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iesy Repository GmbH - Irish Stock Exchange

iesy Repository GmbH - Irish Stock Exchange

separation of the Level

separation of the Level 3 network and the Level 4 network in Germany continues to impact the German cable television market in that it may impede the roll-out by Level 3 operators of new products and services, such as premium cable television and Internet services via the cable network. For it to be economically sound, any upgrade of the Level 3 network necessary for the launch of new products requires a sufficient number of subscribers to which new products can be marketed. The interposed Level 4 operators and housing associations limit the ability of Level 3 operators to market their new products and services directly to end consumers, because they do not provide access to the end-user without seeking additional rent for such access. Moreover, the upgrade of particular parts of the Level 3 network would be futile if the pertinent Level 4 network is not upgraded to meet the technical requirements to carry the new products and services. DTAG (or its predecessor) as the operator of the Level 3 network and, after the regionalization of the Level 3 business, the regional Level 3 operators, used to deliver signals to thousands of such Level 4 operators. Due to regulatory constraints prior to the deregulation of the cable network market in 1996, the Level 4 operators initially focused on the construction and operation of the Level 4 infrastructure in multiple-dwelling units where the relevant housing association or property owner did not have the desire or capital to invest into the cable infrastructure. Housing associations are responsible for the management of multiple-dwelling units. They vary in size and may be responsible for the management of anywhere from a few to thousands of apartments on a local, regional or national level. Historically, the housing associations have either constructed their own Level 4 infrastructure and connected to the relevant regional Level 3 operator’s network or outsourced cable television services to Level 4 operators. Housing associations include customers that not only own and operate their own internal Level 4 networks, but may also operate and administer the networks of other housing associations and, accordingly, display certain characteristics of professional Level 4 operators. However, in some cases large housing associations with significant subscriber clusters have been sourcing television signals via satellite solutions, sometimes after previously having been connected to a cable network. Level 4 operators typically enter into long-term contracts with housing associations, which limits opportunities to win new customers and may hinder iesy’s and ish’s efforts to market its services effectively to housing associations. Over time, several Level 4 operators have consolidated to form larger entities, the most significant of these being Tele Columbus (approximately 2.6 million subscribers as of September 30, 2004), BN (estimated at approximately 1.3 million subscribers in 2004), PrimaCom (approximately 1.0 million subscribers as of September 30, 2004), and EWT (approximately 0.7 million subscribers as of December 31, 2003), all of which operate on a nationwide basis. In early 2005, EWT acquired BN, and BN has since been operating as ewt breitbandnetze gmbh. Typically, Level 3 operators supply Level 4 operators with broadcasting signals. Fees for receiving signal are typically based on the Level 3 operator’s rate card, which is regulated by RegTP. Professional Level 4 operators also often negotiate additional long term signal supply contracts, which allow for further discounts to the regulated rate card. However, Level 4 operators can integrate vertically by building their own headends to receive signals directly, provided that the number of customers to be serviced reaches a critical mass. In a similar fashion, yet at a smaller scale, Level 4 operators (and housing associations) are able to run SMATV (Satellite Master Antenna TV) systems, a satellite system used to distribute television signals to households located in one or more adjacent buildings, primarily serving urban and suburban multiple-dwelling units, using the television signals supplied via satellite for direct-to-home (DTH) and distributing these via cable to their customers. Professional Level 4 operators also seek opportunities to overbuild the Level 3 network, especially in the event of price increases for access to the Level 3 network. BN, for example, started overbuilding the Level 3 network in the city of Kassel in 2002. Following consolidation, such as BN’s recent acquisition by EWT, a Level 4 operator may reach the economies of scale needed to combine a larger number of its Level 4 networks by overbuilding the Level 3 network. In addition, smaller Level 4 operators can combine through cooperation agreements to try to provide a competitive alternative to iesy’s Level 3 network. Competition from professional Level 4 operators could increase in the coming years as the industry undergoes ownership changes and potentially consolidates. In addition, professional Level 4 operators may have certain competitive advantages over iesy’s business, including a lower level of regulation of their pricing. Satellite A major competitive force in the German television market is satellite television, which can be divided among three types of access: (i) FTA satellite, (ii) SMATV, and (iii) premium satellite television. As it relates to FTA satellite, residential subscribers in single or small dwelling units may install a satellite receiver to view a large number of programs without paying subscription fees. Regarding SMATV, Level 4 operators and in certain cases larger housing associations may install a satellite receiver and headend equipment to provide satellite television to their subscribers or tenants, as the case may be, on a 142

shared access basis. In this case, the Level 4 operator or the housing association will not incur ongoing subscription fees but may pay copyright fees and charge certain fees to their subscribers or tenants. Residential subscribers must also install a satellite receiver when they subscribe to premium cable television via satellite, in particular Premiere. Satellite operators, such as SES Astra and Eutelsat, distribute analog and digital signals nationally via satellite directly to television viewers. To receive programming distributed via satellite, viewers need a satellite dish and a satellite receiver, and, for digital channels, a set-top box. Viewers also require a smartcard for premium cable television services distributed via satellite. Satellite providers do not have any relationships with end customers in Germany and, consequently, do not receive any subscription or other fees from them. If applicable, satellite customers are charged premium television subscription fees directly by the providers of such programs. For tenants in single or multiple-dwelling units it is usually up to the property owner or housing association to decide whether to use cable or satellite. Because of structural damage, zoning laws and the unsightly nature of satellite dishes, many property owners and housing associations have contractually prohibited residents from using satellite based solutions, through negative covenants in their tenants’ leases. Among the disadvantages of satellite compared to cable are: • the installation of a satellite dish, as compared to the plug-and-play convenience of cable; • the lack of an ongoing maintenance service, which cable network operators offer to their subscribers; • the susceptibility of satellite reception to external interferences, such as adverse weather conditions; • zoning laws and contractual arrangements with property owners that prohibit the installation of a satellite dish (although such restrictions may loosen in the future as a result of EU regulations); and • the higher up front cost of procuring and installing a satellite based solution. The principal advantages of receiving television signals via satellite compared to cable are: • lower cost over time, given that the initial cost of purchasing a satellite dish is offset by the absence of recurring subscription fees; • satellite’s almost universal coverage across Germany, including remote and rural areas where a cable connection is not available; and • a broader offering of “free-to-air” (FTA) channels. Terrestrial In Germany, terrestrial transmission is FTA, meaning that television viewers are not required to pay a fee for receiving transmissions. It provides viewers with anywhere from 3 to 12 analog channels, depending upon the area in which the viewer is located. Via digital terrestrial television (Digital Video Broadcasting-Terrestrial, or DVB-T), the digital format of terrestrial transmissions, this increases to 18-24 channels. Programming distributed via terrestrial transmission is supplied directly to the viewer’s television or rooftop antenna via transmission towers. In the case of DVB-T, viewers need to acquire a set-top box and a specific antenna for the receipt of digital content. The terrestrial transmission infrastructure is owned and operated by T-Systems MediaBroadcast, a subsidiary of DTAG. The terrestrial television distribution platform does not receive any subscription or other fees from the end-users. They receive fees from broadcasters for signal transmission. In recent years, analog terrestrial television market share has been in decline due to its limited channel offering as compared to cable and satellite. RegTP is generally required to revoke all allocations of frequencies for analog television transmission by December 31, 2010. At the same time, DVB-T is being promoted by the German state media authorities as a means to provide a larger number of channels on terrestrial television. Because the transmission footprint of DVB-T is smaller than analog, more towers are required to cover the same geographic territory, which increases the cost of transmission. German cable network operators have initiated proceedings at the EC challenging the compliance of alledged subsidization of DVB-T in Germany with applicable European competition law. 143

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    PROSPECTUS iesy Repository GmbH €

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    the market price of the Notes at a

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    which the issue or the offer of sec

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    “combined entity”, and “we”

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    “Tele Columbus” refers to the c

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    Revenue generating units, or “RGU

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    CURRENCY PRESENTATION AND EXCHANGE

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    end of 2005. Our subscribers can al

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    populations, with approximately 2.7

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    In April/May 2005, iesy entered int

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    Our Corporate and Financing Structu

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    THE OFFERING The summary below desc

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    Optional Redemption We may redeem a

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    SUMMARY FINANCIAL AND OPERATING INF

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    iesy Other Financial Data (unaudite

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    iesy Operational Data (unaudited) R

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    ish Income Statement Data Audited y

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    35 Three months ended Year ended De

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    37 As of December 31, As of March 3

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    RISK FACTORS You should carefully c

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    acquiring content, purchasing servi

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    agreements—MSG”). We cannot ass

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    In addition, most of our cable netw

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    Strikes or other industrial actions

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    acquisitions. In addition, any addi

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    provision and may not be abusive. S

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    €1,050.0 million would have been

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    We depend on payments from our subs

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    • Claims against the Issuer and s

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    Senior Credit Facilities before the

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    court rulings did not address the p

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    THE ISH ACQUISITION The description

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    In addition to the warranties, spec

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    CAPITALIZATION The following table

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    Unaudited Pro Forma Condensed Conso

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    NOTES TO THE UNAUDITED PRO FORMA CO

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    (€m, except percentages) Pro form

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    Income Statement Data 75 Audited Ye

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    (7) Number of subscribers at the en

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    • iesy’s premium cable televisi

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    egulated pricing model. Fees are pa

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    Risks Relating to Our Indebtedness

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    Legal, Consulting and Management Fe

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    Subscribers iesy classifies its cus

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    2003 to €8.20 per subscriber in t

  • Page 91 and 92: • the senior credit facilities we
  • Page 93 and 94: average installation fees from July
  • Page 95 and 96: Cash flow from investing activities
  • Page 97 and 98: In the three months ended March 31,
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  • Page 103 and 104: oadcasters in television and radio.
  • Page 105 and 106: educed or increased by a material a
  • Page 107 and 108: Income Statement Data Audited year
  • Page 109 and 110: 109 As of December 31, As of March
  • Page 111 and 112: • ish’s premium cable televisio
  • Page 113 and 114: In addition, ish markets pay-per-vi
  • Page 115 and 116: Cost of Materials and Services Cost
  • Page 117 and 118: For accounting purposes, ish treats
  • Page 119 and 120: Subscribers ish classifies its cust
  • Page 121 and 122: Competition ish faces significant c
  • Page 123 and 124: This decrease was primarily due to
  • Page 125 and 126: Net Loss Net loss was €17.9 milli
  • Page 127 and 128: Pension Obligations As of March 31,
  • Page 129 and 130: Term Sheets with DTAG, BRN-ish agre
  • Page 131 and 132: estructuring liabilities, while 200
  • Page 133 and 134: accrual for pending losses. The exp
  • Page 135 and 136: International Financial Reporting S
  • Page 137 and 138: Content Providers Basic Television
  • Page 139 and 140: Digital Home” and PrimaCom offers
  • Page 141: [GRAPHIC] [GRAPHIC] Level 4 is the
  • Page 145 and 146: The following table shows several k
  • Page 147 and 148: In the domestic market, the German
  • Page 149 and 150: BUSINESS Unless otherwise indicated
  • Page 151 and 152: Germany, with approximately 30.2 mi
  • Page 153 and 154: Prudently deploying capital. Our de
  • Page 155 and 156: iesy’s Current Basic Cable Televi
  • Page 157 and 158: amounted to €8.0 million or 5.9%
  • Page 159 and 160: within iesy’s upgraded areas and
  • Page 161 and 162: Supply The following chart shows th
  • Page 163 and 164: Term Sheet Service Duration Offer o
  • Page 165 and 166: y the new fiber system. See “Oper
  • Page 167 and 168: part of settling arbitration procee
  • Page 169 and 170: Business of ish Products and Servic
  • Page 171 and 172: ish’s Current Basic Cable Televis
  • Page 173 and 174: In addition to the monthly subscrip
  • Page 175 and 176: Customers who subscribe to Premiere
  • Page 177 and 178: Sales ish’s sales team is divided
  • Page 179 and 180: The following chart illustrates ish
  • Page 181 and 182: Term Sheet Service Duration Co-use
  • Page 183 and 184: Lease of space for broadband cable
  • Page 185 and 186: Other Significant Supply Agreements
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  • Page 189 and 190: Competition The cable television an
  • Page 191 and 192: Introduction REGULATION German law
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    We assume that we will be deemed to

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    The Amendment provides that provisi

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    • Providers who had a dominant po

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    in the Munich office of Apax Partne

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    Marketing for Germany and Austria,

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    Gerard Tyler is ish’s Treasurer.

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    CERTAIN RELATIONSHIPS AND RELATED P

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    Beneficial Ownership The following

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    DESCRIPTION OF OTHER INDEBTEDNESS T

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    period (unless the interest period

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    Subordinated Bridge Facility In con

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    • the ability of the Obligors (ot

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    owed by the Insolvent Obligor will

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    DESCRIPTION OF THE NOTES The Issuer

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    in London, the Bank of New York, Ne

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    Issuer have agreed that iesy Hessen

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    Subsidiary Guarantor outstanding wh

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    the amount of their secured claim.

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    provisions described under “—De

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    In addition, the Intercreditor Agre

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    Euro Note to and including February

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    circumstances referred to above exi

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    that it has unconditionally exercis

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    time outstanding not exceeding (i)

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    description of this covenant and no

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    Date of any Indebtedness that has b

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    (13) Investments in an aggregate am

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    supplement or other modification) t

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    (1) the assumption by the transfere

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    Reports Whether or not required by

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    of the European Union on January 1,

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    contemporaneously with any such act

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    25% in principal amount of the outs

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    (2) provide for the assumption by a

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    (6) an Officer’s Certificate stat

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    calculated based on the relevant cu

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    “Bank Indebtedness” means any a

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    Consolidated Net Income (excluding

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    (9) the impact of capitalized inter

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    “Exchange Act” means the U.S. S

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    (iii) for the avoidance of doubt, a

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    “Nationally Recognized Statistica

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    (2) Investments in another Person i

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    (15) Permitted Collateral Liens; (1

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    (5) in the case of Apollo and Golde

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    service level agreement as replaced

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    “Unrestricted Subsidiary” means

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    The Issuer and the Trustee and thei

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    Secondary Market Trading The Book-E

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    to trade tax. The taxable gain from

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    date). A U.S. Holder’s adjusted t

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    (c) for so long as the Notes are el

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    PLAN OF DISTRIBUTION We, the Subsid

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    LEGAL MATTERS Certain legal matters

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    WHERE YOU CAN FIND OTHER INFORMATIO

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    Listing LISTING AND GENERAL INFORMA

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    INDEX TO FINANCIAL STATEMENTS iesy

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    Assets iesy Hessen GmbH & Co. KG, W

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    I. Application of Legal Provisions

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    III. Explanation of Balance Sheet a

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    Last year’s extraordinary expense

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    INDEPENDENT AUDITORS’ REPORT We h

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    iesy Repository GmbH, Hamburg AMEND

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    and remaining useful life for the i

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    The movements in consolidated equit

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    iesy Repository GmbH, Hamburg AMEND

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    Assets iesy Repository GmbH, Hambur

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    I. Basis of Presentation The consol

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    V. Explanations to Material Items o

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    Network infrastructure, rental, lea

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    iesy Repository GmbH, Hamburg UNAUD

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    1. Basis of Presentation iesy Repos

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    5. Explanations to Material Items o

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    Shareholdings of iesy Repository Gm

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    iesy Hessen GmbH & Co. KG, Weiterst

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    COURTESY TRANSLATION FROM THE GERMA

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    COURTESY TRANSLATION FROM THE GERMA

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    (1) General COURTESY TRANSLATION FR

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    (3) Accounting and Valuation Princi

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    COURTESY TRANSLATION FROM THE GERMA

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    COURTESY TRANSLATION FROM THE GERMA

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    COURTESY TRANSLATION FROM THE GERMA

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    The following auditors’ report (B

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    COURTESY TRANSLATION FROM THE GERMA

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    COURTESY TRANSLATION FROM THE GERMA

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    COURTESY TRANSLATION FROM THE GERMA

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    Inventories COURTESY TRANSLATION FR

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    Goodwill COURTESY TRANSLATION FROM

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    COURTESY TRANSLATION FROM THE GERMA

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    Depreciation and Amortization COURT

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    COURTESY TRANSLATION FROM THE GERMA

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    COURTESY TRANSLATION FROM THE GERMA

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    COURTESY TRANSLATION FROM THE GERMA

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    (1) General COURTESY TRANSLATION FR

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    COURTESY TRANSLATION FROM THE GERMA

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    COURTESY TRANSLATION FROM THE GERMA

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    COURTESY TRANSLATION FROM THE GERMA

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    Cost of materials COURTESY TRANSLAT

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    [THIS PAGE INTENTIONALLY LEFT BLANK

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    Goodwill. Under German GAAP, the di

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    Under U.S. GAAP, loan origination f

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    IFRS requires a purchase price allo

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    financial liability incurred result

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    €235,000,000 10 1 /8% Senior Note

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