6,205

0

6,393Legal fees and litigation costs

1,557

(80
)
0

330

0

1,807Other

3,413

(4,504
)
0

2,085

0

994Total provisions

25,132

(6,142
)
(1,081
)
10,772

723

29,404


Other provisions can be segregated into current obligations (T€9,194) and non-current obligations
(T€20,120).

Provisions for restructuring

The following development of restructuring provisions includes effects that were utilized or reversed within the same year.

At
the end of fiscal year ended March 31, 2006, KDVS announced a restructuring plan affecting the regional technical departments, the central marketing department and the sales
department. As of March 31, 2007, T€2,455 remained as a restructuring provision of which T€2,165 was utilized and T€54 were reversed during the
fiscal year ended March 31, 2008. Based on the final negotiations related to this restructuring, the
restructuring accrual increased by T€202 and personnel expense in the same amount was recorded. As of March 31, 2008 the restructuring provision amounted to
T€438.

Additional
restructuring plans for the centralization of the regional IT-departments from various regions to Unterföhring, the outsourcing of parts of the
IT-department and the reorganization of the regional technical departments were announced by KDBS. The provision for restructuring amounted to T€1,735 as of
March 31, 2007. At the end of fiscal year March 31, 2008, the total provision amounted to T€1,292 due to a utilization of T€648, a reversal of
T€860 and additional accruals of T€1,065. Amounts recorded were accrued as personnel expenses.

As
of March 31, 2007, KDVS announced an additional restructuring plan relating to the regional technical departments. As of March 31, 2007 T€10,412 remained
as a restructuring provision. In the fiscal year ended March 31, 2008 the provision increased by T€1,598 due to the finalization of the negotiations related to this
restructuring which was recorded as personnel expense. Furthermore an amount of T€10,941 was utilized and an amount of T€651 was reversed during the fiscal year ended
March 31, 2008. As of March 31, 2008 T€418 remained as a restructuring provision.

Provisions for asset retirement obligation

All asset retirement obligation calculations utilize an inflation rate of 2.01% (20-year-OECD-average) and a risk-free
interest refinancing rate of 5.65% (prior period: 4.8% and for the period ended March 31, 2006: 4.5%). The obligation is accreted to the expected payment amount using the effective interest
method.

F-119

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Approximately 93% of KDG's obligations are related to technical equipment, including different kinds of cable and signal transmitting and receiving technology in cable ducts of DTAG. KDG
assumes that 30% of the technical equipment will be replaced by other technologies after 15 years. The remaining 70% of the technical equipment is expected to be replaced after 30 years.

The
remaining 7% of the asset retirement obligations are divided into accruals for furniture and fixtures and miscellaneous restoration obligations.

A
change in estimate with respect to the interest rate as of March 31, 2008 resulted in a decrease of the provision amounting to T€2,308. Further additions for new
asset retirement obligations recognized as of March 31, 2008 increased the provision by T€723.

Other

Provisions for other primarily include provisions for obligations due to onerous contracts and premature cancellation of contracts.

4.14 Other Non-Current Liabilities

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Finance leases

28,836

34,675

27,328Liabilities related to share-based payments (MEP)

7,236

1,819

75436,072

36,494

28,082


4.15 Capital attributable to the Limited Partners

The rights of limited partners regarding repayment of the capital contribution to KDVS are reported in the IFRS consolidated financial statements of KDVS as
liabilities under the item "Capital attributable to the Limited Partners".

4.16 Equity

Kabel Deutschland Verwaltungs GmbH (KDG Verwaltung) is the general partner of KDVS. KDG Verwaltung is fully owned by KDG.

KDG
as the limited partner of KDVS owns a capital share of T€3. The second limited partner, Kabel Deutschland Vertrieb and Service Beteiligungs GmbH & Co KG
(KDVS Beteiligung), has no shares and is liable with an amount of T€1.

Considering
the right of repayment of the contributed capital by the limited partners, as of April 1, 2004, the limited partnership capital (T€2), the capital
reserve (T€293,823) and accumulated deficit (T€1,062,175) were adjusted to capital attributable to the limited partners (T€1,356,000) in accordance with
IAS 32 and IFRS 1.36A.

As
of April 1, 2005, KDG transferred the entire assets and liabilities of 4 sub-divisions to KDVS. In relation to this transaction the Limited Partnership Capital
increased from T€2 to T€3.

Capital reserve

On October 8, 2003, KSH which was merged into KDG as of January 1, 2004, contributed a loan receivable of T€48,000 to the capital
account of MSG.

F-120

---



On
March 25, 2004, LuxCo contributed its loan receivable of T€140,097 from KDVS to the capital reserve of KDG. On March 26, 2004, in a second step, KDG
contributed this partner's loan to the capital account of KDVS.

On
July 2, 2004, KDG made a capital contribution of T€475,000 to KDVS. On November 19, 2004, KDVS' limited partner KDG withdrew capital of
T€475,000.

In
connection of the transfer of four KDG- sub-divisions to KDVS the difference between the underlying assets and liabilities (T€4,361) and the
increase in Limited Partnership Capital (T€1) increased the capital reserve by T€4,360.

For
the years ended March 31, 2008, March 31, 2007 and March 31, 2006, other additions relate to share-based payments of T€656,
T€3,151 and T€7,938, respectively resulting from the repurchase of interests granted under the Group's interest programs and the repurchase of interests granted by the
Group for exercised options the Group's option programs. Additionally, due to interests granted under the MEP IV interest program, the capital reserve decreased by T€3,469 as of
March 31, 2008 (prior year: T€0, for the fiscal year ended March 31, 2006: T€0).

Cash flow hedge reserve

Changes in the fair value of the currency cash flow hedges are recognized directly in equity under cash flow hedge reserve. The accumulated amount is released to
profit or loss insofar the hedged transaction affects profit or loss of the year.

Available-for-sale reserve

Changes in the fair value of financial assets classified as available-for-sale are recognized directly in equity under
available-for-sale reserve.

Accumulated loss

For the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006, the net loss was T€229,822,
T€430,038 and T€45,015, respectively.

Included in this amount are loans granted to Cayman Cable Holding L.P. in its capacity as parent of the group in the amount of T€13,504 as of March 31, 2008
repayable on March 2016. The granted loans are classified as transactions with parents and therefore included in Equity.

5.     Other Notes

5.1   Other Financial Obligations and Contingencies

Leasing and Rental Obligations

KDVS has entered into several long-term service agreements with DTAG as well as its subsidiary T-Systems International GmbH. These
agreements include but are not limited to usage and access agreements for underground cable ducts, fiber optic cables, co-location facilities and energy. The agreements have primarily
fixed prices, either based on a monthly or unit basis, and are valid for up to thirty years. However, KDVS can terminate the agreements with a notice period of 12 to 24 months.

F-121

---



The
financial obligations as of March 31, 2008, March 31, 2007 and March 31, 2006 include the obligations arising due to the earliest possible termination date of
KDVS and are as follows:

March 31, 2008
Due





March 31, 2007
DueType of liability

Due
up to
1 year

between
1 and
5 years

more
than
5 years

Total

Due
up to
1 year

between
1 and
5 years

more
than
5 years

Total(in T€)1.
Agreements with DTAG and
subsidiaries

237,391

310,822

85,845

634,058

208,897

291,054

31,897

531,8482.
License, rental and operating lease commitments

29,265

60,806

5,472

95,543

36,455

64,471

13,233

114,1593.
Other

603,969

8,286

1,701

613,956

28,921

18,092

1,922

48,935Total

870,625

379,914

93,018

1,343,557

274,273

373,617

47,052

694,942


|
|

March 31, 2006
DueDue
up to
1 year

between
1 and
5 years

more
than
5 years

Total(in T€)1. Agreements with DTAG and subsidiaries

206,385

271,138

24,591

502,1142. License, rental and operating lease commitments

58,679

66,660

20,835

146,1743. Other

21,350

45,234

2,293

68,877Total

286,414

383,032

47,719

717,165


The lease payments for cable ducts are T€103,492, T€103,450 and T€103,928 for the fiscal years
ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively. While the Group has the legal right to cancel the agreements for the lease of the cable ducts with a notice
period of 12 - 24 months, the technological requirements to replace leased capacity represent economic penalties which would result in the reasonably assured renewal
of the leases for a certain period of time. Management expects that for 30% of the leased capacity the economic penalties will require renewal of the contracts for 15 years, when the Group
believes it will have the ability to replace the capacity. This results in a non-cancelable lease term of 15 years for this portion of the leased cable ducts. For the remaining 70%,
the lease term is expected to include all renewal periods under the agreement, resulting in a non-cancelable lease term of 30 years through March 31, 2033, after which time
the lease can be cancelled at the option of DTAG. As of March 31, 2008, 2007 and 2006 the total financial obligations for cable ducts amounted to T€2,116,935,
T€2,220,200 and T€2,323,465, respectively.

In
the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006, KDVS had leasing expenses amounting to T€167,890,
T€176,058 and T€173,783, respectively.

The
increase of other financial obligations in the fiscal year ended March 31, 2008 related to the purchase agreement with Orion Cable signed during the fiscal year. The Group
refers to Section 5.7.

Contingencies

On December 16, 2003, KDVS received notice from Arbeitsgemeinschaft Kabel (ARGE Kabel), a copyright collection agency representing three collecting
societies (GVL, VG Wort, VG Bild-Kunst), which indicated that the Group could owe up to approximately T€3,000. This represents 40% of the amount paid to VG Media for
copyright fees for the fiscal year ended December 31, 2003. The Group believes these fees should be paid by GEMA and VG Media as a condition to certain agreements between these two collecting
societies and the Group. Therefore the Group has refused to make the

F-122

---



payment.
In September 2007, the Munich Regional Court dismissed the claim. However, ARGE Kabel filed its appeal with the Munich Higher Regional Court. The proceedings in the second instance are still
pending but Management believes the lower court ruling will be confirmed.

General Risks

In the course of its business activities, the Group faces general economic risks due to relationships with customers, suppliers and employees. In addition,
general risks exist regarding obligations under legal and tax authorities. Currently there are no proceedings related to these risks.

5.2   Related Parties

In accordance with IAS 24, persons or companies which are in control of or controlled by KDVS must be disclosed, unless they are already included as
consolidated companies in KDVS' consolidated financial statements. Control exists if a shareholder owns more than one half of the voting rights in KDVS or, by virtue of an agreement, has the power to
control the financial and operating policies of KDVS' management.

The
disclosure requirements under IAS 24 also extend to transactions with associated companies as well as transactions with persons who have significant influence on KDVS'
financial and operating policies, including close family members and intermediate entities. Significant influence is deemed to be exerted by persons holding an interest in KDVS of 20% or more, a seat
on the management board or the supervisory board, or other key management positions.

The
transactions of KDVS with associated companies are all attributable to the ordinary activities of these respective entities.

The
parent companies of KDVS are:



The parent company of KDG GmbH is KDGHoldCo. The latter company is wholly owned by LuxCo which in turn is wholly owned by Cayman Cable. Cayman Cable is owned by Providence Equity
Partners, the ultimate parent.

Related Party Transactions

KDVS conducted the following transactions with related parties in the years ended March 31, 2008, 2007 and 2006 (in T€).

Cayman Cable

Cable Holding S.à.r.l.

Kabel Holding GmbH2007/ 2008

2006/ 2007

2005/ 2006

2007/ 2008

2006/ 2007

2005/ 2006

2007/ 2008

2006/ 2007

2005/ 2006Goods and services sold

0

0

0

0

0

0

0

0

0Goods and services purchased

0

(253
)
0

0

0

0

0

0

0Interest income

0

0

0

0

0

0

0

98

0Interest expense

0

0

0

0

0

0

0

0

0Receivables

0

253

0

0

0

0

0

0

0Liabilities

0

0

0

0

0

0

0

0

0


F-123

---



|
|

Kabel Deutschland GmbH

KABELCOM Braunschweig(1)

KABELCOM Wolfsburg(2)2007/
2008

2006/
2007

2005/
2006

2007/
2008

2006/
2007

2005/
2006

2007/
2008

2006/
2007

2005/
2006Goods and services sold

725

1,435

0

3,099

2,963

2,242

1,571

1,798

1,671Goods and services purchased

28,476

22,191

30,536

167

150

82

129

160

129Interest income

20,457

13,228

34

0

0

0

0

0

0Interest expense

0

0

1,007

0

0

0

0

0

0Receivables

0

481,598

427,668

0

94

0

0

0

0Liabilities

0

78,327

139,412

0

0

0

0

1

0


---

Most of the significant contracts with associated companies are signal delivery agreements concluded in the ordinary course of business.

According
to the partnership agreement KDVS has a regular annual payment of T€3 to Kabel Deutschland Verwaltungs GmbH for representing the partnership and
performing its obligations under the partnership agreement.

Between
KDVS Group and its shareholder KDG the following transactions should be recognized:

In
an arrangement dated July 14, 2004 and with economic effectiveness as of January 1, 2004, KDG contributed the business of the former DKS to KDBSB in return for new
shares.

KDG
then contributed the shares in KDBSB to KDVS in return for an increase in its capital share. KDVS then contributed the shares in KDBSB to MSG in return for new shares. KDBSB was then
merged into MSG.

In
a spin-off arrangement dated August 3, 2004, the KDVS (old) transferred its operations with economic effect as of January 1, 2004, to Kabel
Asset GmbH & Co. KG in return for shares pursuant to Sec. 123 (3) UmwG (Umwandlungsgesetz: German Law of Reorganizations).
The spin-off was carried out in accordance with the cost method, i.e. at the prevailing fair value. The new shares issued under the spin-off were also recognized by the
KDVS (old) at the prevailing value. After the spin-off was entered in the commercial register on August 25, 2004, the KDVS (old) merged into KDG by way of collapse merger. This
collapse merger was disclosed by KDG in accordance with the book value method.

On
March 25, 2004, LuxCo contributed its loan receivable of T€140,097 from KDVS to the capital reserve of KDG. On March 26, 2004, in a second step, KDG
contributed this partner's loan to the capital account of KDVS.

On
July 2, 2004 KDG made a capital contribution of T€475,000 to KDVS. On November 19, 2004, KDVS' limited partner KDG withdrew capital in an amount of
T€475,000.

As
of July 29, 2005 (effective April 1, 2005) KDG and KDVS signed aAusgliederungs- und Übernahmevertrag(spinoff and acquisition agreement) for KDG`s operating units "Central Marketing", "Central Sales", "Product Management" and "Corporate Services". KDG transferred all of these units with all the
belonging assets and liabilities at their book values as of March 31, 2005 in exchange for an increase in the limited partnership capital of €1 thousand and additional
paid in capital in the amount of €4,360 thousand.

The
acquired assets consisted mainly of licences (€2,544 thousand), property and equipment (€2,423 thousand), receivables from affiliates
(€10,693 thousand) and other assets (€1,575 thousand).

F-124

---



The
acquired liabilities consisted mainly of provision for pensions (€616 thousand), other provisions and trade payable (€12,806 thousand).

Goods
and services purchased mainly relate to cost allocations for management services provided by KDG to its operating subsidiaries. The year-on-year increase is
mainly the result of increased cost allocations for Management Services due to the launch of "Kabel Digital". Management Services are allocated to general and administrative expenses in the amount of
T€28,418 (prior year: T€21,914; period ending March 31, 2005: T€30,146).

In
the fiscal years ended March 31, 2008, 2007 and 2006 KDVS received Management fees in the amount of T€725, T€1,435 and T€1,293,
respectively, for rental expenses from KDG.

Related Party Guarantees

On July 2, 2004 KDG issued senior notes with a nominal value of T€250,000 as well as senior notes with a nominal value of
TUSD 610,000, both with a maturity date in 2014 (2014 Senior Notes). The outstanding loan amount is due and payable on July 1, 2014. The 2014 Senior Notes are senior liabilities that
rank pari passu with all existing and future liabilities of KDG. The 2014 Senior Notes are secured by a second-ranking lien on the shares held by KDG in KDVS.

KDVS
itself is the guarantor of the KDG's debt. The Guarantee is a senior subordinated obligation of KDVS and ranks junior in right of payment to all of its existing and future
unsubordinated debt. The Guarantee will rank senior to all existing and future obligations of KDVS expressly subordinated to the Guarantee. The Guarantee is effectively subordinated in right of
payment to all of KDVS' existing and future secured debt (including under the Senior Credit Facilities), to the extent of the value of the assets securing such debt, and to all liabilities of any
subsidiary of KDVS.

Transactions with Members of the Management Board

The Group is presented by its general partner Kabel Deutschland Verwaltungs GmbH. The Management equals to the one of KDG and therefore payments to the
management board are made by KDG directly.

Management
received short-term employee benefits in the amount of T€3,594 , T€3,871 and T€3,129 as well as
post-employment benefits in the amount of T€300, T€383 and T€377 for the fiscal year ended March 31, 2008, March 31, 2007 and
March 31, 2006, respectively.

Additionally
management participates in the Group's Management Equity Participation Program and is holding interests in the Cayman Cable Holding L.P. of 1.05% upon which they have
received non-cash share-based payments due to changes in the measurement of the carrying amount of the underlying interests in the fiscal year ending March 31, 2008 in the amount of
T€3,451. Cash paid for the repurchase of interests from former members of Management totaled T€7,557 during the period ended March 31, 2008. During the fiscal
year ending March 31, 2007, non-cash share-based payments to members of the Management amounted to T€15,913. In the fiscal year ended March 31, 2006,
Management has not received any share-based payments due a negative change in the carrying amount of the underlying interests. Cash paid for the repurchase of interests from Management totaled
T€5,159 during the period ended March 31, 2006.

In
total, management received remuneration in the amount of T€14,902, T€20,167 and T€8,665 for the fiscal years ended March 31,
2008, March 31, 2007 and March 31, 2006, respectively.

For
further details regarding share-based payments refer to note 5.3.

Dr. Adrian v. Hammerstein obtained a loan with an interest rate of 5.0% p.a. in the amount of T€1,200 from Cayman Cable Holding L.P., accrued interest as of
March 31, 2008 amounted to T€51. Dr. Manuel Cubero obtained a loan with an interest rate of 5.5% p.a. in the amount of T€960 from

F-125

---



Cayman Cable Holding L.P., accrued interest as of March 31, 2008 amounted to T€43. The principal amount of each of these loans is outstanding.

Former Members of Management and their surviving dependents

For former Members of Management and their surviving dependents related to pension claims liabilities of T€129, T€144 and
T€147 have been recorded for the fiscal years ended March 31, 2008, March 31, 2007 and March 31, 2006, respectively.

Transactions with Shareholders

In the fiscal year ended March 31, 2008, Providence Equity Partners (ultimate Shareholder) received Management fees and Director fees and Transaction fees
in the total amount of T€1,671 (prior year: T€1,882, for the fiscal year ended March 31, 2006: T€100)

5.3   Share-Based Payments

Management Equity Participation (MEP) Programs

At March 31, 2008, the Group has five Management Equity Participation Programs (MEP I, MEP II, MEP III, MEP IV and MEP V) in place. MEP I provides
direct and indirectvia Kabel Management Beteiligungs GbRownership in Cayman Cable Holding L.P., the parent
company of KDG and LuxCo. MEP II and III provide options in Cayman Cable Holding L.P. interests. MEP IV is split into an interest program providing indirectvia Kabel Management
Beteiligungs- (MEP IV) GbRownership in Cayman Cable Holding L.P. and an option program providing options in Cayman Cable Holding L.P. interests. MEP V also provides
options in Cayman Cable Holding L.P. interests. Certain employees (including senior executives) of the Group receive remuneration in the form of share-based payment transactions.

MEP I

In the fiscal year ending March 31, 2008, no members of KDVS Management participate in the Cayman Cable Holding L.P. directly as limited partners
(the Direct Management Equity Program Idirect MEP I). Certain members participate indirectly through interests in Kabel Management Beteiligungs GbR, a separate partnership which is itself
a limited partner in Cayman Cable Holding L.P. (the Indirect Management Equity Program Iindirect MEP I). The terms of both programs are substantially the same.

On
February 11, 2004, Cayman Cable Holding G.P. Co. Ltd. (the general partner) and the limited partners of the Partnership entered into a second amended and
restated limited partnership agreement. This agreement sets forth the structure relating to the governance and ownership of the Partnership and the terms of the direct MEP I. Under the direct MEP I,
certain members of Management were admitted to the Partnership as limited partners holding common interests in the Partnership. Other members of Management were admitted to the Program through
ownership in Kabel Management Beteiligungs GbR, a limited partner in the Partnership holding common interests in the Partnership.

The
members both of the direct MEP I and indirect MEP I were required to pay a capital contribution upon admission. The direct MEP I and the indirect MEP I members, respectively, have
financed up to 70% of the members' contributions with a loan from the Partnership.

Interest
accrues on such loans at a rate of 5.5% per annum, compounded annually, and is repayable in accordance with an amortization schedule in the relevant agreement. The members are
entitled to proceeds of gains resulting from the sale of shares in LuxCo by Cayman L.P. With these proceeds the granted loans were repaid.

F-126

---



Put
or call provisions apply to the members' Partnership interests in the event that such member cease to be employed by KDVS or its subsidiaries.

Certain
limits apply with respect to the transfer of interests in the Partnership. Limited partners are not permitted to transfer their interests in the Partnership (subject to certain
exceptions for affiliate transfers and transfers to subsidiaries or family vehicles) without the consent of the general partner, Cayman Cable Holding G.P. Co. Ltd. Such consent
may be given subject to conditions or restrictions or may be withheld at the general partner's absolute discretion. Notwithstanding the foregoing, no transfers shall be valid or effective if the
transfer would violate any applicable securities laws or it would cause the Partnership to lose any of its exemptions or favorable treatment under the U.S. Federal income tax laws, ERISA or the U.S.
Investment Company Act of 1940.

As
of April 19, 2006, Cayman Cable Holding L.P. agreed to assume obligations under PIK-Notes issued by P4 Cayman Cable Ltd. As a result of that, the
Partnership decided to adjust the number of interests to reflect the decrease in the value of MEP I members shares resulting in the issue of additional interests to the MEP I holders. The number of
interests additionally issued as adjustment without any consideration was 8,313 in the direct MEP I and 97,804 in the indirect MEP I.

During
the fiscal year ended March 31, 2008, 4 1,986 interests in Cayman Cable Holding L.P. were sold by members of the indirect MEP I. These interests were repurchased by
Cayman Cable Holding L.P. at an average price of €14.66 per interest. Since Cayman Cable Holding L.P. repurchased these interests for cash and has not required KDVS to
fund the repurchase, the liabilities related to these interests have been treated as a contribution from the parent when settled, resulting in an additional increase in capital reserve of
T€616.

One
member of MEP I was reallocated from KDVS to KDG due to a change in its responsibilities, resulting in a decrease of the number of MEP I interests to be recognized by the Group of
209,930.

Grant date

The grant date determines the point in time at which the fair value of the services of the members of MEP is measured. The persons who are members of the direct
MEP I participate in Cayman Cable Holding L.P. with a grant date as of March 13, 2003. The persons who are members of the indirect MEP I participate with a grant date as of
November 27, 2003. For one limited partner in the Partnership the grant date was October 1, 2003.

On
April 19, 2006, Cayman Cable Holding L.P. granted the holders of interests an additional year vesting. As a result, the vested part of the interests of the MEP I holders
increased by 25% in addition to the scheduled vesting.

Number of interests granted

As of March 31, 2008, Management holds indirect interests of 0.04% in the Cayman Cable Holding L.P. The total consideration paid for these interests
amount to T€30.

Measurement

Under the indirect MEP I as of November 27, 2003, the fair value of the interests in Kabel Management Beteiligungs GbR, which is valued by the fair value
of its contribution in the Cayman Cable Holding L.P. amounts to T€616.

At
each balance sheet date through March 31, 2006, the carrying value of the repurchase obligation related to vested MEP I interests has been based on a formula defined in the
partnership agreement for fair price estimation of the respective shares, which have been negotiated between the

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partners
and are documented in the partnership agreement (third amendment). Effective April 19, 2006 and in connection with the 5th amendment to the limited partnership
agreement, the controlling shareholders of Cayman Cable modified the settlement terms of MEP I interests in Cayman Cable Holding L.P to change the settlement formula from an EBITDA formula with fixed
multiples to a fair value based model. The difference between repurchase obligation as computed at each reporting date and the consideration for the interests is accounted for as personnel expense.
This amount is recognized over a vesting period of four years commencing at grant date using the accelerated recognition method in accordance with IFRS 2 whereby 25% are vested at each
anniversary. Therefore the program is split into 4 different layers, for which fair value is calculated at each reporting date. As of March 31, 2008, March 31, 2007 and March 31,
2006 T€1,402, T€4,030 and T€517 included in the valuation of other liabilities, have been vested. Included in these amounts is the contribution made by
the members of MEP I since such contributions are a liability in case of the sale of the interests. Due to changes in the fair value of the interests and due to additional vesting the Group recognized
an increase in expenses and an increase in other liabilities for the fiscal year ended March 31, 2008 in the amount of T€415 (prior year (including the change from a formula
based price to a fair value based price): T€4,392). In the fiscal year ended March 31, 2008, no changes in personnel expense due to the sale of interests have been recognized
(prior year: decrease of T€352).

MEP II and III

MEP II and MEP III are option programs that differ in the exercise price only. Under these programs, the participants were granted options on interests in the
Cayman Cable Holding L.P.

As
of April 19, 2006, Cayman Cable Holding L.P. agreed to assume obligations under PIK-Notes issued by P4 Cayman Cable Ltd. As a result of this equity
restructuring, the Partnership adjusted the number of options to reflect the decrease in value of the underlying interests resulting in the issuance of additional options to the MEP II and III
holders. The number of options issued for that adjustment was 34,950 in MEP III. No additional options were issued to employees of the Group in MEP II. At the same time, the strike price for the
options was adjusted by the same proportion to keep the total strike price constant. The value of the total outstanding options before and after this adjustment was the same.

Number of options granted

As of March 31, 2008, in total 62,985 options have been granted to the participants in MEP III representing a 0.06% interest in the Cayman Cable
Holding L.P. The increase in the number of options granted compared to March 31, 2007 is due to the change of responsibilities of one member of MEP III from KDG to KDVS. This change
resulted in a reallocation of 20,995 options.

Grant date and terms

The maximum term of the options is ten years after grant date. The options will be forfeited if they are not exercised. The weighted average remaining life of the
options is 1.75 years as of March 31, 2008.

On
April 19, 2006, Cayman Cable Holding L.P. granted the holders of existing an additional year vesting. As a result, the vested part of those options within MEP III
increased by 25% in addition to the scheduled vesting.

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Method and extent of exercise

The options will become immediately vested and exercisable upon any of the following events:



In
addition, the general partner of Cayman Cable Holding L.P. may, at its absolute discretion, allow options to become exercisable, in whole or in part, prior to an exit event if
any other transaction occurs which would materially affect the value of the options.

The
general partner may decide that, instead of procuring the issue or transfer of interests in Cayman Cable Holding L.P. (LP interests) on exercise of an option that it will:



Any
other transfer of options is restricted to certain limited options (e.g. ceasing employment). Any transfer of an option otherwise than permitted in this program would cause
the option to lapse.

Measurement

The measurement of the fair value at grant date and each consecutive reporting period is based on the Black-Scholes option pricing model. The main parameters are
the estimated fair value of the interests, expected volatility of the values of the interests, the estimated term of the options and the risk free interest rate on grant date (based on the estimated
average life of the options of five years). The grant of the options is not dependent on market conditions, whereby expected future distributions have been included in the calculation.

The
volatility was estimated at 25% by benchmarking historical volatilities of listed international cable companies that are comparable regarding the parameters that typically influence
the volatility.

The
strike price is €4.53 for MEP III.

Number of optionsRisk free interest rate at grant date

Fair value of option at grant date

Fair value of shares at grant dateGrant date

March 31, 2007

Granted

Reallocation

Called

Exercised

March 31, 2008

Fair value of option at measurement date(%)

in T€

in T€

in T€January 1, 2005 MEP III

41,990

0

20,995

0

0

62,985

2,99

228

388

65641,990

0

20,995

0

0

62,985


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|
|

Number of optionsRisk free interest rate at grant date

Fair value of option at grant date

Fair value of shares at grant dateGrant date

March 31, 2006

Granted

Adjustment (1)

Called

Exercised

March 31, 2007

Fair value of option at measurement date(%)

in T€

in T€

in T€January 1, 2005 MEP III

35,000

0

6,990

0

0

41,990

2,99

228

388

322February 2, 2005 MEP III

140,000

0

27,960

0

167,960

0

2,78

906

1,552

1,291175,000

0

34,950

0

167,960

41,990


---

For MEP II and III the Group recognized compensation expense and a corresponding increase in other liabilities in the amount of
T€192 in fiscal year ended March 31, 2008, of which the entire amount has vested. None of the options granted have been cancelled since granting. Therefore, all options shown
are outstanding as of year end March 31, 2008 all of which have vested.

Indirect MEP IV

Since March 2007, an additional management participation plan has been implemented, including options on interests in the Partnership (MEP IV option program) and
interests in the Partnership which are held indirectly via Kabel Management Beteiligungs- (MEP IV) GbR (Indirect MEP IV). Kabel Management Beteiligung- (MEP IV) GbR is itself a limited
partner in the Partnership.

The
general rules of the indirect MEP IV plan are substantially the same as for the indirect MEP I. All members of the indirect MEP IV were admitted to the program through ownership in
Kabel Management Beteiligungs- (MEP IV) GbR, a limited partner in the Partnership holding common interests in the Partnership.

The
members of the indirect MEP IV were required to pay a capital contribution upon admission. The Partnership and the Kabel Management Beteiligungs- (MEP IV) GbR, respectively,
have financed 80% of the managers' contributions with a loan from the Partnership. Interest accrues on such loan at a rate of 5.0% per annum, compounded annually, and is repayable in accordance with
an amortization schedule in the relevant agreement. The members are entitled to proceeds received by them in respect of their interests.

Put
or call provisions apply to the members' Partnership interests in the event that such member ceases to be employed by KDG GmbH or its subsidiaries.

The
total number of interests in Kabel Management Beteiligungs- (MEP IV) GbR issued under the Indirect MEP IV amounts to 289,084. During the fiscal year ended March 31,
2008, none of these interests were sold by the respective members.

Grant date

The grant date determines the point in time at which the fair value of the services of the members of MEP is measured. The persons who are members of the indirect
MEP IV participate in Kabel Management Beteiligungs- (MEP IV) GbR with a grant date as of March 29, 2007.

Number of interests granted

As of March 31, 2008, the members of that management participation plan indirectly hold interests in Cayman Cable Holding L.P. of 0.29%. The total
consideration paid for these interests amounts to T€3,469.

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Measurement

Under the indirect MEP IV as of March 29, 2007, the fair value of the interests at March 31, 2008 amounts to T€4,238.

As
for the MEP I, the carrying amount of the repurchase obligation related to vested MEP IV interests at each reporting date is measured based on discounted cash flow models. This amount
is recognized over a vesting period of four years commencing at grant date using the accelerated recognition method in accordance with IFRS 2 whereby 25% are vested at each anniversary.
Therefore the program is split into 4 different layers, for which fair value is calculated at each reporting date. As of March 31, 2008, T€3,870 have vested. The liability was
recorded in other liabilities. Included in these amounts is the contribution made by the members of indirect MEP IV since such contributions are a liability in case of the sale of the interests. Due
to changes in the fair value of the interests and due to additional vesting, the Group recognized an increase in expenses and an increase in other liabilities for the fiscal year ended
March 31, 2008 in the amount of T€401.

MEP IV Option Program

Under the MEP IV Option Program, the participants were granted options on interests in the Cayman Cable Holding L.P. The terms and conditions of this
management participation plan are substantially the same as for the other option programs.

Number of options granted

During the fiscal year ended March 31, 2008 and in conjunction with the implementation of the additional plan, 432,143 options have been granted.
Furthermore, 48,170 options have been called in that period based on the regulations in the amended and restated Cayman Cable Holding L.P. option planMEP IV.

As
of March 31, 2008, a total of 383,973 options have been granted to the participants in MEP IV option program representing a 0.04% interest in the Cayman Cable
Holding L.P.

Grant date and terms

The options under the MEP IV Option program have been issued with a grant date as of March 29, 2007. The weighted average remaining life of the options is
3.99 years as of March 31, 2008.

Method and extent of exercise

The Options will become immediately vested and exercisable upon any of the following events:



after
which they will lapse if unexercised.

In
addition, the general partner of Cayman Cable Holding L.P. may, at its absolute discretion, allow options to become exercisable, in whole or in part, prior to an exit event.

F-131

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The
general partner may decide that, instead of procuring the issue or transfer of interests in Cayman Cable Holding L.P. (LP interests) on exercise of an option that it will:



Any
other transfer of options is restricted to certain limited options (e.g. ceasing employment). Any transfer of an option otherwise than permitted in this program would cause
the option to lapse.

Measurement

The measurement of the fair value at grant date and each consecutive reporting period is based on the Black-Scholes option pricing model. The main parameters are
the estimated fair value of the interests, expected volatility of the values of the interests, the estimated term of the options and the risk free interest rate on grant date (based on the estimated
average life of the options of five years). The grant of the options is not dependent on market conditions, whereby expected future distributions are included in the calculation.

The
volatility was estimated at 25% by benchmarking historical volatilities of listed international cable companies that are comparable regarding the parameters that typically influence
the volatility.

The
strike price is €12.00 for all options in the MEP IV Option Program.

Number of optionsRisk free interest rate at grant date

Fair value of option at grant date

Fair value of shares at grant dateGrant date

March 31, 2007

Granted

Called

Exercised

March 31, 2008

Fair value of option at measurement date(%)

in T€

in T€

in T€March 29, 2007 MEP IV Option Program

0

432,143

48,170

0

383,973

4.00

1,484

5,065

1,980


For the MEP IV Option Program, the Group recognized compensation expense and a corresponding increase in other liabilities in the amount of
T€1,072 in fiscal year ended March 31, 2008, of which the entire amount has vested. None of the options granted have been cancelled since granting. Therefore all options shown
are outstanding as of year end March 31, 2008 of which 95,993





vested and 287,980 remain unvested. The net book value of the liability relating to the MEP IV Option Program at March 31, 2008 amounts to T€1,031.

MEP V

Under MEP V, the participants were granted options on interests in the Cayman Cable Holding L.P. The terms and conditions of this management participation
plan are substantially the same as for the other option programs.

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Number of options granted

During the fiscal year ended March 31, 2008 and in conjunction with the implementation of the additional plan, 481,688 options have been granted. All these
options representing a 0.48% interest in the Cayman Cable Holding L.P. are outstanding as of March 31, 2008.

Grant date and terms

The options under MEP V have been issued with a grant date as of December 3, 2007. The weighted average remaining life of the options is 4.67 years
as of March 31, 2008.

Method and extent of exercise

The options will become immediately vested and exercisable upon any of the following events:



after
which they will lapse if unexercised.

In
addition, the general partner of Cayman Cable Holding L.P. may, at its absolute discretion, allow options to become exercisable, in whole or in part, prior to an exit event.

The
general partner may decide that, instead of procuring the issue or transfer of interests in Cayman Cable Holding L.P. (LP interests) on exercise of an option that it will:



Any
other transfer of options is restricted to certain limited options (e.g. ceasing employment). Any transfer of an option otherwise than permitted in this program would cause
the option to lapse.

Measurement

The measurement of the fair value at grant date and each consecutive reporting period is based on the Black-Scholes options pricing model. The main parameters are
the estimated fair value of the interests,
expected volatility of the values of the interests, the estimated term of the options and the risk free interest rate on grant date (based on the estimated average life of the options of five years).
The grant of the options is not dependent on market conditions, whereby expected future distributions are included in the calculation.

F-133

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The
volatility was estimated at 25% by benchmarking historical volatilities of listed international cable companies that are comparable regarding the parameters that typically influence
the volatility.

The
strike price is €14.66 for all options in the MEP V Option Program.

Number of optionsRisk free interest rate at grant date

Fair value of option at grant date

Fair value of shares at grant dateGrant date

March 31, 2007

Granted

Called

Exercised

March 31, 2008

Fair value of option at measurement date(%)

in T€

in T€

in T€December 3, 2007 MEP V

0

481,688

0

0

481,688

3.90

2,127

7,062

2,014


For MEP V, the Group recognized compensation expense and a corresponding increase in other liabilities in the amount of T€524 in
fiscal year ended March 31, 2008, of which the entire amount has vested. None of the options granted have been cancelled since granting. Therefore all options shown are outstanding as of year
end March 31, 2008 of which none vested and 481,688 remain unvested. The net book value of the liability relating to the MEP V Option Program at March 31, 2008 amounts to
T€524.

5.4   Financial Instruments

KDVS is exposed to market risks from changes in interest rates and currency exchange rates which can impact its operating results and overall financial condition.
KDVS manages its exposure to these market risks through its operating and financing activities and, when deemed appropriate or required by other agreements, through hedging strategies that utilize
derivative financial instruments. The main strategy is to avoid or to mitigate risks, e.g. currency risk by entering in currency swaps or the risk of variable interest payments by entering into
interest rate swaps and buying caps. Derivative instruments are only used to hedge existing or prospective transactions.

Of
KDVS' financial instruments, only the interest swaps bear a fair value interest rate risk, whereas the money market funds and the bank loans bear cash flow interest rate risks.

The
Group has incurred debt that is denominated in various currencies, primarily via bond issues and bank borrowings. As a result, KDVS is exposed to risks from changes in interest rates
and exchange rates.

Risks
are initially hedged by way of naturally closed positions in which the values or the cash flows of primary financial instruments are matched in terms of maturity and amounts. Any
residual risks are mitigated by way of conventional derivative financial instruments.

F-134

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As
of the balance sheet date, derivative financial instruments consisted of the following:

March 31, 2008

March 31, 2007

March 31, 2006T€

T€

T€Interest Rate SwapsWithin one year

75,960

71,863

67,988One to five years

379,568

455,528

527,391More than 5 years

0

0

0Total

455,528

527,391

595,379Interest Rate CapWithin one year

25,320

23,954

22,663One to five years

126,523

151,843

175,797More than 5 years

0

0

0Total

151,843

175,797

198,460Total

607,371

703,188

793,839


The nominal volume is the sum total of all purchase and sale amounts of the interest rate derivatives. The nominal amounts are equal to the volume
of the hedged items.

Interest Rate Swaps and Caps

Approximately T€1,037,500 borrowed under the Group's initial senior loan facility in 2003 was used to fund the acquisition of the cable television
business. The interest rate volatility related to these outstanding loans was mitigated with a combination of interest rate swaps and caps at the time the bank loans were incurred. The loans were
extended by the lending banks subject to the condition that the Group would enter into appropriate interest rate swaps and interest caps.

With
the interest rate swaps, the variable interest rates (EURIBOR) on KDVS' bank loans were effectively exchanged for a fixed interest rate of 4.0495% per annum. KDVS initially entered
into interest rate swaps with a notional amount of T€778,125 which will be amortized until 2015. These swaps entitle KDVS to receive a payment from the counterparty if the variable
market interest rate exceeds the fixed interest rate, and oblige KDVS to make a payment to the counterparty if the fixed interest rate exceeds the variable market interest rate. These types of
agreements are entered into to effectively convert the interest rates on a portion of KDVS' long-term liabilities to banks from variable to fix. In 2003, KDVS also purchased interest rate
caps with a cap level of 4.2% per annum with a notional amount of T€259,375 which will be amortized until 2015. These caps entitle KDVS to receive a payment from the counterparty equal
to the excess, if any, of the hypothetical interest expense on a specified notional amount at a current market interest rate over an amount specified in the agreement.

In
September 2004, KDVS restructured its interest rate swaps and caps. The restructured derivatives now mature June 2009 compared to the original maturity, and the effective interest
rate on the swaps was reduced from 4.0495% to 3.705% as of September 29, 2004.

Credit Risk

Credit risk is the risk of a financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. It arises
principally from receivables from customers. The exposure to credit risk is influenced mainly by the individual characteristics of each customer.

For
all payments underlying the financial instruments, collateral must be requested, credit ratings/references obtained and a track record of prior business relations used in order to
minimize the credit risk depending on the nature and extent of the respective payments. Without taking into account

F-135

---



any
collateral or other credit enhancements, the carrying amount of financial assets represents the maximum exposure to credit risk.

Impairment
losses are recognized for any credit risks associated with the financial assets. The credit risk associated with derivative financial instruments is minimized in that only
counterparties with top credit ratings are selected. For this reason, the general credit risk relating to the derivatives used by the Group is not considered to be significant. No concentration of
credit risks from business relations with individual debtors is evident.

Interest Rate Risk

KDVS' interest payment risk is mitigated by the derivatives described. As of year-end 2008, 2007 and 2006, all of the interest-bearing liabilities are
due in 5 years, which is why the interest rate derivative structure is long term.

Liquidity risk

Liquidity risk represents the risk that liquidity reserves will prove to be insufficient to meet financial obligations in a timely manner. In order to ensure
liquidity the Group has unused Senior Credit Facilities and other lines of credit amounting to T€909,000, T€200,000 and T€50,000 at March 31,
2008, March 31, 2007 and March 31, 2006, respectively. In the fiscal year 2008 an amount of T€650,000 is included which relates to the Senior
Add-on-Facility.

Future
cash outflows arising from financial liabilities that are recognized in the Consolidated Balance Sheet are presented in the following table. This includes payments to settle the
liabilities and interest payments as well as cash outflows from cash settled derivatives with a negative market value. Financial liabilities that are repayable on demand are included on the basis of
the earliest date of repayment. Cash flows for variable interest liabilities are determined with reference to the market conditions at the balance sheet date.

Mar. 31, 2008

Up to 1 year

Between 1 and 3 years

Between 3 and 5 years

After 5 years

TotalT€

T€

T€

T€

T€Financial liabilities

70,350

133,369

1,223,810

0

1,427,529Trade payables

210,408

0

0

0

210,408Finance lease liabilities

10,645

21,285

10,828

0

42,758Other liabilities

3,091

0

0

0

3,091Derivative financial liabilities

0

0

0

0

0Total

294,494

154,654

1,234,638

0

1,683,786


|
|

Mar. 31, 2007

Up to 1 year

Between 1 and 3 years

Between 3 and 5 years

After 5 years

TotalT€

T€

T€

T€

T€Financial liabilities

77,593

136,677

1,293,386

0

1,507,656Trade payables

167,907

0

0

0

167,907Finance lease liabilities

10,008

19,889

19,592

536

50,025Other liabilities

8,335

0

0

0

8,335Derivative financial liabilities

0

0

0

0

0Total

263,843

156,566

1,312,978

536

1,733,923


F-136

---



|
|

Mar. 31, 2006

Up to 1 year

Between 1 and 3 years

Between 3 and 5 years

After 5 years

TotalT€

T€

T€

T€T€Financial liabilities

1,271,803

143,383

65,988

1,291,031

2,772,205Trade payables

146,269

0

0

0

146,269Finance lease liabilities

7,083

12,952

12,891

6,982

39,908Other liabilities

3,760

0

0

0

3,760Derivative financial liabilities

2,937

0

0

0

2,937Total

1,431,852

156,335

78,879

1,298,013

2,965,079


Capital management

The primary objective of the Group's capital management is to ensure that it maintains a strong credit rating to reduce risks from its highly leveraged financing
structure.

This
is monitored using the debt covenants of the Senior Credit Facility and the indenture of the Senior Notes.

The
Group's ability to make payments and to refinance its debt, and to fund future operations and capital expenditures, will depend on future operating performance and the ability to
generate sufficient cash. Accordingly the Group manages its capital structure and makes adjustments to it, in light of changes in economic conditions.

Fair Values of Financial Instruments

The following table presents the carrying amounts of financial instruments according to categories of IAS 39:

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006T€

T€

T€Financial assets at fair value through profit or loss

4,239

5,414

604Loans and Receivables

147,610

157,241

346,558Available-for-Sale financial assets

0

7,446

352151,849

170,101

347,514Financial liabilities at fair value through profit or loss

0

0

3,844Financial liabilities measured at amortised cost

1,413,611

1,321,790

1,378,8181,565,460

1,321,790

1,382,662


The category Available-for-Sale financial assets in the prior years included equity instruments measured at amortized cost
because they did not have a quoted market price and their value could not be measured reliably amounting to T€156 and T€352 for the years ended March 31, 2007
and 2006, respectively.

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The
following table shows net gains or losses of financial instruments according to categories of IAS 39 recognized in the Consolidated Statement of Operations:

Fiscal Year Ended March 31,2008

2007

2006(in T€)Financial assets and liabilities at fair value through profit or loss

(1,175
)
8,655

16,919Loans and Receivables

(27,863
)
(19,268
)
(8,447
)Available-for-Sale financial assets

2,337

0

0(26,701
)
(10,613
)
8,472


Net gains or losses on financial assets and liabilities at fair value through profit or loss include the effects from the fair value measurement
of the derivatives that are not part of a hedge accounting relationship.

Net
gains and losses on loans and receivables comprise mainly impairment losses and reversals.

Net
gains or losses of Available-for-Sale financial assets result from the sale of interests in other companies. In the fiscal year 2008 the amount relates to the
sale of Primacom.

Net
gains and losses on financial liabilities measured at amortised cost include effects from foreign currency translation and from early settlement.

F-138

---





Fair Values of Financial Instruments

The following table presents the carrying amounts and fair values of financial assets and liabilities included in each balance sheet item.

Mar. 31, 2008

Mar. 31, 2007

Mar. 31, 2006Category according to IAS 39

Carrying Amount

Fair Value

Carrying Amount

Fair Value

Carrying Amount

Fair ValueT€

T€

T€

T€

T€

T€Financial assets measured at cost or amortized costCash and Cash Equivalents

LaR

15,422

15,422

54,108

54,108

223,070

223,070Trade Receivables

LaR

130,530

130,530

101,158

101,158

120,789

120,789Receivables from Affiliates

LaR

0

0

256

256

38

38Receivables from Associates

LaR

0

0

0

0

0

0Other Current assets

LaR

1,658

1,658

1,719

1,719

2,661

2,661Other Financial Assets *

AfS

0

0

156

0

492

0Financial assets measured at fair valueOther Financial Assets

AfS

0

0

7,290

7,290

(140
)
(140
)Other non-current AssetsDerivatives without a hedgingrelationship

FAHfT

4,239

4,239

5,414

5,414

604

604Financial liabilities measured at cost or amortized costCurrent Financial Liabilities

FLAC

8,708

8,708

18,112

18,112

77,123

77,123Trade payables

FLAC

210,408

210,408

167,907

167,907

146,269

146,269Liabilities to Associates

FLAC

0

0

0

0

0

0Other Current LiabilitiesOther financial liabilities

FLAC

3,091

3,091

8,398

8,398

3,760

3,760Finance lease liabilities

n/a

8,228

8,228

7,184

7,184

4,740

4,740Senior Credit Facility

FLAC

1,191,404

1,191,404

1,127,436

1,127,436

1,223,526

1,223,526Other non-current LiabilitiesFinance lease liabilities

n/a

28,836

28,744

34,675

34,587

27,328

27,250Financial liabilities measured at fair valueNon-current Financial LiabilitiesDerivatives without a hedgingrelationship

FLHfT

0

0

0

0

3,844

3,844


---

The terms have the following respective meanings:

"LaR"
refers to Loans and Receivables

"AfS"
refers to Available-for-Sale

"FAHfT"
refers to Financial Assets Financial Assets Held for Trading

"FLAC"
refers to Financial Liabilities Measured at Amortized Cost

"FLHfT"
refers to Financial Liabilities Held for Trading

The
carrying amounts of the Group's cash and cash equivalents, money market funds, trade receivables and payables, short-term loans, as well as other current liabilities, in
view of their short terms as of March 31, 2008, 2007, and 2006, are effectively equal to their fair values as they have interest rates based on variable interest rates that change in line with
the market. Using a discounted cash flow analysis based on the current lending rate for an identical loan term, the fair value of the Group's long-term, fixed-rate liabilities
is estimated as the net present value of future payments, using yield curves obtained by banks and money market observations. Due to the complexity inherent in such

F-139

---



an
estimate, the estimate may not necessarily reflect actual market values. Different market assessments or procedures may therefore significantly influence the fair value estimate.

The
carrying amount of the Senior Term Facility materially approximates its fair value. With respect to the carrying amounts of the financial assets and liabilities please refer to the
respective sections in the Notes.

The
fair values of the derivative financial instruments as of the balance sheet date have been estimated as net present values (discounted by market yield curves) of the future payments
and using standard models (in the case of caps). They are as follows (in T€):

Instrument

Nominal amount March 31, 2008

Fair value March 31, 2008

Recognized in statement of operations April 1, 2007-
March 31, 2008

Recognized in equity April 1, 2007-
March 31, 2008T€

T€

T€

T€Interest rate swap

455,528

3,625

(1,358
)
0Interest rate cap

151,843

614

183

0Total

607,371

4,239

(1,175
)
0Deferred Taxes

0

0

0

0Total

607,371

4,239

(1,175
)
0


|
|

Instrument

Nominal amount March 31, 2007

Fair value March 31, 2007

Recognized in statement of operations April 1, 2006-
March 31, 2007

Recognized in equity April 1, 2006-
March 31, 2007T€

T€

T€

T€Interest rate swap

527,391

4,983

8,827

0Interest rate cap

175,797

432

(172
)
0Total

703,188

5,415

8,655

0Deferred Taxes

0

0

0

0Total

703,188

5,415

8,655

0


|
|

Instrument

Nominal amount March 31, 2006

Fair value March 31, 2006

Recognized in statement of operations April 1, 2005-
March 31, 2006

Recognized in equity April 1, 2005-
March 31, 2006T€

T€

T€

T€Interest rate swap

595,379

(3,844
)
17,165

0Interest rate cap

198,460

603

(246
)
0Total

793,839

(3,241
)
16,919

0Deferred Taxes

0

0

0

0Total

793,839

(3,241
)
16,919

0


Prior to March 31, 2007 the Group previously assessed hedge effectiveness of an interest rate swap in a cash flow hedge by applying the
"change in variable cash flow method". Following the publication in the March 2007 IFRIC update of the IFRIC Agenda decision on "IAS 39Financial Instruments:
Recognition and MeasurementAssessing hedge effectiveness of an interest rate swap in a cash flow

F-140

---



hedge" the Group has reconsidered its accounting treatment applied to those transactions and decided to adopt the treatment set out in the IFRIC agenda decision. Accordingly, the Group had adjusted
its financial statements as of March 31, 2007 and comparative periods to reflect the fact that hedge accounting has no longer been historically applied and has, therefore, recorded all changes
in fair value of the interest rate swap through profit and loss. This change in accounting treatment has been accounted for retroactively. This adjustment resulted in a decrease in other comprehensive
income of T€8,320, a decrease in interest expense of T€13,682 and an increase in deferred tax expense of T€5,362 for the fiscal year ended
March 31, 2006.

Sensitivity analysis

KDVS prepares sensitivity analysis that shows how net income and equity would have been affected by changes in the relevant market risk variables that were
reasonably possible at the reporting date.

Interest
rate risks result from the variable interest rates (EURIBOR) on KDVS' bank loans and are hedged with interest rate swaps and caps that are accounted for at fair value through
profit or loss. In determining the sensitivity concerning interest rate risks the fair values for interest rate swaps and caps were calculated based on the hypothetical market interest rates with the
resulting effects on net income and equity. The effect of interest rate changes on interest expense for bank loans with variable interest rates is calculated based on the risk exposure at the balance
sheet date. Under this approach and assuming constant foreign exchange rate the interest rate sensitivity is as follows.

Effect on net income and equityParallel increase of the interest curve of 100 basis points

Parallel decrease of the interest curve of 100 basis points(in T€)

(in T€)March 31, 2008Bank loans with variable interest rate

(12,100
)
12,100Derivative financial instruments

3,523

(3,851
)(8,577
)
8,249March 31, 2007Bank loans with variable interest rate

(11,500
)
11,500Derivative financial instruments

6,469

(6,190
)(5,031
)
5,310


F-141

---



5.5   Group Companies

Registered office

Shareholding(in %)Fully consolidated companies (IFRS 3)1
Kabel Deutschland Vertrieb und Service GmbH & Co. KG

Unterföhring2
Kabel Deutschland Breitband Services GmbH

Unterföhring

100.003
TKS Telepost Kabel-Service Kaiserslautern Beteiligungs-GmbH

Kaiserslautern

100.004
TKS Telepost Kabel-Service Kaiserslautern GmbH & Co. KG

Kaiserslautern

100.005
Leto GmbH

Berlin

100.00


|
|

Registered office

Shareholding(in %)Companies consolidated at equity (IAS 28)6
KABELCOM Braunschweig Gesellschaft für Breitbandkabel-Kommunikation mit beschränkter Haftung

Braunschweig

24.007
KABELCOM Wolfsburg Gesellschaft für Breitbandkabel-Kommunikation mit beschränkter Haftung

Wolfsburg

24.00


5.6   Particular Events after the Balance Sheet Date

On April 30, 2008, KDVS closed the acquisition of several companies from the Orion Group with 1.1 million CATV subscribers. The FCO approved the
transaction which was signed during the fiscal year on April 4, 2008. The purchase price amounted to approximately T€500,000 and was fully funded through an increase in KDVS'
Senior Credit Facility. The transaction covers the acquisition of several entities listed below.

An
additional 30% direct share of KMG and indirect share of 4.225% of RKS Niedersächsische Kabel-Servicegesellschaft mbH & Co. KG and 5% of RKS
Niedersächsische Kabel-Service-Beteiligungsgesellschaft mbH was closed on June 30, 2008.

In
total, the acquisitions include the following entities at the stated percentage of voting equity:

Directly
held:

Tele Columbus Nord GmbH

100.00%KMG KABEL-FERNSEHEN HANNOVER GmbH

100.00%KABELCOM Braunschweig Gesellschaft für Breitbandkabel- Kommunikation mbH

75.58%KABELCOM Wolfsburg Gesellschaft für Breitbandkabel- Kommunikation mbH

72.49%Kabel Deutschland Süd GmbH (previously Cor H Erste GmbH)

100.00%Kabel Deutschland West GmbH (previously Cor H Zweite GmbH)

100.00%Kabel Deutschland Nord GmbH (previously Cor H Dritte GmbH)

100.00%Indirectly held:AEP Plückhahn Kabel GmbH

100.00%RKS Niedersächsische Kabel-Servicegesellschaft mbH & Co. KG

47.38%RKS Niedersächsische Kabel-Service-Beteiligungsgesellschaft mbH

56.20%Urbana Teleunion Rostock GmbH & Co. KG

70.00%Verwaltung Urbana Teleunion Rostock GmbH

50.00%


Please note that the purchase price of the various transactions is based on financial information which is currently being prepared. Therefore,
neither assets and liabilities nor contingent liabilities of

F-142

---



the
acquired entities can be presented at this point in time. As a result, it is impracticable to disclose the purchase price.

As of April 30, 2008 the Group sold and transferred its share in Kabel-Service-Berlin GmbH to Tele Columbus GmbH for total consideration of
T€13,000.

As
of April 30, 2008 an amount of T€535,000 was drawn down under the Senior Add-on Facility. On the same day, the Company entered into an additional
floating to
fix interest rate swap. This swap with a fixed rate of 4.410% per annum has a notional amount of T€250,000 and a one year duration. As of May 9, 2008 the granted loan amount of
the Senior Add-on Facility was reduced by T€115,000 to T€535,000 from T€650,000 originally.

In
April 2008, we entered into a new 24-month collective bargaining agreement with the labor union representing our unionized employees. As a result, wages for employees
increased by 3.7% from June 1, 2008 and will increase another 3.3% from April 1, 2009.

On
May 7, 2008, the Group announced that they have agreed with pay-TV operator Premiere on a new five year contract running until 2012. The contract governs the
feed-in of the existing Premiere pay-TV channels over the Group's cable network.

On
May 14, 2008, the Group announced that the cooperation with Nagravision will be continued and Nagravision's new coding system will be introduced in autumn 2008.

5.7   Management

The Group is represented by its general partner Kabel Deutschland Verwaltungs GmbH. No further representatives are registered in the commercial register.

The
Management and Advisory Board of Kabel Deutschland Verwaltungs GmbH are the following:

Management

|Dr. Adrian von Hammerstein              |  | Chairman of the Management Board,
Chief Executive Officer
|--------------------------------------- |  | ---------------------------------------------------------
|Paul Thomason                           |  | Chief Financial Officer                                  
|Dr. Manuel Cubero del Castillo-Olivares |  | Chief Commercial Officer                                 
|Herbert R. Hribar                       |  | Chief Operating Officer                                  

5.8   Authorization of Financial Statements

The consolidated financial statements were released for publication on July 25, 2008.

Unterföhring, July 25, 2008

Kabel
Deutschland Vertrieb und Service GmbH & Co. KG

|Dr. Adrian von Hammerstein
Chief Executive Officer               |  | Paul Thomason
Chief Financial Officer    
|---------------------------------------------------------------- |  | -----------------------------------------
|Dr. Manuel Cubero del Castillo-Olivares
Chief Commercial Officer |  | Herbert R. Hribar
Chief Operating Officer

F-143

---





Kabel Deutschland Vertrieb und Service GmbH & Co. KG, Unterföhring

Appendix 1 to the Notes

Analysis of Fixed Assets for Period from April 1, 2007 to March 31, 2008

|                           |                                                                 | Acquisition and Production Cost |                  | Accumulated Depreciation and Amortization |               | Net Book Value
|-------------------------- | --------------------------------------------------------------- | ------------------------------- | ---------------- | ----------------------------------------- | ------------- | --------------
|
|
|I. Intangible Assets       |                                                                 |                                 |                  |                                           |               |               
|                           | 1. Software and Licences and other Contractual and Legal Rights |                                 | 148,880,844.66   |                                           | 0.00          |               
|                           | 2. Internally generated Software                                |                                 | 13,837,173.00    |                                           | 0.00          |               
|                           | 3. Customer List                                                |                                 | 715,426,567.68   |                                           | 20,936,112.22 |               
|                           | 4. Prepayments                                                  |                                 | 10,926,153.95    |                                           | 0.00          |               
|                           |                                                                 |                                 |                  |                                           |               |               
|                           |                                                                 | 889,070,739.29                  |                  | 20,936,112.22                             |               | 62,956,347.06 
|                           |                                                                 |                                 |                  |                                           |               |               
|II. Property and Equipment |                                                                 |                                 |                  |                                           |               |               
|                           | 1. Buildings on non-owned Land                                  |                                 | 7,083,733.17     |                                           | 0.00          |               
|                           | 2. Technical Equipment                                          |                                 | 1,603,466,977.78 |                                           | 8,962,186.68  |               
|                           | 3. Other Equipment, Furniture and Fixtures                      |                                 | 61,812,353.85    |                                           | 0.00          |               
|                           | 4. Construction in progress                                     |                                 | 50,533,854.29    |                                           | 0.00          |               
|                           |                                                                 |                                 |                  |                                           |               |               
|                           |                                                                 | 1,722,896,919.09                |                  | 8,962,186.68                              |               | 255,841,812.05
|                           |                                                                 |                                 |                  |                                           |               |               
|III. Financial Assets      |                                                                 |                                 |                  |                                           |               |               
|                           | 1. Equity Investments in Associates                             |                                 | 2,487,200.00     |                                           | 0.00          |               
|                           | 2. Other financial Assets                                       |                                 | 7,445,800.37     |                                           | 4,606,721.62  |               
|                           |                                                                 |                                 |                  |                                           |               |               
|                           |                                                                 | 9,933,000.37                    |                  | 4,606,721.62                              |               | 0.00          
|                           |                                                                 |                                 |                  |                                           |               |               
|                           |                                                                 | 2,621,900,658.75                |                  | 34,505,020.52                             |               | 318,798,159.11
|                           |                                                                 |                                 |                  |                                           |               |               

F-144

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Kabel Deutschland Vertrieb und Service GmbH & Co. KG, Unterföhring

Appendix 2 to the Notes

Analysis of Fixed Assets for Period from April 1, 2006 to March 31, 2007

|                           |                                                                 | Acquisition and Production Cost |                  | Accumulated Depreciation and Amortization |              | Net Book Value
|-------------------------- | --------------------------------------------------------------- | ------------------------------- | ---------------- | ----------------------------------------- | ------------ | --------------
|
|
|I. Intangible Assets       |                                                                 |                                 |                  |                                           |              |               
|                           | 1. Software and Licences and other Contractual and Legal Rights |                                 | 98,012,500.58    |                                           | 0.00         |               
|                           | 2. Internally generated Software                                |                                 | 12,789,484.77    |                                           | 0.00         |               
|                           | 3. Customer List                                                |                                 | 709,713,538.37   |                                           | 5,713,029.31 |               
|                           | 4. Prepayments                                                  |                                 | 2,621,373.16     |                                           | 0.00         |               
|                           |                                                                 |                                 |                  |                                           |              |               
|                           |                                                                 | 823,136,896.88                  |                  | 5,713,029.31                              |              | 63,420,429.98 
|                           |                                                                 |                                 |                  |                                           |              |               
|II. Property and Equipment |                                                                 |                                 |                  |                                           |              |               
|                           | 1. Buildings on non-owned Land                                  |                                 | 5,260,629.38     |                                           | 0.00         |               
|                           | 2. Technical Equipment                                          |                                 | 1,425,843,167.38 |                                           | 741,174.20   |               
|                           | 3. Other Equipment, Furniture and Fixtures                      |                                 | 50,124,817.98    |                                           | 0.00         |               
|                           | 4. Construction in progress                                     |                                 | 39,714,617.85    |                                           | 0.00         |               
|                           |                                                                 |                                 |                  |                                           |              |               
|                           |                                                                 | 1,520,943,232.59                |                  | 741,174.20                                |              | 220,353,485.95
|                           |                                                                 |                                 |                  |                                           |              |               
|III. Financial Assets      |                                                                 |                                 |                  |                                           |              |               
|                           | 1. Equity Investments in Associates                             |                                 | 2,487,200.00     |                                           | 0.00         |               
|                           | 2. Other financial Assets                                       |                                 | 352,000.00       |                                           | 0.00         |               
|                           |                                                                 |                                 |                  |                                           |              |               
|                           |                                                                 | 2,839,200.00                    |                  | 0.00                                      |              | 7,393,800.37  
|                           |                                                                 |                                 |                  |                                           |              |               
|                           |                                                                 | 2,346,919,329.47                |                  | 6,454,203.51                              |              | 291,167,716.30
|                           |                                                                 |                                 |                  |                                           |              |               

F-145

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Kabel Deutschland Vertrieb und Service GmbH & Co. KG, Unterföhring

Appendix 3 to the Notes

Analysis of Fixed Assets for Period from April 1, 2005 to March 31, 2006

|                                                                |  | Acquisition and Production Cost |  | Accumulated Depreciation and Amortization |  | Net Book Value
|--------------------------------------------------------------- |  | ------------------------------- |  | ----------------------------------------- |  | --------------
|
|
|I. Intangible Assets                                            |  |                                 |  |                                           |  |               
|1. Software and Licences and other Contractual and Legal Rights |  | 73,440,636.52                   |  | 0.00                                      |  | 3,479,887.35  
|2. Internally generated Software                                |  | 9,747,676.00                    |  | 0.00                                      |  | 0.00          
|3. Customer List                                                |  | 696,615,984.17                  |  | 5,605,485.01                              |  | 0.00          
|4. Prepayments                                                  |  | 682,883.67                      |  | 0.00                                      |  | 0.00          
|                                                                |  |                                 |  |                                           |  |               
|                                                                |  | 780,487,180.36                  |  | 5,605,485.01                              |  | 3,479,887.35  
|                                                                |  |                                 |  |                                           |  |               
|II. Property and Equipment                                      |  |                                 |  |                                           |  |               
|1. Buildings on non-owned Land                                  |  | 2,960,544.20                    |  | 0.00                                      |  | 1,457,200.60  
|2. Technical Equipment                                          |  | 1,333,122,659.69                |  | 1,704,994.47                              |  | 0.00          
|3. Other Equipment, Furniture and Fixtures                      |  | 38,207,580.17                   |  | 0.00                                      |  | 1,449,229.26  
|4. Construction in progress                                     |  | 24,973,104.54                   |  | 0.00                                      |  | 3,200.00      
|                                                                |  |                                 |  |                                           |  |               
|                                                                |  | 1,399,263,888.60                |  | 1,704,994.47                              |  | 2,909,629.86  
|                                                                |  |                                 |  |                                           |  |               
|III. Financial Assets                                           |  |                                 |  |                                           |  |               
|1. Equity Investments in Associates                             |  | 2,487,200.00                    |  | 0.00                                      |  | 0.00          
|2. Other financial Assets                                       |  | 7,391,930.70                    |  | 0.00                                      |  | 0.00          
|                                                                |  |                                 |  |                                           |  |               
|                                                                |  | 9,879,130.70                    |  | 0.00                                      |  | 0.00          
|                                                                |  |                                 |  |                                           |  |               
|                                                                |  | 2,189,630,199.66                |  | 7,310,479.48                              |  | 6,389,517.21  
|                                                                |  |                                 |  |                                           |  |               

F-146

---