--------------------------------------------------------------------------------
                               CORPORATE PROFILE
--------------------------------------------------------------------------------

        Data Transmission  Network Corporation (DTN), an electronic  information
and  communication  services company  headquartered in Omaha, NE, is a leader in
the electronic  satellite  delivery of  time-sensitive  information  (NEWS...NOT
HISTORY).  DTN is committed to providing our customers with the best information
and analysis  available,  as quickly as possible, at an affordable  cost.  DTN's
services are tailored to  meet our  subscriber's needs and are valuable tools in
managing business and personal affairs.
        The Company began  operations in 1984,  went public in January 1987, and
has  continued  to  evolve  into  a   full-service   information   provider  and
communication  network.  DTN  distributes  information  via FM  radio  side-band
channels,   small  dish  Ku-band  satellite,  TV  cable  (VBI-vertical  blanking
interval), FAX, E-Mail and the Internet. Most subscribers utilize a DTN receiver
that captures  information around the clock and converts it into text,  graphics
and audio available at the subscriber's convenience.
        Prior to 1992, DTN supported only a monochrome  receiver system with the
capability to receive and display  information.  In 1992, the Company introduced
the  Advanced   Communications   EngineSM   (ACE)  receiver  that  expanded  the
information and communications  services provided by the Company.  This receiver
has multiple  processors  that capture,  manipulate and display high  resolution
color video pictures,  graphics and text. In addition,  these processors provide
the ability to play audio clips and to utilize a phone  modem.  The ACE receiver
is equipped with an internal hard drive that allows processed  information to be
stored,  archived  and then  displayed by using the built-in  control  panel,  a
keyboard or a mouse at the subscriber's convenience.
        DTN's services  reach  145,900  subscribers  in the U.S. and Canada. The
Company has services for the agriculture,  automotive,  energy,  farm implement,
financial,  mortgage,  produce, golf, turf management,  aviation,  construction,
emergency management and other weather related industries.  The services include
DTN AgDaily and DTN FarmDayta, targeted for agribusinesses; DTN Pro SeriesSM and
DTN FarmDayta Elite, advanced information services for agribusinesses; DTNstant,
for customers needing a real-time agriculture ticker service;  DTNironSM for the
farm implement dealer; DTN PROduce for the produce industry; DTN Weather Center,
for the golf, turf management,  aviation and construction  industries;  DTN Wall
Street and DTN  SpectrumSM,  an  enhanced  version of DTN Wall Street on the ACE
technology, for the financial industry; DTN FirstRate for the mortgage industry;
DTN GovRate for U.S.  government  securities;  DTN Broker +SM for the  brokerage
industry;  DTNergy for the petroleum and natural gas  industries;  DTNautoSM for
the auto  auctions  and auto  dealers;  and joint  ventures  for the  electrical
equipment and trucking industries.



--------------------------------------------------------------------------------
                               MISSION STATEMENT
--------------------------------------------------------------------------------

        Led by customer  suggestions  and  demands,  Data  Transmission  Network
Corporation  has  engineered  growth and  evolution from what we were the  first
low-cost,   electronically   delivered  agricultural   commodities   information
service to  what we are today a  multi-faceted  information provider utilizing a
full-service  communication  technology  system to deliver that most valuable of
all commodities, timely information (NEWS...NOT HISTORY).
        We  are  committed  to  providing  the  best  information  and  analysis
available, as quickly as possible, at an affordable cost to our customers. Among
the many things that are critical to successfully meeting those commitments, the
three most  important  are  customer  service,  customer  service,  and customer
service!
        As fellow  shareholders  of the  Company,  DTN  employees  have as their
number one goal the long-term enhancement of the value of our Company.


                                    - 235 -
<PAGE>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                               TABLE OF CONTENTS
--------------------------------------------------------------------------------
<S>                                                                          <C>
Financial Highlights ......................................................   2
Five Years In Review ......................................................   2
Letter to Stockholders ....................................................   4
Business Review ...........................................................   6
Selected Financial Data ...................................................  16
Management's Discussion and Analysis ......................................  17
Management's Responsibilities .............................................  23
Independent Auditor's Report ..............................................  23
Financial Statements ......................................................  24
Notes to Financial Statements .............................................  28
Quarterly Data ............................................................  33
Trading Information .......................................................  33
Investor Information ......................................................  34
Directors and Officers ....................................................  34
Appendix - A Letter To Our Shareholders - Technology Update ...............  35
</TABLE>

                                                                 1

                                    - 236 -
<PAGE>


--------------------------------------------------------------------------------
                              FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Year:                                                                1996                     1995                  % Change
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                     <C>                      <C>                            <C>
        Revenues                                                        $  98,383,713            $  62,287,989                   58%
        Operating cash flow(1)                                             40,377,428               23,154,402                   74%
        Loss before income taxes                                           (1,404,306)                (397,076)                   -
        Net loss                                                             (958,306)                (283,076)                   -
        Net loss per share (4)                                          $        (.09)           $        (.03)                   -
------------------------------------------------------------------------------------------------------------------------------------
At Year End:
        Total assets                                                    $ 177,729,762            $  92,672,050                  92 %
        Long-term debt and subordinated notes                              97,747,823               47,020,527                 108 %
        Stockholders equity                                                28,290,289               12,876,965                 120 %
        Book value per share (4)                                        $        2.56            $        1.29                  98 %
------------------------------------------------------------------------------------------------------------------------------------
Key Indicators:
        Total subscribers at year-end                                         145,900                   95,900                  52 %
        Subscriber retention rate                                               89.3%                    91.0%                  (2)%
        Net development costs(2)                                        $   5,344,261            $   3,733,530                  43 %
        Operating cash flow from core services(3)                       $  45,512,581            $  26,749,974                  70 %

As a percent of revenue:
        Operating cash flow(1)                                                 41.0 %                   37.2 %
        Operating cash flow from core services(3)                              47.4 %                   44.4 %
        Depreciation and amortization                                          34.0 %                   30.2 %
        Interest                                                                8.6 %                    7.7 %
        Net loss before income taxes                                           (1.4)%                    (.6)%
--------------------------------------------------------------------------------
<FN>
(1) Operating income before depreciation and amortization expense.
(2) Net  Development  Costs  are  defined  as  the  sum  of 1)  market  research
    activities,  2) hardware and software engineering,  research and development
    and 3) the negative operating cash flow (prior to corporate allocations plus
    interest) of new services.
(3) Core  services  are services no longer in the initial  development  process.
    Operating cash flow from core services as a percent of revenue is calculated
    on core services revenue.
(4) Per share data is shown after 3-for-1 stock split.
</FN>
</TABLE>
--------------------------------------------------------------------------------
                              FIVE YEARS IN REVIEW
--------------------------------------------------------------------------------
GRAPHS IN TABULAR FORM:

                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
  Revenues
($ millions)              26.8      36.0      46.1      62.3      98.4


                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
Operating Cash Flow
    ($ millions)           9.9      12.9      15.8      23.2      40.4

          2


                                    - 237 -
<PAGE>

--------------------------------------------------------------------------------
                              FIVE YEARS IN REVIEW
--------------------------------------------------------------------------------
GRAPHS IN TABULAR FORM:

                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
Operating Cash Flow
(percent of revenue)       37%       36%       34%       37%       41%


                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
Net Development Costs
    ($ millions)           1.1       2.7       4.3       3.7       5.3


                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
Subscribers At Year End
      (thousands)         67.6      74.1      82.0      95.9      145.9


                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
Subscriber Retention Rate
       (percent)          88.2      88.8      89.8      91.0      89.3


                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
Annual Revenue
Per Subscriber
($ based on average
 subscribers)             409       507       591       700       775



                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
Annual Operating Cash
Flow Per Subscriber
($ based on average
 subscribers)             151       183       202       260       318

                                                                 3

                                    - 238 -
<PAGE>

--------------------------------------------------------------------------------
                             LETTER TO STOCKHOLDERS
--------------------------------------------------------------------------------

        The two  most  significant  highlights  for DTN  during  1996  were  the
measurable improvements in the efficiency of administration and customer service
and  our  acquisition  of  Broadcast  Partners.   These  factors  are  primarily
responsible  for  improved   operating  cash  flow   (operating   income  before
depreciation and amortization) as a percentage of revenue.

        Operating  cash flow  improved  from 34 percent of revenue for the first
quarter of 1996 to 40 percent of revenue  for the fourth  quarter of 1996.  This
comparison  is apples to apples - it excludes  any effects  associated  with the
second most  significant  highlight of 1996:  our May  acquisition  of Broadcast
Partners.

        Broadcast  Partners  was  our  biggest  competitor  in the  agricultural
delayed quotes field. We paid $73,300,000 for this asset  acquisition and gained
39,000  customers and  approximately  $10,000,000 in annual operating cash flow.
With the merger of the two businesses,  its associated synergies and elimination
of some redundancies, the acquired cash flow appears to be more in the magnitude
of $13,000,000 to $14,000,000 per year.

        The above two highlights are  responsible for total company cash flow in
the fourth quarter of 1996 to be 44.8 percent of fourth quarter revenues.

        We improved 1996 operating  efficiency  because all employees pitched in
to help manage our fast-growing company in a frugal fashion.  Each and every one
of us took ownership of the task in a way that makes me proud.  Additionally,  I
salute Greg Sloma,  our President,  and his supporting cast, whose abilities and
tenacity brought to us the acquisition of Broadcast Partners.

        DTN recorded an outstanding, unprecedented performance in 1996. Here are
the highlights.

o       Revenues grew 58 percent from  $62,288,000  for 1995 to $98,384,000  for
        1996.

o       Operating  cash  flow   (operating   income  before   depreciation   and
        amortization  expense)  grew 74  percent  from  $23,154,000  for 1995 to
        $40,377,000 for 1996.

o       Operating cash flow as a percentage of revenue  improved from 37 percent
        for 1995 to 41 percent for 1996.

o       Total  subscribers  increased 52 percent from 95,900 for 1995 to 145,900
        for 1996.

o       Operating  revenue per  subscriber - consisting of  subscriptions, "a la
        carte" additional  services,  communications  and advertising  revenue -
        increased 9.4 percent from $55.70 per month for 1995 to $60.92 for 1996.

        To assist in your own  analysis of DTN, I have  included  the  following
1995 vs. 1996 comparisons,  which exclude growth associated with our acquisition
of Broadcast Partners.

o       Revenues grew 33 percent from $62,288,000 to $82,937,000.

o       Operating cash flow grew 32 percent, from $23,154,000 to $30,539,000.

o       Total subscribers increased 11.5 percent, from 95,900 to 106,900.

        DTN's growth in services leaves us with many more doors to knock on than
our  existing  sales  force can  possibly  handle,  so a major focus at our shop
continues to be enlarging our distribution capability, primarily our field sales
force.  During 1996, our field sales force grew  approximately 40 percent,  from
120 to 170 people. For 1997, we have planned an additional 40 percent increase.

        For the second and third quarter reports of 1996, I asked Robert Herman,
our Senior Vice President for Research and Technology, to give us an abbreviated
technology  update.  I have put him in the hot seat one more  time.  So for this
annual report,  Robert has included a more comprehensive  appendix  entitled, "A
Letter to Our Shareholders - Technology Update". I think you will enjoy it.

        Additionally,  as can be seen in the graphic on the following  page, DTN
has put together an array of services for the Agricultural,  Weather, Financial,
Energy, Auto, Electrical Equipment and Trucking Industries.

        The business  review  section  located in the  following  pages offers a
comprehensive  description  of each service.  By necessity  our business  review
section is a little voluminous. However, I suggest that each shareholder read it
as carefully as if you are to be subjected to an exam on its  contents.  Careful
reading of this section will allow you to conjure up a picture of your  company,
its accomplishments,  our momentum, and more importantly assess the potential of
our future. Know what you own.

          4

                                    - 239 -
<PAGE>

        My thanks to our customers,  suppliers,  financiers and stockholders for
their  support.  And a special thanks to all of our employees and their families
for a very successful 1996.



Very sincerely yours,



Roger Brodersen
Chairman and CEO

                                                                 5

                                    - 240 -
<PAGE>

--------------------------------------------------------------------------------
                                BUSINESS REVIEW
--------------------------------------------------------------------------------

      Data  Transmission  Network  Corporation  (DTN) began  operations in April
1984. The Company is in the business of providing  information and communication
services.  During  1996,  DTN added  several new  services  in the  agriculture,
weather and financial service lines. All of these services are discussed in this
report. DTN services reach 145,900 subscribers throughout the U.S. and Canada.

      The Company's subscription services are targeted at niche business markets
and designed to be timely (NEWS...NOT  HISTORY),  simple to use, and convenient.
The Company's information distribution technology provides an efficient means of
sending data and information from point to multi-point.

      The development of a cost-effective  electronic satellite delivery system,
plus a total commitment to customer service and information quality, has enabled
the Company to become a major player in the communications industry. The Company
continues  to make large  investments  to develop and  enhance  its  information
distribution  technology.  These  investments  have  allowed the Company to take
advantage  of many  engineering  and  software  advancements  in an exciting and
growing industry.

Information Distribution Technology

        The  Company  is   committed   to  research   and  develop   information
distribution  technologies that cost effectively  deliver the timely (NEWS...NOT
HISTORY) information that the Company's subscribers demand. DTN supports several
information distribution  technologies allowing the distribution  (transmission)
and  receiving  (capture,   manipulation  and  display)  of  information.  These
technologies  include FM radio  side-band  channels  (FM),  small  dish  Ku-band
satellite (Ku), Fax, Cable TV (by using the vertical blanking interval, or VBI),
E-Mail and the Internet.
        The first  technology used by the Company was FM radio side band. The Ku
technology was added in 1989,  providing the ability to reach customers  outside
the geographic territory of the signal of the FM stations.  Fax, VBI, E-Mail and
the Internet have since been added to further expand our distribution network.
      The Company  provides all of the equipment  necessary for  subscribers  to
receive  their  service  based on FM,  Ku and VBI.  This  equipment  includes  a
receiver, specifically built for the Company, a video monitor, a FM antenna or a
small 30" Ku-band satellite dish. A keyboard,  mouse and printer may be provided
depending on the service.  DTN is  responsible  for the normal  maintenance  and
repair of the subscriber equipment.
      Prior to 1992, the Company utilized a "page-based" receiver and monochrome
system. The monochrome system translates the Company's data stream into text and
has the  capability,  depending on capacity,  to receive and display from 126 to
246 different pages of information.  The monochrome  receiver has the capability
to download information to a printer or computer.
        In 1992, the Company introduced the Advanced Communications Engine (ACE)
receiver, a color graphics receiver system, that expanded the ability to provide
information and communication  services.  This receiver has multiple  processors
that capture, manipulate and display high resolution color pictures,

          6

                                    - 241 -
<PAGE>
graphics and text. A separate processor provides the ability to play audio clips
such as weather forecasts,  voice  advertisements or audio alarms which are used
when a futures contract reaches a pre-set price. In addition, this processor may
send and retrieve  information by using an internal  modem  connected to a phone
line.
        The ACE receiver also has the  capability to download  information  to a
printer or computer.  This receiver is equipped with an internal hard drive that
allows   processed   information  to  be  stored,   archived   (versus  frequent
rebroadcasting) and displayed. The receivers built-in control panel, keyboard or
mouse allows the subscribers to conveniently view this information.
        One of the  unique  aspects  of the  Company's information  distribution
technology is the computer  software  developed by the Company  specifically for
use with the DTN receivers.  This software manages information from a wide array
of  input   sources,   runs  routines,   sets   priorities  and  then  initiates
transmissions  to  the  satellite.  The  software  provides  the  capability  to
individually address each receiver unit placed with a subscriber, permitting the
Company to transmit  specific  information to a specific  subscriber or group of
subscribers.
        The Company leases FM radio side-band  channels,  satellite channels and
VBI space to deliver  the  information  to the  Company's receivers  used by its
subscribers.  All  information  is  up-linked  from Omaha to  satellite  (except
Internet,  Fax and other telephone delivery technology) and down-linked from the
satellite to the subscriber based on the distribution technology.
        The FM  monochrome  subscribers  receive their  information  using an FM
antenna that receives the information via the side-band signal  transmitted from
radio stations.
        On December 31, 1996,  15,600 subscribers  were  receiving the Company's
services via FM distribution technology.
        The Ku subscribers utilize a 30" satellite dish, a direct down-link,  to
receive  their  information.  On December 31,  1996,  128,000  subscribers  were
receiving the Company's services via Ku distribution technology.
        Early in 1994,  the  Company  began  using a new  cable TV  distribution
technology   involving  vertical  blanking  intervals  (VBI).  The  Company  has
contracted with a major cable TV superstation to transmit information along with
the station's TV signal.  This technology  eliminates the need for an FM antenna
or satellite  dish and is available to businesses  or residences  that are wired
for cable TV and receive the superstation's service. On December 31, 1996, 2,300
subscribers   were  receiving  the  Company's   services  by  VBI   distribution
technology.
        The Company has approximately 10,500 Fax customers receiving information
using Fax  technology.  The E-Mail business is primarily a subscriber (an E-Mail
source)  communicating  specific messages to a group of subscribers.  Currently,
there are over 500 E-Mail sources  delivering over 1,500 pages of information to
subscribers  daily.  The Company  began to deliver  services on the  Internet in
1995. The Company is currently offering services in the agriculture, produce and
finance  service  lines  and  plans to  continue  researching  this  information
distribution technology.

--------------------------------------------------------------------------------
SERVICES OFFERED
--------------------------------------------------------------------------------
        The  Company's  revenue  is derived  mainly  from five  categories:  (1)
monthly,   quarterly  or  annual  subscriptions,   (2)  optional  services,  (3)
communication  services,  (4) advertising and (5) service  initiation  fees. The
percentage  of total  revenue for each category over the last three fiscal years
was:
<TABLE>
<CAPTION>
                                               1996        1995        1994
                                               ----        ----        ----
<S>                                             <C>         <C>         <C>
Subscriptions                                   76%         74%         73%
Optional services                                6%          6%          8%
Communication services                           9%         11%         10%
Advertising                                      3%          3%          5%
Service Initiation Fees                          6%          6%          4%
</TABLE>

        The subscription revenue is generated from monthly,  quarterly or annual
subscription  fees  for one of the  Company's  services.  The  Company  offers a
discount  to  subscribers  who  pre-pay  their  subscriptions  annually.  A more
detailed review of each service is found later in this report.
        Optional  services are offered to  subscribers on an "a la carte" basis,
similar to premium  channels on cable TV. The  information for these services is
primarily  provided  by a  third  party  with  DTN  receiving  a  share  of  the
subscription revenue paid by the subscriber. Optional services revenue continues
to grow in total  dollars  and has  maintained  the level  achieved in 1996 as a
percentage  of  total  revenue  during  this  period  of  rapid  subscriber  and
subscription revenue growth.
        The  Company  sells  communication  services  that  allow  companies  to
cost-effectively  communicate  a large  amount  of timely  (NEWS...NOT  HISTORY)
information to their customers or field offices.  This category includes revenue
generated from FAX and E-Mail services.  Communication  revenue has continued to
grow in total dollars and management believes this area offers opportunities for
future growth.
        The Company sells advertising space interspersed among the pages of news
and  information,  similar to a  newspaper  or  magazine.  The  advantage  of an
electronic  advertisement  over  typical  print media is the timely  (NEWS...NOT
HISTORY)  delivery of the ad, as well as the  ability to change the  advertising
message  quickly and as frequently  as market  conditions  dictate.  Advertising
revenue continues to grow in total dollars and has maintained the level achieved
in 1996 as a percentage of total revenue during this period of rapid  subscriber
and subscription revenue growth.
        Service  initiation  fees are  one-time  charges  for new  subscriptions
depending on the service and the information distribution  technology.  DTN also
charges an initiation fee for those  subscribers  who convert to another service
(ie: from a monochrome FM to a Ku color service).
--------------------------------------------------------------------------------
DTN AGRICULTURAL
SERVICES
--------------------------------------------------------------------------------

        The DTN Agricultural  Services include DTN AgDaily,  DTN ProSeries,  DTN
FarmDayta, DTNstant, DTNiron and DTN PROduce.

        New  subscriptions  are primarily  sold by the Company's  national sales
force of employee  district sales  representatives,  in-house  sales staff,  and
inde-

                                                                     7

                                    - 242 -
<PAGE>

GRAPH IN TABULAR FORM:

                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
DTN Ag Services Revenue
    ($ millions)          20.6      27.0      33.7      44.0      69.7


pendent,  commission-only sales  representatives.  The Company obtains leads for
the sales force through telemarketing,  direct mail, print media advertising and
customer referrals. The Company's management continues to analyze the markets in
the  U.S.  and  Canada  to  determine  the  optimum  sales  force  necessary  to
cost-effectively maximize sales.
        The biggest  competition to these services is the combination of printed
advisory services,  radio,  television,  telephone,  other satellite information
services, on-line services and the changing of old information gathering habits
        DTN's  agricultural  subscribers  have more than 150  optional  services
available  to them.  These  services  consist  of  advisory,  informational  and
educational products. Additional services include newswire, association and free
services.  DTN subscribers are given the opportunity to tailor their DTN unit to
their specific needs by choosing from a broad mix of "a la carte" services.  DTN
continues to develop new optional services to meet customer demands by listening
closely to the marketplace.
        The Company  markets these services  through a combination of individual
free trials,  system-wide trials,  on-screen  advertising,  direct mail, invoice
stuffers,  equipment  stuffers  and  telemarketing.  The total number of monthly
subscriptions increased over 25% primarily due to these marketing campaigns. The
increase in subscriptions  fueled the impressive  increase in optional  services
revenue.  Optional  service  subscription  prices  range  from $6 to $1,200  per
quarter with the average subscription price of $60/quarter.
        In 1996,  the  agricultural  related  services  sold over three  million
dollars  in  advertising  space.  The  companies   purchasing   advertising  are
considered major players in the agriculture,  ag chemicals, seeds, equipment and
finance businesses.  The color system  capabilities,  such as inter-activity and
animation,  continue  to entice new  advertisers.  Advertising  research in 1996
confirmed that DTN is an important player in the agriculture media field.
--------------------------------------------------------------------------------
DTN AGDAILY SERVICES
--------------------------------------------------------------------------------
        The DTN  AgDaily  Services  are DTN  AgDaily,  DTN  Pro  Series  and DTN
FarmDayta.  Approximately  80%  of  the  services' subscribers  are  farmers  or
livestock  producers with the balance  consisting  primarily of grain elevators,
agribusinesses,   and  financial  institutions.  DTN  AgDaily,  Pro  Series  and
FarmDayta  subscribers  farm nearly one third of the nations total  cropland and
market more than 50% of the nations' cattle and hogs.  Subscribers  can be found
throughout the U.S and Canada.
        DTN AgDaily  management  believes  the trend toward  consolidation  into
larger  farms is expanding  the market for  agricultural  information  services.
Also, the governments move toward fewer  agricultural price supports and an open
market system will support expansion of agricultural  information services. This
expansion  should provide steady growth for DTN AgDaily,  DTN Pro Series and DTN
FarmDayta.

DTN AgDaily

SERVICE REVIEW
        The Company's  first  service, DTN AgDaily,  is an  agricultural  market
information,  quote and  weather  service.  Monochrome  (FM and Ku) DTN  AgDaily
subscribers  receive delayed  commodity  futures and options quotes;  local cash
grain and livestock prices;  selected regional and world weather updates;  and a
variety of daily  analysis,  commentary and news that affect grain and livestock
prices.
        The DTN AgDaily  color  graphics  system  includes  an advanced  weather
segment  with  national  and  regional  radar maps  (updated  every 15 minutes),
infrared  satellite cloud cover maps,  precipitation,  temperature,  jet stream,
surface  wind and snow cover  maps,  and much more.  The  subscriber  can custom
design high resolution charts and/or select from a library that holds over 1,000
charts.  Subscribers can custom program the futures quotes pages to display only
the quotes they  desire.  The service  also  includes  information  segments for
specific crop and livestock enterprises as well as general, business, sports and
entertainment news.
        DTN AgDaily color service offers crop liability  insurance and livestock
profitability  calculators  by using the  inter-activity  feature  that allows a
subscriber  to  search  a  comprehensive  database.  This  feature  also  allows
subscribers to search an extensive seed catalog.
        The price of the  monochrome FM service is currently $29 per month,  $35
per month for monochrome Ku service and $52 per month for color Ku service.
        DTN offers  services  with  advanced  features  bundled with DTN AgDaily
called the DTN Pro Series.  The DTN Pro Series  services  are also  managed as a
service within DTN AgDaily.

DTN Pro Series

SERVICE REVIEW
        The DTN Pro Series services are an advanced  information source designed
for agricultural  subscribers who require more extensive information that can be
customized for their specific needs and operations. The Pro Series includes five
services: Weather Pro, News Pro, Chart Pro, Intraday Pro and Stock Pro.
        Weather  Pro is the  "meteorological  connection"  to the most  complete
array of current weather, fore-

          8

                                    - 243 -
<PAGE>

cast and satellite  radar  information.  This service  allows the  subscriber to
choose from over 70 new weather maps including detailed regional, state and zone
forecasts. The Weather Pro service gives the subscriber 32 programmable pages to
create their own unique weather information chapter.
        News Pro is the "broadcast  connection"  to the most timely  (NEWS...NOT
HISTORY) business,  sports,  entertainment,  financial,  and general news of the
day. The service also provides an audio summary of the day's  agricultural news.
News Pro subscribers  receive AP Online, a service of the Associated Press, as a
news source.
        Chart Pro is the "graphic  connection" bringing a variety of information
to the screen in an organized  format to allow the subscriber to analyze trends,
patterns and cycles.  This  service  includes 40 pages for  programmable  charts
allowing the subscriber to create an extensive "chart book".
        Intraday Pro is the "trading  connection" to the first  low-cost  system
with the ability to chart market  sessions  minute-by-minute  during the trading
day. This service allows the subscriber to choose the time intervals they desire
to chart and keep them abreast of the markets.
        Stock Pro is the "market connection" providing access to prices for over
50,000 issues of stocks,  bonds and funds.  This service  includes  stock quotes
using  either  the  quick  quote  feature  or  the  programmable  quotes  pages.
Additional  features are the personal library used to store news and information
and the high interest  windows that allows the subscriber to constantly  monitor
up to six futures, options, stock or bond quotes.
        The Pro Series' enhanced  functionality  includes a high interest window
        that  allows a user to view  future or options  quotes on any page,  key
word search that  automatically  searches  the news story  database for articles
affecting the user's operation,  a user custom segment that creates a customized
segment with up to five of the users favorite pages, and a personal library that
serves as a customized archive segment.
        Each individual Pro Series service is currently  priced at $62 per month
except the Stock Pro which is  currently  priced at $66 a month.  DTN Premier is
the package of Weather  Pro,  News Pro,  Chart Pro and Intraday  Pro,  currently
priced at $79 per month.  DTN  Premier  Plus is the  package of DTN  Premier and
Stock Pro,  currently priced at $82 a month.  This service is available by color
Ku-band satellite transmission.

DTN FarmDayta

SERVICE REVIEW
        DTN  FarmDayta  was the  principle  asset  acquired  from the  Broadcast
Partners acquisition in May 1996. The content of this service is very similar to
DTN AgDaily.  In fact,  since its start in 1990,  DTN  FarmDayta was the primary
competition for DTN AgDaily  services.  DTN FarmDayta is an agricultural  market
information,  quote and weather service delivering delayed commodity futures and
options quotes;  local cash grain and livestock  prices;  selected  regional and
world weather updates; and a variety of daily analysis, commentary and news that
affect grain and livestock prices.
        DTN FarmDayta Elite service is an advanced  version of DTN FarmDayta and
is similar in content to the DTN AgDaily  service.  Additional  features include
additional options quotes, charting, weather maps and a hard drive to store data
in the receiver which is critical to maintaining storage of information during a
power outage.  DTN FarmDayta Elite Plus is an advanced service that includes the
DTN  FarmDayta  Elite  features and is similar in content to the DTN Pro Series.
This service  includes  more  advanced news  (Reuters  Headline  News),  quotes,
weather (including motion and zoom capabilities) and programmable charts.
        DTN FarmDayta,  and its enhanced  versions DTN FarmDayta Elite and Elite
Plus, are currently priced at $44, $52, and $62 a month, respectively. All these
services are available by color Ku-band satellite transmission.  The addition of
DTN FarmDayta  gives the Company a fully  integrated  agricultural  service line
with price entry points across a wide spectrum, expanding the marketing horizons
for all DTN agricultural services.
        At the time of the  acquisition,  DTN FarmDayta had 39,000  agricultural
subscribers. The Company does not plan to convert DTN FarmDayta equipment to DTN
AgDaily  equipment and currently  maintains the DTN FarmDayta  facilities,  with
nearly 100 employees, in Des Moines, Iowa.

1996 AGDAILY SERVICES HIGHLIGHTS
        DTN  AgDaily   remains  the  Company's  largest  service  and  its  1996
performance  exceeded managements  expectations.  A 17% subscription growth rate
demonstrated  acceptance of higher-priced services. The number of subscribers in
Canada increased 64% in 1996 compared to 1995.
        DTN AgDaily  introduced a number of  enhancements  to the service during
1996,  including  48-color  regional radar maps,  northern  grains segment and a
peanut segment.  Weather information  advancements  increased the sensitivity of
radar maps,  increased  the number of weather  reporting  stations and added new
maps for 30- and 90-day forecasts.
        The DTN Pro Series had an extremely  successful  1996. The number of Pro
Series subscribers grew more than 60%, accounting for 47% of all the DTN AgDaily
service sales.
        Our ongoing research shows that customer satisfaction for the Pro Series
is very  favorable.  This research is confirmed by the fact that our  subscriber
retention  rate for these  services has remained very high and is well above the
Company's  combined  subscriber  retention  rate.  In  September,   the  Company
introduced  its  agricultural   Internet  service,  DTN  FarmDayta  Online.  DTN
FarmDayta  Online is  similar in content to DTN  FarmDayta  Elite  Plus,  and is
designed  for the  producer  who either  prefers to use his or her own  personal
computer  to  receive  information  or is not able to  utilize  the  traditional
satellite-based  system that DTN  supplies  to its  subscribers.  DTN  FarmDayta
Online is currently available for $25 a month. The market for subscription-based
Internet  services in  agriculture is relatively new so it is difficult to reach
any conclusions on market acceptance.


                                                                 9

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<PAGE>
DTNstant

SERVICE REVIEW
        DTNstant  is a color  service  that  provides a selection  of  real-time
futures  and options  quotes from the major  commodity  exchanges  and  headline
commodity news from multiple sources such as the Associated Press, Futures World
News  and  Knight  Ridder.   The  service  also  provides  market  leading  cash
information,  in-depth charting capabilities, plus all the information available
on the DTN AgDaily color service. In addition, this service provides information
for the energy, metals, softs (ie: orange juice, coffee, cocoa),  transportation
and lumber  industries.  There are no other services in the industry  offering a
more comprehensive news and information service.
         The primary  subscribers are commercial  grain companies and elevators,
feedlots,  commodity brokers and commodity speculators.  Due to the character of
this  industry,  the  Company  provides  on-site  service  and  installation  by
professional service technicians.
         DTNstant  operates in a very competitive  market with numerous national
and regional  providers of instant commodity quotes.  This service is the leader
in the satellite delivery of instant futures and options quotes.
         New  subscriptions  are primarily sold by the Company's  national sales
force  which is  supported  by  telemarketing  and direct mail  campaigns.  This
service is available by color Ku-band  satellite  transmission  and is currently
priced at $170 a month.

1996 HIGHLIGHTS
         DTNstant  experienced  a year of good growth from the  momentum  gained
from  the  1995  acquisition  of  Knight-Ridder  Commodity  Center  subscribers.
Subscribers grew by 8%, and management believes this growth is impressive due to
a  significant  amount  of  resources   committed  to  converting  the  acquired
subscribers to the DTN ACE receiver system.
         New features added during the year include  user-programmable  formulas
for data analysis,  the enhancement of the high interest windows to include news
stories, and increased keyboard functionality. The service is planned to receive
additional  enhancements  in 1997. The DTNstant  service became  compatible with
software that allows the "pass thru" of data and graphics into a computer  local
area network  (LAN).  One DTN ACE receiver  then feeds  information  to multiple
users/traders  on the LAN.  This  pass  thru  software  opens  new  markets,  by
utilizing information  distribution within a customer's LAN enhancing analytical
capabilities.

DTNiron

SERVICE REVIEW
        DTNiron is a color  service  providing  a  cost-effective  communication
resource for the farm implement  industry.  DTNiron is an equipment  locator and
inventory  management  service  providing  a  communication  tool  for the  farm
implement dealers  throughout the U.S and Canada.  The service allows dealers of
all makes of farm  implements  and  equipment  to work  together to manage their
inventory resulting in increased sales and profitability.  This service provides
valuable information on the national outlook for farm equipment sales.
        DTNiron provides  detailed listings of farm implements and equipment for
sale or needed by  dealers.  A listing  stays on the  system for a minimum of 30
days,  renewable at the dealers  request.  Subscribers  receive  industry  news,
financial information,  economic indicators and information from the DTN AgDaily
color service.
        The DTNiron service also includes  listings of  construction  equipment,
trucks,  trailers and other equipment that is found in the agriculture industry.
The service provides listings for implement and equipment parts, especially hard
to find  parts.  In  addition,  the  service  sorts the  listings by regions and
provides hourly updates to keep the information as timely  (NEWS...NOT  HISTORY)
as possible.
        This service is available by color Ku-band satellite transmission and is
currently priced at $98 a month.

1996 HIGHLIGHTS
        DTNiron  introduced  the Combine and Tractor Demand  Monitor,  the first
widely  distributed  annual sales  outlook to cut across the entire  spectrum of
tractor and combine  manufacturers.  This monthly economic study released to all
DTNiron  subscribers  helps track the money-making  trends in the industry.  The
monitor  has been  quickly  adopted by the  industry as the  standard  for sales
outlooks.  The Combine and Tractor  Demand  Monitor is released to the trade and
agricultural press one or two days after release to DTNiron subscribers.

DTN PROduce

SERVICE REVIEW
        DTN PROduce is the authority in providing the produce  industry with the
most timely weather,  produce prices,  transportation  data and news information
available.  There are four major components to the DTN PROduce service. First is
weather  information,  providing the single most important  piece of information
for anyone in the produce  business.  Second is pricing  information,  providing
immediate updates upon release formatted by commodity, growing area and terminal
market. Third is transportation  information,  providing freight rates and daily
truck  availability by the major growing areas.  Finally,  the service  provides
comprehensive news including AP Online.
        DTN PROduce maintains a price discovery network, the DTNdex, that is the
industry  standard.  Competition  in this  industry  continues to focus on older
technology, such as Fax machines.
        The market for this service is the entire produce food chain of growers,
shippers,  packers,  brokers,  retailers  and  institutions.   This  service  is
available via color Ku-band satellite and currently is priced at $88 per month.

1996 HIGHLIGHTS
         DTN  PROduce  began  working  with  the key  industry  sources  of news
including "The Packer" and "The Produce News" and credit information from the

          10

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<PAGE>
"Produce Reporter Company" and the "Red Book Credit Service"  to offer the most
complete information service available.
        DTN PROduce  developed a service  targeted  specifically  to the produce
growers to capitalize on this segment of the market.  This service  includes all
the  features of the DTN PROduce  service with the  exception of  transportation
information  and AP Online news.  This service is currently  available via color
Ku-band satellite and currently is priced at $62 per month.
        DTN PROduce expanded its service to the Internet to accommodate seasonal
and  international  customers  who are unable to utilize a satellite  dish.  The
price of this service is currently $50 a month.
--------------------------------------------------------------------------------
DTN WEATHER SERVICES
--------------------------------------------------------------------------------
        The DTN Weather  Center  Services have expanded from DTN Weather  Center
into specific  industry-related  services  including  DTN Weather  Center - Turf
Manager, DTN Aviation Center and DTN Weather Center - Contractor Dayta.

GRAPH IN TABULAR FORM:
                                             1994      1995      1996
                                             ----      ----      ----
DTN Weather Services Revenue
      ($ millions)                            0.0       1.0       5.6


DTN WEATHER CENTER

SERVICE REVIEW
        DTN  Weather  Center  is  a  comprehensive  weather  information  system
designed  to meet the  weather  information  needs of many  industries.  Markets
specifically  targeted by DTN Weather Center are golf courses,  turf management,
emergency  management,   state  transportation  departments,   construction  and
aviation. DTN Weather Center has found a home in numerous other industries where
timely (NEWS...NOT HISTORY),  accurate and easily accessible weather information
is a critical ingredient in operational planning and staffing decisions.
        DTN Weather Center  services  provide over 100 weather maps, 20 regional
radar  maps  including  NEXRAD  radar  and  infrared  satellite  photos  and six
satellite  maps.  The services  provide  short-range  (12-48  hours)  forecasts,
long-range (3-90 day) outlooks, and 10 day city forecasts for over 550 different
cities in the U.S.  and Canada.  The  services  include a personal  programmable
segment,  storing of maps in an "Archive Segment" and AP Online News is provided
as an optional service.
        This DTN Weather Center service is available via color Ku-band satellite
transmission and is currently priced at $72 per month.

DTN WEATHER CENTER TURF MANAGER

SERVICE REVIEW
        Turf Manager is available to those  individuals and businesses  involved
in turf-related  operations such as golf course,  lawn maintenance,  landscaping
and sod farm. This service provides the news,  weather and chemical  information
designed for turf management.
        Chemical and Pesticide Press Turf Index is a unique feature providing an
information  database of over 275 turf pesticides.  Lightning Indicator Maps are
updated hourly including the latest  information on where lightning is striking.
Evapotranspiration  Tables  provide  regional  evaporation  rates  for  planning
watering and chemical applications. ESPN Sports Ticker provides the current golf
related  stories and results from ESPN. AP ONLINE provides over 300 current news
stories in four  chapters:  General,  Business,  Sports and  Entertainment.  The
National  Golf Course  Directory is a database of the  location,  phone  number,
course pro, and course  superintendent of any member course. This combination of
features  along with the weather  information  makes the Turf Manager a complete
package.
        DTN  Weather  Center - Turf  Manager  is  available  via  color  Ku-band
satellite transmission and is currently priced at $72 a month.

DTN AVIATION CENTER

SERVICE REVIEW
        DTN  Aviation  Center  is  a  comprehensive   aviation  weather  package
specially designed for pilots,  airports and Fixed Base Operators  (FBO's).  DTN
Aviation  Center  supplies  airports,  pilots and FBO's  with the  comprehensive
flight-plan  information found on many premier "on-line"  systems.  This package
includes U.S. and regional depiction maps, 24 hour low level significant weather
prognosis,  and U.S.  region winds and  temperatures  aloft.  Subscribers of DTN
Aviation  Center use it while speaking to flight  services to help visualize the
current weather conditions while they are making their flight plan. This service
can also help determine alternate route destinations.
         Subscribers  can choose the Level I service,  which is designed for the
local/regional  flyers  up to 18,000  feet,  or the  Level II  service  which is
designed for pilots and airports flying  nationally up to 45,000 feet. The Level
II service also provides  European  flight  information.
        DTN  Aviation   Center  is  available   via  color   Ku-band   satellite
transmission  and is currently  priced at $103/month  for Level I and $152/month
for Level II.

                                                                 11

                                    - 246 -
<PAGE>

DTN WEATHER CENTER Contractor Dayta

SERVICE REVIEW
         The DTN  Contractor  Dayta  service  is  designed  to keep  subscribers
informed of all  construction  related news and industry  information  to assist
them in maintaining a competitive  advantage.  This service  provides all of the
valuable  weather  information  that  comes with the DTN  Weather  Center and is
necessary for making those important  day-to-day  business  decisions.
        Industry specific information includes general information,  association
and  industry  information,  construction  news,  bids  and  resources  and  the
contractors  exchange.  In  addition,  subscribers  receive  sports  scores  and
highlights and financial indicators.
        The  DTN  Contractor  Dayta  service  in  available  via  color  Ku-band
satellite transmission and is currently priced at $82 a month.
1996 WEATHER CENTER SERVICES HIGHLIGHTS
        DTN Weather Center services  exceeded company sales goals for the second
straight year and now has over 8,000  subscribers.  The industries  leading with
the  highest  concentration  of sales  continue  to be golf  courses,  aviation,
governmental   agencies   (emergency   management   and   state   transportation
departments) and construction-related businesses.
        The growth of DTN Weather  Center in 1996 has again led to the  decision
to expand the sales and  marketing  staff for 1997 and will include the addition
of sales directors for the aviation and government  markets.  The success of the
governmental agencies included sixteen state Departments of Transportation (DOT)
adding DTN Weather Center  systems to their  maintenance  garages  following the
lead of the Iowa DOT which added over 100 systems in 1995. DTN Weather Center is
quickly becoming the industry standard for weather information provided to state
DOTs.
        DTN Weather  Center made  significant  progress in the golf industry and
added two of the industry's leading organizations as information  providers; the
United States Golf Association and the Golf Course  Superintendents  Association
of America.  DTN Weather  Center also branched out to other sports  providing on
site weather information at 11 NCAA championship events and the 1996 Summer
Olympic Games in Atlanta.
--------------------------------------------------------------------------------
DTN FINANCIAL SERVICES
--------------------------------------------------------------------------------
        DTN  Financial  Services  offers five  services,  DTN Wall  Street,  DTN
SPECTRUM,  DTN  FirstRate,  DTN GovRate and DTN Broker+.  Subscribers to all DTN
Financial  Services  have a variety of  optional  services  from which to choose
providing stock  selection and timing advice,  earnings  estimates,  fundamental
stock market data,  U.S.  Treasury  quotes and other  financial  market  related
services.

GRAPH IN TABULAR FORM:

                                   1992      1993      1994      1995      1996
DTN Financial Services Revenue
        ($ millions)                3.3        4.1      5.1       6.1       8.6

        DTN  Financial  Services  revenue  grew 41% during  1996,  adding to its
bullish  35%  compounded  revenue  growth  for the past 5 years.  DTN  Financial
Services'  objective  is to  provide  a  comprehensive  in-depth  service  at an
affordable  cost to its  subscribers.  This objective will remain very important
due to the highly competitive nature of this business. The "a la carte" optional
services offered to subscribers give them an even larger variety of information.
Contents of all DTN  Financial  Services are broader in scope and cost less than
competitive   services.   This  combination  allows  the  services  to  continue
maintaining a competitive advantage in its market niches.

DTN SPECTRUM

SERVICE REVIEW
        DTN SPECTRUM was released in November,  1995, and is an enhanced version
of DTN Wall Street  utilizing  the ACE  technology.  The service  provides  many
additional  features and functions  that appeal to a wider market.  This service
provides advanced quote selection and custom programming along with alarms, news
search and charting capabilities.
        DTN SPECTRUM is being very well received by new subscribers and existing
subscribers who are electing to "switch-up" to gain use of the advanced features
of the  service.  DTN  SPECTRUM  subscription  sales  accounted  for  54% of DTN
Financial Services new subscription sales during 1996.
        An  extension  of DTN  SPECTRUM is the DTN  SPECTRUM  R-T  service.  DTN
SPECTRUM  R-T  marked the entry by DTN  Financial  Services  into the  real-time
commodity   quotes  market  during  1996.   This  service   provides  a  mix  of
exchange-delayed  quotes along with the subscriber's choice of real-time futures
quotes.  By year-end  1996,  this higher  revenue and higher margin  service was
generating 21% of the total DTN SPECTRUM subscription sales.
        DTN SPECTRUM and DTN SPECTRUM R-T are available on the color platform by
Ku-band  satellite  transmission  and are  currently  priced at $68 and $118 per
month, respectively.

          12

                                    - 247 -
<PAGE>
DTN Wall Street

SERVICE REVIEW
        DTN Wall  Street  provides  exchange-delayed  quotes on  stocks,  bonds,
mutual and money market funds, futures, interest rates, currencies and real-time
index  quotes.  This service also  provides  in-depth  economic,  financial  and
business news and other  time-sensitive  (NEWS...  NOT HISTORY) financial market
information  such as  company-specific  news and earnings.  This service  allows
subscribers to custom  program the system to track their  selection of financial
quotes.
         The  majority  of   subscribers  to  DTN  Wall  Street  are  individual
investors,  and the balance of subscribers  are independent  brokers,  financial
advisors and financial institutions. The primary competition for DTN Wall Street
are satellite,  TV cable (VBI),  Internet and dial-up quote  services.
        DTN Wall  Street is  available  on the  monochrome  platform  by Ku-band
satellite  and TV cable (VBI)  transmission  and is currently  priced at $44 per
month.

DTN FirstRate

SERVICE REVIEW
        DTN FirstRate is a service for the mortgage industry providing wholesale
mortgage  rates in an  easy-to-use  standard  format and intra day interest rate
information to indicate the direction of mortgage loan rates.  This service also
provides  subscribers  with  snapshots  of  real-time  rates from Fannie Mae and
Freddie Mac plus other news, commentary and analysis for mortgage lenders.
        Sales for DTN FirstRate  during 1996 remained slow. In October 1996, DTN
FirstRate+  was made  available on the ACE  platform.  This  service,  named DTN
FirstRate+,  provides  many  more  useful  features  which  are  proving  to  be
appreciated  by new  subscribers.  Marketing  for DTN FirstRate is now all being
done by DTN Financial  Services' institutional  sales group which assists direct
sales of this service by DTN's national sales force. We believe the availability
of DTN FirstRate+ on the ACE platform and a more focused  marketing  effort will
lead to higher sales in 1997.
        DTN  FirstRate  is  available  on the  monochrome  platform  by  Ku-band
satellite  or TV cable (VBI)  transmission  and is  currently  priced at $98 per
month.  DTN  FirstRate+  is currently  available on the ACE platform via Ku-band
satellite transmission for $129 per month.

DTN GovRAte

SERVICE REVIEW
        DTN GovRate provides executable U.S.  government security quotes.  These
real-time  prices  are  provided  from a primary  dealer,  the  former  Discount
Corporation  of New York  (DCNY),  now  operated  as a division  of Zions  First
National  Bank. The Company views this service as an important  development  for
financial  institutions.  DTN GovRate is  providing  opportunities  for small to
mid-size banks, public and corporate treasurers, and independent brokerage firms
to participate in trading of U.S.  government  securities.  Zions First National
Bank facilitates this by offering odd lot trading and repurchase agreements.
        This  service is  currently  available  on the  monochrome  platform  by
Ku-band  satellite  or TV cable (VBI)  transmission  for $34.95 per month and is
also currently  available on the ACE platform by Ku-band satellite  transmission
for $68 per month.

DTN Broker+

SERVICE REVIEW
        DTN  Broker+ is a modified  version of DTN  SPECTRUM  with  enhancements
designed  specifically  to serve  independent  securities  brokers and financial
advisors.  Marketing  for DTN  Broker+  is all  done by DTN  Financial  Services
institutional  sales group which  assists direct  sales of this service by DTN's
national sales force.
        DTN  Broker+  provides  a  comprehensive   source  of  market  data  and
time-sensitive,  market moving news. It is a low cost alternative source of news
and delayed market quotes in its targeted market niche.
        DTN  Broker+ is  available  on the ACE  platform  by  Ku-band  satellite
transmission  and is  currently  priced at $73 per month.  An  extension  of DTN
Broker+,  which provides real-time futures quotes, is currently offered for $123
per month on the ACE platform by Ku satellite transmission.

1996 FINANCIAL SERVICES HIGHLIGHTS
         The enhanced version of DTN Wall Street  utilizing ACE technology,  DTN
SPECTRUM,  was well received  during 1996,  the first full year of marketing and
delivering this service.  A majority of the 41% revenue growth for DTN Financial
Services  during 1996 is attributable  to DTN SPECTRUM.  DTN Financial  Services
reorganized its sales and marketing  operations into two groups during 1996. One
group is responsible  for sales to individual  investors and the second group is
responsible  for sales to  institutional  subscribers.  The  investor  sales and
marketing  efforts  continue to be  directed  from our Omaha  headquarters.  The
institutional  sales  and  marketing  efforts  are being  directed  from the DTN
Financial Services office in Salt Lake City.
        The DTN Financial Services' investor sales and marketing group continues
to do direct response  marketing  utilizing mostly  television,  print media and
direct mail  supported by inbound  telemarketing.  The  institutional  sales and
marketing group  utilizes DTN's national sales force to make direct sales to its
institutional  subscribers  such as  banks,  public  and  corporate  treasurers,
independent brokers and financial planners.
        A mid-year  development that has enhanced the DTN Financial  Services is
the development and release of a software program, DTN Chameleon,  which enables
subscribers  to  automatically  download from the DTN receiver into their PC and
thereby  customize the use of the quotes and news to their personal  needs.  DTN
Chameleon  also  provides  a  universal  and  seamless  interface  to most other
proprietary   software

                                                                 13

                                    - 248 -
<PAGE>
programs  used for  technical  analysis and  portfolio  management.  This almost
universal compatibility makes DTN Financial Services an appealing, comprehensive
and low cost  source of market  data for  thousands  of users of these  software
programs.
--------------------------------------------------------------------------------
DTN ENERGY SERVICES
--------------------------------------------------------------------------------
The energy related services  include DTNergy for the refined fuels,  natural gas
industries and electric industries.

DTNERGY


                                   1992      1993      1994      1995      1996
DTN Energy Services Revenue
        ($ millions)                2.9       4.9       7.2      10.0      12.2

SERVICE REVIEW
        DTNergy is a service  providing  pricing  information and  communication
services for the petroleum  industry.  This service consists of several pages of
delayed  energy  futures and options  quotes plus  selected  news and  financial
information.  DTNergy is  designed  to connect  refiners  (producers  of refined
fuels) to wholesalers (distributors of refined fuels). The refiner sends refined
fuel prices to wholesalers they have authorized to receive this information. The
refiner  also has the  capability  to send  terminal  alerts,  electronic  funds
transfer  notifications,  invoices,  and other communications to the wholesaler.
DTNergy  subscribers can select from a variety of optional services to give them
even more prices or news related to the petroleum industry.
        The  strength of the DTNergy  service is the ability to deliver,  within
seconds,  accurate refiner terminal prices and other vital communications to the
wholesalers.  This service is more reliable,  timely and less expensive than the
competition,  which utilize  telephone  delivered  printer-only  systems and FAX
services.
        DTNergy generates  revenue from two primary sources,  the wholesaler and
the refiner.  Wholesalers currently pay a monthly subscription fee of $38.00 for
the monochrome Ku-band satellite service.  Refiners pay fees based on the number
and length of communications sent to wholesalers.
        DTNergy also has an information service for the natural gas and electric
industries.  Subscribers  receive  instant or delayed  NYMEX energy  futures and
options quotes, a comprehensive  weather package and industry  specific news and
market information. This service is marketed to energy producers and generators,
transporters,  marketers,  utilities and larger energy consumers. The service is
available on color  Ku-band  satellite  and is currently  priced at $130 a month
with 30-minute delayed quotes and $170 a month with real-time quotes.

1996 DTN ENERGY SERVICES HIGHLIGHTS
        The DTN Energy  Services had another very good year in 1996,  with total
revenue  growth of more than 22%  between  the two  product  groups that make up
DTNergy.  The market information and messaging services provided to refiners and
their  distributors  continues  to be the first  choice of the  industry for the
distribution of terminal  prices,  funds transfer  notifications  and electronic
invoices.  The DTNergy system now carries more than two million messages a month
for this  industry.  Total revenue  growth for the Refined Fuels service was 19%
for the year.  Although the subscriber  base receiving  market  information  via
DTN's satellite  receiver  system is nearing  maturity,  growth  potential still
exists  in  niche  areas  such  as  refiner  communications  to  commercial  and
industrial customers and fax communications to smaller fuel distributors.
        The  deregulation of the natural gas and electric markets along with the
growth of trading in these  commodities  will  continue to increase the need and
value of market quotes and information to these  industries and their customers.
DTN's  strategy  is to become a key player in these  industries  and the Company
began  providing  market quotes and weather  information  to customers via their
local area networks (LAN's) in 1996. The future services and market  positioning
are being  addressed  related  to  providing  Internet  services  and  strategic
industry  alliances  which could have a positive impact on the future of the DTN
Energy Services.
--------------------------------------------------------------------------------
DTN Auto Services
--------------------------------------------------------------------------------
SERVICE REVIEW


GRAPH IN TABULAR FORM:

                                         1994          1995           1996
                                         ----          ----           ----
DTN Auto Services Revenue
      ($ Millions)                        0.0           0.7            1.4

          14

                                    - 249 -
<PAGE>
DTNauto

        DTNauto is a communication  and  information  service for the automobile
industry.  This service offers automobile dealers precision information to value
trade-ins and locate used car  inventory  plus a host of other  information  and
convenient features.  Automobile auction companies and manufacturers are able to
communicate directly with the dealers.
        DTNauto provides information on pre-auction automobile listings, results
of past auctions,  new and used car industry  news,  weather and other news. The
service allows subscribers to perform searches of the auction listings, upcoming
and past, for specific automobile information.
        The service offers a variety of optional services providing  information
on credit reporting (CREDCO),  vehicle histories (CARFAX),  warranty information
(The Warranty Guide) and residual value of leased  vehicles  (Lease Guide).  The
CARFAX and CREDCO optional  services  extensively  utilize the internal modem to
send  and  receive  information.  These  services  create  a more  comprehensive
information service that puts the subscriber in the drivers seat.
        This service is being  marketed by the DTNauto sales force to automobile
dealers  across the United  States.  This service is available by color  Ku-band
satellite transmission and is currently priced at $98 per month.

1996 DTNAUTO HIGHLIGHTS
        The driving force that fuels the DTNauto service remains the pre-auction
listings  of used  cars  at more  than  125  auctions  across  the  country  and
AuctionNet,  a wholesale pricing service.  DTNauto  established  remarketing and
communication  networks giving the manufacturers the ability to communicate with
the dealers. These included Lexus, Mazda,  Chrysler,  American Honda, Subaru and
Kia. A remarketing  segment was also  established  for the following  rental car
companies: Avis, Dollar, Enterprise and Thrifty.
--------------------------------------------------------------------------------
JOINT VENTURE SERVICES
--------------------------------------------------------------------------------

GRAPH IN TABULAR FORM:
                                         1994          1995           1996
                                         ----          ----           ----
DTN Joint Ventures Services Revenue
           ($ Millions)                   0.0           0.7            1.4

        DTN has joined  forces with other  companies  to market  their  services
using  the  Company's   technology.   The  services  are  TracElectric  and  DAT
Transportation Terminal.

TRACELECTRIC

SERVICE REVIEW
        TracElectric  is  an  equipment   locator  service  for  the  electrical
equipment industry. This service provides over 100 pages of new, remanufactured,
surplus and used electrical equipment listings.  The service connects buyers and
sellers throughout the U.S. and Canada.  This service is available by monochrome
Ku-band satellite and DTN receives a percentage of the revenue.

DAT Services

SERVICE REVIEW
        The DAT (Dial-A-Truck) Transportation Terminal (DAT) service, located in
Beaverton, OR, is an information communication system for the trucking industry.
The service  provides load and truck matching  performed on a database of 30,000
listings updated daily.
        DAT service allows  subscribers to input their own listings into the ACE
receiver and send this  information  to the database  using the internal  modem.
This service provides the subscriber the ability to perform  extensive  searches
to locate  loads and  trucks  and set  alarms to alert the user that a match has
occurred.  The service also provides  regional  radar maps of major highways and
interstates,  transportation  news,  diesel  fuel  prices  and  other  financial
information related to the trucking industry.
        The target market includes all freight  brokers and carriers  throughout
U.S. and Canada.  This service is available by color  Ku-band  satellite and DTN
receives a monthly fee per receiver.

                                                                 15

                                    - 250 -
<PAGE>
--------------------------------------------------------------------------------
                            SELECTED FINANCIAL DATA
--------------------------------------------------------------------------------

GRAPHS IN TABULAR FORMS:

% of Total Revenues:
                              1996      1995      1994
                              ----      ----      ----
DTN Ag Services                71%       71%       73%
DTN Financial Services          9%       10%       11%
DTN Energy Services            12%       16%       16%
DTN Weather Services            6%        2%        -
Other Services                  2%        1%        -


% of Subscribers At Year End:
                              1996      1995      1994
                              ----      ----      ----
DTN Ag Services                80%       78%       81%
DTN Financial Services          8%       10%       10%
DTN Energy Services             5%        8%        8%
DTN Weather Services            5%        3%        -
Other Services                  2%        1%        1%

<TABLE>
<CAPTION>

                                       1996              1995              1994              1993             1992
------------------------------------------------------------------------------------------------------------------------------------
For the Year:

<S>                                             <C>               <C>               <C>               <C>              <C>
Revenues                                        $  98,383,713     $  62,287,989     $  46,109,789     $  35,992,754    $  26,816,254
Operating income                                    6,920,791         4,343,252           694,560         2,408,868        2,995,319
Income (loss) before income taxes                  (1,404,306)         (397,076)       (2,422,738)        1,020,831        2,051,352
Net income (loss)                                    (985,306)         (283,076)       (1,602,738)          663,831        1,351,352

Net income (loss) per share                              (.09)             (.03)             (.16)              .07              .14
Dividends per share                                      --                   -                 -                 -                -
------------------------------------------------------------------------------------------------------------------------------------
At Year End:

Total assets                                    $ 177,729,762     $  92,672,050     $  71,459,356     $  57,242,313    $  38,260,351
Long-term debt and
 subordinated notes                                97,747,823        47,020,527        33,982,814        25,375,000       13,677,083
Stockholders equity                                28,290,289        12,876,965        12,706,978        12,780,477       12,167,584
</TABLE>

          16


                                    - 251 -

<PAGE>
--------------------------------------------------------------------------------
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
--------------------------------------------------------------------------------
FINANCIAL CONDITION

GENERAL OVERVIEW

        The equipment used by subscribers is a large capital  investment for the
Company.  This  equipment  accounts for 65% of the Company's  total assets.  The
Company has also made  significant  investments  during 1995 and 1996 to acquire
subscribers.  The net intangible asset (goodwill) resulting from the acquisition
of  subscribers  is  21% of the  Company's  total  assets.  The  acquisition  of
subscribers  is expected  to enhance the  operating  performance  and  financial
condition of the Company.  The investments in subscriber  equipment will require
the Company to  increase  long-term  debt until cash  generated  from  operating
activities is sufficient to support future  investments.  The Company's strategy
is to utilize  long-term  debt  financing  versus  equity  whenever  possible to
prevent the dilution of shareholders value.

NET CASH PROVIDED BY OPERATING ACTIVITIES

        Net cash  provided  by  operating  activities  in 1996  was  $33,777,467
compared to $16,623,310 in 1995.  This increase of $17,154,157 was primarily the
result of the  $17,223,026  increase in operating  cash flow plus  $3,438,972 of
additional cash generated from the change in assets and  liabilities,  including
taxes,  offset by the  $3,634,158  increase in interest  expense  related to the
Company's investing activities.

NET CASH USED BY INVESTING ACTIVITIES

        Net cash used by investing activities in 1996 was $106,290,603  compared
to  $29,427,948  in 1995.  This  increase is  primarily  due to the  purchase of
equipment  used by  subscribers  and the  purchase of  Broadcast  Partners.  The
expenditures  on equipment used by subscribers are primarily for color receivers
and related equipment.

        The  investment  in color  receivers  and related  equipment is a direct
result of the growth in the Company's subscriber  base and  equipment  needed to
support trial and complimentary subscriptions related to marketing. In addition,
approximately  3,500 monochrome  system (FM and Ku) subscribers  upgraded to the
color Ku-band  system with over 60% of these  conversions  involving DTN AgDaily
subscribers and the remaining 40% were DTN Wall Street subscribers converting to
DTN SPECTRUM. The conversion of approximately 2,200 subscribers from DTN AgDaily
on the color Ku-band system to other more advanced  Ku-band services such as DTN
Pro Series,  DTNstant/Knight Ridder, DTNiron, DTN PROduce and DTN Weather Center
resulted in upgraded  equipment.  The  acquisition  of Knight  Ridder  customers
resulted  in  approximately  1,400  systems  being  installed  during  1996  for
customers added in 1995.

        DTN increased its inventory of color  receivers and  components to build
color receivers during 1996. At December 31, 1996 the Company had  approximately
$10,000,000  of  inventory  compared  to  $5,000,000  in 1995.  This build up of
inventory  occurred  due to advance  commitments  on  inventory  purchases.  The
Company adjusted production  schedules during the fourth quarter and will reduce
this  inventory to a level adequate to supply  forecasted  sales  activity.  The
reduced production of color systems should reduce borrowing  requirements in the
first quarter of 1997.

        The Company had approximately  39,000  monochrome  customers at December
31, 1996. The Company  utilizes  monochrome  receiver  equipment  coming in from
conversions for new DTN AgDaily,  DTN Wall Street and DTNergy  subscribers.  DTN
will continue to research new markets for monochrome system services but at this
time the Company's  management  believes the prospects are higher for more color
system based services.

        As it relates to the  Company's  investing  activities,  the Company had
negative  working  capital of  $14,748,094  at December  31,  1996,  compared to
$10,471,938  in  1995.  The  increase  in the  working  capital  deficiency  was
primarily due to the Broadcast  Partners  acquisition  which  contributed to the
growth in accrued expenses of $3,061,044 for acquisition  start-up costs and the
growth in the current  portion of long-term debt of $6,055,625  from  additional
term debt borrowing needed to finance the acquisition.

        The  working  capital  deficiency  created by the  increases  in accrued
expenses  and  current  portion of  long-term  debt was offset by an increase in
accounts  receivable  of  $3,177,190  from  December 31, 1995 to 1996.  Accounts
receivable increased due to the 52% increase in total subscribers and $3,129,400
was a direct result of the Broadcast Partners acquisition.

        On July 26, 1995,  the Company  entered  into an  agreement  with KRF to
acquire  2,900 Knight Ridder  Commodity  News Service  subscribers.  The Company
agreed to pay KRF approximately  $4,970,000 for these subscriber over two years.
The Company agreed to pay $1,500,000 at closing and $1,500,000 one year from the
closing.  The  remaining  $1,970,000  was based on future  revenue  sharing from
company  estimates  and is scheduled to be paid  quarterly  during the first two
years  of  this  agreement.  The  purchase  price  is  being  capitalized  as an
intangible  asset  (goodwill)  and is being  amortized  using the straight  line
method over eight years.

        On May 3, 1996, the Company acquired  substantially all of the assets of
Broadcast  Partners,  an  electronic  information  and  communications  services
company providing similar services as DTN in the agricultural industry for $63.5
million  cash  and  the  assumption  of  certain "non-interest" bearing  current
liabilities  of  approximately   $9.8  million.   The  Company  received  39,000
agricultural  subscribers  in this  acquisition to  bring  the  Company's  total
subscribers to 145,900 at December 31, 1996.

                                                                 17


                                    - 252 -

<PAGE>

        The Broadcast  Partners  acquisition  was financed with a combination of
$15 million of privately  placed  common  stock equity and $48.5  million of six
year term debt (see note 3). Included in the acquisition was approximately $38.2
million of equipment used by  subscribers  and other  equipment,  which is being
capitalized  and  amortized  using the  straight  line  method  over five years.
Approximately  $35.2 million was capitalized as an intangible  asset  (goodwill)
and is being amortized using the straight line method over eight years.

NET CASH PROVIDED BY FINANCING ACTIVITIES

        Net cash provided by financing  activities of $72,441,171 was the result
of an increase in total debt outstanding  (current and long-term) of $56,703,541
and the private  placement of 948,000  shares (split  adjusted,  see note 6) for
$15,010,000.  The increase in debt outstanding  included $48,490,000 of six year
term  borrowings  used to fund the  acquisition  of Broadcast  Partners with the
remaining debt used for subscriber growth,  conversions and subscriber equipment
inventory.  The private  placement of $15,010,000 of equity was used to fund the
balance of the  acquisition  of Broadcast  Partners.  The Company made principal
payments of $9,036,459 on bank term debt during 1996.

        DTN  anticipates  that  internally  generated  cash flow and bank credit
lines will be sufficient to fund operating activities,  capital expenditures and
principal payments on long-term debt.

FACTORS THAT MAY AFFECT FUTURE RESULTS

        The Company believes that  inflationary  trends have a limited effect on
the business. However, since a large percentage of the Company's subscribers and
revenues  are  related to  agricultural  industries,  the  general  state of the
agricultural  economy may impact the Company's business operations and financial
condition.

RESULTS OF OPERATIONS

GRAPH IN TABULAR FORM:

                          1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
Operating Cash Flow
    ($ millions)           9.9      12.9      15.8      23.2      40.4

GENERAL OVERVIEW
        The  financial  dynamics of DTN's  business  operations  are  similar to
businesses that sell monthly  subscriptions such as electronic  publications and
communications and cable TV companies.  The financial dynamics are such that DTN
makes  an  initial   investment  of  variable  marketing  costs  to  obtain  new
subscribers (generally a one year subscription  agreement) and the Company makes
a capital  expenditure to provide the subscriber with the necessary equipment to
receive the Company's services.

        In addition, DTN has a level of fixed costs, such as FM and Ku satellite
leases,  certain news and quote  providers,  and  administrative  expenses,  not
directly affected by the number of subscribers receiving the Company's services.

        DTN's  operating cash flow  (operating  income before  depreciation  and
amortization  expense),  a  key  indicator  monitored  by  DTN  management,  has
increased  at a compounded  growth rate of 42% from 1992 to 1996.  This trend is
primarily  the result of a growing base of  subscribers  covering the  Company's
fixed expenses.  The following graph details the trend in operating cash flow as
a percentage of revenue to illustrate operating leverage.

GRAPH IN TABULAR FORM:

                        1992      1993      1994      1995      1996
                          ----      ----      ----      ----      ----
Operating Cash Flow
(percent of revenue)       37%       36%       34%       37%       41%

        The  Company  has  operating  leverage  due to  low  variable  cost  per
subscriber.  This leverage is present when a growth in  subscribers  and related
revenues has a direct impact on operating cash flow.  This leverage,  as seen in
the 1992 to 1994 periods,  can be negatively  impacted by the Company increasing
the amount committed to research and development activities.

        DTN accumulates research and development  activities as "Net Development
Costs".  The  Company  defines  "Net  Development  Costs" as 1) market  research
activities, 2) hardware and software engineering,  research and development, and
3) the  negative  operating  cash flow  (prior  to  corporate  allocations  plus
interest)  of new  services.  The  Company  includes  new  services  in the "Net
Development  Costs"  classification  until the service shows  positive cash flow
prior to corporate administrative  allocations plus interest for a full quarter.
The service becomes a core ser-

          18

                                    - 253 -
<PAGE>

vice after reaching this level in the development process.

        During  the  1992  through  1994  period,   the  Company  was  expanding
development  activities (see chart on page 3) quite rapidly therefore negatively
impacting operating cash flow on a total and percentage basis.

        During 1995, the success of subscription  sales of the new developmental
services  decreased  net  development  costs.  While the  overall  developmental
expenses increased,  the growth rate of developmental  related expenses declined
in 1995  compared to 1994.  The result,  operating  cash flow as a percentage of
revenue  increased  to 37% in  1995  compared  to 34%  in  1994.  Core  services
operating cash flow as percentage of core services  revenue improved to 44.4% in
1995 compared to 43.8% in 1994.

        Finally, during 1996, DTN expanded it developmental  activities with net
development costs growing from $3.7 million in 1995 to $5.3 million in 1996. The
Company's  increased  efficiencies  on a per subscriber  per month basis and the
acquisition of subscribers from Broadcast Partners contributed to an increase in
operating  cash flow as a percentage of revenue from 37% in 1995 to 41% in 1996.
Operating  cash flow as a percentage of revenue,  excluding the  acquisition  of
Broadcast Partners,  was 37% in 1996. The expansion of developmental  activities
was offset by increased  efficiencies on a per subscriber per month basis.  Core
services  operating cash flow as a percentage of core services  revenue improved
to 47.4% in 1996 compared to 44.4% in 1995. Core services operating cash flow as
percentage of core services  revenue,  excluding  the  acquisition  of Broadcast
Partners, was 44.3% in 1996 compared to 44.4% in 1995.

1996 COMPARED TO 1995

        DTN's management team remained focused on growing subscribers,  revenues
and operating cash flow during 1996. The acquisition of Broadcast Partners and a
focus on improving subscriber  efficiencies led to outstanding operating results
as compared to the prior year.  Operating  income  improved but higher  interest
expense linked to the expansion of the business and the acquisition of Broadcast
Partners resulted in a loss for the year.

<TABLE>
<CAPTION>

(In thousands)                              1996           1995        % Change

<S>                                      <C>            <C>               <C>
Subscribers                                145.9           95.9             52%
Revenues                                 $98,384        $62,288             58%
Operating cash flow                       40,377         23,154             74%
Operating income                           6,921          4,343             59%
Net Loss                                    (958)          (283)          (239%)
</TABLE>

        Total  revenue  increased 58% in 1996 compared to 1995 and all operating
revenue  categories made significant  contributions to this increase.  Operating
revenues consisting of subscriptions,  additional  services,  communications and
advertising  increased to $60.92 per  subscriber  per month in 1996  compared to
$55.70 in 1995.

        A 52% growth in total  subscribers and  subscribers  upgrading to higher
priced services led to a 63% growth in subscription revenue. On May 3, 1996, the
Company  acquired  approximately  39,000  subscribers  from  Broadcast  Partners
receiving agricultural  information and communications  services. The subscriber
growth  for DTN  without  the  acquisition  of  Broadcast  Partners  was  11,000
subscribers,  a growth  of  11.5%,  and  subscription  revenue  related  to this
subscriber  growth was up 34% in 1996  compared with 1995. At December 31, 1996,
88%  of  total   subscribers  were  receiving   service  via  Ku-band  satellite
transmission  compared to 77% in 1995. All acquired  subscribers  were receiving
service  via  Ku-band  satellite  transmission.  Subscription  revenue  on a per
subscriber per month basis increased to $49.24, compared to $43.60 in 1995.

        The price of Ku-band  satellite  delivered  services ranged from $35 for
monochrome DTN AgDaily to $160 for the color  DTNstant  service during 1996. The
price of Ku-band satellite delivered services ranged from $33 for monochrome DTN
AgDaily to $160 for the color  DTNstant  service  during 1995.  The price of the
monochrome  FM  delivered  DTN AgDaily (the only FM service) was $27 in 1996 and
$26 in 1995.

        The subscribers converting to higher priced services includes those that
switched from the monochrome FM or Ku-band  satellite DTN AgDaily service to the
color Ku-band satellite DTN AgDaily, priced at $50 in 1996 ($46 prior to June 1,
1996) and $46 in 1995.  Subscribers  continued to convert from the color Ku-band
satellite  DTN AgDaily  service to the color  Ku-band  satellite  DTN Pro Series
which  ranged in price from $63 ($59 prior to June  1,1996),  for one Pro Series
service,  to $79 ($74 prior to June  1,1996),  for all four Pro Series  services
(DTN Premier), in both 1996 and 1995. The DTN Premier and Stock Pro, DTN Premier
Plus,  was  priced at $82 a month in 1996 ($78  prior to June 1, 1996) and $78 a
month in 1995.

        The Company  increased the number of information  services through "a la
carte"  optional  services  (180 in 1996  versus  100 in  1995).  The  growth in
services  combined with the growth of total  subscribers  and the acquisition of
Broadcast  Partners  resulted in a 48% increase in additional  services revenue.
The additional  services revenue growth,  excluding the acquisition of Broadcast
Partners,  was 30% in 1996. The revenue  increased on a per subscriber per month
basis to $3.80 in 1996 compared to $3.70 in 1995.

        The  growth in  communications  revenue  was  primarily  in the  DTNergy
service.  The DTNergy service  transmits  refiner prices and  communications  to
wholesaler/subscribers.  The number of refiner communications  continued to rise
and produced a revenue growth of 28% over 1995 levels.  The revenue decreased on
a company wide per subscriber per month basis to $5.78, down from $6.49 in 1995.
This decrease is due to spreading  communications  revenue over a larger base of
subscribers,  with the largest increase coming from the acquisition of Broadcast
Partners.

        Advertising   revenue  grew  58%  to  $3,198,300  in  1996  compared  to
$2,022,500 in 1995.  This growth was due to an increase in the acceptance of the
color system as an electronic  medium, the acquisition of Broadcast Partners and
less  discounting  due to the  increased  subscriber  base

                                                                 19
                                    - 254 -
<PAGE>

associated  with the  acquisition.  Advertising  revenue  growth,  excluding the
acquisition  of  Broadcast  Partners,  was  30%  in  1996.  Advertising  revenue
increased on a company wide per  subscriber per month basis to $2.10 in 1996, up
from $1.89 in 1995.

        Service  initiation fees, the Company's up-front one-time charges to new
subscribers  ranged  from  $150 to $495 in 1996  and  from  $150 to $295 in 1995
depending on the service and  information  distribution  technology.  Initiation
fees for  subscribers  that  convert  to  another  service  or  change  delivery
technology  (such as FM to Ku) ranged from $50 to $100  depending on the service
in 1995 and 1996. The total fees  collected  increased 66% in 1996 to $5,560,100
compared to $3,357,300 in 1995. The increase was due to increased sales activity
related to the expansion of the national sales force, reduced discounting in the
agricultural  related  services  and an  increase in  conversions  from DTN Wall
Street  to  DTN  SPECTRUM.   Service  initiation  fee  revenue,   excluding  the
acquisition of Broadcast Partners, was 53% in 1996.

        Total operating  expenses increased 58% in 1996 over 1995. This increase
was due to a 45% increase in selling,  general and  administrative  costs, a 71%
increase  in  sales   commissions  and  a  78%  increase  in  depreciation   and
amortization. These expenses (excluding the sales commission costs) increased on
a per subscriber per month basis to $54.07 in 1996 compared to $49.75 in 1995.

        Selling,  general and  administrative  expenses on a per  subscriber per
month basis  increased to $32.12,  up slightly  from 31.97 in 1995.  These costs
were flat due to  efficiency  gains from  spreading  costs over a larger base of
subscribers  obtained  from an  expanded  sales  force  and  from  acquisitions.
Selling,  general,  and  administrative  expenses  as a  percentage  of  revenue
decreased from 54% in 1995 to 50% in 1996.  Selling,  general and administrative
expenses as a percentage  of revenue,  excluding  the  acquisition  of Broadcast
Partners, decreased to 53%.

        Sales commissions are generated from new subscription sales and revenues
related to the DTNergy  service.  Sales  commissions  increased  71% during 1996
compared to 1995. This increase is due to higher subscription  sales,  incentive
programs to the national sales force and sales  management  related to the rapid
expansion  and  22%  higher  revenues  in  DTNergy.  Sales  commissions  growth,
excluding the acquisition of Broadcast Partners, was 60% in 1996.

        Depreciation and  amortization  expense  primarily  increased due to the
purchase of $37,400,000 of new equipment used by subscribers and the acquisition
of Broadcast Partners. The Company acquired and capitalized  approximately $38.2
million of equipment  and $35.2  million of  intangible  assets  related to the
acquisition. The Company began using a six year life for depreciating subscriber
equipment  in July of 1992  compared  to an eight year life prior to the change.
The  Company is  depreciating  the  equipment  acquired  in the  acquisition  of
Broadcast Partners over a five year life and is amortizing the intangible assets
from this acquisition over an eight year life beginning in May of 1996.

        Operating income increased 59% to $6,920,800, up from $4,343,200 in 1995
as a result of the growth in revenues and expenses  discussed  above.  Operating
cash flow grew 74% to $40,377,400, up from $23,154,400 in 1995.

        Interest expense increased 76% in 1996 compared to 1995. The increase is
related to borrowings to finance new subscriber equipment and the acquisition of
Broadcast  Partners.  The Company increased the revolving credit line borrowings
from  $21,250,000  at December 31, 1995 to $38,500,000 at December 31, 1996. The
Company borrowed $48,490,000 to acquire Broadcast Partners.

        The Company's  federal and state  effective tax rate was 32% and 29% for
1996 and 1995, respectively.

1995 COMPARED TO 1994

        The growth in subscribers, revenues and operating cash flow, three major
indicators used by DTN management to monitor company performance, highlighted an
outstanding  year.  Operating  income improved  dramatically but higher interest
expense led to a net loss for the year.
<TABLE>
<CAPTION>

(In thousands)                             1995            1994         % Change

<S>                                     <C>             <C>                 <C>
Subscribers                                95.9            82.0              17%
Revenues                                $62,288         $46,110              35%
Operating cash flow                      23,154          15,751              47%
Operating income                          4,334             695             524%
Net loss                                   (283)         (1,603)             82%

</TABLE>

        Total  revenue  increased  35% in 1995 compared to 1994 due to growth in
all   operating   revenue   categories.   Operating   revenues   consisting   of
subscriptions,  additional services, communications and advertising increased to
$55.70 per subscriber per month in 1995 compared to $46.74 in 1994.

        A 17% growth in total subscribers combined with subscribers upgrading to
higher  priced  services led to a 36% growth in  subscription  revenue.  In July
1995, the Company acquired  approximately 2,900 subscribers  receiving real-time
futures and option  quotes from Knight Ridder  Financial  Commodity  Center.  At
December 31, 1995, 77% of total  subscribers were receiving  service via Ku-band
satellite  transmission  compared to 72% in 1994.  Subscription revenue on a per
subscriber per month basis increased to $43.60, compared to $36.14 in 1994.

        The price of Ku-band satellite delivered services ranged from $32.99 for
monochrome  DTN AgDaily to $159.99 for the color  DTNstant  service during 1995.
The price of  Ku-band  satellite  delivered  services  ranged  from  $30.99  for
monochrome  DTN AgDaily to $159.99 for the color  DTNstant  service during 1994.
The price of the  monochrome  FM delivered DTN AgDaily (the only FM service) was
$25.99 in 1995 and $23.99 in 1994.

        The subscribers  converting to higher priced services primarily switched
from the  monochrome FM or Ku-band  satellite  DTN AgDaily  service to the color
Ku-band  satellite DTN AgDaily,  priced at $45.99 in 1995 and 1994 ($43.99 prior
to August 15,  1994).  Subscribers  continued

          20

                                    - 255 -
<PAGE>

to convert from the color  Ku-band  satellite  DTN AgDaily  service to the color
Ku-band satellite DTN Pro Series which ranged in price from $58.99,  for one Pro
Series services,  to $73.99, for all four Pro Series services (DTN Premier),  in
1995 and 1994.  The DTN Premier and Stock Pro, DTN Premier  Plus,  was priced at
$78.00 a month in 1995.

        The Company  continued to increase the offering of information  services
through "a la carte"  optional  services  (100 in 1995  versus 80 in 1994).  The
growth in services combined with the growth of total subscribers  resulted in an
11% growth in  additional  services  revenue to  $3,917,600  in 1995 compared to
$3,526,300 in 1994. The Ag, Wall Street and Energy  services all  contributed to
this growth.  The revenue decreased on a per subscriber per month basis to $3.70
in 1995 compared to $3.76 in 1994.

        The  growth in  communications  revenue  was  primarily  in the  DTNergy
service.  The DTNergy service  transmits  refiner prices and  communications  to
wholesalers/subscribers.  The  number of  refiner  communications  continued  to
increase in 1995.  The revenue  increased on a company wide per  subscriber  per
month basis to $6.49 in 1995, up from $4.99 in 1994.

        Advertising   revenue  grew  16%  to  $2,022,500  in  1995  compared  to
$1,738,800 in 1994. The growth was due to increased  acceptance of the DTN color
receiver system as a medium for advertising  agricultural products and services.
Other contributing  factors were a positive agriculture economy and modest price
increases for advertising on the color system.

        Service  initiation fees, the Company's up-front one-time charges to new
subscribers  ranged from $150 to $295  depending on the service and  information
distribution  technology in 1994 and 1995.  Initiation fees for subscribers that
convert to another service or change delivery  technology (FM to Ku) ranged from
$50 to $100  depending on the service in 1994 and 1995. The total fees collected
increased 51% in 1995 to $3,357,300 compared to $2,227,500 in 1994. The increase
was  primarily  due to an  increase  in new  subscription  sales.  The Company's
discounting of initiation  fees to respond to competition or slower sales in the
ag market during the seasonally slower summer months was consistent with 1994.

        Total operating  expenses increased 28% in 1995 over 1994. This increase
was due to a 27% increase in selling,  general and  administrative  costs, a 46%
increase in sales commissions and a 25% increase in depreciation. These expenses
(excluding the sales  commission  costs) increased on a per subscriber per month
basis to $49.75 in 1995 compared to $44.49 in 1994.

        Selling,  general and  administrative  expenses on a per  subscriber per
month basis  increased  to $31.97,  up from $28.45 in 1994.  This  increase  was
primarily the result of the increase in variable costs to support a 17% increase
in subscribers,  sales force expansion and teleservices  support  (telesales and
customer  service),  internal  administrative  enhancements  and net development
costs  related  to new  service  development.  All of  these  expenditures  were
important for the Company to accomplish the  aggressive  sales growth planned in
1995 and beyond.

        Sales commissions are generated from increased  subscribers and revenues
in the DTNergy service.  Sales commissions increased 46% during 1995 compared to
1994. This increase is due to higher  subscription  sales,  continued  incentive
programs to the sales force and 39% higher  revenues in DTNergy.  DTNergy  sales
commissions are based on a combination of total subscribers and revenues.

        Depreciation and  amortization  expense  primarily  increased due to the
purchase of over  $23,700,000 of new equipment used by subscribers.  The Company
began using a six year life for  depreciation  purposes in July of 1992 compared
to an eight year life prior to the change.

        Operating income increased significantly  due to the Company's growth in
total revenues and a declining growth rate in the operating  expenses  discussed
above. Operating cash flow grew 47% to $23,154,400, up from $15,750,700 in 1994.

        Interest expense increased 52% in 1995 over 1994. The rise was primarily
due to borrowings necessary to finance the purchase of new subscriber equipment,
an increase  in the prime rate  during 1994 and 1995 along with the  addition of
$15,000,000 of 11.25% subordinated debt in July of 1994.

        The Company's  federal and state effective tax rate was 29% for 1995 and
35% for 1994.

                                                                 21

                                    - 256 -
<PAGE>

--------------------------------------------------------------------------------
                                     NOTES
--------------------------------------------------------------------------------
          22

                                    - 257 -
<PAGE>

--------------------------------------------------------------------------------
                              RESPONSIBILITIES
--------------------------------------------------------------------------------
Managements Responsibility for Financial Statements

To Our Stockholders:

        The management of Data Transmission  Network  Corporation is responsible
for the  preparation,  integrity and objectivity of the  accompanying  financial
statements  and related  notes.  To meet these  responsibilities,  we maintain a
system of internal  controls  to provide  reasonable  assurance  that assets are
safeguarded and transactions are properly authorized and recorded.
        The financial statements have been prepared in conformity with generally
accepted accounting  principles and include amounts based upon our estimates and
judgments, as required. The financial statements have been audited by Deloitte &
Touche LLP who have expressed their opinion,  presented  below,  with respect to
the fairness of the  statements.  Their audit included a review of the system of
internal  control  and  tests of  transactions  to the  extent  they  considered
necessary to render their opinion.
        The Audit  Committee  of the Board of  Directors  is composed  solely of
outside  directors.  The Audit Committee meets periodically with our independent
auditors and management to review  accounting,  auditing,  internal  control and
financial reporting matters.





Roger R. Brodersen                                Brian L. Larson
Chairman of the Board                             Vice President
Chief Executive Officer                           Chief Financial Officer
                                                  Secretary and Treasurer
--------------------------------------------------------------------------------
Independent Auditors' Report

Board of Directors and Stockholders
Data Transmission Network Corporation

        We have audited the  accompanying  balance  sheets of Data  Transmission
Network Corporation as of December 31, 1996 and 1995, and the related statements
of operations,  stockholders'  equity and cash flows for each of the three years
in the period ended  December  31,  1996.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.
        We conducted our audits in accordance with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
        In  our  opinion,  such  financial  statements  present  fairly,  in all
material  respects,   the  financial  position  of  Data  Transmission   Network
Corporation  as of December 31, 1996 and 1995, and the results of its operations
and its cash flows for each of the three years in the period ended  December 31,
1996, in conformity with generally accepted accounting principles.





Deloitte & Touche LLP
January 31, 1997
Omaha, Nebraska

                                                                 23

                                    - 258 -
<PAGE>

--------------------------------------------------------------------------------
                              FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

BALANCE SHEETS
------------------------------------------------------------------------------------------------------------------
As of December 31,                                                                        1996               1995
------------------------------------------------------------------------------------------------------------------
ASSETS

Current Assets:
<S>                                                                         <C>                     <C>
        Cash                                                                $          708,053      $     780,018
        Accounts receivable, net of allowance for
                doubtful accounts of $520,000 and $300,000                           9,653,766          6,476,576
        Prepaid expenses                                                               583,985            474,135
        Deferred commission expense                                                  2,807,330          2,076,262
                Total Current Assets                                                13,753,134          9,806,991

Property and Equipment
        Equipment Used By Subscribers                                              203,310,661        130,266,792
        Equipment and Leasehold Improvements                                        19,702,330         13,952,173
                                                                                   223,012,991        144,218,965
        Less: Accumulated Depreciation                                              98,564,288         67,909,419
                Net Property and Equipment                                         124,448,703         76,309,546

Intangible Assets From Acquisitions, net of accumulated
        amortization of $3,871,956 and $258,850                                     36,517,799          4,711,150

Other Assets                                                                         3,010,126          1,844,363

                                                                                   177,729,762      $  92,672,050
------------------------------------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS EQUITY

Current Liabilities:
        Accounts payable                                                         $   7,485,517      $   9,385,812
        Accrued expenses                                                             5,923,628          1,856,659
        Current portion of long-term debt                                           15,092,083          9,036,458
                Total Current Liabilities                                           28,501,228         20,278,929

Long-Term Debt                                                                      83,184,373         32,536,457
Subordinated Long-Term Notes, net of unamortized
        discount of $436,550 and $595,310                                           14,563,450         14,484,070
Equipment Deposits                                                                     515,142            541,720
Unearned Revenue                                                                    22,675,280         11,953,909

Stockholders Equity:
        Common stock, par value $.001, authorized
                20,000,000 shares, issued 11,074,224 and 10,126,224                     11,074              3,375
        Paid-in capital                                                             30,025,990         14,422,689
        Retained earnings (deficit)                                                 (1,404,602)          (497,687)
        Treasury stock, at cost, 45,919 and 180,945 shares                            (342,173)        (1,051,412)
                Total Stockholders Equity                                           28,290,289         12,876,965
                                                                                 $ 177,729,762      $  92,672,050
------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.

          24

                                    - 259 -
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                      1996                  1995                    1994
------------------------------------------------------------------------------------------------------------------------------------
REVENUES:

<S>                                                                      <C>                    <C>                    <C>
        Subscriptions                                                    $ 75,019,826           $ 46,126,332           $ 33,936,160
        Additional services                                                 5,792,799              3,917,631              3,526,295
        Communication services                                              8,812,718              6,864,275              4,680,987
        Advertising                                                         3,198,321              2,022,440              1,738,830
        Service initiation fees                                             5,560,049              3,357,311              2,227,517
                                                                           98,383,713             62,287,989             46,109,789

EXPENSES:

        Selling, general and administrative                                48,944,027             33,827,282             26,715,251
        Sales commissions                                                   9,062,258              5,306,305              3,643,811
        Depreciation and amortization                                      33,456,637             18,811,150             15,056,167
                                                                           91,462,922             57,944,737             45,415,229

OPERATING INCOME                                                            6,920,791              4,343,252                694,560

        Interest expense                                                    8,432,270              4,798,112              3,158,106
        Other income, net                                                     107,173                 57,784                 40,808

LOSS BEFORE INCOME TAXES                                                   (1,404,306)              (397,076)            (2,422,738)

        Income tax benefit                                                   (446,000)              (114,000)              (820,000)

NET LOSS                                                                 $   (958,306)          $   (283,076)          $ (1,602,738)

------------------------------------------------------------------------------------------------------------------------------------
LOSS PER SHARE                                                           $      (0.09)          $      (0.03)          $      (0.16)
------------------------------------------------------------------------------------------------------------------------------------

Weighted Average Number of Shares
        Outstanding                                                        10,657,893              9,908,592              9,760,200
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

                                                                 25

                                    - 260 -
<PAGE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF STOCKHOLDERS EQUITY
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1996, 1995 and 1994
------------------------------------------------------------------------------------------------------------------------------------
                                                                                         Retained                        Total
                                                              Common      Paid-in        Earnings        Treasury     Stockholders
                                                               Stock      Capital        (Deficit)         Stock         Equity
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                     <C>            <C>             <C>             <C>             <C>
Balance, January 1, 1994                                $      3,375   $ 13,525,884    $  1,516,466    $ (2,268,248)   $ 12,780,477

Treasury stock issued on exercise of
        employee stock options and warrants                     --          (12,195)       (134,229)      1,420,663       1,274,239

Tax benefit related to exercise of
        employee stock options and warrants                     --          154,000            --              --           154,000

Purchase of treasury stock                                      --             --              --          (534,000)       (534,000)

Issuance of warrants in connection
        with subordinated debt                                  --          635,000            --              --           635,000

Net loss                                                        --             --        (1,602,738)           --        (1,602,738)

Balance, December 31, 1994                                     3,375     14,302,689        (217,501)     (1,381,585)     12,706,978

Treasury stock issued on exercise of
        employee stock options and warrants                     --             --             2,890         330,173         333,063

Tax benefit related to exercise of
        employee stock options and warrants                     --          120,000            --              --           120,000

Net loss                                                        --             --          (283,076)           --          (283,076)

Balance, December 31, 1995                                     3,375     14,422,689        (497,687)     (1.051,412)     12,876,965

Treasury stock issued on exercise of
        employee stock options and warrants                     --             --            51,391         709,239         760,630

Tax benefit related to exercise of
        employee stock options and warrants                     --          634,000            --              --           634,000

Issuance of common stock                                         316     14,976,052            --              --        14,977,000

Three-for-one stock split                                      7,383         (7,383)           --              --              --

Net loss                                                        --             --          (958,306)           --          (958,306)

Balance, December 31, 1996                              $     11,704   $ 30,025,990    $ (1,404,602)   $   (342,173)   $ 28,290,289
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.

          26

                                    - 261 -
<PAGE>

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------------------
STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31,                                                       1996              1995            1994
------------------------------------------------------------------------------------------------------------------------------------
Cash Flows From Operating Activities:

<S>                                                                      <C>              <C>              <C>
        Net loss                                                         $    (958,306)   $    (283,076)   $  (1,602,738)
        Adjustments to reconcile net loss to
                net cash provided by operating activities:
                Depreciation and amortization                               33,456,637       18,811,150       15,056,167
                Amortization of debt issue costs and discount                  139,694          128,760           64,380
                Deferred income taxes                                         (480,000)        (239,000)        (802,000)
         Change in assets and liabilities:
                Accounts receivable                                            (63,634)      (3,178,803)      (1,003,263)
                Prepaid expenses                                               (21,839)        (284,803)         (58,262)
                Deferred commission expense                                   (310,792)      (1,446,337)         (22,215)
                Deferred debt issuance costs                                  (112,078)            --           (395,000)
                Other assets                                                      --         (1,029,433)            --
                Accounts payable                                            (1,947,116)         604,791        1,183,434
                Accrued expenses                                              (149,687)         739,453          143,249
                Equipment deposits                                             (26,578)            (382)         (37,269)
                Unearned revenue                                             4,251,166        2,800,990        1,849,771

         Net Cash Provided By Operating Activities                          33,777,467       16,623,310       14,376,254

Cash Flows From Investing Activities:

        Capital expenditures:
                Equipment used by subscribers                              (37,424,684)     (23,746,086)     (27,354,107)
                Equipment and leasehold improvements                        (3,120,125)      (3,914,442)      (2,607,100)
        Acquisition of Subscribers                                         (65,745,794)      (1,767,420)            --

         Net Cash Used By Investing Activities                            (106,290,603)     (29,427,948)     (29,961,207)

Cash Flows From Financing Activities:

        Proceeds from term debt agreement                                   48,490,000             --               --
        Principal payments on long-term debt                                (9,036,459)      (8,718,750)     (20,333,334)
        Proceeds from revolving credit agreement                            17,250,000       21,250,000       20,250,000
        Proceeds from subordinated long-term notes                                --               --         15,000,000
        Proceeds from the exercise of stock options and warrants               760,630          333,063        1,274,239
        Proceeds from the issuance of common stock                          14,977,000             --               --
        Purchase of treasury stock                                                --               --           (534,000)

         Net Cash Provided By Financing Activities                          72,441,171       12,864,313       15,656,905


Net Increase (Decrease) in Cash                                                (71,965)          59,675           71,952


Cash at Beginning of Period                                                    780,018          720,343          648,391


Cash at End of Period                                                 $        708,053 $        780,018    $    720,343
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.

                                                                 27

                                    - 262 -
<PAGE>
--------------------------------------------------------------------------------
                         NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
Years Ended December 31, 1996, 1995 and 1994
--------------------------------------------------------------------------------
1.      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Revenue  Recognition - The Company  provides its  subscribers  with equipment to
receive  information  and  communications   service.  DTN  charges  a  recurring
subscription  fee and in most instances a one-time  service  initiation fee. The
subscriptions are contracted for an initial period of one year and are generally
billed  quarterly in advance.  Payments  received in advance for  subscriptions,
additional  services and advertising are deferred and recognized as the services
are  provided  to the  subscribers.  Service  initiation  fees in  excess of the
related marketing and set-up costs,  excluding sales  commissions,  are deferred
and recognized into income over the initial  twelve-month  subscription  period.
These  revenues no longer exceed the costs and  therefore  beginning in 1995 are
not being  deferred.  Communication  services are  generally  billed  monthly in
arrears based on the number and length of the messages delivered to subscribers.

Deferred Commission Expense - Commissions and bonuses which are paid at the time
of   the   initial   subscription   to   sales   representatives,   to   company
representatives,  or to  subscribers  for  successful  customer  referrals,  are
deferred and expensed over the initial twelve-month subscription period.

Equipment  Used By  Subscribers - Equipment  used by  subscribers to receive the
Company's  electronically  transmitted information and communication services is
stated at cost less accumulated  depreciation.  Depreciation is calculated using
the  straight-line  method over a useful life of three to eight years for assets
placed in  service  prior to July 1,  1992,  and  three to six years for  assets
placed in service subsequent to July 1, 1992.

Equipment and Leasehold  Improvements - Equipment and leasehold improvements are
stated at cost less accumulated  depreciation.  Depreciation is calculated using
the  straight-line  method over the estimated useful lives of the assets,  which
range from two to seven years,  or the related  lease,  which range from five to
ten years.

Intangible  Assets - Intangible assets for acquisition of subscribers are stated
at cost less  accumulated  amortization.  These  costs are  amortized  using the
straight-line  method over eight years. The carrying value of intangible  assets
is periodically  assessed by the Company by reviewing the  recoverability of the
assets over the amortization  period based on the projected  undiscounted future
cash flows of the related  business  unit.  Cash flow  projections  are based on
trends of historical performance and managements estimate of future performance,
giving  consideration  to existing  and  anticipated  competition  and  economic
conditions.

Income Taxes  -Income taxes are computed in  accordance  with the  provisions of
Statement of Financial  Accounting  Standard 109,  "Accounting for Income Taxes"
(SFAS 109).  The  objective of the statement is to recognize the amount of taxes
payable  or  refundable  in the  current  year  and to  recognize  deferred  tax
liabilities and assets for the future tax consequences of events that have been
recognized in the financial statements or tax returns.

Earnings (Loss) Per Share - Earnings (loss) per share is calculated on the basis
of the weighted average  outstanding  common shares and, when applicable,  those
outstanding  options and  warrants  that are  dilutive.  For the periods  ending
December 31, 1996 and 1995, the Company's outstanding  options and warrants were
antidilutive  and  therefore not used in  determining  weighted  average  shares
outstanding.  All share and per share data, for all periods presented, have been
adjusted to reflect a  three-for-one  stock split  effectuated on June 28, 1996,
for shares of record on June 14, 1996.

Statement  of Cash Flows - For  purposes of the  statement  of cash  flows,  the
Company  considers all highly liquid  investments  purchased  with a maturity of
three months or less to be cash  equivalents.  During the periods ended December
31, 1996,  1995 and 1994,  the Company  made  interest  payments of  $8,555,000,
$4,386,000 and $3,165,000,  respectively.  Capital  expenditures  for subscriber
equipment  included  in  accounts  payable  at  year  end  totalled  $1,394,000,
$2,191,000 and $1,106,000 at December 31, 1996, 1995 and 1994, respectively. The
Company paid  $1,146,000 of federal income taxes in 1995 relating to recoverable
Alternative  Minimum  Taxes (AMT) for prior  periods  which is included in other
assets.  The  Company  paid no federal  income  taxes  during  1996 or 1994.  At
December 31, 1996 and 1995,  $931,700 and  $3,202,600 of the purchase  price for
acquired  subscribers  is due in future  periods  and is  included  in  accounts
payable.

Research  and  Development  -  Research  and  development  costs are  charged to
earnings as incurred and approximated $2,263,000,  $1,596,000 and $1,493,000 for
the periods ended December 31, 1996, 1995, and 1994.

Stock-Based Compensation - The Company accounts for its stock-based compensation
under the provisions of Accounting  Principles Board Opinion 25,  Accounting for
Stock Issued to Employees (APB 25).

Estimates - The preparation of financial statements in conformity with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period.  Actual results could differ from these estimates.

          28

                                    - 263 -
<PAGE>
Fair  Value of  Financial  Instruments  -  Because  of their  maturities  and/or
interest  rates,   the  Company's  financial   instruments  have  a  fair  value
approximating   their  carrying  value.   These  instruments   include  accounts
receivable, revolving credit and term borrowings,  subordinated debt, commercial
paper, and trade payables.

2.      ACQUISITIONS

KNIGHT-RIDDER
Effective   July  26,  1995,   the  Company   entered  into  an  agreement  with
Knight-Ridder  Financial  (KRF) to acquire 2,900  Knight-Ridder  Commodity  News
Service subscribers.  The Company agreed to pay KRF approximately $4,970,000 for
these  subscribers  over two years.  The  Company  agreed to pay  $1,500,000  at
closing and $1,500,000 one year from the closing.  The remaining  $1,970,000 was
based on future  revenue  sharing from Company  estimates and is scheduled to be
paid quarterly during the first two years of this agreement.  The purchase price
is  being   capitalized  as  an  intangible   asset  and  amortized   using  the
straight-line method over eight years.

BROADCAST PARTNERS
Effective May 3, 1996, the Company closed on an "Asset Acquisition" of Broadcast
Partners,  an information provider primarily in the agricultural  industry.  The
Company acquired  substantially  all the assets of Broadcast  Partners for $63.5
million cash and the assumption of certain current  liabilities of approximately
$9.8 million.  In the  acquisition,  the Company  received  39,000  agricultural
subscribers.  Also included,  was approximately $38.2 million of equipment which
is being  depreciated  using  the  straight-line  method  over  five  years.  In
addition,  an intangible asset of approximately  $35 million was capitalized and
is being  amortized  using  the  straight-line  method  over  eight  years.  The
acquisition  was financed with a combination of $15,010,000 of privately  placed
common stock equity  representing,  948,000 split  adjusted  shares and with six
year term debt of $48,490,000.

The  following  unaudited  pro  forma  information  sets  forth the  results  of
operations  as though the  acquisition  of  Broadcast  Partners  had occurred at
January 1, 1995:
<TABLE>
<CAPTION>
                                                            Pro Forma
                                                            December 31,
                                                     1996                  1995

<S>                                         <C>                   <C>
Revenues                                    $ 106,646,073         $  84,018,887
Net Loss                                    $  (1,303,509)        $  (2,903,648)
Loss Per Share                              $       (0.12)        $       (0.27)
</TABLE>

This  unaudited  pro  forma  information  is  based  on  historical  results  of
operations  as if the  acquisition  took place on January 1, 1995  adjusted  for
acquisition costs,  realized  efficiencies and in the opinion of Management,  is
not  necessarily  indicative of what the results would have been had the Company
operated with the acquisition since the beginning of 1995.

3.      LONG-TERM DEBT AND LOAN AGREEMENTS
<TABLE>
<CAPTION>

                                                               December 31,
                                                          1996              1995
Revolving Credit Agreement
<S>                                                <C>               <C>
        Revolving credit line                      $38,500,000       $21,250,000

        Term notes                                  10,786,456        19,322,915

Term Credit Agreement
        Term notes                                  48,490,000              --

Stock Repurchase Agreement
        Term notes                                     500,000         1,000,000

Total Loan Agreements                               98,276,456        41,572,915
Less current portion                                15,092,083         9,036,458
Total Long-Term Debt                               $83,184,373       $32,536,457

</TABLE>

The Company has a revolving credit agreement,  as amended, with a group of banks
(the  "Revolving  Credit  Agreement").  The Revolving  Credit  Agreement,  which
expires June 28, 1997 unless extended,  provides for a total commitment of up to
$49,500,000 in new borrowings. As of December 31, 1996, $38,500,000 of the total
commitment had been borrowed,  with the remaining  $11,000,000  available to the
Company subject to certain restrictions as discussed below.
Additional  borrowings under the Revolving Credit Agreement are available to the
Company,  as long as at the time of the advance,  no default  exists with any of
the Company loan  agreements or the  subordinated  notes agreement (see Note 4),
and total debt  outstanding  (including  term notes  outstanding  but  excluding
long-term  subordinated debt) does not exceed thirty-six times monthly operating
cash flow (as defined).  As of December 31, 1996 based on current operating cash
flow,  the  Company  would be able to borrow  all of the  $11,000,000  remaining
commitment available.

In addition to the restrictions mentioned above with respect to advances,  total
debt  outstanding   (excluding  long-term   subordinated  debt)  is  limited  to
forty-eight  times  monthly  operating  cash  flow or three and  one-half  times
stockholders equity (defined to include long-term  subordinated debt), whichever
is less.  Additionally,  total debt outstanding (including subordinated debt) is
limited to sixty times monthly operating cash flow. The Company is also required
to maintain total stockholders' equity of at least $23,500,000  through June 28,
1997 and, a ratio of  quarterly  operating  cash flow to  interest  expense  (as
defined) of at least 2.25 to 1. The Company is permitted  to pay cash  dividends
in any one year, which are, in the aggregate, less than 25% of the Company's net
operating profit after taxes in the previous four quarters.

Interest on the outstanding  borrowings  (prior to when the borrowings  might be
converted to term loans, as discussed below) is at a variable rate, depending on
the ratio of the Company's total borrowings (excluding long-term subordi-

                                                                 29


                                    - 264 -
<PAGE>
nated debt) to stockholders equity (including long-term  subordinated debt) (the
"Ratio").  The base rate is the First  National Bank of Omaha's  "National  Base
Rate",  minus 3/4%.  So long as the Ratio is below 2.5 to 1,  interest is at the
base rate.  When the Ratio is between 2.5 to 1 and 2.99 to 1, the interest  rate
is at base rate plus a 1/4% margin. When the Ratio is between 3.00 to 1 and 3.49
to 1, the interest rate is the base rate plus a 3/4% margin.  The Company is not
to  exceed  a Ratio of 3.5 to 1. The base  rate is  adjusted  monthly,  with the
interest  rate margin (as defined  above)  changed  quarterly.  Through June 27,
1996, the variable rate  borrowings  outstanding  were accruing  interest at the
rate of 8.25%.  Effective June 28, 1996 through  December 31, 1996, the variable
rate borrowings outstanding were accruing at the base rate of 7.50%.

The  Company  has  the  option  to  convert  the  outstanding  revolving  credit
borrowings to term loans at any time,  payable in  forty-eight  equal  principal
installments,  plus  interest.  Interest on the  converted  term loans is at the
Company's  option,  a  variable  interest  rate of 1/4%  over the base  rate (as
determined in the preceding paragraph) or, at a fixed rate of 3/4% over the base
rate, or, 2% over the average of the 3 and 5 year U. S. treasury securities,  as
quoted in the prior month "Federal Reserve  Statistical  Release",  whichever is
greater.  As  of  December  31,  1996,   $38,500,000  of  the  total  borrowings
outstanding  had not been  converted  to term loans.  As of December  31,  1996,
$10,786,456 of term loans were outstanding with monthly installments due through
October 1998, with interest rates ranging from 6.75% to 9.25%.

The Company has a Term Credit  Agreement  dated May 3, 1996, as amended,  with a
group of banks providing for an aggregate  principal amount of $48,490,000 to be
repaid in 72 equal principal  installments  beginning January 31, 1997.  Through
July 16, 1996, the  outstanding  principal was accruing  interest at the rate of
8.25%. Effective July 17, 1996 through July 30, 1996, interest on $21,300,000 of
the principal balance was variable,  accruing at the NY Prime rate less one-half
of one percent  (7.75%).  Effective  July 31, 1996  through  December  31, 1996,
interest on $25,400,000 of the principal balance is variable, accruing at the NY
Prime rate less  one-half of one  percent.  Interest on the  remainder is fixed,
accruing at interest  rates ranging from 8.25% to 8.36%.  Interest  payments are
due on the last day of each month beginning May 31, 1996.

The Company  pays a  commitment  fee of 1/4% on the unused  portion of the total
revolving  credit  commitment.   Additionally,  once  the  Ratio  (as  described
previously) reaches 3.00 to 1, the Company will be required to pay a closing fee
of 1/2% on all new  borrowings  made after that point in time.  In the event the
Ratio  exceeds  3.0 to 1, any term note  accruing  interest at less than 7.5% is
included in a "Trigger  Event".  The Company is  obligated to pay the holders of
such term notes a fee of 0.375% of the outstanding balance of the notes upon the
occurrence  of the Trigger  Event and like amounts on the six month  anniversary
and the twelve month anniversary of the Trigger Event.

During 1992, the Company  entered into a loan agreement and borrowed  $2,000,000
solely for the repurchase of the Company's  outstanding common stock (the "Stock
Repurchase  Agreement").  Currently,  this  commitment  is being repaid in equal
quarterly principal payments,  plus interest, due through December,  1997. As of
December 31, 1996, the amounts  borrowed under the Stock  Repurchase  Agreement,
are accruing interest at 7.69% and 8.00%.

Substantially  all of the Company's assets are pledged as  collateral  under the
Company's long-term debt and loan agreements.

The minimum  principal  maturities  of long-term  debt,  excluding the revolving
credit line, are as follows.

<TABLE>
<CAPTION>
Year ending December 31,

<S>                           <C>
1997                          $15,092,100
1998                           12,310,800
1999                            8,128,500
2000                            8,081,700
2001                            8,081,700
2002 and after                  8,081,700
TOTAL                         $59,776,500
</TABLE>

4.      SUBORDINATED LONG-TERM NOTES

On June 30, 1994,  the Company sold to one  investor  $15,000,000  of its 11.25%
subordinated   long-term  notes  in  a  private   placement   transaction   (the
"subordinated  debt"). The subordinated debt is subordinated in right of payment
to all current and future  senior  debt.  Interest on the  subordinated  debt is
scheduled  to be  paid  quarterly,  with  principle  due in  five  equal  annual
installments beginning on June 30, 2000.

The  Company  has the option to prepay the  subordinated  debt on any date after
June 30,  1997 at a premium  beginning  at 7.5% of the  principal  prepaid,  and
decreasing  by 1.5% per year  until June 30,  2002 when no premium is  required.
There are also  provisions for mandatory  prepayment  upon a change in ownership
control (as defined),  at a premium  beginning at 12.0% of the principal prepaid
during the period ended June 30, 1995 and decreasing by 1.5% per year until June
30, 2002 when no premium is required.

The subordinated debt agreement contains a  cross-acceleration  clause,  whereby
the  subordinated  debt will become  immediately  due and payable upon a payment
default on the revolving and term credit  agreements.  Other  subordinated  debt
financial  covenants and  restrictions are generally less restrictive than those
of the other loan agreements.

The Company also issued a warrant to the investor to purchase  75,000  shares of
the Company's $.001 par value common stock at $7.39 per share (as adjusted after
the three-for-one stock split) on or before June 30, 2004. In
          30
                                    - 265 -
<PAGE>

connection  with the  issuance  of the  warrant to purchase  common  stock,  the
Company  recorded a $635,000  credit to additional paid in capital and a related
debt  discount,  which  represents  an estimate of the fair value of the warrant
issued.

5.      INCOME TAXES

Components of the income tax (benefit) provision are as follows:
<TABLE>
<CAPTION>
                           1996            1995            1994
----------------------------------------------------------------
<S>                   <C>             <C>             <C>
Current               $  34,000       $ 125,000       $ (18,000)

Deferred               (480,000)       (239,000)       (802,000)

                      $(446,000)      $(114,000)      $(820,000)
</TABLE>

The income tax  (benefit)  provision  differs  from the  (benefit)  provision at
federal statutory rates for the following reasons:
<TABLE>
<CAPTION>
                                       1996              1995              1994
--------------------------------------------------------------------------------
<S>                               <C>               <C>               <C>
Federal $                          (477,000)        $(139,000)        $(824,000)

State taxes                         (28,000)            1,000           (24,000)

Other                                59,000            24,000            28,000

                                  $(446,000)        $(114,000)        $(820,000)
</TABLE>

The components of deferred tax liability (asset) are as follows:
<TABLE>
<CAPTION>
                                                      1996                 1995
--------------------------------------------------------------------------------
<S>                                            <C>                  <C>
Depreciation                                   $ 6,411,000          $ 4,880,000

Net operating loss
carryforwards                                   (8,301,000)          (5,383,000)

Other                                              282,000                9,000

Net Deferred Asset                             $(1,608,000)         $  (494,000)
</TABLE>

The Company had  approximately  $24,000,000  of unused net operating  loss (NOL)
carryforwards  at December 31, 1996.  The NOL  carryforwards  will expire in the
years 2002 to 2011.  In addition,  the Company is reflecting in the Other Assets
approximately $1,029,000 relating to pending IRS refund claims.

6.      CAPITAL STOCK

The  Company's  articles  of  incorporation  provide  for  the authorization  of
1,000,000  shares of $.50 par value per share  preferred  stock.  The  preferred
stock,  none of which has been issued,  presently  has no voting rights or other
features,  although the articles of  incorporation  contain  provisions to adopt
various features or privileges at the discretion of the Board of Directors.

In September 1992, the Company's Board of Directors authorized the repurchase of
up to 350,000 shares of the Company's  outstanding  common stock.  The purchases
are to be made from time to time in the open market or in arranged  transactions
at such price or prices as company officers may deem advisable.  The Company has
purchased  150,000 shares of outstanding  common stock since September 1992. The
common  stock  repurchased  may be  used to  provide  shares  for the  Company's
existing stock options and warrants outstanding.

As part of the May 3, 1996 acquisition of Broadcast  Partners,  the Company sold
948,000 (split adjusted) shares through a private placement transaction.

During the second  quarter of 1996,  the  Company  effectuated  a  three-for-one
common stock split,  payable  June 28, 1996 to  stockholders  of record June 14,
1996.  The stated par value of each share was not changed from $.001. A total of
$7,383 was reclassified from the Company's additional paid in capital account to
the Company's common stock account.

7.      COMMON STOCK WARRANTS

In conjunction with a private placement offering of Subordinated Long-Term Notes
in 1988, the Company granted  warrants to purchase 80,325 shares of common stock
at a price  of  $10.00  per  share.  These  warrants  were  exercisable  through
September 30, 1994. During 1992, 7,500 of these warrants were exercised.  During
1994, all of the remaining warrants granted were either exercised or expired.

In conjunction with a private placement offering of subordinated Long-Term Notes
in June 1994, the Company granted warrants,  to the single investor, to purchase
75,000  shares of common stock at a price of $7.39 per share (as adjusted  after
the three-for-one stock split).  These warrants are exercisable through June 30,
2004.

8.      BENEFIT PLAN

The Company has a defined contribution plan under provisions of Internal Revenue
Code  Section  401(k).  All  employees  with at least  one year of  service  may
participate in the plan. The Company  matches the employee's  contribution up to
4% of  the  employee's  compensation,  and  may  make  additional  discretionary
contributions.  During 1996,  1995 and 1994, the Company  contributed  $671,000,
$482,000 and $344,000, respectively, to the plan as matching contributions.

9.      STOCK-BASED COMPENSATION

The Company has employee and director stock option plans with  aggregate  limits
of  2,100,000   shares  for  the  employee  plan  and  210,000  shares  for  the
non-employee  director plan. The exercise price of the stock options is equal to
the market value of the Company's common stock on the date of grant. The options
are  exercisable  for a period  of up to ten  years  from the date of grant  and
generally vest equally over a period of three years.

                                                                 31

                                    - 266 -
<PAGE>
The following  table  summarizes the stock options as of December 31, 1996, 1995
and 1994:
<TABLE>
<CAPTION>
<S>                                              <C>             <C>          <C>             <C>          <C>            <C>
Outstanding at beginning of year                 1,276,959       $    5.79      988,185       $   5.57      876,231       $   4.40

Granted                                            538,800       $   15.64      401,250       $   6.23      273,750       $   8.91
Exercised                                         (134,878)      $    5.64      (70,224)      $   4.74     (129,426)      $   4.41
Cancelled                                         (160,071)      $    7.93      (42,252)      $   6.32      (32,370)      $   7.23
Outstanding at end of year                       1,520,810       $    9.04    1,276,959       $   5.79      988,185       $   5.57
Exercisable at end of year                         741,409       $    5.67      629,811       $   5.08      475,152       $   4.50
</TABLE>

The following table summarizes information about stock options outstanding as of
December 31, 1996:

<TABLE>
<CAPTION>

                                 Weighted    Weighted                  Weighted
                                 Averaged     Average                   Average
   Range of            Shares   Remaining    Exercise     Shares       Exercise
Exercise Prices     Outstanding    Life       Price     Exercisable      Price
<S>                <C>          <C>          <C>           <C>         <C>
$ 0.00 - $ 4.67      450,661    5.0 years    $   4.30      423,601     $  4.34
$ 4.75 - $ 8.83      519,899    7.1 years    $   6.64      293,658     $  6.79
$ 9.67 - $14.42       42,220    8.6 years    $   9.81        6,150     $  9.95
$15.50 - $20.83      508,050    9.0 years    $  15.64       18,000     $ 17.33
$ 0.00 - $20.83    1,520,810    7.2 years    $   9.04      741,409     $  5.67
</TABLE>

At December 31, 1996,  shares of the Company's  authorized but
unissued common stock were reserved for issuance as follows:
<TABLE>
<CAPTION>

                                                                         Shares
                                                                         -------
<S>                                                                      <C>
Employee stock option plan                                               312,929
Non-employee director plan                                               114,003
Total                                                                    426,932
</TABLE>

The Company accounts for its stock-based compensation plans under the provisions
of APB 25.  Accordingly,  no compensation cost has been recognized for its fixed
stock option plans.

The  effect  on 1996 and 1995 net  loss  and loss per  share of  accounting  for
stock-based  compensation  based on the fair  value  method at the  grant  dates
consistent  with the method of FASB  Statement 123,  Accounting for  Stock-Based
Compensation,  are shown in the pro forma information  below:
<TABLE>
<CAPTION>

                                                    1996                 1995
--------------------------------------------------------------------------------
<S>                       <C>                  <C>                  <C>
Net Loss                  As reported          $    (958,306)       $  (283,076)
                          Proforma             $  (2,452,206)       $  (675,125)
Loss per share            As reported          $       (0.09)       $     (0.03)
                          Proforma             $       (0.23)       $     (0.07)
Fair Value                                     $        8.22        $      3.21
</TABLE>
The fair value for options granted under the above mentioned plans was estimated
at the date of grant  using  the  Black-Scholes  option-pricing  model  with the
following assumptions:

<TABLE>
<CAPTION>

                                                           1996            1995
--------------------------------------------------------------------------------
<S>                                                        <C>             <C>
Risk-free interest rate                                     5.4%            7.8%
Dividend yield                                              0.0%            0.0%
Expected volatility                                        56.0%           54.0%
Expected life (years)                                      4.75            4.25
</TABLE>

10.     LEASES

The Company leases the right to subsidiary channel  authorizations from FM radio
stations and satellite network  transmission capacity to broadcast the Company's
information  service  to its  subscribers.  These  leases are  accounted  for as
operating  leases and are for  varying  periods of one to ten years and  contain
annual renewal options for periods of up to five years.

The  Company  also has  various  operating  leases for office  space,  warehouse
facilities and equipment.  These leases expire on various dates through 2005 and
generally  provide for renewal  options at the end of the lease.  The Company is
generally obligated to pay the cost of property taxes, insurance,  utilities and
maintenance on the leases.

Future  minimum lease  payments under all  non-cancellable  operating  leases at
December 31, 1996 are as follows:
<TABLE>
<CAPTION>

Year Ending December 31,
<S>                    <C>
   1997                $ 3,438,000
   1998                  3,059,000
   1999                  2,467,000
   2000                  2,236,000
   2001                  1,588,000
   2002 and after        4,379,000

Total future minimum
  lease payments       $17,167,000
</TABLE>

Total  rent  expense on all  operating  leases was  $3,459,000,  $2,712,000  and
$2,369,000 for the years ended December 31, 1996, 1995 and 1994, respectively.

          2


                                    - 267 -


<PAGE>
--------------------------------------------------------------------------------
                           QUARTERLY DATA (UNAUDITED)
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                              Operating        Pre-Tax             Net Income (loss)
                                             Revenues        Cash Flow(1)    Income(loss)       Amount      Per Share    Subscribers
------------------------------------------------------------------------------------------------------------------------------------
Fiscal 1996
<S>                                          <C>             <C>             <C>              <C>             <C>           <C>
        First                                $19,113,017     $ 6,502,483     $  (557,991)     $  (356,991)    $  (.04)       99,600
        Second                                24,194,864       9,592,827        (701,346)        (447,346)       (.03)      142,000
        Third                                 27,141,339      11,759,893        (328,503)        (260,003)       (.02)      144,100
        Fourth                                27,934,493      12,522,225         183,534          106,034         .01       145,900

Year                                         $98,383,713     $40,377,428     $(1,404,306)     $  (958,306)    $  (.09)      145,900

Fiscal 1995
        First                                $13,617,210     $ 4,967,889     $  (426,972)     $  (272,972)    $  (.03)       84,600
        Second                                14,739,450       5,591,904          51,802           32,802       --           86,700
        Third                                 16,168,251       6,173,867         150,556           96,556         .01        92,400
        Fourth                                17,763,078       6,420,742        (172,462)        (139,462)       (.01)       95,900

Year                                         $62,287,989     $23,154,402     $  (397,076)     $  (283,076)    $  (.03)       95,900
------------------------------------------------------------------------------------------------------------------------------------
<FN>

(1) Operating income before depreciation and amortization expense.
(2) Net  income  per  share for each of the four  quarters  may not agree to net
    income per share for the year due to rounding.
</FN>
</TABLE>
--------------------------------------------------------------------------------
                              TRADING INFORMATION
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                        Market Price 1996          Market Price 1995
Quarter Ended         High     Low      Last     High     Low      Last

<S>                   <C>      <C>      <C>      <C>      <C>      <C>
  March 31            16 58    13 58    15 38     8 38     5 12     8 14

  June 30             23 00    15 58    21 38     8 58     7 78     8 12

  September 30        26 12    17 00    21 00    12 14     8 12    11 78

  December 31         23 00    19 34    22 14    16 34    11 18    16 38
--------------------------------------------------------------------------------
</TABLE>
The  Company's  common  stock  trades on the Nasdaq  National Market tier of the
Nasdaq  Stock Market under the symbol:  DTLN.  On December 31, 1996,  there were
approximately 500 stockholders of record, not including beneficial holders whose
shares are held in names other than their own.

                                                                 33

                                    - 268 -
<PAGE>
--------------------------------------------------------------------------------
                              INVESTOR INFORMATION
--------------------------------------------------------------------------------

Corporate Headquarters:
        9110 West Dodge Road, Suite 200
        Omaha, NE 68114
        (402) 390-2328

Independent Auditors:
        Deloitte & Touche LLP

Stock Transfer Agent:
        First National Bank of Omaha
        Attn: Corporate Trust Services
        One First National Center
        Omaha, Nebraska 68102

Annual Stockholders Meeting:
The annual  stockholders  meeting will be held on  Wednesday,  April 23, 1997 at
10:00 A.M., at the Holiday Inn-Old Mill, 655 N. 108th Avenue,  Omaha,  Nebraska.

Form  10-K:  A COPY OF THE  COMPANY'S FORM 10-K FILED  WITH THE  SECURITIES  AND
EXCHANGE COMMISSION IS AVAILABLE WITHOUT CHARGE UPON WRITTEN REQUEST TO:

Secretary
Data Transmission Network Corporation
9110 West Dodge Road, Suite 200
Omaha, Nebraska 68114

Dividends:
The  Company has never paid any  dividends  and has no present  intention  of so
doing.  Payment of cash  dividends in the future,  if any, will be determined by
the Board of Directors in light of the Company's earnings,  financial  condition
and other relevant considerations.

--------------------------------------------------------------------------------
                             DIRECTORS AND OFFICERS
--------------------------------------------------------------------------------

Board of Directors:
-------------------------------
Roger R. Brodersen
Chairman of the Board
Chief Executive Officer
Data Transmission Network Corp.

Robert S. Herman
Senior Vice President
Data Transmission Network Corp.

David K. Karnes
President
Chief Executive Officer
The Fairmont Group Inc.
Of Counsel, Kutak Rock law firm

J. Michael Parks
Former President
Former Chief Operating Officer
First Data Resources, Inc.

Jay E. Ricks
Chairman of the Board
Douglas Communications Corp.

Greg T. Sloma
President
Chief Operating Officer
Data Transmission Network Corp.

Roger W. Wallace
Senior Vice President
Data Transmission Network Corp.


Corporate Officers:
-------------------------------
Roger R. Brodersen
Chairman of the Board
Chief Executive Officer

Greg T. Sloma
President
Chief Operating Officer

Robert S. Herman
Senior Vice President
Research and Technology

Roger W. Wallace
Senior Vice President
Co-President, Ag Services

James J. Marquiss
Senior Vice President
Co-President, Ag Services

Charles R. Wood
Senior Vice President
President, Financial Services

Keith A. Cook
Vice President
President, Auto Services

H. Wade German
Vice President
Business Research

Brian L. Larson
Vice President
Chief Financial Officer
Secretary and Treasurer

Gordon R. Lundy
Vice President
President, Energy Services

Charles E. McQuinn
Vice President
President, West Financial Services

James G. Payne
Vice President
Services Support and Special Projects

          34


                                    - 269 -
<PAGE>

--------------------------------------------------------------------------------
                A LETTER TO OUR SHAREHOLDERS - TECHNOLOGY UPDATE
--------------------------------------------------------------------------------
        Shareholders ask, Is DTN keeping ahead of the "technology  curve"? We at
DTN strive to keep abreast of the fast pace of technological change,  especially
as it relates to the evolution of our marketplace and customer. Media hype leads
one to believe that the world is changing overnight, yet in the marketplace most
changes  occur  incrementally  over time.  DTN is, for the most part, a low-cost
niche-market  information  provider  and so we have the luxury of avoiding  the,
often unproven,  "bleeding edge" technology.  To put things in some perspective,
Interactive  TV was the hype of the  moment  two years  ago,  but has now nearly
dropped off the screen. The landscape is littered with companies that made large
bets too  early in the  game.  At DTN,  we  prefer  making  studied  incremental
changes, allowing us to take advantage of proven, cost-effective technologies.

        Our overriding intent at DTN is to deliver comprehensive,  high-quality,
business-related   information   to  our   subscribers   in  a  manner  that  is
time-sensitive,  convenient,  reliable,  secure,  and economical.  These are the
qualities  most  meaningful  to our  subscriber.  How the  information  travels,
arrives,  and how it is  accessed  is  relevant  only as it  contributes  to the
suitability  and  convenience  of the  content  to the  user.  At  DTN,  we take
advantage of new  alternatives  when and if they become suitable for our use and
for the needs of our subscribers.

        This technology update will concentrate on the Internet and some related
items.

I.      THE INTERNET - AN OVERVIEW AND SOME CAUTIONARY COMMENTS

        Simply described,  the Internet is an international network of computers
and data communications  circuits of varying capacity.  It is somewhat akin to a
telephone,   a  magazine  or  newspaper,   an  on-line  service  (AOL,  Prodigy,
CompuServe,  etc.), the Library of Congress,  and sometimes it is likened to the
talk  around the water  cooler.  The  Internet is both more and less than any of
these. Functionally,  it is owned by no one, controlled by no one, planned by no
one, and maintained by no one (or by everyone, depending on how you look at it).
In many  respects,  it brings to mind the joke that  defines a  helicopter  as a
conglomeration  of 100,000  rapidly moving parts all flying in loose  formation.
What keeps the Internet  working is a common set of standards  and protocols for
data file development,  manipulation, and communications.  This is no small feat
and  represents a good example of your tax dollars at work.  Internet  standards
allow diverse hardware and software platforms to communicate  efficiently across
the street or around the world, be it text, databases, graphics, audio, computer
software, video, data packets, or any combination of the above.

        You will also often hear about another  phenomena  called the World Wide
Web,  often  shortened  to "the Web".  The Web is the sexy part of the  Internet
where the real action in graphics, audio, video, browsers, Java applets, and the
like take place.  The Web has made the Internet a household word and is spurring
most of the growth,  as well as most of the hype.  Although the Internet and the
Web are not one and the same, for purposes of this  discussion  these terms will
sometimes be used interchangeably.

        The  Internet/Web  is almost always  acknowledged  as having changed the
technological  landscape.  It has been  compared to man's  discovery  and use of
fire. At the other  extreme,  it has also been  described as the CB radio of the
1990s  (i.e.,  of huge  use to some,  but to most a  passing  fad).  As with all
technology, merit is found in its application.

        What  many  people  seem to forget is that the  Internet  is,  first and
foremost,  a tool.  By analogy,  a hammer is a useful tool found in nearly every
home.  It  can  be  used   productively  in  building  a  home;   harmlessly  as
entertainment by a child randomly  pounding nails; or dangerously as a weapon of
lethal threat.  The hammer,  much like the tool called the Internet,  is neither
good nor bad in and of itself, but as defined by the use to which it is put. Ill
try not to hammer this  analogy to death,  but there is an old saying that often
seems to apply to the Internet,  When the only tool you have is a hammer,  every
problem  begins to look like a nail.  At DTN,  we  believe  that tools are to be
mastered and then utilized as suits the task.

        It is  interesting  to us at DTN that,  having  talked  to a great  many
people in the information  business,  the following  stands out. The predominant
rationale that most companies use for  positioning  themselves as an information
provider on the  Internet is  fear-fear  of being left behind and missing out on
this seemingly historical change. Getting on the Internet is rarely based on the
positive  opportunity  of  making  an  immediate  or  near-term  return  on ones
investment.

BROAD BRUSH PLUSES ABOUT THE INTERNET:

o       It benefits from being the newest "IN" thing. A significant  part of the
        growth  is based on  children.  I have to have it or my child  will fall
        behind.

o       Low-cost  access.  Approximately $20/month for unlimited access & mostly
        free usage of content (excluding subscription or pay-per-use sites) -for
        now.

o       The magnitude of available  information is huge and growing rapidly. As
        a  means  of  random  access  to  massive   amounts  of  unfiltered  and
        unorganized  data,  it cant be beat.  The  number of  "pages" on the Web
        alone is estimated to exceed  50,000,000  today-but no one really knows,
        or can  know.  For the most  part,  information  is broad  but  shallow,
        targeted for mass appeal. One mostly 35

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        skims the surface, thus the expression, "surfing the WEB".

o       International in  scope.    While  mostly   a   positive,   this  is  a
        double-edged sword. Widely varying business  environments with regard to
        taxes, rules on competitive promotion,  trademarks,  etc., all mean that
        rarely is doing business as simple as it looks.

o       Two-way    point-to-point   communications   allows   direct   business
        transactions.

o       Near-universal accessibility  in  the  U.S.  Approximately  13%  of  the
        population has already tried either the Internet, On-Line, or other type
        of computer-based communications at some time.

o       A rapid adoption curve, faster than that of TVs, VCRs, or CDs.

BROAD BRUSH MINUSES ABOUT THE INTERNET:

       Problem  of  "the  Commons".  Communal  property   will  be  overused  to
destruction.  Paying no incremental cost, no one is particularly concerned about
efficiency,  prioritization  of best use (as  defined by whom),  or the  general
conservation  of  resources.  The  relationship  between  supply  and  demand is
effectively being short-circuited.

       Capacity  (read  timeliness  and  reliability)  is being  strained due to
growth in both subscribers and high-bandwidth  (capacity hog)  applications.  It
has reached the point that a University of Michigan  Internet  monitoring  group
says that" every day at peak periods, the Internet  backbones lose more than 10%
of the data packets they  transmit".  "Brownouts"  are  becoming  common.  Larry
Landweber,  Chairman of the Internet  Society,  opines that these  problems will
probably  worsen before they improve.  Several  dynamics within the world of the
Internet appear to be working  together to ensure that bandwidth  demand exceeds
supply.

       It  has  not  yet  experienced  its  first  significant   failure.   Many
knowledgeable  insiders would  emphasize the word YET. Murphy's Law has not been
repealed.

       Significant   security  and  privacy  issues  remain   regarding   dollar
transactions,  ability  to  control  access  to  data by  subscriptions,  covert
information gathering, and general data integrity.

       For  typical  users,  the  Internet  is  mostly  inconvenient  and  slow.
Navigation is tedious and it takes  significant time to retrieve data. The World
Wide Web is sometimes frustratedly referred to as the World Wide Wait.

       "The  Internet is a ripe medium for fraud"", according to  Pennsylvania's
attorney general's office.  Plagiarism, theft of data content,  copyright abuse,
and outright fraud are fairly common. For instance,  a theme drawing much recent
attention has involved stock or investment-related  information.  You often cant
know who you are dealing with or whose  interests are being served.  Two private
consumer  protection  groups noted  recently  that the Internet is providing new
opportunities for scams.

       The  Internet  has not yet  had to  face  up to its  natural  enemies-the
governmental bureaucracies driven to control such things, the Luddites who don't
want to allow serious change to the status quo, and the tax man who wants to cut
a deep wedge of revenue from it.  Since the Internet  seemed to spring up nearly
overnight,  "opposing  forces" have lagged in their  response to it-but they are
gathering.
THE INTERNET AS IT RELATES TO DTN:

        DTN has  launched  its first  product  on the Net.  It is  available  by
subscription (www.dayta.com). We will soon be following this Ag service with DTN
PROduce,  Weather Center, Aviation Center, Wall Street Spectrum, and others. Our
intent is to gain  experience  in niches that present a viable  opportunity  and
establish a position in the Internet marketplace.

Impact of competition from the Internet on DTN:

o       The Internet allows  competitors easier access to a small,  but growing,
        portion of our customer base.

o       The  availability of  some  free  sources  of information may raise the
        hurdle for attracting the marginal-use subscriber who might be satisfied
        with an incomplete or less convenient package.

o       Possibility of  diminishing  some of the  advantage  that having our own
        delivery system has given us.

BENEFITS TO DTN OF GETTING ON THE INTERNET:

o       Becoming  positioned  to  take  advantage  of additional or alternative
        market opportunities, such as international and corporate markets.

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o       Being a player on the new field in order to gain experiences.

o       Enhancement of DTN's market  positioning. Customers want to be reassured
        that DTN is up-to-date and on the cutting edge. We are often asked, "Are
        you on the Net"? even though these  customers  are rarely  interested in
        getting us via the Net.

o       May  allow  DTN to  capture revenue from the sale of information to the
        more casual user.

        So how is DTN positioned  face-to-face  with the Internet and attendant
would-be  competitors?  Consider  first that potential  competitors  must create
content from scratch, along with a fully functional,  secure, and redundant data
center,  regardless of the distribution  system used. The Internet merely allows
them to avoid investments in such things as satellite delivery.  However,  since
the Internet is point-to-point in nature, it will have at least some incremental
cost per  subscriber  (bandwidth  & hardware  costs...).  The bigger  barrier to
market entry that would-be  competitors  must face is  represented by the market
position  and the  economies  of scale that DTN has already  achieved.  Take our
ag-oriented products, Ag Daily, FarmDayta, and DTNstant, as an example. Our cost
of acquiring and  aggregating  information is already spread out across 145,000+
subscribers.  A start-up  service on the  Internet  faces a  formidable  task to
overcome that advantage.

        Another  piece  of  the  competitive  equation  is  that  DTN  has  both
considerable  brand-name  awareness,  a strong position in existing markets, and
the trust of our subscribers.  This is particularly true of our agricultural and
energy  services.  DTN's ag-related  services combine to represent a significant
share of the producer,  agribusiness, and grain elevator markets in the U.S. The
information   provided  by  DTN  to  its  subscribers  is  the  most  widespread
information  on which the  markets  trade.  Because  of this,  even  when  other
information is available,  the people in the marketplace still need to know what
their competitors are reading on DTN. And since delivery of quality  information
is our only business, our customers have grown to trust that we do not shade the
information  to our own  advantage.  This trust is a valuable  resource  that we
strive to build on every day.

        DTN's energy service, DTNergy, is used nearly  exclusively by virtually
all refined fuel  suppliers  (over 110) in the United  States to send  wholesale
daily fuel prices to virtually all jobbers  (over 15,000) in the United  States.
We further strengthen our market position by using our proprietary technology to
add value by receiving  information from suppliers in a wide variety of formats,
processing  and managing that  information,  and delivering it to each jobber in
the format and by the delivery  method of his choice.  By being a  one-stop-shop
for a wide variety of information  management and delivery needs, we ensure that
we maximize the value of our dominant position in this niche market.

        According  to  our  research,  DTN's stand-alone  systems  are  seen  as
significantly  easier to use,  much faster,  more  convenient,  and more capable
(charting etc.) than  Internet-based  information.  Access to DTN information is
more reliable and, since  information  transfer is continuous,  the user can set
alarms on his selected key  interests to notify him when an event has  occurred.
He has constant  connections to information 24 hours a day, 7 days a week. He is
not dependent on having to continually  re-establish access. Generally speaking,
on the  Internet  access is more  cumbersome,  communications  are  slower,  and
support is poorer, making the Internet a less than optimum  alternative to DTN's
satellite system.

SPECIFIC DTN PRODUCTS AND THE INTERNET:

        FarmDayta, Ag Daily, Pro-Series, & Premier Series via the Internet.

        DTN  launched  (4th Qtr.  1996) a  subscription-based  service  into the
agricultural market (www.dayta.com) based on our FarmDayta content. We currently
have paying  subscribers  active on the FarmDayta site. We see this DTN Internet
site as superior in content to other Internet agriculture information providers;
however, there has been no landslide of interest. This site may well prove to be
a good sales tool for  bringing  customers  to our  satellite-based  system.  By
comparison,  our  satellite  service is superior in content and ease of use. Our
research  suggests  that only 4% of our Ag  customers  have ever had any on-line
experience (AOL, CompuServe,  Prodigy,  Internet, etc.).  Additionally,  much of
rural America incurs long-distance phone charges for Internet Access.

        Of tangential interest, DTN's FarmDayta Web site, only a few months old,
is one of the larger Web sites anywhere based on pages of information  available
on a  regularly-updated  basis.  The vast  majority  of sites  are  filled  with
generally static information such as brochures,  product sheets, annual reports,
and press releases.

DTN PROduce via the Internet

        DTN recently  launched  (1st Qtr 1997) an Internet  product that mirrors
DTN  PROduce.  The  produce  industry  provides  an example  of how an  Internet
delivery  vehicle can be used to expand our market with  virtually zero downside
risk.  In this  industry,  there is little "free" information  available  on the
Internet.  In addition,  U.S. data on the  marketplace  drives much of the world
produce market.  Hence, DTN has the opportunity to open up international markets
as well as corporate  opportunities here in North America. The Internet may also
prove to be a better platform for the smaller  growers with short-term  seasonal
needs for information.

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DTN Weather Center, Aviation, Marine, & Forestry Centers
via the Internet

        DTN recently  launched  (1st Qtr 1997) an Internet  product that mirrors
DTN Weather Center products. We believe that DTN's Weather Center site is one of
the best weather-oriented  sites on the Internet. DTN Weather Center subscribers
are not casual users of weather  information.  For these  high-power  users, the
superior reliability,  convenience,  completeness, image quality, and timeliness
of DTN's satellite-based system are all elevated in importance.

        While  there is,  relatively  speaking,  a  considerable  amount of free
weather data on the Internet,  this information is not very time-sensitive,  nor
is it complete. Because it is graphics intensive, weather information is slow to
download.  Almost by definition,  anyone who is satisfied  with the  information
provided via the  Internet is not a serious  candidate  for DTN's Weather Center
product.  Therefore,  while  meeting some niche  applications,  we feel that the
satellite-based  system will dominate the weather market.

Financial Information Services via the Internet

        DTN Wall Street currently provides several "segments" of news and market
information  on an Internet web site  operated by PAWWS,  a division of Security
APL/Checkfree Corporation.  These segments are provided for monthly subscription
fees.  While this service is  producing  modest  revenues for DTN,  were gaining
useful  experience  which is helping us plan and  develop new  applications  for
delivery of financial services via the Internet on DTN's own Internet site.

        DTN Wall Street and DTN SPECTRUM  retain key advantages in  convenience,
timeliness,  reliability,  customer  service,  and  especially in the ability to
provide a complete equities feed for purposes of charting or technical  analysis
on all instruments.  These are things that the Internet is less able to provide.

Other DTN services via the Internet

        Those  remaining  DTN  services  not  discussed  above are either  being
researched for Internet applications or have been dismissed as not applicable.


QUESTIONS AND ANSWERS

        Volumes have been written about the Internet.  Any search of newspapers,
periodicals,  technical  journals,  and the  like  will  turn up more  analysis,
opinion,  and (in many  cases)  hype than can be  absorbed  in a  lifetime.  The
following  discussion is not exhaustive or complete concerning all facets of the
Internet.  Instead, it provides some broad-brush  observations in a Q & A format
concerning  how this all effects DTN.  Please let us know if you have  questions
that may have gone unanswered herein. Well respond as well as we are able.

Q.Why is the Internet attracting so much attention? Why the hype?

A.First of all,  because the Internet  truly is big; it will be a major force in
our  future  in one form or  another.  This  extremely  useful  tool  has  grown
explosively  (as you might  expect  for  something  that is seen as  essentially
free).   It  touches  all  the   bases-entertainment,   business,   leading-edge
communications,   wild  get-rich-quick   success  stories,   gruesome  roadkill,
buzzwords galore, and the high-adrenaline  excitement due a proper revolution. A
"new  high"  of hype.  Forrester  Research,  one of the  dominant  research  and
analysis companies covering this field of business,  states they have never seen
an industry built on such hype. However,  the overload of hype does not preclude
the  underlying  substance and value.  What is there just may not be as much, as
fast, or as good as you may otherwise be led to believe.

Q.Describe   the  nature  of  information  on  the  Internet  and  some  of  the
ramifications for the future.

A.There is an unknowable volume of information on the Internet, most of which is
interesting or useful to only a few. The term  BROCHURE-WARE  has been coined to
slander the practice of putting up company marketing or P/R material that hardly
ever changes.  The smaller category of information that changes regularly is not
often vetted.  Anybody can put out information,  with any spin, be it legitimate
or  fraudulent.  Information  is very  often  used as a lure to hook  you for an
advertiser.  (This is the chief means of obtaining  revenue over the Internet to
date.) As a lure, it need only be good enough to bring you into the advertiser's
net.  Information,  as a lure,  also tends to be  scattered  about at  different
sites.  It is  unusual  to  find a  one-stop-shop  on  the  Internet.  As  such,
convenience and completeness suffers (especially at the free sites). The content
is often  purposefully  delayed  or  abbreviated  to  protect  its  value to the
provider.  By way of  example,  Reuters  news is provided as part of several WEB
sites.  What the user is not told,  is that  Reuters is not crazy enough to give
away their core franchise value. The wire provided is of "selected" stories from
the full newswire and is often provided on a delayed basis. The good stuff isn't
free!

Q.The number of Internet users is growing rapidly.  Can any  generalizations  be
made about them?

A.There are many projections/guesses about age, gender,  education,  income, and
other assorted  demographics.  However,  the biggest  generalizations  about the
Internet users are that they are young, that their use is sporadic (only 10%-15%
of the approximately 15,000,000 WEB surfers use the medium frequently), and that
the primary use is for  entertain-

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<PAGE>
ment. The hype of Internet numbers should be regarded  cautiously.  Sources that
produce these numbers have great incentive to keep the bandwagon rolling and may
be less than critical.

Q.Who, if anyone, is making money on the Internet?

A.The generally accepted,  if somewhat glib, answer is made in comparison to the
gold rush. While prospectors may have made a strike here and there, the ones who
reliably and consistently made money sold the picks,  shovels, and mules. So far
at least,  this analogy generally applies to those who sell the PCs, network and
database servers, and modems.
        A commonly-heard warning is often made to small companies that are first
getting  involved in the  Internet-"Invariably,  it will cost more than you plan
for". As one wag has said,"The Internet is a marvel of efficiency. It allows you
to make your  mistakes  at an  accelerated  rate and they can be of far  greater
magnitudes".  For some, a quote by Don Logan,  CEO of Time, Inc. is instructive.
He comments that Pathfinder, Time Warner's glitzy Web site,"gives new definition
to the term black hole".

Q.Access  costs (the on-ramp to this  Information  Highway)  have gotten  fairly
cheap. Will Internet access continue to get less expensive?

A.With common  offerings of $20/month for Internet  access (the on-ramp),  costs
have  likely  bottomed  out for  awhile.  Given  hardware  and phone line costs,
margins are now  probably  tight  enough to drive out all but the major  players
(AT&T, Sprint, MCI, etc.) over time. According to one source (Robert Lucky - OEM
Magazine Dec 96),  Bell  Atlantic,  in a  regulatory  filing,  is claiming  that
providing  Internet access to their users costs them $75/month once all customer
service,  marketing, and technology-related costs are fully accounted for. While
this may be an exaggeration, it does support the general conclusion that today's
Internet model may not be economically  sound over the long haul. What is apt to
happen is that prices will remain fairly level, despite higher connection speeds
or other  bells  and  whistles  being  added to  upgrade  the  level of  service
provided.  Providers  appear to be  targeting  market  share rather than profits
notwithstanding  that this is generally a commodity  business with extremely low
consumer  brand  loyalty.  There  are also a  number  of  events,  such as those
relating to tax policy,  that could send  Internet  access  costs  significantly
higher. (For some good amplifying material see "Why the $19.95 Internet Fees May
Not Last" in the December 24, 1996 Wall Street Journal.)

Q.Will  basic usage  (excluding  subscription-based  services)  on the  Internet
remain "free"?

A.This is one of the great  questions  that will likely  drive the future of the
Internet.  A little history is in order.  The Internet,  while now worldwide and
generally  uncontrolled,  was created by the U.S.  Government for the purpose of
building  a  communications  network  that could  survive  and  operate  under a
scenario   of  nuclear   war.   The  vision   certainly   did  not  include  the
commercialization/privatization   that  has  since  developed.   Initially,  the
Internet was  supported  with  government  funds and was built on a  socialistic
model with no cost  associated  with amount of usage or priorities.  Hence,  the
"Tragedy of the Commons" scenario has come to apply.
        The  culture of the  Internet  is that  "information  wants to be free".
Setting fees on the  Internet,  either for specific  information  or for general
"usage"  of  the  resource,   will  generate  shock  waves   impacting   content
availability,  content quality, usage/demand, and service quality. The effect of
setting fees will ripple through every other corner of the communications world.
Implementing  this  change  will be no small  task  even for the  giants  of the
communications  industry.  (Can you name any other  industry that is expected to
thrive and continue to expand geometrically while being given away?)
        Without a pricing  mechanism  to  allocate  resources,  the  Internet is
headed for trouble.  Already,  it is less  dependable and often slower than only
months  ago.  Robert  Metcalfe,  one  of  the  primary  founders  of  networking
technology and founder of 3COM Corp., widely predicts a "catastrophic  collapse,
probably within the next year" of the Internet.  Such an event, should it occur,
may provide the opportunity for changing the model-and the culture.
        In addition,  look at the relative economics.  Free Internet telephones,
free  Internet  Fax  services  and free  Internet  links  are  slowly  replacing
traditional  dedicated  telco  circuits and the revenues that they  here-to-fore
represented.  It seems  unlikely  that the phone  giants will  quietly go out of
business,  nor will the tax receipts  that they  represent to the  government be
quietly   foregone.   One  need   only  look  at  the   acquisition   prices  of
Internet-related businesses such as UUNET and MFS Communications to see that the
companies  providing the backbone,  heart,  and soul of the Internet  system are
placing big bets on a pay-for-usage/priority  model. Otherwise, the prices being
paid for these acquisitions would seem to make little economic sense.
        A  "parallel  Internet"  based on  paying  for  usage  and  priority  of
delivery,  is already  being put into place by some large users.  They have been
effectively chased off the Internet because of speed, reliability,  quality, and
security  considerations  that can't be "fixed" on the current "free" model.  As
this "shadow  Internet" becomes  fine-tuned,  the technical issues of converting
the Internet to a price/usage model may become less daunting.

Q.What  factors  lead you to believe  that  demand for  communications  capacity
(bandwidth) may outpace supply?

A.1) The  newest and  cleverest  uses of the  Internet  are  generally  based on
high-capacity   applications  such  as  audio,   video,  and  complex  graphics.
Meanwhile,  higher-speed  modems and communications  lines  reduce the  "waiting
penalty"  experienced by the user at the current choke

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point-the  access  ramp to the  information  highway.  The result is a geometric
increase on bandwidth  demanded as providers  foster  expectations  of a near-TV
experience.   While   improvement   in  data   compression   schemes  and  other
technological   advancements   may  mitigate  this  exploding  drain  on  system
resources,  it also demands a customer base that will  regularly  "keep up" with
the system by purchasing expensive hardware and software updates.  Access to the
free stuff can often be quite costly!
        2) The current analogy for the Internet is a pipeline to which users are
connected with drinking  straws.  The capacity of the drinking straw itself acts
as a  governor  on each  users  demand  for  bandwidth.  High-speed  modems  and
communications  links (cable,  ADSL,  ISDN,  etc.) boost the drinking straw to a
large diameter fire hose,  connected to the same  pipeline.  Demand is likely to
outstrip supply in the near term.
        3) Relative  to other  communications,  the  providers  of the  backbone
circuits (Sprint, AT&T, MCI, etc.) are not very well paid for providing more and
more Internet backbone capacity.  (Despite the lack of some usage-based  charge,
they are  pressed to  continually  upgrade  their  infrastructure  with no clear
expectation  of a return on their  investment.)  How long will they  continue to
subsidize a venture that is attacking their own cash cow?
        4) Absent a money-making  model that provides for a pay-per-usage on the
Internet, the backbone providers' core business (long-distance telephony) is put
at  considerable  risk.  Internet  telephone  software  and Internet FAX service
compete directly with the more lucrative long-distance business,  while Internet
E-Mail  and  other  information  transfers  of data  compete  indirectly.  These
backbone  providers  are now  established  as  integral  "players"  in the game.
Letting core business erode while providing nearly free services on the Internet
is becoming a losing game, one that they are unlikely to play for very long. The
Information  Highway is destined to have many toll booths,  both  commercial and
governmental.

Q.Industry  experts  casually  suggest that capacity can be easily added to meet
demand. Can it reasonably be done?

A.Telephone  companies are currently in the process of making a complete  change
in their physical plants,  from POTS (Plain Old Telephone  Service)  networks to
digital  networks.  The switched  model  contained an implicit  assumption  that
approximately  1% of potential  users would be on the line at any one time, with
the average call being under 5 minutes.  The digital  model,  which includes the
Internet,  infers a continuous connection.  Taken to the logical next step, this
infers a massive upgrade just to "stay even". Hence, the technological answer to
the  question  is  probably  yes,  but to do this will cost LOTS OF MONEY.  Many
industry  experts  who say that  capacity  can be easily  added  are being  very
generous with other companies' money and future revenue streams.
        In my experience, technology is rarely the problem. If the economics are
in line, the engineers and programmers will solve the technological hurdles. The
economics of the current Internet model are not rational. Therefore, most of the
commentary  and reporting on Internet  issues are barking up the wrong tree. The
hype and glitz of the technology are simply  distractions from  concentrating on
old fashion business modeling, analysis, planning, and execution.

Q.Can the Internet  compare with DTN's  satellite-based  services concerning the
issue of reliability?

A.Somewhat simplified, the Internet is just a series of network connections.  It
consists  of the  user,  the  users'  access  provider,  the  Internet  backbone
provider(s),   the  information  providers'  access  provider,  the  information
provider, and then back again through the chain to the original user. The system
can (and often does) break down at any of the points along this  path-in  either
direction.  Therefore,  in  each  transaction  on the  Internet,  there  are ten
potential  parties  that may be  responsible  for any  given  failure.  The real
problem is not so much that the  electronic  chain of  connections  occasionally
breaks, but rather that no one entity is responsible to the customer for knowing
about or responding to the breakdown in communications. The opportunity for even
the most  responsible  access  provider or  information  provider to support the
subscriber with end-to-end customer service is nil.
        Even when all systems work from end to end, the Internet  often  suffers
time delays. This is inherent to the network for there is no predicting what all
of the other  millions  of users are  going to do at any given  moment.  With no
priorities to Internet  activities,  your critical  information can be backed up
behind  someone  downloading  pornography  off the net.  In the  Internet,  your
priority,  or lack  thereof,  is the same.  Worse yet, peak demand is managed by
general rationing.  Some communications  simply don't get through. News articles
about  last   springs   market   correction   and  the   resultant   overwhelmed
financial-oriented sites provide a cautionary tale to anyone thinking to rely on
the  Internet  when real money is  involved.  The USA TODAY  article  concerning
strained  phone lines in California  provides  another twist to consider  before
depending   on   the   Internet   for   important   information.   DTN's  closed
point-to-multipoint network is managed so that this problem does not exist.

Q.Discuss  security  issues on the Internet.  What are the main issues and their
primary ramifications?

A.Data  Security:  Can I send data without it being  intercepted?  Can I prevent
someone  from  getting  into my system  and  corrupting  my data?  If the proper
precautions are used, the general answer is yes.  Software and related  firewall
procedures  have joined to eliminate  this problem at the levels of  information
security needed by DTN.
        Payment  Security:   Are  subscribers  safe  making  payments  over  the
Internet?  This issue is generally overblown and is mostly a perception problem.
[Note: According to someone who worked on the protocols,  SET (Secure Electronic
Transactions  protocol  developed  by Visa and

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MasterCard)  was  developed  as a marketing  tool to spur the use of credit card
sales over the Internet by relieving  the public's  fears.  SET does not provide
complete end-to-end security.] Keep in mind that providing your credit card over
the Internet is no more  dangerous than handing it to a waiter who then takes it
out of your sight for processing.  In either case, you generally have a limit to
liability of $50. The primary risk lies in to whom you give this information and
what levels of care they give to your private information. From DTN's viewpoint,
this is a non-issue, as we are readily able to take credit card information over
the phone, should a customer desire,  rather than directly via the Internet.  We
already have customer support and  administrative  system safeguards in place to
handle this challenge.
        Subscription   Security:    Historically,   the   greatest   hurdle   to
subscription-based  services on the  Internet  has been the  inability  to limit
access to paying  subscribers.  Most  security  efforts use a LOGIN and PASSWORD
method to  control  access.  This works well for  pay-per-use  or  transactional
services,  but not for subscription  services where such codes can too easily be
shared  around to bypass  payment  requirements.  This is one  reason why so few
subscription-based services currently exist on the Internet.

Q.What are the  predominant  business  models for  actually  making money on the
Internet?

A.There are fundamentally three scenarios:  1)  Advertising-supported  sites. By
volume,  these  sites have  enjoyed  the most  significant  initial  (financial)
success. However, advertisers are growing wary of the relative value of Internet
advertising.  2) Transaction-based models. With few exceptions (porno sites, for
example),  these sites tend to deal in tangible goods. Various catalog companies
or  mail-order  firms  are good  examples.  As  security/payment  questions  are
answered,   this   model   is   likely   to  come   into   greater   acceptance.
Highly-specialized   sites  should  do  better  than  general  merchandise.   3)
Subscription-based  models.  This  model  attempts  to  bridge  the gap  between
pay-per-take   pricing  and  free  information  on  the  Internet.   They  allow
all-you-can-eat  access at a set price. Few have been successful to date, as the
technology to limit services to only paying subscribers has been lacking.

Q. How does DTN plan to make money on the Internet?

A.DTN is primarily targeting the  subscription-based  model. We have developed a
reliable means of ensuring that only a single  subscriber per  subscription  can
access our service.  It ensures that we are properly paid for our services.  The
convenience and  completeness of our information  aggregation,  coupled with our
proprietary  information and trusted name in our primary  industries and our low
marginal costs for providing such services  should allow for some success on the
Internet.

Q.Given that DTN is aimed in that  direction,  is there any major  impediment to
the success of a subscription-based  model?

A. Yes. The basic culture of the net is somewhat  chaotic with  countless  gurus
making  statements such as "Information  wants to be free". This is fine as long
as I am the user and someone else is the provider. (No one says that cars or ice
cream cones want to be free.) There is a significant  cadre who feel that,  once
they get access to the  Internet,  it is somehow  un-American  to be charged for
anything.

Q.Why  doesn't  DTN  follow  the  advertising-supported  model?   What  are  the
weaknesses inherent in them?

A.In  fact,  we  will be  using  aspects  of this  model  as  well.  DTN has had
significant  advertiser  revenue  for some  time now on our  existing  products.
Success with our Web sites should reflect  enhanced  revenue as well. We have an
added  leg  up  on  competing   sites,   because  we  have   already-established
relationships and accounts with advertisers. This is no small advantage.
        Advertising-supported  Internet models are most successful when the site
is inexpensive  and of adequate  quality to bring bodies through the gate.  This
often means the emphasis is on new bodies, since they are more likely to explore
around and run into the advertising. Successful sites are often better known for
their   novelty   or   cleverness   (entertainment   value?)   than  their  true
business-oriented utility. Because advertising can make the site slower and more
complex,  the ease of use to the subscriber and the advertising  value are often
inversely related.
        An  ever-growing  number of sites are dividing up a limited  revenue pie
estimated as being less than $100 million in 1996.  Considering  the size of the
Web and the grandiose predictions, this is not a large pie to be divided. Bigger
estimates  are  often  bandied  about but they  include  the  inferred  value of
advertising  done as a cashless  swap or valued and then  discounted  to free to
lure  in  potential   future  revenue  streams.   As  advertisers   become  more
knowledgeable  about the Internet,  the payment  models are changing and it will
become more  difficult to retain a meaningful  piece of the pie. The  successful
sites will be relatively  few in number and will be the main WEB search  engines
(YAHOO!  et. al.) and the more  successful  entertainment-oriented  sites (ESPN,
etc.).  Serious  information  services do not yet appear to be successful  using
this model.

Q.Death and Taxes are inevitable. When does the taxman come to the Web?

A.Soon. Some states, such as West Virginia, Tennessee, Texas, New York, and Ohio
are already  imposing  taxes on Internet  access  providers.  Most other  taxing
authorities are studying the issue.  Their greatest  difficulty lies in tracking
down the "from whom and by what method".  To actually  collect  funds,  they all
appear to be  looking  at a  transactional  model  like  taxes on  long-distance
services. This model would provide big money and, for the Internet in general,

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this is potentially a major time bomb looking for the spot marked X.
        Since  the  Internet  is  international,  cross-border  taxes  should be
expected.  The UK has already  introduced a VAT tax on Internet Access providers
via "a new interpretation" of the rules. Some use-based tax is thought to be not
far  behind.  If the German and  Chinese  governments  can  successfully  censor
content  that  originates  outside  of  their  borders,  taxing  it  wont be too
difficult. Governments will eventually go after this pot of gold notwithstanding
the political heat of a vocal base of users. This is where the money is.

Q.Is  there any  reason to  believe  that  Internet  pricing  models  are indeed
changing?

A.The  first  rumbles of  recognition  of the  already-mentioned  problems  have
already  occurred.  The faults and defects of the Internet  are slowly  becoming
apparent to the mainstream media as well as to the techno-crowd. USA TODAY's Oct
30, 1996 headline  proclaimed that "Net use strains phone lines".  It went on to
state that,  in one area of  California,  16% of all calls did not connect,  due
mainly to high Internet usage.  This is not just Internet calls,  but ALL calls!
The  article  went on to cite  statistics  about  call  volumes,  call  duration
comparisons,  etc.,  which  clearly  indicate that the problems and risks to the
Internet that I describe are more than theoretical.  Another good article,  "Web
Snarl",  appeared in the April 8, 1996 issue of Forbes magazine.  The picture of
the Internet  being  painted in the media is slowly  becoming  more  balanced in
nature.  That is an  important  first step in laying the  groundwork  for needed
changes to be accepted in the future.  Further evidence of change in the current
model is  starting  to appear.  According  to recent  wire  stories,  the FCC is
considering  allowing phone  companies  (the backbone  providers) to raise their
monthly fees to access  providers from an average of $30/month to  approximately
$600/month. This is approximately what a long-distance carrier would pay for the
equivalent  service.  Pacific Bell found that the access  providers and Internet
users  are  subsidized  to  the  extent  that  they  pay  only  12%  of  what  a
long-distance  carrier  would  have to pay for the same  line.  Bell  Atlantic's
access  customers paid just 4.5% of the  equivalent  long-distance  rates,  even
though  Internet  users made  longer  calls,  tying up more of the phone  system
resources than did voice traffic. When the government supported the Internet and
was  paying for these  lines,  it was in its best  interest  to keep the cost of
these lines low and to not tax them (as they would have been effectively  taxing
themselves).  Now that they do not pay the  freight  AND they can tax the gross,
the push to allow dramatic increases in pricing and to add taxes is obvious.

Q.What happens if/when the Internet has a serious failure?

A.In the  short-term,  a failure  would be painful  because it would  strain the
perceptions of reliability  and credibility  that now exist.  Over the long run,
this would probably result in needed changes.
        As an example, consider Interactive Television (ITV). Two years ago, ITV
was the wave of the future. It was to obsolete every competing technology in its
path.  ITV would fill nearly  every need or want that could be thought of and be
in every room of every home within twelve to eighteen  months.  Licenses for ITV
spectrum  were  sold  for  megabucks!   All  this  took  place  without  working
production-level  equipment or tested and proven business models.  Today, ITV is
still suffering from its collision with reality. Incredible amounts of money are
being  lost in the  shake-out  process  that will  leave ITV as a  humbled,  yet
entirely viable industry.
        Interestingly  enough,  a shake-out of the Internet  (resulting  in some
form of  pay-per-usage  model)  will  probably be  positive  for DTN.  Since DTN
targets the serious subscriber  oriented towards business,  a sifting out of the
chaff should eliminate the distractions that now proliferate. It would also tend
to make the users  experience  more positive from a reliability  standpoint.  By
analogy,  its better to pay  admittance  to Disney World than to have it free to
everybody  but too  crowded to even enter.  Most  serious  business  users would
prefer less chaos on the Internet and more reliability-even at a price.

II.     INTRANETS

        DTN sees  significant  opportunity in the interesting  variations of the
Internet known as Intranets. They are closed systems, normally within a business
organization,  that  use  Internet  standards  and  technology.  While  they are
compatible with Internet providers,  they do not allow contact with the Internet
except  through a barrier  often called a firewall.  This  barrier  protects the
corporate  resources  from being  pirated  from the outside,  while  restricting
outbound  connections to the Internet by internal users. Hence, the organization
can use the same  navigational and display tools, that are cheaply available for
Internet browsing,  for use of internal distribution and control of information.
Common items found on Intranets are those that require wide-spread  distribution
such as  personnel  policies,  general  announcements,  training  material,  and
business-oriented news or information.

        As to the  opportunity  for DTN? DTN is a great source for a broad range
of  business-related  information  across many  marketplaces.  We can bypass the
less-than-reliable parts of the Internet with our satellite systems and feed the
corporate  Intranet  directly.   We  then  use  the  network  resources  of  the
organizations  Intranet as an internal delivery and display system thus avoiding
the need to provide  hardware  for each node on the  network.  This is a natural
next step-a step that we are now taking.

        As an aside,  the  proliferation  of Intranets  will  contribute  to the
degradation  of  performance  problems on the  Internet.  The Internet  model is
based,  in part, on each new site taking  resources from the Internet,  but also
contributing  resources  in  the  form  of  computing  power  or  communications
pathways.

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Intranets,  by virtue of their firewalls,  take resources from the Internet, but
do not  contribute  much  back  to the  common  system.  The  law of  unintended
consequences strikes again.

III. ADSL & CABLE MODEMS

        These are two competing  technologies  that would, if widely  available,
provide  much  faster  access to the  Internet  by the user.  Think of them as a
dramatically  souped up engine  that  turns the  Internet  from a Model A into a
Jaguar.   Both  technologies  are  technically   feasible,   but  require  large
investments by the telephone and cable companies respectively.  They are part of
the competing  strategies  that the respective  industries  have for taking away
each other's  business.  (Telephone  companies want to be your cable  providers.
Cable companies want to be your telephony  providers.)  These  technologies  may
also be slower in reaching  widespread  availability  than first  expected,  due
partly  to the  magnitude  of the  investment  required  by the  cable  or telco
companies  and  to the  financial  squeeze  that  they  are  already  in.  These
technologies  do address a significant  problem-speed  of download and access by
the user. What this will mean for the Internet is a toss-up. Will people pay the
price? (Currently, ADSL modems cost between $1,500 and $2,500 each, with monthly
connection  costs of between $75 and $250 per  month.) If the mass market  won't
pay the price, will the providers build it? Stay tuned...

        On the downside, these technologies will contribute significantly to the
demand  side  of  the  resource  equation,  placing  incredible  strains  on the
infrastructure  of the  Internet.  An earlier  analogy  likened the  Internet to
drinking  straws  connected to a water main.  The faster  modems would shift the
description to fire hoses  connected to the water main.  While it means that any
one hose can get a lot more water,  it also speeds the  eventual  failure of the
system.  (The Internet has not been  exempted from the general rule that,  while
each problem may have its solution,  each solution creates its own problems.) It
is unlikely  that, in any near term,  these  technologies  will be in widespread
usage beyond the early-adapters.

        As an interesting  side note, the cable and ADSL forces are not fighting
just each other. They also are faced with significant infighting, the fratricide
centering  around  conflicting  standards  and  interoperability.  This fight is
expected to go on for the next two to three years.

        To close, I would reiterate that DTN is not a technology company. We are
an information and communications  company that uses technology.  We do not sell
technology-we  sell value to our  subscriber.  This  creates  value for you, our
shareholders.  We are working to maintain and enhance that value for the benefit
of all.

        I hope that discussions such as this are helpful and interesting to you,
our shareholders. I continue to welcome your comments or questions, and will try
to use them to direct the subject matter for my comments in the coming quarterly
shareholder reports. You can reach me by E-Mail at roberth@dtn.com,  by phone at
(402)390-2328, or by FAX at (402)390-7188.

Very truly yours,



Robert S. Herman
Senior Vice President
Research and Technology


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