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iesy Repository GmbH - Irish Stock Exchange

iesy Repository GmbH - Irish Stock Exchange

ANNEX A Summary of

ANNEX A Summary of Certain Significant Differences Between German GAAP and U.S. GAAP The financial information included herein is prepared and presented in accordance with German GAAP. Certain differences exist between German GAAP and U.S. GAAP which might be material to the financial information herein. The matters described below summarize certain differences between German GAAP and U.S. GAAP that may be material. iesy has not prepared a complete reconciliation of its consolidated financial statements and related footnote disclosures between German GAAP and U.S. GAAP and has not quantified such differences. Accordingly, no assurance is provided that the following Summary of differences between German GAAP and U.S. GAAP is complete. In making an investment decision, investors must rely upon their own examination of the Issuer, the terms of the offering and the financial and other information. Potential investors should consult their own professional advisors for an understanding of the differences between German GAAP and U.S. GAAP, and how those differences might affect the financial information herein. Basis of Presentation German GAAP and U.S. GAAP differ in several fundamental respects. German companies apply more conservative valuation methods in their financial statements reflecting a fundamental German GAAP principle called the “principle of prudence”. In addition, German GAAP financial statements are generally prepared with creditor protection in mind, while U.S. GAAP financial statements are prepared to provide information in a form that assists investor decision making and comparability to other companies. Furthermore, German GAAP financial statements serve as the authoritative basis for the tax accounts. Financial Statement Presentation Under German GAAP, the balance sheet and the income statement are classified differently than under U.S. GAAP. In the balance sheet, German GAAP generally requires companies to classify assets as either fixed or current and liabilities classified as either provisions or liabilities. In contrast, the balance sheet, according to U.S. GAAP, is based primarily on the liquidity of the account balances, with the most liquid item being presented first. In addition, assets and liabilities are classified into current and non-current depending on the nature of the account. Under German GAAP, companies can present its income statement under the cost summary method, which classifies revenues in a manner similar to U.S. GAAP, but classifies expenses into categories based on their nature, such as materials, personnel, and depreciation. Under U.S. GAAP, the income statement is presented on a transactional basis, which classifies revenues and expenses based on their functional activities. The disclosures in the explanatory Notes to the financial statements are far more extensive under U.S. GAAP compared to German GAAP. Capital Leases German GAAP does not explicitly specify the accounting treatment for leasing transactions. Measurement is generally based on regulations issued by the German Tax Authorities. Taking into account the respective criteria for tax accounting, lease agreements are generally structured so that the leased property must be recorded by the lessor, i.e. as operating leases. Under U.S. GAAP, leased assets are to be capitalized if they meet specific criteria, and depreciated over the useful life that would be assigned if (1) the asset were owned or (2) the lease term, depending on the type of capital lease. Capital leases are recorded as assets and liabilities at the lower of (1) the present value of the minimum lease payments at the beginning of the lease term or (2) the fair value of the leased property at the inception date. Accounting for Acquisitions Differences exist between German and U.S. GAAP in the valuation of assets and liabilities of acquired businesses due to the valuation of underlying assets and liabilities (including deferred taxes), dates used to calculate consideration paid, as well as the effective acquisition date. Acquisition costs. Under German GAAP costs incurred in the decision making process such as legal fees, due diligence fees, travel costs and similar items that meet the incremental and direct criteria, are not included in the purchase price. Under U.S. GAAP the purchase price includes certain incremental direct costs that have been incurred. 390

Goodwill. Under German GAAP, the difference between the cost of acquisition and the fair value of the identifiable assets arising from an acquisition is recorded as goodwill and can be written off immediately to reserves or be capitalized and amortized generally using the straight-line method for up to four years or, at the option of the company, its estimated useful life. Under German GAAP goodwill is required to be tested for impairment if indicators exist that goodwill could be impaired. If goodwill is impaired it is written down to its fair value. German GAAP does not provide detailed guidance on the performance of the impairment test. Under U.S. GAAP, goodwill, which is defined as the difference between the cost of the acquired company over the estimated fair values assigned to assets acquired and liabilities assumed, is not amortized, but is required to be tested at least annually for impairment. In addition, if indicators of impairment exist prior to or after the annual impairment test, an interim impairment test is required to be performed. Once goodwill is reduced by an impairment charge it cannot be written back up in future periods if circumstances subsequently improve. Negative goodwill. Under German GAAP, negative goodwill is reported in the balance sheet and may be recognized in income when unfavorable effects anticipated at the time of acquisition have occurred or if it relates to a realized profit. U.S. GAAP requires a company to allocate negative goodwill as a pro rata reduction to acquired assets (excluding certain financial assets, assets held for sale, deferred tax assets, prepaid pension assets or other current assets). If any negative goodwill remains after the pro rata allocation, it should be recorded as a gain in the period in which the business combination is initially recognized. Valuation of Tangible Fixed Assets Under German GAAP, tangible fixed assets are depreciated using either the straight-line method or the declining balance method over the estimated useful life of the asset. In general, the useful life of an asset is similar to regulations under German tax law. In addition, assets that do not meet a minimum capitalization requirement, established by German tax law, can be depreciated in the year of acquisition. Under U.S. GAAP, the depreciable life is the estimated useful life of the asset to the existing user and is not influenced by tax regulations. In addition, the fact that certain assets do not meet the minimum capitalization requirements does not result in writing off the asset in the year of acquisition. Impairment of Intangible and Tangible Fixed Assets Under German GAAP asset impairment must be recognised if there is a permanent decline in the value of the asset. The value of the asset is derived from the repurchase price or net selling price of similar asset. In addition if an asset is no longer in use an extraordinary write off has to be recorded. The recoveries of impairment are allowed. Under U.S. GAAP asset impairment must be recognised if there is an indication of impairment. If an indication of impairment exists an entity must assess whether the impairment has occurred based on the future cash flows (undiscounted and excluding interest) expected to result from use and eventual disposal of the asset. An impairment loss will exist if the sum of these cash flows is less than the carrying amount of the assets. The impairment loss is then recognized for the excess of carrying value over fair value of the asset. Impairment is recognized as a charge to the income statement in the period identified. Recoveries of impairment are not allowed. Internally Developed Software Under German GAAP, internal costs incurred to develop software for internal use are generally expensed as incurred, whereas costs incurred in the development of internal use software related to external suppliers are generally capitalized. Under U.S. GAAP both certain internal and external costs used to develop software for internal use are capitalized once the performance criteria have been met. The capitalized costs should then be amortized on a straight line basis unless another systematic or rational basis is more representative of the services received. Trade Receivables Valuation Allowances Under German GAAP, in addition to specific valuation allowances, general valuation allowances can be recorded to cover general credit and default risks with respect to the net realizable values of existing receivables. U.S. GAAP only permits valuation allowances to be recorded on the basis of past collection experience and specific cases where collection is estimated to be unlikely. 391

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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

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    • the senior credit facilities we

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    average installation fees from July

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    Cash flow from investing activities

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    In the three months ended March 31,

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    eview and optimization of services

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    Cash Flow from Operating Activities

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    oadcasters in television and radio.

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    educed or increased by a material a

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    Income Statement Data Audited year

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    109 As of December 31, As of March

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    • ish’s premium cable televisio

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    In addition, ish markets pay-per-vi

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    Cost of Materials and Services Cost

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    For accounting purposes, ish treats

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    Subscribers ish classifies its cust

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    Competition ish faces significant c

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    This decrease was primarily due to

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    Net Loss Net loss was €17.9 milli

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    Pension Obligations As of March 31,

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    Term Sheets with DTAG, BRN-ish agre

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    estructuring liabilities, while 200

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    accrual for pending losses. The exp

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    International Financial Reporting S

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    Content Providers Basic Television

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    Digital Home” and PrimaCom offers

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    [GRAPHIC] [GRAPHIC] Level 4 is the

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    shared access basis. In this case,

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    The following table shows several k

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    In the domestic market, the German

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    BUSINESS Unless otherwise indicated

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    Germany, with approximately 30.2 mi

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    Prudently deploying capital. Our de

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    iesy’s Current Basic Cable Televi

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    amounted to €8.0 million or 5.9%

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    within iesy’s upgraded areas and

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    Supply The following chart shows th

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    Term Sheet Service Duration Offer o

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    y the new fiber system. See “Oper

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    part of settling arbitration procee

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    Business of ish Products and Servic

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    ish’s Current Basic Cable Televis

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    In addition to the monthly subscrip

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    Customers who subscribe to Premiere

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    Sales ish’s sales team is divided

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    The following chart illustrates ish

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    Term Sheet Service Duration Co-use

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    Lease of space for broadband cable

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    Other Significant Supply Agreements

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    ights themselves. As an exception,

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    Competition The cable television an

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    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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