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                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                            ------------------------

                                   FORM 10-K

(Mark One)

<TABLE>
<S>        <C>
      / /                 ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
                             OF THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>

                                       OR

<TABLE>
<S>        <C>
      /X/               TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
                             OF THE SECURITIES EXCHANGE ACT OF 1934
</TABLE>

        For the transition period from July 1, 1997 to December 31, 1997

                         Commission file number 0-27492

                      UNITED STATES SATELLITE BROADCASTING
                                 COMPANY, INC.

             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                            <C>
                  MINNESOTA                                     41-1407863
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                       Identification No.)
</TABLE>

                   3415 UNIVERSITY AVENUE, ST. PAUL, MN 55114
              (Address of principal executive offices) (zip code)

                                 (612) 645-4500
              (Registrant's telephone number, including area code)

                                      N/A
Former name, former address and former fiscal year, if changed since last report

<TABLE>
<S>                                                     <C>
Securities registered pursuant to Section 12(b) of the                  None
  Act:
Securities registered pursuant to Section 12(g) of the    Class A Common Stock, $.0001 par
  Act:                                                                  value
</TABLE>

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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
of Regulation S-K 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/

As of March 17, 1998, 16,172,601 shares of the registrant's Class A Common Stock
were issued and outstanding, and the aggregate market value of the Class A
Common Stock held by non-affiliates of the registrant as of March 17, 1998, was
approximately $151,325,349.

                      DOCUMENTS INCORPORATED BY REFERENCE

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<S>                                                                  <C>
  Selected portions of the 1997 Report to Shareholders                Incorporated into Part
                                                                                          II
</TABLE>

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                                    PART I

                              ITEM 1.  BUSINESS
GENERAL

     United States Satellite Broadcasting Company, Inc. (the "Company") is a
provider of subscription television programming to households throughout the
continental United States via high-power direct broadcast satellite ("DBS").
The Company broadcasts a high quality digital television signal using the
Digital Satellite System ("DSS-Registered Trademark-") broadcasting system.
The Company's programming is available to virtually all of the approximately
97 million U.S. television households upon the purchase of a DSS unit, which
features an 18 inch satellite dish.  The Company currently can deliver up to
30 channels of video programming, with a focus on "premium" networks such as
Multichannel HBO-Registered Trademark- (5 channels), HBO-Registered
Trademark- FAMILY (2 channels), Multichannel SHOWTIME-Registered Trademark- (4
channels), Multichannel CINEMAX-Registered Trademark- (3 channels),
Multichannel THE MOVIE CHANNEL-TM- (2 channels), FLIX-Registered Trademark-,
the SUNDANCE CHANNEL-Registered Trademark-, SHOWTIME EXTREME-TM-, and FXM:
MOVIES FROM FOX. The programming delivered by the Company includes over 900
movie titles per month.  The Company also broadcasts events and specials on a
pay-per-view basis, as well as public service programming.

     The Company broadcasts from a single satellite, DBS-1, which is able to
reach the entire continental United States.  DBS-1 broadcasts with minimal
signal interference because of its favorable orbital location at 101DEG.
west longitude, greater orbital spacing than that provided for non-DBS
satellites and its high-power 120 watt transponders.  DBS-1 was manufactured
by Hughes Electronics Corporation ("Hughes") and is owned and operated
jointly by the Company and DIRECTV, Inc., a subsidiary of Hughes.  The
Company believes that the DSS system, which incorporates the technologically
advanced MPEG 2 digital compression standard, results in a higher picture
quality than any other existing terrestrial domestic television broadcasting
system. The Company expects to replace DBS-1 at its current orbital location
before the end of its expected life in 2010.  In addition to its FCC license
to broadcast from 101DEG. west longitude, the Company also has an FCC permit
to construct and launch high-power DBS systems at two other orbital locations.

     The DSS unit consists of an unobtrusive 18 inch satellite dish, an
integrated receiver/decoder similar in size to a VCR and a remote control.
The DSS unit features an easy to use on-screen electronic program guide, a
ratings control function and the capability to switch easily between DSS
signals and local programming signals.  DSS units are currently manufactured
and sold by leading consumer electronics manufacturers and sold at over
26,000 retail locations.

     The Company and DIRECTV, Inc. were the first domestic providers of
high-power DBS programming.  The Company and DIRECTV, Inc. share the use of
the technology underlying the DSS system, cooperate to promote and build
awareness of the DSS system and currently offer complementary programming
packages.  The Company estimates that the majority of DSS households receive
both USSB-Registered Trademark- programming and DIRECTV-Registered
Trademark- programming.  DIRECTV, Inc. offers approximately 175 channels of
digital video and audio programming, including basics, news, sports,
entertainment and pay-per-view movies and events.

STRATEGY

     The Company seeks to offer the highest quality, most-sought-after
premium television programming at a competitive price, enhance the DSS
position as the leading provider of satellite television, increase the market
share of USSB programming by offering the premier movie networks and a wide
variety of pay-per-view events, and achieve profitability.

<PAGE>

     The Company intends to accomplish these objectives by (i) building on
its lead in the high power DBS market; (ii) capitalizing on its relationships
with leading program suppliers, with which it has multi-year agreements;
(iii) maintaining its strategic relationship with Hughes and DIRECTV, Inc. to
further benefit from the technological advantages of high-power DBS and the
DSS system and to promote and build awareness of the DSS system; (iv)
enhancing its strong relationships and joint marketing efforts with leading
consumer electronics manufacturers and retailers to further promote the sale
of DSS units and USSB programming; (v) expanding and continuing to support
the large and established retail distribution network for DSS units and
adding other distribution opportunities; (vi) continuing to provide the
highest broadcast quality; and (vii) emphasizing customer service to maintain
a high level of customer satisfaction.

     On January 6, 1998, USSB and DIRECTV announced an arrangement that is
designed to better serve the growing base of more than three million DSS
subscribers nationwide.  Under the arrangement, the basic channels previously
carried by USSB were integrated into the DIRECTV channel line-up on March 10,
1998.  The channels involved were the MTV Networks (MTV, M2, VH1, Nickelodeon
and Nick at Nite's TV LAND), Lifetime and Comedy Central.  At the same time,
USSB added new commercial-free premium movie services from Showtime Networks
Inc. and fXM Networks, Inc.:   Showtime Extreme and fXM: Movies from Fox.
The Company expects to add additional premium movie channels in 1998.

THE MARKET

     The Company believes that there is significant unsatisfied demand for
high quality, reasonably priced television programming.  The Company
believes, therefore, that the potential market in the United States for
high-power DBS broadcasting consists of all of the approximately 97 million
households with television sets, as well as certain commercial markets, such
as hotels, motels, bars and restaurants.

     The primary target markets for the Company include (i) existing cable
subscribers who desire a greater choice and variety in programming, improved
video and audio quality, better customer service and fewer signal
interruptions; and (ii) all of the U.S. television households unserved by
cable.  Based upon the most recently available FCC data, there are
approximately 64 million U.S. cable subscribers.  These subscribers
reportedly pay an average of approximately $32 per month for television
programming services.  The Company also views as a target market the
approximately 30 million U.S. television households which have access to
cable television but are not customers of the local cable operator.

     The Company believes that the demand for satellite television services
in the United States will continue to grow.  The Company also believes that
the DSS system, with its digital picture and CD-quality sound, provides the
consumer with the highest quality subscription television programming
currently available.  While the high-power DBS share of the U.S. television
market is currently small compared to cable, it has been steadily increasing.
The Company has conducted extensive research to better understand the
television market in the United States, the desires and preferences of
consumers and the features and benefits that will attract subscribers.  This
research indicates that a substantial number of consumers are dissatisfied
with cable television, that former cable subscribers who subscribe to the DSS
system are more satisfied with it than cable and that 63% of DSS unit owners
who were cable subscribers purchased premium movie programming.  This
research also indicates that the most likely USSB customers are homeowners
with families who currently have or have had cable, subscribed to the premium
movie channels and consider television a significant component of their
entertainment activities.  The Company believes, based on this research, that
demand for more choice in television programming, dissatisfied cable
subscribers, and consumers unserved or underserved by cable will contribute
to the market growth of the DSS system and the Company's subscriber base.

                                       3
<PAGE>

     The Company's research also indicates that the growth of the DSS market
has been hampered by the misperception that reception of local television
broadcasts is incompatible with the DSS system.  The Company and DIRECTV have
initiated programs designed to inform consumers and retailers about reception
of local television broadcasts and to facilitate local broadcast reception.
The Company has commenced an extensive information campaign, coupled with
training of retail salespeople, to educate consumers that local television
broadcasts are readily received using a standard television antenna with the
DSS system.  DIRECTV recently announced a program to encourage retailers to
include off-air antennas with DSS purchases or to subsidize their cost.

MARKETING

     The Company engages in extensive marketing, advertising and promotional
activities to increase consumer awareness of the DSS system and USSB
programming, to promote the sale of DSS units and to generate subscriptions
to USSB programming.  The Company intends to continue these efforts and
anticipates that it will continue to make substantial expenditures for new
and intensified marketing, advertising and promotional activities, including
the following:

     ADVERTISING.  The Company's advertising activities presently consist of
television commercials aired nationally, radio commercials, and print
advertisements promoting the DSS system and USSB programming service.

     PROMOTIONS.  The Company promotes subscriptions to its programming
service by offering all owners of DSS units, upon initial purchase of a DSS
unit, one free promotional month of its premier programming package,
ENTERTAINMENT UNLIMITED-SM-.  During the free promotional month of
programming, the Company engages in targeted telemarketing and mailings
designed to convert free subscribers to paying subscribers.  The Company
believes that its free promotional month of ENTERTAINMENT UNLIMITED is an
effective marketing tool.

     To support its marketing, the Company also delivers a free channel that
is available to all owners of DSS units and, in conjunction with its
programmers, regularly provides USSB FREEVIEWs-Registered Trademark-, or
access to programming channels during certain periods of the year without
charge.  The Company also engages in joint advertising and promotions with
its programmers.

     TV GUIDE-TM-. The Company has a relationship with the publisher of TV
GUIDE, whereby the Company offers a "DSS Edition of TV GUIDE", available to
all DSS households.  The DSS Edition of TV GUIDE provides a comprehensive
listing of all subscription channels offered on the DSS system, and features
special inserts reviewing programming offered by USSB each week.

     RETAIL SUPPORT.  The Company engages in an active retail support
program, which provides dealers with point-of-sale literature and displays,
incentives and training.  DSS retailers promote the Company's programming and
encourage customers to activate their free promotional month and to subscribe
to ENTERTAINMENT UNLIMITED.  The Company generally pays commissions to
eligible retailers when their customers become paying subscribers, regardless
of which manufacturer's DSS unit was purchased.  In addition, the Company
makes USSB programming available for demonstration to the customer at the
point of sale.

     The Company has a long-term sales agency agreement with Thomson Consumer
Electronics ("Thomson"), pursuant to which Thomson acts as the Company's
sales agent for consumer electronics outlets that Thomson services.  Thomson
is the top selling television manufacturer in the United States, marketing
the "RCA," "GE" and "ProScan-Registered Trademark-" brands. Both the Company,
with a dedicated staff of approximately 40 sales personnel, and Thomson, with
a sales and support staff of approximately 350, service retail outlets.

                                       4
<PAGE>

     MANUFACTURER INCENTIVE PROGRAM AND OTHER JOINT MARKETING.  The Company
engages in a number of joint marketing efforts with DIRECTV, Inc. and DSS
unit manufacturers.  One of these efforts, the Manufacturer Incentive
program, is a joint financial incentive arrangement with DIRECTV which has
had the effect of contributing to DSS manufacturers lowering the price of DSS
units.  Such arrangements run for up to four years depending on the
manufacturer.

     The Company also shares costs with other DSS system participants for
advertising, public relations and retail promotions.  The Company believes it
also benefits from the marketing efforts of all DSS system participants.  All
current manufacturers of DSS units include information regarding USSB
programming in their retail packaging and all new DSS unit manufacturers are
expected to continue this practice.

PROGRAMMING

     The Company selected its programming based on extensive market research,
which indicated that potential DSS customers would have a strong desire for
movies and major pay-per-view events.  As a result, the Company sought
multi-year agreements with content providers which offered programming that
could satisfy this target market.  The Company broadcasts over 900 movie
titles per month and a wide variety of specialty sports events and
entertainment specials on a pay-per-view basis.

     The Company delivers premium networks in multichannel format to increase
viewer choice and variety.  The Company is not aware of any cable system with
a comparable level of multichannel premium programming.  The Company's
research indicates that multichannel programming is a popular attraction with
its subscribers, as each programmer generally "counter programs" certain of
its multiple channels; i.e., the programmer will, for example, run an action
movie, a comedy movie and a family movie in the same general time slot.  The
Company's delivery of premium channels in multichannel format allows a USSB
subscriber to receive multiple channels of a premium service at a price
generally paid by cable subscribers for one premium channel.  In early 1997,
the Company continued its commitment to providing the best premium movie
channels by adding HBO Family (2 channels) and Showtime 3, at no additional
cost to subscribers.  On March 10, 1998, USSB added two new commercial-free
premium movie services to its line-up: fXM:  Movies from Fox, and the
national premiere of Showtime Extreme.

     Coinciding with the launch of the new movie channels from Showtime and
Fox, the Company announced new programming packages effective March 10, 1998.
Programming is currently available in four subscription packages:
Entertainment Unlimited, Select Three, Select Two, and Select One.  The
Company's top programming package, Entertainment Unlimited, contains all of
the premium movie channels offered by the Company.  In addition to
Entertainment Unlimited, as the package names imply, DSS owners can choose to
put together their own package by selecting any one or any combination of the
premium networks offered by the Company.  Current subscription prices for the
packages range from $10.99 to $32.99 per month.  Management believes that the
Company offers the greatest number of premium movie channels with the highest
degree of flexibility as compared to its competitors.

     The Company makes its pay-per-view events available to all residential
DSS owners. The Company also distributes some of its pay-per-view events to
commercial establishments through a third party.

     The Company offers a complimentary channel to all DSS unit owners,
whether or not they are USSB programming subscribers.  This channel is
currently utilized by the Company to broadcast marketing messages to maximize
viewership of upcoming USSB programming, as well as for public service
broadcasting. The Company also broadcasts in Spanish all of the programming
which is provided to it with a Spanish language soundtrack.

                                       5
<PAGE>

     Since the DSS system poses no technical barriers to receiving both USSB
programming and DIRECTV programming, all purchasers of DSS units have access
to more than 200 channels of programming.  DIRECTV programming currently
includes approximately 50 channels of pay-per-view movies, as well as
subscription sports packages, established basic networks and audio services.
The Company provides programming that complements DIRECTV's existing
programming packages, thus maximizing the consumer appeal of the DSS system.
There is currently no overlap between USSB programming and DIRECTV
programming.

     Local television stations are readily received using a standard
television antenna with the DSS system.  DSS owners can easily switch between
DSS programs and local stations by using the DSS remote control. According to
the Company's research, approximately 60% of DSS households currently receive
local programming signals from standard television antennas.  DSS owners who
are not able to receive local programming signals because of their distance
from terrestrial broadcasting towers may receive national network programming
through the DSS system.  Local programming is also available to DSS owners
through a basic "lifeline" cable subscription.

DISTRIBUTION OF DSS UNITS

     The introduction of the DSS unit is widely regarded as the most
successful introduction and fastest growing major consumer electronics
product in United States history.  Since its introduction three years ago,
more than four million DSS units have been shipped to retailers.

     DSS units are currently sold at over 26,000 retail locations, including
national retailers such as Best Buy, Circuit City, Radio Shack, Sears and
WalMart.  DSS systems are also available at regional and independent consumer
electronics stores, satellite specialty stores, and other specialty retailers
including catalog, internet and television shopping networks.  DSS units are
also distributed by National Rural Telecommunications Cooperative affiliates
that sell satellite equipment predominately in rural areas.  The Company
recently entered into arrangements with the video subsidiaries of two
regional telephone operating companies whereby such companies will market,
sell and provide billing and customer service for DSS systems and USSB
programming. The Company's sales agency agreement with AT&T Corp. has been
terminated.

     DSS units are currently manufactured and distributed by many of the most
prominent consumer electronics companies, including: RCA, Sony, GE, Hughes
Network Systems, Toshiba, Panasonic, Optimus and Hitachi.

THE DSS UNIT

     The DSS unit consists of an unobtrusive 18 inch satellite dish, an
integrated receiver/decoder similar in size to a VCR and a remote control.
The dish, which must be aimed in the direction of the 101DEG. west longitude
orbital location, can be mounted on the exterior of the home.  Company
research indicates that approximately 63% of purchasers of DSS units choose
to install their units themselves, while the balance have their units
professionally installed.

     The DSS unit has been designed to be as easy to use as a basic
television set.  The consumer-friendly remote control allows subscribers to
quickly and easily access desired programming via a colorful on-screen
program guide and menu system.  Subscribers can create lists of favorite
channels, limit access to certain types of programming and establish budget
limits on pay-per-view selections.  The remote control has been designed to
be compatible with a wide variety of television sets, allowing subscribers to
operate both the television set and the DSS unit with the same remote
control.

                                       6
<PAGE>

     The DSS system is also designed to receive local television broadcasts
by using readily available television antennas.  Many antennas on the market
today provide improved and convenient ways to receive local stations with the
DSS system.

     The DSS system's on-screen programming guide provides convenient and
easy-to-use information regarding all programming and channels, as well as
program ratings for most programs carried by the premium services and permits
parents to set rating limits and "lock out" programming which the subscriber
does not wish to receive.

     The DSS system is designed to be available (i.e., free from outages)
99.7% of the time. Outages are generally the result of severe storms passing
between the satellite and the customer's dish or between the Company's
transmission facility and the satellite.

OPERATIONS

     The Company's program suppliers deliver signals to the Company via
commercial satellites, fiber optics or microwave transmissions.  These
signals are then uplinked, or transmitted, to the Company's transponders on
the DBS-1 satellite, through antennas located at the Company's National
Broadcast Center in Oakdale, Minnesota.  DBS-1 then broadcasts the signal to
DSS households. The Company also maintains a separate Auxiliary Broadcast
Center which provides redundant uplinking capability.

     All of the Company's video channels are encrypted to prevent
unauthorized reception of the signal.  The conditional access system utilized
in the DSS system, which controls the encryption and decryption of the
television signal, was developed and is operated by NDS Americas Inc.
(formerly News DataCom).  The signal processing system, which is responsible
for the transmission of audio and video, was developed by Thomson.  Both
technologies were developed under contract with Hughes and are available for
use by the Company pursuant to long-term agreements with Hughes.  The
conditional access system was upgraded in 1997 by issuing replacement access
cards to all DSS unit owners with "first-generation" cards.

     The conditional access system is controlled by a Conditional Access
Management Center located in Castle Rock, Colorado, with a backup facility in
Los Angeles, California.  The conditional access system has many flexible
features, allowing for subscription services and pay-per-view services on
both an impulse and order-ahead basis.

     The Company's signal processing system and all DSS units, regardless of
manufacturer, fully comply with the main profile and the main level of the
MPEG 2 digital compression standard. MPEG 2 is an international standard
promulgated by the Moving Picture Expert Group. Compliance with MPEG 2 allows
DSS unit manufacturers efficiencies in designing and manufacturing receivers.
Even though the DSS system is MPEG 2 compliant, it incorporates a number of
proprietary technologies and may not be used by other high-power DBS
broadcasters unless they obtain a license to such technology from Hughes.

     The Company contracts out customer service and billing functions to
Alliance Data Systems, Inc. ("ADS") (formerly BSI Business Services, Inc.).
ADS's functions include the handling of orders from subscribers, establishing
and maintaining customer accounts, inbound and outbound telemarketing,
billing and remittance processing.  All of ADS's interactions with
subscribers are conducted under the Company's name. The Company seeks to
provide the highest levels of customer service and believes that customer
service is important in developing customer loyalty and in distinguishing its
service from its competitors.

                                       7
<PAGE>

SATELLITE

     The Company owns five-sixteenths of DBS-1, including a five transponder
payload on the satellite. DBS-1 was manufactured by Hughes and was launched
by Arianespace in December 1993.  Hughes currently estimates that the DBS-1
satellite will have a life of 15.9 years, plus or minus 0.4 years, from its
launch date.  The Company expects that it will make arrangements for a
replacement satellite to ensure continuity of its programming service prior
to the end of the useful life of DBS-1.

OTHER COMPANY ORBITAL LOCATIONS

     The FCC has issued a Construction Permit and Launch Authority which
authorizes the Company to construct high-power DBS systems at 110DEG. west
longitude (three transponders) and 148DEG.  west longitude (eight
transponders). In connection with this permit, the Company has entered into
two satellite construction contracts with Lockheed Martin for the
construction of the two satellites.  The 110DEG. west longitude orbital slot
would enable the Company to provide a second high-power DBS service to the
United States, and additionally to Alaska and Hawaii.  The 148DEG. west
longitude slot would allow the Company to provide programming between the
United States and the Pacific Rim, if the FCC and international regulatory
bodies agree to grant the necessary authorizations.  See "Regulatory Matters."

COMPETITION

     The Company's existing and potential competitors comprise a broad range
of companies engaged in communications and entertainment, including cable
operators, other direct-to-home satellite service providers, wireless cable
operators, open video providers, electric utilities with existing fiber
networks, television networks and home video products companies, as well as
companies developing new technologies.  The FCC has granted several entities
authority to construct and launch satellites in the Ka-band which could
provide direct-to-home services, potentially allowing customers to
participate in activities from distance learning to interactive home
shopping.  One company has proposed using the Ka-band to uplink local
television station signals within their Designated Market Areas and making
such signals available to all DBS providers for sale by the DBS providers to
their subscribers.  The Company anticipates that other DBS satellites will be
launched at the 110DEG. west longitude and other orbital locations, increasing
the number of competitors in the direct broadcast satellite market.  Many of
the Company's competitors have greater financial and marketing resources than
the Company, and the business of providing subscription and pay television
programming is highly competitive. The Company expects that quality and
variety of programming, quality of picture and service and cost will be the
key bases of competition.

     The Company believes that the DSS system has several advantages,
including superior picture and sound quality compared to terrestrial
broadcasters and most cable operators, its programming variety, its retail
distribution network, well-established brand name manufacturers, advantageous
orbital location and the limited capital expenditures required in the future.
The DSS system currently offers the broadest variety of programming available
from any single source and employs the MPEG 2 digital compression standard
which, the Company believes, results in a higher picture quality than any
other existing domestic television broadcasting system. With the 101DEG.
west longitude orbital slot, the Company (and DIRECTV, Inc.) also have the
most desirable location for reaching the entire continental United States
with the least possibility of obstruction. The Company believes that the 18
inch dish used in the DSS unit also gives the Company an advantage over many
of its competitors, who must generally rely on larger and, in the case of
C-band broadcasters, more expensive dishes.

                                       8
<PAGE>

CABLE OPERATORS

     Cable television is currently available for purchase by as much as 97%
of the approximately 97 million U.S. television households. The cable
television industry is an established provider of television programming,
with approximately 66% of total television households subscribing.  Cable
systems typically offer 30 to 80 channels at an average monthly subscription
price of approximately $32.

     Cable television providers benefit from their entrenched position in the
domestic consumer marketplace.  Cable subscribers have relatively minimal
up-front costs as compared to DSS households, which must purchase (or lease)
and install the DSS unit.  In addition, the cost of both USSB programming and
DIRECTV programming may be higher than a subscriber would pay for cable
service. Certain cable companies have indicated an intention to rebuild their
transmission systems to upgrade to digital technology or add some digital
capacity, which would provide their cable television customers with improved
picture quality and sound and/or more channels.

SATELLITE PROGRAM PROVIDERS

     The FCC authorizes two types of satellite services for transmission of
television programming: (i) high-power DBS and (ii) low-power (C-band) and
medium-power (Ku-band) DBS.  In addition, the FCC has recently authorized the
use of Ka-Band satellites, although none have been constructed or launched.
High-power DBS delivers high quality video and audio signals, can be received
by an easily installed, 18 inch dish with virtually no signal interference
and, depending on the satellite's orbital location, can be broadcast
throughout the continental United States from a single satellite.  Low- and
medium-power DBS were intended by the FCC primarily for commercial use.

     The International Telecommunication Union, an agency of the United
Nations, allocated to the United States 32 transponders at each of eight
orbital locations for the provision of domestic high-power DBS service.  The
FCC has issued licenses or construction permits for all eight orbital
locations. Although the number of potential competitors in the high-power DBS
market is limited by the number of orbital slots authorized for such service
by the FCC and by regulatory authorities of adjoining countries, additional
spectrum may be allocated to high-power DBS in the future, which would
increase the number of orbital locations beyond the present eight.  In
addition, satellites regulated by foreign governments may, in the future,
provide competitive DBS services under protocols between the United States
and such foreign governments.  Under a protocol between Mexico and the United
States, Mexico has an orbital location which permits service to the United
States and the FCC has granted a Mexican entity authority in the United
States for reception of Spanish programming.  If Canada were to enter into a
similar protocol, Canada also has orbital locations which would permit DBS
service to the United States.

HIGH-POWER DBS

     The Company and DIRECTV, Inc. were the first domestic providers of
high-power DBS programming.  DIRECTV, Inc. broadcasts over 175 channels from
the 101DEG. west longitude orbital location shared with the Company, as
compared with up to 30 channels offered by the Company.  DIRECTV, Inc. offers
a broad range of sports programming and emphasizes pay-per-view movies and
events and offers over 50 channels of "basic" programming.  While the Company
and DIRECTV, Inc. share the goal of promoting the DSS system, they do compete
for subscriber revenues once the DSS unit is purchased by the consumer.

     EchoStar Communications Corporation ("EchoStar") provides service using
three high-power DBS satellites.  Two satellites are at the 119DEG. west
longitude orbital location. EchoStar offers programming which includes many
of the premium and basic channels available on the DSS

                                       9
<PAGE>

system and is aggressively marketing its programming services and satellite
dish as an alternative to the DSS system. EchoStar manufactures the 18-inch
satellite dish needed to receive its programming and thereby has greater
control over the retail price of its satellite dish than the Company, but
also bears the financial responsibility associated with this aspect of its
business.  In addition to two satellites at the 119DEG. west longitude
orbital location, EchoStar has acquired Direct Broadcast Satellite
Corporation, which has launched a satellite at 61.5DEG. west longitude.
Direct Broadcast Satellite Corporation has authority for 11 transponder slots
at 61.5DEG. west longitude, which is available to provide EchoStar's
programming.  In addition, Dominion Video Satellite, Inc. has agreed to lease
six of its eight transponders at the 61.5DEG. orbital location to EchoStar.
Since EchoStar and Dominion Video Satellite, Inc. will use the same
encryption and receive system, Dominion subscribers may purchase EchoStar
programming in addition to Dominion programming.  EchoStar has also acquired
24 transponder slots at 148DEG. west longitude which were auctioned in
January 1996 by the FCC and has requested authority from the FCC to relocate
one of its two satellites at 119DEG. west longitude to 148DEG. west longitude.

     The partners in PRIMESTAR Partners ("PRIMESTAR"), a partnership
consisting of G.E. Americom and major cable television system operators,
including Tele-Communications, Inc. ("TCI"), have agreed to form a new
corporation, PRIMESTAR, Inc., which is intended to be a publicly held
company.  As part of that reorganization, the FCC has been asked to approve a
transfer of control of Tempo Satellite, Inc. ("Tempo"), which has eleven
transponders authorized at 119DEG. west longitude and eleven transponders
authorized at 166DEG. west longitude, from TCI Satellite Entertainment, Inc.
to PRIMESTAR, Inc.  On March 8, 1997, Tempo launched its satellite to provide
high power direct broadcast satellite service at 119DEG. west longitude, but
such service has not yet commenced.

     PRIMESTAR has also entered into an agreement with MCI, News Corp., and
ASkyB which will permit PRIMESTAR to acquire the 28 transponders authorized
to MCI at 110DEG. west longitude, two satellites which are presently under
construction, and other related assets.  The FCC has been asked to approve
the assignment of the MCI authorization to PRIMESTAR LHC, a wholly owned
subsidiary of PRIMESTAR, Inc.  If this transaction proceeds as presently
contemplated, ASkyB, which will be owned by News Corp. (80.1%) and MCI
(19.9%), will have a non-voting equity interest (31%) in PRIMESTAR.  The
parties have represented to the FCC that they are willing to divest the
eleven transponders at 119DEG. west longitude if the 28 transponders at
110DEG. west longitude are permitted to be assigned to PRIMESTAR LHC.

LOW AND MEDIUM-POWER DBS

     PRIMESTAR also offers a 95 channel medium power broadcast system using
capacity on a medium-power satellite owned by G.E. Americom and leases
receivers and three foot satellite dishes to subscribers. PRIMESTAR's lease
program is widely credited for the success of its medium-power satellite
service which, according to trade publications, has approximately 2.0 million
subscribers. PRIMESTAR offers programming which includes many of the premium
and basic channels available on the DSS system.  PRIMESTAR promotes its
service as superior to cable and markets to the same general television
viewers as the Company. See also "High-Power DBS" above.

     Potential competitors may provide television programming at any time by
leasing transponders from an existing satellite operator.  However, the
number of transponders available for lease on any one satellite is generally
limited, making it difficult to provide sufficient channels for a viable
system.

     The Company also competes with low-power (C-band) systems.  These
systems, which utilize a 4 to 8 foot dish, in the aggregate serve
approximately 2.3 million subscribers.

                                      10
<PAGE>

TELEPHONE COMPANIES

     Certain regional telephone operating companies and long distance
telephone companies could become significant competitors of the Company in
the future. Several telephone companies have begun to enter the video
programming market by creating cable subsidiaries, acquiring existing cable
operators outside of the area they presently serve with telephone service, or
by continuing their involvement with wireless cable systems.  In addition,
telephone companies can establish open video services, which they either can
make available to television programmers or utilize themselves.  Among other
things, telephone companies have an existing relationship with virtually
every household in their service area, substantial financial resources and an
existing infrastructure. However, the Company has recently entered into an
agreement in principle with Bell Atlantic Video Services Company under which
Bell Atlantic will market, sell and provide billing and customer service for
DSS systems and USSB programming. The Company has also entered into an
agreement with Southwestern Bell Video Services, Inc. for the sale and
marketing of DSS systems and USSB programming to multiple dwelling units.  As
noted above under "Business - Distribution of DSS Units," the Company's sales
agency agreement with AT&T Corp. has been terminated.

WIRELESS CABLE AND OTHER MICROWAVE SYSTEMS

     There are approximately 200 wireless cable systems in the United States,
serving approximately 900,000 subscribers.  These systems typically offer 20
to 40 channels of programming, which may include local programming; however,
these systems will require substantial capital expenditures to upgrade to
digital technology.  The FCC has recently allocated spectrum for the Local
Multipoint Distribution Service (LMDS), a form of wireless cable with
increased bandwidth. FCC auctions are being conducted to make the spectrum
available for video, voice, internet and data services.  Companies acquiring
rights for LMDS could become providers of competitive video services.

VHF/UHF BROADCASTERS

     Most areas of the United States are covered by traditional terrestrial
VHF/UHF broadcasters that typically offer three to ten channels. These
stations provide local, network and syndicated programming free of charge.
The FCC has mandated that terrestrial television stations commence digital
television service, and has granted additional spectrum on an interim basis
which may be used for multichannel programming and/or high definition
television (HDTV).  The Company is unable to predict at this time the effect
of such a development on the Company's competitive position.

REGULATORY MATTERS

     The Company is subject to the regulatory authority of the FCC. As a
distributor of television programming, the Company is also affected by
numerous laws and regulations.  Unlike a common carrier, however, the Company
is free to set prices and serve customers according to its business judgment
without rate of return or certain other types of regulation.

     The FCC has issued a license (the "License") to the Company which allows
the Company to broadcast from the 101DEG. west longitude orbital slot.
DIRECTV, Inc. is the only other entity licensed for the 101DEG. west
longitude orbital slot.  No other entities can currently obtain transponders
at 101DEG. west longitude.

     The License must be renewed at the end of its ten year term.  FCC
licenses are generally renewed in the ordinary course, absent misconduct by
the licensee. Under the License, the

                                      11
<PAGE>

Company is subject to FCC review primarily for the following: (i) standards
regarding individual satellites (e.g., meeting minimum financial, legal and
technical standards); (ii) avoiding interference with other satellites; and
(iii) complying with rules the FCC has established specifically for
high-power DBS satellite licenses.  USSB II, Inc. ("USSB II"), a wholly owned
subsidiary of the Company, holds the License and owns the five transponders.
The Company and USSB II have entered into a Transponder Use Agreement,
whereby the Company is granted the right to use the transponders. In
addition, uplink facilities are separately licensed by the Satellite Radio
Branch of the FCC. The Company's National Broadcast Center and its Auxiliary
Broadcast Center have each received a Satellite Radio Branch license.

     The FCC has also issued a Construction Permit and Launch Authority (the
"Permit") to the Company.  The Permit allows the Company to construct and
launch high-power DBS systems with three transponders at 110DEG. west
longitude and with eight transponders at 148DEG. west longitude. The 110DEG.
west longitude orbital slot would enable the Company to provide a second
high-power DBS service to the United States, and additionally to Alaska and
Hawaii.  The 148DEG. west longitude slot would allow the Company to provide
programming between the United States and the Pacific Rim, if the FCC and
international regulatory bodies agree to grant the necessary authorizations.
The Permit required that these two additional systems be operational by
December 1997. The Company has requested an extension to December 1999 in
which to complete the construction and launch of the remainder of its DBS
systems.  The Company's request is presently pending before the FCC.  The
Company's ability to operate at the 101DEG. west longitude orbital location
is not linked to the Permit.  In connection with the Permit, the Company has
entered into two satellite construction contracts with Lockheed Martin for
the construction of two satellites.  Under the contract for the 110DEG.
orbital location, the Company is presently required to make future fixed
payments totaling approximately $67.6 million after having made advance
payments of $8.4 million.

     The Telecommunications Act of 1996 (the "Act") significantly deregulated
the telecommunications industry.  The Act further clarifies that the FCC has
exclusive jurisdiction over high-power DBS service, that criminal penalties
may be imposed for piracy of high-power DBS signals, that local zoning and
homeowner covenants which impair a viewer's ability to receive DBS signals
are preempted except where necessary for safety or historic reasons and that
local (but not state) taxes on DBS service are precluded.

     On February 26, 1998, the FCC released a Notice of Proposed Rulemaking.
This Rulemaking seeks to streamline and simplify the Commission's rules
governing DBS service.  In addition to proposing changes in the processing
and service Rules, the Rulemaking requests comments on ownership issues such
as foreign ownership and horizontal concentration limitations on common
ownership of cable and DBS providers in the multi-channel video program
distribution market.  At present, the Company is uanble to determine the
effects of such proposed rules on its operations or competitive position.

RELATIONSHIP WITH HUGHES

     The Company has an important business relationship and course of dealing
with Hughes, based on their co-ownership of DBS-1, their shared use of the
DSS system (including its underlying technology) and their mutual objective
to build and promote consumer acceptance and growth of the DSS system.  The
relationship with Hughes dates back to 1991 and is based on contractual
arrangements and a history of cooperation. The Company and Hughes (or an
affiliate of Hughes) are parties to the following agreements:

     SATELLITE PAYLOAD PURCHASE AGREEMENT.  In May 1991, the Company entered
into a Satellite Payload Purchase Agreement (the "SPPA") with Hughes
Communications Galaxy, Inc. ("HCG"). The SPPA provided for the purchase by
the Company of a five-sixteenths interest in DBS-1,

                                      12
<PAGE>

enabled the Company and DIRECTV, Inc. to share the cost of satellite
construction and launch and enabled the Company and DIRECTV, Inc. to become
the first high-power DBS satellite broadcasters in the United States.  In
addition, the SPPA provided that the Company would pay its fair share of the
development and/or acquisition costs for the system technology, which
includes conditional access, signal processing and other systems.  Through
this agreement, DIRECTV, Inc. and the Company utilize a common system and
avoid any technical barriers to consumers subscribing to both USSB
programming and DIRECTV programming.

     TRANSPONDER SERVICE AGREEMENT.  The Company also entered into a
Transponder Service Agreement with Hughes Communications Satellite Services,
Inc. ("HCSS"), whereby HCSS provides telemetry, tracking and control of
DBS-1.  Pursuant to this Agreement, the Company and HCSS technical personnel
are in regular contact, sharing information regarding the satellite and
cooperating in managing its operations.

     INTERIM TECHNOLOGY ACCESS AND COORDINATION AGREEMENT.  The Company and
HCG have entered into an Interim Technology Access and Coordination
Agreement, which clarifies certain issues regarding the sharing of the
technology underlying the DSS system and sets forth the preliminary agreement
on the sharing of development costs.  In addition, DIRECTV, Inc. has primary
responsibility for security of the DSS system and undertakes initiatives to
detect signal piracy and implement countermeasures.

     Even though the Company and DIRECTV, Inc. compete for subscriber
revenues from DSS households, there is currently no overlap between USSB
programming and DIRECTV programming.  The Company recently cooperated with
DIRECTV, Inc. in integrating its basic channels into DIRECTV's programming,
so that USSB could concentrate on offering premium movie channels.
Accordingly, both the Company and DIRECTV, Inc. have a common interest in
promoting awareness of the DSS system, maximizing DSS unit sales and
cooperating in joint marketing efforts to promote the DSS system.  See also
"Marketing."

EMPLOYEES

     As of December 31, 1997, the Company employed 152 persons.  None of the
Company's employees are represented by a union and the Company believes its
employee relations are satisfactory.

     In addition, pursuant to an Administrative Services Agreement between
the Company and Hubbard Broadcasting, Inc. ("HBI"), the Company's largest
shareholder, the Company receives services from certain executives of HBI and
also from the tax, payroll, accounts payable, risk management, management
information systems and legal staff of HBI.  The Company incurred an
aggregate charge of $625,900 for such services during the six month
transition period ended December 31, 1997 (the "Transition Period").

EXECUTIVE OFFICERS OF THE REGISTRANT

     The executive officers of the Company are as follows:

NAME                         AGE            POSITION WITH THE COMPANY
----                         ---            -------------------------

Stanley S. Hubbard            64            Chairman of the Board

Stanley E. Hubbard            36            Chief Executive Officer and
                                            President

Robert W. Hubbard             33            Executive Vice President

                                      13
<PAGE>

Gerald D. Deeney              74            Treasurer, Chief Financial
                                            Officer and Secretary

Mary Pat Ryan                 41            Senior Vice President, Marketing

Bernard J. Weiss              44            Vice President,
                                            Finance and Administration


     STANLEY S. HUBBARD is the founder of the Company and serves as its
Chairman of the Board. Mr. Hubbard served as Chief Executive Officer of the
Company from its inception to November 1995.  Mr. Hubbard is also the
Chairman of the Board, President and Chief Executive Officer of HBI and
divides his professional time between the Company and HBI and its affiliates.
Mr. Hubbard is an executive with several other entities affiliated with HBI,
including Conus Communications Company Limited Partnership ("Conus"), a
satellite news gathering firm.  Mr. Hubbard, a graduate of the University of
Minnesota, joined HBI in 1951.  He and his father, the founder of HBI, were
co-recipients of the Distinguished Service Award from the National
Association of Broadcasters in 1995.  Stanley S. Hubbard is the father of
Stanley E. Hubbard and Robert W. Hubbard.  Mr. Hubbard is also a director of
Fingerhut, Inc.

     STANLEY E. HUBBARD was elected Chief Executive Officer of the Company in
November 1995. From February 1993 until November 1995, Mr. Hubbard served as
President and Chief Operating Officer of the Company.  Prior thereto, he
served as Vice President of the Company.  He has been a director of the
Company since 1991.  Mr. Hubbard has also been a Vice President of HBI for
more than five years and has a broad range of television experience.  He
holds positions in other affiliated companies, including director of HBI.
Mr. Hubbard is also a director of First Team Sports, Inc.

     ROBERT W. HUBBARD was elected Executive Vice President of the Company in
February 1993 and elected a director of the Company in September 1992.  Mr.
Hubbard has a broad range of television experience with various HBI
affiliates and divides his professional time between the Company and HBI and
its affiliates.  Mr. Hubbard is also a director of HBI and serves as
President of its television group.

     GERALD D. DEENEY was elected Treasurer of the Company in June 1981,
Chief Financial Officer of the Company in September 1995 and Secretary in
January 1996.  Mr. Deeney has been with HBI for more than thirty-five years
and has been Vice President and Treasurer of HBI for more than twenty-five
years.  In 1992, Mr. Deeney was elected a director of HBI.

     MARY PAT RYAN joined the Company as Vice President, Marketing in
February 1994 and now is Senior Vice President, Marketing.  From 1983 to
1993, Ms. Ryan was at Draft Worldwide, one of the largest direct marketing
agencies in the world, and served as Executive Vice President and Director of
Client Services. At Draft Worldwide, Ms. Ryan managed marketing programs for
HBO's Cable and Satellite Divisions, Time Warner Cable, The Sega Channel and
American Express Travelers Cheque Group, and oversaw all administrative,
business development and training functions for client services.

     BERNARD J. WEISS joined the Company in January 1994 and has been Vice
President of Finance and Administration of the Company since January 1995.
From April 1990 until January 1994, Mr. Weiss served in various financial and
operating positions at Northwest Airlines. Inc., including Director of
Budgets and Analysis.  From June 1986 to 1990, Mr. Weiss served as Vice
President and acting division head of the media and communications division
of First Banks. Mr. Weiss is a Certified Public Accountant.

                                      14
<PAGE>

                            ITEM 2.  PROPERTIES

     The Company utilizes the following facilities:

<TABLE>
                                             SQUARE
      FACILITY            LOCATION          FOOTAGE        OWNED OR LEASED
      --------            --------          -------        ---------------
<S>                       <C>               <C>            <C>
 Executive Offices        St. Paul,          15,043        Leased from HBI(a)
                          Minnesota

 National Broadcast       Oakdale,           20,500        Owned
 Center                   Minnesota

 Auxiliary Broadcast      St. Paul,           1,300        Antennas and
 Center                   Minnesota                        equipment are owned
                                                           by the Company; roof
                                                           site for antennas is
                                                           leased from HBI(b)
</TABLE>

(a)  The lease for the Company's executive offices expires on June 30, 2000.
     The Company expects to renew this lease in the ordinary course.  The
     Lease may be terminated by either party upon one (1) year's notice.

(b)  The Auxiliary Broadcast Center lease expires on June 30, 1999 and
     includes three five-year renewal options.

     The Company believes that its executive offices are adequate for its
office and administrative purposes for the foreseeable future and that its
National Broadcast Center is sufficient for its signal reception, signal
processing and uplinking facilities for the foreseeable future.  The
Company's telemarketing, customer service and billing functions are performed
for it on a contract basis by third parties and do not require the use of
Company facilities.






                                      15
<PAGE>

                           ITEM 3.  LEGAL PROCEEDINGS

     The Company is exposed to litigation encountered in the normal course of
business.  In the opinion of management, the resolution of such litigation
matters of which the Company is aware will not have a material adverse effect on
the Company's financial position, results of operations or cash flows.  In
addition, the Company is a party to the following actions:

     IN THE MATTER OF CERTAIN DIGITAL SATELLITE SYSTEM (DSS) RECEIVERS AND
     COMPONENTS THEREOF, United States International Trade Commission,
     Investigation No. 337-TA-392; and PERSONALIZED MEDIA COMMUNICATIONS, L.L.C.
     v. THOMSON CONSUMER ELECTRONICS, ET AL., United States District Court,
     Northern District of California, Case No. C-96 20957.

In November 1996, Personalized Media Communications, L.L.C. ("PMC") initiated a
legal proceeding before the United States International Trade Commission ("ITC")
and a separate proceeding in the United States District Court for the Northern
District of California against digital satellite system developers,
manufacturers and programmers, including, among others, Hughes Network Systems,
Thomson Consumer Electronics and other DSS manufacturers, DIRECTV, Inc., and the
Company.

In the ITC action, PMC alleges that Hughes Network Systems, Thomson Consumer
Electronics and other DSS manufacturers have infringed, and that DIRECTV, Inc.
and the Company have contributed to and/or induced the infringement of, a patent
owned by PMC and requests the ITC to (i) bar the importing, marketing,
promoting, distributing, or sale of imported infringing DSS receivers in the
United States which are covered by PMC's patent and (ii) prohibit DIRECTV, Inc.
and the Company from broadcasting television programming to any imported
infringing DSS receiver.  A trial of the ITC proceeding before an administrative
law judge was conducted in July 1997, and an initial determination by the
administrative law judge was rendered in October 1997 ruling against PMC's
claims on all material issues.  In December 1997 the ITC accepted the
determination of the Administrative Law Judge, and PMC has appealed that
decision.  The appeal is pending in the Court of Appeals for the Federal
Circuit.

In the Federal District Court action, PMC alleges that the same defendants,
including DIRECTV, Inc. and the Company, have infringed at least one claim of
several PMC patents and have induced the infringement of PMC's patents by
various DSS manufacturers.  PMC has requested the court to award PMC damages, to
treble such damages, and to enjoin the Company and the other defendants from
infringing PMC's patents.  The Court and all parties have agreed that the
Federal District Court action be stayed pending resolution of the ITC
investigation.  The stay is currently in force.

The Company has denied all material allegations in both complaints.  While it is
not possible to estimate the probable outcome of these proceedings at this time,
management believes, based on advice of counsel, and the favorable decision by
the ITC, that it has valid defenses to PMC's claims.  The Company does not
believe that PMC is entitled to damages or any remedies from the Company, and
management intends to vigorously defend both actions.


                                      16

<PAGE>

     IPPV ENTERPRISES V. THOMSON CONSUMER ELECTRONICS, INC., HUGHES NETWORK
     SYSTEMS, SONY CORPORATION OF AMERICA, HITACHI HOME ELECTRONICS (AMERICA),
     INC., UNIDEN AMERICA CORPORATION, DIRECTV, INC., AND UNITED STATES
     SATELLITE BROADCASTING COMPANY, INC., UNITED STATES DISTRICT COURT,
     DISTRICT OF DELAWARE, CASE NO. 97-288.

In June 1997, IPPV Enterprises, a Georgia partnership ("IPPV"), initiated a
legal proceeding in the United States District Court for the District of
Delaware against digital satellite system developers, manufacturers, including,
among others, Hughes Network Systems, Thomson Consumer Electronics and other DSS
manufacturers, DIRECTV, Inc., and the Company.

IPPV alleges that the defendants, including DIRECTV, Inc. and the Company, have
infringed several IPPV patents relating to parental control and pay-per-view
features used in the DSS system.  IPPV has requested the court to award IPPV
damages, and to treble such damages.  The IPPV patents in the suit have all
expired.

The Company has denied all material allegations in the complaint.  While it is
not possible to estimate the probable outcome of this proceeding at this time,
management believes, based on advice of counsel, that it has valid defenses to
IPPV's claims.  The Company does not believe that IPPV is entitled to damages,
and management intends to vigorously defend the action.


                                      17

<PAGE>

           ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On November 17, 1997, the Company held its 1997 Annual Meeting of
Shareholders (the "Meeting").

     At the Meeting, each of the following persons were elected as a director of
the Company.  The persons designated as Class A Directors were elected solely by
the holders of the Class A Common Stock.  The Directors designated Other
Directors were elected by the holders of the Class A Common Stock and the Common
Stock, voting together as a single class.

     CLASS A DIRECTORS
     -----------------
     Peter F. Frenzer
     William D. Savoy
     Louis G. Zachary, Jr.

     OTHER DIRECTORS
     ---------------
     Stanley S. Hubbard
     Stanley E. Hubbard
     Robert W. Hubbard
     Herbert S. Schlosser
     David S. Allen
     Frank N. Magid
     Peter G. Skinner
     John W. Marvin
     Ward L. Quaal

     In addition, shareholders were asked to ratify the selection by the Board
of Directors of Arthur Andersen LLP as the Company's independent public
accountants for the Transition Period and the 1998 fiscal year.  The vote on
such matter was as follows:

     651,407,830 in favor; 240,236 opposed; 37,284 abstained.  There were no
broker "non-votes."


                                      18

<PAGE>

                                      PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     The Company's Class A Common Stock trades on the Nasdaq National Market
under the symbol "USSB."  The following table sets forth the high and low
closing sales prices for such stock as reported on the Nasdaq National Market
for each quarter during the Transition Period:


     Transition Period ended December 31, 1997:    LOW       HIGH
     ------------------------------------------    ---       ----
     Quarter ended September 30, 1997             8 1/4     9  1/4
     Quarter ended December 31, 1997              7 5/8     10 3/4

     On March 17, 1998, the last reported sale price of the Company's Class A
Common Stock was $9.875 per share.  At that date, the Company had 679 Class A
Common shareholders of record.

     The Company has not paid any cash dividends on its Class A Common Stock and
does not intend to pay cash dividends for the foreseeable future.  Earnings will
be retained for use in the operation and expansion of the Company's business.

REPORT ON SALES OF SECURITIES AND USE OF PROCEEDS THEREFROM.

     Subsequent to the Company's initial public offering, effective January 31,
1996 (Registration No. 33-99906), and pursuant to the requirements of the
Securities Act of 1933, as amended and as then in effect, the Company filed an
initial report on Form SR with the Securities and Exchange Commission on May 10,
1996 and amendments thereto on November 12, 1996, May 12, 1997.  Further
information was reported in the Company's Report on Form 10-Q for the quarter
ended September 30, 1997.

     The following table sets forth the amount of direct or indirect payments to
others from such effective date through December 31, 1997 which have changed
since the most recently filed report on Form 10-Q.

<TABLE>

Use of Proceeds                           Direct or Indirect Payments to Others
---------------                           -------------------------------------
<S>                                       <C>
Working Capital                                       $31,820,034
Purchase and Installation of Machinery
  and Equipment                                        20,340,535
Temporary Investments
  Short Term Treasuries                                55,000,000
  Cash                                                  3,067,206
</TABLE>

                ITEM 6. SELECTED FINANCIAL AND OPERATING DATA

     Information required by this item is set forth in the Company's 1997 Report
to Shareholders on page 7, under the heading "Selected Financial and Operating
Data," and is incorporated herein by reference.


                                      19

<PAGE>

        ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                         AND RESULTS OF OPERATIONS

     Information required by this item is set forth in the Company's 1997 Report
to Shareholders on pages 8 to 15, under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and is
incorporated herein by reference.

             ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     Information required by this item is set forth in the Company's 1997 Report
to Shareholders on pages 16 to 29, in the consolidated financial statements and
notes, and on page 30, under the heading "Report of Independent Public
Accountants," and is incorporated herein by reference.


     ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
                             FINANCIAL DISCLOSURE

     None.










                                      20
<PAGE>

                                      PART III

           ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table provides certain information with respect to the members of
the Board of Directors.  Three directors, the Class A Directors, are elected
solely by the holders of Class A Common Stock.  The remaining directors are
elected by the holders of the Class A Common Stock and the holders of Common
Stock, voting as a single class.


CLASS A DIRECTORS
-----------------

Peter F. Frenzer                       63

William D. Savoy                       33

Louis G. Zachary, Jr.                  39


OTHER DIRECTORS
---------------

Stanley S. Hubbard                     64

Stanley E. Hubbard                     36

Robert W. Hubbard                      33

Herbert S. Schlosser                   71

David S. Allen                         68

Frank N. Magid                         66

Peter G. Skinner                       53

John W. Marvin                         50

Ward L. Quaal                          78

Information with respect to Messrs. Stanley S. Hubbard, Stanley E. Hubbard and
Robert W. Hubbard and the other executive officers of the Company is contained
in Part I, Item 1 of this Report on Form 10-K under the heading "Business -
Executive Officers of the Registrant," and is incorporated herein by reference.

     HERBERT S. SCHLOSSER was elected a director of the Company in March 1994.
Since 1986, Mr. Schlosser has served as Senior Advisor, Broadcasting and
Entertainment with Schroder & Co. Inc.  Mr. Schlosser was Executive Vice
President of RCA Corporation from 1978 until 1985 and prior to that was
President of the National Broadcasting Company.  Mr. Schlosser is also a
director of Data Broadcasting Corporation, a financial data communications
company, and Central European Media Enterprises Ltd., a company which holds
interests in private commercial television stations in central and eastern
Europe.


                                      21

<PAGE>

     DAVID S. ALLEN has been a director of the Company since 1994.  Mr. Allen is
currently Chairman and Chief Executive Officer of The Boatworks, a boat sales
and service company.  From 1980 through March 1993, Mr. Allen served as
Chairman, President and Chief Executive Officer of Petry, Inc., which provides
services to HBI relating to the sale of HBI's commercial time.  Petry, Inc. is
one of the largest sales organizations of national television advertising in the
U.S.

     FRANK N. MAGID was elected a director of the Company in 1994.  Mr. Magid
has been the Chairman and Chief Executive Officer of Frank N. Magid Associates,
a television industry research and consulting firm since 1957.

     PETER G. SKINNER was elected a director of the Company in March 1994.
Since 1985, Mr. Skinner has been General Counsel, Secretary, and Senior Vice
President (since 1989) for Dow Jones & Company, Inc. ("Dow Jones").

     JOHN W. MARVIN was elected a director of the Company in March 1994.  Since
1974, Mr. Marvin has held various positions with Marvin Lumber and Cedar
Company, including Plant Manager, Board Member and Chief Operating Officer.

     WARD L. QUAAL was elected a director of the Company in September 1982.  Mr.
Quaal has been President of Ward L. Quaal Company, management consultants to the
broadcasting industry, since October 1974.  Previously, he was President of
Tribune Broadcasting Company.  Mr. Quaal is a recipient of the Distinguished
Service Award from the National Association of Broadcasters.

     PETER F. FRENZER was elected to the Board of Directors in July 1996.  Mr.
Frenzer recently retired from Nationwide Insurance Enterprise after 21 years of
service.  From 1991 to 1996, he was President of Nationwide Life Insurance
Company and, from 1981 to 1995, he was Chief Investment Officer of Nationwide
Insurance Enterprise.

     WILLIAM D. SAVOY was elected a director of the Company in March 1994.
Since 1990, Mr. Savoy has served as Vice President of Vulcan Ventures, Inc.
("Vulcan"), a venture capital firm owned by Paul Allen, a co-founder of
Microsoft, Inc.  From 1987 until November 1990, Mr. Savoy was employed by
Layered, Inc., a company controlled by Mr. Allen, and became its President in
1988.  Mr. Savoy has served as President for Vulcan Northwest, Inc., a company
wholly-owned by Mr. Allen, from November 1990 until the present.  Mr. Savoy
serves on the Advisory Board of Directors of DreamWorks SKG and the Board of
Directors of CINET, Inc.; Harbinger Corporation; Metricom, Inc.; Telescan Inc.;
Ticketmaster; and USA Networks, Inc.

     LOUIS G. ZACHARY, JR. was elected to the Board of Directors of the Company
in July 1996.  Mr. Zachary is a Managing Director in the investment banking
department of Credit Suisse First Boston Corporation, which he joined in 1981.

     Messrs. Stanley S. Hubbard, Robert W. Hubbard, and Deeney are also employed
by, and spend a significant portion of their time on, the businesses of Hubbard
Broadcasting, Inc. ("HBI") and its affiliates other than the Company.  Mr.
Stanley E. Hubbard devotes his professional time primarily to the business of
the Company, but does hold positions with HBI and its affiliates which will
require a certain amount of his time.  The Company does not anticipate any
material change in the relative amount of time such persons will spend on the
Company's matters.  Each of such persons who is a director has indicated to the
Company that, should a conflict of interest arise, he will promptly disclose
such conflict to the Company's Board of Directors and refrain from voting on
such matter as a director.


                                      22

<PAGE>

COMMITTEE AND BOARD MEETINGS

The Company's Board of Directors has an Audit Committee which (i) reviews the
Company's quarterly and annual financial statements, its filings on Forms 10-K
and 10-Q and earnings releases regarding financial results, (ii) makes
recommendations regarding the Company's independent public accountants and scope
of their services, (iii) reviews the adequacy of accounting policies, compliance
assurance procedures and internal controls, (iv) reviews auditors' independence
and (v) reports to the Board on the adequacy of disclosures and adherence to
accounting principles.  Messrs. Marvin, Skinner and Savoy comprised the Audit
Committee during the Transition Period.  The Audit Committee met five times
during the Transition Period ended December 31, 1997.

The Company's Board of Directors has a Compensation Committee which (i) reviews
compensation philosophy and major compensation plans for executives, (ii)
administers the Company's stock option plans and (iii) approves the compensation
of the Company's executive officers.  Messrs. Frenzer, Quaal and Schlosser
comprised the Compensation Committee during the Transition Period.  The
Compensation Committee met two times during the Transition Period ended December
31, 1997.

The Company's Board of Directors has a Nominating Committee, which makes
recommendations to the Board of Directors as to nominees for election to the
Board.  Messrs. Stanley S. Hubbard, Allen and Magid comprised the Nominating
Committee during the Transition Period.  The Nominating Committee met one time
during the Transition Period ended December 31, 1997.

The Board of Directors also has an Executive Committee, consisting of Messrs.
Stanley S. Hubbard, Stanley E. Hubbard, Robert W. Hubbard and Schlosser.
Between meetings of the Board of Directors, the Executive Committee exercises
all the powers of the Board of Directors in the management and direction of the
business and affairs of the Company, except as provided otherwise by law,
resolutions of the Board of Directors, the Company's By-laws, or its Articles of
Incorporation.

During the Transition Period, the Board held two meetings.  Each director
attended 75% or more of the meetings of the Board held while each was a director
during such Transition Period and of the meetings of Committees of which he was
a member during such Transition Period, except that Mr. Allen did not attend one
Board of Directors meeting, and Mr. Savoy did not attend two meetings of the
Audit Committee.  Mr. Frenzer was appointed to the Compensation Committee at the
November 17, 1997 Board of Directors meeting.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee was, during the Transition Period or
previously, an officer or employee of the Company.

Mr. Quaal is the President of Ward L. Quaal Company, which performs government
relations work for both the Company and HBI.  The Company has paid $20,812
during the six months ended December 31, 1997, and $126,333, $141,683 and
$61,007 in 1995, 1996 and 1997, respectively, to such company.


                                      23

<PAGE>

COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than ten percent of a registered class of the Company's equity securities,
to file with the Securities and Exchange Commission ("SEC") initial reports of
ownership and changes in ownership of Common Stock and other equity securities
of the Company.  Officers, directors and greater than ten percent shareholders
are required by SEC regulation to furnish the Company with all Section 16(a)
forms they file.

To the Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, all Section 16(a) filing requirements applicable to officers,
directors and greater than ten percent shareholders were satisfied.


                           ITEM 11.  EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

     The Summary Compensation Table shows compensation information for the
Company's Chief Executive Officer and the four most highly compensated executive
officers of the Company for services rendered in all capacities during the six
months ended December 31, 1997 and the years ended December 31, 1995, 1996 and
1997.

<TABLE>
                                          ANNUAL COMPENSATION
                                                                   ALL OTHER
NAME AND PRINCIPAL                         SALARY       BONUS     COMPENSATION
POSITION                    PERIOD          ($)          ($)           ($)
                            ------         ------       -----     ------------
<S>                      <C>               <C>           <C>       <C>
Stanley E. Hubbard       7/1/97-12/31/97   175,000        ___           ___
CEO, President                1997         350,000        ___           ___
                              1996         231,539        ___           ___
                              1995         100,000

Robert W. Hubbard        7/1/97-12/31/97   125,000        ___           ___
Executive V.P.                1997         250,000        ___           ___
                              1996         180,770        ___           ___
                              1995         100,000

Mary Pat Ryan            7/1/97-12/31/97   112,500       50,000(1)   1,897(2)
Sr. V.P., Marketing           1997         225,000      100,000      6,400(2)
                              1996         229,327      100,000      6,000(2)
                              1995         211,539       75,000      4,232(2)

Bernard J. Weiss         7/1/97-12/31/97    70,000       25,000(1)   3,600(2)
V.P. Finance and              1997         140,000       50,000      6,400(2)
Administration                1996         137,308       50,000      6,000(2)
                              1995         124,616       25,000      3,509(2)



                                      24

<PAGE>

Carl S. Wegener          7/1/97-12/31/97    65,000       12,500(1)   2,850(2)
V. P. Dealer Marketing        1997         130,000       25,000      5,450(2)
                              1996         129,808       25,000      5,492(2)
                              1995         125,000       17,000      4,045(2)

</TABLE>


(1)  Amounts accrued for the six month period, but paid in 1998.
(2)  Consists of a matching contribution made by the Company to such executive
     officer's 401(k) plan.

DIRECTOR COMPENSATION

The Company pays non-employee directors an annual retainer of $15,000 and $500
for each Board of Directors or committee meeting which they attend (with
committee chairpersons receiving $750 per committee meeting). Directors of the
Company also participate in a non-employee director option plan which provides
for the automatic grant of options to purchase 1,000 Class A Common Shares to
each non-employee director upon election (and each re-election) to the Board.
The compensation earned by certain directors, including options, is paid (or
granted, in the case of options) directly to the employers of such directors.

EMPLOYMENT AGREEMENTS

The Company does not have employment agreements with any of its executive
officers.

OPTION/SAR GRANTS IN SIX MONTHS ENDED DECEMBER 31, 1997

<TABLE>
                                                                                              Potentially Realizable Value
                                             Percent of                                          at Assumed Annual Rates
                         Number of         Total Options/                                            of Stock Price
                         Securities             SARs                                                Appreciation for
                         Underlying          Granted to     Exercise or                                Option Term
                        Options/SARs        Employees in     Base Price     Expiration        ----------------------------
      Name               Granted(#)         Fiscal Year      ($/Share)         Date              5%($)            10%($)
      ----              ------------       --------------   ------------    -----------       -----------       ----------
 <S>                    <C>                <C>              <C>           <C>               <C>                 <C>
 Mary Pat Ryan            30,000              11.9              $7.75     November 16, 2007      146,218          370,545
 Bernard J. Weiss         15,000               6.0              $7.75     November 16, 2007       73,109          185,273
 Carl S. Wegener          10,000               4.0              $7.75     November 16, 2007       48,739          123,515
</TABLE>




                                      25

<PAGE>

              ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                            OWNERS AND MANAGEMENT

     The following table sets forth certain information known to the Company
with respect to beneficial ownership of Class A Common Stock and Common Stock
by (i) each shareholder known by the Company to be the beneficial owner of
more than 5 percent of either class, (ii) each nominee for director, (iii)
each executive officer and (iv) all executive officers and directors of the
Company as a group.  Such information is presented as of March 5, 1998.

               SHARES OF CLASS A COMMON STOCK AND COMMON STOCK
                            BENEFICIALLY OWNED (1)

<TABLE>
                                                                          PERCENT         PERCENT OF     PERCENT OF
NAME AND ADDRESS                                                          OF              COMMON         TOTAL
OF BENEFICIAL OWNER(2)                    NUMBER                          CLASS A         STOCK          VOTING POWER
----------------------                    ------                          -------         -----          ------------
<S>                                       <C>                             <C>             <C>            <C>
Hubbard Broadcasting, Inc. ("HBI")        11,790 (Class A)                   *            63.2                61.8
3415 University Avenue                    46,522,825
St. Paul, Minnesota 55114                 (Common Stock)(3)

Stanley S. Hubbard                        7,740 (Class A)                    *            63.2                61.8
                                          46,522,825 (Common Stock)(4)

Stanley E. Hubbard                        7,740 (Class A)                    *            62.5                61.2
                                          46,051,225 (Common Stock)(5)

Robert W. Hubbard                         7,740 (Class A)                    *            62.5                61.2
                                          46,051,225 (Common  Stock)(5)

Nationwide Mutual Insurance Company       5,065,500                         ---            6.9                 6.7
One Nationwide Plaza                      (Common Stock)
Columbus, Ohio 43216

Quantum Industrial Partners, L.D.C.       4,941,150                         ---            6.7                 6.6
Kaya Flamboyan 9                          (Common Stock)
Willemstad, Curacao, Netherlands
  Antilles

Peter G. Skinner                          3,000 (Class A)                    *             6.0                 5.9
Dow Jones & Company                       4,411,800 (Common Stock)(6)
200 Liberty Street
New York, New York 10281

Dow Jones & Company                       2,000 (Class A)(7)                ---            6.0                 5.9
200 Liberty Street                        4,411,800
New York, New York 10281                  (Common Stock)

Pittway Corporation                       4,167,375                         ---            5.7                 5.5
200 South Wacker Drive                    (Common Stock)
Chicago, Illinois 60606


Vulcan Ventures, Inc.                     3,529,425                         ---            4.8                 4.7
110 110th Avenue Northeast                (Common Stock)
Bellevue, Washington 98004
</TABLE>

-----------
* Less than one percent

(1) Each share of Common Stock is convertible into one share of Class A
    Common Stock at the option of the holder.

(2) Unless otherwise noted, the address is 3415 University Avenue, St. Paul,
    Minnesota 55114.

(3) Includes (i) 2,025 shares of Class A Common Stock held by each of Stanley
    S. Hubbard, Stanley E. Hubbard and Robert W. Hubbard and (ii) 471,600
    shares of Common Stock held in trust for certain employees of HBI, for
    which Stanley S. Hubbard acts as trustee.

(4) Includes (i) 46,051,225 shares of Common Stock held by HBI, (ii) 471,600
    shares of Common Stock held in trust for certain employees of HBI, for
    which Stanley S. Hubbard acts as trustee, and (iii) 5,715 shares of Class A
    Common Stock held by HBI.

(5) Includes 46,051,225 shares of Common Stock and 5,715 shares of Class A
    Common Stock held by HBI.

(6) Includes options to purchase 2,000 shares of Class A Common Stock granted
    to Dow Jones & Company, all of which are currently exercisable, and
    4,411,800 of shares of Common Stock held by Dow Jones & Company, of which
    Mr. Skinner is General Counsel, Secretary and Senior Vice President.

(7) Consists of options to purchase shares of Class A Common Stock, all of
    which are currently exercisable.

                                      26
<PAGE>

<TABLE>
                                                                          PERCENT         PERCENT OF     PERCENT OF
NAME AND ADDRESS                                                          OF              COMMON         TOTAL
OF BENEFICIAL OWNER(2)                    NUMBER                          CLASS A         STOCK          VOTING POWER
----------------------                    ------                          -------         -----          ------------
<S>                                       <C>                             <C>             <C>            <C>
William D. Savoy                          2,000 (Class A)(7)                 *             4.8            4.7
Vulcan Ventures, Inc.                     3,529,425 (Common Stock)(8)
110 110th Avenue Northwest
Bellevue, Washington 98004

John W. Marvin                            14,000 (Class A)(9)                *             1.8            1.8
Marvin Lumber and Cedar Company           1,323,525 (Common Stock)(10)
Highway 11
Warroad, Minnesota  56763

Frank N. Magid                            662,225 (Class A)(11)             4.1             ---              *

David S. Allen                            2,000 (Class A)(7)                 *               *              *
                                          286,650 (Common Stock)

Gerald D. Deeney                          3,000 (Class A)                    *               *              *
                                          122,550 (Common Stock)


Ward L. Quaal                             2,000 (Class A)(7)                 *               *              *
                                          94,350 (Common Stock)


Herbert S. Schlosser                      2,000 (Class A)(7)                 *               *              *
                                          83,775 (Common Stock)

Mary Pat Ryan                             105,000 (Class A)(12)              *             ---              *

Bernard J. Weiss                          35,500 (Class A)(13)               *             ---              *

Peter F. Frenzer                          4,000 (Class A)(14)                *             ---              *

Louis G. Zachary, Jr.                     2,000 (Class A)(7)                 *             ---              *


All directors and executive officers      848,515 (Class A)                5.2            76.5           75.0
as a group (15 persons)(15)               56,374,900 (Common Stock)
</TABLE>

----------

(8)  Consists of shares held by Vulcan Ventures, Inc., of which Mr. Savoy is
     Vice President.

(9)  Includes options to purchase 2,000 shares of Class A Common Stock, all
     of which are currently exercisable.

(10) Consists of shares of Common Stock held by Marvin Lumber and Cedar
     Company, of which Mr. Marvin is Chief Operating Officer.

(11) Includes options to purchase 2,000 shares of Class A Common Stock, all
     of which are currently exercisable.

(12) Consists of options to purchase 105,000 shares of Class A Common Stock,
     30,000 of which are currently exercisable.

(13) Includes options to purchase 35,000 shares of Class A Common Stock,
     8,000 of which are currently exercisable.

(14) Includes options to purchase 2,000 shares of Class A Common Stock, all
     of which are currently exercisable.

(15) Footnote (3) and Footnotes (6)-(19) are incorporated herein by reference.


                                      27
<PAGE>

         ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to an Administrative Services Agreement between HBI and the Company,
HBI charges the Company a portion of the expenses of the HBI departments that
provide services to the Company, namely legal, management information systems,
tax, risk management, payroll and accounts payable.  Pursuant to this Agreement,
the Company paid $625,900 to HBI for the six months ended December 31, 1997,
$1,123,900 in 1997, $978,000 in 1996, $902,000 to HBI in 1995, and expects to
pay HBI $1,300,000 in 1998.

The Company and HBI have filed combined state tax returns as required in
Minnesota and New Mexico.  Utilizing the Company's net operating loss
carryforwards, HBI realized benefits as to the state returns of approximately
$0.1 million for the six months ended December 31, 1997, $0.2 million in 1997,
$1.4 million in 1996 and $1.4 million in 1995 and, HBI and the Company have
entered into a Tax Sharing Agreement relating to such filings.  Under this
Agreement, HBI will reimburse the Company for such benefits in the year they
would otherwise be realized by the Company.

The Company leases 15,043 square feet of office and administrative space in St.
Paul, Minnesota from HBI under a lease expiring on June 30, 2000.  Under such
lease, the Company paid HBI $97,100 for the six months ended December 31, 1997,
$151,375 in 1997, $81,630 in 1996 and $66,350 in 1995, and expects to pay
approximately $180,000 in 1998.

The Company owns its National Broadcast Center in Oakdale, Minnesota, which
consists of 20,500 square feet. The land for the facility was purchased in May
1993, from Minnesota Mining and Manufacturing Company ("3M"), and the Company
and HBI agreed to provide advertising time on USSB programming and/or HBI's
television stations in value equal to the purchase price of $340,000.  HBI has
agreed to provide all of such advertising time at no cost to the Company.  In
1997, 3M exercised its right under the agreement to be paid an adjusted purchase
price in cash, and the Company paid such amount in satisfaction of its remaining
obligations under the agreement.

The Company has entered into various agreements with Conus Communications
Limited Partnership ("Conus") for the provision of engineering and other
services.  HBI and Stanley S. Hubbard, the Chairman of the Board of the Company,
are each general partners of Conus.  For such services, the Company paid Conus
$82,000 in the six months ended December 31, 1997, $203,000 in 1997, $165,000 in
1996, and $554,000 in 1995.  The Company anticipates that it will pay Conus
approximately $210,000 in 1998 for such services.

The ALL NEWS CHANNEL is a joint venture of Viacom Satellite News, Inc. and
Conus.  Pursuant to its programming agreement with the ALL NEWS CHANNEL, the
Company paid such joint venture $2,765,350 in the six months ended December 31,
1997, $5,211,700 in 1997, $3,598,800 in 1996, and $1,524,000 in 1995.
Management believes that the parties will review the current agreement during
1998 in light of the integration of the basic channels previously carried by
USSB into the DIRECTV channel line-up. Under the current arrangement with ALL
NEWS CHANNEL, such payments are related to the number of subscribers. The
Company is unable to predict the amount of payments which will be made in 1998.

The Company has entered into programming development agreements with certain of
its shareholders.  It has agreed with Vulcan that in the event Vulcan can
develop viable specialty programming related to computers, and the Company has
sufficient transponder capacity, Vulcan shall be the exclusive provider of such
programming, other than such programming as may be included as incidental
programming by the Company's other programming providers. The Company has
agreed to broadcast up to ten hours of such programming per week.  At
present, the

                                     28
<PAGE>

Company is unaware of any such programming being developed by Vulcan.
William D. Savoy, a director of the Company, is Vice President of Vulcan.

The Company has also agreed with Dow Jones that Dow Jones shall have development
rights with respect to business and financial programming and shall be the
exclusive third-party provider of business and financial programming carried on
the Company's programming other than such as may be included as incidental
programming by the Company's other programmers.  Dow Jones has the right to
require the Company to broadcast up to six hours per weekday of such programming
if such programming becomes available.  Peter G. Skinner, a director of the
Company, is General Counsel, Secretary and President of Television Operations of
Dow Jones.

Certain directors and former directors of the Company perform or have performed
consulting services for the Company. Frank N. Magid Associates, Inc., of which
Mr. Magid is President, performs research for both the Company and HBI.  The
Company has paid $330,372 for the six months ended December 31, 1997, $807,575
in 1997, $733,809 in 1996, and $371,943 in 1995 to such company, and anticipates
payments of approximately $750,000 in 1998.

Mr. Quaal is the President of Ward L. Quaal Company, which performs government
relations work for both the Company and HBI.  The Company has paid $20,812 for
the six months ended December 31, 1997, $61,007 in 1997, $141,683 in 1996, and
$126,333 in 1995 to such company.  The Company expects to pay such company
approximately $50,000 in 1998.

The Company believes that all of the foregoing transactions have been on terms
no less favorable to the Company than could have been obtained from unaffiliated
third parties.




                                     29
<PAGE>

                                    PART IV

              ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES
                           AND REPORTS ON FORM 8-K

(a)  1.   CONSOLIDATED FINANCIAL STATEMENTS

          The following information is included in the Company's 1997 Report
          to Shareholders and are incorporated in Part II, Item 8 of this Form
          10-K by reference:

          Report of Independent Public Accountants

          Consolidated Statements of Operations for the Years Ended December
          31, 1997, 1996, and 1995 and the six month period ended December 31,
          1997

          Consolidated Balance Sheets as of December 31, 1997 and 1996

          Consolidated Statements of Shareholders' Equity for the Years Ended
          December 31, 1997, 1996 and 1995 and the six month period ended
          December 31, 1997

          Consolidated Statements of Cash Flows for the Years Ended December
          31, 1997, 1996 and 1995 and the six month period ended December 31,
          1997

          Notes to Consolidated Financial Statements

     2.   FINANCIAL STATEMENT SCHEDULES

               All schedules have been omitted since the required information
          is not present in amounts sufficient to require submission of the
          schedule.

     3.   EXHIBITS

               The following exhibits are filed as part of this Report on Form
          10-K or, where indicated, were previously filed and are hereby
          incorporated by reference.

  EXHIBIT NO.    EXHIBIT DESCRIPTION

     1.1      Form of Underwriting Agreement(1)

     1.2      Form of Subscription Agreement(1)

     3.1      Restated Articles of Incorporation(1)

     3.2      Bylaws(1)

     3.3      Form of Second Restatement of the Articles of Incorporation(1)

     3.4      Form of Amended and Restated Bylaws(1)

     4.1      Form of Stock Certificate(1)

                                     30
<PAGE>

     10.1     United States Satellite Broadcasting Company, Inc. 1995
              Stock Option Plan(1)*

     10.2     Sales Agency Agreement, dated December 22, 1993, between
              Thomson Consumer Electronics, Inc. and United States
              Satellite Broadcasting Company, Inc.(1)**

     10.3     United States Satellite Broadcasting Company, Inc. 1996
              Non-Employee Director Stock Option Plan(5)*

     10.4     Consulting Services Agreement, dated November 1, 1995
              between Conus Communications Company Limited Partnership and
              United States Satellite Broadcasting Company, Inc.(2)

     10.5     [Intentionally reserved.]

     10.6     [Intentionally reserved.]

     10.7     [Intentionally reserved.]

     10.8     [Intentionally reserved.]

     10.9     [Intentionally reserved.]

     10.10    Amendment No. 1, effective July 1, 1997, to the Indenture of
              Lease dated May 1994, between Hubbard Broadcasting, Inc. and
              United States Satellite Broadcasting Company, Inc.(5)

     10.11    Service Agreement, dated January 1, 1994 between Conus
              Communications Company Limited Partnership and United States
              Satellite Broadcasting Company, Inc.(1)

     10.12    Indenture of Lease, dated May 1994, between Hubbard
              Broadcasting, Inc. and United States Satellite Broadcasting
              Company, Inc.(1)

     10.13    Satellite Payload Purchase Agreement, dated May 31, 1991,
              between Hughes Communications Galaxy, Inc. and United States
              Satellite Broadcasting Company, Inc., as amended(1)**

     10.14    Interim Technology Access and Coordination Agreement, dated
              June 17, 1993, between Hughes Communications Galaxy, Inc.
              and United States Satellite Broadcasting Company, Inc.(1)**

     10.15    Transponder Service Agreement, dated May 31, 1991, between
              Hughes Communications Satellite Services, Inc. and United
              States Satellite Broadcasting Company, Inc.(1)**

     10.16    Processing Agreement, dated March 5, 1993, between JCPenney
              Business Services, Inc. and United States Satellite Broadcasting
              Company, Inc.(1)**

     10.17    Auxiliary Broadcast Center Lease(1)

     10.18    Form of Subscription Agreement, Letter of Investment Intent
              and Investor's Rights Agreement(1)

                                     31
<PAGE>

     10.19    Administrative Services Agreement, effective July 1, 1994,
              between United States Satellite Broadcasting Company, Inc.
              and Hubbard Broadcasting, Inc.(1)

     10.20    Tax Sharing Agreement between United States Satellite
              Broadcasting Company, Inc. and Hubbard Broadcasting, Inc.(1)

     10.21    6-Channel Direct Broadcast Satellite Contract, originally
              dated June 15, 1984, between Lockheed Martin Corporation
              (formerly RCA Corporation) and United States Satellite
              Broadcasting Company, Inc., as amended(1)**

     10.22    Amendment No. 10, dated December 18, 1995, to Direct Broadcast
              Satellite Contract between Lockheed Martin Corporation and
              United States Satellite Broadcasting Company, Inc.(1)**

     10.23    Administrative Services Agreement, effective July 1, 1996,
              between United States Satellite Broadcasting Company, Inc.
              and Hubbard Broadcasting, Inc.(2)

     10.24    Amendment No. 11, effective September 30, 1996, to Direct
              Broadcast Satellite Contract between Lockheed Martin Corporation
              and United States Satellite Broadcasting Company, Inc.(3)

     10.25    Amendment No. 12, effective November 27, 1996 to Direct
              Broadcast Satellite Contract between Lockheed Martin Corporation
              and United States Satellite Broadcasting Company, Inc.(4)

     10.26    Amendment No. 13, effective December 31, 1996, to Direct
              Broadcast Satellite Contract between Lockheed Martin Corporation
              and United States Satellite Broadcasting Company, Inc.(4)

     10.27    Contract No. 104274-B, effective December 31, 1996, Direct
              Broadcast Satellite Contract between Lockheed Martin Corporation
              and United States Satellite Broadcasting Company, Inc.(4)***

     10.28    Amendment No. 1, effective April 11, 1997, to Direct
              Broadcast Satellite Contract between United States Satellite
              Broadcasting Company, Inc. and Lockheed Martin Corporation(5)***

     10.29    Amendment No. 2, effective April 30, 1997, to Direct
              Broadcast Satellite Contract between United States Satellite
              Broadcasting Company, Inc. and Lockheed Martin Corporation(5)***

     10.30    Amendment No. 3, effective June 1, 1997, to Direct Broadcast
              Satellite Contract between United States Satellite
              Broadcasting Company, Inc. and Lockheed Martin Corporation(5)***

     10.31    Amendment No. 14, effective December 31, 1997, to Direct
              Broadcast Satellite Contract between Lockheed Martin Corporation
              and United States Satellite Broadcasting Company, Inc.(6)

     10.32    Amendment No. 4, effective December 31, 1997, to Direct
              Broadcast Satellite Contract between United States Satellite
              Broadcasting Company, Inc. and Lockheed Martin Corporation(6)****

                                     32
<PAGE>

     13.1     Selected Portions of the Company's 1997 Report to Shareholders(6)

     21.1     Subsidiaries of the Company(6)

     23.1     Consent of Arthur Andersen LLP(6)

     27.1     Financial Data Schedule(6)

     99.1     Additional Exhibit; Report on Form 8-K dated September 4, 1997(6)

-------------
*     Denotes management contract or compensatory plan or arrangement in which
      certain directors and named executive officers participate.

**    Portions of these documents were redacted and filed separately with the
      Securities and Exchange Commission pursuant to a request by the Company
      for confidential treatment pursuant to Rule 406 under the Securities Act
      of 1933, as amended, in connection with the filing of the Registration
      Statement described in note(1) below.

***   Portions of this document were redacted and filed separately with the
      Securities and Exchange Commission pursuant to a request by the Company
      for confidential treatment pursuant to Rule 24b-2 under the Securities
      Exchange Act of 1934, as amended, in connection with the prior filing of
      the Company's Reports on Form 10-Q and 10-K described in notes (4) and
      (5) below.

****  Portions of this document were redacted and filed separately with the
      Securities and Exchange Commission pursuant to a request by the Company
      for confidential treatment pursuant to Rule 24b-2 under the Securities
      Exchange Act of 1934, as amended, in connection with the filing of this
      Report on Form 10-K.

     (1)  Pursuant to Rule 12b-32, this exhibit is incorporated by reference
          under the same exhibit number to the exhibits filed with the Company's
          Registration Statement on Form S-1, File No. 33-99906.

     (2)  Pursuant to Rule 12b-32, this exhibit is incorporated by reference
          under the same exhibit number to the exhibits filed with the Company's
          Report on Form 10-K for the fiscal year ended June 30, 1996.

     (3)  Pursuant to Rule 12b-32, this exhibit is incorporated by reference
          under the same exhibit number to the exhibits filed with the Company's
          Report on Form 10-Q for the quarter ended September 30, 1996.

     (4)  Pursuant to Rule 12b-32, this exhibit is incorporated by reference
          under the same exhibit number to the exhibits filed with the Company's
          Report on Form 10-Q for the quarter ended December 31, 1996.

     (5)  Pursuant to Rule 12b-32, this exhibit is incorporated by reference
          under the same exhibit number to the exhibits filed with the Company's
          Report on Form 10-K for the year ended June 30, 1997.

     (6)  Filed herewith.

                                     33
<PAGE>

(b)  Report on Form 8-K.

     The Company filed a Report on Form 8-K dated September 4, 1997 describing,
     under Item 8, the action of the Board of Directors of the Registrant
     changing the Registrant's fiscal year end from June 30 to December 31,
     beginning with a transition period ending on December 31, 1997.



                                     34

<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, thereunto duly authorized.


Dated: March 27, 1998                   UNITED STATES SATELLITE
                                        BROADCASTING COMPANY, INC.



                                        By:  /s/ Stanley E. Hubbard
                                           -------------------------------------
                                           Stanley E. Hubbard
                                           Chief Executive Officer and President
                                           (Principal 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.

      Signature                      Title                         Date
      ----------                     -----                         ----

/s/ Stanley S. Hubbard
--------------------------   Chairman of the Board             March 27, 1998
Stanley S. Hubbard

/s/ Stanley E. Hubbard
--------------------------   Chief Executive Officer,          March 27, 1998
Stanley E. Hubbard           President, and Director
                             (Principal Executive Officer)

/s/ Robert W. Hubbard
--------------------------   Executive Vice President          March 27, 1998
Robert W. Hubbard            and Director

/s/ Gerald D. Deeney         Treasurer and Chief Financial     March 27, 1998
--------------------------   Officer (Principal Financial
Gerald D. Deeney             and Accounting Officer)

/s/ Herbert S. Schlosser
--------------------------   Director                          March 27, 1998
Herbert S. Schlosser

/s/ David S. Allen
--------------------------   Director                          March 27, 1998
David S. Allen

/s/ Frank N. Magid
--------------------------   Director                          March 27, 1998
Frank N. Magid

/s/ Peter G. Skinner
--------------------------   Director                          March 27, 1998
Peter G. Skinner

/s/ William D. Savoy
--------------------------   Director                          March 27, 1998
William D. Savoy

/s/ John W. Marvin
--------------------------   Director                          March 27, 1998
John W. Marvin

                                     35
<PAGE>

/s/ Ward L. Quaal
--------------------------   Director                          March 27, 1998
Ward L. Quaal

/s/ Louis G. Zachary, Jr.
--------------------------   Director                          March 27, 1998
Louis G. Zachary, Jr.

/s/ Peter F. Frenzer
--------------------------   Director                          March 27, 1998
Peter F. Frenzer




                                     36