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iesy Repository GmbH - Irish Stock Exchange

iesy Repository GmbH - Irish Stock Exchange

total of approximately

total of approximately 217,000 homes in Frankfurt and Marburg. See “—Recent Developments” and “Risk Factors—Risks Relating to Our Business—If we fail to introduce new or enhanced products and services successfully, our revenues and margins could be lower than expected.” Other Revenues Other revenues primarily consists of own work capitalized, premium cable television program carriage fees and prior period income, such as the release of accruals and allowances. iesy has historically recognized a fairly significant amount of other revenues. We believe this item will decline over time. For the three months ended March 31, 2005, other revenues were €1.2 million (3.7%) of iesy’s total revenues, and €6.7 million (4.9%) of its total revenues for the year ended December 31, 2004. Own Work Capitalized Own work capitalized reflects that portion of personnel costs which is directly attributable to the planning and construction of projects related to the extension of iesy’s network. Under German GAAP, these costs are also reflected in iesy’s revenues to the extent capitalized. If and to the extent iesy’s expansion activities (and hence capitalized costs) increase, the contribution from own work capitalized to revenues will also increase. Own work capitalized were €0.5 million, or 1.5% of iesy’s total revenues for the three months ended March 31, 2005, and €1.3 million, or 1.0% of its total revenues for the year ended December 31, 2004. Other Operating Income Other operating income primarily consists of prior period income such as releases of accruals and allowances, as well as premium cable television carriage fees. It includes premium cable television program carriage fees, which relate primarily to fees paid by Premiere to iesy via MSG. The fees derived by iesy from this arrangement include a fixed carriage fee component for each premium cable television channel made available to Premiere, plus a variable fee based upon Premiere’s revenues generated from its subscribers served by iesy’s network. This calculation is performed by MSG on a national basis and revenues are then allocated to each of the Level 3 operators based upon the number of their digitally reachable subscribers. iesy does not receive carriage fees from broadcasters for its foreign and English language program packages but instead pays programming fees for access to such content to either Mediapool Content Services GmbH (“Mediapool”), a program provider who acquires content on iesy’s behalf, or to the broadcasters from whom iesy acquires content directly. Premium cable television program carriage fees generated €0.5 million, or 1.5% of iesy’s total revenues for the three months ended March 31, 2005, and €1.9 million, or 1.4% of iesy’s total revenues for the year ended December 31, 2004. See “— Other operating expenses—Costs relating to premium cable television programming” and “Risk Factors—Risks Relating to Our Business—We do not have guaranteed access to programs and are dependent on agreements with third parties for our content and carriage fees, which may adversely affect our business.” Other operating income for the three months ended March 31, 2005 was €0.8 million, or 2.4% of iesy’s total revenues, and for the year ended December 31, 2004 was €5.4 million, or 4.0%, of iesy’s total revenues. Cost of Materials and Services Cost of materials consists of cost of raw materials and consumables, and cost of purchased services. The former is comprised mainly of repairs and maintenance costs, and the latter of network infrastructure services costs, which include costs under SLAs and the BRN-iesy agreement with DTAG and other agreements, and customer care, billing and network systems. Repair and maintenance costs will be affected by the development of new products and services and, dependent upon the success of the rollout, may increase. iesy’s most significant costs include payments under SLAs and the BRN-iesy agreement with DTAG for the use of assets which are shared between iesy’s network and that of DTAG, and which are owned by DTAG, and for services provided by DTAG. These assets include underground ducts used to house DTAG’s telephony network and iesy’s cable television network; facilities which house DTAG’s telephony switches and iesy’s cable television headends; tower space used to house iesy’s transmission devices; rental space housing iesy’s microwave equipment used to transmit cable television signals; electricity supplied to shared facilities; and fiber optic systems used to transmit iesy’s cable television signals. For a description of the SLAs, see “Business—Business of iesy—Supply—SLAs with DTAG.” If DTAG terminates any of these SLAs or the BRN-iesy agreement, iesy would be required to obtain replacement facilities, which could be difficult and could be more expensive. See “Risk Factors—Risks Relating to Our Business—We rely on DTAG and certain of its affiliates for a significant part of our network. Any disruption or termination of our arrangements with DTAG would materially and adversely affect our business and results of operations.” For accounting purposes, iesy treats the SLAs as operating leases and hence expense payments made under the SLAs. See “Risk Factors— 82

Risks Relating to Our Indebtedness and Our Structure—Our high leverage and debt service obligations could materially adversely affect our business, financial condition or results of operations” and “—Risks Relating to the Notes, the Subsidiary Guarantees and the Security—We have not included IFRS or U.S. GAAP financial information in this Prospectus, and there may be certain significant differences between our financial position and results of operations under German GAAP, IFRS or U.S. GAAP.” Services and facilities provided under the SLAs are governed by their respective Term Sheets. iesy has favorably renegotiated the Term Sheets in 2002, and has terminated certain services under the Term Sheets where they were no longer required. During 2005, iesy will replace AMTV radio links with leased fiber solutions to establish a more integrated network capable of distributing television signals from a single, central feed-in point, without any significant capital investment or increase in operating expenditures. This will allow iesy to more cost-effectively deliver premium cable television services in the future. iesy leases antenna space for its AMTV equipment from DTAG, and these leases will, in most cases, terminate as of December 31, 2005. Under the BRN-iesy agreement, DTAG installs, makes available and operates a fixed-line broadband and broadcasting distribution network in the 630 MHz spectrum. This network, which is made up of optical leased lines, will replace the AMTV technology as well as the Diamant system. See “Business—Business of iesy—Supply—SLAs with DTAG.” Personnel Expenses Personnel expenses include salaries and wages, and social security, pension, and other benefits of the permanent staff. It also includes other forms of compensation such as overtime and stand-by pay, and does not include temporary staff expenses, which are included as other operating expenses. Personnel expenses were €5.3 million for the three months ended March 31, 2005, and €22.0 million for the year ended December 31, 2004. Many of the terms and conditions to the collective bargaining agreements with the labor union representing many of iesy’s employees are now more than two years out of date; accordingly, iesy recently gave notice to terminate its main collective bargaining agreements providing for a requirement of six months’ notice in order to renegotiate these terms and increase the flexibility ahead of the roll-out of iesy’s new products and services during 2005. See “Risk Factors—Risks Relating to Our Business—Strikes or other industrial actions as well as the negotiation of a new collective bargaining agreement could disrupt our operations or make it more costly to operate our facilities” and “Business—Business of iesy— Employees.” Depreciation and Amortization iesy records depreciation expenses relating to property, plant and equipment and intangible assets. A substantial proportion of iesy’s depreciation and amortization expenses related to the amortization of its customer base due to the step-up resulting from the application of purchase accounting in connection with the original acquisition from DTAG in 2000. See “—The iesy Acquisition.” In addition, iesy has significant depreciation expenses relating to capital expenditures made prior to the original acquisition in 2000. Furthermore, in our consolidated accounts, we have recognized an increased amortization of goodwill in the fourth quarter of 2004 as a result of the contribution of interests of New iesy to the Issuer by the minority shareholders of New iesy. The minority shareholders of New iesy, representing an equity interest of approximately 18%, contributed their interests in New iesy to iesy Repository in exchange for new shares issued by iesy Repository, which resulted in a recognition of goodwill for the year ended December 31, 2004. This goodwill has been accounted for in accordance with existing accounting policies, and thereby will result in increased depreciation and amortization expenses in future years. In the near future, we anticipate an increase in iesy’s capital expenditures and, as a result, iesy’s depreciation expense will increase accordingly. See “—Capital Expenditures.” iesy also expects a significant increase in its depreciation and amortization expenses related to the amortization of goodwill recognized in connection with the ish Acquisition. See “Unaudited Pro Forma Condensed Consolidated Financial Statements of iesy.” Other Operating Expenses Other operating expenses include copyright license fees, costs relating to premium cable television services, rental and leasing fees, sales and marketing expenses, legal, consulting, and management fees, and miscellaneous other operating expenses. Copyright License Fees iesy is required under German law to pay royalties to the holders of copyrights and related rights for the retransmission of radio and television programs that include, among other things, literary, scientific or artistic works protected by copyright law. iesy pays these fees pursuant to a collective agreement (Kabelglobalvertrag) between members of the cable 83

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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

  • Page 31 and 32: iesy Operational Data (unaudited) R
  • Page 33 and 34: ish Income Statement Data Audited y
  • Page 35 and 36: 35 Three months ended Year ended De
  • Page 37 and 38: 37 As of December 31, As of March 3
  • Page 39 and 40: RISK FACTORS You should carefully c
  • Page 41 and 42: acquiring content, purchasing servi
  • Page 43 and 44: agreements—MSG”). We cannot ass
  • Page 45 and 46: In addition, most of our cable netw
  • Page 47 and 48: Strikes or other industrial actions
  • Page 49 and 50: acquisitions. In addition, any addi
  • Page 51 and 52: provision and may not be abusive. S
  • Page 53 and 54: €1,050.0 million would have been
  • Page 55 and 56: We depend on payments from our subs
  • Page 57 and 58: • Claims against the Issuer and s
  • Page 59 and 60: Senior Credit Facilities before the
  • Page 61 and 62: court rulings did not address the p
  • Page 63 and 64: THE ISH ACQUISITION The description
  • Page 65 and 66: In addition to the warranties, spec
  • Page 67 and 68: CAPITALIZATION The following table
  • Page 69 and 70: Unaudited Pro Forma Condensed Conso
  • Page 71 and 72: NOTES TO THE UNAUDITED PRO FORMA CO
  • Page 73 and 74: (€m, except percentages) Pro form
  • Page 75 and 76: Income Statement Data 75 Audited Ye
  • Page 77 and 78: (7) Number of subscribers at the en
  • Page 79 and 80: • iesy’s premium cable televisi
  • Page 81: egulated pricing model. Fees are pa
  • Page 85 and 86: Legal, Consulting and Management Fe
  • Page 87 and 88: Subscribers iesy classifies its cus
  • Page 89 and 90: 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,
  • Page 99 and 100: eview and optimization of services
  • Page 101 and 102: Cash Flow from Operating Activities
  • 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
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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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    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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