<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, DC 20549
 
                                   FORM 10-K
 
   [X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
   For the fiscal year ended December 31, 1998
 
                                      or
 
   [_] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
   For the transition Period from        to       .
 
                           COMMISSION FILE NUMBERS:
 
                    Renaissance Media Group LLC--333-56679
               Renaissance Media (Louisiana) LLC*--333-56679-02
               Renaissance Media (Tennessee) LLC*--333-56679-01
             Renaissance Media Capital Corporation*--333-56679-03
          (Exact names of Registrants as specified in their charters)
 
<TABLE>
       <S>                                     <C>
                  Delaware                               14-1803051
                  Delaware                               14-1801165
                  Delaware                               14-1801164
                  Delaware                               14-1803049
       (State or other jurisdiction of         (I.R.S. Employer Identification
        incorporation or organization)                     Numbers)
</TABLE>
 
                        One Cablevision Center--Suite 100
                             Ferndale, New York 12734
                     (Address of principal executive offices)
 
                                  (914) 295-2600
               (Registrant's telephone number including area code)
 
   Securities registered pursuant to Section 12(b) of the Act: None
 
   Securities registered pursuant to section 12(g) of the Act:  None
 
   Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No [_] .
 
   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 or Regulation S-K ((S)229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. X
 
   State the aggregate market value of the voting equity securities held by
non-affiliates of the Registrants:
 
   All of the limited liability company membership interests of Renaissance
Media (Louisiana) LLC and Renaissance Media (Tennessee) LLC are held by
Renaissance Media Group LLC. All of the issued and outstanding shares of
capital stock of Renaissance Media Capital Corporation are held by Renaissance
Media Group LLC. All of the limited liability company membership interests of
Renaissance Media Group LLC are held by affiliates. There is no public trading
market for any of the aforementioned limited liability company membership
interests or shares of capital stock.
 
* Renaissance Media (Louisiana) LLC, Renaissance Media (Tennessee) LLC and
 Renaissance Media Capital Corporation meet the conditions set forth in
 General Instruction I(1)(a) and (b) to the Form 10-K and are therefore filing
 with the reduced disclosure format.
 
<PAGE>
 
                          Renaissance Media Group LLC
                       Renaissance Media (Louisiana) LLC
                       Renaissance Media (Tennessee) LLC
                     Renaissance Media Capital Corporation
 
                          1998 FORM 10-K ANNUAL REPORT
 
                               TABLE OF CONTENTS
 
                                     PART I
 
<TABLE>
<CAPTION>
                                                                           Page
                                                                           ----
 <C>     <S>                                                               <C>
 Item  1 Business.......................................................     1
 Item  2 Properties.....................................................    22
 Item  3 Legal Proceedings..............................................    23
 Item  4 Submission of Matters to a Vote of Security Holders............    23
 
                                    PART II
 
 Item  5 Market for Registrant's Common Equity and Related Stockholder
         Matters........................................................    23
 Item  6 Selected Financial Data........................................    24
 Item  7 Management's Discussion and Analysis of Financial Condition and
         Results of Operations..........................................    27
 Item  8 Financial Statements and Supplementary Data....................    36
 Item  9 Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure...........................................    80
 
                                    PART III
 
 Item 10 Representatives and Executive Officers of the Registrant.......    80
 Item 11 Executive Compensation.........................................    82
 Item 12 Security Ownership of Certain Beneficial Owners and
         Management.....................................................    83
 Item 13 Certain Relationships and Related Transactions.................    84
 
                                    PART IV
 
 Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-
         K..............................................................    85
</TABLE>
 
                                     PART I
<PAGE>
 
Item 1--Business
 
Organization and Ownership Structure
 
   Renaissance Media (Louisiana) LLC ("Renaissance Louisiana") and Renaissance
Media (Tennessee) LLC ("Renaissance Tennessee") were formed by Renaissance
Media Holdings ("Holdings") on January 7, 1998. Renaissance Media Group LLC
("Group", and, collectively, with Renaissance Louisiana, Renaissance
Tennessee, Renaissance Capital (as herein defined) and Renaissance Media (as
herein defined, the "Company") and Renaissance Media Capital Corporation
("Renaissance Capital") were formed by Holdings on March 13, 1998 and March
12, 1998, respectively. On February 13, 1998, Renaissance Louisiana and
Renaissance Tennessee acquired their respective equity interests in
Renaissance Media LLC ("Renaissance Media") from the general partner of the
general partner of each of Morgan Stanley Capital Partners III, L.P.
("MSCPIII"), Morgan Stanley Capital Investors, L.P. ("MSC"), MSCPIII 892
Investors, L.P. ("MSCP Investors" and, collectively, with its affiliates,
MSCPIII, MSCI and their respective affiliates, the "Morgan Stanley Entities").
Holdings is owned by the Morgan Stanley Entities, TWI Cable, Inc. and its
cable related affiliates ("Time Warner") and six former senior managers
("Management Investors") of Cablevision Industries Corporation ("CVI").
 
General
 
   The Company was formed to acquire, operate and develop medium-sized cable
television systems. The Company acquired six cable television systems from
Time Warner on April 9, 1998 (the "Systems"). The Systems are clustered in
southern Louisiana and western Mississippi (the "Louisiana Systems") and
western Tennessee (the "Tennessee System") and, as of December 31, 1998,
passed approximately 185,620 homes and served approximately 129,164
subscribers. Group and Renaissance Capital have no material assets other than
Group's investment in Renaissance Louisiana and Renaissance Tennessee and do
not, and will not, conduct any operations.
 
   The Company is a wholly owned subsidiary of Holdings.
 
   The Company's strategy has been to increase its revenues and EBITDA by
acquiring, operating and developing cable television systems and capitalizing
on the expertise of management, as well as the Company's relationship with the
Management Investors and Time Warner.
 
   Subject to the Charter transaction, (as herein defined), the Company
intends to increase its subscriber base and operating cash flow by improving
and upgrading its technical plant and expanding its service offerings. The
Company believes that by clustering systems it is able to realize economies of
scale, such as reduced payroll, reduced billing and technical costs per
subscriber, reduced advertising sales costs, increased local advertising
sales, more efficient roll-out and utilization of new technologies and
consolidation of its customer service functions. Subject to the Charter
transaction the Company plans to improve and upgrade its technical plant,
which should allow it to provide a wide array of new services and service
tiers, as well as integrate new interactive features into advanced analog and
digital set-top consumer equipment. Subject to the Charter transaction the
Company also plans to develop and provide new cable and broadband services and
develop ancillary businesses including digital video and high-speed Internet
access services.
 
   The Company's principal executive offices are located at One Cablevision
Center, Suite 100, Ferndale, New York 12734 and the telephone number is (914)
295-2600.
 
Time Warner Asset Purchase Agreement
 
   Holdings was formed on November 5, 1997 and entered into an Asset Purchase
Agreement dated November 14, 1997 (the "Time Warner Asset Purchase Agreement")
with Time Warner to acquire the Systems (the "Acquisition"). The Time Warner
Asset Purchase Agreement was assigned by Holdings to Renaissance Media,
 
                                       1
<PAGE>
 
and, on April 9, 1998, Renaissance Media purchased substantially all of the
assets of the Systems for approximately $300.0 million in cash, plus the
issuance to Time Warner of a $9.5 million equity ownership interest in
Holdings, subject to adjustment based upon working capital and subscriber
amounts at the time of closing. Time Warner has agreed to indemnify
Renaissance Media in an amount not to exceed $26.0 million in the aggregate
for any losses arising out of any representation or warranty made by Time
Warner in connection with the Acquisition not being true and accurate.
 
Sale of the Company
 
   On February 23, 1999 Holdings, Charter Communications, Inc. ("Charter") and
Charter Communications, LLC ("Buyer") executed and delivered a purchase
agreement (the "Charter Purchase Agreement"), pursuant to which Holdings will
sell and Buyer will purchase, all the outstanding limited liability membership
company interests in Group held by Holdings (the "Charter Transaction").
Consummation of the Charter Transaction is subject to certain conditions,
including obtaining consents from certain local franchising authorities and
the Federal Communications Commission (the "FCC") in connection with transfer
of certain cable television franchises and FCC licenses, respectively. There
can be no assurance that any of such conditions to the consummation of the
Charter Transaction contemplated by the Charter Purchase Agreement will be
satisfied in a timely manner or at all. The Charter Purchase Agreement
contains certain restrictions on the operation of the Company's business until
consummation of the Charter Transaction or termination of the Charter Purchase
Agreement, including, without limitation, renewing franchises, entering into
or amending agreements and contracts, disposing of assets, incurring
indebtedness, creating liens, altering employees' compensation and undertaking
capital expenditures. For purposes of this Annual Report on Form 10K,
discussions regarding forward looking statements reflect management's strategy
and existing views, however, until consummation of the Charter Transaction
pursuant to the Charter Purchase Agreement, or termination thereof, the
operations of the Company's business will be subject to the restrictions
thereon contained in the Charter Purchase Agreement. Subject to such
restrictions, the Company will continue to conduct its business in the
ordinary course, consistent with past practice.
 
The Systems
 
   Overview. The following table illustrates certain subscriber and operating
statistics for the Systems as of December 31, 1998. The Systems are divided
into two geographical regions, southern Louisiana and western Mississippi (the
"Louisiana Systems") and western Tennessee (the "Tennessee System"):
 
<TABLE>
<CAPTION>
                                                                                                      Average
                                                                                                      Monthly
                                     Total                                 Premium                    Revenue
                            Homes    Plant     Basic           Basic       Service      Premium      Per Basic
         System           Passed (1) Miles Subscribers (2) Penetration (3) Units (4) Penetration (5) Subscriber
         ------           ---------  ----- --------------  --------------  --------  --------------  ----------
<S>                       <C>        <C>   <C>             <C>             <C>       <C>             <C>
Louisiana Systems:
 St. Tammany System.....    64,670   1,379     43,972           68.0%       25,383        57.7%
 Lafourche System.......    30,110     579     22,473           74.6%       11,215        49.9%
 St. Landry System......    27,495     530     19,195           69.8%        7,227        37.7%
 Picayune System........     7,516     227      5,686           75.7%        2,424        42.6%
 Pointe Coupee System...     6,250     162      4,455           71.3%        1,870        42.0%
                           -------   -----    -------                       ------
 Total..................   136,041   2,877     95,781           70.4%       48,119        50.2%
                           -------   -----    -------                       ------
Tennessee System........    49,579     957     33,383           67.3%       10,593        31.7%
                           -------   -----    -------                       ------
Total Systems...........   185,620   3,834    129,164           69.6%       58,712        45.5%        $37.24
                           =======   =====    =======                       ======
</TABLE>
--------
(1) Homes passed refers to estimates of the number of dwelling units and
    commercial establishments in a particular community that can be connected
    to the distribution system without any further extension of principal
    transmission lines. Such estimates are based upon a variety of sources,
    including billing records, house counts, city directories and other local
    sources.
 
                                       2
<PAGE>
 
(2) The number of basic subscribers has been computed by adding the actual
    number of subscribers for all non-bulk accounts and the equivalent
    subscribers for all bulk accounts. The number of such equivalent
    subscribers has been calculated by dividing aggregate basic service
    revenue for bulk accounts by the full basic service rate for the community
    in which the accounts are located. Bulk accounts consist of commercial
    establishments and multiple dwelling units. (2,730 equivalents at December
    31, 1998.)
 
(3) Basic penetration represents the number of basic subscribers as a
    percentage of the total number of homes passed in the system.
 
(4) Premium service units represent the number of subscriptions to premium
    channels offered for a monthly fee per channel.
 
(5) Premium penetration represents the number of premium service units as a
    percentage of the total number of basic subscribers.
 
   The following table sets forth certain information regarding the analog
channel capacities of the Systems as of December 31, 1998:
 
<TABLE>
<CAPTION>
                                            330 MHz  450 MHz  550 MHz
                                            -------- -------- --------
                                               40       62       78
                                            Channels Channels Channels  Total
                                            -------- -------- -------- -------
<S>                                         <C>      <C>      <C>      <C>
Number of headends.........................    1        9        4       14
Subscribers as of December 31, 1998
 (excluding equivalents)...................  1,679    85,463   39,292  126,434
% of total subscribers.....................   1.3%     67.6%    31.1%   100.0%
Miles of plant.............................     60     2,309    1,465    3,834
% of total plant...........................   1.6%     60.2%    38.2%   100.0%
</TABLE>
 
   The Company continues to deploy fiber optic technology and to upgrade the
Systems to a minimum of 550 MHz and to a maximum of 860 MHz where system
characteristics warrant. The deployment of fiber optic technology will allow
future upgrades to the Systems in a cost-effective manner. The Company also
plans to use fiber optic technology to interconnect headends and to create
fiber optic backbones to reduce amplifier cascades, thereby gaining
operational efficiencies and improved picture quality and system reliability.
 
   Subject to the terms and conditions of the Charter Purchase Agreement, the
Company plans to upgrade the Systems according to the following table:
 
<TABLE>
<CAPTION>
                                                                         Planned
                                                                         Upgrade
                                                                Current   (Mhz)
                            System                              -------- -------
<S>                                                             <C>      <C>
Jackson, TN....................................................  330/450     860
Picayune, MS...................................................      550     550
St. Tammany, LA................................................ 450/550* 550/860
Lafourche, LA.................................................. 450/550* 550/750
St. Landry, ...................................................      450     750
Point Coupee, LA...............................................      550     550
</TABLE>
--------
* Some sections of these systems are currently 450 or 330 MHz and the rest
  were recently upgraded to 550 MHz. The Company plans to upgrade the 450 MHz
  and 330 MHz sections to 750 or 860 MHz.
 
                                       3
<PAGE>
 
 The Louisiana Systems
 
   The Louisiana Systems consist of five cable television systems serving
95,781 basic subscribers as of December 31, 1998, located in southern
Louisiana and western Mississippi: the St. Tammany system, the St. Landry
system, the Lafourche system, the Picayune system and the Pointe Coupee
system. As of December 31, 1998, approximately one-half of the Louisiana
Systems' subscribers were served by the St. Tammany system. The Louisiana
Systems are operated from the Regional Office located in Thibodaux, Louisiana
which provides certain support services for the Systems. The Systems' regional
management has 15 years average experience in the cable television industry.
 
   The St. Tammany System. The St. Tammany system comprises one consolidated
headend, and serves the communities of Slidell, Mandeville and St. Tammany,
the towns of Pearl River, Abita Springs and Madisonville and the City of
Covington. St. Tammany is a suburb located approximately 40 miles northeast of
New Orleans, and is recognized as Louisiana's fastest growing parish since
1995.
 
   The Lafourche System. The Lafourche system comprises two headends, one of
which is a consolidated headend, and serves the communities of Lafourche,
Assumption and St. James. Lafourche is located in southeast Louisiana along
the Gulf of Mexico, approximately 60 miles from New Orleans. Commercial
fishing and the oil and gas extraction industries dominate the local economy
in the southern portion of the system's service area, comprising a significant
portion of the manufacturing work force there. In the northern portion of the
system's service area, sugar is a prominent industry, as are other farming
related industries.
 
   The St. Landry System. The St. Landry system comprises four headends and
serves the communities of Jennings, Church Point, Eunice and Opelousas.
Located 61 miles from Baton Rouge, St. Landry's economy is primarily focused
on agriculture.
 
   The Picayune System. The Picayune system comprises one headend and serves
the communities of Picayune and parts of Pearl County. Picayune, 25 miles
northeast of Slidell and 60 miles northeast of New Orleans, is in Pearl
County, Mississippi. The John C. Stennis Space Center is one of the largest
employers in the Picayune area and is the main testing facility for NASA's
large propulsion systems, including the Space Shuttle.
 
   The Pointe Coupee System. The Pointe Coupee system comprises one headend
and serves the community of New Roads and the Village of Morganza. Pointe
Coupee is a suburb of Baton Rouge and is Louisiana's second oldest settlement.
Pointe Coupee's major industry is agriculture.
 
 The Tennessee System
 
   As of December 31, 1998, the Tennessee System served 33,383 basic
subscribers located in Jackson, Tennessee and surrounding counties. The
Tennessee System is managed from the Regional Office located in Thibodaux,
Louisiana. The Tennessee System comprises five headends and serves the
communities of Jackson, Selmer, Bethel Springs, Adamsville, Camden, Alamo,
Bells, Maury City, Newbern, Trimble, Obion, Troy and the counties of Madison,
Crockett, McNairy, Benton, Dyer and Obion. Jackson is the medical, retail,
cultural and geographic center of west Tennessee. As of December 31, 1998,
approximately 22,000 basic subscribers (excluding bulk subscribers), or almost
two-thirds of the Tennessee System's subscribers, were served from a single
headend.
 
The Social Contract
 
   The Social Contract between Time Warner and the FCC, which became effective
on January 1, 1996, resolved certain outstanding cable rate cases involving
Time Warner that arose in connection with regulations promulgated by the FCC
pursuant to the 1992 Cable Act. The Social Contract established parameters
within which Time Warner and subsequent buyers of Time Warner's cable
television systems might determine certain subscriber rates and maintain a
high level of technical capacity in such systems. Among other obligations,
Time Warner agreed to upgrade one-half of its systems to 550 MHz capacity and
the balance to 750MHz capacity
 
                                       4
<PAGE>
 
within the term of the Social Contract, of which at least 200 MHz is expected
to be allocated to digital compression technology by January 1, 2001. In
exchange, the Social Contract settled those certain outstanding rate cases and
established a right of Time Warner to increase monthly CPST rates by an
additional $1.00 per year above other permissible increases resulting from
inflation and so-called "external costs" for the term of the Social Contract
through the year 2000. The Social Contract provides that Time Warner may
petition the FCC to modify or terminate the Social Contract based on any
relevant change in applicable law, regulation or circumstance.
 
   In connection with the Acquisition, the Company received the FCC's consent
to the assignment of the Social Contract as it applies to the Systems. By
assuming Time Warner's unsatisfied obligations with respect to the Systems,
the Company has gained certain rate benefits described above. The principal
remaining obligations under the Social Contract as they relate to the Systems
will be to upgrade the Tennessee System, the St. Landry system and
approximately one-half of the St. Tammany and Lafourche systems to 750 MHz
capacities. The failure to comply with the upgrade requirements will subject
the Company to refund liability under the terms of the Social Contract. The
Company also is required to ensure that at least 60% of new analog services in
the Systems are added to the CPST, and add at least 15 new channels on average
(weighted by CPST subscribers) to the CPST of the Systems. The Company
believes the upgrades are prudent both due to the competitive advantages to be
gained by technologically advanced facilities and from the rate increases the
Company will be permitted to implement.
 
   The consummation of the Charter Transaction will not change the rights or
obligations of the Company under the Social Contract.
 
Industry Overview
 
   A cable television system receives television, radio and data signals at
the system's "headend" site by means of off-air antennas, microwave relay
systems and satellite earth stations. These signals are then modulated,
amplified and distributed, primarily through coaxial and fiber optic
distribution systems, to deliver a wide variety of channels of television
programming, primarily entertainment and informational video programming, to
the homes of subscribers who pay fees for this service, generally on a monthly
basis. A cable television system may also produce its own television
programming and other information services for distribution through the
system. Cable television systems generally are constructed and operated
pursuant to non-exclusive franchises or similar licenses granted by local
governmental authorities for a specified period of time, generally up to ten
years.
 
   Cable television systems offer customers various levels (or "tiers") of
cable services consisting of broadcast television signals of local network
affiliates, independent and educational television stations, a limited number
of broadcast television signals from so-called "super stations" originating
from distant cities (such as WGN), various satellite-delivered, non-broadcast
channels (such as Cable News Network (CNN), MTV: Music Television (MTV), the
USA Network, ESPN and Turner Network Television (TNT), programming originated
locally by the cable television system (such as public, educational and
governmental access programs) and informational displays featuring news,
weather and public service announcements. Cable television systems also offer
"premium" television services to customers on a monthly charge per-channel
basis and sometimes on a pay-per-view basis. These services (such as Home Box
Office (HBO) and Showtime and selected regional sports networks) are satellite
channels that consist principally of feature films, live sporting events,
concerts and other special entertainment features, usually presented without
commercial interruption.
 
   A customer generally pays an initial installation charge and fixed monthly
fees for basic, tier and premium television services and for other services
(such as the rental of converters and remote control devices). Such monthly
service fees constitute the primary source of revenue for cable television
systems. In addition to customer revenue, cable television systems also
frequently offer to their customers home shopping services, which pay such
systems a share of revenue from products sold in the systems' service areas.
Some cable television systems also receive revenue from the sale of available
spots on advertiser-supported programming.
 
 
                                       5
<PAGE>
 
Programming and Subscriber Rates
 
   Cable television systems offer their customers programming that includes
the local network, independent and educational broadcast television stations,
a limited number of broadcast television signals from distant cities, numerous
satellite-delivered, non-broadcast channels and, in some systems, local
information and public, educational and governmental access channels.
Depending upon each system's channel capacity and viewer interests, the
Company offers tiers of cable television programming: a basic programming tier
(consisting generally of network, independent and public television signals
available over-the-air), an "expanded basic" programming tier (consisting
generally of satellite-delivered programming services with broad based
viewership appealing to a wide variety of subscriber tastes), one or more
specialty tiers (consisting of satellite-delivered programming, services
tailored to particular niche subscriber groups such as the Sci-Fi Channel,
Home & Garden, The Cartoon Network, American Movie Classics, ESPN2 and
regional sports programming) and per channel and pay-per-view premium services
purchased from content suppliers such as HBO, Cinemax and The Disney Channel.
 
   The Company has retained Time Warner under an exclusive arrangement to
manage all of the Company's programming, except local programming, at rates
which the Company believes will be favorable. Time Warner has various
contracts and arrangements to obtain basic, satellite and premium programming
for the Systems from program suppliers, including, in limited circumstances,
some broadcast stations, with compensation generally based on a fixed fee per
customer or a percentage of the gross receipts for the particular service.
Some program suppliers provide volume discount pricing structures and/or offer
marketing support. Through Time Warner, the Company has long-term programming
contracts for the supply of a substantial amount of its programming. Such
contracts generally are for fixed periods of time ranging from one to five
years and will be subject to negotiated renewal. Time Warner invoices the
Company on a monthly basis for the programming services it provides to the
Company (approximately 61 services as of December 31, 1998) in an amount equal
to the amount such programming services charge Time Warner, plus an
administrative fee. For the period from April 9, 1998 to December 31, 1998,
the average monthly per subscriber programming cost payable to Time Warner was
$3.84. The loss of contracts with certain programming suppliers could have a
material adverse effect on the Company, its financial condition, prospects and
debt service ability. In the event that the Company's arrangement with Time
Warner is terminated, the Company expects it will be able to obtain other
programming arrangements, although such arrangements may be at higher rates.
This arrangement with Time Warner lasts only as long as Time Warner retains an
equity interest in Holdings and Holdings holds all or substantially all of the
Systems. This arrangement with Time Warner will terminate upon consummation of
the Charter Transaction.
 
   Cable programming costs are expected to continue to increase due to
additional programming being provided to customers, inflationary increases and
other factors. In 1996 and 1997, programming costs as a percentage of the
System's revenues were approximately 20.1% and 20.5%, respectively, and 20.8%
for the period January 1, 1998 to April 8, 1998. Following the Acquisition,
programming costs as a percentage of revenue increased to 23.2% due to the
loss of certain discounts that were realized as a result of being part of a
larger MSO. See "Pro Forma Financial Data" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
 
   Monthly customer rates for services offered by the Systems vary from market
to market, primarily according to the amount of program offerings and costs of
operations. During 1998, the monthly basic service rates for residential
customers for the Systems ranged from $5.20 to $11.00, per-channel premium
service rates ranged from $7.95 to $11.95 and Cable Programming Satellite Tier
("CPST") service rates ranged from $13.59 to $24.24. During 1998 the weighted
average basic service rate was approximately $7.88 and the weighted averaged
CPST service rate was approximately $20.28. During January 1999, the Systems
increased their monthly subscription rates for CPST service from $20.28 to
$22.61 on a weighted average basis.
 
Customer Service and Marketing
 
   The Company emphasizes the importance of excellent customer service, which
it believes is critical to the successful operation of its business. The
Company intends to implement business approaches which permit it to
 
                                       6
<PAGE>
 
provide high-quality locally focused service to each community served. The
Company believes that a system-by-system, decentralized approach to operations
is required as each area served has distinct characteristics such as
demographics, economic diversity and geographic setting. The Company's local
management strives to become an integral part of the communities served. These
efforts will enable the Company periodically to adjust its local service
offerings to meet the needs of a particular community.
 
   In the communities it serves, the Company believes that many customers
prefer to personally visit the local office to pay their bills or ask
questions about their service. As a result, the Company maintains conveniently
accessible local offices in many of its service areas. The Systems' local
staff, typically native to the areas they serve, are familiar with the
community's customer base. The Company believes that this combination of local
offices and local staffing allow the Company to provide a high level of
customer service. Additionally, the Company believes familiarity with its
communities allow it to customize its menu of services and respective pricing
to provide its customers with products that are both diverse and affordable.
 
   The Company operates under a quality assurance program which stresses
responsibility and reliability among employees at all levels, and treats each
customer's concerns individually. To monitor the performance of its Systems
and the quality of its customer service, the Company measures eleven criteria
on a weekly, and in some cases, daily basis. These criteria are: service call
response times, service call-to-total customers ratio, installation response
time, repeat service calls, new-customer service calls, average outage
duration, picture quality, occurrence of all-telephone-trunks busy per
measurement period, telephone answer rate and response time to customer
correspondence. The Company also uses market research tools to gauge its
performance and customer satisfaction and to tailor its local service
offerings to the particular community. Management believes that its focus on
system operations and customer service will increase subscriber penetration,
revenues and cash flow margins.
 
   The Company aggressively markets and promotes its cable television services
with the objective of adding and retaining customers and increasing subscriber
revenue. The Company actively markets its basic and premium program packages
through a number of coordinated marketing techniques, including: (i) door-to-
door sales and subscriber audit programs; (ii) direct mail for basic and
upgrade acquisition campaigns; (iii) monthly subscriber statement inserts;
(iv) local newspaper and broadcast/radio advertising where population
densities are sufficient to provide a reasonable cost per sale; and (v) cross-
channel promotion of new services and pay-per-view movies and events.
 
Franchises
 
   Cable television companies operate under non-exclusive franchises granted
by local authorities which are subject to renewal and renegotiations from time
to time. These franchises typically contain many conditions, including: (i)
time limitations on commencement and completion of construction; (ii)
conditions of service including customer response requests, technical
standards, compliance with FCC regulations and the provision of free service
to schools and certain other public institutions; and (iii) the maintenance of
insurance and indemnity bonds. Certain provisions of local franchises are
subject to federal regulation under the 1984 Cable Act, the 1992 Cable Act and
the 1996 Telecom Act.
 
   As of December 31, 1998, the Systems held 47 franchises in the aggregate.
These franchises, all of which are non-exclusive, generally provide for the
payment of fees to the issuing authority. The Company's franchise fees
typically range from 3.0% to 5.0% of "revenue" (as defined in each franchise
agreement). For the past three years, franchise fee payments made by the
Systems have averaged approximately 3.8% of total gross System revenue.
Franchise fees are generally passed directly through to the customers on their
monthly bills. General business or utility taxes may also be imposed in
various jurisdictions. As amended by the 1996 Telecom Act, the 1984 Cable Act
prohibits franchising authorities from imposing franchise fees in excess of 5%
of gross revenue derived from the operation of a cable television system to
provide cable services and also permits the cable operator to seek
renegotiations and modification of franchise requirements if warranted by
changed
 
                                       7
<PAGE>
 
circumstances. Most of the Company's franchises can be terminated prior to
their stated expirations for uncured breaches of material provisions. See
"Legislation and Regulation."
 
   The following table sets forth for the Systems the number of franchises by
year of franchise expiration and the number of basic subscribers and
percentage of the Systems' basic subscribers as of December 31, 1998:
 
<TABLE>
<CAPTION>
                                                      Number of
                                                        Basic     Percentage
                                       Percentage of Subscribers  of Systems'
      Year of Franchise     Number of      Total      (excluding     Basic
          Expiration        Franchises  Franchises   equivalents) Subscribers
      -----------------     ---------- ------------- -----------  -----------
   <S>                      <C>        <C>           <C>          <C>
   Prior to 2000...........      1           2.1%        3,680         2.9%
   2000--2004                   14          29.8%       52,244        41.3%
   2005--2008                   19          40.4%       44,133        34.9%
   2009 and after..........     13          27.7%       26,377        20.9%
                               ---         -----       -------       -----
     Total.................     47         100.0%      126,434       100.0%
                               ===         =====       =======       =====
</TABLE>
 
   The Company believes that the Systems have good relationships with their
respective franchising authorities. However, renewals or extensions of
franchises may result in more rigorous franchise requirements.
 
   The 1984 Cable Act provides for, among other things, procedural and
substantive safeguards for cable operators and creates an orderly franchise
renewal process in which renewal of franchise licenses issued by governmental
authorities cannot be unreasonably withheld, or, if renewal is withheld and
the franchise authority acquires ownership of the system or effects a transfer
of the system to another person, such franchise authority or other person must
pay the operator either: (i) the "fair market value" (without value assigned
to the franchise) for the system if the franchise was granted after the
effective date of the 1984 Cable Act (December 1984) or the franchise was pre-
existing but the franchise agreement did not provide a buyout or (ii) the
price set in franchise agreements predating the 1984 Cable Act. In addition,
the 1984 Cable Act established comprehensive renewal procedures which require
that an incumbent franchisee's renewal application be assessed on its own
merits and not as part of a comparative process with competing applications.
See "Legislation and Regulation."
 
   The 1984 Cable Act also establishes buyout rates in the event the franchise
is terminated "for cause" and the franchise authority desires to acquire the
system. For franchises which post-date the existence of the 1984 Cable Act or
pre-date the 1984 Cable Act but do not specify buyout terms, the franchise
authority must pay the operator an "equitable" price. To date, none of the
System's franchises has been terminated.
 
   The 1992 Cable Act prohibits the award of exclusive franchises, prohibits
franchising authorities from unreasonably refusing to award additional
franchises and permits them to operate cable systems themselves without
franchises. The 1996 Telecom Act provides that no state or local laws or
regulations may prohibit or have the effect of prohibiting any entity from
providing any interstate or intrastate telecommunications service. State and
local authorities retain authority to manage the public rights of way and
"competitively neutral" requirements concerning right of way fees, universal
service, public safety and welfare, service quality and consumer protection
are permitted with respect to telecommunications services.
 
Competition
 
   Cable television systems face competition from alternative methods of
receiving and distributing television signals and from other sources of news,
information and entertainment such as off-air television broadcast
programming, newspapers, movie theaters, live sporting events, interactive
online computer services and home video products, including videotape cassette
recorders. The extent to which a cable communications system is competitive
depends, in part, upon the cable system's ability to provide, at a reasonable
price to customers, a greater variety of programming and other communications
services than those which are available off-air or through other alternative
delivery sources and upon superior technical performance and customer service.
 
 
                                       8
<PAGE>
 
   Cable television systems generally operate pursuant to franchises granted
on a nonexclusive basis. The 1992 Cable Act prohibits franchising authorities
from unreasonably denying requests for additional franchises and permits
franchising authorities to operate cable television systems. See "Legislation
and Regulation." It is possible that a franchising authority might grant a
franchise to another company containing terms and conditions more favorable
than those afforded the Company. Well-financed businesses from outside the
cable industry (such as the public utilities that own the poles to which cable
is attached) may become competitors for franchises or providers of competing
services. See "Legislation and Regulation." Currently, the Systems' principal
competitors for receiving and distributing television signals in the areas
they serve are off-air television broadcast programming, home satellite dish
earth stations ("HSDS") and DBS, although other cable television systems
operate in other non-overlapping areas of the Company's franchise areas. See
"Risk Factors--Significant Competition in the Cable Television Industry."
 
   The 1992 Cable Act contains provisions, which the FCC implemented with
regulations, to enhance the ability of cable competitors to purchase and make
available to HSDS owners certain satellite-delivered cable programming at
competitive costs. The 1996 Telecom Act prohibits certain local restrictions
that impair a viewer's ability to receive video programming services using
HSDS and over-the-air antennae, and the FCC adopted regulations implementing
this provision that preempts certain local restrictions on satellite and over-
the-air antenna reception of video programming services, including zoning,
land-use or building regulations, or any private covenant, homeowners'
association rule or similar restriction on property within the exclusive use
or control of the antenna user. Recently, the FCC implemented rules to extend
the prohibition on local restrictions which hamper consumer use of television
antennas, small satellite dishes, and wireless cable antennas, to include
viewers who rent property and seek to use antennas in areas where they have
"exclusive use," including balconies, patios, gardens, and yards exclusively
used by the renter.
 
   Cable operators also face competition from private satellite master antenna
television ("SMATV") systems that serve condominiums, apartment and office
complexes and private residential developments. The 1996 Telecom Act broadens
the definition of SMATV systems not subject to regulation as a franchised
cable television system, and the FCC recently revised its cable inside wiring
rules to provide a more specific procedure for the disposition of internal
cable wiring that belongs to an incumbent cable operator that is forced to
terminate its cable services in a multiple dwelling unit ("MDU") building by
the building owner. SMATV systems offer both improved reception of local
television stations and many of the same satellite-delivered program services
offered by franchised cable television systems. SMATV operators often enter
into exclusive agreements with building owners or homeowners' associations.
Although some states have enacted laws that authorize franchised cable
operators access to such private complexes, Louisiana, Mississippi and
Tennessee have not. These laws have been challenged in the courts with varying
results. In addition, some companies are developing and/or offering to these
private residential and commercial developments packages of telephony, data
and video services. The ability of the Company to compete for customers in
residential and commercial developments served by SMATV operators is
uncertain.
 
   In recent years, Congress enacted regulation and the FCC has initiated new
policies and authorized new technologies to provide a more favorable operating
environment for new and existing technologies that provide, or have the
potential to provide, substantial additional competition to cable television
systems. These technologies include, among others, direct broadcast satellite
service, commonly known as DBS service, whereby signals are transmitted by
satellite directly to small receiving dishes located on the customer's
property. High-powered direct-to-home satellites have made possible the wide-
scale delivery of programming to individuals throughout the United States
using roof- top or wall-mounted antennas. According to recent government and
industry reports, medium and high-power satellites currently provide video
programming to over seven million subscribers. DBS providers typically offer
to their subscribers more than 200 channels of programming including news
channels, movies, broadcast stations, live concerts and sporting events, and
other program services similar to those program services provided by cable
systems. DBS systems use video compression technology to increase
significantly the channel capacity of their systems and digital technology to
improve significantly the technical quality of the signals transmitted to
subscribers.
 
                                       9
<PAGE>
 
   DBS service currently has certain competitive advantages and disadvantages
compared to cable service. DBS service provides more programming and greater
channel capacity and digital quality of the signals delivered to subscribers.
The disadvantages of DBS service compared to cable service include high up-
front customer equipment and installation costs and a lack of local
programming and local service.
 
   Currently, satellite program providers are only authorized to provide the
signals of television network stations to subscribers who live in areas where
over-the-air reception cannot be received. Congress is presently considering
legislation which will enhance the ability of DBS providers to transmit local
broadcast signals to local markets and if adopted, will likely improve the
competitive position of DBS providers against cable operators.
 
   The availability of reasonably-priced home satellite dish earth stations,
commonly called HSDS, enables individual households to receive many of the
satellite-delivered program services formerly available only to cable
subscribers. Furthermore, the 1992 Cable Act contains provisions, which the
FCC has implemented with regulations, to enhance the ability of cable
competitors to purchase and make available to HSDS owners certain satellite-
delivered cable programming at competitive costs.
 
   Programming is currently available to the owners of HSDS through
conventional, medium and high-powered satellites. PrimeStar, a consortium
comprised of several multiple system operators and a satellite company,
commenced operation in 1990 of a medium-power DBS satellite system using the
Ku portion of the satellite frequency spectrum and currently provides service
consisting of approximately 160 channels of programming, including broadcast
signals and pay-per-view services. Two major companies, DirecTV and EchoStar
Communications Corporation, are currently offering nationwide high-power DBS
services. DirecTV and Primestar recently reported that DirecTV and its parent
company have acquired Primestar's medium-power DBS business and are acquiring
the high-power DBS business of Tempo, a subsidiary of Primestar. EchoStar
recently announced that it is acquiring a high-power DBS license from MCI
Telecommunications Corporation and two DBS satellites currently under
construction from News Corp. Various agencies of the federal government must
still approve these transactions; however, if they are completed, DirecTV and
EchoStar will significantly enhance the number of channels on which they can
provide programming to subscribers and will improve significantly their
competitive positions against cable operators. The Company is unable to
predict the impact DirecTV's and EchoStar's enhanced operations may have on
its business and operations as a result of these transactions.
 
   The degree to which DBS service providers will be able to compete with the
cable television industry will depend on, among other factors, the
availability of reception equipment at reasonable prices and whether DBS
providers will be permitted to offer local broadcast signals in their program
packages. Although it is not possible at this time to predict the likelihood
of success of any DBS services venture or the effect that it will have on the
company's business. DBS may offer substantial competition to the cable
television industry.
 
   While DBS presents a competitive threat, the Company currently has excess
channel capacity available in most of its systems, as well as strong local
customer service and technical support, which will enhance its ability to
compete. By selectively increasing channel capacities of systems to between 78
and 110 channels and introducing new premium channels, pay-per-view and other
services, the Company will seek to maintain programming parity with DSS and
competitive service price points. The Company will continue to monitor closely
the activity level and the product and service needs of its customer base to
counter potential erosion of its market position or unit growth to DSS.
 
   Cable television systems also compete with wireless program distribution
services such as MMDS, which uses low power microwave frequencies to transmit
video programming over the air to customers. Additionally, the FCC recently
adopted new regulations allocating frequencies in the 28 GHz band for a new
multichannel wireless video service called Local Multipoint Distribution
Service that is similar to MMDS, and the FCC initiated spectrum auctions for
LMDS licenses in February 1998. Wireless distribution services generally
provide many of the programming services provided by cable systems, and
digital compression technology and recently
 
                                      10
<PAGE>
 
authorized two-way transmissions is likely to increase significantly the
channel capacity and services of such wireless systems. Because MMDS and LMDS
service requires unobstructed "line of sight" transmission paths, the ability
of MMDS systems to compete may be hampered in some areas by physical terrain
and large buildings. The Company is not aware of any significant MMDS
operation currently within its cable franchise service areas.
 
   The 1996 Telecom Act makes it easier for local exchange carriers ("LECs")
and others to provide a wide variety of video services competitive with
services provided by cable systems and to provide cable services directly to
subscribers. Other new technologies, including Internet-based services, may
become competitive with services that the Company may offer. See "Legislation
and Regulation." Various LECs currently are providing video programming
services within and outside their telephone service areas through a variety of
distribution methods, including both the deployment of broadband wire
facilities and the use of wireless transmission facilities. LECs also provide
access to interactive online computer services using conventional or
integrated service digital network ("ISDN") modems. Cable television systems
could be placed at a competitive disadvantage if the delivery of video
programming and interactive online computer services by LECs becomes
widespread, since LECs are not required to comply with the variety of
obligations imposed upon cable television systems under such franchises.
Issues of cross-subsidization by LECs of video and telephony services also
pose strategic disadvantages for cable operators seeking to compete with LECs
that provide video services. The Company cannot predict the likelihood of
success of video service ventures by LECs or the impact on the Company of such
competitive ventures.
 
   The Company is planning to market high-speed Internet access and data
transmission in certain areas served by its cable systems and expects that the
competition in the interactive online services area will be significant. The
high-speed cable modems that will be used by the Company are capable of
providing access to interactive online information services, including the
Internet, at faster speeds than that of conventional or ISDN modems used by
other service providers. LECs and other companies provide facilities for the
transmission and distribution to homes and businesses of interactive computer-
based services, including Internet access, as well as data and other non-video
services. Competitors in this area may include LECs, Internet service
providers, commonly called ISPs, long distance carriers, satellite companies,
public utilities and others, many of whom have more substantial financial
resources than the Company. Telephone companies are accelerating the
deployment of Asymmetric Digital Subscriber Line Technology commonly known as
ADSL. These companies report that ADSL technology will allow Internet access
to subscribers at peak data transmission speeds equal or greater than that of
modems over conventional telephone lines. Several of the Regional Bell
Operating Companies have requested the FCC to fully deregulate packet-switched
networks (a type of data communications in which small blocks of data are
independently transmitted and reassembled) to allow them to provide high-speed
broadband services, including interactive online services, without regard to
present service boundaries and other regulatory restrictions. Regardless of
whether this request is granted, the Company expects that competition in the
interactive online services area will be significant. Recently, a number of
ISPs have requested local authorities and the FCC to provide access rights to
cable television systems' broadband infrastructure so that they may be able to
deliver their services directly to cable television subscribers. In a recent
report, the FCC declined to institute a proceeding to examine this issue, and
concluded that alternative means of access are or soon will be made available
to a broad range ISPs. Because the FCC believes the marketplace is working and
expanding consumer choice for broadband services, it declined to take action
on ISP access to broadband cable facilities, and the FCC indicated that it
would continue to monitor this issue. Several local jurisdictions also are
reviewing this issue. The Company cannot predict the likelihood of success of
the broadband services offered by the Company's competitors or the impact on
the Company of such competitive ventures.
 
   The Company cannot predict the likelihood of success of the online services
offered by these competitors, ISP attempts to gain access to the cable
industry's broadband facilities, or the impact of those developments on the
Company's business.
 
   The 1996 Telecom Act directed the FCC to establish, and the FCC has
adopted, regulations and policies and has issued licenses for digital
television ("DTV") to incumbent television broadcast licensees. DTV is
expected to deliver high definition television pictures, multiple digital-
quality program streams, as well as
 
                                      11
<PAGE>
 
CD-quality audio programming and advanced digital services, such as data
transfer or subscription video. The FCC also has authorized television
broadcast stations to transmit textual and graphic information useful both to
consumers and businesses. The FCC also permits commercial and noncommercial FM
stations to use their subcarrier frequencies to provide nonbroadcast services
including data transmissions. The FCC established an over-the-air Interactive
Video and Data Service that will permit two-way interaction with commercial
and educational programming along with informational and data services.
 
   Advances in communications technology as well as changes in the marketplace
and the regulatory and legislative environments are constantly occurring.
Thus, it is not possible to predict the effect that ongoing or future
developments might have on the cable industry or on the operations of the
Company.
 
Employees
 
   The Company has 219 full-time employees and 5 part-time employees, none of
whom are represented by a labor union on the date hereof.
 
Legislation and Regulations
 
   The cable television industry is regulated by the FCC and certain state and
local governments. In addition, legislative and regulatory proposals under
consideration by the Congress and federal agencies may materially affect the
cable television industry.
 
   The cable television industry is regulated by the FCC, some state
governments and substantially all local governments. In addition, various
legislative and regulatory proposals under consideration from time to time by
the Congress and various federal agencies may materially affect the cable
television industry. The following is a summary of federal laws and
regulations affecting the growth and operation of the cable television
industry and a description of certain state and local laws.
 
   A federal law known as the Communications Act of 1934, as amended,
establishes a national policy to guide the development and regulation of cable
television systems. This Act, as it relates to the cable television industry,
was amended by the Cable Communications Policy Act of 1984 and the Cable
Television Consumer Protection and Competition Act of 1992. The 1984 Cable Act
established comprehensive national standards and guidelines for the regulation
of cable television systems and identified the boundaries of permissible
federal, state and local government regulation. The 1992 Cable Act permitted a
greater degree of regulation of the cable industry, and in particular
subjected cable television systems to regulation of the rates charged
customers for basic and certain cable programming services.
 
   In 1996, a new law, the Telecommunications Act of 1996, further amended the
Communications Act, including the 1984 and 1992 Cable Acts, and established
the most comprehensive reform of the nation's telecommunications laws since
the adoption of the Communications Act in 1934. The articulated long-term goal
of this 1996 amendment to the Communications Act is to promote competition and
decrease governmental regulation of various communications industries,
including the cable television industry. However, until the desired
competition develops, various federal, state and local governmental units will
have broad regulatory authority and responsibilities over telecommunications
and cable television matters. The courts, especially the federal courts, will
continue to play an important oversight role as the statutory and regulatory
provisions are interpreted and enforced by the various federal, state and
local governmental units.
 
   The 1996 Telecom Act is intended, in part, to promote substantial
competition in the marketplace for telephone local exchange service and in the
delivery of video and other services and permits cable television operators to
enter the local telephone exchange market. The 1996 Act repeals the cable
television/telephone cross-ownership ban adopted in the 1984 Cable Act and
permits local telephone companies commonly known as LECs and other service
providers to provide video programming. The 1996 Act directs the FCC to revise
the current pole attachment rate formula. This will result in an increase in
the rates paid by entities, including cable
 
                                      12
<PAGE>
 
operators, that provide telecommunication services. (Cable operators that
provide only cable services are unaffected.) The 1996 Act also contains
provisions regulating the content of video programming and computer services.
Specifically, the new law prohibits the use of computer services to transmit
"indecent" and "obscene" material to minors. The U.S. Supreme Court has held
that these computer-related provisions are unconstitutional to the extent they
regulate the transmission of indecent material. Under the 1996 Act, a
franchising authority may not require a cable operator to provide
telecommunications services or facilities, other than an institutional
network, as a condition to a grant, renewal, or transfer of a cable franchise,
and franchising authorities are preempted from regulating telecommunications
services provided by cable operators and from requiring cable operators to
obtain a franchise to provide such services. The 1996 Act also repeals the
1992 Cable Act's anti-trafficking provision which generally required the
holding of cable television systems for three years.
 
   It is premature to predict the effect of the 1996 Act on the cable industry
in general or the Company in particular. The FCC was required to undertake
numerous rulemaking proceedings to interpret and implement the 1996 Act. Most
of these rulemakings have been completed, but are subject to pending petitions
for reconsideration, appeals, or both. It is not possible at this time to
predict several the outcome of those proceedings or their effect on the
Company.
 
   The Communications Act allocates principal responsibility for enforcing
federal policies between the FCC, state and local governmental authorities.
The FCC and state regulatory agencies regularly conduct administrative
proceedings to adopt or amend regulations implementing the statutory mandate
of the Communications Act. At various times interested parties to these
administrative proceedings have challenged the new or amended regulations and
policies in the courts with varying levels of success. The Company expects
that further court actions and regulatory proceedings will occur and will
refine the rights and obligations of various parties, including the
government, under the Communications Act. The results of these judicial and
administrative proceedings may materially affect the cable industry and the
Company's business and operations. In the following paragraphs, the federal
laws and regulations materially affecting the growth and operation of the
cable industry are summarized. A brief description of certain state and local
laws is also provided.
 
The Communications Act and FCC Regulations
 
 Rate Regulation
 
   The Communications Act limits the ability of cable television systems to
raise rates for basic services and equipment, as well as certain non-basic
cable programming services. The Communications Act authorizes rate regulation
for certain cable services and customer equipment in communities that are not
subject to "effective competition," as defined by federal law. The
Communications Act and the FCC's regulations prohibit the regulation of cable
television operators' rates where comparable video programming services, other
than DBS, are offered by local telephone companies, or their affiliates, or by
third parties using the local telephone company's facilities, or where
"effective competition" is established as defined by federal law. Under the
effective competition standard implemented by the 1992 Cable Act, most cable
television systems became subject to rate regulation.
 
   Where there is no effective competition to the cable television operator's
services, the Communications Act gives local franchising authorities the
responsibility to regulate the monthly rates charged by the operator for: (i)
the lowest level of programming service offered by the cable television
operator, typically called basic service, which includes the local broadcast
channels and any public access or governmental channels that are required by
the operator's franchise; and (ii) the installation, sale and lease of
equipment used by subscribers to receive basic service, such as converter
boxes and remote control units.
 
   Local franchising authorities who wish to regulate basic service rates and
related equipment rates must first obtain FCC certification to regulate by
submitting certain general information to the FCC about the community and the
cable television operator, complying with a simplified FCC certification
procedure, and agreeing to follow established FCC rules and policies when
regulating the operator's rates.
 
                                      13
<PAGE>
 
   Several years ago, the FCC adopted detailed rate regulations, guidelines
and rate forms that the Company and the local franchising authority must use
in connection with the regulation of basic service and equipment rates. The
FCC adopted a benchmark methodology as the principal method of regulating
rates. However, if this methodology produces unacceptable rates, the Company
may also justify its rates using a detailed and complicated cost-of-service
methodology, which, among other things, permits the use of an industry-wide
11.25% after tax rate of return on the Company's allowable rate base. The
FCC's rules also require franchising authorities to regulate equipment rates
on the basis of actual cost plus a reasonable profit, as defined by the FCC.
 
   If the local franchising authority concludes that the Company's rates are
too high under the FCC's rate rules, the local franchising authority may
require the Company to reduce its rates and to refund overcharges to
subscribers with interest. The Company may appeal adverse local rate decisions
to the FCC, and the FCC may reverse any rate decision made by a local
franchising authority if the decision is inconsistent with the FCC's rules and
policies.
 
   The FCC also adopted several years ago comprehensive and restrictive
regulations that allow cable television systems to modify regulated rates on a
quarterly or annual basis using various methodologies that account for changes
in:
 
  . the number of regulated channels;
 
  . inflation; and
 
  . certain external costs, such as franchise and other governmental fees,
    copyright and retransmission consent fees, taxes, programming fees and
    franchise-related obligations.
 
   The Company cannot predict whether the FCC will modify these rate
regulations in the future.
 
   The Communications Act and FCC regulations also permit local franchising
authorities to file complaints with the FCC concerning rates the Company
charges for certain non-basic cable programming service tiers. The
Communications Act requires the FCC:
 
  . to issue a final order within 90 days after receipt of a rate complaint
    from a local franchising authority;
 
  . to reduce any rates found to be unreasonable; and
 
  . to order the operator to pay refunds to subscribers for any rate
    overcharges.
 
   The 1996 Act prohibits the regulation of non-basic cable programming
service tiers after March 31, 1999, except as noted below under the terms of
the Social Contract although Congress could consider legislation to delay,
eliminate altogether or reinstitute the regulation of non-basic rates.
 
   The Communications Act also:
 
  . prohibits the regulation of the rates charged by cable operators for
    programming offered on a per-channel or per-program basis, and for
    certain multi-channel groups of new non-basic programming that operators
    offered to subscribers after September 30, 1994;
 
  . requires operators to charge uniform rates throughout each franchise area
    that is not subject to effective competition, as defined by federal law;
 
  . prohibits regulation of non-predatory bulk discount rates offered by
    operators to subscribers in commercial and residential developments; and
 
  . permits regulated equipment rates to be computed by aggregating costs of
    broad categories of equipment at the franchise, system, regional or
    company level.
 
   The 1996 Telecom Act also provides for the deregulation of the CPST of
certain cable systems owned by "small cable operators." Among other
requirements, an eligible small operator is one which does not serve,
 
                                      14
<PAGE>
 
directly or through an affiliate, one percent or more of cable subscribers
nationwide and is not affiliated with any entity or entities whose gross
annual revenues aggregate more than $250,000,000. The Company is not eligible
for small cable operator status under the 1996 Telecom Act because the Morgan
Stanley Entities own more than 20% of the Company, and those investors and
their affiliated companies have aggregated annual revenues in excess of
$250,000,000.
 
   In addition to rate deregulation for certain small cable operators under
the 1996 Telecom Act, the FCC adopted regulations in June 1995 ("Small System
Regulations") pursuant to the 1992 Cable Act that were designed to reduce the
substantive and procedural burdens of rate regulation on "small cable
systems." For purposes of these FCC regulations, a "small cable system" is a
system serving 15,000 or fewer subscribers that is owned by or affiliated with
a cable company which serves, in the aggregate, 400,000 or fewer subscribers.
Under the FCC's Small System Regulations, qualifying systems may justify their
regulated service and equipment rates using a simplified cost-of-service
formula. The regulatory benefits accruing to qualified small cable systems
under certain circumstances remain effective even if such systems are later
acquired by a larger cable operator that serves in excess of 400,000
subscribers. Various franchising authorities and municipal groups have
requested the FCC to reconsider its Small System Regulations. Renaissance
Media's assumption of Time Warner's Social Contract precludes such exemption
from rate regulation for systems that serve 15,000 or fewer subscribers, but
ameliorates the effect of such preclusion by permitting the Company to benefit
from automatic rate adjustments during the term of the Social Contact for all
of the Systems acquired from Time Warner. The Company has the right to
increase monthly CPST rates by $1.00 during each year of the Social Contact
above other permissible increases resulting from inflation and so-called
"external costs."
 
 "Anti-Buy Through" Provisions
 
   The 1992 Cable Act also requires cable systems to permit customers to
purchase video programming offered by the operator on a per channel or a per
program basis without the necessity of subscribing to any tier of service,
other than the basic service tier, unless the system's lack of addressable
converter boxes or other technological limitations does not permit it to do
so. The statutory exemption for cable systems that do not have the
technological capacity to offer programming in the manner required by the
statute is available until a system obtains such capability, but not later
than December 2002. The FCC may waive such time periods, if deemed necessary.
Most of the Company's cable systems do not have the technological capability
to offer programming in the manner required by the statute and currently are
exempt from complying with the requirement.
 
 Must Carry/Retransmission Consent
 
   The 1992 Cable Act contains broadcast signal carriage requirements that
allow local commercial television broadcast stations to elect once every three
years to require a cable system to carry the station, subject to certain
exceptions, or to negotiate for "retransmission consent" to carry the station.
A cable system generally is required to devote up to one-third of its
activated channel capacity for the carriage of local commercial television
stations whether pursuant to the mandatory carriage or retransmission consent
requirements of the 1992 Cable Act. Local noncommercial television stations
are also given mandatory carriage rights; however, such stations are not given
the option to negotiate retransmission consent for the carriage of their
signals by cable systems. Additionally, cable systems are required to obtain
retransmission consent for all "distant" commercial television stations
(except for commercial satellite-delivered independent "superstations" such as
WGN), commercial radio stations and certain low power television stations
carried by such systems after October 1993. In March 1997, the U.S. Supreme
Court affirmed a three-judge district court decision upholding the
constitutional validity of the 1992 Cable Act's mandatory signal carriage
requirements. As a result of the mandatory carriage rules, some of the Systems
have been required to carry television broadcast stations that otherwise would
not have been carried and may be required to displace possibly more attractive
programming. The retransmission consent rules have resulted in the deletion of
certain local and distant television broadcast stations which various Systems
were carrying. To the extent retransmission consent fees must be paid for the
continued carriage of certain television stations, the Company's cost of doing
business will increase with no assurance that such fees can be recovered
through rate increases. The FCC has initiated rulemaking to consider the
requirements, if any, for mandatory
 
                                      15
<PAGE>
 
carriage of DTV signals. The Company cannot predict the ultimate outcome of
this proceeding, which could require the carriage on its cable television
system of new services and the displacement of more attractive programming.
 
 Designated Channels
 
   The Communications Act permits franchising authorities to require cable
operators to set aside certain channels for public, educational and
governmental access programming. Federal law also requires a cable system with
36 or more activated channels to designate a portion of its channel capacity
for commercial leased access by third parties to provide programming that may
compete with services offered by the cable operator. The U.S. Supreme Court
has upheld the statutory right of cable operators to prohibit or limit the
provision of indecent or obscene programming on commercial leased access
channels. The FCC has adopted rules regulating: (i) the maximum reasonable
rate a cable operator may charge for commercial use of the designated channel
capacity; (ii) the terms and conditions for commercial use of such channels;
and (iii) the procedures for the expedited resolution of disputes concerning
rates or commercial use of the designated channel capacity.
 
 Franchise Procedures
 
   The 1984 Cable Act affirms the right of franchising authorities (state or
local, depending on the practice in individual states) to award one or more
franchises within their jurisdictions and prohibits non-grandfathered cable
systems from operating without a franchise in such jurisdictions. The 1992
Cable Act encourages competition with existing cable systems by (i) allowing
municipalities to operate their own cable systems without franchises, (ii)
preventing franchising authorities from granting exclusive franchises or
unreasonably refusing to award additional franchises covering an existing
cable system's service area, and (iii) prohibiting (with limited exceptions)
the common ownership of cable systems and co-located MMDS or SMATV systems. In
January 1995, the FCC relaxed its restrictions on ownership of SMATV systems
to permit a cable operator to acquire SMATV systems in the operator's existing
franchise area so long as the programming services provided through the SMATV
system are offered according to the terms and conditions of the cable
operator's local franchise agreement. The 1996 Telecom Act provides that the
cable/SMATV and cable/MMDS cross-ownership rules do not apply in any franchise
area where the cable operator faces "effective competition" as defined by
federal law. The 1996 Telecom Act also permits local telephone companies to
provide video programming services as traditional cable operators with local
franchises.
 
   The 1984 Cable Act also provides that in granting or renewing franchises,
local authorities may establish requirements for cable-related facilities and
equipment, but not for video programming or information services other than in
broad categories. The 1984 Cable Act limits franchise fees to 5% of cable
system revenue derived from the provision of cable services and permits cable
operators to obtain modification of franchise requirements by the franchising
authority or judicial action if warranted by changed circumstances. The
Company's franchises typically provide for payment of fees to franchising
authorities in the range of 3% to 5% of "revenue" (as defined by each
franchise agreement). Recently, a federal appellate court held that a cable
operator's gross revenue includes all revenue received from subscribers,
without deduction, and overturned an FCC order which had held that a cable
operator's gross revenue does not include money collected from subscribers
that is allocated to pay local franchise fees. The 1996 Telecom Act generally
prohibits franchising authorities from: (i) imposing requirements in the cable
franchising process that require, prohibit or restrict the provision of
telecommunications services by an operator; (ii) imposing franchise fees on
revenue derived by the operator from providing telecommunications services
over its cable system; or (iii) restricting an operator's use of any type of
subscriber equipment or transmission technology.
 
   The 1984 Cable Act provides for, among other things, procedural and
substantive safeguards for cable operators and creates an orderly franchise
renewal process in which renewal of franchise licenses issued by governmental
authorities cannot be unreasonably withheld, or, if renewal is withheld and
the franchise authority acquires ownership of the system or effects a transfer
of the system to another person, such franchise authority or other person must
pay the operator either: (i) the "fair market value" (without value assigned
to the franchise)
 
                                      16
<PAGE>
 
for the system if the franchise was granted after the effective date of the
1984 Cable Act (December 1984) or the franchise was pre-existing but the
franchise agreement did not provide a buyout or (ii) the price set in
franchise agreements predating the 1984 Cable Act. In addition, the 1984 Cable
Act established comprehensive renewal procedures which require that an
incumbent franchisee's renewal application be assessed on its own merits and
not as part of a comparative process with competing applications. The 1984
Cable Act also establishes buyout prices in the event the franchise is
terminated "for cause" and the franchise authority desires to acquire the
system. For franchises which post-date the existence of the 1984 Cable Act or
pre-date the 1984 Cable Act but do not specify buyout terms, the franchise
authority must pay the operator an "equitable" price. As amended by the 1996
Telecom Act, the 1984 Cable Act permits the cable operator to seek
renegotiation and modification of franchise requirements if warranted by
changed circumstances.
 
   The 1992 Cable Act made several changes to the renewal process which could
make it easier for a franchising authority to deny renewal. Moreover, even if
the franchise is renewed, the franchising authority may seek to impose new and
more onerous requirements such as significant upgrades in facilities and
services or increased franchise fees as a condition of renewal. Similarly, if
a franchising authority's consent is required for the purchase or sale of a
cable system or franchise, such authority may attempt to impose more
burdensome or onerous franchise requirements in connection with a request for
such consent. Historically, franchises have been renewed for cable operators
that have provided satisfactory services and have complied with the terms of
their franchises. Most of the Company's franchises can be terminated prior to
their stated expirations for uncured breaches of material provisions.
 
   Various courts have considered whether franchising authorities have the
legal right to limit franchise awards to a single cable operator and to impose
certain substantive franchise requirements (i.e., access channels, universal
service and other technical requirements). These decisions have been somewhat
inconsistent and, until the U.S. Supreme Court rules definitively on the scope
of cable operators' First Amendment protections, the legality of the
franchising process generally and of various specific franchise requirements
is likely to be in a state of flux.
 
 Ownership Limitations
 
   Pursuant to the 1992 Cable Act, the FCC adopted rules prescribing national
customer limits and limits on the number of channels that can be occupied on a
cable system by a video programmer in which the cable operator has an
attributable interest. The FCC's horizontal ownership limits have been stayed
because a federal district court found the statutory limitation to be
unconstitutional. An appeal of that decision is pending and has been
consolidated with an appeal of the FCC's regulations which implemented the
national customer and channel limitation provisions of the 1992 Cable Act. In
connection with these ownership limitations, the FCC recently reaffirmed the
current 30% horizontal ownership limit, but maintained its voluntary stay on
enforcement of that limit pending further action by the federal appellate
court; reaffirmed its horizontal ownership information reporting requirements;
made effective the requirement that any person holding an attributable
interest (as defined by FCC rules) in cable systems reaching 20% or more of
homes passed by cable plant nationwide notify the FCC of any incremental
change in that person's cable ownership interests; and opened an
administrative proceeding to reevaluate its cable television attribution rules
due to recent developments in the cable industry, including strategic
alliances, partnerships, system swaps, mergers and acquisitions among cable
entities.
 
   The 1996 Telecom Act eliminates the statutory prohibition on the common
ownership, operation or control of a cable system and a television broadcast
station in the same service area and directs the FCC to eliminate its
regulatory restrictions on cross-ownership of cable systems and national
broadcasting networks and to review its broadcast-cable ownership restrictions
to determine if they are necessary in the public interest. Pursuant to the
mandate of the 1996 Telecom Act, the FCC eliminated its regulatory restriction
on cross-ownership of cable systems and national broadcasting networks. In
March 1998, the FCC initiated a rulemaking proceeding to determine whether the
cable television/broadcast cross-ownership ban is necessary and in the public
interest or should be eliminated.
 
                                      17
<PAGE>
 
 Telephone Company Ownership of Cable Systems
 
   The 1996 Telecom Act makes far-reaching changes in the regulation of
telephone companies that provide video programming services. The new law
eliminates federal legal barriers to competition in the local telephone and
cable communications businesses, preempts legal barriers to competition that
previously existed in state and local laws and regulation and sets basic
standards for relationships between telecommunications providers. The 1996
Telecom Act eliminates the requirement that LECs obtain FCC approval under
Section 214 of the Communications Act before providing video services in their
telephone service areas and removes the statutory telephone company/cable
television cross-ownership prohibition, thereby allowing LECs to offer video
services in their telephone service areas. LECs may provide service as
traditional cable operators with local franchises or they may opt to provide
their programming over unfranchised "open video systems," subject to certain
conditions, including, but not limited to, setting aside a portion of their
channel capacity for use by unaffiliated program distributors on a non-
discriminatory basis.
 
   The 1996 Telecom Act generally limits acquisitions and prohibits certain
joint ventures between LECs and cable operators in the same market. There are
some statutory exceptions to the buy-out and joint venture prohibitions,
including exceptions for certain small cable systems (as defined by federal
law) and for cable systems or telephone facilities serving certain rural
areas, and the FCC is authorized to grant waivers of the prohibitions under
certain circumstances. The FCC adopted regulations implementing the 1996
Telecom Act requirement that LECs open their telephone networks to competition
by providing competitors interconnection, access to unbundled network elements
and retail services at wholesale rates. Numerous parties appealed these
regulations. The Eighth Circuit Court of Appeals in an opinion in 1997,
overturned many of the interconnection rules affecting LECs, including most
aspects of the FCC's pricing rules, intrastate dialing parity rules, certain
rules governing unbundled elements and the "pick and choose" rule on the
belief that the FCC lacked the authority to impose rules upon state
commissions. The government appealed the Eighth Circuit's opinion and on
January 25, 1999, the Supreme Court upheld the FCC's interconnection rules in
all respects relevant to the Company. The ultimate outcome of the FCC's
regulations and the 1996 Telecom Act or any final regulations adopted pursuant
to the new law on the Company or its business cannot be determined at this
time.
 
 Pole Attachment
 
   The Communications Act requires the FCC to regulate the rates, terms and
conditions imposed by public utilities for cable systems' use of utility pole
and conduit space unless state authorities can demonstrate that they
adequately regulate pole attachment rates, as is the case in Louisiana. In the
absence of state regulation, the FCC administers pole attachment rates through
the use of a formula that it has devised. In some cases, utility companies
have increased pole attachment fees for cable systems that have installed
fiber optic cables and that are using such cables for the distribution of
nonvideo services. The FCC concluded that, in the absence of state regulation,
it has jurisdiction to determine whether utility companies have justified
their demand for additional rental fees and that the Communications Act does
not permit disparate rates based on the type of service provided over the
equipment attached to the utility's pole. The 1996 Telecom Act and the FCC's
implementing regulations modify the current pole attachment provisions of the
Communications Act by immediately permitting certain providers of
telecommunications services to rely upon the protections of the current law
and by requiring that utilities provide cable systems and telecommunications
carriers with nondiscriminatory access to any pole, conduit or right-of-way
controlled by the utility. The 1996 Act amendment increases significantly
future pole attachment rates for cable television systems which use pole
attachments in connection with the provision of telecommunications services as
a result of a new rate formula charged to telecommunication carriers for the
non-useable space of each pole. These rates are to be phased in after a five-
year period beginning in 2001. In adopting its new attachment regulations, the
FCC concluded, in part, that a cable operator providing Internet service on
its cable system is not providing a telecommunications service for purposes of
the new rules. Several parties have requested the FCC to reconsider its new
regulations and several parties have challenged the new rules in court. A
federal district court recently upheld the constitutionality of the new
statutory provision and the utilities involved in that litigation have
appealed the lower court's decision. The Company is unable to predict the
outcome of this litigation or the ultimate impact of any revised FCC rate
formula or of any new pole attachment rate regulations on its business and
operations.
 
                                      18
<PAGE>
 
 Other Statutory Provisions
 
   The 1992 Cable Act, the 1996 Telecom Act and FCC regulations preclude a
satellite video programmer affiliated with a cable company, or with a common
carrier providing video programming directly to customers, from favoring an
affiliated company over competitors and require such a programmer to sell its
programming to other multichannel video distributors. These provisions limit
the ability of cable program suppliers affiliated with cable companies or with
common carriers providing satellite-delivered video programming directly to
customers to offer exclusive programming arrangements to their affiliates. The
1992 Cable Act requires operators to block fully both the video and audio
portion of sexually explicit or indecent programming on channels that are
primarily dedicated to sexually oriented programming or, alternatively, to
carry such programming only at "safe harbor" time periods currently defined by
the FCC as the hours between 10 p.m. to 6 a.m. A three-judge federal district
court recently determined that this provision was unconstitutional, and the
federal government announced that it will appeal the lower court's ruling. The
1996 Telecom Act also contains provisions regulating the content of video
programming and computer services and specifically prohibits the use of
computer services to transmit "indecent" material to minors. The United States
Supreme Court has found these provisions unconstitutional to the extent they
regulated the transmission of indecent material. The Communications Act also
includes provisions, among others, concerning horizontal and vertical
ownership of cable systems, customer service, customer privacy, marketing
practices, equal employment opportunity, technical standards, and consumer
equipment compatibility.
 
 Other FCC Regulations
 
   In addition to the FCC regulations noted above, there are other FCC
regulations covering such areas as equal employment opportunity, syndicated
program exclusivity, network program nonduplication, closed captioning of
video programming, registration of cable systems, maintenance of various
records and public inspection files, microwave frequency usage, lockbox
availability, origination cablecasting and sponsorship identification, antenna
structure notification, marking and lighting, carriage of local sports
broadcast programming, application of rules governing political broadcasts,
limitations on advertising contained in nonbroadcast children's programming,
consumer protection and customer service, ownership of home wiring and MDU
building inside wiring, indecent programming, programmer access to cable
systems, programming agreements and technical standards. The FCC has adopted
regulations to implement the requirements of the 1992 Cable Act designed to
improve the compatibility of cable television systems and consumer electronics
equipment. These regulations, inter alia, generally prohibit cable television
operators from scrambling their basic service tier and from changing the
infrared codes used in their existing customer premises equipment. This latter
requirement could make it more difficult or costly for cable television
operators to upgrade their customer premises equipment and the FCC has been
asked to reconsider its regulations. The 1996 Telecom Act directs the FCC to
set only minimal standards to assure compatibility between television sets,
VCRs and cable television systems, and to rely on the marketplace. Pursuant to
this statutory mandate, the FCC has adopted rules to assure the competitive
availability to consumers of customer premises equipment, such as converters,
used to access the services offered by cable television systems and other
multichannel video programming distributors. Pursuant to those rules,
consumers are given the right to attach compatible equipment to the Company's
cable facilities, so long as the equipment does not harm the Company's
network, does not interfere with the services purchased by other subscribers,
and is not used to receive unauthorized services. As of July 1, 2000, cable
television operators are required to separate security from non-security
functions in the subscriber premises equipment which they sell or lease to
their subscriber and offer their subscribers the option of using component
security modules obtained from the cable operator with set-top units purchased
or leased from retail outlets. As of January 1, 2005, the Company will be
prohibited from distributing new set-top equipment integrating both security
and non-security functions to its subscribers.
 
   The FCC has the authority to enforce its regulations through the imposition
of substantial fines, the issuance of cease and desist orders and/or the
imposition of other administrative sanctions, such as the revocation of FCC
licenses needed to operate certain transmission facilities often used in
connection with cable operations.
 
 
                                      19
<PAGE>
 
   The 1992 Cable Act, the 1996 Telecom Act and the FCC's rules implementing
these statutory provisions generally have increased the administrative and
operational expenses of cable systems and have resulted in additional
regulatory oversight by the FCC and local franchise authorities. The Company
will continue to develop strategies to minimize the adverse impact that the
FCC's regulations and the other provisions of the 1992 Cable Act and the 1996
Telecom Act have on the Company's business. However, no assurances can be
given that the Company will be able to develop and successfully implement such
strategies to minimize any adverse impact of the 1992 Cable Act or the 1996
Telecom Act on the Company's business.
 
The Social Contract
 
   The Social Contract between Time Warner and the FCC, which became effective
on January 1, 1996, resolved certain outstanding cable rate cases involving
Time Warner that arose in connection with regulations promulgated by the FCC
pursuant to the 1992 Cable Act. The Social Contract established parameters
within which Time Warner and subsequent buyers of Time Warner's cable
television systems might determine certain subscriber rates and maintain a
high level of technical capacity in such systems. Among other obligations,
Time Warner agreed to upgrade one-half of its systems to 550 MHz capacity and
the balance to 750 MHz capacity within the term of the Social Contract of
which at least 200 MHz is expected to be allocated to digital compression
technology by January 1, 2001. In exchange, the Social Contract settled those
certain outstanding rate cases and established a right of Time Warner to
increase monthly CPST rates by an additional $1.00 per year above other
permissible increases resulting from inflation and so-called "external costs"
for the term of the Social Contract through the year 2000. The Social Contract
provides that Time Warner may petition the FCC to modify or terminate the
Social Contract based on any relevant change in applicable law, regulation or
circumstance.
 
   In connection with the Acquisition, the Company received the FCC's consent
to the assignment of the Social Contract as it applies to the Systems. By
assuming Time Warner's unsatisfied obligations with respect to the System, the
Company gained certain rate benefits described above. The principal remaining
obligations of the Social Contract as they relate to the Systems is to upgrade
the Tennessee System, the St. Landry system and approximately one-half of the
St. Tammany and Lafourche systems to 750 MHz capacities. The failure to comply
with the Social Contract's upgrade requirements will subject the Company to
refund liability under the terms of the Social Contract. The Company is also
required to ensure that at least 60% of new analog services in the Systems are
added to the CPST and add at least 15 new channels on average (weighted by
CPST subscribers) to the CPST of the Systems. The Company believes the
upgrades are prudent both due to the competitive advantages to be gained by
technologically advanced facilities and from the rate increases the Company
will be permitted to implement.
 
   The consummation of the Charter Transaction will not change the rights or
obligations of the Company under the Social Contract.
 
Copyright
 
   Cable systems are subject to federal copyright licensing covering carriage
of television and radio broadcast signals. In exchange for filing certain
reports and contributing a percentage of their revenue to a federal copyright
royalty pool, cable operators can obtain blanket permission to retransmit
copyrighted material on broadcast signals. The nature and amount of future
payments for broadcast signal carriage cannot be predicted at this time. In a
recent report to Congress, the Copyright Office recommended that Congress make
major revisions of both the cable television and satellite compulsory licenses
to make them as simple as possible to administer, to provide copyright owners
with full compensation for the use of their works, and to treat every
multichannel video delivery system the same, except to the extent that
technological differences or differences in the regulatory
 
                                      20
<PAGE>
 
burdens placed upon the delivery system justify different copyright treatment.
The possible simplification, modification or elimination of the compulsory
copyright license is the subject of continuing legislative review. The
elimination or substantial modification of the cable compulsory license could
adversely affect the Company's ability to obtain suitable programming and
could substantially increase the cost of programming that remained available
for distribution to the Company's customers. The Company cannot predict the
outcome of this legislative activity.
 
   Cable operators distribute programming and advertising that use music
controlled by the two major music performing rights organizations, ASCAP and
BMI. In October 1989, the special rate court of the U.S. District Court for
the Southern District of New York imposed interim rates on the cable
industry's use of ASCAP-controlled music. The same federal district court
recently established a special rate court for BMI. BMI and certain cable
industry representatives recently concluded negotiations for a standard
licensing agreement covering the usage of BMI music contained in advertising
and other information inserted by operators into cable programming and on
certain local access and origination channels carried on cable systems. ASCAP
and cable industry representatives have met to discuss the development of a
standard licensing agreement covering ASCAP music in local origination and
access channels and pay-per-view programming. Although the Company cannot
predict the ultimate outcome of these industry negotiations or the amount of
any license fees it may be required to pay for past and future use of ASCAP-
controlled music, it does not believe such license fees will be material to
the Company's operations.
 
State and Local Regulation
 
   Cable systems are subject to state and local regulation, typically imposed
through the franchising process, because they use local streets and rights-of-
way. Regulatory responsibility for essentially local aspects of the cable
business such as franchisee selection, billing practices, system design and
construction, and safety and consumer protection remains with either state or
local officials and, in some jurisdictions, with both.
 
   Cable systems generally are operated pursuant to nonexclusive franchises,
permits or licenses granted by a municipality or other state or local
government entity. Franchises generally are granted for fixed terms and in
many cases are terminable if the franchisee fails to comply with material
provisions. The terms and conditions of franchises vary materially from
jurisdiction to jurisdiction. Each franchise generally contains provisions
governing payment of franchise fees, franchise term, system construction and
maintenance obligations, system channel capacity, design and technical
performance, customer service standards, franchise renewal, sale or transfer
of the franchise, territory of the franchisee, indemnification of the
franchising authority, use and occupancy of public streets and types of cable
services provided. A number of states subject cable systems to the
jurisdiction of centralized state governmental agencies, some of which impose
regulation of a character similar to that of a public utility. Attempts in
other states to regulate cable systems are continuing and can be expected to
increase. To date, Louisiana, Mississippi and Tennessee have not enacted such
state level regulation. However, a bill which was pending in the 1997 term of
the Louisiana legislature and which provided for the certification and
regulation of cable television systems by the Public Utility Committee ("PUC")
was not re-introduced in the 1998 term. The bill, if adopted, would have (i)
allowed the PUC to void, order new rates or reduce rates found to be
discriminatory or necessary to reflect adequate service; (ii) required that
all cable television systems commencing or expanding service be franchised
conditioned upon confirmation by the PUC; and (iii) provided the PUC with the
authority to order construction, operation, or an extension of cable service
on such terms and conditions as it deems reasonable where cable service has
been unreasonably delayed or withheld. However, this bill could be re-
introduced for the 1999 legislative session, which begins on the last Monday
of March 1999. During its 1997-1998 session, the Tennessee legislature
considered a bill which would authorize municipalities operating electric
utility plants and electric cooperatives authorization to provide cable
television and other services. A second bill which was also considered would
have authorized six pilot municipal electric systems to provide cable
television and other services. Though the authorization would have terminated
on June 30, 2001, any system actually providing such services to customers as
a pilot system prior to that date would have been permitted to continue doing
so indefinitely. Neither of these bills was enacted by the Tennessee
legislature. A
 
                                      21
<PAGE>
 
bill which was pending in the Mississippi legislature and which would have
prohibited landlords and condominium boards from preventing any tenant of a
dwelling unit or condominium owner from procuring cable television service
from a cable television system operating pursuant to a written franchise
agreement with a municipality or county lapsed in the senate PUC in 1998. The
Company cannot predict whether any of the states in which it currently
operates will engage in such regulation in the future. State and local
franchising jurisdiction is not unlimited, however, and must be exercised
consistently with federal law. The 1992 Cable Act immunizes franchising
authorities from monetary damage awards arising from regulation of cable
systems or decisions made on franchise grants, renewals, transfers and
amendments.
 
   The foregoing does not purport to describe all present and proposed
federal, state, and local regulations and legislation affecting the cable
industry. Other existing federal regulations, copyright licensing, and, in
many jurisdictions, state and local franchise requirements, are currently the
subject of judicial proceedings, legislative hearings and administrative and
legislative proposals which could change, in varying degrees, the manner in
which cable systems operate. Neither the outcome of these proceedings nor the
impact on the cable television industry or the Company can be predicted at
this time.
 
Forward-Looking Statements
 
   Any matters discussed or incorporated by reference in this Form 10-K that
are not historical facts are forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. Any
expressions that indicate future events and trends identify forward-looking
statements. These forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from
historical results, results the Company anticipates or results expressed or
implied by such forward-looking statements. These risks and uncertainties
included, among others:
 
  . General economic and business conditions, both nationally and in the
    regions where the Company operates;
 
  . Technology changes;
 
  . Competition;
 
  . Changes in business strategy or development plans;
 
  . The ability to attract and retain qualified personnel;
 
  . Existing governmental regulations and changes in, or the failure to
    comply with, governmental regulations;
 
  . Liability and other claims asserted against the Company;
 
  . Year 2000 issues and Year 2000 readiness disclosures; and
 
  . Adverse developments under, or termination of, the Charter Purchase
    Agreement with Charter and Buyer.
 
   The Company undertakes no obligation to update any forward-looking
statements or to release publicly the results of any revisions to forward-
looking statements made in this Form 10-K to reflect events or circumstances
after the date of this Form 10-K or to reflect the occurrence of unanticipated
events.
 
Item 2--Properties
 
   A cable television system consists of three principal operating components.
The first component, known as the headend, receives television, radio and
information signals generally by means of special antennas and satellite earth
stations. The second component, the distribution network, which originates at
the headend and extends throughout the system's service area, consists of
microwave relays, coaxial or fiber optic cables and associated electronic
equipment placed on utility poles or buried underground. The third component
of the system is a "drop cable," which extends from the distribution network
into each customer's home and connects
 
                                      22
<PAGE>
 
the distribution system to the customer's television set. An additional
component used in certain systems is the home terminal device, or
converter/descrambler, that expands channel capacity to permit reception of
more than twelve channels of programming on a non-cable ready television set
and permits the operator to control the reception of program offerings by
subscribers.
 
   The Company's principal physical assets consist of cable television
systems, including signal-receiving, encoding and decoding apparatus,
headends, distribution systems and subscriber house drop equipment for each of
the Systems. The signal receiving apparatus typically includes a tower,
antennas, ancillary electronic equipment and earth stations for reception of
satellite signals. Headends, consisting of associated electronic equipment
necessary for the reception, amplification and modulation of signals,
typically are located near the receiving devices. The Company's distribution
systems consist primarily of coaxial cable, fiber optic cable and related
electronic equipment. As upgrades are completed, the Systems will continue to
incorporate fiber optic cable. Subscriber equipment consists of house drops,
converters/descramblers and, in some cases, traps. The Company owns its
distribution systems, various office fixtures, test equipment and certain
service vehicles. The physical components of the Systems require maintenance
and periodic upgrading to keep pace with technological advances.
 
   The Company's cables are generally attached to utility poles under pole
rental agreements with local public utilities, although in some areas the
distribution cable is buried in trenches or placed in underground ducts. The
FCC regulates most pole attachment rates under the Federal Pole Attachment
Act, although in certain cases attachment rates are regulated by state law.
 
   The Company owns or leases 27 parcels of real property for signal reception
sites (antenna towers and headends), microwave complexes and business offices.
The Company believes that its properties, both owned and leased, are in good
condition and are suitable and adequate for the Company's business operations
as presently conducted.
 
Item 3--Legal Proceedings
 
   As of the date hereof, the Company is not a party to any material pending
litigation proceedings. The Systems are subject to certain litigation
proceedings incidental to their businesses. Pursuant to the Time Warner Asset
Purchase Agreement, the Company did not assume any liabilities related to
litigation commenced on or prior to the acquisition date, and Time Warner has
agreed to indemnify the Company from and against any such liabilities, subject
to the terms and provisions of the Time Warner Asset Purchase Agreement. The
Company's management believes that the outcome of all pending legal
proceedings will not, individually or in the aggregate, have a material
adverse effect on the Company's business, results of operations or financial
condition.
 
Item 4--Submission of Matters to a Vote of Security Holders
 
   No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Annual Report on Form 10-K.
 
                                    PART II
 
Item 5--Market for Registrant's Common Equity and Related Stockholder Matters
 
   There is no established trading market for the equity interests in any of
Renaissance Louisiana, Renaissance Tennessee, Renaissance Capital and Group.
 
   Holdings owns all of the limited liability company membership interests of
Group. Group owns all the limited liability company membership interests of
Renaissance Louisiana and Renaissance Tennessee and all the outstanding
capital stock of Renaissance Capital. Group has not made any distributions to
Holdings since its inception, and Renaissance Louisiana, Renaissance Tennessee
and Renaissance Capital have made no
 
                                      23
<PAGE>
 
distributions to Group since their respective inceptions. The Company's
ability to pay dividends is limited under the terms of covenants in the
indenture governing Group's outstanding Senior Discount Notes.
 
Item 6--Selected Financial Data
 
   The selected financial and other data set forth below were derived from the
historical combined financial statements of the Systems acquired in the
Acquisition and the historical combined and consolidated financial statements
of the Company. The financial data as of December 31, 1995, 1996, 1997 and
1998 and as of April 8, 1998 and for the years ended December 31, 1995, 1996,
1997 and 1998 and for the period January 1 to April 8, 1998 were derived from
the combined financial statements of the Systems, the combined financial
statements of Holdings and Media and the consolidated financial statements of
the Company which have been audited by Ernst & Young LLP, independent
auditors. The financial data for the Systems as of December 31, 1994 and for
the year ended December 31, 1994 were derived from unaudited combined
financial statements of the Systems which, in the opinion of management,
include all adjustments (consisting only of normal recurring adjustments)
necessary for a fair presentation of the results of operations and financial
condition of the Systems for such periods. The selected financial and other
data set forth below should be read in conjunction with, and are qualified in
their entirety by, "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the financial statements and notes
thereto include elsewhere in this Form 10-K.
 
                                      24
<PAGE>
 
<TABLE>
<CAPTION>
                                                                                            Renaissance
                                                                                            Media Group
                                                                                 Holdings       LLC
                                                                                and Media
                                            Systems (1)                          Combined   Consolidated
                          ---------------------------------------------------- ------------ ------------
                                                                   Period from
                                Year Ended December 31,            January 1--  Year Ended   Year Ended
                          ---------------------------------------   April 8,   December 31, December 31,
                            1994      1995      1996       1997       1998         1997       1998(13)
                          --------  --------  ---------  --------  ----------- ------------ ------------
                                      (dollars in thousands, except per subscriber data)
<S>                       <C>       <C>       <C>        <C>       <C>         <C>          <C>
Statement of Operations
 Data:
 Revenues (2)...........  $ 40,168  $ 43,549  $  47,327  $ 50,987   $ 15,221     $     65    $  41,524
 System operating
  expenses (2)(3).......    18,656    20,787     22,626    23,142      6,952          --        18,998
 Non-system operating
  expenses (4)..........     2,032     2,200      2,733     2,782        785           25        2,039
 Depreciation,
  amortization and loss
  (gain) on disposal of
  fixed assets..........    16,583    17,610     18,116    19,317      4,935          --        19,107
                          --------  --------  ---------  --------   --------     --------    ---------
 Operating income.......     2,897     2,952      3,852     5,746      2,549           40        1,380
                          --------  --------  ---------  --------   --------     --------    ---------
 Interest expense net...   (11,603)  (11,871)       --        --         --             4      (14,200)
 Income tax benefit
  (expense).............     3,482     3,567     (1,502)   (2,262)    (1,191)         --          (135)
                          --------  --------  ---------  --------   --------     --------    ---------
 Net (loss) income......  $ (5,224) $ (5,352) $   2,350  $  3,484   $  1,358     $     36    $ (12,955)
                          ========  ========  =========  ========   ========     ========    =========
Balance Sheet Data (at
 period end):
 Cash and cash
  equivalents...........  $    419  $    566  $     570  $  1,371   $      7     $    903    $   8,482
 Property, plant and
  equipment, net........    34,739    34,426     36,966    36,944     35,992          --        63,952
 Total assets...........   142,316   132,905    300,049   288,914    282,943       17,003      315,750
 Total debt.............   130,068   128,328        --        --         --           --       209,874
 Net (liabilities)
  assets................  $(48,939) $(54,292) $ 237,475  $224,546   $218,154     $ 15,036    $  95,621
Other Financial Data:
 Net cash provided by
  operations............  $  8,019  $  7,523  $  23,088  $ 23,604   $  6,999     $    (97)   $  22,696
 Net cash (used in)
  investing activities..   ( 9,964)   (7,376)  (257,643)  ( 6,390)      (613)     (15,000)    (317,036)
 Net cash provided by
  (used in) financing
  activities............     2,041       -0-    235,125   (16,413)    (7,750)      16,000      302,822
 EBITDA (5).............    19,480    20,562     21,968    25,063      7,484           40       20,487
 System cash flow (6)...    21,512    22,762     24,701    27,845      8,269          --        22,526
 Capital expenditures...  $  9,152  $  7,376  $   8,170  $  6,390   $    613          --     $   5,683
 EBITDA margin (2)......      48.5%     47.2%      46.4%     49.2%      49.2%        61.5%        49.3%
 Ratio of earnings to
  fixed charges(7)......       --        --         --        --         --           --           --
Other Data:
 Homes passed (at period
  end)(8)...............   143,248   145,148    175,522   178,449    179,402          N/A      185,620
 Basic subscribers (at
  period end)              115,075   120,340    123,203   126,558    127,191          N/A      129,164
 Basic penetration (at
  period end)(8)........      80.3%     82.9%      70.2%     70.9%      70.9%         N/A         69.6%
 Premium units (at
  period end)...........    62,434    60,462     64,716    64,963     61,053          N/A       58,712
 Premium penetration (at
  period end)...........      54.3%     50.2%      52.5%     51.3%      48.0%                     45.5%
 Average monthly revenue
  per basic
  subscriber(9).........  $  29.87  $  30.83  $   32.39  $  34.02   $  36.73          N/A    $   37.24
 Annual EBITDA per basic
  subscriber(10)........  $ 173.85  $ 174.69  $  180.40  $ 200.70   $ 216.69          N/A    $  220.46
 Annual system cash flow
  per basic
  subscriber(11)........  $ 191.98  $ 193.38  $  202.85  $ 222.97   $ 239.42          N/A    $  242.40
 Annual capital
  expenditures per basic
  subscriber(12)........  $  81.68  $  62.66  $   67.09  $  51.17   $  17.75          N/A    $   61.15
</TABLE>
--------
(1)   Prior to January 4, 1996, the Systems were owned by certain subsidiaries
      of CVI, and for the period January 4, 1996 through April 8, 1998, the
      Systems were owned by Time Warner. Financial statements of the Systems
      presented in this annual report for periods prior to April 9, 1998 in
      Item 8 are referred to as financial statements of the "Predecessor".
 
 
                                      25
<PAGE>
 
(2)   Prior to 1997, franchise fees were included in both revenues and
      expenses. In 1997, the Systems began itemizing franchise fees on
      subscriber billing invoices and recorded such fees as an offset to
      system operating expenses. Had the itemization process occurred prior to
      1997, the estimated amount of franchise fees that would have been
      reflected as an offset to System operating expenses and not included in
      revenues in 1994, 1995 and 1996 would have been approximately $1.3
      million, $1.4 million and $1.5 million, respectively. The effect of this
      change on EBITDA margin would have resulted in EBITDA margins of 50.1%,
      48.9% and 48.0% for the years 1994, 1995 and 1996, respectively.
 
(3)   Represents all system operating expenses and excludes management fees
      and corporate overhead.
 
(4)   Represents management fees and corporate overhead.
 
(5)   EBITDA represents income before interest, income taxes and depreciation,
      amortization and loss (gain) on disposal of fixed assets. EBITDA is not
      intended to represent cash flow from operations or net (loss) income as
      defined by generally accepted accounting principles and should not be
      considered as a measure of liquidity or an alternative to, or more
      meaningful than, operating income or operating cash flow as an
      indication of the Company's operating performance. Moreover, EBITDA is
      not a standardized measure and may be calculated in a number of ways.
      Accordingly, the EBITDA information provided may not be comparable to
      other similarly titled measures provided by other companies. EBITDA is
      included herein because management, certain investors, and industry
      analysts consider EBITDA to be a relevant and useful measure of
      comparative operating performance in the cable television industry, and
      when used in comparison to debt levels or the coverage of interest
      expense, as a measure of liquidity. In addition, certain covenants under
      the Company's indenture and credit agreement require a determination of
      EBITDA.
 
(6)   Represents EBITDA before non-system operating expenses. System cash flow
      should not be considered as a measure of liquidity or an alternative to,
      or more meaningful than, operating cash flow as defined by generally
      accepted accounting principles.
 
(7)   For purposes of this calculation, "earnings" is defined as earnings
      before fixed charges. Fixed charges consist of interest expense,
      amortization of deferred financing costs, income taxes and the portion
      of rent expense under operating leases representative of interest. For
      the years ended December 31, 1994 and 1995 the Systems' earnings before
      fixed charges were insufficient to cover their fixed charges by $9.0
      million, $9.1 million respectively. For the year ended December 31,
      1998, the Company's earnings before fixed charges were insufficient to
      cover its fixed charges by $12.9 million. For the years ended December
      31, 1996 and 1997, the Systems did not have indebtedness and a ratio of
      earnings to fixed charges would not be meaningful. The Company had no
      indebtedness at December 31, 1997.
 
(8)   Based on a homes passed audit conducted in 1996 which showed an increase
      in homes passed of approximately 27,000 homes, the homes passed may be
      understated in 1994 and 1995 and basic penetration may be overstated for
      such periods.
 
(9)   Reflects revenues for the applicable period divided by the average
      number of basic subscribers for the applicable period divided by the
      number of months in the applicable period.
 
(10)   Reflects EBITDA for the applicable period divided by the average number
       of basic subscribers for the applicable period. For purposes of this
       calculation, EBITDA was annualized for all periods presented that are
       less than one year.
 
(11)   Reflects system cash flow for the applicable period divided by the
       average number of basic subscribers for the applicable period. For
       purposes of this calculation, cash flow was annualized for all periods
       presented that are less than one year.
 
(12)   Reflects capital expenditures for the applicable period divided by the
       average number of basic subscribers for the applicable period. For
       purposes of this calculation, capital expenditures were annualized for
       all periods presented that are less than one year.
 
(13)   Prior to the acquisition of the Time Warner Systems, on April 9, 1998
       the Company had no operations, thus the results of operations of the
       Company for the year ended December 31, 1998 reflect operating results
       for the period from April 9, 1998 to December 31, 1998.
 
                                      26
<PAGE>
 
Item 7--Management's Discussion and Analysis of Financial Condition and
       Results of Operations
 
Overview
 
   Holdings was formed on November 5, 1997 and entered into the Time Warner
Asset Purchase Agreement with Time Warner on November 14, 1997 to acquire the
Systems. Holdings was initially capitalized with a $15.0 million capital
contribution from MSCPIII, MSCP Investors and MSCI and received a $1.0 million
advance capital contribution from the Management Investors. The $16.0 million
in funds received by Holdings was utilized to fund the escrow deposit of $15.0
million required under the Time Warner Asset Purchase Agreement and to provide
working capital. For the period from inception through March 31, 1998,
Holdings earned interest income on the escrow deposit and the working capital
fund and incurred costs, primarily related to the Acquisition. Prior to the
consummation of the Acquisition, Holdings assigned all of its interest in the
Time Warner Asset Purchase Agreement to Renaissance Media, and all assets and
liabilities of Holdings became assets and liabilities of Renaissance Media.
The Acquisition was consummated on April 9, 1998. The Systems acquired in the
Acquisition are clustered in southern Louisiana, western Mississippi and
western Tennessee and, as of December 31, 1998, passed 185,620 homes, served
129,164 basic subscribers and had 58,712 premium service units.
 
   The Systems were owned and operated by CVI or related entities prior to the
acquisition of CVI by Time Warner on January 4, 1996 and were owned and
operated by Time Warner since that date until April 9, 1998. As a result, the
assets of the Systems have been reflected utilizing Time Warner's basis from
January 4, 1996 to April 9, 1998 and CVI's basis prior to January 4, 1996.
 
   Subject to the terms and conditions of the Charter Purchase Agreement, the
Company intends to increase its subscriber base and operating cash flow by
improving and upgrading its technical plant and expanding its service
offerings. The Company believes that by clustering systems it is able to
realize economies of scale, such as reduced payroll, reduced billing and
technical costs per subscriber, reduced advertising sales costs, increased
local advertising sales, more efficient roll-out and utilization of new
technologies and consolidation of its customer service functions. The Company
plans to improve and upgrade its technical plant, which should allow it to
provide a wide array of new services and service tiers, as well as integrate
new interactive features into advanced analog and digital set-top consumer
equipment. Subject to the terms and conditions of the Charter Purchase
Agreement, the Company also plans to develop and provide new cable and
broadband services and develop ancillary businesses including digital video
and high speed Internet access services.
 
   Industry analysts generally consider EBITDA to be an important measure of
comparative operating performance in the cable television industry, and when
used in comparison to debt levels or the coverage of interest expense, as a
measure of liquidity. However, EBITDA should be considered in addition to, not
as a substitute for, operating income, net income, cash flow and other
measures of financial performance and liquidity reported in accordance with
generally accepted accounting principles. EBITDA as defined herein may not be
comparable to similarly titled measures reported by other companies. An
analysis of changes in EBITDA are set forth below under "--Liquidity and
Capital Resources."
 
   Revenues. The Systems' revenues are primarily attributable to subscription
fees charged to subscribers for basic and premium cable television programming
services. Basic revenue consists of monthly subscription fees for basic and
CPST services. Multiple dwelling unit accounts typically are offered a bulk
rate in exchange for single point billing and basic service to all units.
Premium revenue consists of monthly subscription fees for programming provided
on a per-channel basis. In addition, other revenue is derived from new product
tiers, pay-per-view fees, installation and reconnection fees charged to
subscribers to receive service, monthly equipment
 
                                      27
<PAGE>
 
rental fees, advertising revenue and commissions related to the sale of goods
by home shopping services and in-home wiring maintenance contracts. The table
below sets forth for the periods indicated basic, premium and other revenues
expressed as a percentage of total revenues:
 
<TABLE>
<CAPTION>
                                                                    Renaissance
                                                                       Media
                                          Systems                    Group LLC
                            --------------------------------------- ------------
                                                       Period from
                            Year Ended December 31,    January 1 --  Year Ended
                            -------------------------    April 8,   December 31,
                             1995     1996     1997        1998         1998
                            -------  -------  -------  ------------ ------------
<S>                         <C>      <C>      <C>      <C>          <C>
Basic......................    65.9%    68.4%    70.6%     71.6%        72.1%
Premium....................    14.7%    13.4%    12.8%     11.6%        11.2%
Other......................    19.4%    18.2%    16.6%     16.8%        16.7%
                            -------  -------  -------     -----        -----
Total Revenues.............   100.0%   100.0%   100.0%    100.0%       100.0%
                            =======  =======  =======     =====        =====
</TABLE>
 
   Basic revenue has been increasing as a percentage of total revenues since
1995 due primarily to increases in subscription rates offset by a change in
the treatment of the portion of franchise fees that are passed through
directly to subscribers on their monthly billing invoices ("subscriber
franchise fees"). Prior to 1997, subscriber franchise fees were not itemized
on subscribers' monthly billing invoices, but were included in the total
monthly service charge paid by subscribers. As a result, when the Systems
recorded monthly revenue it included subscriber franchise fees. Franchise fee
expense, prior to 1997, included non-subscriber franchise fees paid directly
by the Systems and subscriber franchise fees that were paid by and collected
from subscribers. Beginning in 1997, the Systems began itemizing subscriber
franchise fees on customers' billing invoices. As such, the Systems ceased
recording subscriber franchise fees to revenue and began recording subscriber
franchise fees to an accrual account. As a result of such change, franchise
fee expense only reflects the franchise fees paid directly by the Systems. The
effect of this change in the treatment of subscriber franchise fees was a
reduction of revenue in direct proportion to the reduction of franchise fee
expense, resulting in no impact to net income on a comparative basis. Premium
revenues have been decreasing as a percentage of total revenues due to
marginal growth in this revenue category. Other revenue has been decreasing as
a percentage of total revenues due primarily to the elimination in 1996 and
1995 of additional outlet charges, offset in part, by increases in other
revenue items.
 
   System Operating Expenses. System operating expenses are comprised of
variable operating expenses and selling, service and administrative expenses
directly attributable to the Systems. Variable operating expenses consist of
costs directly attributable to providing cable services to customers and
therefore generally vary directly with revenues. Variable operating expenses
include programming fees paid to suppliers of programming included in the
Systems' basic and premium cable television services, as well as expenses
related to copyright fees, franchise fees and bad debt expenses. Programming
costs have historically increased at rates in excess of inflation due, in
part, to improvements in the quality of programming. Cable programming costs
are expected to continue to increase due to additional programming being
provided to customers, inflationary increases and other factors. Programming
costs as a percentage of revenue increased to 20.5% in 1997 from 20.1% in 1996
and to 20.8% for the period January 1, 1998 to April 8, 1998. For the period
from April 9, 1998 to December 31, 1998, the Company's programming costs as a
percentage of revenue were 23.2%. The increase is due to the loss of certain
programming discounts that were realized as a result of being part of a large
MSO. Selling, service and administrative expenses directly attributable to the
Systems include the salaries and wages of field and office personnel, plant
operating expenses, office and administrative expenses and sales costs.
 
   Non-System Operating Expenses. Non-system operating expenses consist
primarily of corporate related expenses, which are not directly attributable
to the Systems. These expenses include personnel costs, rent, legal, audit,
tax and other corporate overhead costs.
 
   Depreciation, Amortization and Loss (Gain) on Disposal of Fixed
Assets. Depreciation, amortization and loss (gain) on disposal of fixed assets
include depreciation of the Systems' network and equipment, amortization
 
                                      28
<PAGE>
 
of goodwill and intangibles assets and losses or gains recognized on the
disposal of assets. Management expects depreciation and amortization to
increase as a result of the purchase accounting adjustments arising in
connection with the Time Warner Acquisition.
 
   The table below sets forth for the periods indicated certain data regarding
expenses expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
                                                                   Renaissance
                                                                      Media
                                          Systems                   Group LLC
                            -------------------------------------- ------------
                                                       Period from
                            Year Ended December 31,    January 1--  Year Ended
                            -------------------------   April 8,   December 31,
                             1995     1996     1997       1998         1998
                            -------  -------  -------  ----------- ------------
<S>                         <C>      <C>      <C>      <C>         <C>
Revenues..................    100.0%   100.0%   100.0%    100.0%      100.0%
System operating
 expenses.................     47.7     47.8     45.4      45.8        45.7
Non-system operating
 expenses.................      5.1      5.8      5.5       5.0         4.9
Depreciation, amortization
 and loss (gain) on
 disposal of fixed
 assets...................     40.4     38.3     37.9      32.4        46.0
Operating income..........      6.8      8.1     11.2      16.8         3.3
Interest expense..........     27.3      --       --        --         34.1
Income tax (benefit)
 expense..................     (8.2)     3.2      4.4       7.8          .3
Net (loss) income.........    (12.3)     4.9      6.8       9.0       (31.2)
</TABLE>
 
   The Systems have not had any material acquisitions during these periods and
thus the growth since 1995 represents internal growth resulting from
subscriber additions, rate increases and additional services purchased by
subscribers and advertisers.
 
Results of Operations
 
   Year Ended December 31, 1998 Compared with Year Ended December 31, 1997
 
   Prior to the acquisition of the Time Warner Systems from Time Warner on
April 9, 1998, Group had no operations. Consequently, the results of
operations of the company for the year ended December 31, 1998 include
operating results for the period April 9, 1998 to December 31, 1998. In order
to facilitate discussion of the Results of Operations for the year ended
December 31, 1998 compared to the year ended December 31, 1997, the 1998
results of the Company have been annualized as indicated below:
 
<TABLE>
<CAPTION>
                                               As Reported
                                        -------------------------
                                          Systems      Company     Annualized
                                         Year Ended   Year Ended   Year Ended
                                        December 31, December 31, December 31,
                                            1997         1998       1998(1)
                                        ------------ ------------ ------------
                                                       (000's)
                                        --------------------------------------
<S>                                     <C>          <C>          <C>
Revenues...............................   $50,987      $ 41,524     $ 56,745
System operating expenses..............    23,142        18,998       26,220
Non-system operating expenses..........     2,782         2,039        2,824
Depreciation, amortization and loss
 (gain) on disposal of fixed assets....    19,317        19,107       26,166
                                          -------      --------     --------
Operating income.......................     5,746         1,380        1,535
Interest expense (net).................       --         14,200       19,564
Income tax expense.....................    (2,262)         (135)        (135)
                                          -------      --------     --------
Net (loss) income......................   $ 3,484      $(12,955)    $(18,164)
                                          =======      ========     ========
</TABLE>
 
(1) Computed by multiplying December 31, 1998 as reported items by 137% (365
  days / 267 days (number of days in period April 9, 1998 to December 31,
  1998), except for Corporate Franchise Taxes not subject to annualization and
  other immaterial adjustments.
 
                                      29
<PAGE>
 
   Revenues. Revenues increased $5.8 million or 11.3% to $56.7 million in 1998
from $51.0 million in 1997. The primary reasons for this increase in revenues
were increases in subscription rates in 1998 and an increase in subscribers of
2,606 in 1998. In January 1998, the systems increased their subscriber rates
from $7.69 to $7.88 on a weighted average basis (excluding bulk subscribers)
for basic service, and from $17.33 to $20.28 on a weighted average basis, for
the cable programming satellite tier (CPST). In total, average revenue per
basic subscriber, per month, increased to $36.98 in 1998 from $34.02 in 1997.
In addition to these increases in subscription revenue, advertising revenue
increased approximately $.3 million or 24.8%.
 
   Systems Operating Expenses. Systems operating expenses increased $3.1
million or 13.3% to $26.2 million in 1998 from $23.1 million in 1997. The
primary reason for this increase in systems operating expenses was the
increase in programming costs of $2.8 million, an increase of 26.4% over 1997
programming costs. This increase in programming costs resulted from: (1) loss
of certain volume discounts resulting from not being a part of a larger MSO,
(2) annual rate increases on programming services and (3) new services
launched in 1998. Other systems operating expenses generally increased
consistent with general inflation rates. Offsetting these cost increases, in
part, was the increase in capitalized internal labor and overhead costs of $.6
million associated with capital projects. Capitalized internal labor and
overhead costs increased in 1998 due to the increase in 1998 over 1997 in new
capital projects; primarily, the upgrade in St. Tammany and Jackson and the
increase in new build projects.
 
   System cash flow increased $2.7 million or 9.6% to $30.5 million in 1998
from $27.8 million in 1997. System cash flow margin decreased slightly to
53.8% in 1998 from 54.6% in 1997.
 
   Non-System Operating Expenses. Non-system operating expenses, which
consists of corporate overhead, did not change materially in 1998 from 1997
amounts. As a percentage of revenue, non-system operating expenses were 4.97%
and 5.46% in 1998 and 1997, respectively.
 
   Depreciation, Amortization and Loss (Gain) on Disposal of Fixed Assets
("D&A"). D&A increased $6.8 million or 35.5% to $26.2 million in 1998 from
$19.3 million in 1997. This increase is due to: (1) the Company's depreciation
computations based on a composite useful life of its assets of approximately 7
years, giving consideration to the planned upgrade of the cable
infrastructure, which is shorter than the composite useful life of
approximately 11 years used by Time Warner; and (2) the Company's amortization
period for franchise assets and goodwill of 15 and 25 years, respectively,
which differ from the estimated useful lives of franchise assets and goodwill
over periods up to 20 years and over periods up to 40 years, respectively,
used by Time Warner.
 
   Operating Income. Operating Income decreased $4.2 million or 73.3% to $1.5
million in 1998 from $5.7 million in 1997. This decrease is due primarily to
the increase in D&A of $6.8 million or 35.5% to $26.2 million in 1998,
exceeding the increase in system cash flow of $2.7 million or 9.6% to $30.5
million in 1998.
 
   Interest Expense. Interest expense was $19.6 million in 1998. Interest
expense represents interest incurred by the Company in 1998 on the credit
agreement, including $110.0 million of term loans facilities and a $40.0
million revolving credit facility, between Renaissance Media, Renaissance
Louisiana, Renaissance Tennessee, Renaissance Capital, Morgan Stanley Senior
Funding (MSSF), and other lenders party thereto (the "Senior Credit Facility")
(including commitment fees) and the 10% Senior Discount Notes due 2008 (the
"Senior Discount Notes") and the amortization of an interest rate cap
agreement and debt issuance costs. The Systems had no indebtedness in 1997.
 
   Income Tax Expense. Renaissance Louisiana and Renaissance Tennessee have
elected to be treated as corporations for United States Federal income tax
purposes. The provision for income tax expense in 1998 represents corporate
franchise tax expense. No income tax benefit for the loss incurred in 1998 has
been recorded due to the uncertainty of the realization of such loss during
the related carry forward period. The provision for income taxes in 1997
represents income tax expense computed on a stand alone basis for the Systems.
 
   Net Loss. For the reasons discussed above, the net loss was $18.2 million
in 1998 compared to net income of $3.5 million in 1997.
 
                                      30
<PAGE>
 
 Year Ended December 31, 1997 Compared with Year Ended December 31, 1996
 
   The Systems served 126,558 basic subscribers at December 31, 1997 compared
with 123,203 basic subscribers at December 31, 1996, an increase of 3,355
subscribers or 2.7%. Homes passed increased to 178,449 at December 31, 1997
from 175,522 at December 31, 1996, an increase of 2,927 homes or 1.7%. Premium
service units increased to 64,963 at December 31, 1997 from 64,716 at December
31, 1996.
 
   Revenues. Revenues increased $3.7 million or 7.7% to $51.0 million in 1997
from $47.3 million in 1996. Adjusting for the change in the method of
recording franchise fees, as described above, revenues increased $5.2 million
or 11.1%. The increase in revenues in 1997 resulted primarily from increases
in basic revenue and other revenue. Basic revenue increased due to an increase
in the weighted average monthly subscription rate for basic service to $7.69
in 1997 from $6.38 in 1996 and an increase in the weighted average monthly
subscription rate for CPST to $17.33 in 1997 from $16.19 in 1996. In addition,
basic revenue increased due to the increase in the number of subscribers in
1997. Other revenue components including home shopping, pay-per-view and
advertising revenue increased, while additional outlet revenue decreased.
 
   System Operating Expenses. System operating expenses increased $.5 million
or 2.3% to $23.1 million in 1997 from $22.6 million in 1996. Adjusting for the
change in the method of recording franchise fees, system operating expenses
increased $2.0 million or 8.8% over 1996. The increase in system operating
expenses in 1997 resulted primarily from increases in salaries and programming
costs.
 
   Non-System Operating Expenses. Non-system operating expenses increased $.1
million or 1.8% to $2.8 million in 1997 from $2.7 million in 1996.
 
   Depreciation, Amortization and Loss (Gain) on Disposal of Fixed
Assets. Depreciation, amortization and loss (gain) on disposal of fixed assets
increased $1.2 million or 6.6% to $19.3 million in 1997 from $18.1 million in
1996. This increase resulted primarily from $.6 million of losses on
miscellaneous asset disposals during the year.
 
   Operating Income. For the reasons discussed above, operating income
increased $1.9 million or 49.2% to $5.7 million in 1997 from $3.9 million in
1996.
 
   Income Tax (Benefit) Expense. Income tax expense increased $.8 million or
50.6% to $2.3 million in 1997 from $1.5 million in 1996. This increase is due
to the increase in operating income in 1997.
 
   Net (Loss) Income. For the reasons discussed above, net income increased
$1.1 million or 48.3% to $3.5 million in 1997 from $2.4 million in 1996.
 
 Year Ended December 31, 1996 Compared with Year Ended December 31, 1995
 
   The Systems served 123,203 basic subscribers at December 31, 1996 compared
with 120,340 basic subscribers at December 31, 1995, an increase of 2,863
basic subscribers or 2.4%. Homes passed increased to 175,522 homes at December
31, 1996 compared to 145,148 at December 31, 1995, an increase of 30,374 homes
or 20.9%. This increase resulted primarily from a homes passed audit of the
Systems during 1996, which added approximately 27,000 homes to the Systems'
database, and estimated real growth in the number of homes passed by the
Systems of approximately 1.7%. Premium service units increased 4,254 or 7.0%
to 64,716 at December 31, 1996 from 60,462 at December 31, 1995.
 
   Revenues. Revenues increased $3.8 million or 8.7% to $47.3 million in 1996
from $43.5 million in 1995. Basic revenue increased due to increases in the
weighted average monthly subscription rate for CPST to $16.19 in 1996 from
$13.09 in 1995, offset in part by a decrease in the weighted average monthly
subscription rate for basic service to $6.38 in 1996 from $6.75 in 1995. In
addition, basic revenue increased due to the increase in the number of basic
subscribers in 1996. Premium and other revenue remained the same due to a
reduction in advertising and additional outlet revenue, offset by increases in
pay-per-view revenue and other revenue.
 
                                      31
<PAGE>
 
   System Operating Expenses. System operating expenses increased $1.8 million
or 8.8% to $22.6 million in 1996 from $20.8 million in 1995. The 1996 expenses
reflect increased payroll expenses, pay-per-view expenses, marketing and other
miscellaneous costs, offset in part by reductions in programming costs
resulting from the lower rates incurred by Time Warner.
 
   Non-System Operating Expenses. Non-system operating expenses increased $.5
million or 24.2% to $2.7 million in 1996 from $2.2 million in 1995 due to the
different amounts of corporate overhead and regional expenses incurred by Time
Warner in 1996 and CVI in 1995.
 
   Depreciation, Amortization and Loss (Gain) on Disposal of Fixed
Assets. Depreciation, amortization and loss (gain) on disposal of fixed assets
increased $.5 million or 2.9% to $18.1 million in 1996 from $17.6 million in
1995. This net increase resulted primarily from the net write-up of assets in
1996 under the purchase method of accounting following the acquisition of the
Systems by Time Warner.
 
   Operating Income. For the reasons discussed above, operating income
increased $.9 million or 30.5% to $3.9 million in 1996 from $3.0 million in
1995.
 
   Interest Expense. Interest expense was $11.9 million in 1995 which related
to debt recorded at the System level by CVI. The Systems recorded no interest
expense in 1996 because Time Warner met the Systems' financing needs through
non-interest bearing capital advances.
 
   Income Taxes (Benefit) Expense. Income tax (benefit) expense increased $5.1
million to an expense of $1.5 million in 1996 from a benefit of $3.6 million
in 1995. The increase in income tax (benefit) expense resulted from the
increase in operating income in 1996.
 
   Net (Loss) Income. For the reasons discussed above, net (loss) income
increased $7.7 million to net income of $2.3 million in 1996 from a net loss
of $5.4 million in 1995.
 
Liquidity and Capital Resources
 
   From January 4, 1996 until April 9, 1998, the Systems were owned by Time
Warner and their liquidity and capital resources needs were evaluated and met
based upon funding from Time Warner. The Systems' cash balances were generally
minimized with excess cash balances transferred to corporate cash management
accounts.
 
   The cable television business requires substantial capital for the
upgrading, expansion and maintenance of signal distribution equipment, as well
for home subscriber devices and wiring and for service vehicles. Subject to
the terms and provisions of the Charter Purchase Agreement, the Company will
continue to deploy fiber optic technology and to upgrade the Systems to a
minimum of 550 MHz and to 860 MHz where system characteristics warrant. The
deployment of fiber optic technology will allow future upgrades to the Systems
in a cost-effective manner. The Company believes that the application of
digital compression technology will likely reduce the requirement in the
future for upgrades to increase capacity beyond 860 MHz.
 
   The working capital requirements of a cable television business are
generally not significant since subscribers are billed for services monthly in
advance, while the majority of expenses incurred (except for payroll) are paid
generally 30 to 60 days after their incurrence.
 
   Prior to the acquisition of the Time Warner Systems on April 9, 1998 the
Company had no operations. Consequently, the results of operations for the
year ended December 31, 1998 include operating results for the period April 9,
1998 to December 31, 1998. The Company's net cash provided by operations was
$22.7 million in 1998. The Company's net cash used in investing activities was
$317.0 million in 1998 and the Company's net cash provided from financing
activities amounted to $302.8 million in 1998. The cash used in investing
activities and cash provided from financing activities in 1998 related
primarily to the payment of the cash purchase price
 
                                      32
<PAGE>
 
for the Systems to Time Warner and the capitalization of the Company,
respectively. The Systems net cash provided by operations was $23.6 million in
1997 and $23.1 million in 1996. The Systems net cash used in investing
activities was $6.4 million in 1997 and $8.2 million in 1996, respectively and
in 1996 Time Warner allocated $249.5 million of the purchase price paid (net
of cash acquired) for CVI to the Systems. The Systems net cash used in some
financing activities was $16.4 million in 1997 and $14.9 million in 1996,
respectively and in 1996 Time Warner allocated $250.0 million of the purchase
price paid for CVI to the Systems. The Systems net cash provided by operations
for the period January 1, 1998 though April 8, 1998 was $7.0 million. The
Systems net cash used in investing activities for the period January 1, 1998
through April 8, 1998 was $.6 million. The Systems net cash used in financing
activities for the period January 1, 1998 through April 8, 1998 was $7.8
million.
 
   The Company's EBITDA was $20.5 million or 49.3% of revenues during the
operating period in 1998. The Systems EBITDA was $25.1 million in 1997 and
$22.0 million in 1996. The System's EBITDA as a percentage of revenue
increased to 49.2 % in 1997 from 46.4% in 1996, primarily resulting from a
change in the method of recording franchise fees. Had the method of recording
franchise fees been changed in 1996 the effect of this change would have
resulted in EBITDA margin of 48.0% for 1996. The Systems EBITDA was $7.5
million for the period January 1, 1998 to April 8, 1998. As a percentage of
revenue EBITDA was 49.2% for the period January 1, 1998 to April 8, 1998.
 
   Simultaneously with the Offering of the Senior Discount Notes: (i) the
Company received equity contributions of $95.1 million from the Morgan Stanley
Entities and $3.9 million from the Management Investors; (ii) Renaissance
Media, as borrower, and Renaissance Louisiana, Renaissance Tennessee and
Renaissance Capital, as guarantors, entered into the Senior Credit Facility,
consisting of $110.0 million in Term Loans and a $40.0 million Revolver; and
(iii) Renaissance Media acquired the Systems from Time Warner for $300.0
million in cash and the issuance to Time Warner of a $9.5 million equity
interest in Holdings.
 
   The Company used the net proceeds from the Offering of the Senior Discount
Notes, together with the Equity Contributions and borrowings under the Term
Loans, to consummate the Acquisition. The Company has approximately $209.9
million of indebtedness outstanding and unused commitments under the Revolver
of $40.0 million. Subject to the terms and conditions of the Charter Purchase
Agreement and compliance with the terms of the Senior Credit Facility,
borrowings under the Revolver will be available for working capital purposes,
capital expenditures and acquisitions.
 
   Subject to the terms and provisions of the Charter Purchase Agreement, the
Company expects to make substantial investments in capital to: (i) upgrade its
cable plant; (ii) build line extensions; (iii) purchase new equipment; and
(iv) acquire the equipment necessary to implement its digital and Internet and
data transmission strategy. In 1998, the Company made capital expenditures of
approximately $5.7 million and expects to make capital expenditures of
approximately $16.9 million in 1999. The Company believes that the borrowings
expected to be available under the Revolver and anticipated cash flow from
operations will be sufficient to upgrade the Systems as currently contemplated
and to satisfy the Company's working capital, capital expenditure and debt
service requirements. However, the actual amount and timing of the Company's
capital requirements may differ materially from the Company's estimates as a
result of, among other things, the demand for the Company's services and
regulatory, technological and competitive developments (including additional
market developments and new opportunities) in the Company's industry. The
Company also expects that it will require additional financing if the
Company's development plans or projections change or prove to be inaccurate or
the Company engages in any acquisitions. Sources of additional financing may
include commercial bank borrowings, vendor financing or the private or public
sale of equity or debt securities. There can be no assurances that such
financing will be available on terms acceptable to the Company or at all.
 
   Borrowings under the Senior Credit Facility bear interest at floating
rates, although the Company is required to maintain interest rate protection
programs. Renaissance Media's obligations under the Senior Credit Facility is
secured by substantially all the assets of Renaissance Media.
 
                                      33
<PAGE>
 
   The Company is subject to interest rate fluctuations on its Senior Credit
Facility, ($102.5 million outstanding at December 31, 1998) and, accordingly,
has entered into an interest rate cap agreement with a notional amount of
$100.0 million. This agreement serves to cap the interest rates associated
with the Company's variable rate debt under the Senior Credit Facility. The
cap agreement protects the Company from increased interest costs if LIBOR
exceeds 7.25% and expires on December 1, 1999.
 
   The Company assesses its interest rate protection options on an ongoing
basis with a goal of having in place interest rate protection plans as it
deems appropriate, based on its assessment of future interest rates balanced
against the cost of such plans and the degree of interest rate fluctuation
risk the Company believes is appropriate.
 
Year 2000 Issues
 
   The Company relies on computer systems, related software applications and
other control devices in operating and monitoring all major aspects of its
business, including, but not limited to, its financial systems (such as
general ledger, accounts payable, payroll and fixed asset modules), subscriber
billing systems, internal networks and telecommunications equipment. The
Company also relies, directly and indirectly, on the external systems of
various independent business enterprises, such as its suppliers and financial
organizations, for the accurate exchange of data.
 
   The Company continues to assess the likely impact of Year 2000 issues on
its business operations, including its material information technology ("IT")
and non-IT applications. These material applications include all billing and
subscriber information systems, general ledger software, payroll systems,
accounting software, phone switches and certain headend applications, all of
which are third party supported.
 
   The Company believes it has identified all systems that may be affected by
Year 2000 Issues. Concurrent with the identification phase, the Company is
securing compliance determinations relative to all identified systems. For
those systems that the Company believes are material, compliance programs have
been received or such systems have been certified by independent parties as
Year 2000 compliant. For those material systems that are subject to compliance
programs, the Company expects to receive Year 2000 certifications from
independent parties by the second quarter of 1999. Determinations of Year 2000
compliance requirements for less mission critical systems are in progress and
are expected to be completed in the second quarter of 1999.
 
   With respect to third parties with which the Company has a material
relationship, the Company believes its most significant relationships are with
financial institutions, who receive subscriber monthly payments and maintain
Company bank accounts, and subscriber billing and management systems
providers. We have received compliance programs, which, if executed as
planned, should provide a high degree of assurance that all Year 2000 issues
will be addressed by mid 1999.
 
   The Company has not incurred any material Year 2000 costs to date, and
excluding the need for contingency plans, does not expect to incur any
material Year 2000 costs in the future because most of its applications are
maintained by third parties who have borne Year 2000 compliance costs.
 
   The Company cannot be certain that it or third parties supporting its
systems have resolved or will resolve all Year 2000 issues in a timely manner.
Failure by the Company or any such third party to successfully address the
relevant Year 2000 issues could result in disruptions of the Company's
business and the incurrence of significant expenses by the Company.
Additionally, the Company could be affected by any disruption to third parties
with which the Company does business if such third parties have not
successfully addressed their Year 2000 issues.
 
   Failure to resolve Year 2000 issues could result in improper billing to the
Company's subscribers which could have a major impact on the recording of
revenue and the collection of cash as well as create significant customer
dissatisfaction. In addition, failure on the part of the financial
institutions with which the Company relies on for its cash collection and
management services could also have significant impact on collections, results
of operations and the liquidity of the Company.
 
                                      34
<PAGE>
 
   The Company has not yet finalized contingency plans necessary to handle the
most likely worst case scenarios. Before concluding as to possible contingency
plans, the Company must determine whether the material service providers
contemplate having such plans in place. In the event that contingency plans
from material service providers are not in place or are deemed inadequate,
management expects to have such plans in place by the third quarter of 1999.
 
Impact of Inflation
 
   With the exception of programming costs, the Company does not believe that
inflation has had or will likely have a significant effect on its results of
operations or capital expenditure programs. Programming cost increases in the
past have tended to exceed inflation and may continue to do so in the future.
The Company, in accordance with FCC regulations, may pass along programming
cost increases to its subscribers.
 
New Accounting Standards
 
   During fiscal 1998, the Financial Account Standards Board ("FASB") issued
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133"). FAS 133 provides a comprehensive and consistent
standard for the recognition and measurement of derivatives and hedging
activities. The Company will adopt FAS 133 as of January 1, 2000. The impact
of the adoption on the Company's consolidated financial statements is not
expected to be material.
 
                                      35
<PAGE>
 
Item 8--Financial Statements and Supplementary Data
 
   The Company's consolidated financial statements and the predecessor
combined financial statements, and related notes thereto, and the reports of
the Company's and predecessor's independent auditors follow:
 
                 RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
 
                         INDEX TO FINANCIAL STATEMENTS
 
<TABLE>
<CAPTION>
                                                                            Page
RENAISSANCE MEDIA GROUP LLC                                                 ----
<S>                                                                         <C>
Report of Independent Auditors............................................   37
Consolidated Balance Sheet as of December 31, 1998........................   38
Consolidated Statement of Operations for the year ended December 31,
 1998.....................................................................   39
Consolidated Statement of Members' Equity for the year ended December 31,
 1998.....................................................................   40
Consolidated Statement of Cash Flows for the year ended December 31,
 1998.....................................................................   41
Notes to Consolidated Financial Statements................................   42
RENAISSANCE MEDIA HOLDINGS LLC AND RENAISSANCE MEDIA LLC
Report of Independent Auditors............................................   50
Combined Balance Sheet as of December 31, 1997............................   51
Combined Income Statement and Retained Earnings for the Period from
 November 5, 1997 (Date of Inception) to December 31, 1997 ...............   52
Combined Statement of Cash Flow for the Period from November 5, 1997 (Date
 of Inception) to December 31, 1997.......................................   53
Notes to Financial Statements.............................................   54
PREDECESSOR
Report of Independent Auditors............................................   57
Combined Balance Sheet as of April 8, 1998................................   58
Combined Statement of Operations for the Period from January 1, 1998
 through April 8, 1998....................................................   59
Combined Statement of Changes in Net Assets for the Period from January 1,
 1998 through April 8, 1998...............................................   60
Combined Statement of Cash Flows for the Period January 1, 1998 to April
 8, 1998..................................................................   61
Notes to Combined Financial Statements....................................   62
Report of Independent Auditors............................................   68
Combined Balance Sheets as of December 31, 1996 and 1997..................   69
Combined Statements of Operations for the Years Ended December 31, 1995,
 1996 and 1997............................................................   70
Combined Statements of Changes in Net Assets for the Years Ended December
 31, 1996 and 1997........................................................   71
Combined Statements of Cash Flows for the Years Ended 1995, 1996 and
 1997.....................................................................   72
Notes to Combined Financial Statements....................................   73
</TABLE>
 
Note: Financial statements of Renaissance Louisiana, Renaissance Tennessee,
     and Renaissance Media Capital (collectively, the "Subsidiaries"), each a
     wholly-owned subsidiary of Renaissance Media Group, have not been
     presented as (i) Group and the Subsidiaries have no operations or assets
     independent of Renaissance Media, a wholly-owned subsidiary of
     Renaissance Louisiana and Renaissance Tennessee, (ii) the Subsidiaries
     were formed solely for the purpose of serving as co-obligors of the
     Senior Discount Notes as Renaissance Tennessee's and Renaissance
     Louisiana's only significant assets are their respective equity ownership
     interests in Renaissance Media, and Renaissance Capital has no
     significant assets and is nominally capitalized, and (iii) as the
     Subsidiaries, Group and these wholly-owned subsidiaries are effectively
     jointly and severally liable for the obligations under the Senior
     Discount Notes on a full and unconditional basis. Accordingly, management
     has determined that such financial statements would not be material to
     investors.
 
                                      36
<PAGE>
 
                        Report of Independent Auditors
 
To the Board of Directors of Renaissance Media Group LLC
 
   We have audited the accompanying consolidated balance sheet of Renaissance
Media Group LLC as of December 31, 1998 and the related consolidated
statements of operations, changes in members' equity, and cash flows for the
year ended December 31, 1998. Our audit also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audit.
 
   We conducted our audit 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 audit provides a reasonable basis
for our opinion.
 
   In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Renaissance
Media Group LLC at December 31, 1998, and the consolidated results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
 
                                          Ernst & Young LLP
 
New York, New York
February 22, 1999
except for Note 11, as to which the date is
February 24, 1999
 
                                      37
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
                           CONSOLIDATED BALANCE SHEET
                               December 31, 1998
                                 (In Thousands)
 
<TABLE>
<CAPTION>
Assets
Cash and cash equivalents............................................. $  8,482
<S>                                                                    <C>
Accounts receivable--trade (less allowance for doubtful accounts of
 $92).................................................................      726
Accounts receivable--other............................................      584
Prepaid expenses and other assets.....................................      340
Escrow deposit........................................................      150
Investment in cable television systems:
  Property, plant and equipment.......................................   71,246
  Less: accumulated depreciation......................................   (7,294)
                                                                       --------
                                                                         63,952
                                                                       --------
  Cable television franchises.........................................  236,489
  Less: accumulated amortization......................................  (11,473)
                                                                       --------
                                                                        225,016
                                                                       --------
  Intangible assets...................................................   17,559
  Less: accumulated amortization......................................   (1,059)
                                                                       --------
                                                                         16,500
                                                                       --------
  Total investment in cable television systems........................  305,468
                                                                       --------
Total assets.......................................................... $315,750
                                                                       ========
<CAPTION>
Liabilities and Members' Equity
<S>                                                                    <C>
Accounts payable...................................................... $  2,042
Accrued expenses (a)..................................................    6,670
Subscriber advance payments and deposits..............................      608
Deferred marketing support............................................      800
Advances from holdings................................................      135
Debt..................................................................  209,874
                                                                       --------
Total Liabilities.....................................................  220,129
                                                                       --------
Members' equity:
  Paid in capital.....................................................  108,600
  Accumulated deficit.................................................  (12,979)
                                                                       --------
Total members' equity.................................................   95,621
                                                                       --------
Total liabilities and members' equity................................. $315,750
                                                                       ========
</TABLE>
 
--------
(a)--Includes accrued costs from transactions with affiliated companies of
$921.
 
                  See accompanying notes to financial statements.
 
                                       38
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
                      CONSOLIDATED STATEMENT OF OPERATIONS
 
                          Year Ended December 31, 1998
 
                                 (In Thousands)
<TABLE>
<S>                                                                   <C>
Revenues............................................................. $ 41,524
Costs and expenses:
  Service costs (a)..................................................   13,326
  Selling, general and administrative................................    7,711
  Depreciation and amortization......................................   19,107
                                                                      --------
Operating income.....................................................    1,380
Interest income......................................................      158
Interest (expense) (b)...............................................  (14,358)
                                                                      --------
(Loss) before provision for taxes....................................  (12,820)
Provision for taxes..................................................      135
                                                                      --------
Net (loss)........................................................... $(12,955)
                                                                      ========
</TABLE>
--------
(a)--Includes costs from transactions with affiliated companies of $7,523.
(b)--Includes $676 of amortization of deferred financing costs.
 
 
                See accompanying notes to financial statements.
 
                                       39
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
              CONSOLIDATED STATEMENT OF CHANGES IN MEMBERS' EQUITY
 
                          Year ended December 31, 1998
                                 (In Thousands)
 
<TABLE>
<CAPTION>
                                                                       Total
                                                 Paid-In  Accumulated Members'
                                                 Capital   (Deficit)   Equity
                                                 -------- ----------- --------
<S>                                              <C>      <C>         <C>
Contributed Members' Equity--
 Renaissance Media Holdings LLC and Renaissance
 Media LLC...................................... $ 15,000  $   (24)   $ 14,976
Additional capital contributions................   93,600       --      93,600
Net (loss)......................................      --    (12,955)   (12,955)
                                                 --------  --------   --------
Balance December 31, 1998....................... $108,600  $(12,979)  $ 95,621
                                                 ========  ========   ========
</TABLE>
 
 
 
                  See accompanying notes to financial statements.
 
 
                                       40
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
                          Year ended December 31, 1998
                                 (In Thousands)
 
 
<TABLE>
<CAPTION>
Operating activities
Net (loss).............................................................. $ (12,955)
Adjustments to non-cash and non-operating items:
  Depreciation and amortization.........................................     19,107
<S>                                                                      <C>
  Accretion on Senior Discount Notes....................................     7,363
  Other non-cash charges................................................       730
  Changes in operating assets and liabilities:
    Accounts receivable--trade, net.....................................      (726)
    Accounts receivable--other..........................................      (584)
    Prepaid expenses and other assets...................................      (338)
    Accounts payable....................................................     2,031
    Accrued expenses....................................................     6,660
    Subscriber advance payments and deposits............................       608
    Deferred marketing support..........................................       800
                                                                         ---------
Net cash provided by operating activities...............................    22,696
                                                                         ---------
<CAPTION>
Investing activities
<S>                                                                      <C>
Purchased cable television systems:
  Property, plant and equipment.........................................   (65,580)
  Cable television franchises...........................................  (235,412)
  Cash paid in excess of identifiable assets............................    (8,608)
Escrow deposit..........................................................      (150)
Capital expenditures....................................................    (5,683)
Cable television franchises.............................................    (1,077)
Other intangible assets.................................................      (526)
                                                                         ---------
Net cash (used in) investing activities.................................  (317,036)
                                                                         ---------
<CAPTION>
Financing activities
<S>                                                                      <C>
Debt acquisition costs..................................................    (8,323)
Principal repayments on bank debt.......................................    (7,500)
Advances from Holdings..................................................        33
Proceeds from bank debt.................................................   110,000
Proceeds from 10% Senior Discount Notes.................................   100,012
Capital contributions...................................................   108,600
                                                                         ---------
Net cash provided by financing activities...............................   302,822
                                                                         ---------
Net increase in cash and cash equivalents...............................     8,482
Cash and cash equivalents at December 31, 1997..........................       --
                                                                         ---------
Cash and cash equivalents at December 31, 1998.......................... $   8,482
                                                                         =========
<CAPTION>
Supplemental disclosures
<S>                                                                      <C>
Interest paid........................................................... $   4,639
                                                                         =========
</TABLE>
 
                  See accompanying notes to financial statements.
 
 
                                       41
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
                               December 31, 1998
                       (All dollar amounts in thousands)
 
 
1.  Organization and Basis of Presentation
 
   Renaissance Media Group LLC ("Group") was formed on March 13, 1998 by
Renaissance Media Holdings LLC ("Holdings"). Holdings is owned by Morgan
Stanley Capital Partners III, L.P. ("MSCP III"), Morgan Stanley Capital
Investors, L.P. ("MSCI"), MSCP III 892 Investors, L.P. ("MSCP Investors" and,
collectively, with its affiliates, MSCP III and MSCI and their respective
affiliates, the "Morgan Stanley Entities"), Time Warner and the Management
Investors. On March 20, 1998, Holdings contributed to Group its membership
interests in two wholly-owned subsidiaries; Renaissance Media (Louisiana) LLC
("Louisiana") and Renaissance Media (Tennessee) LLC ("Tennessee"), which were
formed on January 7, 1998. Louisiana and Tennessee acquired a 76% interest and
24% interest, respectively, in Renaissance Media LLC ("Media") from Morgan
Stanley Capital Partners III, Inc. ("MSCP"), on February 13, 1998 through an
acquisition of entities under common control accounted for as if it were a
pooling of interests. As a result, Media became a subsidiary of Group and
Holdings. Group and its aforementioned subsidiaries are collectively referred
to as the "Company". On April 9, 1998, the Company acquired (the
"Acquisition") six cable television systems (the "Systems") from TWI Cable,
Inc. ("TWI Cable"), a subsidiary of Time Warner Inc. ("Time Warner"). See Note
3. Prior to this Acquisition, the Company had no operations other than start-
up related activities.
 
2. Summary of Significant Accounting Policies
 
 New Accounting Standards
 
   During fiscal 1998, the Financial Accounting Standards Board ("FASB")
issued Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("FAS 133").
 
   FAS 133 provides a comprehensive and consistent standard for the
recognition and measurement of derivatives and hedging activities. The Company
will adopt FAS 133 as of January 1, 2000. The impact of the adoption on the
Company's consolidated financial statements is not expected to be material.
 
Principles of Consolidation
 
   The consolidated financial statements of the Company include the accounts
of the Company and its wholly owned subsidiaries. Significant intercompany
accounts and transactions have been eliminated.
 
Concentration of Credit Risk
 
   A significant portion of the customer base is concentrated within the local
geographical area of each of the individual cable television systems. The
Company generally extends credit to customers and the ultimate collection of
accounts receivable could be affected by the local economy. Management
performs continuous credit evaluations of its customers and may require cash
in advance or other special arrangements from certain customers. Management
does not believe that there is any significant credit risk which could have a
material effect on the Company's financial condition.
 
 Revenue and Costs
 
   Subscriber fees are recorded as revenue in the period the related services
are provided and advertising revenues are recognized in the period the related
advertisements are exhibited. Rights to exhibit programming are purchased from
various cable networks. The costs of such rights are generally expensed as the
related services are made available to subscribers.
 
                                      42
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
                               December 31, 1998
                       (All dollar amounts in thousands)
 
 
 Advertising Costs
 
   Advertising costs are expensed upon the first exhibition of the related
advertisements. Advertising expense amounted to $491 in 1998.
 
 Cash and Cash Equivalents
 
   Cash and cash equivalents include cash and investments in short-term,
highly liquid securities, which have maturities when purchased of three months
or less.
 
 Property, Plant and Equipment
 
   Property, plant and equipment is recorded at purchased and capitalized
cost. Capitalized internal costs principally, consist of employee costs and
interest on funds borrowed during construction. Capitalized labor, materials
and associated overhead amounted to approximately $1,429 in 1998.
Replacements, renewals and improvements to installed cable plant are
capitalized. Maintenance and repairs are charged to expense as incurred.
Depreciation expense for the year ended December 31, 1998 amounted to $7,314.
Property, plant and equipment is depreciated using the straight-line method
over the following estimated service lives:
 
<TABLE>
      <S>                                                            <C>
      Buildings and leasehold improvements.......................... 5-30 years
      Cable systems, equipment and subscriber devices............... 5-30 years
      Transportation equipment......................................  3-5 years
      Furniture, fixtures and office equipment...................... 5-10 years
 
   Property, plant and equipment at December 31, 1998 consisted of:
 
      Land..........................................................    $   432
      Buildings and leasehold improvements..........................      1,347
      Cable systems, equipment and subscriber devices...............     62,740
      Transportation equipment......................................      2,181
      Furniture, fixtures and office equipment......................        904
      Construction in progress......................................      3,642
                                                                     ----------
                                                                         71,246
      Less: accumulated depreciation................................     (7,294)
                                                                     ----------
      Total.........................................................    $63,952
                                                                     ==========
</TABLE>
 
 Cable Television Franchises and Intangible Assets
 
   Cable television franchise costs include the assigned fair value, at the
date of acquisition, of the franchises from purchased cable television
systems. Intangible assets include goodwill, deferred financing and other
intangible assets. Cable television franchises and intangible assets are
amortized using the straight-line method over the following estimated useful
lives:
 
<TABLE>
      <S>                                                             <C>
      Cable television franchises....................................   15 years
      Goodwill.......................................................   25 years
      Deferred financing and other intangible assets................. 2-10 years
</TABLE>
 
                                      43
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
                               December 31, 1998
                       (All dollar amounts in thousands)
 
 
   Intangible assets at December 31, 1998 consisted of:
 
<TABLE>
      <S>                                                               <C>
      Goodwill......................................................... $ 8,608
      Deferred financing costs.........................................   8,323
      Other intangible assets..........................................     628
                                                                        -------
                                                                         17,559
      Less: accumulated amortization...................................  (1,059)
                                                                        -------
      Total............................................................ $16,500
                                                                        =======
</TABLE>
 
   The Company periodically reviews the carrying value of its long-lived
assets, including property, plant and equipment, cable television franchises
and intangible assets, whenever events or changes in circumstances indicate
that the carrying value may not be recoverable. To the extent the estimated
future cash inflows attributable to the asset, less estimated future cash
outflows, is less than the carrying amount, an impairment loss is recognized
to the extent that the carrying value of such asset is greater than its fair
value.
 
 Estimates Used in Financial Statement Presentation
 
   The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
3. Acquisitions
 
 TWI Cable
 
   On April 9, 1998, the Company acquired six cable television systems from
TWI Cable. The systems are clustered in southern Louisiana, western
Mississippi and western Tennessee. This Acquisition represented the first
acquisition by the Company. The purchase price for the systems was $309,500
which was paid as follows: TWI Cable received $300,000 in cash, inclusive of
an escrow deposit of $15,000, and a $9,500 (9,500 units) equity interest in
Renaissance Media Holdings LLC, the parent company of Group. In addition to
the purchase price, the Company incurred approximately $1,385 in transaction
costs, exclusive of financing costs.
 
   The Acquisition was accounted for using the purchase method and,
accordingly, results of operations are reported from the date of the
Acquisition (April 9, 1998). The excess of the purchase price over the
estimated fair value of the tangible assets acquired has been allocated to
cable television franchises and goodwill in the amount of $235,387 and $8,608,
respectively.
 
 Deffner Cable
 
   On August 31, 1998, the Company acquired the assets of Deffner Cable, a
cable television company located in Gadsden, Tennessee. The purchase price was
$100 and was accounted for using the purchase method. The allocation of the
purchase price is subject to change, although management does not believe that
any material adjustment to such allocation is expected.
 
 Bayou Vision, Inc. and Gulf South Cable, Inc.
 
   On February 3, 1999, Media acquired the cable television assets of Bayou
Vision, Inc. and Gulf South Cable, Inc. serving approximately 1,950
subscribers in the Villages of Estherwood, Morse and Mermentau and
 
                                      44
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
                               December 31, 1998
                       (All dollar amounts in thousands)
 
Acadia and Livingston Parish, Louisiana. The cash purchase price was
approximately $2,700 and was paid out of available Company funds.
 
   Unaudited Pro Forma summarized results of operations for the Company for
the year ended December 31, 1998 and 1997, assuming the Acquisition, Notes (as
hereinafter defined) and Credit Agreement (as hereinafter defined) had been
consummated on January 1, 1998 and 1997, are as follows:
 
<TABLE>
<CAPTION>
                                                               Year ended
                                                               December 31
                                                            ------------------
                                                              1998      1997
                                                            --------  --------
      <S>                                                   <C>       <C>
      Revenues............................................. $ 56,745  $ 50,987
      Expenses.............................................   55,210    53,022
                                                            --------  --------
      Operating (loss) income..............................    1,535    (2,035)
      Interest expense and other expenses..................  (19,699)  (19,740)
                                                            --------  --------
      Net (Loss)........................................... $(18,164) $(21,775)
                                                            ========  ========
</TABLE>
 
4. Debt
 
   As of December 31, 1998, debt consisted of:
 
<TABLE>
      <S>                                                              <C>
      10.00% Senior Discount Notes at Accreted Value (a).............. $107,374
      Credit Agreement (b)............................................  102,500
                                                                       --------
                                                                       $209,874
                                                                       ========
</TABLE>
--------
(a) On April 9, 1998, in connection with the Acquisition described in Note 3,
    the Company issued $163,175 principal amount at maturity, $100,012 initial
    accreted value, of 10.00% senior discount notes due 2008 ("Notes"). The
    Notes pay no interest until April 15, 2003. From and after April 15, 2003
    the Notes will bear interest, payable semi-annually in cash, at a rate of
    10% per annum on April 15 and October 15 of each year, commencing October
    15, 2003. The Notes are due on April 15, 2008.
(b) On April 9, 1998, Renaissance Media entered into a credit agreement among
    Morgan Stanley & Co. Incorporated as Placement Agent, Morgan Stanley
    Senior Funding Inc., as Syndication Agent, the Lenders, CIBC Inc., as
    Documentation Agent and Bankers Trust Company as Administrative Agent (the
    "Credit Agreement"). The aggregate commitments under the Credit Agreement
    total $150,000, consisting of a $40,000 revolver, $60,000 Tranche A Term
    Loans and $50,000 Tranche B Term Loans (collectively the "Term Loans").
    The revolving credit and term loans are collateralized by a first lien
    position on all present and future assets and the member's interest of
    Media, Louisiana and Tennessee. The Credit Agreement provides for interest
    at varying rates based upon various borrowing options and the attainment
    of certain financial ratios and for commitment fees of 1/2% on the unused
    portion of the revolver. The effective interest rate, including commitment
    fees and amortization of related deferred financing costs and the
    interest-rate cap, for the year ended December 31, 1998 was 8.82%.
 
   On April 9, 1998, $110,000 was borrowed under the Credit Agreement's
Tranche A and B Term Loans. On June 23, 1998, $7,500 was repaid resulting in
$102,500 of outstanding Tranche A and B Term Loans as of December 31, 1998.
 
 
                                      45
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
                               December 31, 1998
                       (All dollar amounts in thousands)
 
   As of December 31, 1998, the Company had unrestricted use of the $40,000
revolver. No borrowings had been made by the Company under the revolver
through that date.
 
   Annual maturities of borrowings under the Credit Agreement for the years
ending December 31 are as follows:
 
<TABLE>
      <S>                                                             <C>
      1999........................................................... $     776
      2000...........................................................     1,035
      2001...........................................................     2,701
      2002...........................................................     9,506
      2003...........................................................    11,590
      2004...........................................................    11,590
      Thereafter.....................................................    65,302
                                                                      ---------
                                                                        102,500
      Less: Current portion..........................................      (776)
                                                                      ---------
                                                                      $ 101,724
                                                                      =========
</TABLE>
 
 
   The Credit Agreement and the Indenture pursuant to which the Notes were
issued contain restrictive covenants on the Company and subsidiaries regarding
additional indebtedness, investment guarantees, loans, acquisitions, dividends
and merger or sale of the subsidiaries and require the maintenance of certain
financial ratios.
 
   Total interest cost incurred for the year ended December 31, 1998,
including commitment fees and amortization of deferred financing and interest-
rate cap costs was $14,358, net of capitalized interest of $42.
 
5. Interest Rate Cap Agreement
 
   The Company purchases interest-rate cap agreements that are designed to
limit its exposure to increasing interest rates and are designated to its
floating rate debt. The strike price of these agreements exceeds the current
market levels at the time they are entered into. The interest rate indices
specified by the agreements have been and are expected to be highly correlated
with the interest rates the Company incurs on its floating rate debt. Payments
to be received as a result of the specified interest rate index exceeding the
strike price are accrued in other assets and are recognized as a reduction of
interest expense (the accrual accounting method). The cost of these agreements
is included in other assets and amortized to interest expense ratably during
the life of the agreement. Upon termination of an interest rate cap agreement,
any gain is deferred in other liabilities and amortized over the remaining
term of the original contractual life of the agreement as a reduction of
interest expense.
 
   On December 1, 1997, the Company purchased an interest rate cap agreement
from Morgan Stanley Capital Services Inc. The carrying value as of December
31, 1998 was $47. The fair value of the interest rate cap, which is based upon
the estimated amount that the Company would receive or pay to terminate the
cap agreement as of December 31, 1998, taking into consideration current
interest rates and the creditworthiness of the counterparties, approximates
its carrying value.
 
   The following table summarizes the interest-rate cap agreement:
 
<TABLE>
<CAPTION>
   Notional                                                Initial
   Principal                 Effective     Termination     Contract     Fixed Rate
    Amount        Term         Date           Date           Cost       (Pay Rate)
   ---------     -------     ---------     -----------     --------     ----------
   <S>           <C>         <C>           <C>             <C>          <C>
   $100,000      2 Years      12/1/97        12/1/99         $100          7.25%
</TABLE>
 
                                      46
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
                               December 31, 1998
                       (All dollar amounts in thousands)
 
 
6. Taxes
 
   For the year ended December 31, 1998, the provision for income taxes has
been calculated on a separate company basis. The components of the provision
for income taxes are as follows:
 
<TABLE>
<CAPTION>
                                                                     Year ended
                                                                    December 31,
                                                                        1998
                                                                    ------------
      <S>                                                           <C>
      Federal:
        Current....................................................     $--
        Deferred...................................................      --
      State:                                                             --
        Current....................................................      135
        Deferred...................................................      --
                                                                        ----
      Provision for income taxes...................................     $135
                                                                        ====
</TABLE>
 
   The Company's current state tax liability results from its obligation to
pay franchise tax in Tennessee and Mississippi and tax on capital in New York.
 
   The Company has a net operating loss ("NOL") carryforward for income tax
purposes which is available to offset future taxable income. This NOL totals
approximately $14,900 and expires in the year 2018. The Company has
established a valuation allowance to offset the entire potential future tax
benefit of the NOL carryforward and, therefore, has recognized no deferred tax
asset with respect to the NOL.
 
   Louisiana and Tennessee have elected to be treated as corporations for
federal income tax purposes and have not recorded any tax benefit for their
losses as the realization of these losses by reducing future taxable income in
the carry forward period is uncertain at this time.
 
7. Related Party Transactions
 
  (A) Transactions with Morgan Stanley entities
 
   In connection with the Acquisition, Media entered into the Credit Agreement
with Morgan Stanley Senior Funding Inc. and Morgan Stanley & Co. Incorporated
acted as the Placement Agent for the Notes. In connection with these services
the Morgan Stanley Entities received customary fees and expense reimbursement.
 
  (B) Transactions with Time Warner and related parties
 
   In connection with the Acquisition, Media entered into an agreement with
Time Warner, pursuant to which Time Warner manages the Company's programming
in exchange for providing the Company access to certain Time Warner
programming arrangements.
 
  (C) Transactions with management
 
   Prior to the consummation of the Acquisition described in Note 3, Media
paid fees in 1998 to six senior executives of the Company who are investors in
the Company (the "Management Investors") for services rendered prior to their
employment by Media relating to the Acquisition and the Credit Agreement.
These fees totaled $287 and were recorded as transaction and financing costs.
 
 
                                      47
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
                               December 31, 1998
                       (All dollar amounts in thousands)
 
  (D) Due to Management Investors
 
   Prior to the formation of the Company, the Management Investors advanced
$1,000 to Holdings, which was used primarily for working capital purposes.
Upon formation of the Company, Holdings contributed certain assets and
liabilities to Group and the $1,000 advance from the Management Investors was
recorded as paid in capital.
 
  (E) Transactions with board member
 
   The Company has utilized the law firm of one of its board members for legal
services for the Acquisition, financing agreements and various ongoing legal
matters. These fees totaled approximately $1,348 for the year ended December
31, 1998.
 
8. Accrued Expenses
 
   Accrued expenses as of December 31, 1998 consist of the following:
 
<TABLE>
<CAPTION>
      Accrued programming costs......................................... $1,986
      <S>                                                                <C>
      Accrued interest..................................................  1,671
      Accrued franchise fees............................................  1,022
      Accrued legal and professional fees...............................    254
      Accrued salaries, wages and benefits..............................    570
      Accrued property and sales tax....................................    637
      Other accrued expenses............................................    530
                                                                         ------
                                                                         $6,670
                                                                         ======
</TABLE>
 
9. Employee Benefit Plan
 
   Effective April 9, 1998, the Company began sponsoring a defined
contribution plan which covers substantially all employees (the "Plan"). The
Plan provides for contributions from eligible employees up to 15% of their
compensation. The Company's contribution to the Plan is limited to 50% of each
eligible employee's contribution up to 10% of his or her compensation. The
Company has the right in any year to set the amount of the Company's
contribution percentage. Company matching contributions to the Plan for the
year ended December 31, 1998 were approximately $97. All participant
contributions and earnings are fully vested upon contribution and company
contributions and earnings vest 20% per year of employment with the Company,
becoming fully vested after five years.
 
10. Commitments and Contingencies
 
  (A) Leases
 
   The Company had rental expense under various lease and rental agreements
primarily for offices, tower sites and warehouses of approximately $125 in
1998. In addition, the Company rents utility poles in its operations generally
under short term arrangements, but the Company expects these arrangements to
recur.
 
                                      48
<PAGE>
 
                          RENAISSANCE MEDIA GROUP LLC
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
 
                               December 31, 1998
                       (All dollar amounts in thousands)
 
 
   Total rent expense for utility poles was approximately $620 in 1998. Future
minimum annual rental payments under noncancellable leases are as follows:
 
<TABLE>
<CAPTION>
      1999................................................................ $162
      <S>                                                                  <C>
      2000................................................................   38
      2001................................................................   24
      2002................................................................   20
      2003 and thereafter.................................................   66
                                                                           ----
      Total............................................................... $310
                                                                           ====
</TABLE>
 
  (B) Employment Agreements
 
   Media has entered into employment agreements with six senior executives who
are also investors in Holdings. Under the conditions of five of the agreements
the employment term is five years, expiring in April 2003 and requires Media
to continue salary payments (including any bonus) through the term if the
executive's employment is terminated by Media without cause, as defined in the
employment agreement. Media's obligations under the employment agreements may
be reduced in certain situations based on actual operating performance
relative to the business plan, death or disability or by actions of the other
senior executives.
 
   The employment agreement for one senior executive has a term of one year
and may be renewed annually. This agreement has been renewed through April 8,
2000.
 
  (C) Other Agreements
 
   In exchange for certain flexibility in establishing cable rate pricing
structures for regulated services that went into effect on January 1, 1996,
Time Warner agreed with the Federal Communications Commission ("FCC") to
invest in certain upgrades to its cable infrastructure (consisting primarily
of materials and labor in connection with the plant upgrades up to 750 MHz) by
1999 (approximately $23 million). This agreement with the FCC has been assumed
by the Company as part of the Acquisition.
 
  11. Subsequent Event
 
   On February 23, 1999, Holdings entered into an agreement with Charter
Communications, LLC to sell 100% of its members' equity in the Company for
approximately $459,000, subject to certain closing conditions. This
transaction is expected to close during the third quarter of 1999.
 
                                      49
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
To the Members of
Renaissance Media Holdings LLC
Renaissance Media LLC
 
   We have audited the accompanying combined balance sheet of Renaissance
Media Holdings LLC and Renaissance Media LLC (as combined, the "Company") as
of December 31, 1997 and the related combined income statement and statement
of cash flows for the period from November 5, 1997 (date of inception) to
December 31, 1997. These combined financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these combined financial statements based on our audit.
 
   We conducted our audit 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 audit provides a reasonable basis
for our opinion.
 
   In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Company at
December 31, 1997 and the results of its operations and its cash flows for the
period from November 5, 1997 (date of inception) to December 31, 1997 in
conformity with generally accepted accounting principles.
 
                                             Ernst & Young LLP
 
New York, New York
March 16, 1998
 
                                      50
<PAGE>
 
            RENAISSANCE MEDIA HOLDINGS LLC AND RENAISSANCE MEDIA LLC
 
                             COMBINED BALANCE SHEET
 
                               December 31, 1997
 
                                     ASSETS
 
<TABLE>
<S>                                                                 <C>
Cash and cash equivalents.......................................... $   903,034
Accrued interest income............................................      59,434
Accounts receivable................................................       2,500
Prepaid expenses and other assets..................................       2,041
Escrow deposit.....................................................  15,000,000
Deferred acquisition costs, net....................................     347,500
Deferred financing costs...........................................     692,500
Less accumulated amortization......................................      (4,271)
                                                                    -----------
                                                                        688,229
                                                                    -----------
    Total assets................................................... $17,002,738
                                                                    ===========
 
                        LIABILITIES AND MEMBERS' EQUITY
 
Due to Management Investors........................................ $ 1,000,000
Accounts payable...................................................      11,313
Accrued expenses:
  Legal............................................................     880,000
  Audit fees.......................................................      15,000
  Other professional fees..........................................      60,000
                                                                      1,966,313
                                                                    -----------
MEMBERS' EQUITY:
Morgan Stanley Capital Partners III, Inc. .........................           1
Morgan Stanley Capital Partners III, L.P. .........................  13,269,701
MSCP III 892 Investors, L.P. ......................................   1,358,582
Morgan Stanley Capital Investors, L.P. ............................     371,717
Retained earnings..................................................      36,424
                                                                    -----------
    Total members' equity..........................................  15,036,425
                                                                    -----------
    Total liabilities and members' equity.......................... $17,002,738
                                                                    ===========
</TABLE>
 
                  See accompanying notes to financial statements.
 
                                       51
<PAGE>
 
            RENAISSANCE MEDIA HOLDINGS LLC AND RENAISSANCE MEDIA LLC
 
              COMBINED STATEMENTS OF INCOME AND RETAINED EARNINGS
 
           November 5, 1997 (Date of Inception) to December 31, 1997
 
<TABLE>
<S>                                                                     <C>
Revenues:
Interest income........................................................ $64,968
                                                                        -------
    Total revenue......................................................  64,968
                                                                        -------
Expenses:
Employee...............................................................   9,196
General................................................................      77
Professional...........................................................  15,000
Interest expense.......................................................   4,271
    Total expenses.....................................................  28,544
                                                                        -------
    Net income......................................................... $36,424
    Retained earnings, beginning of period.............................     -0-
                                                                        -------
    Retained earnings, end of period................................... $36,424
                                                                        =======
</TABLE>
 
 
                See accompanying notes to financial statements.
 
                                       52
<PAGE>
 
            RENAISSANCE MEDIA HOLDINGS LLC AND RENAISSANCE MEDIA LLC
 
                        COMBINED STATEMENT OF CASH FLOW
 
           November 5, 1997 (Date of Inception) to December 31, 1997
 
<TABLE>
<S>                                                                <C>
Operating Activities:
Net income........................................................ $     36,424
Adjustments to non-cash and non-operating items:
  Non-cash interest expense/(income)..............................        4,271
  Changes in operating assets and liabilities:
    Accrued interest income.......................................      (59,434)
    Accounts receivable...........................................       (2,500)
    Prepaid expenses and other assets.............................       (2,041)
    Purchase of interest rate cap agreement.......................     (102,500)
    Accrued expenses:
      Other professional fees.....................................        2,500
      Audit fees..................................................       15,000
    Accounts payable..............................................       11,313
Net cash (used in) operating activities...........................      (96,967)
                                                                   ------------
Investing Activities:
Escrow deposit....................................................  (15,000,000)
Net cash (used in) investing activities...........................  (15,000,000)
                                                                   ------------
Financing Activities:
Due to Management Investors.......................................    1,000,000
Capital contributions:
  Morgan Stanley Capital Partners III, Inc........................            1
  Morgan Stanley Capital Partners III, L.P........................   13,269,701
  MSCP III 892 Investors, L.P.....................................    1,358,582
  Morgan Stanley Capital Investors, L.P...........................      371,717
                                                                   ------------
Net cash provided by (used in) financing activities...............   16,000,001
                                                                   ------------
Net Increase in Cash and Cash Equivalents.........................      903,034
Cash and Cash Equivalents at the beginning of the period..........          --
                                                                   ------------
Cash and Cash Equivalents at the end of the period................ $    903,034
                                                                   ============
</TABLE>
 
                See accompanying notes to financial statements.
 
                                       53
<PAGE>
 
           RENAISSANCE MEDIA HOLDINGS LLC AND RENAISSANCE MEDIA LLC
 
                         NOTES TO FINANCIAL STATEMENTS
 
                               December 31, 1997
 
1. Organization and Basis of Presentation
 
   Renaissance Media Holdings LLC ("Holdings") was formed on November 5, 1997
to acquire certain cable television systems in Louisiana, Tennessee and
Mississippi. The initial investing stockholders of Holdings were Morgan
Stanley Capital Partners III, L.P. ("MSCP III L.P."), MSCP III 892 Investors,
L.P. ("MSCP III 892"), and Morgan Stanley Capital Investors, L.P. ("MSCI
L.P."). Renaissance Media LLC ("Media") was formed on November 24, 1997. The
initial investing stockholder of Media was Morgan Stanley Capital Partners
III, Inc. ("MSCP III Inc.).
 
   The financial statements of Holdings and Media (as combined, the "Company")
have been combined as of December 31, 1997 and for the period from November 5,
1997 (date of inception) to December 31, 1997 as (i) it is management's belief
that the combined financial statements present the financial position and
results of operations of what will become the ultimate legal entity structure
upon the closing of the Asset Purchase Transaction (as defined in Note 3
below) and the offering of the Notes (as defined in Note 9 below), (ii) Media
and Holdings were the only legal operating entities in existence at December
31, 1997 with any assets, liabilities, revenue or expenses, (iii) Media was
nominally capitalized at $1 and had minimal operations, (iv) Media and
Holdings were under common control because (x) Holdings has been advised by
MSCP III L.P., MSCP III 892 and MSCI L.P. that MSCP III Inc. is the general
partner of the general partner of each of MSCP III L.P., MSCP III 892 and MSCI
L.P., which were the sole equity owners of Holdings and as general partner
controls all activities of MSCP III L.P., MSCP III 892 and MSCI L.P.
(including, without limitation, their major operating and financial policies)
and (y) MSCP III Inc. was the sole equity owner of Media, and (v) the
financial statements of Media are not material to the combined financial
statements. Subsequent to December 31, 1997, the following legal entity
structure changes were enacted: (a) Holdings formed two wholly-owned
subsidiaries, Renaissance Media (Louisiana) LLC ("Louisiana") and Renaissance
Media (Tennessee) LLC ("Tennessee"), on January 7, 1998; (b) Louisiana and
Tennessee acquired a 76% interest and 24% interest in Media, respectively,
from MSCP III Inc. on February 13, 1998 at the same nominal amount through an
acquisition of entities under common control accounted for as if it were a
pooling of interests, as a result of which Media became a subsidiary of
Holdings; (c) Holdings formed two wholly-owned subsidiaries, Renaissance Media
Group LLC ("Group") and Renaissance Media Capital Corporation, on March 13,
1998 and March 12, 1998, respectively; and (d) Holdings contributed its
membership interests in Louisiana and Tennessee to Group on March 20, 1998.
 
   Significant intercompany transactions and accounts have been eliminated.
 
2. Summary of Significant Accounting Policies
 
 Use of Estimates
 
   The presentation of the financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect the amounts
reported in the financial statements and footnotes thereto. Actual results
could differ from those estimates.
 
 Cash Equivalents
 
   The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.
 
 Deferred Acquisition and Financing Costs
 
   Deferred acquisition and financing costs at December 31, 1997 consist
primarily of legal fees associated with the acquisition of certain assets of
TWI Cable Inc. ("TWI Cable") and financing costs relating to the
 
                                      54
<PAGE>
 
           RENAISSANCE MEDIA HOLDINGS LLC AND RENAISSANCE MEDIA LLC
 
                  NOTES TO FINANCIAL STATEMENTS--(Continued)
 
                               December 31, 1997
contemplated financing (see note 4). Subsequent to the closing of the
acquisition, these costs will be amortized over periods ranging from 8 to 15
years.
 
3. Time Warner Asset Purchase Agreement
 
   On November 14, 1997, Holdings entered into an Asset Purchase Agreement
(the "Time Warner Asset Purchase Agreement") with TWI Cable whereby Holdings
agreed to purchase from TWI Cable the assets of certain cable television
systems in Louisiana, Tennessee and Mississippi (the "Acquisition"). This
transaction closed on April 9, 1998 and was accounted for using the purchase
method. The purchase price for the assets acquired was $309.5 million, $300
million of which was paid in cash and $9.5 million of which was paid by the
issuance of an equity interest (9,500 units) in Holdings to TWI Cable at the
closing. The 9,500 units issued to TWI Cable as equity represent an 8.8%
interest in Holdings, determined by dividing the TWI Cable interest of 9,500
units by the total units outstanding of Holdings of 108,500. TWI Cable's
interest in Holdings is as a minority member with one Board representative,
and TWI Cable has economic interests in Holdings equal to its ownership
percentage on the same basis as all other members of Holdings. Holdings was
formed to consummate the Acquisition and had no assets prior to this
transaction. In accordance with the Limited Liability Company Agreement of
Holdings, TWI Cable is not required to make any future equity contribution to
Holdings and its ability to sell or otherwise dispose of its interests in
Holdings is limited. In accordance with the Time Warner Asset Purchase
Agreement, Holdings made a deposit payment of $15 million on December 5, 1997
which was held by an escrow agent until the closing date. (See Note 9.)
 
4. Capitalization and Debt Financing
 
   In accordance with a commitment letter dated November 14, 1997, Morgan
Stanley Senior Funding, Inc. has committed to provide up to $200 million of
acquisition debt financing to Media ("Acquisition Debt"), including $25
million available to Media, if necessary, to fund capital expansion and
upgrade programs as well as for general working capital requirements. (See
Note 9.)
 
5. Interest Rate Cap Agreement
 
   On December 5, 1997, Media purchased an interest rate cap agreement from
Morgan Stanley Capital Services Inc. At December 31, 1997, the interest rate
cap agreement effectively fixed or set a maximum interest rate of 7.25% on
bank debt borrowings up to $100 million. The interest rate cap agreement
expires on December 5, 1999. The cost of this agreement has been recorded as
deferred financing costs and is being amortized to interest expense ratably
over the life of the agreement.
 
6. Due to Management Investors
 
   Subsequent to the formation of the Company and the execution of the Time
Warner Asset Purchase Agreement, the Management Investors advanced $1 million
to Holdings. At the closing of the Time Warner Asset Purchase Agreement, (see
Note 9), this advance will be contributed by the Management Investors to
Holdings as equity.
 
7. Commitments
 
   Media entered into a lease agreement on January 5, 1998 for corporate
office headquarters. The lease agreement expires on January 4, 1999. Annual
rental expense for 1998 under the agreement will be $90,000.
 
 
                                      55
<PAGE>
 
           RENAISSANCE MEDIA HOLDINGS LLC AND RENAISSANCE MEDIA LLC
 
                  NOTES TO FINANCIAL STATEMENTS--(Continued)
 
                               December 31, 1997
8. Income Taxes
 
   Holdings and Media are limited liability companies and are not subject to
Federal or State Income Tax. Any income earned by these entities will be taxed
to their respective members.
 
9. Subsequent Events (Unaudited)
 
   On April 9, 1998, the Acquisition described in Note 3 was completed. At
that time Holdings assigned its rights and obligations under the Time Warner
Asset Purchase Agreement to Media.
 
   The capitalization of Holdings was modified with respect to the financing
aspects of the transaction such that the Acquisition Debt described in Note 4
was reduced to $150 million of which $110 million was drawn and $40 million is
available under a revolving credit facility. In addition, Renaissance Media
Group LLC, Renaissance Media (Louisiana) LLC, Renaissance (Tennessee) LLC and
Renaissance Media Capital Corporation (collectively, the "Obligors") issued
$163 million principal amount of senior discount notes due 2008 (the "Notes")
and received net cash proceeds of approximately $100 million. The Notes will
fully accrete to face value on April 15, 2003, and after such date will bear
interest, payable semi-annually in cash, at a rate of 10% per annum on April
15 and October 15 of each year commencing October 15, 2003. The Notes are
redeemable at the option of the Obligors at any time on or after April 15,
2003 at 105.0% of the principal amount thereof at maturity until April 15,
2004 and declining in accordance with a schedule to 100.0% of the principal
amount thereof at maturity in 2006 and thereafter. The payment of the Notes
will be guaranteed by Renaissance Media Group LLC and will be effectively
subordinated to all liabilities of Renaissance Media Group LLC's subsidiaries.
The indenture for the Notes contains certain restrictive covenants. Additional
equity contributions of $93.5 million, were made by MSCP III, L.P., MSCP III
892, MSCI L.P., TWI Cable and the Management Investors on April 9, 1998 to the
Company.
 
                                      56
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
To the Board of Directors of
TWI Cable, Inc.
 
   We have audited the accompanying combined balance sheet of the Picayune MS,
Lafourche LA, St. Tammany LA, St. Landry LA, Pointe Coupee LA, and Jackson TN
cable television systems, (collectively, the "Combined Systems") included in
TWI Cable, Inc. ("TWI Cable"), as of April 8, 1998, and the related combined
statements of operations, changes in net assets and cash flows for the period
from January 1, 1998 through April 8, 1998. Our audit also included the
financial statement schedule listed in the Index at Item 14 (a). These
combined financial statements and schedule are the responsibility of the
Combined Systems' management. Our responsibility is to express an opinion on
these combined financial statements and schedule based on our audit.
 
   We conducted our audit 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 audit provides a reasonable basis
for our opinion.
 
   In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of the
Combined Systems, included in TWI Cable, at April 8, 1998, and the combined
results of their operations and their cash flows for the period from January
1, 1998 through April 8, 1998, in conformity with generally accepted
accounting principles. Also, in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
 
                                          Ernst & Young LLP
 
New York, New York
February 22, 1999
 
                                      57
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                          (Included in TWI Cable Inc.)
 
                             COMBINED BALANCE SHEET
                                 (In Thousands)
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                                       April 8,
                                                                         1998
                                                                       --------
<S>                                                                    <C>
Cash and cash equivalents............................................. $      7
Receivables, less allowance of $116...................................      576
Prepaid expenses and other assets.....................................      438
Property, plant and equipment, net....................................   35,992
Cable television franchises, net......................................  195,907
Goodwill and other intangibles, net...................................   50,023
                                                                       --------
  Total assets........................................................ $282,943
                                                                       ========
 
                           LIABILITIES AND NET ASSETS
 
Accounts payable...................................................... $     63
Accrued programming expenses..........................................      978
Accrued franchise fees................................................      616
Subscriber advance payments and deposits..............................      593
Deferred income taxes.................................................   61,792
Other liabilities.....................................................      747
                                                                       --------
  Total liabilities...................................................   64,789
  Total net assets....................................................  218,154
                                                                       --------
  Total liabilities and net assets.................................... $282,943
                                                                       ========
</TABLE>
 
 
            See accompanying notes to combined financial statements.
 
                                       58
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                          (Included in TWI Cable Inc.)
 
                        COMBINED STATEMENT OF OPERATIONS
                                 (In Thousands)
 
<TABLE>
<CAPTION>
                                                             For the period from
                                                               January 1, 1998
                                                                   through
                                                                  April 8,
                                                                    1998
                                                             -------------------
<S>                                                          <C>
Revenues....................................................       $15,221
Costs and Expenses:
Operating and programming...................................         3,603
Selling, general and administrative.........................         4,134
Depreciation and amortization...............................         5,031
(Gain) on disposal of fixed assets..........................           (96)
                                                                   -------
  Total costs and expenses..................................        12,672
                                                                   -------
Operating income............................................         2,549
Provision for income taxes..................................         1,191
                                                                   -------
Net income..................................................       $ 1,358
                                                                   =======
</TABLE>
 
 
            See accompanying notes to combined financial statements.
 
                                       59
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                          (Included in TWI Cable Inc.)
 
                  COMBINED STATEMENT OF CHANGES IN NET ASSETS
                                 (In Thousands)
 
<TABLE>
<S>                                                                    <C>
Balance at December 31, 1997.......................................... $224,546
  Repayment of advances from Parent...................................  (17,408)
  Advances from Parent................................................    9,658
  Net income..........................................................    1,358
                                                                       --------
Balance at April 8, 1998.............................................. $218,154
                                                                       ========
</TABLE>
 
 
 
            See accompanying notes to combined financial statements.
 
                                       60
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                          (Included in TWI Cable Inc.)
 
                        COMBINED STATEMENT OF CASH FLOWS
                                 (In Thousands)
 
<TABLE>
<CAPTION>
                                                                     For the
                                                                   period from
                                                                 January 1, 1998
                                                                     through
                                                                  April 8, 1998
                                                                 ---------------
<S>                                                              <C>
Operating Activities:
Net income......................................................     $ 1,358
Adjustments for noncash and nonoperating items:
  Income tax expense............................................       1,191
  Depreciation and amortization.................................       5,031
  (Gain) on disposal of fixed assets............................         (96)
  Changes in operating assets and liabilities:
    Receivables, prepaids and other assets......................         289
    Accounts payable, accrued expenses and other liabilities....        (770)
    Other balance sheet changes.................................          (4)
                                                                     -------
Net cash provided by operations.................................       6,999
                                                                     -------
Investing Activities:
Capital expenditures............................................        (613)
                                                                     -------
Net cash used in investing activities...........................        (613)
                                                                     -------
Financing Activities:
Net repayment of advances from Parent...........................      (7,750)
                                                                     -------
Net cash (used in) financing activities.........................      (7,750)
Increase in Cash and Cash Equivalents...........................      (1,364)
Cash and Cash Equivalents at Beginning of Period................       1,371
                                                                     -------
Cash and Cash Equivalents at End of Period......................     $     7
                                                                     =======
</TABLE>
 
 
            See accompanying notes to combined financial statements.
 
                                       61
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                         (Included in TWI Cable Inc.)
 
                    NOTES TO COMBINED FINANCIAL STATEMENTS
 
1. Organization and Summary of Significant Accounting Policies
 
 Description of Business
 
   The cable television systems operating in the metropolitan areas of
Picayune, Mississippi; Lafourche, Louisiana; St. Tammany, Louisiana; St.
Landry, Louisiana; Pointe Coupee, Louisiana; and Jackson, Tennessee (the
"Combined Systems") are principally engaged in the cable television business
under non-exclusive franchise agreements, which expire at various times
beginning in 1999. The Combined Systems' operations consist primarily of
selling video programming which is distributed to subscribers for a monthly
fee through a network of coaxial and fiber-optic cables.
 
   Prior to January 4, 1996, the Combined Systems were included in certain
subsidiaries of Cablevision Industries Corporation ("CVI"). On January 4,
1996, CVI merged into a wholly owned subsidiary of Time Warner Inc. (the "CVI
Merger"). On October 1, 1996, Time Warner Inc. ("Time Warner") completed a
reorganization amongst certain of its wholly owned cable television
subsidiaries whereby CVI was renamed TWI Cable Inc. ("TWI Cable").
 
 Basis of Presentation
 
   TWI Cable has sold the Combined Systems to Renaissance Media Holdings LLC
("Renaissance") pursuant to an Asset Purchase Agreement with Renaissance,
dated November 14, 1997 (see Note 8). Accordingly, the accompanying combined
financial statements of the Combined Systems reflect the "carved out"
historical financial position, results of operations, cash flows and changes
in net assets of the operations of the Combined Systems as if they had been
operating as a separate company. Effective as of January 1, 1996, the Combined
Systems' financial statements reflect the new basis of accounting arising from
Time Warner's merger with CVI. Based on Time Warner's allocation of the
purchase price, the assets and liabilities of the Combined Systems were
revalued resulting in goodwill allocated to the Combined Systems of
approximately $52,971,000, which is being amortized over its estimated life of
40 years. In addition, approximately $220,981,000 was allocated to cable
television franchises and other intangible assets, which is being amortized
over periods up to 20 years.
 
   The combined statements have been adjusted to include the allocation of
certain corporate expenses incurred by Time Warner Cable and/or TWI Cable on
the Combined Systems' behalf, based upon the number of Combined System
subscribers managed by Time Warner Cable and the ratio of Combined System
subscribers to total TWI Cable subscribers, respectively. These allocations
reflect all costs of doing business that the Combined Systems would have
incurred on a stand alone basis as disclosed in Note 3. Management believes
that these allocations are reasonable.
 
 Basis of Combination
 
   The combined financial statements include the assets, liabilities,
revenues, expenses, income, loss and cash flows of the Combined Systems, as if
the Combined Systems were a single company. Significant intercompany accounts
and transactions between the Combined Systems have been eliminated.
Significant accounts and transactions with Time Warner and its affiliates are
disclosed as related party transactions (see Note 3).
 
 Use of Estimates
 
   The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the combined financial
statements and footnotes thereto. Actual results could differ from those
estimates.
 
                                      62
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISON SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
 
 Concentration of Credit Risk
 
   A significant portion of the customer base is concentrated within the local
geographical area of each of the individual cable television systems. The
Combined Systems generally extend credit to customers and the ultimate
collection of accounts receivable could be affected by the local economy.
Management performs continuous credit evaluations of its customers and may
require cash in advance or other special arrangements from certain customers.
Management does not believe that there is any significant credit risk which
could have a material effect on the financial condition of the Combined
Systems.
 
 Revenue and Costs
 
   Subscriber fees are recorded as revenue in the period the related services
are provided and advertising revenues are recognized in the period the related
advertisements are exhibited. Rights to exhibit programming are purchased from
various cable networks. The costs of such rights are generally expensed as the
related services are made available to subscribers.
 
 Franchise Fees
 
   Local governmental authorities impose franchise fees on the cable
television systems owned by the Combined Systems ranging up to a federally
mandated maximum of 5.0% of gross revenues. On a monthly basis, such fees are
collected from the Combined Systems' customers and such fees are not included
as revenue or as a franchise fee expense.
 
 Advertising Costs
 
   Advertising costs are expensed upon the first exhibition of the related
advertisements. Advertising expense amounted to $105,000 for the period from
January 1, 1998 through April 8, 1998.
 
 Statement of Cash Flows
 
   The Combined Systems participate in a cash management system with
affiliates whereby cash receipts are transferred to a centralized bank account
from which centralized payments to various suppliers and creditors are made on
behalf of the Combined Systems. The excess of such cash receipts over payments
is included in net assets. Amounts shown as cash represent the Combined
Systems' net cash receipts not transferred to the centralized account as of
December 31, 1996 and 1997. The average net intercompany payable balances was
$166,522,000 for the period from January 1, 1998 through April 8, 1998.
 
   For purposes of this statement, cash and cash equivalents includes all
highly liquid investments purchased with original maturities of three months
or less.
 
                                      63
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISON SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
 
 Property, Plant and Equipment
 
   Property, plant and equipment are stated at cost. Additions to property,
plant and equipment generally include material, labor, overhead and interest.
Depreciation is provided on the straight-line method over estimated useful
lives as follows:
 
<TABLE>
      <S>                                                             <C>
      Buildings and improvements..................................... 5-20 years
      Cable television equipment..................................... 5-15 years
      Furniture, fixtures and other equipment........................ 3-10 years
</TABLE>
 
     Property, plant and equipment consist of:
<TABLE>
<CAPTION>
                                                                  April 8, 1998
                                                                  --------------
                                                                  (in thousands)
      <S>                                                         <C>
      Land and buildings........................................     $  2,255
      Cable television equipment................................       40,276
      Furniture, fixtures and other equipment...................        2,308
      Construction in progress..................................        1,183
                                                                     --------
                                                                       46,022
      Less accumulated depreciation.............................      (10,030)
                                                                     --------
        Total...................................................     $ 35,992
                                                                     ========
</TABLE>
 
 Intangible Assets
 
   The Combined Systems amortized goodwill over periods up to 40 years and
cable television franchises over periods up to 20 years, both using the
straight-line method. For the period from January 1, 1998 through April 8,
1998 amortization of goodwill amounted to $360,000 and amortization of cable
television franchises amounted to $3,008,000. Accumulated amortization of
intangible assets amounted to $28,114,000 at April 8, 1998.
 
 Impairment
 
   Management separately reviews the carrying value of acquired long-lived
assets for each acquired entity on a quarterly basis to determine whether an
impairment may exist. Management considers relevant cash flow and
profitability information, including estimated future operating results,
trends and other available information, in assessing whether the carrying
value of long-lived assets can be recovered. Upon a determination that the
carrying value of long-lived assets will not be recovered from the
undiscounted future cash flows of the acquired business, the carrying value of
such long-lived assets would be considered impaired and would be reduced by a
charge to operations in the amount of the impairment. An impairment charge is
measured as a deficiency in estimated discounted future cash flows of the
acquired business to recover the carrying value related to the long-lived
assets.
 
 Income Taxes
 
   Income taxes have been provided using the liability method prescribed by
FASB Statement No. 109, "Accounting for Income Taxes." Under the liability
method, deferred income taxes reflect tax carryforwards and the net tax
effects of temporary differences between the carrying amount of assets and
liabilities for financial statements and income tax purposes, as determined
under enacted tax laws and rates.
 
 
2. Employee Benefit Plans
 
   Following the CVI Merger, the Combined Systems began participation in the
Time Warner Cable Pension Plan (the "Pension Plan"), a non-contributory
defined benefit pension plan, and the Time Warner Cable
 
                                      64
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISON SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
Employee Savings Plan (the "Savings Plan") which are administered by a
committee appointed by the Board of Representatives of Time Warner
Entertainment Company, L.P. ("TWE"), an affiliate of Time Warner, and which
cover substantially all employees.
 
   Benefits under the Pension Plan are determined based on formulas which
reflect an employee's years of service and compensation levels during the
employment period. Pension expense for the period from January 1, 1998 through
April 8, 1998 totaled $61,000.
 
   The Combined Systems' contributions to the Savings Plan are limited to
6.67% of an employee's eligible compensation during the plan year. The Board
of Representatives of TWE has the right in any year to set the maximum amount
of the Combined Systems' contribution. Defined contribution plan expense for
the period from January 1, 1998 through April 8, 1998 totaled $38,000.
 
   The Combined Systems have no material obligations for other post retirement
benefits.
 
3. Related Parties
 
   In the normal course of conducting business, the Combined Systems had
various transactions with Time Warner and its affiliates, generally on terms
resulting from a negotiation between the affected units that in management's
view resulted in reasonable allocations.
 
 Programming
 
   Included in the Combined Systems' operating expenses are charges for
programming and promotional services provided by Home Box Office, Turner
Broadcasting System, Inc. and other affiliates of Time Warner. These charges
are based on customary rates and are in the ordinary course of business. These
charges totaled $1,164,000 for the period from January 1, 1998 through April
8, 1998. Accrued related party expenses for these programming and promotional
services included in accrued programming expenses approximated $409,000 for
the period from January 1, 1998 through April 8, 1998.
 
 Management Fees
 
   TWI Cable entered into a management service arrangement with Time Warner
Cable ("TWC"), pursuant to which TWC is responsible for the management and
operation of TWI Cable, which includes the Combined Systems. The management
fees paid to TWC by TWI Cable are based on an allocation of the corporate
expenses of TWC's cable division in proportion to the respective number of
subscribers of all cable systems managed by TWC's cable division. The
allocation of the TWI Cable management fee to the Combined Systems
approximated $486,000 for the period from January 1, 1998 through April 8,
1998.
 
   Other divisional expenses allocated to the Combined Systems approximated
$299,000 for the period from January 1, 1998 through April 8, 1998.
 
4. Interest Expense
 
   Prior to the CVI Merger, the Jackson, Tennessee system was included in
Cablevision Industries Limited Partnership and Combined Entities ("CILP"). The
Jackson system was charged interest expense in connection with CILP's (a)
senior and subordinated bank credit agreements; and (b) senior unsecured
subordinated Series A
 
                                      65
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
and Series B notes payable to CVI. The remaining five systems comprising the
Combined Systems were included in Cablevision Industries of the Southeast,
Inc. and Combined Entities ("CIOS"). These systems were charged interest
expense in connection with CIOS's (a) bank revolving credit agreement; and (b)
junior and senior subordinated debt to CVI.
 
5. Income Taxes
 
   Effective January 4, 1996, the Combined Systems are included in the
consolidated federal income tax return of Time Warner. Prior to January 4,
1996, the Combined Systems were included in the consolidated federal income
tax return of CVI. The provision for income taxes has been calculated on a
separate company basis. The components of the provision for income taxes are
as follows:
 
<TABLE>
<CAPTION>
                                                                     For the
                                                                   period from
                                                                 January 1, 1998
                                                                     through
                                                                  April 8, 1998
                                                                 ---------------
                                                                 (in thousands)
      <S>                                                        <C>
      Federal:
        Current................................................      $   --
        Deferred...............................................         962
      State:
        Current................................................          --
        Deferred...............................................         229
                                                                     ------
          Net provision for income taxes.......................      $1,191
                                                                     ======
</TABLE>
 
   The Combined Systems did not, and will not, have a tax sharing agreement
with either Time Warner, TWI Cable or CVI. Therefore, the Combined Systems
have not and will not be compensated for the utilization of the Combined
Systems' tax losses, by Time Warner, TWI Cable or CVI. In addition, the
Combined Systems have not and will not be required to make payments to either
Time Warner or TWI Cable for the current tax provision of the Combined
Systems.
 
   The differences between the income tax provision expected at the U.S.
federal statutory income tax rate and the total income tax provision are due
to nondeductible goodwill amortization and state taxes.
 
   Significant components of the Combined Systems' deferred tax assets and
liabilities, as calculated on a separate company basis, are as follows:
 
<TABLE>
<CAPTION>
                                                                  April 8, 1998
                                                                  --------------
                                                                  (in thousands)
      <S>                                                         <C>
      Deferred tax liabilities:
        Amortization............................................     $57,817
        Depreciation............................................       4,181
                                                                     -------
          Total gross deferred tax liabilities..................      61,998
                                                                     -------
      Deferred tax assets:
        Tax loss carryforwards..................................         160
        Allowance for doubtful accounts.........................          46
                                                                     -------
          Total deferred tax assets.............................         206
                                                                     -------
          Net deferred tax liability............................     $61,792
                                                                     =======
</TABLE>
 
 
                                      66
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
   On a separate company basis, the Combined Systems have tax loss
carryforwards of approximately $400,000 at April 8, 1998. However, if the
Combined Systems are acquired in an asset purchase, the tax loss
carryforwards, and net deferred tax liabilities relating to temporary
differences will not carry over to Renaissance (see Note 8).
 
6. Commitments and Contingencies
 
   The Combined Systems had rental expense of approximately $244,000 for the
period from January 1, 1998 through April 8, 1998 under various lease and
rental agreements for offices, utility poles, warehouses and computer
equipment. Future minimum annual rental payments under noncancellable leases
will approximate $1,000,000 annually over the next five years.
 
   In exchange for certain flexibility in establishing cable rate pricing
structures for regulated services that went into effect on January 1, 1996,
TWC has agreed with the Federal Communications Commission ("FCC") to invest in
certain upgrades to its cable infrastructure (consisting primarily of
materials and labor in connection with the plant upgrades up to 750 MHz) over
the next three years (approximately $25 million at December 31, 1997). This
agreement with the FCC, which extends to the Combined Systems, will be assumed
by Renaissance as it relates to the Combined Systems in accordance with the
Asset Purchase Agreement.
 
7. Other Liabilities
 
   Other liabilities consist of:
 
<TABLE>
<CAPTION>
                                                                  April 8, 1998
                                                                  --------------
                                                                  (in thousands)
      <S>                                                         <C>
      Compensation..............................................       $279
      Data Processing Costs.....................................        161
      Sales and other taxes.....................................        146
      Copyright Fees............................................         35
      Pole Rent.................................................         93
      Other.....................................................         33
                                                                       ----
          Total.................................................       $747
                                                                       ====
</TABLE>
 
8. Subsequent Event
 
   The sale of the Combined Systems, in connection with the Asset Purchase
Agreement with Renaissance, closed on April 9, 1998 at the purchase price of
$309,500,000.
 
                                      67
<PAGE>
 
                        REPORT OF INDEPENDENT AUDITORS
 
To the Board of Directors of
TWI Cable Inc.
 
   We have audited the accompanying combined balance sheets of the Picayune
MS, Lafourche LA, St. Tammany LA, St. Landry LA, Pointe Coupee LA, and Jackson
TN cable television systems, (collectively, the "Combined Systems") included
in TWI Cable, Inc. ("TWI Cable"), as of December 31, 1996 and 1997, the
related combined statements of operations, changes in net assets and cash
flows for the years then ended. Our audit also included the financial
statement schedule listed in the Index at Item 14(a). In addition, we have
audited the combined statement of operations and cash flows for the year ended
December 31, 1995 of the Predecessor Combined Systems. These combined
financial statements and schedule are the responsibility of the Combined
Systems' or the Predecessor's management. Our responsibility is to express an
opinion on these combined financial statements and schedule 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, the combined financial statements referred to above present
fairly, in all material respects, the financial position of the Combined
Systems, included in TWI Cable or the Predecessor, at December 31, 1996 and
1997, and the combined results of their operations and their cash flows for
the years ended December 31, 1995, 1996 and 1997, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set for the therein.
 
                                          Ernst & Young LLP
 
New York, New York
March 16, 1998
 
                                      68
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                          (Included in TWI Cable Inc.)
 
                            COMBINED BALANCE SHEETS
                                 (In Thousands)
 
<TABLE>
<CAPTION>
                                                                December 31,
                                                              -----------------
                                                                1996     1997
                                                              -------- --------
                                     ASSETS
<S>                                                           <C>      <C>
Cash and cash equivalents.................................... $    570 $  1,371
Receivables, less allowance of $71 and $116 for the years
 ended
 December 31, 1996 and 1997, respectively....................      794    1,120
Prepaid expenses and other assets............................       45      183
Property, plant and equipment, net...........................   36,966   36,944
Cable television franchises, net.............................  209,952  198,913
Goodwill and other intangibles, net..........................   51,722   50,383
                                                              -------- --------
    Total assets............................................. $300,049 $288,914
                                                              ======== ========
 
                           LIABILITIES AND NET ASSETS
Accounts payable............................................. $  1,640 $    652
Accrued programming expenses.................................      847      904
Accrued franchise fees.......................................      736      835
Subscriber advance payments and deposits.....................       66      407
Deferred income taxes........................................   58,340   60,601
Other liabilities............................................      945      969
                                                              -------- --------
    Total liabilities........................................   62,574   64,368
    Total net assets.........................................  237,475  224,546
                                                              -------- --------
    Total liabilities and net assets......................... $300,049 $288,914
                                                              ======== ========
</TABLE>
 
 
            See accompanying notes to combined financial statements.
 
                                       69
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
 
                       COMBINED STATEMENTS OF OPERATIONS
                                 (In Thousands)
 
<TABLE>
<CAPTION>
                                                                                                    Year ended December 31,
                                                                                                 ------------------------------
                                                                                                     1995       1996     1997
                                                                                                 ------------- -------  -------
                                                                                                                (Included in
                                                                                                 (Predecessor) TWI Cable Inc.)
                                                                                                 ------------- ----------------
<S>                                                                                              <C>           <C>      <C>
Revenues........................................................................................    $43,549    $47,327  $50,987
Costs and Expenses:
Operating and programming.......................................................................     13,010     12,413   12,101
Selling, general and administrative.............................................................      9,977     12,946   13,823
Depreciation and amortization...................................................................     17,610     18,360   18,697
(Gain) loss on disposal of fixed assets.........................................................        --        (244)     620
                                                                                                    -------    -------  -------
  Total costs and expenses......................................................................     40,597     43,475   45,241
                                                                                                    -------    -------  -------
Operating income................................................................................      2,952      3,852    5,746
Interest expense................................................................................     11,871        --       --
                                                                                                    -------    -------  -------
(Loss) income before income tax (benefit) expense...............................................     (8,919)     3,852    5,746
Income tax (benefit) expense....................................................................     (3,567)     1,502    2,262
                                                                                                    -------    -------  -------
Net (loss) income...............................................................................    $(5,352)   $ 2,350  $ 3,484
                                                                                                    =======    =======  =======
</TABLE>
 
 
            See accompanying notes to combined financial statements.
 
                                       70
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                          (Included in TWI Cable Inc.)
 
                  COMBINED STATEMENTS OF CHANGES IN NET ASSETS
                                 (In Thousands)
 
<TABLE>
<S>                                                                    <C>
Contribution by Parent................................................ $250,039
  Repayment of advances from Parent...................................  (47,895)
  Advances from Parent................................................   32,981
  Net income..........................................................    2,350
                                                                       --------
Balance at December 31, 1996..........................................  237,475
  Repayment of advances from Parent...................................  (50,661)
  Advances from Parent................................................   34,248
  Net income..........................................................    3,484
                                                                       --------
Balance at December 31, 1997.......................................... $224,546
                                                                       ========
</TABLE>
 
 
 
            See accompanying notes to combined financial statements.
 
                                       71
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
 
                       COMBINED STATEMENTS OF CASH FLOWS
                                 (In Thousands)
 
<TABLE>
<CAPTION>
                                                  Year ended December 31,
                                              ---------------------------------
                                                  1995        1996       1997
                                              ------------- ---------  --------
                                                               (Included in
                                              (Predecessor)   TWI Cable Inc.)
                                              ------------- -------------------
<S>                                           <C>           <C>        <C>
Operating Activities:
Net (loss) income...........................     $(5,352)   $   2,350  $  3,484
  Adjustments for noncash and nonoperating
   items:
  Income tax (benefit) expense..............      (3,567)       1,502     2,262
  Depreciation and amortization.............      17,610       18,360    18,697
  (Gain) loss on disposal of fixed assets...         --          (244)      620
  Changes in operating assets and
   liabilities:
    Receivables, prepaids and other assets..        (196)         944      (464)
    Accounts payable, accrued expenses and
     other liabilities......................        (972)         176      (466)
    Other balance sheet changes.............         --           --       (529)
                                                 -------    ---------  --------
Net cash provided by operations.............       7,523       23,088    23,604
Investing Activities:
Purchase of Predecessor cable systems, net
 of cash acquired...........................         --      (249,473)      --
Capital expenditures........................      (7,376)      (8,170)   (6,390)
                                                 -------    ---------  --------
Net cash used in investing activities.......      (7,376)    (257,643)   (6,390)
Financing Activities:
Advance from Parent for purchase of
 Predecessor................................         --       250,039       --
Net repayment of advances from Parent.......         --       (14,914)  (16,413)
                                                 -------    ---------  --------
Net cash provided by (used in) financing
 activities.................................         --       235,125   (16,413)
Increase in Cash and Cash Equivalents.......         147          570       801
Cash and Cash Equivalents at Beginning of
 Period.....................................         419            0       570
                                                 -------    ---------  --------
Cash and Cash Equivalents at End of Period..     $   566    $     570  $  1,371
                                                 =======    =========  ========
</TABLE>
 
 
            See accompanying notes to combined financial statements.
 
                                       72
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                         (Included in TWI Cable Inc.)
 
                    NOTES TO COMBINED FINANCIAL STATEMENTS
 
 
1. Organization and Summary of Significant Accounting Policies
 
 Description of Business
 
   The cable television systems operating in the metropolitan areas of
Picayune, Mississippi; Lafourche, Louisiana; St. Tammany, Louisiana; St.
Landry, Louisiana; Pointe Coupee, Louisiana; and Jackson, Tennessee (the
"Combined Systems") are principally engaged in the cable television business
under non-exclusive franchise agreements, which expire at various times
beginning in 1999. The Combined Systems' operations consist primarily of
selling video programming which is distributed to subscribers for a monthly
fee through a network of coaxial and fiber-optic cables.
 
   Prior to January 4, 1996, the Combined Systems were included in certain
subsidiaries of Cablevision Industries Corporation ("CVI"). On January 4,
1996, CVI merged into a wholly owned subsidiary of Time Warner Inc. (the "CVI
Merger"). On October 1, 1996, Time Warner Inc. ("Time Warner") completed a
reorganization amongst certain of its wholly owned cable television
subsidiaries whereby CVI was renamed TWI Cable Inc. ("TWI Cable").
 
 Basis of Presentation
 
   TWI Cable has committed to sell the Combined Systems to Renaissance Media
Holdings LLC ("Renaissance") pursuant to an Asset Purchase Agreement with
Renaissance, dated November 14, 1997. Accordingly, the accompanying combined
financial statements of the Combined Systems reflect the "carved out"
historical financial position, results of operations, cash flows and changes
in net assets of the operations of the Combined Systems as if they had been
operating as a separate company. Effective as of January 1, 1996, the Combined
Systems' financial statements reflect the new basis of accounting arising from
Time Warner's merger with CVI. Based on Time Warner's allocation of the
purchase price, the assets and liabilities of the Combined Systems were
revalued resulting in goodwill allocated to the Combined Systems of
approximately $52,971,000, which is being amortized over its estimated life of
40 years. In addition, approximately $220,981,000 was allocated to cable
television franchises and other intangible assets, which is being amortized
over periods up to 20 years. The Combined Systems' financial statements
through December 31, 1995 reflect the historical cost of their assets and
liabilities and results of their operations.
 
   The combined statements have been adjusted to include the allocation of
certain corporate expenses incurred by Time Warner Cable and/or TWI Cable on
the Combined Systems' behalf, based upon the number of Combined System
subscribers managed by Time Warner Cable and the ratio of Combined System
subscribers to total TWI Cable subscribers, respectively. These allocations
reflect all costs of doing business that the Combined Systems would have
incurred on a stand alone basis as disclosed in Note 3. Management believes
that these allocations are reasonable.
 
 Basis of Combination
 
   The combined financial statements include the assets, liabilities,
revenues, expenses, income, loss and cash flows of the Combined Systems, as if
the Combined Systems were a single company. Significant intercompany accounts
and transactions between the Combined Systems have been eliminated.
Significant accounts and transactions with Time Warner and its affiliates are
disclosed as related party transactions (see Note 3).
 
 Use of Estimates
 
   The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the combined financial
statements and footnotes thereto. Actual results could differ from those
estimates.
 
                                      73
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
 
 Concentration of Credit Risk
 
   A significant portion of the customer base is concentrated within the local
geographical area of each of the individual cable television systems. The
Combined Systems generally extend credit to customers and the ultimate
collection of accounts receivable could be affected by the local economy.
Management performs continuous credit evaluations of its customers and may
require cash in advance or other special arrangements from certain customers.
Management does not believe that there is any significant credit risk which
could have a material effect on the financial condition of the Combined
Systems.
 
 Revenue and Costs
 
   Subscriber fees are recorded as revenue in the period the related services
are provided and advertising revenues are recognized in the period the related
advertisements are exhibited. Rights to exhibit programming are purchased from
various cable networks. The costs of such rights are generally expensed as the
related services are made available to subscribers.
 
 Franchise Fees
 
   Local governmental authorities impose franchise fees on the cable
television systems owned by the Combined Systems ranging up to a federally
mandated maximum of 5.0% of gross revenues. On a monthly basis, such fees are
collected from the Combined Systems' customers. Prior to January 1997,
franchise fees were not separately itemized on customers' bills. Such fees
were considered part of the monthly charge for basic services and equipment,
and therefore were reported as revenue and expense in the Combined Systems'
financial results. Management began the process of itemizing such fees on all
customers' bills beginning in January 1997. In conjunction with itemizing
these charges, the Combined Systems began separately collecting the franchise
fee on all revenues subject to franchise fees. As a result, such fees are no
longer included as revenue or as franchise fee expense. The net effect of this
change is a reduction in 1997 revenue and franchise fee expense of
approximately $1,500,000 versus the comparable period in 1996.
 
 Advertising Costs
 
   Advertising costs are expensed upon the first exhibition of the related
advertisements. Advertising expense amounted to $308,000, $632,000 and
$510,000 for the years ended 1995, 1996 and 1997, respectively.
 
 Statement of Cash Flows
 
   The Combined Systems participate in a cash management system with
affiliates whereby cash receipts are transferred to a centralized bank account
from which centralized payments to various suppliers and creditors are made on
behalf of the Combined Systems. The excess of such cash receipts over payments
is included in net assets. Amounts shown as cash represent the Combined
Systems' net cash receipts not transferred to the centralized account as of
December 31, 1996 and 1997. The average net intercompany payable balances were
$173,348,000 and $170,438,000 for the years ended December 31, 1996 and 1997,
respectively.
 
   For purposes of this statement, cash and cash equivalents includes all
highly liquid investments purchased with original maturities of three months
or less.
 
                                      74
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
 
 Property, Plant and Equipment
 
   Property, plant and equipment are stated at cost. Additions to property,
plant and equipment generally include material, labor, overhead and interest.
Depreciation is provided on the straight-line method over estimated useful
lives as follows:
 
<TABLE>
      <S>                                                             <C>
      Buildings and improvements..................................... 5-20 years
      Cable television equipment..................................... 5-15 years
      Furniture, fixtures and other equipment........................ 3-10 years
</TABLE>
 
   Property, plant and equipment consist of:
 
<TABLE>
<CAPTION>
                                                                December 31,
                                                               ----------------
                                                                1996     1997
                                                               -------  -------
      <S>                                                      <C>      <C>
      Land and buildings.....................................  $ 2,003  $ 2,265
      Cable television equipment.............................   32,324   39,589
      Furniture, fixtures and other equipment................    1,455    2,341
      Construction in progress...............................    5,657    1,028
                                                               -------  -------
                                                                41,439   45,223
      Less accumulated depreciation..........................   (4,473)  (8,279)
                                                               -------  -------
        Total................................................  $36,966  $36,944
                                                               =======  =======
</TABLE>
 
 Intangible Assets
 
   During 1996 and 1997, the Combined Systems amortized goodwill over periods
up to 40 years and cable television franchises over periods up to 20 years,
both using the straight-line method. Prior to the CVI Merger, goodwill and
cable television franchises were amortized over 15 years using the straight-
line method. For the years ended 1995, 1996, and 1997, amortization of
goodwill amounted to $8,199,000, $1,325,000, and $1,325,000, respectively, and
amortization of cable television franchises amounted to $1,284,000,
$11,048,000, and $11,048,000, respectively. Accumulated amortization of
intangible assets at December 31, 1996 and 1997 amounted to $12,373,000 and
$24,746,000, respectively.
 
 Impairment
 
   Management separately reviews the carrying value of acquired long-lived
assets for each acquired entity on a quarterly basis to determine whether an
impairment may exist. Management considers relevant cash flow and
profitability information, including estimated future operating results,
trends and other available information, in assessing whether the carrying
value of long-lived assets can be recovered. Upon a determination that the
carrying value of long-lived assets will not be recovered from the
undiscounted future cash flows of the acquired business, the carrying value of
such long-lived assets would be considered impaired and would be reduced by a
charge to operations in the amount of the impairment. An impairment charge is
measured as a deficiency in estimated discounted future cash flows of the
acquired business to recover the carrying value related to the long-lived
assets.
 
 
                                      75
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
 Income Taxes
 
   Income taxes have been provided using the liability method prescribed by
FASB Statement No. 109, "Accounting for Income Taxes." Under the liability
method, deferred income taxes reflect tax carryforwards and the net tax
effects of temporary differences between the carrying amount of assets and
liabilities for financial statements and income tax purposes, as determined
under enacted tax laws and rates.
 
2. Employee Benefit Plans
 
   Following the CVI Merger, the Combined Systems began participation in the
Time Warner Cable Pension Plan (the "Pension Plan"), a non-contributory
defined benefit pension plan, and the Time Warner Cable Employee Savings Plan
(the "Savings Plan") which are administered by a committee appointed by the
Board of Representatives of Time Warner Entertainment Company, L.P. ("TWE"),
an affiliate of Time Warner, and which cover substantially all employees.
 
   Benefits under the Pension Plan are determined based on formulas which
reflect an employee's years of service and compensation levels during the
employment period. Pension expense for the years ended December 31, 1996 and
1997 totaled $184,000 and $192,000, respectively.
 
   The Combined Systems' contributions to the Savings Plan are limited to
6.67% of an employee's eligible compensation during the plan year. The Board
of Representatives of TWE has the right in any year to set the maximum amount
of the Combined Systems' contribution. Defined contribution plan expense for
the years ended December 31, 1996 and 1997 totaled $107,000 and $117,000,
respectively.
 
   Prior to the CVI Merger, substantially all employees were eligible to
participate in a profit sharing plan or a defined contribution plan. The
profit sharing plan provided that the Combined Systems may contribute, at the
discretion of their board of directors, an amount up to 15% of compensation
for all eligible participants out of its accumulated earnings and profits, as
defined. Profit sharing expense amounted to approximately $31,000 for the year
ended December 31, 1995.
 
   The defined contribution plan contained a qualified cash or deferred
arrangement pursuant to Internal Revenue Code Section 401(k). This plan
provided that eligible employees may contribute from 2% to 10% of their
compensation to the plan. The Combined Systems matched contributions of up to
4% of the employees' compensation. The expense for this plan amounted to
approximately $96,000 for the year ended December 31, 1995.
 
   The Combined Systems have no material obligations for other post retirement
benefits.
 
3. Related Parties
 
   In the normal course of conducting business, the Combined Systems had
various transactions with Time Warner and its affiliates, generally on terms
resulting from a negotiation between the affected units that in management's
view resulted in reasonable allocations.
 
                                      76
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
 
 Programming
 
   Included in the Combined Systems' 1996 and 1997 operating expenses are
charges for programming and promotional services provided by Home Box Office,
Turner Broadcasting System, Inc. and other affiliates of Time Warner. These
charges are based on customary rates and are in the ordinary course of
business. For the year ended December 31, 1996 and 1997, these charges totaled
$3,260,000 and $3,458,000, respectively. Accrued related party expenses for
these programming and promotional services included in accrued programming
expenses approximated $327,000 and $291,000 for the years ended December 31,
1996 and 1997, respectively. There were no such programming and promotional
service related party transactions in 1995.
 
 Management Fees
 
   TWI Cable entered into a management service arrangement with Time Warner
Cable ("TWC"), pursuant to which TWC is responsible for the management and
operation of TWI Cable, which includes the Combined Systems. The management
fees paid to TWC by TWI Cable are based on an allocation of the corporate
expenses of TWC's cable division in proportion to the respective number of
subscribers of all cable systems managed by TWC's cable division. The
allocation of the TWI Cable management fee to the Combined Systems
approximated $1,432,000 and $1,715,000 for the years ended December 31, 1996
and 1997, respectively.
 
   Other divisional expenses allocated to the Combined Systems approximated
$1,301,000 and $1,067,000 for the years ended December 31, 1996 and 1997,
respectively.
 
4. Interest Expense
 
   Prior to the CVI Merger, the Jackson, Tennessee system was included in
Cablevision Industries Limited Partnership and Combined Entities ("CILP"). The
Jackson system was charged interest expense in connection with CILP's (a)
senior and subordinated bank credit agreements; and (b) senior unsecured
subordinated Series A and Series B notes payable to CVI. The remaining five
systems comprising the Combined Systems were included in Cablevision
Industries of the Southeast, Inc. and Combined Entities ("CIOS"). These
systems were charged interest expense in connection with CIOS's (a) bank
revolving credit agreement; and (b) junior and senior subordinated debt to
CVI.
 
5. Income Taxes
 
   Effective January 4, 1996, the Combined Systems are included in the
consolidated federal income tax return of Time Warner. Prior to January 4,
1996, the Combined Systems were included in the consolidated federal income
tax return of CVI. The provision (benefit) for income taxes has been
calculated on a separate company basis. The components of the provision
(benefit) for income taxes are as follows:
 
<TABLE>
<CAPTION>
                                                       Year ended December 31,
                                                       ------------------------
                                                          1995     1996   1997
                                                       ---------- ------ ------
                                                          (in
                                                       thousands)
      <S>                                              <C>        <C>    <C>
      Federal:
        Current.......................................  $   --    $  --  $  --
        Deferred......................................   (2,881)   1,213  1,826
      State:
        Current.......................................      --       --     --
        Deferred......................................     (686)     289    436
                                                        -------   ------ ------
      Net provision (benefit) for income taxes........  $(3,567)  $1,502 $2,262
                                                        =======   ====== ======
</TABLE>
 
 
                                      77
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                         (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
 
   The Combined Systems did not, and will not, have a tax sharing agreement
with either Time Warner, TWI Cable or CVI. Therefore, the Combined Systems
have not and will not be compensated for the utilization of the Combined
Systems' tax losses, by Time Warner, TWI Cable or CVI. In addition, the
Combined Systems have not and will not be required to make payments to either
Time Warner or TWI Cable for the current tax provision of the Combined
Systems.
 
   The differences between the income tax provision (benefit) expected at the
U.S. federal statutory income tax rate and the total income tax provision
(benefit) are due to nondeductible goodwill amortization and state taxes.
 
   Significant components of the Combined Systems' deferred tax assets and
liabilities, as calculated on a separate company basis, are as follows:
 
<TABLE>
<CAPTION>
                                                                  Year ended
                                                                 December 31,
                                                                ---------------
                                                                 1996    1997
                                                                ------- -------
                                                                (in thousands)
      <S>                                                       <C>     <C>
      Deferred tax liabilities:
        Amortization........................................... $61,266 $58,507
        Depreciation...........................................   3,576   4,060
                                                                ------- -------
          Total gross deferred tax liabilities.................  64,842  62,567
                                                                ------- -------
      Deferred tax assets:
        Tax loss carryforwards.................................   6,474   1,920
        Allowance for doubtful accounts........................      28      46
                                                                ------- -------
          Total deferred tax assets............................   6,502   1,966
                                                                ------- -------
        Net deferred tax liability............................. $58,340 $60,601
                                                                ======= =======
</TABLE>
 
   On a separate company basis, the Combined Systems have tax loss
carryforwards of approximately $4.8 million at December 31, 1997. However, if
the Combined Systems are acquired in an asset purchase, the tax loss
carryforwards, and net deferred tax liabilities relating to temporary
differences will not carry over to Renaissance (see Note 8).
 
6. Commitments and Contingencies
 
   The Combined Systems had rental expense of approximately $642,000,
$824,000, and $843,000 for the years ended December 31, 1995, 1996 and 1997,
respectively, under various lease and rental agreements for offices, utility
poles, warehouses and computer equipment. Future minimum annual rental
payments under noncancellable leases will approximate $1,000,000 annually over
the next five years.
 
   In exchange for certain flexibility in establishing cable rate pricing
structures for regulated services that went into effect on January 1, 1996,
TWC has agreed with the Federal Communications Commission ("FCC") to invest in
certain upgrades to its cable infrastructure (consisting primarily of
materials and labor in connection with the plant upgrades up to 750 MHz) over
the next three years (approximately $22 million). This agreement with the FCC,
which extends to the Combined Systems, will be assumed by Renaissance as it
relates to the Combined Systems in accordance with the Asset Purchase
Agreement.
 
                                      78
<PAGE>
 
           PICAYUNE MS, LAFOURCHE LA, ST. TAMMANY LA, ST. LANDRY LA,
           POINTE COUPEE LA, AND JACKSON TN CABLE TELEVISION SYSTEMS
                          (Included in TWI Cable Inc.)
 
              NOTES TO COMBINED FINANCIAL STATEMENTS--(Continued)
 
 
7. Other Liabilities
 
   Other liabilities consist of:
 
<TABLE>
<CAPTION>
                                                                      December
                                                                         31,
                                                                     -----------
                                                                     1996  1997
                                                                     ----- -----
                                                                         (in
                                                                     thousands)
      <S>                                                            <C>   <C>
      Compensation.................................................. $ 217 $ 250
      Data Processing Costs.........................................   100    90
      Sales and other taxes.........................................   101    90
      Copyright Fees................................................    85    83
      Pole Rent.....................................................    66    63
      Other.........................................................   376   393
                                                                     ----- -----
        Total....................................................... $ 945 $ 969
                                                                     ===== =====
</TABLE>
 
8. Subsequent Event (Unaudited)
 
   The sale of the Combined Systems, in connection with the Asset Purchase
Agreement with Renaissance, closed on April 9, 1998 at the purchase price of
$309,500,000.
 
                                       79
<PAGE>
 
Item 9--Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
 
   Not applicable.
 
                                   PART III
 
Item 10--Representatives, Directors and Executive Officers of the Registrant
 
   The following table sets forth certain information concerning the members
of the Boards of Representatives and executive officers of Holdings and
Renaissance Media. All persons specified as executive officers of Holdings and
Renaissance Media also hold such offices with Renaissance Louisiana,
Renaissance Tennessee, Renaissance Capital and Group.
 
<TABLE>
<CAPTION>
          Name           Age(1)                         Position
          ----           ------                         --------
<S>                      <C>    <C>
Fred Schulte............   48   Representative and President, Chief Executive Officer and
                                Chairman(2)
Rodney Cornelius........   48   Representative and Vice Chairman
Michael J. Egan.........   46   Executive Vice President
Darlene Fedun...........   41   Executive Vice President
Mark Halpin.............   50   Representative, Executive Vice President, Chief Financial
                                Officer and Treasurer
David L. Testa..........   50   Executive Vice President
Alan E. Goldberg........   44   Representative
Michael M. Janson.......   51   Representative
Leonard J. Baxt.........   51   Representative
Amy Rosen Wildstein.....   28   Representative
David E. O'Hayre........   56   Representative
</TABLE>
 
--------
(1) As of March 1, 1999.
(2)  Also a Representative of Group, Renaissance Louisiana and Renaissance
     Tennessee and a Director of Renaissance Capital.
 
   Fred Schulte has been President, Chief Executive Officer and Chairman since
April 9, 1998, and was a founder of the Company. Mr. Schulte founded
Renaissance Media Partners, L.L.C., the predecessor of the Company ("RMP"),
and has served as President since its formation in 1996. From 1980 until
January 1996, Mr. Schulte held several key management positions, including
Chief Operating Officer, at CVI. Mr. Schulte's 23-year career in the cable
industry includes a number of field operations positions with several
companies, although the majority of his career was at CVI. He has served as a
Director of the Cable Television Association of New York from 1986 to 1990.
 
   Rodney Cornelius has been the Vice Chairman of Renaissance Media since
April 9, 1998, and was a founder of the Company. Mr. Cornelius has worked as a
cable television industry consultant to RMP from January 1996 through November
1997 and previously served as the Vice Chairman of CVI and held several other
key management positions at CVI from 1980 to 1995. Before joining CVI, Mr.
Cornelius was the Chief Operating Officer of Robotics, Inc., and prior to that
he spent ten years in public accounting.
 
   Michael J. Egan has been an Executive Vice President since April 9, 1998,
and was a founder of the Company. Mr. Egan is a founder of RMP and spent over
15 years at CVI in various senior management positions, most recently as Vice
President of Programming and New Product Development. Mr. Egan is the
recipient of several cable industry awards and was twice elected to the Board
of Governors of the National Academy of Cable Programming.
 
                                      80
<PAGE>
 
   Darlene Fedun has been an Executive Vice President since April 9, 1998, and
was a founder of the Company. Ms. Fedun is also a founding member of RMP.
Prior to her association with RMP, Ms. Fedun served for 15 years in various
marketing, sales and customer service functions at CVI, where she was a Vice
President of Operations. Ms. Fedun is an active member of several cable
industry groups including the Cable Television Administration and Marketing
Society and the Cable Television Human Resource Association.
 
   Mark Halpin has been an Executive Vice President, Chief Financial Officer
and Treasurer since April 9, 1998, and was a founder of the Company. Mr.
Halpin worked as a cable television industry consultant to RMP from January
1996 through November, 1997 and previously was Executive Vice President for
Administration at CVI since 1990. Mr. Halpin's professional career spans 18
years during which he worked in a wide variety of industries as a partner at
Arthur Andersen, including being a member of Arthur Andersen's cable
television industry committee. Mr. Halpin is a member of the AICPA and the
Connecticut State Society of CPA's.
 
   David Testa has been an Executive Vice President since April 9, 1998, and
was a founder of the Company and one of the founding members of RMP. Mr. Testa
served as a Vice President of CVI since 1987. Mr. Testa's career in the cable
industry spans 18 years with Warner Cable, Teleprompter, Group W Cable and
CVI. He has served on several national industry committees and was a Director
of the Cable Television Association of New York.
 
   Alan E. Goldberg has been a Representative since April 9, 1998, and is the
Head of the Morgan Stanley Dean Witter Private Equity Group. Mr. Goldberg has
been a Managing Director of Morgan Stanley & Co. Incorporated since January
1988. Mr. Goldberg is a Managing Director of Morgan Stanley Capital Partners
III, Inc., the general partner of the general partner of Morgan Stanley
Capital Partners III, L.P. He also serves as director of Catalytica, Inc.,
Amerin Corporation, Jefferson Smurfit Corporation, Direct Response
Corporation, Homeowners Direct Corporation, Equant, N.V. and several private
companies.
 
   Michael Janson has been a Representative since April 9, 1998, and is a
Managing Director of Morgan Stanley & Co. Incorporated and of Morgan Stanley
Capital Partners III, Inc. Mr. Janson was previously a Managing Director of
Morgan Stanley Global High Yield Capital Group prior to joining Morgan
Stanley's Private Equity Group. He is also a Director of Jefferson Smurfit
Corporation and American Color Graphics Inc.
 
   Leonard J. Baxt has been a Representative since July 1998, and is the Chief
Executive Officer and the head of the Corporate Department of Dow, Lohnes &
Albertson, PLLC. Mr. Baxt has been a member of such firm since 1980. Mr. Baxt
specializes in the acquisition and financing of media and telecommunications
companies. He is also a director of Falcon Holding Group, Inc.
 
   Amy Rosen Wildstein has been a Representative since April 9, 1998, and is
an Associate of Morgan Stanley & Co. Incorporated and of Morgan Stanley
Capital Partners III, Inc. Ms. Rosen Wildstein has been employed by Morgan
Stanley & Co. Incorporated since 1994. Ms. Wildstein was previously employed
by the Blackstone Group. She is also a director of The Compucare Company.
 
   David E. O'Hayre has been a Representative since April 9, 1998, and is the
Senior Vice President, Investments, for Time Warner Cable Ventures. Mr.
O'Hayre joined American Television and Communications Corporation ("ATC"), a
principal owner of Time Warner Cable, in 1973. Mr. O'Hayre held a number of
key positions at ATC, including Vice President, Cable Investments, and was
responsible for the acquisition, sale and trade of cable television systems of
ATC nationwide.
 
Committees of the Boards
 
   The Boards of Representatives of Holdings and Renaissance Media have Audit
Committees and Compensation Committees. The Audit Committees' primary
responsibilities are to review and recommend to the Board internal accounting
and financial controls and the accounting principles and auditing practices
and procedures to be employed in preparation and review of financial
statements and to make recommendations
 
                                      81
<PAGE>
 
concerning the engagement of independent public accountants and the scope of
the audit to be undertaken by such accountants. The audit committee met in
March 1999 to review with the Company's Independent Public Accountants the
results of the audit of the consolidated financial statement of the Company,
as of and for the year ended December 31, 1998, and recommendations regarding
internal controls. The Compensation Committee's primary responsibility is to
review and recommend policies, practices and procedures relating to the
compensation of the officers and other managerial employees and the
establishment and administration of employee benefit plans, including the
Renaissance Media Executive Bonus Incentive Plan (the "Plan"). The
Compensation Committee met in March 1999 to establish the Executive Bonus
Awards for 1998 and the salaries of the Executives for 1999.
 
Representative and Director Compensation
 
   Representatives and Directors will not receive any compensation for their
services as Representatives and Directors of Holdings, Group, Renaissance
Capital, Renaissance Louisiana, Renaissance Tennessee and Renaissance Media.
Representatives and Directors will be reimbursed by the Company for their
reasonable out-of-pocket expenses accrued in connection with acting as
Representatives and Directors.
 
Appointment of Executive Officers
 
   Executive officers are appointed at the first meeting of the Boards of
Representatives/Directors after each annual meeting of members or
stockholders, as applicable, and are elected to serve until they resign or are
removed, or are otherwise disqualified to serve, or until their successors are
elected and qualified.
 
Item 11--Executive Compensation
 
   The following table summarizes the compensation paid to the Chief Executive
Officer and each of the five remaining most highly compensated officers of the
Company for the 1998 fiscal year:
 
                          Summary Compensation Table
 
<TABLE>
<CAPTION>
  Name and Principal Position        Year  Salary   Bonus
-----------------------------        ---- -------- -------
<S>                                  <C>  <C>      <C>
Fred Schulte
 President, Chief Executive Officer  1998 $160,851 $65,000
Rodney Cornelius
 Vice Chairman                       1998 $160,588 $  -0-
Michael T. Egan
 Executive Vice President            1998 $123,177 $43,750
Darlene Fedun
 Executive Vice President            1998 $123,745 $43,750
Mark Halpin
 Executive Vice President
 Chief Financial Officer &
 Treasurer                           1998 $124,053 $80,000
David L. Testa
 Executive Vice President            1998 $123,937 $30,000
</TABLE>
 
Executive Employment Arrangements
 
   Renaissance Media has entered into an employment agreement with each of the
Management Investors. Each of the employment agreements provides for an annual
base salary and an incentive bonus determined according to the Renaissance
Media Executive Bonus Incentive Plan. Each agreement has an initial term of
five years, except for that of Mr. Cornelius which had a one year initial term
which was extended in January 1999 until April 2000. The initial terms may be
extended by Renaissance Media if a sale of Renaissance Media is in
 
                                      82
<PAGE>
 
process at the expiration of such term. Each employment agreement may be
terminated by Renaissance Media with or without cause or upon an executive's
continued disability. Each Management Investor may terminate the employment
agreement with or without good reason, including for material reduction in
position or responsibilities or termination of certain other executives by
Renaissance Media, other than for cause, subject to certain exceptions. If an
employment agreement is terminated by Renaissance Media without cause or by
the Management Investor with good reason, Renaissance Media is obligated to
pay the applicable Management Investor (other than Mr. Cornelius), subject to
certain exceptions, any accrued unpaid base salary, any prior year bonus
earned but not paid, a pro rata bonus for the year in which the termination
occurs and severance for the remainder of the term of the agreement equal to
the base salary and bonus at the annual rate for the year prior to the
termination. Mr. Cornelius would be entitled to one year severance payments
upon his termination without cause or for good reason. In certain
circumstances where the Management Investors employment has been terminated
other than for good reason and Renaissance Media fails to meet certain
financial targets, the term of severance may be limited to the lesser of the
remainder of the employment term and two years. It is anticipated that Mr.
Cornelius will be entitled to one year severance payments in such
circumstances. Pursuant to the terms of the employment agreement, each
Management Investor is subject to a (i) confidentiality covenant, (ii) a non-
compete covenant for a period from the date of the employment agreement until
the earlier of: (a) the expiration of the employment term; (b) the last day of
any period of severance payments; and (c) two years following termination of
employment; and (iii) for a period of two years following termination of
employment, a non-solicitation covenant. All obligations of the Company under
the employment agreements will terminate upon consummation of the Charter
Purchase Agreement, without further liability to the Company.
 
   An exclusivity agreement between Renaissance Media and each of the
Management Investors permits the Management Investors to manage other cable
television systems after 2001 subject to first offering such acquisition
opportunities to the Morgan Stanley Entities.
 
   All decisions as to the compensation of the Company's executives are made
by the Compensation Committee of Holdings and Renaissance Media.
 
Executive Bonus Incentive Plan
 
   Renaissance Media has established the Plan to provide its executive
officers, including the Management Investors, and other key employees with
bonuses based upon the achievement of annual performance goals. The Plan is
administered by the Compensation Committee of the Board of Renaissance Media,
consisting of at least three Representatives. The Compensation Committee
establishes performance goals based on the Company's EBITDA. The award of
bonuses is based on the attainment of the Company's performance goals and the
performance of individual executives.
 
Item 12--Security Ownership of Certain Beneficial Owners and Management
 
   The Company is a wholly owned subsidiary of Holdings. The following table
sets forth certain information regarding beneficial ownership of the limited
liability company membership interests in Holdings by: (i) each person known
by the Company to beneficially own more than 5% of the outstanding equity
interests of Holdings; (ii) each member of the Boards of Representatives or
Board of Directors, as applicable, of Holdings the Company and its
subsidiaries; (iii) each executive officer of Holdings, the Company and its
subsidiaries; and (iv) all members of the Boards of Representatives, Board of
Directors and executive officers of Holdings, the Company and its subsidiaries
as a group. The information as to beneficial ownership has been furnished by
the respective equity holders, Representatives, Directors and executive
officers of Holdings, the Company and its subsidiaries, and, unless otherwise
indicated, each of the equity holders has the sole voting and investment power
with respect to the equity interests beneficially owned. The address for each
Representative, Director and executive officer of Holdings, the Company and
its subsidiaries is c/o Renaissance Media, One Cablevision Center, Suite 100,
Ferndale, New York 12734. The address for each of MSCPIII, MSCI and MSCP
Investors is 1221 Avenue of the Americas, New York, New York 10020. The
address for Time Warner is 290 Harbor Drive, Stamford, Connecticut 06902.
 
                                      83
<PAGE>
 
<TABLE>
<CAPTION>
                                                                 Percent of
         Name of Beneficial Owner                             Equity Ownership
         ------------------------                             ----------------
      <S>                                                     <C>
      Morgan Stanley Entities (1)............................       87.6%
      Time Warner............................................        8.8
      Fred Schulte (2).......................................         .9
      Rodney Cornelius (2)...................................         .9
      Michael J. Egan (2)....................................         .4
      Darlene Fedun (2)......................................         .4
      Mark Halpin (2)........................................         .4
      David L. Testa (2).....................................         .4
      Alan E. Goldberg (3)...................................         --
      Michael M. Janson......................................         --
      Leonard J. Baxt........................................         .1
      Amy Rosen Wildstein (3)................................         --
      David E. O'Hayre.......................................         --
      All Representatives, Directors and executive officers
       as a group............................................        3.7
</TABLE>
--------
(1) The equity ownership interests of the Morgan Stanley Entities in Holdings
    are owned, directly or indirectly, by MSCPIII, MSCI and MSCP Investors in
    the following percentages: 88.5%, 9.1% and 2.4%, respectively,
    representing percentage equity interests in Holdings of 77.5%, 8.0% and
    2.1%, respectively.
(2) Excludes certain carried interests in affiliates of Time Warner and the
    Morgan Stanley Entities which hold their respective equity interests in
    Holdings. These carried interests represent the right to participate in
    future distributions of such affiliates.
(3) Mr. Goldberg and Mr. Janson are Managing Directors of, and Ms. Wildstein
    is an associate of, Morgan Stanley Capital Partners III, Inc., the general
    partner of the general partner of MSCPIII.
 
Item 13--Certain Relationships and Related Transactions
 
Transactions with the Morgan Stanley Entities and Related Parties
 
   In connection with the consummation of the Transactions, Renaissance Media
entered into the Senior Credit Facility with MSSF, an affiliate of the Morgan
Stanley Entities, as syndication agent and arranger. The Senior Credit
Facility establishes an eight-year revolving credit facility in the initial
aggregate principal amount of $40.0 million, an eight-year term loan in the
initial aggregate principal amount of $60.0 million and an eight and one-half-
year term loan in the initial aggregate principal amount of $50.0 million. In
addition, Morgan Stanley & Co. Incorporated ("MSCI") acted as the placement
agent for the Senior Discount Notes. In connection with its services, MSSF and
MSCI received customary fees and reimbursement for expenses.
 
Transactions with Time Warner and Related Parties
 
   The Systems were owned by CVI from December 31, 1988 through January 4,
1996, in the case of the Louisiana Systems, and from September 12, 1986
through January 4, 1996, in the case of the Tennessee System. On January 4,
1996, the Systems were acquired by Time Warner as a result of the acquisition
of CVI by Time Warner. The Company purchased the Systems from Time Warner on
April 9, 1998 in accordance with the terms and provisions of the Time Warner
Asset Purchase Agreement and Time Warner received approximately $300.0 million
in cash and a $9.5 million equity ownership interest in Holdings, subject to
adjustment.
 
   In connection with the Acquisition, the Company entered into an agreement
with Time Warner, pursuant to which Time Warner manages the Company's
programming. The Company believes that the rates at which Time Warner makes
any such programming available to the Company is at least as favorable as the
rates the Company could obtain from unaffiliated third parties. Upon
consummation of the transactions contemplated by the Charter Purchase
Agreement, the Programming Agreement will be terminated. The Company paid Time
Warner $7.5 million in 1998 for programming made available to the Company
under the program management agreement. In
 
                                      84
<PAGE>
 
addition, the Company has assumed Time Warner's obligations under the Social
Contract with respect to the Systems.
 
Transactions with Management
 
   Prior to the consummation of the Acquisition, Media paid fees in 1998 to
the Management Investors for services rendered prior to their employment by
Media relating to the Acquisition and the Credit Agreement. These fees totaled
$.3 million and were recorded as transaction and financing costs.
 
   Prior to the formation of the Company, the Management Investors advanced
$1.0 million to Holdings, which was used primarily for working capital
purposes. Upon formation of the Company, Holdings contributed certain assets
and liabilities to Group and the $1.0 million advance from the Management
Investors was recorded as paid in capital.
 
Other
 
   Leonard J. Baxt is a member of the Board of Representatives of Holdings and
Renaissance Media. Mr. Baxt is also a member of Dow, Lohnes & Albertson, PLLC,
which has served as counsel to the Company in connection with the Senior
Credit Facility, Senior Discount Notes, the Time Warner Acquisition and the
Charter Transaction. Dow, Lohnes & Albertson, PLLC, has provided other legal
services to the Company from time to time and has received customary fees for
all services previously described totaling approximately $1.3 million in 1998
for such services.
 
                                    PART IV
 
Item 14--Exhibits, Financial Statement Schedules and Reports on Form 8-K
 
   (a) The following documents are filed as part of this report:
 
     (1) A listing of the consolidated financial statements, notes and report
  of independent public accountants required by Item 8 are listed on page 36
  of this Annual Report on Form 10-K.
 
     (2) Financial Statement Schedules--Schedule II--Valuation and Qualifying
  Accounts.
 
     (3) Exhibits required to be filed by Item 601 of Regulation S-K.
 
                                      85
<PAGE>
 
                               INDEX TO EXHIBITS
 
<TABLE>
<CAPTION>
 Exhibit
 Number                                Description
 -------                               -----------
 <C>     <S>
  3.1    Certificate of Incorporation of Renaissance Media Capital Corporation
         and all amendments thereto. (1)
  3.2    By-laws of Renaissance Media Capital Corporation. (1)
  3.3    Certificate of Formation of Renaissance Media (Louisiana) LLC. (1)
  3.4    Limited Liability Company Agreement dated as of March 20, 1998 of
         Renaissance Media (Louisiana) LLC. (1)
  3.5    Certificate of Formation of Renaissance Media (Tennessee) LLC. (1)
  3.6    Limited Liability Company Agreement dated as of March 20, 1998 of
         Renaissance Media (Tennessee) LLC. (1)
  3.7    Certificate of Formation of Renaissance Media Group LLC. (1)
  3.8    Limited Liability Company Agreement dated as of March 20, 1998 of
         Renaissance Media Group LLC. (1)
  4.1    Indenture dated as of April 9, 1998 by and among Renaissance Media
         (Louisiana) LLC, Renaissance Media (Tennessee) LLC, Renaissance Media
         Capital Corporation, Renaissance Media Group LLC and United States
         Trust Company of New York, as Trustee. (1)
  4.2    Registration Rights agreement dated April 6, 1998 among Renaissance
         Media Group LLC, Renaissance Media (Louisiana) LLC, Renaissance Media
         (Tennessee) LLC, Renaissance Media Capital Corporation and Morgan
         Stanley & Co. Incorporated. (1)
 10.1    Credit Agreement dated as of April 9, 1998 among Renaissance Media
         LLC, the Lenders party thereto, Morgan Stanley Senior Funding, Inc.,
         as Syndication Agent and Arranger, CIBC, Inc., as Documentation Agent,
         and Bankers Trust Company, as Administrative Agent. (1)
 10.2    Asset Purchase Agreement dated as of November 14, 1997, as amended by
         the Letter Agreement dated December 11, 1997, the Letter Agreement
         dated December 29, 1997, the Letter Agreement dated January 13, 1998,
         the Letter Agreement dated March 5, 1998, and the Letter Agreement
         dated April 9, 1998, between TWI Cable Inc. and Renaissance Media LLC
         (as assignee of Renaissance Media Holdings LLC). (1)
 10.3    Program Management Agreement, dated as of April 9, 1998, between
         Renaissance Media LLC and Time Warner Cable. (1)
 10.4    CSG Master Subscriber Management System Agreement, dated as of March
         28, 1998, between CSG Systems International, Inc. and Renaissance
         Media LLC. (1)
 10.5    Social Contract approved by the Federal Communications Commission (the
         "FCC") on November 30, 1995 and entered into between the FCC and Time
         Warner Entertainment Company, L.P., TWI Cable Inc. and Time Warner
         Entertainment-Advance/Newhouse Partnership, or any subsidiary,
         division or affiliate thereof. (1)
 10.6    Employment Agreement dated April 9, 1998 between Renaissance Media LLC
         and Fred Schulte. (1)
 10.7    Employment Agreement dated April 9, 1998 between Renaissance Media LLC
         and Rodney Cornelius. (1)
 10.8    Employment Agreement dated April 9, 1998 between Renaissance Media LLC
         and Michael J. Egan. (1)
 10.9    Employment Agreement dated April 9, 1998 between Renaissance Media LLC
         and Darlene Fedun. (1)
 10.10   Employment Agreement dated April 9, 1998 between Renaissance Media LLC
         and Mark Halpin. (1)
</TABLE>
 
                                       86
<PAGE>
 
<TABLE>
<CAPTION>
 Exhibit
 Number                                Description
 -------                               -----------
 <C>     <S>
 10.11   Employment Agreement dated April 9, 1998 between Renaissance Media LLC
         and David L. Testa. (1)
 10.12   Renaissance Media LLC Annual Executive Bonus Incentive Plan. (1)
 10.13   Exclusivity Agreement dated as of April 9, 1998 among Morgan Stanley
         Capital Partners III, L.P., MSCP III 892 Investors, L.P., Morgan
         Stanley Capital Investors, L.P., Rodney Cornelius, Michael J. Egan,
         Darlene Fedun, Mark Halpin, Fred Schulte, and David L. Testa. (1)
 10.14   St. Tammany Parish, Louisiana, Police Jury Ordinance Calendar N. 3081,
         Ordinance Police Jury Series No. 98-2821. (1)
 10.15   City of Covington, Louisiana, Resolution No. 98-03. (1)
 10.16   City of Slidell, Louisiana, Resolution R98-04. (1)
 10.17   S. James Parish, Louisiana, Council Resolution 98-3. (1)
 10.18   Assumption Parish, Louisiana, Police Jury Resolution. (1)
 10.19   City of Eunice, Louisiana, Resolution No. 0398(E). (1)
 10.20   City of Opelousas, Louisiana, Resolution No. 13 of 1998. (1)
 10.21   St. Landry Parish, Louisiana, Excerpt from the Minutes of a Police
         Jury Meeting, February 9th, 1998. (1)
 10.22   City of Jackson, Tennessee, Resolution No. 98-5. (1)
 10.23   County of Madison, Tennessee, Resolution. (1)
 10.24   City of Newbern, Tennessee, Resolution. (1)
 10.25   City of Selmer, Tennessee, Resolution No. 0398. (1)
 10.26   City of Thibodaux, Louisiana, Resolution No. 656. (1)
 10.27   Purchase Agreement dated as of February 23, 1999 by and among Charter
         Communications, Inc., Charter Communications, LLC, Renaissance Media
         Holdings LLC and Renaissance Media Group LLC. [Confidential material
         omitted and filed separately with the Securities and Exchange
         Commission pursuant to a request for confidential treatment.] (2)
 21      Subsidiaries of Registrants. (1)
 27.1    Financial Data Schedule
</TABLE>
--------
(1) Incorporated by reference to the corresponding exhibit of the Registration
    Statement of Renaissance Media Group LLC, Renaissance Media (Louisiana)
    LLC, Renaissance Media (Tennessee) LLC and Renaissance Media Capital
    Corporation on Form S-4 (Commission File No. 333-56679).
(2) Incorporated by reference to Exhibit 99.1 of the Current Report on Form 8-
    K of Renaissance Media Group LLC, Renaissance Media (Louisiana) LLC,
    Renaissance Media (Tennessee) LLC and Renaissance Media Capital
    Corporation dated February 23, 1999 (Commission File No. 333-56679).
 
   (b) Reports on Form 8-K:
 
     The Registrants filed a report on Form 8-K on October 8, 1998, which
  announced the completion of the Registrants' exchange offer for its
  outstanding 10% Senior Discount Notes due 2008.
 
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.
 
   No annual reports or proxy materials were sent to the Registrants' security
holders during fiscal year 1998.
 
                                      87
<PAGE>
 
                                  SIGNATURES
 
   Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunder duly authorized.
 
                                          Renaissance Media Group LLC
                                          Renaissance Media (Louisiana) LLC
                                          Renaissance Media (Tennessee) LLC
                                          Renaissance Media Capital
                                          Corporation
 
March 31, 1999                            BY:        /s/ Fred Schulte
                                             ----------------------------------
                                            Fred Schulte
                                            Chairman and Chief Executive
                                            Officer
 
   Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
             Signatures                      Title                Date
 
          /s/ Fred Schulte             Chairman and Chief    March 31, 1999
-------------------------------------  Executive Officer
            Fred Schulte               (Principal Executive
                                       Officer) Director
                                       and Representative
 
           /s/ Mark Halpin             Executive Vice        March 31, 1999
-------------------------------------  President, Chief
             Mark Halpin               Financial Officer,
                                       Treasurer
 
          /s/ Kevin Quarry             Controller            March 31, 1999
-------------------------------------  (Principal
            Kevin Quarry               Accounting Officer)
 
                                      88
<PAGE>
 
                SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
 
                 RENAISSANCE MEDIA GROUP LLC AND SUBSIDIARIES
 
<TABLE>
<CAPTION>
                                            Additions
                                 Balance at Charged to              Balance at
                                 Beginning  Costs and  Deductions--   End of
          Description            of Period   Expenses  Describe(1)    Period
          -----------            ---------- ---------- ------------ ----------
<S>                              <C>        <C>        <C>          <C>
For the year ended December 31,
 1998:
  Allowance for receivables.....  $    -0-   $370,000   $(278,000)   $ 92,000
                                  ========   ========   =========    ========
For the period from January 1,
 through April 8, 1998
 (predecessor)(2)
  Allowance for receivables.....  $116,000   $ 64,000   $ (64,000)   $116,000
                                  ========   ========   =========    ========
For the year ended December 31,
 1997 (predecessor)(2)
  Allowance for receivables.....  $ 71,000   $471,000   $(426,000)   $116,000
                                  ========   ========   =========    ========
For the year ended December 31,
 1996 (predecessor)(2)
  Allowance for receivables.....  $ 84,000   $398,000   $(411,000)   $ 71,000
                                  ========   ========   =========    ========
</TABLE>
--------
(1) Represents the write-off of uncollectible accounts, net of recoveries.
(2) Predecessor represents the Picayune MS, Lafourche LA, St. Tammany LA, St.
    Landry LA, Pointe Coupee LA, and Jackson TN Cable Television Systems
    (included in TWI Cable Inc.)
 
                                      89