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iesy Repository GmbH - Irish Stock Exchange

iesy Repository GmbH - Irish Stock Exchange

iesy

iesy experienced higher than usual churn levels in early 2005 as annual subscriber contracts came up for renewal for the first time since iesy’s 2004 price increase. See “Risk Factors—Risks Relating to Our Business—Customer churn, or the threat of customer churn, may adversely affect our business.” In the longer term, we believe that the introduction of premium cable television and high speed Internet products and services will help to maintain subscriber levels, particularly among the residential and housing association customers. However, conditions may change due to, among other things, further industry consolidation and market developments, and this may encourage further disconnections in the future. See “Risk Factors—Risks Relating to Our Business—Customer churn, or the threat of customer churn, may adversely affect our business.” Under iesy’s existing customer care and billing systems, iesy tracks the number of customer contracts that are added and terminated. These numbers include, among other factors, contract renewals and terminations attributable to churn (which is the number of subscribers that disconnect from iesy’s network and do not reconnect under a new contract). Churn is caused by a number of factors, the principal factor being house moves, as well as competition and pricing. See “Risk Factors—Risks Relating to Our Business—We operate in competitive industries, and competitive pressures could have a material adverse effect on our business” and “Business—Competition.” Although iesy’s ability to reduce its customer churn rate is limited by certain factors, such as customers moving outside iesy’s network service area, managing its customer churn rate is a significant component of iesy’s business plan. To help meet these objectives, we intend to continue to maintain iesy’s high level of customer care, improve and introduce new product offerings and enhance iesy’s direct contact with customers. ARPU ARPU (average revenue per unit) is a measure we use to evaluate how effectively we are realizing potential revenues from customers. ARPU is generally calculated on a yearly, quarterly or monthly basis by dividing total sales generated from the provision of services by the average number of subscribers served in that period and by the number of months in the period. The basic cable ARPU for the year ended December 31, 2003 was €7.86. During the latter part of 2003, iesy established segmental revenues reporting which has allowed iesy from January 1, 2004 to report ARPUs on a segmental basis. Detailed below is ARPU by the three months ended March 31, 2004 and 2005, and for the year ended December 31, 2004: 88 Year ended Three months ended December 31, March 31, 2004 2004 2005 Subscriber segment (€) Residential (1) 11.43 11.23 11.71 Housing associations (2) 6.22 6.14 6.30 Professional Level 4 operators (3) 3.97 3.80 4.05 Basic cable ARPU (4) 8.20 8.06 8.32 (1) Calculated by dividing residential basic cable subscription revenues (including installation but excluding carriage fees) for the year ended December 31, 2004 by the average number of residential subscribers for that period and the number of months for that period. Residential subscribers typically comprise accounts of one to five dwelling units. (2) Calculated by dividing housing associations basic cable subscription revenues (including installation but excluding carriage fees) for the year ended December 31, 2004 by the average number of housing association subscribers for that period and the number of months for that period. Housing associations include customers that not only own and operate their own Level 4 networks, but also operate and administer the networks of other housing associations and, accordingly, display certain characteristics of professional Level 4 operators. (3) Calculated by dividing professional Level 4 operators basic cable subscription revenues (including installation but excluding carriage fees) for the year ended December, 2004 by the average number of professional Level 4 operators subscribers for that period and the number of months for that period. Professional Level 4 operators are comprised of BN, EWT, PrimaCom, and Tele Columbus. (4) Calculated by dividing basic cable subscriber revenues (including basic cable installation fees but excluding basic cable carriage fees) for a period by the average number of total basic cable subscribers for that period and the number of months for that period. iesy’s basic cable subscriber ARPU has increased by 3.2% from €8.06 for the three months ended March 31, 2004 to €8.32 for the three months ended March 31, 2005, and by 4.3% from €7.86 per subscriber in the year ended December 31,

2003 to €8.20 per subscriber in the year ended December 31, 2004. We believe this reflects both the price increases iesy has implemented and its professional Level 4 operator discount policy. Competition iesy faces significant competition in each of its businesses. iesy’s ability to acquire and retain customers and increase sales depends on its continued level of service and enhanced product offerings. If competitive forces prevent iesy from charging the prices for these services that iesy plans to charge, or if iesy’s competition is able to attract its customers or potential customers it is targeting, its results of operations will be negatively affected. For further details as to the competition that we face, please see “Business—Competition” and “Risk Factors—Risks Relating to Our Business—We operate in competitive industries, and competitive pressures could have a material adverse effect on our business.” Trade Receivables and Bad Debt iesy’s trade receivables declined from €12.8 million in the three months ended March 31, 2004 to €5.9 million in the three months ended March 31, 2005, and from €13.5 million as of December 31, 2003 to €12.8 million as of December 31, 2004. These reductions are result of both improved credit control and the write-off of old balances at December 31, 2004. In line with the seasonality of trade receivables, which peak during the annual cycle of pre-paid accounts (November through February), iesy’s bad debt allowance also peaks during a similar period. iesy’s bad debt allowance policy is to provide general and specific allowances based on customer groups on a prudent basis. During the first quarter of 2003, iesy migrated its receivables ledger from ICMS, its billing system, into SAP, its accounting system. This was done to improve iesy’s management of receivables, especially through improved allocation of receipts and to allow regular reminder letters to be sent to overdue accounts. This migration to SAP has allowed us to adopt a more aggressive disconnection policy in order to reduce past due and disputed accounts receivable. The balances transferred at the time of migration have now stabilized, showing little or no movement. In the fourth quarter of 2004 iesy wrote off any old balances from the migration date. This resulted in a total write off of €1.1 million. Together with bad debt expenses in the ordinary course of business and the addition to bad debt reserves total expenses related to bad or doubtful debts equalled €0.2 million for the three months ended March 31, 2005, and €1.8 million for the year ended December 31, 2004. Seasonality Certain aspects of iesy’s business are subject to seasonal factors. In particular iesy has a disproportionately high level of annual prepayments in the months between November and February, which results in a higher level of accounts receivable and cash flow from operations in these months each year. The Refinancing and Financing Following the Refinancing and the Financing related to the ish Acquisition, iesy has become and will be highly leveraged and have significant debt service obligations. See “—Recent Developments” and “The ish Acquisition.” After giving pro forma effect to the Refinancing, the ish Acquisition and Financing, as of March 31, 2005, iesy would have had €1,625.0 million of indebtedness, of which €1,050.0 million would have been indebtedness under the Senior Credit Facilities (excluding €100.0 million available but undrawn under a revolving credit facility) and €575.0 million of indebtedness would have been the Notes and the Existing Notes. As of July 1, 2005, iesy had made requests to utilize €22.0 million of its revolving credit facility, to fund normal working capital needs. iesy’s substantial leverage could increase its vulnerability to a downturn in its business or economic or industry conditions, limit its ability to update its network and introduce new products and services, limit its ability to obtain future financing, require the dedication of a substantial portion of its cash flows from operations to fund debt service, and limit its flexibility to plan for or react to changes in its business, competition or industry. Any of these consequences could have a material adverse effect on iesy’s ability to satisfy its obligations. See “Risk Factors—Risk 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.” iesy does not have substantial revenues, expenses or liabilities that are denominated in currencies other than the euro. At March 31, 2005, iesy had no interest rate swaps. However, iesy anticipates entering into certain interest rate hedges in connection with the Senior Credit Facilities and, to the extent Dollar Notes are issued, iesy anticipates entering into dollar/euro currency exchange hedges. See “The ish Acquisition” and “—Qualitative and Quantitative Disclosure of Market Risk.” Recent Developments In February 2005, iesy completed the Refinancing, which consisted of the offering of the €215.0 million Existing Notes as well as the entering into of a €230.0 million Senior Credit Facilities, consisting of a €200.0 million term loan facility and a 89

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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

  • 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 and 84: Risks Relating to Our Indebtedness
  • Page 85 and 86: Legal, Consulting and Management Fe
  • Page 87: Subscribers iesy classifies its cus
  • 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 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
  • Page 135 and 136: International Financial Reporting S
  • Page 137 and 138: 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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