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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

For the quarter ended September 30, 2002

or

For the transition period from                              to                             

Commission File No. 000-25365

United Pan-Europe Communications N.V.
(Exact name of Registrant as specified in its charter)

Registrant's telephone number, including area code: (31) 20-778-9840

        Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes ý    No o

        The number of shares outstanding of the Registrant's common stock as of November 14, 2002 was:

443,417,525 ordinary shares A, including
shares represented by American Depository Receipts

TABLE OF CONTENTS

PART I—FINANCIAL INFORMATION

1

UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Stated in thousands of Euros, except per share amounts and number of shares)

Item 1. Financial Statements

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Stated in thousands of Euros, except per share amounts and number of shares)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(Stated in thousands of Euros, except number of shares)
(Unaudited)

(1)

As of December 31, 2001, Other Cumulative Comprehensive Income (Loss) represents foreign currency translation adjustments of 169,571, unrealized gain on investments of 4,522, and fair value of derivative assets of (26,920). As of September 30, 2002, Other Cumulative Comprehensive Income (Loss) represents foreign currency translation adjustments of 170,070, unrealized loss on investments of (17,731) and fair value of derivative liability of (13,765).

         The accompanying notes are an integral part of these condensed consolidated financial statements.

4

UNITED PAN-EUROPE COMMUNICATIONS N.V.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Stated in thousands of Euros)
(Unaudited)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

UNITED PAN-EUROPE COMMUNICATIONS N.V.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.    Organization and Nature of Operations

        United Pan-Europe Communications N.V. ("UPC" or the "Company"), whose parent company is UnitedGlobalCom Inc. ("United"), which owns an indirect equity ownership interest in UPC through UGC Holdings Inc. ("UGC Holdings") and United Europe Inc. ("United Europe") of 53.1%, owns and operates broadband communications networks in 11 European countries through its three primary divisions: UPC Distribution, UPC Media and Priority Telecom. UPC Distribution comprises the local operating systems and provides video, telephone and internet services for residential customers (Triple Play). UPC Media provides broadband internet and interactive digital products and services, transactional television services such as pay per view movies, digital broadcast and post-production services, and thematic channels for distribution on UPC's network, third party networks and DTH platforms. Priority Telecom focuses on providing network solutions to the business customer. The following chart presents a summary of the Company's significant investments as of September 30, 2002:

6

(1)

UPC owns 92.0% of Médiaréseaux S.A. through its 100.0% owned subsidiary UPC France. The 8% minority shareholders in UPC France have the right to require UPC to purchase their shares in 2004 at the then fair market value.

(2)

On July 30, 2002, UPC's interest in EWT/TSS Group was diluted to 28.7%. (See Note 5.)

(3)

On November 4, 2002, UPC bought the remaining 49% minority interest in Eurosat.

(4)

On October 10, 2002, in consideration for the transfer of rights from UGC Internet Holdings to UPC necessary to eliminate UGC Internet Holdings territorial restrictions on chello broadband's business, UPC transferred 4,838,946 chello broadband class B ordinary shares to UGC Internet Holdings representing 13.3% of chello broadband's issued share capital. As a result of the transfer of the class B ordinary shares to UGC Internet Holdings, UPC has owned approximately 86.7% of chello broadband since October 10, 2002. Including shares owned by the chello Foundation, UPC owns approximately 76.9% of the chello broadband ordinary shares on a fully diluted basis subsequent to such date.

(5)

UPC owns approximately 76.0% of Priority Telecom's issued and outstanding ordinary shares. UPC also owns 100% of the class A shares and the convertible shares of Priority Telecom. On November 14, 2002, UPC transferred 932,200 of Priority Telecom's ordinary shares to a third party in settlement of consultancy services.

2.    Risks and Going Concern Uncertainties

        UPC has experienced net losses since formation. As of September 30, 2002, there was substantial uncertainty whether UPC's sources of capital, working capital and projected operating cash flow would be sufficient to fund the Company's expenditures and service the Company's indebtedness over the next year. Accordingly, there is substantial doubt regarding the Company's ability to continue as a going concern. In addition, as a result of the events of default described below, UPC's senior notes, senior discount notes, the Exchangeable Loan and the UPC Distribution Bank Facility have been classified as current liabilities. UPC's ability to continue as a going concern is dependent on (i) UPC's ability to restructure its senior notes and senior discount notes, the Exchangeable Loan and convertible preferred stock and (ii) UPC's ability to generate the cash flows required to enable it to recover the Company's assets and satisfy the

7

Company's liabilities, in the normal course of business, at the amounts stated in the consolidated financial statements. The report of the Company's previous independent accountant, Arthur Andersen, on the Company's consolidated financial statements for the year ended December 31, 2001, includes a paragraph that states that the Company has suffered recurring losses from operations and has a net capital deficiency that raises doubt about the Company's ability to continue as a going concern.

        The Company has incurred substantial operating losses and negative cash flows from operations, which have been driven by the Company's continuing development efforts, including the introduction of new services such as digital video, telephony and internet. Additionally, substantial capital expenditures have been required to deploy these services and to acquire businesses. Management expects the Company to incur operating losses at least through 2005, primarily as a result of the continued introduction of these new services, which are in the early stages of deployment, as well as continued depreciation expense. During 2001, the Company reviewed its current and long-range plan for all segments of its business and the Company engaged a strategic consultant to assist the Company in the process. The Company worked extensively with this consultant to revise the Company's strategic and operating plans. The Company has revised its strategic vision, no longer focusing on an aggressive digital roll-out, but on increasing sales of products and services that have better gross margins and profitability. The revised business plan focuses on improved average revenue per subscriber and margins, increased penetration of new service products within existing upgraded homes, efficient deployment of capital and focus on products with positive net present values.

Default and Waivers

        Viewing the Company's funding requirements and the Company's possible lack of access to debt and equity capital in the near term, UPC determined that it would not make interest payments on UPC's senior notes and senior discount notes, as they fell due. On February 1, 2002, UPC failed to make required interest payments in the aggregate amount of 113.0 million (USD 100.6 million) on UPC's outstanding 10⁷/8% Senior Notes due 2009, 11¹/4% Senior Notes due 2010 and 11¹/2% Senior Notes due 2010. The indentures related to UPC's senior notes and senior discount notes provide that failing to make interest payments constitutes an "Event of Default" under the notes if UPC is in default of the payment of interest on any of the notes for a period of time in excess of 30 days. Since UPC failed to make the interest payments on the first three series of notes upon expiration of this 30-day grace period on March 3, 2002, Events of Default occurred under the related indentures. The occurrence of these Events of Default constituted cross Events of Default under the indentures related to the remaining series of senior notes and senior discount notes. The occurrence of the various Events of Default gives the trustees under the related indentures, or requisite number of holders of such notes, the right to accelerate the maturity of all of the Company's senior notes and senior discount notes. In addition, on May 1, 2002, August 1, 2002 and November 1, 2002, UPC failed to make required interest payments in the aggregate amount of 38.9 million, 123.5 million and 36.5 million, respectively, on UPC's outstanding 10⁷/8% Senior Notes due 2007 and 11¹/4% Senior Notes due 2009, 10⁷/8% Senior Notes due 2009, 11¹/4% Senior Notes due 2010 and 11¹/2% Senior Notes due 2010. As of November 14, 2002, neither the trustees for the defaulted notes nor the requisite number of holders of those notes have accelerated the payment of principal and interest under those notes.

        UPC's failure to make the February 1, 2002, May 1, 2002, August 1, 2002 and November 1, 2002 interest payments on its senior notes, and the resulting Events of Default under the indentures relating to

8

the senior notes and senior discount notes, gave rise to potential cross events of default under the following credit and loan facilities:

•

the senior secured credit facility among UPC Distribution Holding B.V., UPC's indirect wholly-owned subsidiary ("UPC Distribution"), as Borrower, TD Bank Europe Limited and Toronto Dominion (Texas), Inc., as Facility Agents, and a group of banks and financial institutions (the "UPC Distribution Bank Facility");



•

the revolving loan facility among EWT Elektro & Nachrichtentechnik GmbH, UPC's then majority-owned subsidiary ("EWT"), as Borrower, a group of entities as Guarantors, The Royal Bank of Scotland plc ("RBS") as Facility Agent and Security Agent and a group of financial institutions (the "EWT Facility"); and



•

the USD 856.8 million 6% Guaranteed Discount Notes due 2007 issued under the loan agreement among Belmarken Holding B.V. ("Belmarken"), UPC, UPC Internet Holding B.V. and Liberty Belmarken, Inc. as the original lender (the "Exchangable Loan"). The Exchangeable Loan was transferred to United in January 2002.

        On July 30, 2002, UPC transferred 22.3% of its UPC Germany shares to the holders of the remaining minority interest in UPC Germany (See Note 5). Due to the share transfer, such holders became the majority shareholders of UPC Germany on July 30, 2002. The EWT facility was refinanced by the new majority shareholders and the potential cross default ceased to exist.

        The UPC Distribution Bank Facility is secured by share pledges to the banks on UPC Distribution Holding B.V., which is the holding company of most companies within the UPC Distribution group, and over certain operating companies within this group. The Exchangeable Loan is secured by pledges over the stock of Belmarken, its wholly owned subsidiary UPC Holding B.V. and UPC Internet Holding B.V., which owns chello broadband N.V. The Exchangeable Loan continued to be held by United as of November 14, 2002. The occurrence of matured cross events of default under the UPC Distribution Bank Facility and the Exchangeable Loan would have given the creditors under those facilities the right to accelerate the maturity of the loans and to foreclose upon the collateral securing the loans.

        On March 4, 2002, UPC received the first waivers from the lenders under the UPC Distribution Bank Facility, the EWT Facility and the Exchangeable Loan for the potential cross events of defaults under such facilities that existed or may exist as a result of the Company's failure to make the interest payment due on February 1, 2002 on the Company's outstanding 10⁷/8% Senior Notes due 2009, 11¹/4% Senior Notes due 2010 and, 11¹/2% Senior Notes due 2010 within the applicable cure periods, or any resulting cross defaults. During the period from June 4, 2002 to July 28, 2002, UPC received bi-weekly waivers from the bank lenders and United until September 27, 2002. On September 30, 2002, the bank lenders and United extended the coverage of the waivers to all UPC's outstanding senior notes and senior discount notes and any resulting cross defaults and the duration of the waivers until March 31, 2003.

        Each of these waivers will remain effective until the earlier of

•

March 31, 2003,



•

the occurrence of any other Event of Default under the respective credit or loan facility that is not covered by the waiver, or



•

in the case of the waiver for the Exchangeable Loan only, the acceleration of any advances under the UPC Distribution Bank Facility, the conversion of the notes under the credit or loan facility into UPC's ordinary shares in accordance with the terms of the Memorandum of Understanding, or five

9

business days after United has given notice to the Company that, in its judgment, restructuring negotiations with holders of the senior notes and senior discount notes are not progressing satisfactorily.

        In addition, each of these waivers contains certain other conditions and undertakings and will terminate if there is a default by UPC of the terms of that waiver. The waiver under the UPC Distribution Bank Facility subjects UPC to a 100 million drawdown limitation under that facility, during the period in which the waiver is in place. Availability under the limitation is subject to certain conditions. In addition, the waiver to the UPC Distribution Bank Facility includes amendments to the UPC Distribution Bank Facility which:

•

increase operational headroom for the UPC Distribution Group by increasing and extending the maximum permitted ratios of senior debt to annualized EBITDA and by lowering and extending the minimum required ratios of EBITDA to total cash interest and EBITDA to senior debt service;



•

increase the interest margin on outstanding loans under the facility by 1.5%;



•

include a fee of 0.25% on the total commitment amount;



•

reduce the total commitment amount under the facility to 3.5 billion;



•

require UPC Holding B.V. to provide an additional 125 million in funding to UPC Distribution on or before March 31, 2003.

        As of November 14, 2002, UPC had not made the interest payments on the 10⁷/8% Senior Notes due 2009, 11¹/4% Senior Notes due 2010, 11¹/2% Senior Notes due 2010, 10⁷/8% Senior Notes due 2007 or the 11¹/4% Senior Notes due 2009. Subscriber growth has been impacted in some countries by our financial restructuring, however the restructuring did not have a material adverse effect on UPC's subsidiaries' or UPC's relationships with suppliers and employees.

Agreement for Restructuring

        On February 1, 2002, UPC signed a Memorandum of Understanding with United and UGC Holdings (the "Memorandum of Understanding"). The Memorandum of Understanding is a non-binding agreement in principle with United and UGC Holdings to enter into negotiations with the holders of the Company's senior notes and senior discount notes to attempt to reach agreement on a means to restructure the Company's indebtedness at the holding company level.

        During the month of March 2002, UPC met with representatives of United, which currently holds the Exchangeable Loan and a significant portion of the Company's senior notes and senior discount notes, and an ad hoc noteholders committee representing the holders of the Company's senior notes and senior discount notes (other than United) to begin preliminary discussions with respect to a process for, and terms of, a restructuring of those notes and the Exchangeable Loan. United and its advisors and the ad hoc noteholders committee and its advisors completed the due diligence about UPC and the Company's current financial condition.

        On September 30, 2002, UPC announced that a binding agreement had been reached with United and the members of the ad hoc noteholders committee on a recapitalization plan for UPC. If implemented under its current terms, the agreed recapitalization will substantially delever UPC's balance sheet eliminating approximately 4.3 billion accreted value of senior notes and senior discount notes, accrued interest on the senior notes of 293.8 million, 942.1 million of Exchangeable Loan debt, and 1.6 billion of convertible preference shares in exchange for equity issued by a new holding company that will be the

10

parent of UPC and a subsidiary of United ("New UPC"). The agreement consists primarily of the following key terms:

•

United will receive approximately 65.5% of New UPC's pro forma equity (subject to dilution under certain circumstances) for the exchange of its 1.6 billion in UPC notes including accrued interest and its 942.1 million Exchangeable Loan;



•

third-party noteholders will receive approximately 32.5% of New UPC's pro forma equity (subject to dilution under certain circumstances) for the exchange of their holding of 3.0 billion of UPC notes (including accrued interest on the senior notes);



•

approximately 2% of New UPC's pro forma equity will be available for UPC's existing preferred and ordinary shareholders, including United;



•

in addition, United will agree to purchase up to 100 million in New UPC common stock at the consummation of the UPC restructuring subject to reduction if UPC sells any assets or raises any non-dilutive capital in the interim. United will purchase the stock at the valuation implied by the restructuring. The noteholders (other than United and its subsidiaries) will have the option to participate pro rata in the equity issuance; and



•

the third-party noteholders will have certain board representation and minority rights in New UPC.

        In addition the restructuring agreement contains an agreement by the parties (other than UPC) to forbear on exercising rights and remedies relating to defaults on the senior notes, senior discount notes and Exchangeable Loan while the restructuring agreement remains in effect.

        In order to facilitate an efficient and effective recapitalization, in accordance with the terms of the restructuring agreement, UPC, which operates as a financial holding company, intends to seek relief under (i) a debt moratorium proceeding in the Netherlands, leading to a voluntary suspension of payments, and (ii) a Chapter 11 bankruptcy proceeding in the United States. The Company expects that, in these proceedings in the Netherlands and the United States, a plan of reorganization will be approved that comports with the recapitalization terms contained in the restructuring agreement. The anticipated court proceedings in the Netherlands and the United States could result in material changes in the nature of UPC's business, material adverse changes to UPC's financial condition and results of operations or the Company's liquidation. UPC expects that this process will take a number of months to complete. If consummated, the recapitalization would result in the exchange of the UPC senior and senior discount notes and other claims against the Company for equity in New UPC and the substantial dilution of UPC's existing shareholders, including the holders of the Company's ordinary shares, priority shares and preference shares.

        In the event that the Company is unable to successfully consummate the recapitalization envisioned by the restructuring agreement holders of the Company's outstanding securities, including the Company's ordinary shares, priority shares, preference shares and senior notes and senior discount notes, as well as the Exchangeable Loan, would likely lose a substantial portion, or all, of the value of their investment in the Company's securities.

        If the Company is not able to complete the restructuring contemplated by the restructuring agreement, the Company might be required to liquidate or take other restructuring actions, these may have a greater adverse effect on the Company's financial condition and results of operations and the value of its debt and equity securities.

11

3.    Basis of Presentation

Basis of Presentation

        The accompanying condensed consolidated financial statements of the Company have been prepared in accordance with United States generally accepted accounting principles for interim financial information and are in the form prescribed by the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by U.S. GAAP for complete financial statements. The interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company as of and for the year ended December 31, 2001 and the unaudited condensed consolidated financial statements as of and for the three and nine month period ended September 30, 2001. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and nine month period ended September 30, 2002 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2002. The preparation of financial statements in conformity with United States generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

        Certain prior period amounts have been reclassified to conform with current period presentation.

New Accounting Principles

        The Company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142") effective January 1, 2002. Under SFAS 142, goodwill and intangible assets with indefinite lives are no longer amortized, but are tested for impairment on an annual basis and whenever indicators of impairment arise. In addition, goodwill on equity method investments is no longer amortized, but tested for impairment in accordance with APB 18. The goodwill impairment test, which is based on fair value, is performed on a reporting unit level. All recognized intangible assets that are deemed not to have an indefinite life are amortized over their estimated useful lives.

12

        The following table presents the pro forma effect on net loss from the reduction of amortization expense and the reduction of amortization of excess basis on equity method investments, as a result of the adoption of SFAS 142:

        The Company has engaged an external party to compare the fair value of its reporting units with their respective carrying amounts, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test will be performed to measure the amount of impairment loss. The first step of the goodwill impairment test was performed and the carrying value of certain reporting units exceeded their fair value, including reporting units in the Netherlands, Sweden, Hungary, the Czech Repulic, France, Slovakia and Poland and Priority Telecom. The Company is currently carrying out the second step of the test to quantify how much of the total goodwill will be impaired. A substantial cumulative effect adjustment will be required as a result of this process. The determination of the potential impairment adjustment will be completed by the end of the year. Net goodwill of approximately 2.8 billion is included in the accompanying condensed consolidated balance sheets as of September 30, 2002.

        In April 2002, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 145, "Rescission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections" ("SFAS 145"). SFAS 145, which updates, clarifies and simplifies existing accounting pronouncement, and addresses the reporting of debt extinguishments and accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. The provisions of SFAS 145 are generally effective for the Company's 2003 fiscal year, or in the case of specific provisions, for transactions occurring after May 15, 2002 or financial statements issued on or after May 15, 2002. For certain provisions, including the rescission of Statement No. 4, early application is encouraged. UPC has not yet adopted SFAS 145 and is currently evaluating the impact of SFAS 145 on the Company's consolidated financial statements. The Company does not believe that the adoption of SFAS 145 will have a material impact on the Company's results of operations, financial condition or cash flows.

        On June 28, 2002 the Financial Accounting Standards Board issued SFAS No. 146, "Accounting for Exit or Disposal Activities" ("SFAS 146"). SFAS 146 addresses significant issues regarding the recognition, measurement and reporting of costs that are associated with exit and disposal activities, including

13

restructuring activities that are currently accounted for pursuant to the guidance that the Emerging Issues Task Force ("EITF") has set forth in EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)". The scope of SFAS 146 also includes (1) costs related to terminating a contract that is not a capital lease and (2) termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not an ongoing benefit arrangement or an individual deferred compensation contract. SFAS 146 will be effective for financial statements issued for fiscal years beginning after December 31, 2002. The Company has not yet determined what will be the impact of SFAS 146 on its results of operations or financial condition.

4.    Impairment and Restructuring Charges

        During 2001, the Company implemented a restructuring plan to both lower operating expenses and strengthen its competitive and financial position, by eliminating certain employee positions, reducing office space and related overhead expenses, recognizing losses related to excess capacity under certain contracts and canceling certain programming contracts. The Company also incurred certain restructuring charges during the three and nine month period ended September 30, 2002 related to employee severance and termination costs and costs related to the Company's financial debt restructuring.

        The following table summarizes these costs by type and related segment of the business.

        Employee severance and termination costs.    These costs relate to termination salaries, benefits, outplacement and other costs related to the employees involuntarily terminated. The total workforce

14

reduction was effected through attrition, involuntary terminations and reorganization of the Company's operations to permanently eliminate open positions resulting from normal employee attrition. These costs were determined in accordance with the criteria of EITF 94-3. Salaries and benefits earned during the transition period have not been included in the restructuring charge.

        Office closures.    In addition to the decrease in employee positions, the restructuring plan provided for reduction in office space and related overhead expenses. Office closure and consolidation costs are the estimated costs to be incurred upon closure of specifically identified facilities, costs associated with obtaining subleases, lease-termination costs and other related costs.

        Programming and lease contract termination costs.    These costs relate to costs associated with the impairment and cancellation of, or recognition of costs associated with, excess capacity of certain contracts. For the nine months ended September 30, 2002, Priority Telecom released 10.3 million of its restructuring provision, which relates to the extinguishment of vendor financing liabilities.

        Asset disposal losses and other costs.    These amounts relate to costs associated with asset disposal and costs relating to the Company's financial debt restructuring.

        The following table summarizes the number of employees to be terminated during 2002 in accordance with the restructuring by both division and function and the number of employees still to be terminated as of September 30, 2002:

15

5.    Investments in and Advances to Affiliated Companies

Equity Method Investments

Transfer of Germany Shares

        Until July 30, 2002 UPC had effective ownership of 51% of EWT/TSS Group through its 51% owned subsidiary, UPC Germany. Pursuant to the agreement by which UPC acquired EWT/TSS Group, UPC was required to fulfill a so-called contribution obligation by no later than March 2003, by contributing certain assets amounting to approximately 358.8 million. If UPC failed to make the contribution by such date or in certain circumstances, such as a material default by UPC under its financing agreements, the 49% owner in UPC Germany could call for 22% of the ownership interest in UPC Germany in exchange for the Euro equivalent of 1 Deutsche Mark. On March 5, 2002, UPC received the holders' notice of exercise. On July 30, 2002, UPC settled the exercise. UPC completed the transfer of 22.3% of UPC Germany to the 49% shareholders in return for the cancellation of the 358.8 million face value asset contribution obligation due from UPC to UPC Germany. UPC now owns 28.7% of UPC Germany, with the former 49% shareholders owning the remaining 71.3%. UPC Germany is governed by a newly agreed shareholders' agreement and was deconsolidated by UPC effective August 1, 2002. This transaction

16

resulted in a deferred gain on sale of assets of 150.3 million in the third quarter of 2002. Although it is not the managements' current intention, it may decide to fund UPC Germany sometime in the future, and as such the Company deferred the gain on sale of assets.

Germany Assets and Liabilities

        Details of the final deconsolidated assets and liabilities are as follows (in thousands):

        For details on revenue, Adjusted EBITDA and total assets of UPC Germany as of September 30, 2002, see Note 10.

Marketable Equity Securities of United, at Fair Value

        UPC holds 5,569,240 Class A common shares of United as of September 30, 2002. The fair value of these shares was approximately 9.3 million as of September 30, 2002, including a cumulative unrealized loss of approximately 17.4 million.

6.    Property, Plant and Equipment

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7.    Goodwill and Other Intangible Assets

8.    Long-Term Debt

(1)

As discussed in Note 2 "Risks and Going Concern Uncertainties", since March 3, 2002, the Company has been in default under its senior notes and senior discount notes and has received short term waivers with respect to the UPC Distribution Bank Facility and the Exchangeable Loan. Accordingly, these borrowings have been reclassified to the current portion of long-term debt.

        All non-Euro denominated borrowings are recorded each period using the period end spot rate with the result being recorded as foreign exchange gain or loss.

Exchangeable Loan

        The Exchangeable Loan was transferred to United on January 30, 2002, as part of a transaction between Liberty Media Corporation ("Liberty"), the original holder of the Exchangeable Loan, and United. The notes issued under the Exchangeable Loan may be exchanged for UPC's ordinary shares at USD 6.85 per share under certain circumstances before or after May 29, 2002. As indicated in Note 2,

18

there is a potential cross default under this facility, but the Company has obtained waivers of the cross defaults until March 31, 2003.

UPC Distribution Bank Facility

        As described in Note 2, the Company defaulted on its interest payments under its senior notes in the first quarter of 2002, which gave rise to potential cross events of default under the terms of this the UPC Distribution Bank Facility. The Company had obtained waivers for the potential cross default from the bank syndicate which was extended on the same terms thereafter, currently until March 31, 2003. During the period of waiver, the Company is permitted to borrow another 100 million under the facility, subject to certain conditions. UPC has made drawdowns aggregating 65 million of the permitted 100 million as of November 14, 2002.

        In addition, the bank lenders under UPC Distribution Bank Facility have included the following amendments to the UPC Distribution Bank Facility:

•

increase operational headroom for the UPC Distribution group by increasing and extending the maximum permitted ratios of senior debt to annualized EBITDA and by lowering and extending the minimum required ratios of EBITDA to total cash interest and EBITDA to senior debt service;



•

increase the interest margin on outstanding loans under the facility by 1.5%;



•

include a fee of 0.25% on the total commitment amount;



•

reduce the total commitment amount under the facility to 3.5 billion;



•

require UPC N.V. to provide an additional 125 million in funding to UPC Distribution on or before March 31, 2003.

Derivative Instruments

        In connection with certain borrowings, the Company entered into both cross-currency swaps and interest rate swaps providing economic hedges to both currency and interest rate exposure.

        The following table details the fair value of the derivative instruments outstanding by related borrowing (in thousand of Euros):

        The UPC Distribution Bank Facility swaps include an interest rate swap of 13.8 million, which qualifies as an accounting cash flow hedge. Accordingly, the changes in fair value of this instrument are recorded through other comprehensive income in the consolidated statement of shareholders' deficit. The remaining instruments are marked-to-market each period with the corresponding fair value gain (loss) recorded as a part of foreign exchange gain (loss) and other income (expense) in the accompanying

19

consolidated statements of operations. For the three months ended September 30, 2002 and 2001, the Company recorded a gain of 1.0 million and a loss of 85.1 million, respectively, and for the nine months ended September 30, 2002 and 2001, the Company recorded a loss of 179.7 million and a loss of 59.6 million, respectively, in connection with the mark-to-market valuations.

        The condensed consolidated balance sheets reflect these instruments as derivative assets or liabilities as appropriate.

        In June 2002, the Company recognized an extraordinary gain of 347.2 million from the delivery by certain banks of 404.6 million in aggregate principal amount of the Company's senior notes and senior discount notes as settlement of the interest rate/cross currency derivative contracts on UPC's July 1999 Senior Notes, UPC's October 1999 Senior Notes and the UPC January 2000 Senior Notes.

9.    Commitments and Contingencies

Purchase Commitments

        The table below provides an overview of the Company's commitments per year.

        In addition to the programming commitments specified in table above, all UPC Distribution affiliates are parties to channel carriage agreements obliging the affiliate to make the channel available to subscribers throughout the term of the agreement and in a specified package. The payments due under these programming commitments are dependent upon the actual number of subscribers.

        The Company has entered into a framework agreement for the supply of various types of equipment. Under this agreement, the company has a remaining one to three year obligation to buy 197,000 Set Top Computers ("STCs") at market price and a one year obligation to buy 61,500 modems.

Litigation and Claims

        The following is a description of certain legal proceedings to which UPC or one of UPC's subsidiaries is a party. In addition, from time to time, UPC may become involved in litigation relating to claims arising out of its operations in the normal course of the Company's business. In the opinion of the Company's management, the ultimate resolution of these legal proceedings would not be likely to have a material adverse effect on UPC's subsidiaries' business, results of operations, financial condition or liquidity.

        On July 4, 2001, InterComm Holdings LLC, InterComm France CVOHA ("ICF I"), InterComm France II CVOHA ("ICF II"), and Reflex Participations ("Reflex," collectively with ICF I and ICF II, the "ICF Party") served a demand for arbitration on UPC, UGC Holdings, and its subsidiaries, Belmarken Holding B.V. and UPC France Holding B.V. The claimants allege breaches of obligations allegedly owed by UPC in connection with the ICF Party's position as a minority shareholder in Médiaréseaux S.A. The claimants seek relief in the nature of immediate acceleration of an alleged right to require UPC or an

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affiliate to purchase all or any of the remaining shares in Médiareséaux S.A. from the ICF Party and/or compensatory damages, but in either case no less than EUR 163 million, plus reasonable fees and costs. The ICF Party has not specified from which entity it is seeking such relief; however, UGC Holdings is not a party to any agreement with the claimants and has been dismissed from the proceedings. UPC and its affiliates, as respondents, deny these claims and intend to defend against claimants' allegations vigorously. UPC is vigorously defending the arbitration proceedings and has filed appropriate counter claims.

        On October 28, 2002, the vice-president of the French commercial court of Meaux acceded on the request made by the ICF Party and Mr. Schimmel (the "ICH Group") on emergency proceedings and appointed a temporary judicial administrator (French concept of "administrateur provisoire") for Médiaréseaux S.A. (i.e., the French holding company of UPC's French operating subsidiaries), with the mission, in particular, to carry out the management of Médiaréseaux S.A. in lieu of the directors of the aforesaid company so as to resolve both the so-called financial crisis alleged by the ICH Group and an alleged conflict of interests by the ICH Group resulting from the status of the directors of Médiaréseaux S.A. within the different companies of the UPC group. Médiaréseaux S.A. has been granted an accelerated appeal process with the Court of Appeal of Paris to overturn the appointment of the temporary judicial administrator and has made appropriate counter claims.

        On October 22, 2002, Philips Digital Networks B.V. ("Philips") commenced legal proceedings against UPC, UPC Nederland B.V. and UPC Distribution (together the "UPC Defendants") alleging the UPC's Defendants' failure to perform under a Set Top Computer Supply Agreement between the parties dated November 19, 2001, as amended (the "STC Agreement"). Philips' principle allegation is that the UPC Defendants have failed to take delivery of 47,100 STCs with a value claimed of 21.2 million. Additionally, Philips is claiming dissolution of the STC Agreement and a release from an obligation to manufacture and deliver a further 29,850 STCs and related damages of 7.0 million. Lastly, Philips is claiming additional costs, including interest on late payments of approximately 1.0 million. The UPC Defendants deny all claims brought by Philips, and intend to vigorously defend themselves against these claims and will file appropriate counter claims. This action has been commenced by Philips following a termination of the STC Agreement by the UPC Defendants as a consequence of Philips failure to deliver STCs conforming to the material technical specifications required by the terms of the STC Agreement.

        On October 2, 2002 UPC Distribution Holding B.V. gave notice that it wished to cancel 83.3 million of the Facility A commitments and 416.8 million of the Facility B commitments under the UPC Distribution Bank Facility, effective on October 7, 2002. In order to prepay 346.8 million of the outstanding Facility B advances, UPC Distribution Holding B.V. also made a request for an advance of 346.8 million under the Facility A tranche under the UPC Distribution Bank Facility effective on October 7, 2002. All the lenders advanced their proportionate shares of the requested drawing, except ten institutions. The shortfall arising was 29.3 million. UPC made a further request for advances in the sum of 25.0 million, on October 14, 2002. The same institutions failed to pay and accordingly there was a further shortfall of 2.3 million. On October 3, 2002, six of the ten lenders which did not fund pursuant to the October 2, 2002 notice (the "Claimants"), issued proceedings in the English High Court against TD Bank Europe Limited, UPC Distribution Holding BV and UPC Financing Partnership (the "UPCD Defendants"). In the proceedings the Claimants seek, amongst other things, a declaration from the English High Court as to whether they were obligated in the circumstances to make the payments in dispute. The UPCD Defendants, who consider that the English High Court is likely to declare that the Claimants are obligated to make the payments, applied for the hearing of these proceedings to be expedited and a trial date has been set for November 18, 2002. The Company expects that the trial will last a few days. The UPCD Defendants intend to defend themselves vigorously in these proceedings.

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10.  Segments and Geographic Information

        The Company is managed internally as three primary divisions: UPC Distribution, UPC Media and Priority Telecom. In addition, Corporate, IT and Other is a separate reporting segment. UPC Distribution focuses on providing cable television, DTH, internet and telephony services to residential customers and is comprised of the local operating systems. chello broadband serves as the internet access provider and was, in February 2001, combined with the programming businesses led by UPCtv under one management team as UPC Media. UPC Media provides broadband internet and interactive digital products and services, transactional television services such as pay per view movies, digital broadcast and post-production services, and thematic channels for distribution on UPC's network, third party networks and DTH platforms. Priority Telecom is focused on providing services to business customers. Corporate, IT and Other relates primarily to centralized activities, which support multiple platforms and services.

        The Company evaluates performance and allocates resources based on the results of these divisions. The key operating performance criteria used in this evaluation include revenue growth and "Adjusted EBITDA". Adjusted EBITDA is not a generally accepted accounting principle ("GAAP") measure. Adjusted EBITDA represents net operating earnings before depreciation, amortization, stock-based compensations charges, retention bonuses, and impairment and restructuring charges. Adjusted EBITDA is one of the primary measures used by the Company's chief decision makers to measure the Company's operating results and to measure segment profitability and performance. Management believes that Adjusted EBITDA is meaningful to investors because it provides an analysis of operating results using the same measures used by the Company's chief decision makers, that Adjusted EBITDA provides investors with the means to evaluate the financial results of the Company compared to other companies within the same industry and it is common practice for institutional investors and investment bankers to use various multiples of current or projected Adjusted EBITDA for purposes of estimating current or prospective enterprise value. The Company's calculation of Adjusted EBITDA may or may not be consistent with the calculation of this measure by other companies in the same industry. Investors should not view adjusted EBITDA as an alternative to GAAP measure of income as a measure of performance, or to cash flows from operating investing and financing activities as a measure of liquidity. In addition, Adjusted EBITDA does not take into account changes in certain assets and liabilities as well as interest and income taxes that can affect cash flows. Adjusted EBITDA excludes non-cash and cash stock-based compensation charges, which result from variable plan accounting for certain of the Company's and its subsidiaries' stock option and phantom stock option plans.

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        A summary of the segment information is as follows: