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iesy Repository GmbH - Irish Stock Exchange

iesy Repository GmbH - Irish Stock Exchange

television industry and

television industry and GEMA (representing collecting societies), public broadcasters, and a few German and foreign private broadcasters in television and radio. This contract is scheduled to terminate on December 31, 2006. iesy also pays royalties to VG Media pursuant to a collective agreement between iesy, ish, the other Level 3 operators and VG Media (representing the majority of private broadcasters). This agreement came into force on January 1, 2003 and may be terminated by each party on December 31, 2005, at the earliest. On March 22, 2005, as part of settling arbitration proceedings, iesy became a party to this agreement. As a result, iesy’s accruals increased and a payment was made to cover the periods from January 1, 2003. Total copyright fees paid by iesy under the GEMA and VG Media agreements in the three months ended March 31, 2005 amounted to €1.5 million, and in the year ended December 31, 2004 amounted to €5.6 million. Some collecting societies represented by ARGE Kabel have claimed additional royalty payments from iesy. See “Risk Factors—Risks Relating to Our Business—Uncertainties as to copyright laws may adversely affect our ability to conduct our business” and “Business—Business of iesy—Legal Proceedings.” Costs Relating to Premium Cable Television Programming iesy currently delivers its foreign language program packages and Premiere’s program packages and encryption data for smart cards through MSG’s digital playout facility. iesy is obliged under its service agreement with MSG to pay its share of the costs associated with the facility’s operation. MSG allocates these costs based on digitally reachable subscriber numbers among iesy, Kabel BW, ish and KDG. While MSG must substantiate those costs to iesy, iesy has no control over the costs of operating the facility or the amount that MSG deems to be iesy’s allocable share of such costs. iesy had disputes with MSG as to past billings related to the provision of digital playout services from 2001 to 2004. In January 2004, a settlement was reached covering the period from 2001 to 2003. A settlement covering 2004 was reached in August 2004. iesy incurred expenses of €1.2 million for services provided by MSG in the year ended December 31, 2004. These costs do not include €0.4 million related to the usage of the digital channels S26 and S38. In the third quarter of 2004 iesy decided to capitalize the costs relating to these channels for the remaining period of time. iesy incurred expenses of €0.3 million for services provided by MSG in the three months ended March 31, 2005. See “Risk Factors—Risks Relating to Our Business—We rely on MSG, a subsidiary of KDG, for the provision of certain playout services and because of changes in our relationship with MSG, our premium cable television services could be disrupted or may lead to higher costs. Existing contracts of MSG with third parties, especially Premiere, as well as our current agreements with MSG, could adversely affect the development of our digital strategy,” “Business—Business of iesy—Products and Services—Basic cable television—iesy’s basic cable carriage fees.” In addition, iesy licenses the programs for iesy’s foreign language television offerings from Mediapool, a program provider who acquires content on iesy’s behalf, for a monthly fee that varies per program per subscriber. The current term of iesy’s contract with Mediapool has been extended through 2009. With regard to iesy tv USA-UK, iesy has concluded agreements directly with broadcasters to procure content. These agreements provide for fees based upon the total number of subscribers to the package and in the case of a few broadcasters have some relatively low minimum guarantees. iesy’s programming costs may increase in the future with an expansion of our premium cable television services. See “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” and “Business—Business of iesy—Products and Services—Premium cable television—iesy’s programming content and payments.” Rental and Leasing Fees iesy leases all its offices, including its headquarters, and lease service vehicles and automobiles for certain employees. Total rent and lease payments recorded were €1.0 million for the three months ended March 31, 2005, and €3.8 million for the year ended December 31, 2004. Sales and Marketing Expenses iesy pays sales commissions for the sale of subscriptions to its products. Sales commissions were €0.7 million for the three months ended March 31, 2005, and €2.7 million for the year ended December 31, 2004. Marketing expenses for the three months ended March 31, 2005 were €0.3 million, and for the year ended December 31, 2004 were €1.7 million. iesy expects its marketing costs to significantly increase as iesy extends its marketing activities, and particularly as iesy expands its premium cable television and high speed Internet services. 84

Legal, Consulting and Management Fees iesy incurred legal and consulting fees as part of operating its business and conducting strategic reviews, as well as transactions such as the ish Acquisition, the Financing and the Refinancing. In addition Apollo may be entitled to strategic advisory fees in connection with certain transactions. Following the completion of the ish Acquisition, Apollo received a €12.7 million strategic advisory fee. Upon completion of the ish Acquisition, Apollo agreed to waive its right to receive management fees pursuant to the management services agreement. See “Certain Relationship and Related Party Transactions—Management services agreement.” For the three months ended March 31, 2005, iesy incurred €0.3 million in legal and consulting fees, and €0.5 million in strategic advisory fees, and for the year ended December 31, 2004, iesy incurred legal and consulting fees of €4.3 million (including €3.0 million on refinancing and acquisition related advisory fees), and management and strategic advisory fees of €5.8 million. Bad Debt Expenses Bad debt expenses were €0.2 million for the three months ended March 31, 2005, and €1.8 million for the year ended December 31, 2004. For more information see “—Trade receivables and bad debt.” Taxes on Income iesy’s effective tax rate is positively affected by the deferred tax assets relating to our prior tax losses. Recently, an increase in iesy’s profits has increased its effective tax rate. Following completion of the ish Acquisition, iesy intends to create tax groups (Organschaften) with ish and certain other subsidiaries. As a result, the combined entity will not be able to use the tax loss carry forwards to offset taxes while such Organschaften exist (other than existing loss carry-forwards of iesy Hessen). See the “The ish Acquisition—Potential Post-Acquisition Reorganization.” iesy has written up its customer base in the financial statements of iesy Hessen for the year ended December 31, 2004. The total amount of this write-up was €152.8 million and, accordingly, its effect on its balance sheet was a taxable gain which resulted in incremental taxes payable of €1.4 million. Losses iesy has a history of losses, although in the year ended December 31, 2004 iesy reported a net profit. During the three months ended March 31, 2005, iesy recognized a taxable loss and therefore accrued no tax liabilities during this period. iesy expects to incur net losses in the future due to the Financing and the ish Acquisition. A substantial portion of these losses are expected to consist of depreciation and amortization expense, which does not directly impact iesy’s cash flow, interest expense and extraordinary items, which are mainly one-time in nature and directly related to finance and advisory fees. Capital Expenditures iesy’s capital expenditures relate primarily to extending or upgrading its network. Capital expenditures also include intangible assets (except iesy’s customer list) and do not include financial assets. In addition, iesy incurs a limited amount of expenditures required to sustain its current network which iesy accounts for as repair and maintenance expenditures within raw materials and consumables on its income statement. Repair and maintenance expenditures were €2.6 million in the year ended December 31, 2004, and €0.6 million in the three months ended March 31, 2005. Capital expenditures were €6.7 million for the year ended December 31, 2004 and were €2.8 million in the three months ended March 31, 2005. These amounts correspond to 4.9% and 8.4% of total revenues for each of these respective periods. iesy focuses on maximizing cash flows from existing assets and engages in limited network upgrades on a selective basis. iesy has a high quality, well-engineered network in which the vast majority of the cable plant is below the ground (and as such is subject to fewer breakdowns caused by external elements). In addition, iesy believes its network ownership structure contributes to lower capital maintenance and operating expenses for infrastructure. DTAG generally has a responsibility to maintain and invest in network infrastructure leased to iesy, and professional Level 4 operators and housing associations generally maintain their own networks. For that reason, a significant part of the network infrastructure is maintained by other parties. Incremental capital expenditures such as the upgrade of the Level 4 or in-house network or the introduction of a new product are designed to ensure that iesy’s return on investment thresholds are met. Capital expenditures for the year ended December 31, 2004 include approximately €1.3 million for the upgrading of iesy’s network for an additional 120,000 homes in Frankfurt. It also includes €0.6 million for the acquisition of small Level 4 operators. Capital expenditures during the three months ended March 31, 2005 relate primarily to the development of iesy’s 85

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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

  • 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 and 82: egulated pricing model. Fees are pa
  • Page 83: Risks Relating to Our Indebtedness
  • 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
  • Page 133 and 134: 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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