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UNITED PAN-EUROPE COMMUNICATIONS N.V.
(DEBTOR-IN-POSSESSION)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

For the year ended December 31, 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
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
American Depository Shares each representing one ordinary share

        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 o    No ý

        Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

        The aggregate market value of the voting stock held by nonaffiliates of the Registrant, computed by reference to the last sales price of such stock, as of the close of trading on March 28, 2003 was USD 12.9 million.

        The number of shares outstanding of the Registrant's common stock as of March 31, 2003 was:

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

UNITED PAN-EUROPE COMMUNICATIONS N.V.

ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2002

Table of Contents

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PART I

Item 1.    Business

General Development of Business

        We began business as a provider of cable television services. Over the last few years we have been upgrading many of our networks so that they are capable of providing two-way telecommunications services, such as telephone, internet access and enhanced digital video services. We launched telephone services to business and residential customers in many of our operating companies under the brand name Priority Telecom in 1998 and 1999. Also in 1999, many of our operating companies launched internet services using our chello broadband access and portal. We continued to develop our video, telephone and internet businesses in 2002.

        At the end of 2001 and in 2002, we continued to take a number of actions to reorganize internally. In 2001 and 2002, we combined the management of our internet subsidiary, chello broadband N.V., and our programming businesses, led by UPCtv, to form a division, UPC Media. In December 2001, we transferred the assets and employees relating to the technical network and systems access to the internet from chello broadband N.V. to our UPC Distribution operating companies. In addition to internet services and pay television, UPC Media is developing interactive services and transactional television. At the end of 2002, UPC Media's activities included internet portal and content, video content and digital products and services. During 2001 and 2002, we decided that five of the eight thematic channels produced by UPCtv would be closed as part of the revision of our strategy. During 2001, certain of our operating companies spun off their business telephone activities and assets to our subsidiary, Priority Telecom N.V., which operates as a separate competitive local exchange carrier, or "CLEC" and as our provider of telephone and data network solutions to business customers, leveraging off our operating systems' existing network infrastructure. Priority Telecom N.V. was listed on the Euronext Amsterdam N.V. stock exchange ("Euronext") in September 2001. Our operating companies, which we sometimes refer to as UPC Distribution, provide analogue and digital video services, telephone and internet services to residential customers. In addition, as part of the ongoing realignment of the business, we are in the process of forming an Investments Division, which will manage our non-consolidated investment assets. These assets were valued at 226.0 million and 127.3 million as of December 31, 2001 and 2002, respectively. The reduction in the value of the portfolio arose as a result of write-downs and asset disposals. During 2003, we have agreed to sell our shares in SBS Broadcasting S.A. ("SBS") to our affiliate, UnitedGlobalCom, Inc. ("United") for 100 million, against a year-end 2002 book value of 65.4 million, prior to the completion of our proposed restructuring, described below. As a result the pro forma value of the portfolio is 61.9 million. We continue to focus on rationalizing our investment portfolio to maximize value.

        We operated from July 1995 to December 1997 as a 50–50 joint venture between United Europe, Inc., a subsidiary of UGC Holdings, Inc., formerly known as UnitedGlobalCom, Inc. but distinct from United ("UGC Holdings"), and Philips Electronics N.V. ("Philips"). In December 1997, we and United Europe, Inc. acquired the 50% of our ordinary shares held by Philips. Following this acquisition and until our initial public offering in February 1999, we were a wholly-owned indirect subsidiary of UGC Holdings. In May 2002, UGC Holdings became a wholly-owned subsidiary of United as of December 31, 2002, United owns 64.4% of our total outstanding ordinary shares A on a fully diluted basis.

        We have grown substantially since formation through acquisitions of cable television systems and related businesses in our existing and new markets, and though organic growth from the sale of new services. We expect our new services, such as telephone, internet and digital video, to continue to develop and become an increasingly important part of our business.

        All monetary amounts in Item 1 to Item 15 are stated in Euros, unless indicated otherwise.

3

Developments

        We have incurred substantial operating losses and negative cash flows from operations, which have been driven by continuing development efforts, including the introduction of new services such as digital video, telephone and internet. Additionally, substantial capital expenditures have been required to deploy these services and to acquire businesses. Management expects to incur operating losses at least through 2004, primarily as a result of the continued introduction of these new services, some of which are in the early stages of deployment, as well as continued depreciation expense.

        During 2001, we reviewed our current and long-range plan for all segments of our business and we hired a strategic consultant to assist us in the process. We worked extensively with this consultant to revise our strategic and operating plans. We have revised our 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 are profitable. The revised business plan focuses on average revenue per subscriber and margin improvement, increased penetration of new service products within existing upgraded homes, efficient deployment of capital and focus on products with positive net present values. During 2002, we took steps to implement our revised business plan.

Defaults and Waivers

        Viewing our funding requirements and our possible lack of access to debt and equity capital in the near term, we determined that we would not make interest payments on our senior notes and senior discount notes as they fell due. On February 1, 2002, we failed to make required interest payments in the aggregate amount of 113.0 million (USD 100.6 million) on our outstanding 10⁷/8% Senior Notes due 2009, 11¹/4% Senior Notes due 2010 and 11¹/2% Senior Notes due 2010. The indentures related to our senior notes and senior discount notes provide that failing to make interest payments constitutes an "Event of Default" under the notes if we are in default of the payment of interest on any of the notes for a period of time in excess of 30 days. Since we 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 our senior notes and senior discount notes. In addition, on May 1, 2002, August 1, 2002, November 1, 2002 and February 1, 2003, we failed to make required interest payments in the aggregate amount of 38.9 million, 123.5 million, 36.5 million and 117.8 million, respectively, on our outstanding 10⁷/8% Senior Notes due 2007 and 11¹/4% Senior Notes due 2009, 10⁷/8% Senior Notes due 2009, and 11¹/4% Senior Notes due 2010 and 11¹/2% Senior Notes due 2010. Neither the trustees for the defaulted notes nor the requisite number of holders of those notes accelerated the payment of principal and interest under those notes.

        Our failure to make the February 1, 2002, May 1, 2002, August 1, 2002 November 1, 2002 and February 1, 2003 interest payments on our senior notes, and the resulting Events of Default under the indentures relating to 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., our 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, our 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

4

•

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

        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. Our interest in EWT is held indirectly through UPC Germany GmbH ("UPC Germany"), in which we held a 51% interest until July 30, 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, we 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 have existed as a result of its failure to make the interest payment due on February 1, 2002 on our 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 and any resulting cross defaults. During the period from June 4, 2002 to September 27, 2002, we received bi-weekly waivers from the bank lenders and United. On September 27, 2002, the bank lenders and United extended the coverage of the waivers to all our 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 our ordinary shares in accordance with the terms of the Memorandum of Understanding described below, or five business days after United has given notice to us that, in their 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 us of the terms of that waiver. The waiver under the UPC Distribution Bank Facility subjects us to a 100 million drawdown limitation under that facility, subject to certain conditions, during the period in which the waiver is in place. 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; and



•

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

5

        On July 30, 2002, we transferred a 22.3% holding in UPC Germany shares to the holders of the remaining minority interest in UPC Germany (as described in Note 5 of the Notes to the Consolidated Financial Statements contained in this Annual Report on Form 10-K). Due to the share transfer, such holders became the majority shareholders of UPC Germany. The EWT Facility was refinanced by the new majority shareholders and the potential cross default ceased to exist.

Agreement for Restructuring

        On February 1, 2002, we signed a Memorandum of Understanding with United and its subsidiary, 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 our senior notes and senior discount notes to attempt to reach agreement on a means to restructure our indebtedness at the holding company level.

        During the month of March 2002, we met with representatives of United, which currently holds the Exchangeable Loan and a significant portion of our senior notes and senior discount notes, and a steering committee representing the holders of our 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 their advisors and the steering committee and their advisors completed their due diligence on us and our current financial condition.

        On September 30, 2002, we announced that a binding agreement had been reached with United and the members of the ad hoc noteholders committee on a recapitalization plan for us. If implemented under its current terms, the agreed recapitalization will substantially delever our balance sheet eliminating approximately 4.1 billion accreted value of senior notes and senior discount notes, accrued interest on the senior notes of 351.5 million, 894.5 million of Exchangeable Loan debt, and 1.7 billion of convertible preference shares (all amounts as of December 31, 2002) in exchange for equity issued by a newly formed Delaware corporation, United European Communications, Inc. ("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 1.5 billion in our senior and senior discount notes including accrued interest on the senior notes and its 894.5 million Exchangeable Loan as of December 31, 2002;



•

third-party noteholders will receive approximately 32.5% of New UPC's pro forma equity for the exchange of their holding of 2.9 billion of our notes (including accrued interest on the senior notes) as of December 31, 2002;



•

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



•

in addition, United would agree to purchase up to 100 million ("Maximum Subscription Amount") in shares of common stock of New UPC ("New UPC common stock") at the consummation of our restructuring, subject to reduction if we sold any assets or raised any non-dilutive capital in the interim. United agreed to purchase the stock at the valuation implied by the restructuring; and



•

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

We are currently negotiating and expect to receive an extension to the original bank waiver.

        If we complete the sale of our SBS shares to United prior to the completion of the restructuring described below, as is contemplated the proceeds from the sale will reduce the Maximum Subscription Amount to zero and as a result, our third-party noteholders will not have the right to subscribe for any shares of New UPC common stock. The Plan and the Akkoord and the other transactions contemplated by

6

the restructuring agreement are to become effective on a date (the "Effective Date") identified by us and falling no more than 11 days after all conditions to the consummation of the Plan and Akkoord have been satisfied or waived.

        In addition, the restructuring agreement contains an agreement by the parties (other than us) 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.

The Plan of Reorganization

        In order to effectuate the restructuring, on December 3, 2002 (the "Petition Date"), we filed a petition for relief under Chapter 11 (the "Chapter 11 Case") of the United States Bankruptcy Code (the "U.S. Bankruptcy Code") and we filed a pre-negotiated plan of reorganization, dated December 3, 2002 (the "Plan"), with the United States Bankruptcy Court for the Southern District of New York (the "U.S. Bankruptcy Court"). The first amended Plan was filed with the U.S. Bankruptcy Court on December 23, 2002 and second amended Plan was filed with the U.S. Bankruptcy Court on January 7, 2003. The Plan, as amended and modified by the first modifications dated February 18, 2003, was confirmed by the U.S. Bankruptcy Court on February 20, 2003. In general, the Plan provides for the transfer of New UPC common stock for various claims against, and equity interests in, us, as contemplated by the Memorandum of Understanding.

Akkoord

        In order to fully achieve the restructuring, including the distributions contemplated by the Plan, it was also necessary to effect the restructuring under the laws of certain non-U.S. jurisdictions, including Dutch law. Accordingly, in conjunction with the commencement of the Chapter 11 Case, on December 3, 2002, we commenced a moratorium of payments in The Netherlands under Dutch bankruptcy law (the "Dutch Bankruptcy Case"). On December 3, 2002, we filed a proposed plan of compulsory composition (the "Akkoord") with the Amsterdam Court (Rechtbank) (the "Dutch Bankruptcy Court") under the Dutch Faillissementswet (the "Dutch Bankruptcy Code"). We submitted a revision to the Akkoord to the Dutch Bankruptcy Court on December 23, 2002 and a subsequent revision on January 7, 2003. The Dutch Bankruptcy Court ratified the Akkoord on March 13, 2003. On March 24, 2003, InterComm Holdings L.L.C. ("ICH"), a creditor in the Dutch moratorium proceeding with a EUR1.00 claim and one vote, based on a claim against us, appealed the Dutch Court's ratification of the Akkoord. The Dutch Court of Appeals has scheduled an expedited hearing for the appeal for April 1, 2003 and is expected to rule on the appeal shortly thereafter. We believe the appeal is without merit. The U.S. Bankruptcy Court has already overruled a similar objection brought by ICH in the parallel United States Chapter 11 process. We do not expect that this appeal will affect the successful completion of our restructuring, which in all other respects has been finalized. The appeal will however, delay completion of the restructuring beyond March 31, 2003.

Dutch Implementing Offer

        Unlike the U.S. Bankruptcy Code, the Dutch Bankruptcy Code does not provide for the Akkoord to reorganize or cancel any of the equity interests, ownership interests or shares in us. Therefore, in order to facilitate implementation of the Plan with respect to certain of our Ordinary Shares A in accordance with Dutch law, New UPC commenced an offer, solely with respect to holders of our Ordinary Shares A who were not U.S. Persons (as defined in Rule 902(k) of Regulation S promulgated under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"), "U.S. Persons") and were not located or residing within the United States, to deliver shares of New UPC common stock to such holders of our Ordinary Shares A in consideration for the delivery by such holders of our Ordinary Shares A to New UPC (the "Dutch Implementing Offer").

7

Extraordinary General Meeting of Shareholders

        Similarly, the Dutch Bankruptcy Code does not provide for the Dutch Bankruptcy Case to exempt compliance from otherwise applicable corporate law. Therefore, in order to facilitate implementation of the Plan, we held an extraordinary meeting of the holders of our Ordinary Shares A, our Priority Shares and our Preference Shares A (the "Extraordinary General Meeting") to approve certain amendments to our Articles of Association and other shareholder proposals (the "Shareholder Proposals").

        At our Extraordinary General Meeting of our shareholders, which was held on February 19, 2003, the following amendments were adopted:

•

proposal to amend our Articles of Association (the "First Amendment") to



(i)

decrease the nominal value of each of our issued and outstanding Ordinary Share A from 1.00 to 0.02 without repayment; and



(ii)

decrease the nominal value of each of our Priority Share and Preference Share A from 1.00 to 0.02 without repayment,

        which capital reduction will permit us to eliminate our accumulated deficit;

•

proposal to amend our Articles of Association (the "Second Amendment") to



(i)

decrease the number of our authorized Ordinary Shares A to 450,000,000;



(ii)

remove our Preference Shares A from our authorized capital;



(iii)

authorize a new class of 50,000,000,000 registered Ordinary Shares C ("Ordinary Shares C") with a nominal value of 0.02;



(iv)

in the event Dutch law allows the issuance of nonvoting stock, prohibit the issuance of nonvoting stock and prohibit cooperation in connection with the issuance of depository receipts; and



(v)

remove our Ordinary Shares B and our Preference Shares B from our authorized capital;




•

proposal to convert our Preference Shares A on a one-for-one basis into registered Ordinary Shares A, effective upon the Second Amendment and the Effective Date;



•

proposal to amend our Articles of Association (effective on the later to occur of the Effective Date and the date of the delisting of our Ordinary Shares A from Euronext Amsterdam N.V.) (the "Third Amendment") to provide that we will have the Articles of Association of a non-listed company, including, inter alia, provisions:



(i)

allowing registered shares;



(ii)

restricting transfers of shares;



(iii)

amending our management structure to a one-tier board (i.e., that our Supervisory Board will be eliminated, the holders of our Priority Shares will have certain rights with respect to our Board of Management and our Board of Management will consist of one or more members);



(iv)

authorizing holders of our Ordinary Shares A to exercise the rights attached to such Ordinary Shares A only upon exchange of such bearer Ordinary Shares A into registered UPC Ordinary Shares A; and



(v)

as soon as all of our issued shares are held by one shareholder, converting each of our issued Priority Shares into one Ordinary Share C, and vesting all powers of the holders of the our

8

Priority Shares under our Articles of Association, to the extent possible, in the general meeting of our shareholders.

Summary of Status of the Restructuring

        As of the date of the filing of this Annual Report on Form 10-K, our restructuring has not been completed, but is in the final stages. The Plan, which provides for the transfer of New UPC common stock for various claims against, and interests in our equity, has been confirmed by the U.S. Bankruptcy Court. In addition, the Akkoord, which was filed to effect the restructuring under Dutch law, has been ratified by the Dutch Bankruptcy Court. An appeal was filed against the ratification of the Akkoord on March 24, 2003, but we believe it is without merit and intend to oppose it vigorously. The Dutch Court of Appeals has scheduled a hearing for the appeal for April 1, 2003. The Dutch Implementing Offer, which was scheduled to expire on March 21, 2003, has been extended to April 14, 2003. The Dutch Implementing Offer will become unconditional on the Effective Date of the Plan and the settlement of the Dutch Implementing Offer will occur no later than five Euronext business days after the Dutch Implementing Offer becomes unconditional (e.g., no later than five Euronext business days after the effective date of the Plan). Certain amendments to our Articles of Association were adopted during an Extraordinary General Meeting of our shareholders. Some of the amendments were effective immediately and the remaining amendments will become effective upon the later to occur of the effective date of the Plan and the date of the delisting of our Ordinary Shares A from Euronext Amsterdam. The Plan and the Akkoord are expected to become effective and our restructuring complete soon after the appeal against the Akkoord is resolved. We are currently negotiating and expect to receive an extension to the waiver on our UPC Distribution Bank Facility with the coordinating committee of senior bank lenders in case such a waiver is required. From and after the Effective Date of the Plan, we expect to operate our businesses and properties as a reorganized entity pursuant to the terms of the Plan.

        As of December 31, 2002, we 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 and the 11¹/4% Senior Notes due 2009. We believe subscriber growth has been impacted in some countries by our financial restructuring in particular The Netherlands; however, we believe the restructuring has not had a material adverse effect on our subsidiaries or our relationships with suppliers and employees.

        We have experienced net losses since formation. As of December 31, 2002, as a result of the events of default described above, our senior notes, senior discount notes, the Exchangeable Loan and the UPC Distribution Bank Facility have been classified as current liabilities and there was substantial uncertainty whether our sources of capital, working capital and projected operating cash flow would be sufficient to fund our expenditures and service our indebtedness over the next year. Accordingly, there is substantial doubt regarding our ability to continue as a going concern. Our ability to continue as a going concern is dependent on (i) our ability to restructure the July 1999 Notes, October 1999 Notes, January 2000 Notes, the Exchangeable Loan and the convertible preferred stock and (ii) our ability to generate the cash flows required to enable us to recover our assets and satisfy our liabilities, in the normal course of business, at the amounts stated in the consolidated financial statements. Due to the uncertainty of our ability to continue as a going concern, the Report of Independent Accountant includes a modification in this respect. Following the successful completion of the planned restructuring, we believe that we will have sufficient sources of capital, working capital and operating cash flows to enable us to continue as a going concern.

Narrative Description of Business

        We own and operate broadband communications networks in 11 countries in Europe. Our operations are organized into three principal divisions: UPC Distribution, UPC Media and Priority Telecom. UPC Distribution delivers video, internet and telephone services to residential customers (the "Triple Play"). UPC Media provides broadband internet and interactive digital products and services, transactional

9

television services such as pay per view movies, digital broadcast and post production services, and thematic channels for distribution on our network, third party networks and DTH platforms. Priority Telecom operates our CLEC business and provides telephone and data network solutions to the business market. The Priority Telecom brand is also used to offer telephone services to residential customers through UPC Distribution. In addition, as part of the ongoing realignment of the business, we are in the process of forming an Investments Division, which will manage our non-consolidated investment assets. These assets were valued at 226.0 million and 127.3 million as of December 31, 2001 and 2002, respectively. We continue to focus on rationalizing our investment portfolio to maximize value.

        Our subscriber base is one of the largest of any group of broadband communications networks operated across Europe. Our goal is to enhance our position as a leading pan-European distributor of video programming services and to become a leading pan-European provider of telephone, internet and enhanced video services, offering a one-stop shopping solution for residential and business communication needs. We plan to execute on this goal by increasing the penetration of our new services, such as digital video, telephone and internet, primarily within our existing customer base.

        Since formation, we have developed largely through acquisitions and organic growth in new services, which have resulted in significant growth in our consolidated revenues and expenditures.

        During 2001, we reviewed our current and long-range plan for all segments of our business and we hired a strategic consultant to assist us in the process. We worked extensively with this consultant to revise our strategic and operating plans. Our strategic vision has changed our focus from an aggressive digital roll-out to increasing the volume of our 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.

        Information regarding the revenues and the long-lived assets of our business segments and geographic areas of our business is contained in Note 12 to our audited consolidated financial statements contained in this Annual Report on Form 10-K.

10

Summary Operating Data for 2002 and 2001

        In the tables below, the "UPC Paid In Ownership" column shows the percentage we own of the operating systems in which we have an interest. The operating data set forth below reflect the aggregate statistics of the operating systems in which we have an ownership interest.

(1)

"Homes in Service Area" represents the number of homes in a certain franchise area that can potentially be served.

(2)

"Homes Passed" represents a home that can be connected to our distribution system without further extending the cable network distribution plant.

(3)

"Two-way Homes Passed" represents the number of homes passed by our network where customers can request and receive the installation of a two-way addressable set-top box, cable modem and/or voice port which, in most cases, allows for the provision of video, voice and data (broadband) services.

(4)

"Basic Subscriber", is generally defined as a home taking our basic cable service.

(5)

"DTH Subscriber" is generally defined as a home or commercial unit with one or more television sets that receive video programming that is broadcast directly to the home via geosynchronous satellites.

(6)

"Digital Subscriber" is generally described as a home with one or more digital converter boxes. A digital subscriber is also counted as a Basic Subscriber.

(7)

Statistics of PrimaCom are as of September 30, 2002.

(8)

Statistics of Israel are as of March 31, 2002.

(9)

As of December 7, 2001 our Polish DTH business was contributed to a newly formed joint venture with Canal + ("TKP") in which we have a 25% investment and is therefore reported as a non-consolidated company.

(10)

As of August 1, 2002, Germany (EWT/TSS) is a non-consolidated company.

11

Summary Operating Data (Continued)

(1)

"Telephony Homes Serviceable" represents a home that can be connected to our cable distribution system, or our copper network in certain areas where customers can request and receive the installation of a voice port that allows for the provision of voice (broadband) services.

(2)

Residential telephony Subscriber is generally defined as a home with one or more voice ports connected to our broadband network where a customer has requested and is receiving voice services. Certain of our systems provide traditional switched telephone services in the local loop.

(3)

"Telephony Lines" are defined as the number of lines provided to a Telephony Subscriber.

(4)

As of August 1, 2002, Germany (EWT/TSS) is a non-consolidated company.

(5)

Hungary (Monor) and Czech Republic offer traditional telephone services.

12

Summary Operating Data (Continued)

(1)

"Internet Homes Serviceable" represents a home that can be connected to our cable distribution system where customers can request and receive the installation of cable modem, which allows for the provision of high-speed internet access services.

(2)

"Internet Subscriber" is generally defined as a home or commercial unit with one or more cable modems connected to our broadband network, where a customer has requested and is receiving high-speed internet access services.

(3)

Internet subscribers who are not served by chello broadband.

(4)

Statistics of PrimaCom are as of September 30, 2002.

(5)

As of August 1, 2002, Germany (EWT/TSS) is a deconsolidated company.

(6)

Statistics of Israel are as of March 31, 2002.

13

(1)

"Homes in Service Area" represents the number of homes in a certain franchise area that can potentially be served.

(2)

"Homes Passed" represents a home that can be connected to our distribution system without further extending the cable network distribution plant.

(3)

"Two-way Homes Passed" represents the number of homes passed by our network where customers can request and receive the installation of a two-way addressable set-top box, cable modem and/or voice port which, in most cases, allows for the provision of video, voice and data (broadband) services.

(4)

"Basic Subscriber", is generally defined as a home taking our basic cable service.

(5)

"DTH Subscriber" is generally defined as a home or commercial unit with one or more television sets that receive video programming that is broadcast directly to the home via geosynchronous satellites.

(6)

"Digital Subscriber" is generally described as a home with one or more digital converter boxes. A digital subscriber is also counted as a Basic Subscriber.

(7)

As of August 1, 2002, Germany (EWT/TSS) is a non-consolidated company.

(8)

As of December 7, 2001 our Polish DTH business was contributed to a newly formed joint venture with Canal + ("TKP") in which we have a 25% investment and is therefore reported as a non-consolidated company.

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Summary Operating Data (Continued)

(1)

"Telephony Homes Serviceable" represents a home that can be connected to our cable distribution system, or our copper network in certain areas where customers can request and receive the installation of a voice port that allows for the provision of voice (broadband) services.

(2)

Residential telephony Subscriber is generally defined as a home with one or more voice ports connected to our broadband network where a customer has requested and is receiving voice services. Certain of our systems provide traditional switched telephone services in the local loop.

(3)

"Telephony Lines" are defined as the number of lines provided to a Telephony Subscriber.

(4)

As of August 1, 2002, Germany (EWT/TSS) is a non-consolidated company.

(5)

Hungary (Monor) and Czech Republic offer traditional telephone services

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(1)

"Internet Homes Serviceable" represents a home that can be connected to our cable distribution system where customers can request and receive the installation of cable modem, which allows for the provision of high-speed internet access services.

(2)

"Internet Subscriber" is generally defined as a home or commercial unit with one or more cable modems connected to our broadband network, where a customer has requested and is receiving high-speed internet access services.

(3)

Internet subscribers who are not served by chello broadband.

(4)

As of August 1, 2002, Germany (EWT/TSS) is a deconsolidated company.

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Summary Operating Data (Continued)

        Residential Revenue Generating Units    The operating data set forth below reflect the aggregate statistics of the operating systems in which we have an ownership interest. Revenue Generating Units, or ("RGUs"), is separately an Analogue (Basic) Subscriber, Digital Subscriber, DTH Subscriber, Residential Telephony Subscriber or Internet Subscriber. A home may contain one or more RGUs. For example, if a residential customer in our Austrian system subscribed to our analogue cable service digital cable service, telephone service and high-speed Internet service, the customer would constitute four RGUs.

(1)

Total Subscribers, or "Total RGUs" is the sum of Analogue, Digital, DTH, Telephony and Internet Subscribers.

(2)

As of August 1, 2002, Germany (EWT/TSS) is no longer in the consolidated RGUs.

UPC Distribution

        Our distribution division delivers video services, and, in many of our Western European systems, telephone and internet services to the residential market. Our distribution division also offers residential internet and telephone services in some of our Eastern European systems. Over the past few years, we have been upgrading our cable television systems to high speed, two-way capacity. In addition to enabling us to offer telephone and internet services, the upgraded network will provide us with technology to offer enhanced digital video services, such as near video on demand ("NVOD") and interactive television. As of December 31, 2002, approximately 74.9% of the network in our Western European systems, excluding Germany, had been upgraded, as well as 21.4% of our Eastern Europe systems.

        In 2002, we provided digital video services in The Netherlands, Austria, France, Norway and Sweden. We expect that full digitalization of our television signals will be made possible by our network upgrade to

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full two-way capability. The roll-out of digital services via set-top computers installed in customers' homes will involve significant capital investment and the use of new technologies. We cannot assure that we will be able to complete the roll-out of digital services across all our systems.

        In the period 2000 to 2002, we undertook a significant project of upgrading and integrating our information technology systems, creating a pan-European infrastructure to support the delivery of our services. The primary purpose of the project was the integration of software applications and processes into a complete IT and business solution. Various modules, such as billing and collection, customer care, activation and provisioning, capacity management, and reporting were linked to a pan-European data center based in The Netherlands. By the end of 2002, we had migrated more than 3.4 million customers of UPC France and UPC Netherlands to the new platform.

UPC Distribution–Video

        As of December 31, 2002, our operating companies had approximately 6.6 million consolidated subscribers to their basic tier video services, excluding an additional 141,000 subscribers for our digital DTH service in Hungary, the Czech Republic and the Slovak Republic. In 2002, we offered digital video services commercially in The Netherlands, Austria, France, Norway and Sweden. At December 31, 2002, we had approximately 126,300 digital video subscribers in those countries. We plan to continue increasing our revenue per subscriber by expanding our video services program offerings through digital and expanded basic tier services, pay-per-view and digital audio.

        We offer our subscribers some of the most advanced analogue video and digital services available today and a large choice of radio programs. In many systems, for example, we have introduced impulse pay-per-view services. We plan to continue to improve our expanded basic tier offerings by adding new channels where appropriate. In addition, we offer subscribers additional choice by offering thematic groupings of tiered video services in a variety of genres and by increasing the number and time availability of pay-per-view offerings. Generally, basic tier pricing is regulated by media laws and local licenses, while the expanded basic tier is not specifically price regulated, although it is subject to the general rules of competition law.

        The increased channel capacity provided by digitalization enables us to offer digital subscribers more choice in video products, such as NVOD, digital expanded basic tiers, and additional premium channels. In addition, digitalization allows us to provide value added services such as digital music, walled garden, interactive television and basic e-mail functionality. The increased channel capacity provided by digitalization also enables digital subscribers to customize their subscriptions for our products and services to suit their lifestyles and personal interests. We also provide our digital subscribers with customizable programming guides that enable them to program their favorite channels and also allows parents to restrict their children's viewing choices. Because many of these products and services are new and have not achieved market acceptance, there can be no assurance when or if we will be able to market them successfully.

        In areas where our cable television franchises are exclusive, our operating companies generally face competition from DTH satellite service providers and in certain area's also from television terrestrial broadcasters. We face the most competition from DTH providers in France, Poland, Norway and Sweden. In those areas where our cable television franchises are non-exclusive, our operating companies face competition from other cable television providers, in addition to DTH satellite service providers and television terrestrial broadcasters.

UPC Distribution–Telephone

        We offer residential telephone services over our networks in our Austrian, Dutch, French and Norwegian systems. Our operating companies generally do not offer telephone services to business customers in those countries in which our business telephone activities have been spun-off to Priority

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Telecom. We also have a traditional switched telephone network in Hungary and the Czech Republic. We offer our residential telephone customers local, national and international voice services, in addition to several value added features. As of December 31, 2002, we had 462,900 residential telephone subscribers.

        Traditional telephone service is carried over twisted copper pair in the local loop. The cable telephone technology that we are using allows telephone traffic to be carried over our upgraded network without requiring the installation of twisted copper pair. This technology requires the addition of equipment at the master telecom center, the distribution hub and in the customer's home to transform voice communication into signals capable of transmission over the fiber and coaxial cable. We are currently working in close co-operation with some suppliers to develop the possible introduction of alternative telephony technologies, including Voice over Internet Protocol ("VOIP"). VOIP is well suited for many of our networks, as the technology used is similar to our existing internet service. Because of these similarities, we believe we can decrease significantly our capital expenditures for the introduction of VOIP as compared to other technologies. Since VOIP is in relatively early stage of development and VOIP services are not rolled out on any significant scale in the world, there can be no assurances when or if we will be able to successfully launch VOIP services to our customers.

        We generally price our telephone service at a discount compared to services offered by incumbent telecommunications operators. Because of the relatively high European local tariff rates, we believe potential customers will continue to be receptive to our telephone services, especially in a bundled offer with any of our other services. In addition to offering competitive pricing, we offer a full complement of services to telephone subscribers including custom local access services or "CLASS", including caller ID, call waiting, call forwarding, call blocking, distinctive ringing and three-way calling. We also provide voice mail and second lines. The introduction of number portability in some of our markets, including the Netherlands, Norway, Austria and France, provides an even greater opportunity, as potential customers will be able to subscribe to our service without having to change their existing telephone numbers.

        Each operating company that offers telephone services has entered into an interconnection agreement with the incumbent national telecommunications service provider. In addition, certain of these operating companies have also entered into interconnection agreements with other telecommunications service providers, providing alternative routes and additional flexibility. Even though we have secured these interconnection arrangements, we may still experience difficulty operating under them. In Austria, our interconnection arrangement is subject to a dispute with the incumbent telecommunications service provider, which is pending at the administrative court. In Austria, the Netherlands, France, the Czech Republic and Hungary we directly manage interconnect relationships with incumbent telephone operators whilst in Norway these are managed by Priority Telecom.

        In the provision of telephone services, our operating companies face competition from the incumbent telecommunications operator in each country. These operators have substantially more experience in providing telephone services and may have greater resources to devote to the provision of telephone services. In many countries, our operating companies also face competition from other new telephone service providers like ourselves, including traditional fixed line providers, other cable telephone providers, wireless telephone providers and indirect access providers.

UPC Distribution–Internet

        We initially launched our broadband internet business in a few of our operating systems in September 1997. As we have upgraded our network, we have continued to roll out our internet service. We currently offer internet services in nine countries. As of December 31, 2002, our operating companies had 660,400 residential internet subscribers.

        Cable modem technology allows access to the internet over our existing upgraded network. The data communication is transformed into signals capable of transmission over fiber and coaxial cable by the addition of incremental electronic equipment, including servers, routers and switches at the master

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telecom center. Cable modems allow internet access at speeds significantly faster than traditional dial-up access, although we cannot guarantee the speed over our networks since it is a shared medium. A number of different technologies designed to provide much faster access than traditional dial-up modems have been proposed and are being introduced, such as Integrated Services Digital Network ("ISDN") and asynchronous digital subscriber line ("ADSL"), which compete with our cable modem access technology. Cable modem technology, is based on the widely used Transport Control Protocol/Internet Protocol ("TCP/IP"), which is used on local area networks and the internet. A global standard for TCP/IP has been created and accepted.

        Our network assets include equipment at the network operations center, our Always On Ready To Access ("AORTA") backbone infrastructure and internet related equipment and assets at master and regional data centers containing servers, routers and associated software. This infrastructure allows internet traffic to be rerouted if parts of the network are congested or impaired. The AORTA backbone infrastructure connects Amsterdam, Stockholm, Vienna, Paris, Brussels, London, Oslo and New York. The network operations center is used to monitor the quality of services. This center located in Amsterdam, operates 24 hours per day, seven days per week, and manages the infrastructure, regional data centers, regional networks, head-end facilities, servers and other components of the network infrastructure. We have deployed bandwidth-monitoring tools, which are critical for effective network cost control. The bandwidth monitoring tools enable us to introduce "fair use" pricing policies, under which heavy internet users pay fees based on their use of internet, rather than a fixed fee.

        Our local operating companies have entered into franchise arrangements with chello broadband N.V. Under the franchise arrangements chello broadband N.V. provides our operating companies with product development, customer support, local language broadband portals and marketing support for a fee based upon a percentage of subscription revenue.

        To achieve cost efficiencies and synergies, our internet network assets, including AORTA, and related employees were transferred from chello broadband N.V. to the UPC Distribution operating companies in December 2001. As part of the transfer, certain elements of the chello broadband N.V.    franchise agreement with our operating companies were revised to reflect changes in costs and operational responsibilities. chello broadband N.V. is expected to enter into a separate framework operating agreement and service level agreements with companies within the UPC Distribution group with regard to certain operational matters.

        In providing internet access to our customers, we face competition from incumbent telecommunications companies and other telecommunications operators and other cable-based and non-cable-based internet service providers. The internet services offered by these competitors include both traditional dial-up internet services and high-speed access services. We have encountered competition from ADSL, a new technology, which provides high-speed internet access over traditional telephone lines. ADSL services are offered by both incumbent and alternative providers. We expect to face strong competition from ADSL operators for our internet service in the future.

UPC Distribution–Operating Companies


Western Europe

        Austria: UPC Telekabel Group.     UPC Telekabel Group consists of five Austrian corporations, each of which owns a cable television operating system. We own 95% of, and manage, each UPC Telekabel Group company. Each of the respective cities in which the operating systems are located owns, directly or indirectly, the remaining 5% interest in each company. The UPC Telekabel Group provides cable television and communications services to the Austrian cities of Vienna, Klagenfurt, Graz, Baden and Wiener Neustadt. UPC Telekabel Group's largest subsidiary, Telekabel Wien, serves Vienna and represents approximately 87% of UPC Telekabel Group's total subscribers. It owns and operates one of the larger clusters of cable systems in the world in terms of subscriber numbers served from a single headend.

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        We intend to continue to capitalize on UPC Telekabel Group's strong market position, positive perception by its customers and its upgraded network which is 99.7% two-way capable. The upgraded network enabled UPC Telekabel Group to launch an expanded basic tier, impulse pay-per-view services and internet/data and access services in 1997. In 2002 certain elements of the analogue service were replaced by a digital service. UPC Telekabel Group launched the Priority Telecom cable telephone service in Vienna on a commercial basis in early 1999, and the chello broadband service in June 1999. We launched digital video services in Austria in the second half of 2001.

        In connection with United Europe, Inc's acquisition of Philips' interest in us in December 1997, the City of Vienna and Philips agreed that Philips will continue to guarantee the capital level to be maintained by Telekabel Wien. Philips has also agreed to guarantee the continued fulfilments of the agreements that were originally concluded between the city and Philips and that were assigned by Philips to us. These agreements have a term until 2022, with an extension option. United has agreed to indemnify Philips for any liability under Philips' guarantee and in return we have agreed to indemnify United.

        Belgium: UPC Belgium.     UPC Belgium, our 100% owned subsidiary, provides cable television and communications services in selected areas of Brussels and Leuven. UPC Belgium plans to increase revenues through the continued introduction of new services that currently are not subject to price regulation. UPC Belgium offers an expanded basic tier cable television, and also distributes three premium channels, two in Brussels and one in Leuven, which are provided by Canal+. UPC Belgium's network is fully upgraded to two-way capability and will continue to introduce expanded service offerings. UPC Belgium began offering internet access services in September 1997 and introduced the chello broadband service in early 1999.

        France: UPC France.     We have been constructing and operating cable television and communications systems in France since 1996. During 1999, we acquired several additional major cable television systems and UPC France is now one of the largest cable television providers in France. UPC France's initial operating companies constructed their networks with technology and capacity that enabled them to offer integrated video, voice and internet services. UPC France's network is 49% upgraded to two-way capability. We are continuing to upgrade certain of the networks of our acquired French systems to be able to offer cable telephone and internet services in these systems as well. UPC France's major operations are located in suburban Paris, the Marne-la-Vallee area east of Paris, Lyon and in other towns and cities throughout France. We currently own through UPC France Holding B.V, which owns 92% of Médiaréseaux S.A., which in turn holds all our interests in the distribution activities in France.

        Most of our French systems offer various tiers of cable television service. To increase its average monthly revenue per subscriber, UPC France began offering pay-per-view services in May 1998. We are expanding these revenue-generating services across our acquired systems. In addition UPC France launched a digital video product commercially in 2001.

        In June 1998, UPC France obtained a 15-year telephone and network operator license for an area that includes 1.5 million homes in the eastern suburbs of Paris. UPC France began offering telephone services, under the Priority Telecom brand in its existing cable television franchise area in March 1999 and has continued to roll out telephone services in 2000 and 2001 in suburban Lyon and Limoges.

        UPC France launched chello broadband's internet access services over the upgraded portions of its network in 1999. UPC France launched chello broadband's internet access service in its systems in the suburban Lyon and Limoges areas in the second quarter of 2000.

        During 2001 and during the first quarter of 2002, UPC France migrated all its customers into one pan-European billing and customer care system which enabled UPC France to centralize its customer care and certain key customer operation functions.

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        In 2002, through a number of rationalization and efficiency projects, including the outsourcing of non-critical functions, UPC France has significantly reduced its workforce and overall operational expenditure.

        The Netherlands: UPC Nederland.     Our Dutch systems are our largest group of cable television and communications systems. We have had operations in the Netherlands since we were formed in 1995. We began upgrading a portion of our Dutch networks in 1997 and, as of December 31, 2002, approximately 86.9% of our network was fully upgraded. As our subscribers are located in large clusters, including the major cities of Amsterdam, Rotterdam, and Eindhoven, we have constructed a national fiber backbone to interconnect these regional networks. In addition to television services, UPC Nederland offers internet and telephone services over its upgraded network.

        As a result of the high penetration in our Dutch systems and the rate regulation of the basic tier in many of UPC Nederland's franchise areas, we have focused our efforts on increasing revenue per subscriber in these systems through the introduction of new video, telephone and internet services. Many of our Dutch systems have offered an expanded basic tier since late 1996 through the introduction of an analogue decoder. We initially launched impulse pay-per-view services in April 1997. In 2001, we commenced the roll-out of digital video services in our Dutch systems.

        UPC Nederland launched its cable telephone service in Amsterdam in July 1997 and its Priority Telecom cable telephone service in many other parts of its network in May 1999. In some of our acquired systems, we launched cable telephone services in 2000 and 2001.

        Some of our Dutch systems had internet access services as early as 1997. We launched chello broadband's internet/data services in UPC Nederland's existing systems in early 1999. In 2000, we launched chello broadband in Rotterdam.

        During 2002, we have continued to integrate our Dutch acquisitions. We finalized the rationalization of the 11 legacy billing systems inherited from our Dutch acquisitions and now operate one single billing and customer care system. In 2002, we achieved additional cost savings through continuing rationalization of operating activities and we continue to focus on the bundling of our new services to achieve increased revenue per subscriber. Over the period 2001 and 2002 UPC Nederland implemented a new subscriber management system involving the consolidation of a number of customer databases. As part of this implementation, there has been a systematic reduction in the period over which an overdue account is disconnected for non-payment of service fees. This has resulted in reductions to the subscribers in the subscriber database in the fourth quarter of 2002 and is expected to be completed by the end of the second quarter of 2003.

        UPC Nederland has been engaged since 1995 in various litigation with Canal+, in relation to the carriage of Canal+ services on our network. On February 27, 2003, the Dutch Court ruled in favor of UPC Nederland and declared that Canal+ is obligated to pay a carriage fee for these services, which is not based upon actual costs.

        Norway: UPC Norge.     UPC Norge is Norway's largest cable television operator. UPC Norge's main network is located in Oslo and its other systems are located primarily in the southeast and along the southwestern coast. UPC Norge has been upgrading its network to two-way capacity since 1998. As of December 31, 2002, UPC Norge's network is 39.6% upgraded to two-way capability.

        Our goals for UPC Norge's cable television business are to continue to increase its penetration rate and to improve its revenue per subscriber generally by providing additional programming and services.

        UPC Norge introduced Priority Telecom's cable telephone service in 1999 in the upgraded portions of its network. UPC Norge launched an internet access service in 1998 and introduced chello broadband service in 1999. In 2001, we commenced the roll-out of digital video services.

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        Sweden: UPC Sweden.     UPC Sweden operates cable television and communications systems servicing the greater Stockholm area. UPC Sweden launched internet services in 1999. We commenced a roll-out of digital video services in Stockholm during the fourth quarter of 2001. As of December 31, 2002, UPC Sweden's network is 61.1% upgraded to two-way capability.

        UPC Sweden leases the fiber optic cables used to link to its main head-end under agreements with Stokab, a city-controlled entity with exclusive rights to lay ducts for cables for communications and broadcast service cables in the city of Stockholm. The main part of the leased ducting and fiber optic cables is covered by an agreement, which expires in January 2019. Additional fiber optic cables are leased under several short-term agreements, most of which have three-year terms but some of which have ten-year terms.

Central and Eastern Europe

        In addition to the video, internet and telephone services we offer in Central and Eastern Europe, we provide DTH services in the Czech Republic, Hungary and the Slovak Republic. In December 2001, we merged our Polish and United Kingdom DTH business into Telewizyjna Korporacja Partycypacyjna S.A. ("TKP"), a subsidiary of Canal+ Group ("Canal+").

        Czech Republic: UPC Ceská republika a.s.     Our Czech Republic subsidiary provides cable television services in more that 80 cities and towns in the Czech Republic, including Prague and Brno, the two largest cities in the country. Our network in the Czech Republic is 35.1% upgraded to two-way capability.

        We offer a number of tiers of programming services in the Czech Republic. We launched DTH service during the third quarter of 2000, leveraging off our then existing DTH platform in Poland. During 2001, we significantly expanded our internet services in the Czech Republic.

        Hungary: UPC Magyarorszag.     Our network in Hungary is approximately 50.6% two-way upgraded. In the fourth quarter of 2000, UPC Magyarorszag launched chello broadband internet services. We currently offer a number of tiers of programming services.

        We launched DTH service through UPC Direct in the third quarter of 2000, leveraging off our then existing DTH platform in Poland.

        Monor Telephone Company has offered public switched telephone services over a traditional copper pair network since December 1994 in the Southeastern part of Pest County. We have an economic ownership interest in Monor of approximately 98.9%. Our exclusivity clause for offering local loop telephone services in the area expired at the end of 2002. During 2002 we started to offer ADSL services over the telephony network.

        Poland:     UPC Polska. In August 1999 we acquired @Entertainment, Inc., now called UPC Polska, Inc., which owns and operates the largest cable television system in Poland. UPC Polska's subscribers are located in regional clusters encompassing eight of the ten largest cities in Poland. In addition, until December 7, 2001, UPC Polska had a DTH broadcasting service for Poland, targeted at homes outside of its cable network coverage area. In December 2001, UPC Polska sold its Polish and United Kingdom DTH assets to Telewizyjna Korporacja Partycpacyjna ("TKP"), a subsidiary of Canal+, the television and film division of Vivendi Universal, and lent 30.0 million to TKP from the Canal+ Proceeds (the "JV Loan"), on February 1, 2002. For this UPC Polska received a 25% ownership interest in TKP and 150.0 million in cash. As part of this transaction, through a carriage agreement, the Canal+ Polska premium channel will also be available on UPC Polska's cable network. Canal+ retained the remaining 75% of TKP. In connection with the TKP transaction, on February 1, 2002 UPC Polksa lent TKP 30 million from the cash proceeds received in the TKP transaction. On February 27, 2003 the 30 million loan was repaid and UPC Polska subsequently contributed the 30 million to TKP's paid-in capital, following the shareholders' resolution to increase share capital of TKP. A subsidiary of UPC Polska

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acquired 60,000 registered C series shares at the issue price of 500 Euros each. Canal+ and PolCom contributed together 90 million of their loans into paid-in capital on the same date. After the contribution, a subsidiary of UPC Polska continued to hold 25% of TKP's shares. As the loan granted to TKP of 30.0 million was included in the fair market value of the investment in TKP as of December 7, 2001, the above transactions (repayment of the loan to a subsidiary of UPC Polska by TKP and further capital contribution of 30.0 million) have no influence on the valuation of the investment in TKP.

        UPC Polska currently offers cable subscribers three packages of cable television service. Some areas are offered a package of up to 60 channels. For an additional monthly charge, certain of the company's cable networks have offered premium television services, mainly the HBO Poland service. In February 2002, UPC Polska began distribution of Canal+ Multiplex, a Polish-language premium package of three movie, sport and general entertainment channels, through its network on terms set forth in an agreement with Canal+. UPC Polska and TKP are currently negotiating a definitive long-term channel carriage agreement for UPC Polska's carriage of Canal+ Multiplex. Our network in Poland is approximately 10.2% upgraded to two-way capability.

        UPC Polska launched chello broadband internet service in the fourth quarter of 2000.

        UPC Polska has been able to avoid constructing its own underground conduits in certain areas by entering into a series of agreements with TPSA (the Polish national telephone company) which permit UPC Polska to use TPSA's infrastructure for an indefinite period or, in some instances, for fixed periods up to 20 years. Over 80% of UPC Polska's cable television plant has been constructed using pre-existing conduits from TPSA. A substantial portion of these contracts permit termination by TPSA without penalty upon breaches of specified regulations. Any termination by TPSA of such contracts could result in UPC Polska losing its permits, the termination of agreements with co-op authorities and programmers, and an inability to service customers in the areas where its networks utilize the conduits that were the subject of such TPSA contracts. In addition, some conduit agreements with TPSA provide that cables can be installed in the ducts only for the use of cable television. If UPC Polska uses the cables for a purpose other than cable television, such as data transmission, telephone, or internet access, such use could be considered a violation of the terms of certain conduit agreements, unless this use is expressly authorized by TPSA. There is no guarantee that TPSA would give its approval to permit other uses of the conduits.

        UPC Polska is aware that its main creditors, including us and holders of the UPC Polska notes are engaged in discussions about a restructuring of UPC Polska's indebtedness. No final agreement has been reached so far.

        Romania:     When we first entered the Romanian market, we have widened our customer base through acquisition and marketing activities in conjunction with build out. We entered into a joint venture with the owners of two Romanian cable television companies (collectively, "AST") to which our and AST's Romanian assets were contributed. Through 2001, we held a 70% interest in the joint venture and the former owners of AST held the remaining 30%. We acquired the 30% remainder of the partnership from the former owners in February 2002, as a result of the former owner's exercise of their put option, requiring UPC to purchase all of their partnership interests. In November 2002, we acquired the remaining 49% of the shares in Eurosat. This allowed us to merge all eight entities owned 100% into one single entity as of January 1, 2003. Our Romanian systems offer subscribers two or three different tiers of programming depending on the network area.

        Slovak Republic: UPC Slovensko.     We are the largest cable operator in the Slovak Republic. We offer subscribers three tiers of cable television service. UPC launched DTH service in the Slovak Republic in the fourth quarter of 2000, leveraging its existing DTH platform in Poland. Our network in the Slovak Republic is 4.5% upgraded to two-way capability.

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UPC Media

        Our division, UPC Media, operates our converging internet and video content and programming businesses, including digital products, through chello broadband N.V., UPCtv and other of our subsidiaries. UPC Media focuses on four key areas: (i) chello broadband, internet services; (ii) interactive television services; (iii) transactional television services, such as pay per view movies and (iv) pay television channels and digital media center.

chello broadband

        In 1998, we founded our chello broadband business for the purpose of developing a global broadband internet operation. The chello broadband product provides high-speed access to the internet gateway, as well as local language content through the chello broadband portal. The chello broadband product was launched in early 1999, and at December 31, 2002, it had approximately 676,000 subscribers, including 15,600 subscribers on non-UPC networks. chello broadband products are offered to residential customers through UPC Distribution operating companies and to business customers in the Netherlands, Austria and Scandinavia through Priority Telecom. In addition, chello broadband N.V. offers its products to residential and business customers through the Austrian company Telesystems Tyrol. chello broadband N.V. was formed in 2000 as a subsidiary that would operate and market our internet services.

        Through agreements with affiliated and non-affiliated companies, chello broadband N.V. provides product development, aspects of customer support, local language broadband portals and marketing support for a fee based upon percentage of subscription and installation revenue as determined in the agreements. The agreements further provide that in the future the local operator will receive a percentage of the revenue from chello broadband e-commerce and advertising.

        In the provision of internet access services and online content, our chello broadband products face competition from incumbent telecommunications companies and other telecommunications operators, other cable-based internet service providers, non-cable-based internet service providers and internet portals. The internet services offered by these competitors include both traditional dial-up internet services and high-speed access services.

Interactive Services

        We expect the development of interactive television ("iTV") services to play an important role in the take-up of our digital television product. Our interactive services group within UPC Media is responsible for core digital products, such as electronic program guide ("EPG"), walled garden, television-based email, and PC/TV portals as well as other television and PC-based applications supporting various areas including communications services and enhanced television ("ETV") services. We expect to offer increasing support and services built upon the above core platform to enable products such as on-screen betting, broadcast synchronous interactive applications and games services. We have completed the initial launch of our base set of services (such as EPG and walled garden) in both the Netherlands and Austria. Because these are new products that have not yet received significant customer acceptance, we are unable to predict when or if we will be able to market these products successfully.

Transactional Television

        Transactional television, branded as "arrivo", consisting of Near Video On Demand ("NVOD") and Video On Demand ("VOD"), is another important component of our digital services. Our current digital product includes 42 channels of NVOD programming in The Netherlands and 56 channels of NVOD programming in Austria at December 31, 2002. A NVOD service is planned for launch for UPC Scandinavia later in 2003. The transactional television service provides digital customers with a wide range of Hollywood blockbusters under the brand name arrivo. Adult entertainment is also available under the brand name Xotix. Arrivo also services third party operators and provides NVOD programming and

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marketing support for Cablecom, Switzerland. Arrivo is also in the process of developing VOD services for our affiliates and potentially third party cable operators. The VOD service will provide VOD subscribers with enhanced playback functionality and will give subscribers access to a broad array of on-demand programming, including movies, live events, local drama, music videos, kids programming, and adult programming. However, since the VOD product is still under development, no assurance can be given when or if it will become successful.

Pay Television and Digital Media Center

        UPCtv Channels:     UPCtv produces and markets its own pay television products, currently consisting of three thematic channels launched in 1999 and 2000. The channels target the following genres: extreme sports and lifestyles ("Extreme"); women's information and entertainment ("Club"); and real life documentaries ("Reality TV"). All three channels originate from our Digital Media Center ("DMC") located in Amsterdam. They are distributed to a broad base of customers through UPC's cable systems and direct-to-home ("DTH") platforms, as well as through cable systems and DTH platforms not affiliated with UPC and in countries where UPC currently does not own distribution companies.

        At the end of 2002, UPCtv undertook a strategic review of its thematic channels businesses, resulting in the decision to terminate the men's information and entertainment channel ("Avante"), due to its unfavourable economics.

        Digital Media Center ("DMC"):     The DMC is a technologically advanced production facility that services UPCtv and other clients with channel origination, post-production and satellite and fiber transmission. The DMC delivers high-quality, customized programming by integrating different video elements, languages (either in dubbed or sub-titled form) and special effects, then transmits the final product to various customers in numerous countries.

        During 2002, the DMC contracted with several third party clients for the play out and transmission of their proprietary channels. The DMC also subleased satellite space leased by UPC to third parties.

        UPC Media Ventures:     In addition to the UPCtv channels and the DMC, UPC Media has been involved in branded equity ventures for the development of country specific programming, including Iberian Programming Services (Spain and Portugal), Xtra Music (pan- Europe), CineNova (Benelux), MTV Networks Polska (Poland) and ATV (Austria). We are currently reviewing our various investments and may decide to divest certain of those investments.

        We also have an investment of approximately 21.2% of SBS, which creates, acquires, packages and distributes programming and other media content in many of our territories and elsewhere in Europe via commercial general entertainment television channels, radio stations and the internet. During 2003, we have agreed to sell our shares in SBS to United for 100 million, prior to completion of our restructuring.

Priority Telecom

        Priority Telecom is currently our division for providing telephone services to business customers. We founded our Priority Telecom business in 1998 for the purpose of providing telephone services to customers passed by our upgraded networks. Due to the potential value of our business customers, we decided to establish Priority Telecom N.V. as a separate CLEC, which would operate as our primary vehicle for providing telecommunication services to business customers and to which the business customers of our local operating companies would be spun off. In November 2000, a subsidiary of Priority Telecom N.V. merged with Cignal Global Communications ("Cignal"), a global carriers' carrier. As consideration for the merger between Priority Telecom N.V. and Cignal, the former shareholders of Cignal received 16% of the shares of Priority Telecom N.V. on a fully diluted basis, in return for their Cignal shares. Priority Telecom N.V. decided to close its international wholesale voice business during the second quarter of 2001 and in the second quarter of 2002, its wholesale data business. Through Priority Telecom N.V., our CLEC business is

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currently operating in metropolitan areas in The Netherlands, Austria and Norway. As of December 31, 2002, Priority Telecom N.V. had approximately 7,700 business customers. UPC Distribution's local operating companies continue to provide telephone services to residential customers as a part of our UPC Distribution division's services, using the Priority Telecom brand.

        Priority Telecom N.V. was listed on the Euronext Amsterdam stock exchange in September 2001. In connection with the listing, the capital structure of Priority Telecom N.V. was restructured, and we contributed additional equity to Priority Telecom N.V. We currently hold approximately 71.5% of Priority Telecom N.V.'s outstanding shares. The former Cignal shareholders hold approximately 11.8% and the balance is held by a foundation reserving such shares for issuance pursuant to employee benefit plans.

        Priority Telecom N.V. has developed a product portfolio for advanced telecommunication solutions, including VOIP, InterLAN, IP-virtual private network ("IP-VPN") services and Application Service Provider ("ASP") enabling services. We believe these products will help us anticipate and meet changing business customer requirements. Some of these, such as VOIP, are new products using emerging technologies. Accordingly, we cannot predict when or if Priority Telecom will be able to market such products successfully.

        We expect Priority Telecom N.V. to be able to leverage substantially from the existing infrastructure of UPC Distribution's operating companies, allowing for efficient, cost-effective growth. The network used by Priority Telecom N.V. consists of indefeasible rights of use ("IRUs"), granted by UPC Distribution operating companies to our metropolitan area fiber networks and a backbone connecting these fiber networks. Given the density of this fiber network, it is possible for Priority Telecom N.V. to connect business customers directly to our core metropolitan area networks that could only feasibly be connected by the incumbents in the past. We believe this provides strategic advantages for Priority Telecom N.V. In addition, the dense network enables Priority Telecom N.V. to execute a "smart build" strategy. It allows certain CLEC extensions to the current footprint and additions of local tails for limited capital expenditure with a short execution time.

        The metropolitan and national networks used by Priority Telecom N.V. are based on 25-year IRUs granted by the UPC Distribution operating companies. As part of the IRU agreements, Priority Telecom N.V. pays UPC Distribution operating companies annual administration, operations and maintenance fees. In addition to the IRU agreements, Priority Telecom N.V. has access to the local tail circuits of UPC Distribution.

        We and our operating companies have also signed operating agreements with Priority Telecom N.V., whereby Priority Telecom N.V. offers a range of services to our operating companies and our operating companies offer a range of services to Priority Telecom. The services which we provide to Priority Telecom N.V. include equipment, local loop and other capacity leases, and human resource, billing, information technology and co-location services.

        We and our operating companies intend to provide Priority Telecom N.V. with a variety of services and facilities made available under the operating agreements and IRU agreements, in support of Priority Telecom's telecommunications business, up to an aggregate value of 50 million. Priority Telecom N.V. intends to finance these services as follows:

•

The operating agreements for Austria, The Netherlands and Norway will allow payments, to an aggregate of 30 million, to be made in Series 1 in Convertible Shares of Priority Telecom N.V., cash or securities for services provided through December 2003.



•

Under the IRU agreements for The Netherlands, Austria and Norway, certain subsidiaries of Priority Telecom N.V. may purchase services and facilities over a 27-month period up to a value of 20 million. The value of services received plus interest at a rate equal to the three-month EURIBOR plus 3.75%, compounded quarterly will be payable in cash 36 months from the date of invoice.

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        Priority Telecom faces competition from the incumbent telecommunications operators and from other CLEC operators in the countries in which it does business. Some of these operators have substantially more experience in providing telephone services and have substantively greater resources to devote to the provision of telephone services.

Other Information

Employees

        As of December 31, 2002, we, together with our consolidated subsidiaries, had approximately 7,810 employees. Certain of our operating subsidiaries, including our Austrian, Dutch and Norwegian systems, are parties to collective bargaining agreements with some of their respective employees. We believe that we have in general a constructive relationship with our employees.

Regulation–General

        Our distribution, video, telephone and content businesses are regulated in each of the countries in which we operate. The scope of regulation varies from country to country, although in some significant respects regulation in our Western European markets are harmonized under the regulatory structure of the European Union ("EU"). In addition, Norway's laws are, and will continue to be, substantially harmonized with those of the EU and, of the other non-EU countries in which we operate, the Czech Republic, Hungary, Poland, Malta and the Slovak Republic are all expected to join the EU during 2004 and will therefore need to harmonize their national laws with EU norms. Adverse regulatory developments could subject us to a number of risks. Such developments could limit our growth plans, our revenues, and the number and types of services we offer in different markets. In addition, regulation may impose certain obligations on our systems that subject them to competitive pressure, including pricing restrictions, interconnection obligations, open-network provision obligations and restrictions on content we deliver, including content provided by third parties. Failure to comply with current or future regulation could expose us to various penalties.

        In general, the regulatory environment in the EU countries in which we operate is to an increasing degree shaped by the EU framework. Since January 1, 1998, EU directives have set out a framework for telecommunications regulation that all EU Member States must follow. Regular implementation reports from the European Commission assess the compliance of Member States with the various requirements of the directives. In addition, the European Commission has taken action to enforce compliance on Member States. The EU is taking steps to substantially increase the level of harmonization across the whole range of communications and broadcasting services.

        Set forth below is an overview of the types of regulation that affect our various businesses, as well as a summary of the regulatory environment in the EU and certain countries in which we operate a significant proportion of our major systems.

Regulation–European Union

        Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, The Netherlands, Portugal, Spain, Sweden, and the United Kingdom are all member states of the EU. As such, these countries are required to enact national legislation which implements European Union directives. Although not an EU Member State, Norway is a member of the European Economic Area and has generally implemented, or is implementing, the same principles on the same timetable as EU member states. The Czech Republic, Hungary, Malta, Poland, Romania and the Slovak Republic, which are in the process of negotiating their membership in the EU, have started adjusting their regulatory systems to EU requirements. All of these countries, with the exception of Romania, are expected to accede to the EU during 2004, and Romania is expected to join later. As a result, most of the markets in which we operate have been significantly affected by regulation initiated at the EU level.

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        In 2003, the EU regulatory framework applying to our business will be substantially changed. A package of five new directives has to be implemented into the law of the 15 Member States. Four of these directives were published in the European Commission's Official Journal on April 24, 2002 and must be transposed into the national laws of and become effective in Member States by July 25, 2003. The provisions of the fifth (the Electronic Communications Data Protection Directive) need be transposed into the national laws of, and become effective in, Member States by October 30, 2003.

        The new regulatory framework seeks, among other things, to harmonize national regulations and licensing systems and further increase market competition. These policies will seek to harmonize licensing procedures, reduce administrative fees, ease access and interconnection, and reduce the regulatory burden for telecommunications companies. Generally speaking, the framework relies on general competition laws rather than regulation to prevent dominant carriers from abusing their market power.

        Certain key elements of the new and old EU regimes are set out below. This is not intended to be a comprehensive description of all aspects of regulation in this area.

        Conditional Access for Video Services.     EU member states may regulate the offering of conditional access systems such as those used, for example, for the expanded basic tier services offered by many of our operating companies. Under current EU law, providers of conditional access systems may be required to make them available on a fair, reasonable and non-discriminatory basis to other video service providers, such as broadcasters. This requirement will be carried into the new regime.

        Telephone Interconnection.     Currently, a specific EU directive sets forth the general framework for interconnection, including general obligations for telecommunications operators to allow interconnection with their networks. Public telecommunications network operators are required to negotiate interconnection agreements on a non-discriminatory basis. Public telecommunications network operators with significant market power (which, although it may vary, is generally presumed when an operator has 25% or more of the relevant market) are subject to additional obligations. They must offer interconnection without discriminating between operators that offer similar services, and their interconnection charges must follow the principles of transparency and be based on the actual cost of providing the interconnection and carriage of telephone traffic. The directive also contains provisions on collocation of facilities, number portability with certain exceptions, supplementary charges to contribute to the costs of universal service obligations and other interconnection standards.

        Under the new regime, the specific obligations that presently exist will no longer be automatic but, instead, can be imposed by national regulatory authorities at their discretion on operators with significant market power. The threshold for significant market power will change to equate with the competition law concept of dominance. This is not a market share test per se, but it is not likely that the test would be met with a market share of less than 40%. In practice, we do not expect the new interconnection regime to differ materially from that in force today.

        Telephone Licensing.     Currently, EU member states are required to adopt national legislation so that providers of telecommunications services generally require either no authorization or a general authorization, which is conditional upon "essential requirements," such as the security and integrity of the network's operation. However, operators of public voice telephony such as ourselves are generally required to hold individual licences. Licensing conditions and procedures must be objective, transparent and non-discriminatory. In addition, telecommunications operators with significant market power, typically 25% of the relevant markets, may be subjected by member states to more burdensome conditions than the authorizations held by other providers. License fees can only include administrative costs except in the case of scarce resources where additional fees are allowed. The new regulatory package will see a move to general authorizations rather than individual licenses in almost all cases.

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Regulation–National Regulations

        Certain important aspects of national regulation requirements are set out below. This is not intended to be a comprehensive description of all aspects of national regulation.

        Distribution/Video Licenses.     Our operating companies are generally required to either obtain licenses, permits or other governmental authorizations from, or notify or register with, relevant local or regulatory authorities to own and operate their respective distribution systems. Generally, these licenses are non-exclusive. In many countries, licenses are granted for a specified number of years.

        The businesses of our operating companies are dependent on these licenses, permits and authorizations and the loss or non-continuation of them, as a result of non-compliance with their terms or otherwise, could have a material adverse effect on us. We believe we are in material compliance with the material terms of such licenses, permits and authorizations.

        In some countries we pay annual franchise fees based on the amount of our revenues. In other countries, the fee consists of a payment upon initial application and/or nominal annual payments.

        Video "Must Carry" Requirements.     In most countries where we provide video and radio services, we are required to transmit to subscribers certain "must carry" channels, which generally include public national and local channels. In some countries we can be required to transmit quite a large number of channels by virtue of these requirements. To date, there has been no meaningful oversight of this issue at EU level. This will change when the new regulatory package comes into effect. Member States will only be permitted to impose must carry obligations where they are necessary to meet clearly defined general interest objectives and where they are proportionate and transparent. Any such obligations shall be subject to periodical review. It remains to be seen what effect this new rule will have in practice but we expect it to lead to a reduction of the size of must-carry package that we must carry.

        Pricing Restrictions.     Local or national regulatory authorities in some countries where we provide video services also impose pricing restrictions. Generally, in these cases, basic tier price increases must be approved by the relevant local or national authority. In certain countries, price increases will only be approved if the increase is justified by an increase in costs associated with providing the service or if the increase is less than or equal to the increase in the consumer price index. Even in countries where rates are not regulated, subscriber fees may be challenged if they are deemed to constitute anti-competitive practices. These price restrictions are generally not applied to expanded basic tier or digital programming.

        Internet/Data.     Our chello broadband subsidiary and most of our operating companies must comply with both EU regulation and with relevant domestic law in the provision of internet access services and on-line content. In several countries, including Norway and France, the provision of internet/data services does not require any sort of license or notification to a regulatory body. Other countries, including Austria, Belgium and The Netherlands, require that providers of these services register with or notify the relevant regulatory authority of the services they provide and, in some cases, the prices charged to subscribers for such services.

        Our operating companies that provide internet services must comply with both internet-specific and general legislation concerning data protection, content provider liability and electronic commerce. As regulation in this area develops, it will likely have a significant impact on the provision of internet services by our operating companies.

Regulation–Competition Law and Other Matters

        EU directives and national consumer protection and competition laws in our Western European and certain other markets impose limitations on the pricing and marketing of integrated packages of services, such as video, telephone and internet/data services. These limitations are common in developed market economies and are designed to protect consumers and ensure a fair competitive market. While we may

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offer our services in integrated packages in our Western European markets, we are generally not permitted to make subscription to one service, such as cable television, conditional upon subscription to another service, such as telephone, that a subscriber might not otherwise take. In addition, we must not abuse or enhance a dominant market position through unfair anti-competitive behavior. For example, cross-subsidization between our business lines that would have this effect would be prohibited.

        Should we become larger throughout the EU and in individual countries in terms of service area coverage and number of subscribers, we may face further regulatory scrutiny. Regulators may prevent certain acquisitions or permit them only subject to certain conditions. In a number of non-EU jurisdictions where our operating companies have a significant market presence, we are subject to certain limitations. For example, in Hungary a single cable operator may not provide service to homes exceeding in the aggregate one-sixth of the Hungarian population.

Item 2.    Properties

        We lease our corporate offices in Amsterdam, along with a representative office in London. Our operating companies and subsidiaries also generally lease their offices. We own small parcels of property in various countries that we use for our network equipment. In other countries, we have been able to obtain easements for this equipment and our cable network.

Item 3.    Legal Proceedings

        The following is a description of the legal proceedings to which we or one of our subsidiaries is a party. In addition, from time to time, we may become involved in litigation relating to claims arising out of our operations in the normal course of our business. In the opinion of our management, the ultimate resolution of these legal proceedings would not be likely to have a material adverse effect on our subsidiaries' business, results of operations, financial condition or liquidity. As these legal proceedings are resolved, to the extent that we have any liability and such liability is owned by us, we will distribute shares of New UPC common stock as provided under the Plan and the Akkoord in satisfaction of such claim.

        On July 4, 2001, InterComm Holdings L.L.C., 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 us in connection with the ICF Party's position as a minority shareholder in Médiaréseaux S.A. The claimants are seeking relief in the nature of immediate acceleration of an alleged right to require us or an 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 for a maximum of 192 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. We and our affiliates, as respondents, deny these claims and intend to defend against claimants' allegations vigorously. We are vigorously defending the arbitration proceedings and have filed appropriate counterclaims. The ICF Party withdrew its arbitration on 31 January 2003 and refiled the same claims on February 14, 2003. We have filed a request with the International Chamber of Commerce to combine the counterclaims filed by us in the first arbitration with the new request filed by the ICF Party.

        On March 21, 2002, we received a notice of service of a class action lawsuit for damages filed in the U.S. District Court for the Southern District of New York against the Company, our officers and certain other persons, who include certain of the underwriters for our initial public offering on the Nasdaq National Stock Market in February 1999. The complaint alleged violations of Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, based on the purported failure of the Company, our officers and the other defendants to disclose that some of the underwriters in the offering, including the lead underwriters, had

31

solicited and received excessive and undisclosed commissions from certain investors. The U. S. Bankruptcy Court lifted the automatic stay in the U.S. Chapter 11 Case to permit the plaintiffs to pursue this litigation for the purpose of attempting to obtain a judgment or settlement up to the amount of our insurance in respect of such liability and to collect any judgment or settlement solely out of such insurance in full satisfaction of any such claims. We believe that the plaintiffs' claims are without merit and intend to defend the lawsuit vigorously. Since more than 200 similar class actions have been filed against other companies primarily against the underwriters there are discussions going on to release the companies from these litigations. We and our insurance company are also involved in those discussions.

        On April 26, 2002, we received notice that certain former shareholders of Cignal Global Communications ("Cignal") had filed a lawsuit against us in the District Court in Amsterdam, The Netherlands, claiming USD 200 million on the basis that we failed to honour certain option rights which were granted to those shareholders in connection with acquisition of Cignal by Priority Telecom N.V., one of our subsidiaries. We believe that we have complied in full with our obligations to these shareholders through the successful consummation of the initial public offering of Priority Telecom N.V. on September 27, 2001. Accordingly, we believe that the Cignal shareholders' claims are without merit and intend to defend this suit vigorously.

        On October 22, 2002, Philips Digital Networks B.V. ("Philips") commenced legal proceedings against us, UPC Nederland B.V. and UPC Distribution (together, the "UPC Defendants") alleging failure to perform by the UPC Defendants under a Set Top Computer Supply Agreement between the parties dated November 19, 2001, as amended (the "STC Agreement"). Philips' principal allegation is that the UPC Defendants have failed to take delivery of 47,100 Set Top Computers ("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 have filed appropriate counterclaims. This action was 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 December 3, 2002, we filed a petition for relief under Chapter 11 of the United States Bankruptcy Code (the "U.S. Chapter 11 Case") with the U.S. Bankruptcy Court. For further details, please see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation–Plan of Reorganization."

        In order to fully achieve the restructuring, including the distributions contemplated by the Plan, it was also necessary to effect the restructuring under the laws of certain non-U.S. jurisdictions, including Dutch law. Accordingly, in conjunction with the commencement of the U.S. Chapter 11 Case, on December 3, 2002, we commenced the Dutch Bankruptcy Case. On December 3, 2002, we filed the Akkoord with the Dutch Bankruptcy Court under the Dutch Bankruptcy Code. We submitted a revision to the Akkoord to the Dutch Bankruptcy Court on December 23, 2002 and a subsequent revision on January 7, 2003. The Dutch Bankruptcy Court ratified the Akkoord on March 13, 2003. On March 21, 2003, InterComm Holdings L.L.C. ("ICH"), a creditor in the Dutch moratorium proceeding with a EUR 1.00 claim and one vote, based on a claim against us, appealed the Dutch Bankruptcy Court's ratification of the Akkoord. The Dutch Court of Appeals has scheduled an expedited hearing for the appeal for April 1, 2003 and is expected to rule on the appeal shortly thereafter. We believe the appeal is without merit and intend to oppose the appeal vigorously. The U.S. Bankruptcy Court has already overruled an objection brought by ICH in the parallel U.S. Chapter 11 Case. We do not expect that this appeal will affect the successful completion of our restructuring, which is in its final stages. The appeal, however, will delay completion of the restructuring, into the second quarter of 2003.

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        As part of the U.S. Chapter 11 process, the U.S. Bankruptcy Court authorized us to reject the so called "cable affiliation agreement" (the "Cable Affiliation Agreement") between Europe Movieco Partners Limited ("Movieco") and us in relation to the carriage of a premium movie channel ("Cinenova") on our networks in The Netherlands and the Flemish speaking part of Belgium. Based on this rejection order, we terminated the Cable Affiliation Agreement on March 1, 2003. Movieco has filed, pursuant to the Cable Affiliation Agreement, an amended request for arbitration with the International Chamber of Commerce on March 21, 2003 seeking specific performance by us under the Cable Affiliation Agreement. We believe that we have validly terminated the Cable Affiliation Agreement and will defend ourselves vigorously against this suit. Furthermore, Movieco was awarded a provisional measure requiring us to continue to carry Cinenova on our networks during the arbitration process. We are in the process of filing an appeal against this decision.

Item 4.    Submission of Matters to a Vote of Security Holders

        None.

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PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters

(a)

Market Information.

        Our ordinary shares A trade on the Euronext stock exchange ("Euronext") under the symbol "UPC" and American Depositary Shares ("ADSs") representing our ordinary shares A trade on the Nasdaq National Market ("Nasdaq") under the symbol "UPCOY." Each ADS represents one ordinary share A. The following table shows the range of high and low sales prices reported on Euronext and Nasdaq:

(b)

Holders

        As of December 31, 2002 there were approximately 8 registered holders of our ADSs. We generally do not know who the owners of our ordinary shares A are since they are held in bearer form.

(c)

Dividends

        We have never paid cash dividends on our ordinary shares A.

Amsterdam Exchange–Negative Equity

        As of December 31, 2001 we had negative shareholders' equity. Upon occurrence of the event, we promptly reported this deficit to the Euronext. As a result of our continuing negative shareholders' equity, Euronext put the UPC Ordinary Shares A on the so-called "penalty bench" (strafbankje) and, on February 14, 2002, removed the UPC Ordinary Shares A from the Amsterdam Exchange index ("AEX index") after a three month notice period until such time as we returned to positive shareholder's equity. This did not, however, result in a delisting of our shares, which are still freely tradable. In accordance with article 108A, book 2 of the Dutch Civil Code, we addressed the issue of negative equity at our 2002 general shareholders' meeting.

        If the restructuring is successfully completed, New UPC will hold over 99% of our outstanding Ordinary Shares (including the UPC Ordinary Shares A). In such event, we intend to seek approval from Euronext for the termination of the listing of our Ordinary Shares A on Euronext.

        We intend to seek to delist our Ordinary Shares A from Euronext upon successful completion of the restructuring. If Euronext denies our application to delist our Ordinary Shares A from Euronext upon successful completion of the restructuring, a trading market for our Ordinary Shares A will continue to exist following completion of the restructuring. However, in that case, we do not expect that there will be active trading in our Ordinary Shares A on Euronext following the restructuring.

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        If the restructuring is consummated in the manner contemplated by the Plan, the Akkoord and the Dutch Implementing Offer, New UPC will have various mechanisms available under Dutch law to require the holders of our Ordinary Shares A to accept a cash payment in relinquishment of our Ordinary Shares A. Therefore, if a non-U.S. holder of our Ordinary Shares A fails to receive shares of New UPC common stock for its UPC Ordinary Shares A under the Plan and fails to participate in the Dutch Implementing Offer, such holder would be required to accept cash for its UPC Ordinary Shares A after the restructuring if New UPC decides to proceed with a "squeeze out" of the non-New UPC holders of our Ordinary Shares A. No assurance can be given as to the amount of cash such a holder would receive from New UPC for its UPC Ordinary Shares A. However, such amount of cash may be less than the value of the shares of New UPC common stock such holder would have received if it had received shares of New UPC common stock under either the Plan or the Dutch Implementing Offer.

Nasdaq National Market Listing Requirements

        Our ordinary shares were traded in the form of American Depositary Shares ("ADSs") on the NASDAQ National Market under the symbol "UPCOY." NASDAQ has traditionally maintained certain rules regarding bid prices for continued listing on the market. Following our third quarter results announcement on November 14, 2001 and as a result of reporting negative shareholders equity we were informed, through a notification from NASDAQ, that we would be delisted on May 15, 2002, if the stock did not trade for 10 consecutive trading days above USD 3.00 during a 90 day, beginning February 15, 2002.

        Our Ordinary Shares A (in the form of UPC ADSs) were delisted from NASDAQ on May 23, 2002 as a result of our inability to continue to comply with the minimum bid price requirements for listing. Since delisting our ADSs have traded in the United States on the Over The Counter Bulletin Board under the ticker symbol UPCOY. Following completion of our restructuring, we do not intend to apply for a relisting of our ADSs on NASDAQ or a listing of our ADSs or our Ordinary Shares A on any securities exchange in the United States and our ADSs programme will be cancelled.

        In our restructuring agreement, New UPC has agreed to use its commercially reasonable efforts to list the shares of New UPC common stock on the NASDAQ. To date, New UPC has applied for a NASDAQ listing and is confident to obtain a listing shortly after successful completion of the restructuring.

Item 6.    Selected Financial Data

        The following selected consolidated financial data for the years ended December 31, 2002, 2001,2000, 1999, and 1998 have been derived from our audited consolidated financial statements. We adopted the Euro reporting as our currency effective December 31, 1999. We have retroactively restated financial information for all periods presented using the exchange rate fixed on January 1, 1999 of EUR1.0 to 2.20371 Dutch Guilders. The consolidated financial data set forth below for our company is qualified by reference to, and should be read in conjunction with, our audited consolidated financial statements and notes thereto and also with Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".

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SELECTED CONSOLIDATED FINANCIAL DATA